Financial Highlights
FOR THE YEAR ENDED 31 MARCH 2014
ANNUAL REPORT 2014
1
2014
£m
2013
£m
Change
%
Turnover from continuing operations
38.26
35.60
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.
3.40
3.65
22.0p
11.5p
2.80
285p
7.5
21.7
10.8
3.3
0.0
2.80
3.29
21.3p
11.5p
3.47
-19.3
276p
3.3
Turnover (£m) from continuing operations
Underlying profit tax* (£m)
34.11
35.60
38.26
31.84
29.22
3.23
3.29
3.65
2.69
2.73
2010
2011
2012
2013
2014
2010
2011
2012
2013
2014
Diluted earnings per share (pence)
before amortisation and non-trading items
Dividends per share (pence)
21.7
20.6
21.3
22.0
9.0
9.5
11.0
11.5
11.5
26.2
2010
2011
2012
2013
2014
2010
2011
2012
2013
2014
2
Chairman’s Statement 2014
David Hudd
Chairman
We are pleased to report another
good year of progress for the Group,
with encouraging revenue
and profit growth.
The Group achieved a pleasing trading result for the year with
underlying pre-tax profits (before amortisation and non-trading
items, but including the £0.04 million Group’s share of the joint
venture results) up 10.8% to a record £3.65 million (2013: £3.29
million). Diluted earnings per share based upon underlying profits
increased by 3.3% to 22.0p from 21.3p. Reported earnings per
share were 21.1p (2013: 13.7p).
The Directors are pleased to recommend a maintained final
dividend of 7.5p, which makes the total dividend for the year
11.5p (2013 11.5p).
The Group’s financial position remains strong and after £5 million
of capital expenditure of which £2.7million was invested in the
Falklands, cash balances at the end of the year were £5.7 million,
with residual bank debt which will be repaid this year reduced to
£1 million. The excellent track record and cash generative nature
of the Group’s three trading businesses mean that the Group
has significant untapped borrowing potential sufficient to fund
likely investment requirements in the medium term.
Operations
Thanks to a substantial increase in profits at Momart, Group
underlying operating profits before tax (as defined above)
increased by 10.0% to £3.85 million from £3.50 million.
Momart enjoyed an excellent year with a 53% increase in
contribution to £1.8 million as the business benefited from the
continued strength of the international art market. A strong
roster of exhibitions and a high level of capacity utilisation for
gallery services and storage resulted in a record year.
The Portsmouth Harbour Ferry Company maintained its profit
at just over £1.0 million. Passenger numbers saw a significant
improvement on the historic trend, experiencing a much smaller
decline of 1.6% compared to the 8.9% decline in the prior year,
the impact of which was offset by increased fares.
For the first time for three years there was no offshore drilling in
Falkland waters. The presence of a drilling rig and associated
personnel have provided a substantial stimulus to the economy
and generated significant business for the Falkland Islands
Company (FIC) in prior years. The absence of drilling particularly
impacted wholesale food sales and property rental income but
support services maintained its contribution and construction
and Falkland 4x4 performed well. There were significant
inflationary increases in labour and freight costs which also had
an impact. As a result profits decreased to £1.0 million from
£1.3 million last year.
Falkland Oil and Gas (FOGL)
The most significant development for FOGL was the acquisition
of Desire Petroleum in December 2013 and the subsequent farm
out of two of Desire’s licences to Premier Oil and Rockhopper
Exploration. We were supportive of the Desire transaction,
which gave FOGL exposure to the North Falklands Basin and
the Sea Lion field. Following these developments FOGL is now
the largest licence holder in the Falkland Islands and has a net
interest of 40,000 sq km.
During the year three separate 3D surveys totalling over 12,000
sq km was carried out to the South and East of the Falklands
and the interpretation of these results together with existing
seismic and drilling data will inform the choice of targets for
the next drilling campaign. This is expected to start in the first
half of 2015 and will include five wells in which FOGL will have
an interest; three in the Sea Lion area and two in the original
acreage to the South and East of the Falklands.
The market valuation of the Group’s shareholding of 12.83
million shares was virtually unchanged over the year at £3.3
million with the shares at 25.5p at 31 March 2014 (2013: 26.5p).
The shareholding now represents 2.4% of the enlarged share
capital of FOGL (2013: 4.0%).
Over the last decade FOGL, in which we were founding
shareholders, has drilled three exploration wells in the Southern
and Eastern basins. Although confirming the presence of
hydrocarbons, these wells did not reveal their presence in
commercial quantities. The 2015 drilling campaign for which
FOGL is already funded is FOGL’s most extensive to date
and has the potential to transform the value of our holding. In
these circumstances your Board currently believes that it is
appropriate to retain a significant shareholding until the outcome
of the programme is known.
Outlook
We anticipate an increase in economic activity in the Falklands
as the next round of drilling approaches, but it will be the funding
of the Sea Lion development which will trigger a step change in
activity. Meanwhile we will continue to invest in modernising FIC
in readiness for future growth. For the current year, the fishing
season started well and we expect further progress from our
construction business.
At Momart, the pipeline of exhibition work remains strong but
we are unlikely to repeat the exceptional result experienced this
year. A number of opportunities are being explored to increase
the capacity of the business to meet customer demand.
For PHFC, there are encouraging signs of an improving trend in
demand and the changes agreed with the Ministry of Defence for
the reimbursement of travel expenses on the ferry augur well for
the future. Good progress is being made with the construction of
our new ferry, Harbour Spirit, which we expect to introduce into
service early in 2015.
In the year to date, the Group’s trading performance is in line
with our expectations and we anticipate a satisfactory year.
Looking further ahead we continue to believe that we have an
outstanding business opportunity in the Falkland Islands.
David Hudd
Chairman
9 June 2014
FALKLAND ISLANDS HOLDINGS PLC ANNUAL REPORT 2014
3
Managing Director’s Strategic Report
BUSINESS REVIEW
John Foster
Managing Director
Group Overview
I am pleased to report another year of progress for the Group,
with an encouraging 7.5% increase in revenues to £38.3 million
(2013: £35.6 million) and a 10.8% increase in underlying pre-tax
profits to £3.65 million (2013: £3.29 million).
The strong trading performance at Momart more than offset
a reduced contribution from the Falklands so that underlying
operating profits for the Group (before amortisation and
financing costs but including the Group’s £0.04m share of the
SAtCO joint venture results) increased by 10% to £3.85 million
(2013: £3.50 million).
Group Revenue 2014
Momart
48%
FIC
41%
PHFC
11%
Review of Operations
Group revenue and operating profits are analysed below:
Group revenue
Year ended 31 March
Falkland Islands Company
Portsmouth Harbour Ferry
Momart
Total
2014
£m
15.88
4.12
18.26
38.26
2013
£m
Change
%
15.22
4.08
16.30
35.60
4.3
1.2
12.0
7.5
Group underlying operating profit*
Year ended 31 March
Falkland Islands Company
Portsmouth Harbour Ferry
Momart
Total
2014
£m
1.01
1.01
1.83
3.85
2013
£m
1.33
0.98
1.19
3.50
Change
%
-23.5
2.9
53.1
10.0
* operating profit is stated before amortisation of intangibles and
non–trading items, and includes the Group’s £0.04m share of
the SAtCO joint venture profit.
Group Revenue 2013
Underlying Operating Profit 2014
FIC
43%
Momart
46%
PHFC
11%
Momart
48%
FIC
26%
PHFC
26%
Underlying Operating Profit 2013
Momart
34%
FIC
38%
PHFC
28%
4
Managing Director’s Strategic Report
BUSINESS REVIEW - CONTINUED
Ramform Titan Seismic Vessel, Image @ Copyright PGS
Falkland Islands Company (“FIC”)
As expected the Falklands had a quieter year with the absence of
offshore drilling resulting in a temporary hiatus in the economic
growth experienced in recent years. Lower oil exploration
demand for rental housing, provisioning, food supplies and
agency services led to a downturn in revenues and profits for
those activities, whilst in the wider economy, general retail
demand softened as linked private sector work contracted. As a
consequence, although the Group’s Falklands business retains
outstanding growth potential over the medium to long term, in
the year just ended FIC profits had decreased to £1.01 million
from £1.33 million in the prior year.
Oil Developments
During the year, Noble Energy and Premier Oil continued to
progress their plans for a new round of exploration drilling
planned for 2015 in the Northern and Southern basins and in
March 2014 a new temporary floating dock arrived in Stanley
Harbour to support the offshore programme. In the North
Falklands basin, Premier Oil, (“Premier”), the licence holder for
the 300mbbl Sea Lion field refined its plans and confirmed the
engineering approach for the ultimate commercial production of
oil.
In February 2014, Premier announced that it was seeking a
farm-in partner for Sea Lion and it is now clear that the Sea
Lion development will not go ahead without the introduction
of a third party who can help with funding, which is estimated
at $5.2billion. Meanwhile, Premier has indicated that it is
progressing the preparatory work and that contracts to develop
the detailed engineering design work necessary for phase 1
of Sea Lion will be placed by mid-2014. This will ensure that
once funding is in place, field development can proceed with
minimum delay. Significant onshore construction activity and
oil related expenditure would then be expected within 2 years
with “First Oil” flowing approximately 4 years after final project
sanction.
The planned drilling programme in both the Northern and
Southern basins during 2015 opens up the prospect of further
discoveries. This together with the impact of the Sea Lion
discovery on the Falklands economy, mean that FIC has good
prospects for growth over the medium term.
Trading Review
FIC has a long established position as a leading local business
and the wide range of retail and support services it can offer
to Islanders, government and oil companies makes it uniquely
placed to benefit from the anticipated growth in the Falklands
economy.
In the year, further steps were taken in modernising FIC and
strengthening local management. In addition the benefits
of earlier investment were seen with good growth in both
the Company’s automotive business “Falklands 4x4” and in
Falklands Building Services (“FBS”). As a result, despite the
downturn in retail demand and freight income, overall revenue in
FIC increased by £0.66 million (+4.3%) to £15.88 million (2013:
£15.22 million).
However, increased freight costs and wage inflation of some 5%
saw continued pressure on profits. Helped by FBS and strong
demand for new 4x4 vehicles, profitability in the second half
recovered to be on a par with the prior year, but the slow start
to the year meant that overall underlying operating profits were
£0.32 million lower at £1.01 million (2013: £1.33 million).
FALKLAND ISLANDS HOLDINGS PLC ANNUAL REPORT 2014
5
FIC Operating Results
Year ended 31 March
2014
£m
2013
£m
Change
%
Revenues
Retail
Falklands 4x4
Freight & Port
Services
Support services
FBS (property and
construction)
9.26
2.66
1.26
1.30
1.40
9.73
-4.8
1.87
42.3
1.65
-23.5
1.21
6.7
0.76
85.6
Total FIC revenue
15.88
15.22
4.3
FIC underlying
operating profit
1.01
1.33
-23.5
Underlying operating
profit margin
6.4%
8.7%
-26.7
Total retail sales fell by 4.8% to £9.26 million (2013: £9.73
million) which was accounted for by reduced warehouse sales
following the departure of the Leiv Eiriksson drilling rig late last
year. After a weaker first half, the Company’s core West Store
supermarket finished the year with sales only 1.1% lower helped
by increased spending from cruise ship passengers, where
visitor numbers rose by 34%, and a strengthened BHS clothing
offer. In other areas, sales at the waterfront Capstan gift shop
were 6% ahead on the prior year, and further progress was seen
at the satellite “West Store” at the Mount Pleasant military base.
Driven by a more aggressive pricing policy, sales in construction
and building materials increased by 18%, although the focus
on growing market share did result in some margin erosion.
This together with increased freight costs and overheads saw
contribution from retailing as a whole decline and was the major
factor in the decrease in FIC’s contribution in the year.
Falklands 4x4, made good progress benefiting from an
increased use of HP financing to stimulate sales. Total vehicle
sales increased from 48 to 79 units (+65%) helped by sales to
the Falklands Government. At £2.66 million total automotive
revenues were at a record level despite the absence of military
orders which remain subject to central procurement from UK.
Revenues from third party freight and port services fell by 23.5%
to £1.26 million (2013: £1.65 million) without the benefit of oil
related cargoes, which increased revenues last year.
On a positive note Support Services revenues recovered to
increase by 6.7% helped by a strong illex squid catch which
boosted revenues at FIC’s Fishing Agency, an improved
performance from Penguin Travel as cruise ship numbers
increased and further progress at FIC’s insurance agency.
FBS has been able to establish a unique client offer that finances
work in progress for first time buyers during the 3-4 month
construction period. In this way FBS has delivered 8 new houses
for local buyers and at 31 March 2014 had a record order book
for 20 further houses. In addition to house building, FBS also
undertook small general construction contracts for the Falkland
Islands Government as well as progressing internal construction
projects within FIC (which are not included in revenue). At the
end of the year FBS had 54 employees compared to 22 in March
2013. Despite a £0.1 million decline in rental income, overall
revenues from property and construction increased by 85.6%
to £1.4 million.
To prepare FIC for the expected future growth in the economy,
capital expenditure of £2.7 million was incurred, including £0.7
million spent on investment properties, and FBS:
• Completed the construction of four new houses in Hebe Street
central Stanley which are all now occupied.
• Progressed the expansion and modernisation of office facilities
at FIC’s office at Crozier Place including space for external
tenants which will be available in late 2014.
• Commenced the expansion of DIY/Building Materials retail
outlet Homebuilder to the rear of Crozier Place for completion
in Autumn 2014.
• Commenced the construction of new warehouse/freezer
facilities at Airport Road East Stanley which will replace FIC’s
aging facilities and make available a prime 2 acre site on the
waterfront in central Stanley.
FIC‘s property rental portfolio now comprises 36 properties in
central Stanley which are available for letting. In the absence
of any drilling activity, rental income declined by 25% to £0.2
million in the year to 31 March 2014, rental yields reduced and
overall occupancy averaged 82% during the year.
FIC Revenues 2014
FIC Revenues 2013
Falklands 4x4
12%
Retail
58%
Falklands 4x4
17%
Falkland Building
Services 9%
Freight & Port
Services 8%
Support Services
8%
Momart
48%
Retail
64%
FIC
26%
PHFC
26%
Falkland Building
Services 5%
Freight & Port
Services 11%
Support Services
8%
6
FALKLAND ISLANDS HOLDINGS PLC
Managing Director’s Strategic Report
BUSINESS REVIEW - CONTINUED
During the year the Falkland Islands Government completed
its own site surveys and commissioned PWC to advise on the
feasibility of financing a new deep water port at the government’s
designated site at Port William in Stanley’s outer harbour.
However further progress awaits the agreement of commercial
terms with port users and FIG support.
We have deferred, pending further progress on the Sea Lion
development, the construction of 26 apartments on Fitzroy
Road and a workers’ camp at Dairy Paddock.
In the year, FIC’s construction joint venture, the South Atlantic
Construction Company, (“SAtCO”) won its first contracts
undertaking infrastructure work for FIG and winning the contract
to install a new floating dock in Stanley Harbour that will support
Noble Energy’s exploration drilling programme in 2015. Work
on the dock commenced in March 2014 and is expected to
be ready by mid-2014. Connected with this contract, SAtCO
invested £1 million in crane and forklift facilities which are being
leased to Noble Energy. In the year to March 2014 SAtCO earned
revenues of £1.0 million and produced a profit before tax of £0.1
million. The Group’s share of post-tax results from SAtCO was
£0.04 million. All staff were seconded as required from parent
companies FIC and Trant Construction and at 31 March 2014
SAtCO had no permanent employees.
FIC Key Performance Indicators
and Operational Drivers
Year ended 31 March
2014
2013
2012
Staff Numbers
( FTE 31 March )
165
129
Capital Expenditure
£’000’s
2,715
1,594
119
632
Retail Sales growth % -4.8%
3.0%
-2.8%
Number of FIC rental
properties
Average occupancy
during the year
Number of vehicles
sold
Number of 3rd party
houses sold
IIlex squid catch in
tonnes ( 000’s)
Cruise ship
passengers
( 000’s )
36
32
33
82%
88%
83%
79
8
48
3
50
0
188.0
58.2
67.3
39.5
29.6
35.2
Spirit of Gosport with HMS Warrior and the Historic Dockyard in the background
ANNUAL REPORT 2014
7
Portsmouth Harbour Ferry Company
(“PHFC”)
During the period, there was a significant improvement in
the underlying trend as passenger numbers fell by 1.6%,
compared to the 8.9% decline seen in the prior year. Overall
total ferry revenues increased by 1.2% and operating profits,
(before pontoon lease finance costs of £0.23 million) increased
marginally to £1.01 million (2013: £0.98 million).
Ferry fares were increased by an average of 3.3% in June 2013,
bringing the total cost of an adult return to £2.90. Discounted
fares for regular customers (£1.35 per ferry journey), and lower
tariffs for seniors and children (£1.90 return) reinforce the value
for money offered by the ferry service compared to bus and car
travel.
Average fares per passenger journey increased by 3.1% to
£1.32 (2013: £1.28).
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
Passengers carried
(000s)
2013
£m
Change
%
2014
£m
3.95
0.17
4.12
3.89
0.19
4.08
1.01*
0.98*
24.6% 24.0%
1.5
-5.4
1.2
2.9
2.2
2,986
3,033
-1.6
*Operating profit is shown before charging finance lease interest
of £0.23 million (2013: £0.24 million) relating to the new Pontoon.
Over the course of the year weekday passenger numbers
declined by 2.7% whereas in contrast weekend volumes
increased by 1.8%. The further decline in weekday commuter
traffic reflected the ongoing economic challenges in the local
economy and the impact of changes to the Ministry of Defence’s
policy of “Home to Duty” expenses reimbursement which saw a
shift from ferry to car travel. However after persistent lobbying,
support from the local MP in Gosport and the Secretary of State
for Transport, the Ministry of Defence agreed to reverse its
decision and from 1 May 2014 will once more reimburse travel
to work on the ferry. We anticipate that this will have a positive
impact on passenger numbers in 2014-15 which should go
some way to offsetting the impact of 1,000 dockyard job losses
announced by BAE Systems in 2014. Looking ahead the outlook
for passenger growth is positive as the Naval Base expands to
support the new Queen Elizabeth class carriers.
Ferry reliability was again outstanding with on time departures
running at 99.7% (2013: 99.5%).
Construction is now well advanced on a third modern ferry
vessel, “Harbour Spirit”, which is due to enter service early in
2015. Expenditure incurred in the year on the vessel amounts to
£1.8 million and the total cost will be approximately £3.3 million,
this will be substantially financed by a 10 year bank loan. With
three ferry vessels built since 2001 and an estimated service
life of over 30 years, no further significant vessel expenditure is
anticipated in the next decade.
PHFC Key Performance Indicators
and Operational Drivers
Year ended 31 March
2014
2013
2012
Staff Numbers (FTE
at 31 March)
Capital Expenditure
£ ‘000’s
Ferry Reliability
(on time departures)
Number of weekday
passengers ‘000
37
35
35
1,958
223
5,080
99.7% 99.5% 99.9%
2,169
2,230
2,497
% change on prior year
-2.7% -10.7% -1.6%
Number of weekend
passengers ‘000
817
803
831
% change on prior year
1.8% -3.4% -4.1%
Total number of
passengers ‘000’s
2,986
3,033
3,328
% change on prior year
-1.6% -8.9% -2.1%
Revenue growth %
1.2% -1.9% 11.5%
Average yield per
passenger journey
£1.32
£1.28
£1.19
8
FALKLAND ISLANDS HOLDINGS PLC
Managing Director’s Strategic Report
BUSINESS REVIEW - CONTINUED
Houghton Revisited Exhibition at Houghton Hall, Copyright: Georgia Oetker, 2013
Momart
Momart, the Group’s art handling and logistics business, again
produced a strong trading performance. The growth seen in the
first half of the year continued into the second half and total
revenue for the year increased by 12.0% to £18.3 million (2013:
£16.3 million) while underlying operating profit increased by
53.1% to £1.83 million (2013: £1.19 million).
Momart Operating Results
Year ended 31 March
2014
£m
2013
£m
Change
%
Revenues
Museums and public
exhibitions
Commercial gallery
services
Storage
10.86
9.01
20.4
5.57
5.50
1.83
1.79
1.3
2.6
Total Momart revenue
18.26
16.30
12.0
Underlying Momart
operating profit
Underlying operating
profit margin
1.83
1.19
53.1
10.0% 7.3%
36.6
Exhibitions
Museum exhibitions enjoyed an exceptional year both in the UK
and internationally with overall revenues increasing by 20.4% to
a record level of £10.86 million. Momart installed a wide variety
of high quality, technically complex exhibitions, drawing on
its reputation for client service, problem solving and attention
to detail. This record level of activity in exhibitions includes a
number of large international projects which are not expected
to re-occur in the near term and some touring exhibitions which
travelled to multiple locations. In the UK, Momart was involved
in the installation of a number of prestigious and popular
exhibitions including: Manet: Portraying Life at the Royal
Academy, Ellen Gallagher: AxMe at Tate Modern, David Bowie:
Is and Masterpieces of Chinese Painting at the V & A, the Portrait
of Vienna at the National Gallery, Vikings: Life and Legend at
the British Museum and the Houghton Revisited Exhibition at
Houghton Hall, which showcased Sir Robert Walpole’s personal
art collection, on loan from the Hermitage Museum.
Gallery Services
Gallery Services revenues were 1.3% ahead of 2013 at £5.57
million. Gross margins improved, helped by the appointment of
a new Finance and Commercial Director and as the first benefits
were realised from Momart’s recent investment in improved
management information systems. The final roll out of this ERP
system was completed in March 2014 and further benefits are
expected to be generated in the current year.
Storage
Storage revenues increased by 2.6% and were generated
from a broader client base as new commercial relationships
were established. With Momart’s existing storage facilities fully
utilised plans are being progressed for a significant extension to
existing warehouse facilities.
ANNUAL REPORT 2014
9
FOGL Investment
Details of the Group’s shareholding in FOGL are set out below:
General
The year saw Momart generate record levels of revenue and
contribution reflecting the strength of its global reputation and
its commercial and institutional relationships which have been
developed over decades. With the continued strength of the
global art market and the increasing importance of London as
an international centre, prospects for sustained growth and
underlying profits are excellent, although in the short term we
do not expect to see a repetition of the exceptional results of
2013-14.
Momart Key Performance Indicators and
Operational Drivers
Cost
Book cost per share
31 March
Number of shares held
FOGL share price (bid price)
Market value of holding
2014
12,825,000
25.5p
£3.27m
£2.6m
20.0p
Year ended 31 March
2014
2013
2012
Staff Numbers
(FTE 31 March)
Capital
Expenditure
£ ‘000’s
Warehouse % fill
vs capacity
Exhibition Order
Book 31 March
Internal labour &
services charged
out
Revenues from
overseas clients
Exhibitions sales
growth
Gallery Services
sales growth
Storage sales
growth
124.6
119.0
115.9
260
598
524
92.9%
94.2%
95.1%
£3.89m £3.83m
£4.16m
£11.67m £9.02m
£8.58m
£8.3m
£4.6m
£5.7m
20.4%
27.8%
5.7%
1.3% (12.7)%
26%
2.6%
10.5%
6.6%
Total Sales growth
%
12.0%
8.9%
13.5%
The market value of the Group’s 2.4% shareholding on 6 June
2014 was £3.30 million.
Trading Outlook
The Group’s prospects for growth in the medium term remain
outstanding.
In the Falklands, delays in the development of the Sea Lion oil
field have slowed progress but the size of the discovery is such
that its future development seems assured. With the added
potential of positive results from the 2015 drilling campaign, the
prospects for dramatic growth for the Falkland Islands economy
over the medium term remain.
At PHFC the stabilisation in passenger numbers is encouraging
and this should be helped by the recent change in travel policy
by the Ministry of Defence and the longer term outlook for
growth at the Portsmouth Dockyard.
At Momart, although we do not anticipate an immediate
repetition of the exceptional performance seen in the year ended
31 March 2014, underlying growth prospects in this high quality
business remain good.
With bank borrowings reduced to £1.0 million (2013: £2.0 million)
and cash on hand of £5.7 million, together with significant further
borrowing capacity, the Group has significant capacity to exploit
opportunities over the medium term.
Momart Revenues 2014
Momart Revenues 2013
Museum
and public
exhibitions
59%
Commercial Gallery
Services 31%
Museum
and public
exhibitions
55%
Commercial Gallery
Services 34%
Storage 10%
Storage 11%
10
FALKLAND ISLANDS HOLDINGS PLC
Managing Director’s Strategic Report
FINANCIAL REVIEW
Summary Income Statement
Year ended 31 March
2014
£m
2013
£m
Change
%
Group revenue
38.26
35.60
7.5
Underlying operating
profit*
3.85
3.50
10.0
Net financing costs
(0.20)
(0.21)
(2.8)
Underlying profit
before tax
Less:
Fund raising costs
Gain on sale of FOGL
shares
Gain / (loss) on
disposal of the PHFC
pension scheme
Amortisation of
intangibles
Profit before tax as
reported
3.65
3.29
10.8
-
-
(0.68)
0.77
–
–
0.06
(0.18)
(135.2)
(0.31)
(0.40)
(22.9)
3.40
2.80
21.7
*Underlying operating profit excludes amortisation and non-
trading items but includes £0.04 million of the Group’s share of
the results of the SAtCO joint venture.
Revenue and Underlying Operating Profit
Group revenue rose 7.5% to £38.26 million and Group and
underlying operating profit increased 10.0% to £3.85 million in
the year ended 31 March 2014. These are discussed in more
detail above in the Review of Operations.
Non-Trading Items
Non-trading items comprise a gain of £0.06 million on the final
transfer of the PHFC defined benefit scheme (2013: loss £0.18
million), and a fall in the amortisation charge to £0.31 million on
the intangible assets (2013: £0.40 million) due to a review of the
useful life of the Momart brand name, which is now expected
to have an indefinite useful life, so amortisation ceased on 30
September 2013. The prior year included a further profit of £0.77
million on the sale of FOGL shares and £0.68 million relating to
the costs of the £10.0 million fund raising in July 2012.
Net Financing Costs
The Group’s net financing costs remain little changed with the
prior year at £0.20 million, with the fall in interest income on
bank deposits following the expenditure in the year, being offset
by a decrease in bank interest payable reflecting the £1.0 million
reduction in bank loans.
Underlying Pre-Tax Profit
The Group’s underlying pre-tax profits (“PBT”) grew by £0.36
million (10.8%) to £3.65 million (2013: £3.29 million).
Reported Pre-Tax Profit
After charging £0.3 million for the amortisation of intangible
assets (2013: £0.4 million), and the other non-trading items
noted above, reported profit before tax for the Group increased
by 21.7% to £3.40 million (2013: £2.8 million).
Taxation
The Group pays corporation tax on its UK earnings at 23%
and on earnings in the Falkland Islands at 26%. The Falklands
Islands Company Limited has been granted a foreign branch
exemption, and as a result no longer pays UK corporation tax
and will gain the full benefit of the tax allowability in the Falkland
Islands of expenditure on commercial and industrial buildings.
The effective tax rate on underlying profits is 24.7% (2013:
24.2%).
ANNUAL REPORT 2014
11
Earnings Per Share
Year ended 31 March
%
Underlying profit
before tax
2014
£m
3.65
2013
£m
Change
3.29
10.8
Taxation on underlying
profit
(0.90)
(0.80)
13.2
Underlying profit
after tax
Diluted average
number of shares in
issue (thousands)
Effective underlying
tax rate
Diluted EPS on
underlying profit
2.75
2.49
10.1
12,461
11,704
24.7% 24.2%
22.0p
21.3p
6.5
2.1
3.3
Fully diluted Earnings per Share (“EPS”) derived from underlying
profits, increased by 3.3% to 22.0p (2013: 21.3p), this was
after a 6.5% increase in the diluted average number of shares,
following the 33% increase in the share capital of the Company
in July 2012.
Balance Sheet
The Group’s Balance Sheet remains strong. Total net assets
increased to £35.4 million from £34.3 million in the prior year,
despite a £0.1 million fall in the market value of the Group’s
investment in FOGL as the share price fell slightly from 26.5
pence to 25.5 pence.
Retained earnings after the payment of tax and dividends
increased by £0.2 million to £14.8 million (2013: £13.6 million).
Bank borrowings were reduced to £1.0 million (2013: £2.0
million) and the Group had cash balances of £5.7 million (2013:
£11.4 million).
The carrying value of intangible assets was reduced by £0.1
million to £12.2 million (2013: £12.3 million) due to the annual
amortisation charge of £0.3 million on the intangible assets
arising on the 2008 acquisition of Momart, and a £0.1 million
amortisation charge for computer software, offset by a £0.3
million transfer from plant and machinery.
The net book value of property, plant and equipment increased
by £2.9 million to £16.6 million (2013: £13.7 million) after capital
investment of £4.3 million, including £2.1 million in the Falkland
Islands.
The Group owns investment properties comprising commercial
and residential properties in the Falkland Islands held for rental,
together with approximately 400 acres in and around Stanley.
This includes 18 acres for industrial development, 25 acres of
prime mixed-use land and 300 acres which is adjacent to the
site proposed for a new port.
During the year, the net book value of investment property
increased £0.6 million to £3.4 million (2013: £2.8 million) after
£0.1 million of depreciation. These properties are all situated in
the Falkland Islands, and the £0.7 million additions include £0.2
million for the purchase of a property on Ross Road, Stanley
and further development of residential properties to increase the
Group’s portfolio.
The Group owns 36 investment properties (mainly houses) in
Stanley which are held at depreciated cost. The net book value
of these properties of £3.4 million has been reviewed by the
Directors resident in the Falkland Islands and at 31 March 2014
the fair value of this property portfolio was estimated at £6.3
million (2013: £5.7 million). If oil development proceeds, the
value of all these properties is expected to increase significantly.
The Group’s 2.4% shareholding in FOGL is described above in
the Business Review.
Deferred tax assets relating to
liabilities
decreased to £0.6 million (2013: £0.7 million). These assets
now only include the deferred tax on the FIC unfunded scheme
calculated by applying the 26% Falklands tax rate.
future pension
Inventories, which largely represents stock held for resale in the
Falkland Islands increased by £1.6 million to £6.7 million at 31
March 2014. The increase largely relates to Falklands Building
Services which is experiencing significant growth.
Trade and Other Receivables were increased by £0.9 million to
£7.0 million as at 31 March 2014 due to the increased activity
at Momart. Average debtor days outstanding were 47.0 (2013:
57.1).
Outstanding finance lease liabilities totalled £5.2 million (2013:
£5.3 million). £4.9 million of the finance leases balance is in
respect of the 50 year lease from Gosport Borough Council for
the Gosport Pontoon.
Corporation tax due for payment within the next 12 months
is £0.4 million (2013: £0.4 million). This is lower than the £0.9
million taxation charge on underlying profit, as £0.3 million of the
2014 tax charge has been paid in instalments.
Trade and other payables increased from £10.0 million to £11.0
million at 31 March 2014 reflecting increased trading activity.
At 31 March 2014 the liability due in respect of the Group’s
defined benefit pension schemes was £2.5 million (2013: £2.6
million). The pension scheme in the Falkland Islands, which was
closed to new entrants in 1988 and to further accrual in 2007, is
unfunded and liabilities are met from operating cash flow.
The net deferred tax liabilities, excluding the pension asset at
31 March 2014 at £1.6 million remained in line with the prior
year (2013: £1.7 million). £1.4 million of this balance arises
on property, plant and equipment, and is principally due to
properties in the Falklands, where capital allowances of 10%
are available on the majority of the FIC properties. With such
assets depreciated over 20-50 years a timing difference arises
on which deferred tax is provided.
Net assets per share were 285p at 31 March 2014 (2013: 276p).
12
FALKLAND ISLANDS HOLDINGS PLC
Managing Director’s Strategic Report
FINANCIAL REVIEW - CONTINUED
Cash Flows
Operating Cash Flow
Net cash flow from operating activities decreased from £3.5
million last year to £2.8 million, primarily due to a further
increase in working capital as the Falkland Islands prepare for
future growth.
The Group’s Cash Flow can be summarised as follows:
Year ended 31 March
2014
£m
2013
£m
Underlying profit before tax
Depreciation
Amortisation of computer
software
Net Interest payable
EBITDA
Share based payments
Increase in working capital
Tax paid
Other
Net cash inflow from operating
activities
Net proceeds of shares issued
Sale of 1.2 million FOGL shares
Less:
Dividends paid
Capital expenditure
Net bank interest received
Disposal of PHFC pension
scheme
Loan to joint venture
Net cash outflow on sale &
purchase of treasury shares
Loan repayments
Increase in hire purchase
debtors
Financing draw down loans
Net (outflow) / inflow from
financing and investing
activities
Net cash (outflow) / inflow
Cash balance b/fwd
Cash balance c/fwd
3.6
1.1
0.1
0.2
5.0
-
(1.7)
(0.8)
0.3
2.8
-
-
(1.4)
(5.0)
0.1
-
(0.5)
(0.1)
(1.4)
(0.2)
-
(8.5)
(5.7)
11.4
5.7
3.3
1.2
-
0.2
4.7
0.2
(0.5)
(0.7)
(0.2)
3.5
9.2
1.0
(1.4)
(2.4)
0.1
(0.3)
-
-
(1.1)
(0.1)
0.1
5.1
8.6
2.8
11.4
Financing Outflows
During the year the Group paid dividends of £1.4 million (2013:
£1.4million) and made fixed asset investment of £5.0 million
of expenditure to strengthen the Group’s operating base,
including instalment payments of £1.6 million on the new vessel
for Gosport ferry (2013 total expenditure: £2.4 million); £2.7
million was invested in Stanley with £0.7 million of expenditure
on investment land and buildings, £0.6 million on plant and
machinery, £0.3 million spend refurbishing the Stanley head
office and £0.5 million building a new retail warehouse at Airport
Road.
Scheduled loan repayments of £1.4 million were made,
including £0.3 million of payments to Gosport Council on the
50 year pontoon finance lease, £0.1m of repayments on hire
purchase leases for trucks at Momart and £1.0 million of bank
loan repayments reducing the Group’s bank debt to £1.0 million.
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 which in the
Falklands is affected by Argentinian pressure on cruise ship
operators. 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 but will be at lower levels in the current year
following the departure of the Leiv Eiriksson exploration rig in
December 2012. Drilling activity is expected to resume in 2015.
If oil exploration were to stop, this stimulus would cease and
economic 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, India and South America. The global art market remains
buoyant 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 no increase in
subsidies is anticipated in the near term.
Income generated
from cultural exports through touring
international exhibitions is an important source of revenue for
UK museums and galleries and is likely to continue to grow as
new countries seek to display art works.
ANNUAL REPORT 2014
13
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 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.
At Momart, forward sales projections are monitored 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
9 June 2014
Risk Factors
The PHFC and FIC businesses are sensitive to changes in local
economic conditions and employment levels in local government
and key local businesses. 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
innovation,
leadership depends on continued
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 this was reinforced in March 2013 by an
overwhelming vote in favour of the Falklands status as a British
Overseas Territory by the people of the Falkland Islands. Despite
this Argentina has continued to protest its spurious claims and
this has made the development of commercial links with other
South American countries difficult although 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
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.
14
FALKLAND ISLANDS HOLDINGS PLC
Board of Directors and Secretary
David Hudd Chairman
David joined the Board as Chairman in 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 and
a non-executive director of a number of listed and unlisted companies. He was a founder director of Falkland Oil and Gas
Limited and remains a non-executive director of that company.
John Foster Managing Director
John joined the Board in 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 Non-executive Director
Mike joined the Board in 2005, having previously been appointed non-executive Chairman of the Portsmouth Harbour
Ferry Company Limited, following the Company’s successful bid. He is also a non-executive director of an investment
trust, Amati VCT 2 plc, and Treasurer of the University of Southampton. He is a Chartered Accountant and was a partner
of KPMG (and predecessor firms) until 1998. Since then he has been non-executive Chairman of several quoted and
unquoted companies. He is Chairman of the Audit Committee and a member of the Remuneration Committee.
Jeremy Brade Non-executive Director
Jeremy joined the Board in 2009. He is a Director of Harwood Capital Management where he is the senior private
equity partner. Jeremy has served on the boards of several private and publicly listed international companies. Formerly
Jeremy was a diplomat in the Foreign and Commonwealth Office, and before that an Army officer. He is Chairman of the
Remuneration Committee.
Edmund Rowland Non-executive Director
Edmund was appointed to the Board on 16 April 2013. He currently serves as a Director of Blackfish Capital Management,
a specialist asset manager based in London and as an employee of Banque Havilland S.A (London Branch), previously
having gained experience in London and Hong Kong, as an analyst and investment manager with BNP Paribas and
Blackfish. He has broad experience of principal investing in both equity and credit capital markets, with a focus on special
situations. Edmund is a member of the Remuneration Committee.
Carol Bishop Company Secretary
Carol Bishop joined the Company in 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.
15
Directors’ Report
The Directors present their annual report and the financial statements for the Company and for the Group for the year ended 31
March 2014.
Results and Dividend
The Group’s result for the year is set out in the Group Income Statement on page 20. The Group profit for the year after taxation
amounted to £2,633,000 (2013: £1,604,000). Basic earnings per share on underlying profits were 22.2p (2013: 21.6p). The Directors
recommend a dividend of 7.5p per share (2013: 7.5p) which, if approved by shareholders at the forthcoming Annual General Meeting
will be paid on 19 September 2014 to shareholders on the register at close of business on 29 August 2014. With the interim dividend
of 4.0p paid in January 2014 (2013: 4.0p) this will take the total dividend for the year to 11.5p per share (2013: 11.5p). 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 7.5p per share in respect of the previous year ended 31 March 2013 and an interim dividend of 4.0p per share in respect
of the current year.
Principal Activities
The business of the Group during the year ended 31 March 2014 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 Managing Director’s Strategic Report on pages 3 to 13 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’ on page 17. 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 on pages 53 to 57.
Share Capital and Substantial Interests In Shares
During the year no share capital was issued (2013: 3,119,837 Shares were issued by means of a placing and Open Offer to raise
£10.0 million, and 14,219 share options were exercised).
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 page 17 and in note 25 on pages 58 and 59.
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 2014.
Blackfish Capital Management
Fidelity investments
L S Licht
Number of shares
2,500,000
892,114
610,000
Percentage of shares in issue
net of shares held in Treasury
20.1
7.2
4.9
ANNUAL REPORT 2014 16
FALKLAND ISLANDS HOLDINGS PLC
Directors’ Report
CONTINUED
Capital Reorganisation
Following the shareholder approval, received at the Company’s Annual General Meeting on 20 August 2013, the Company’s share
capital underwent a reorganisation, as a result of which the number of shareholders was reduced from 6,324 to 2,294.
The existing ordinary shares were consolidated into ordinary shares of £10 each (“Consolidated Shares”), and the Company purchased
the fractional entitlements of Small Shareholders (being those with less than 1 Consolidated Share) created by this consolidation,
which amounted to 883.81 Consolidated Shares in aggregate. The price paid by the Company for these fractional entitlements
was £372.75 per Consolidated Share (equivalent to 372.75p per existing share). Following this purchase by the Company, the
Consolidated Shares (including those purchased by the Company) were sub-divided into new ordinary shares of 10p each which
were admitted to trading on 21 August 2013. The new ordinary shares representing the fractional entitlements purchased by the
Company were taken into Treasury.
On 27 August 2013, 70,000 of the shares held in Treasury were sold for 372.5 pence each. Following this sale, the Company holds
18,381 shares in Treasury. There have been no further movements in the Treasury shares since this date.
Payments to Suppliers
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 2014 or 31 March 2013.
Charitable and Political Donations
Charitable donations made by the Group during the year amounted to £23,709 (2013: £19,443), largely to local community charities
in Gosport and the Falkland Islands. There were no political donations in the year (2013: 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 auditor is 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 auditor is aware of
that information.
Auditors
KPMG Audit plc resigned as auditor on 2 August 2013. On 14 November 2013 the Directors appointed KPMG LLP as auditor of
the company to fill the vacancy. A resolution proposing the re-appointment of KPMG LLP 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, 200 Aldersgate, London, EC1A 4HD at
2.00 p.m. on 4 September 2014. 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 2014 and in the preceding year follows:
David Hudd
John Foster
Mike Killingley
Jeremy Brade
Edmund Rowland
Total
Salary
£’000
Bonuses
£’000
125
196
35
30
23
52
84
-
-
-
2014
Total
£’000
177
280
35
30
23
2013
Total
£’000
215
278
35
30
-
409
136
545
558
None of the Directors of the Company receive any pension contributions or benefit from any Group pension scheme.
ANNUAL REPORT 2014
17
Directors’ Report
CONTINUED
The Executive Directors participate in annual performance related bonus arrangements. The Chairman had the potential during the
year of earning up to 80% of his salary and the Managing Director up to 65%. The bonuses are subject to the achievements of
specified corporate and personal objectives.
Directors’ Interests in Shares
As at 31 March 2014 and 31 March 2013, the share options of executive Directors may be summarised as follows:
Date of grant
10 Feb 2005
14 Jun 2005
7 Aug 2007
15 Jul 2009
13 Aug 2012
Total
Number of options
D L Hudd
Number of options
J L Foster
Exercise price
Exercisable from
Expiry date
-
49,411
-
43,674
61,881
57,692
14,117
27,517
44,550
76,700
154,966
220,576
£5.20
10 Feb 2008
9 Feb 2015
£4.25
14 Jun 2008
13 Jun 2015
£3.30
£2.90
7 Aug 2010
6 Aug 2017
15 Jul 2012
14 Jul 2019
£4.04
13 Aug 2015
13 Aug 2022
The mid-market price of the Company’s shares on 31 March 2014 was 314.0 pence and the range in the year was 312.5 pence to
385.0 pence.
The Remuneration Committee has not yet reached a decision on whether, and if so to what extent, the 20,000 options granted to
David Hudd and 20,000 options granted to John Foster on 21 December 2010, should vest. For accounting purposes they have
been treated as lapsed in the year to 31 March 2014 and disclosed accordingly in this Annual Report. If the options do vest, wholly
or partially, an accounting adjustment, which is not expected to be material, will be made in a future accounting period.
The Directors’ options extant at 31 March 2014 totalled 375,542 and represented 3.0% of the Company’s issued share capital. The
399,354 remaining options are held by 51 other employees of the Group including subsidiary directors and senior management.
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 2006 were as shown below:
David Hudd*
John Foster*
Mike Killingley
Jeremy Brade
Edmund Rowland
Ordinary shares as at 31 March 2014
Ordinary shares as at 31 March 2013
116,199
61,153
30,000
15,000
110,630
25,584
16,000
10,000
**2,500,000
**2,500,000
* The shareholdings above include all Shares held in the Company’s share incentive plan in which the Directors have a beneficial
interest.
** Edmund Rowland is a Director of Blackfish Capital Management Limited, the fund manager of Blackfish Capital Alpha Fund
SPC – Blackfish Talisman Fund which holds 2,500,000 shares. He does not hold any shares directly in the Company.
Share Incentive Plan
In November 2012, the Company implemented an HMRC approved Share Incentive Plan (SIP) available to employees of the Group,
which enables UK and Falklands staff to acquire shares in the Company through monthly purchases of up to £125 per
month or 10% of salary, whichever is lower. For each three shares purchased by the employee, the Company contributes one free
matching share. These shares are placed in trust and if they are left in trust for at least five years, they can be removed free of UK
income tax and national insurance contributions. During the years ended 31 March 2014 and 2013 the Company purchased £500 of
matching shares for Mr D Hudd and Mr J Foster.
18
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. As required by the
AIM rules of the London Stock Exchange, 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 Parent 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:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• state whether they have been prepared in accordance with IFRSs as adopted by the EU; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Company
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:
• these financial statements, prepared in accordance with IFRS, as adopted by the European Union, give a true and fair view of the
assets, liabilities, financial position and profit of the Company and the undertakings included in the consolidation as a whole; and
• the management report, which comprises the Chairman’s Statement and the Managing Director’s Strategic Report, includes a fair
review of the 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
9 June 2014
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 2014 which comprise
the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated and Company
Balance Sheets, the Consolidated and Company Cash Flow Statements, the Consolidated and Company Statements of Changes in
Shareholders’ Equity and the related notes.
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 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 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 Financial Reporting Council’s web-site at
www.frc.org.uk/auditscopeukprivate.
Opinion on Financial Statements
In our opinion:
• the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 March
2014 and of the Group’s profit for the year then ended;
• the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the EU;
• the Parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the EU and as
applied in accordance with the provisions of the Companies Act 2006; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on Other Matter Prescribed by the Companies Act 2006
In our opinion the information given in the Strategic Report and 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:
• adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received
from branches not visited by us; or
• the Parent Company financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Wayne Cox
Senior Statutory Auditor
For and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
St Nicholas House
Park Row
Nottingham
NG1 6FQ
9 June 2014
ANNUAL REPORT 2014 20
FALKLAND ISLANDS HOLDINGS PLC
Consolidated Income Statement
FOR THE YEAR ENDED 31 MARCH 2014
Before
amortisation
of intangibles
Amortisation
of intangibles
& non-trading
items (Note 5)
2014
£’000
2014
£’000
Before
amortisation
of intangibles
items
Amortisation
of intangibles
& non-trading
items (Note 5)
2013
£’000
2013
£’000
Total
2014
£’000
Notes
4
Revenue
Cost of sales
Gross profit
Other administrative
expenses
Fund raising expenses
Gain on sale of FOGL shares
24
11
Net settlement gain /(loss)
on the PHFC pension
scheme transfer
Amortisation of intangible
assets
38,263
(22,212)
16,051
(12,235)
-
-
-
-
-
-
-
-
-
-
64
38,263
35,596
(22,212)
(21,178)
16,051
14,418
(12,235)
(10,916)
-
-
64
-
-
-
-
(307)
(307)
Total
2013
£’000
35,596
(21,178)
14,418
(10,916)
(682)
768
-
-
-
-
(682)
768
(182)
(182)
(398)
(398)
Operating expenses
(12,235)
(243)
(12,478)
(10,916)
(494)
(11,410)
Operating profit
3,816
(243)
3,573
3,502
(494)
3,008
Share of results of
Joint Venture
Profit before net financing
costs
Finance income
Finance expense
Net financing costs
Profit / (loss) before tax
from continuing operations
36
-
36
-
-
-
3,852
(243)
3,609
3,502
(494)
3,008
220
(425)
(205)
-
-
-
220
(425)
(205)
257
(468)
(211)
-
-
-
257
(468)
(211)
3,647
(243)
3,404
3,291
(494)
2,797
Taxation
(901)
130
(771)
(796)
(397)
(1,193)
8
9
Profit / (loss) for the year
attributable to equity
holders of the company
10
Earnings per share
2,746
(113)
2,633
2,495
(891)
1,604
Basic
Diluted
22.2p
22.0p
21.3p
21.1p
21.6p
21.3p
13.9p
13.7p
ANNUAL REPORT 2014
21
Consolidated Statement of Comprehensive Income
FOR THE YEAR ENDED 31 MARCH 2014
15
Unrealised loss on revaluation of shares held in Falkland Oil and Gas Limited
Transfer to the income statement on sale of shares in Falkland Oil and Gas
2014
£’000
(129)
2013
£’000
(4,873)
-
(521)
Items which will ultimately be recycled to the income statement
(129)
(5,394)
24
24
PHFC remeasurement of the defined benefit liability
FIC remeasurement of the defined benefit liability
Movement on deferred tax asset relating to pension schemes
Effect of tax rate changes on deferred tax asset relating to pension schemes
Items which will not ultimately be recycled to the income statement
Other comprehensive expense
Profit for the year
Total comprehensive income/ (expense)
-
135
(35)
-
100
(29)
2,633
2,604
(77)
(173)
61
47
(142)
(5,536)
1,604
(3,932)
22
FALKLAND ISLANDS HOLDINGS PLC
Consolidated Balance Sheet
AT 31 MARCH 2014
Notes
11
12
13
15
16
17
18
19
20
17
21
Non-current assets
Intangible assets
Property, plant and equipment
Investment properties
Shares held in Falkland Oil and Gas Limited
Investment in Joint Venture
Loan to Joint Venture
Non-current assets held-for-sale
Hire purchase debtors due in more than one year
Deferred tax assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Hire purchase debtors due in less than one year
Cash and cash equivalents
Total current assets
TOTAL ASSETS
Current liabilities
22
Interest-bearing loans and borrowings
Corporation tax payable
23
Trade and other payables
Total current liabilities
Non-current liabilities
22
24
18
Interest-bearing loans and borrowings
Employee benefits
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
2014
£’000
2013
£’000
12,238
16,609
3,396
3,270
86
529
-
342
645
12,315
13,725
2,786
3,399
50
-
20
121
671
37,115
33,087
6,692
7,041
503
5,715
19,951
57,066
(1,109)
(419)
(10,981)
(12,509)
(5,061)
(2,480)
(1,639)
(9,180)
(21,689)
35,377
1,243
17,447
1,162
14,839
686
5,099
6,133
486
11,416
23,134
56,221
(1,149)
(364)
(10,012)
(11,525)
(6,139)
(2,584)
(1,694)
(10,417)
(21,942)
34,279
1,243
17,447
1,162
13,612
815
35,377
34,279
These financial statements were approved by the Board of Directors on 9 June 2014 and were signed on its behalf by:
J L Foster
Director
Company Balance Sheet
AT 31 MARCH 2014
Notes
Non-current assets
14
20
18
20
21
Financial assets - investments in subsidiaries
Other receivables
Deferred tax
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
TOTAL ASSETS
Current liabilities
22
Interest-bearing loans and borrowings
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
ANNUAL REPORT 2014
23
2014
£’000
2013
£’000
29,004
1,952
4
29,097
1,709
4
30,960
30,810
19
9,280
9,299
40,259
(785)
(48)
(578)
21
10,554
10,575
41,385
(800)
(51)
(461)
(1,411)
(1,312)
-
-
-
(1,411)
38,848
1,243
17,447
6,910
13,248
38,848
(769)
(582)
(1,351)
(2,663)
38,722
1,243
17,447
6,910
13,122
38,722
These financial statements were approved by the Board of Directors on 9 June 2014 and were signed on its behalf by:
J L Foster
Director
Registered company number: 03416346
24
FALKLAND ISLANDS HOLDINGS PLC
Consolidated Cash Flow Statement
FOR THE YEAR ENDED 31 MARCH 2014
Notes
21
Cash flows from operating activities
Profit for the year
Adjusted for:
(i) Non-cash items:
Depreciation
Depreciation of computer software
Amortisation
(Profit) / loss on disposal of fixed assets
Share of Joint Venture profit
Amortisation of loan fees
Past service cost of pension scheme
Expected return on pension scheme assets
Interest cost on pension scheme liabilities
Equity-settled share-based payment expenses
Non-cash items adjustment
(ii) Other items:
Bank interest receivable
Bank interest payable
Finance lease interest
Gain on disposal of FOGL shares
Fund raising expenses
Net settlement (gain)/loss on the transfer of the PHFC pension scheme
Corporation and deferred tax expense
Other adjustments
Operating cash flow before changes in working capital and provisions
Increase in trade and other receivables
Increase in 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
Purchase of property, plant and equipment
Purchase of computer software
Proceeds from the disposal of property, plant and equipment
Proceeds received from the sale of FOGL shares
Cash received / (paid) on transfer of pension scheme
Investment in Joint Venture
Loans to Joint Venture
Interest received
Net cash flow from investing activities
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
Net cashflows from sale and purchase of Treasury shares
Fund raising expenses paid
Dividends paid
Net cash flow from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at start of year
Cash and cash equivalents at end of year
2014
£’000
2013
£’000
2,633
1,604
1,116
117
307
(4)
(36)
16
45
-
108
43
1,712
(99)
39
262
-
-
(64)
771
909
5,254
(888)
(1,593)
927
(122)
(1,676)
3,578
(780)
2,798
(4,933)
(41)
21
-
46
-
(529)
99
(5,337)
(238)
(1,396)
-
(39)
-
(66)
-
(1,423)
(3,162)
(5,701)
11,416
5,715
1,204
-
398
56
16
-
(2)
111
134
1,917
(164)
85
-
(768)
682
182
1,193
1,210
4,731
(513)
(1,108)
1,221
(129)
(529)
4,202
(735)
3,467
(2,415)
-
17
1,005
(260)
(50)
-
164
(1,539)
(72)
(1,135)
122
(85)
9,889
-
(620)
(1,362)
6,737
8,665
2,751
11,416
Company Cash Flow Statement
FOR THE YEAR ENDED 31 MARCH 2014
Notes
Cash flows from operating activities
Profit / (Loss) for the year
Adjusted for:
Net financing costs
Amortisation of loan fees
Equity-settled share-based payment expenses
Impairment in Erebus
Fund raising expenses
Corporation and deferred tax expense
Operating profit before changes in working capital
Decrease in trade and other receivables
Increase (Decrease) in trade and other payables
Cash generated from operations
Corporation taxes paid
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
Net cashflows from sale and purchase of Treasury shares
Fund raising expenses paid
Dividends paid
Net cash flow from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at start of year
21
Cash and cash equivalents at end of year
ANNUAL REPORT 2014
25
2014
£’000
2013
£’000
1,632
(1,597)
26
16
7
129
-
72
64
16
52
3,766
682
57
1,882
3,040
2
57
4
(50)
1,941
2,994
(75)
(23)
1,866
2,971
(825)
(800)
(26)
-
(66)
-
1,949
(800)
(64)
9,889
-
(620)
(1,423)
(1,362)
(3,140)
8,992
(1,274)
10,554
11,963
(1,409)
9,280
10,554
26
FALKLAND ISLANDS HOLDINGS PLC
Consolidated Statement of Changes in Shareholders’ Equity
FOR THE YEAR ENDED 31 MARCH 2014
Notes
Reconciliation of movement in
capital and reserves - Group
Financial
assets fair
value
revaluation
reserve
£’000
Share
premium
account
£’000
Called up
share capital
£’000
Other
reserves
£’000
Retained
earnings
£’000
Total equity
£’000
Balance at 1 April 2012
930
6,209
7,871
1,162
13,316
29,488
Profit for the year
Share-based payments granted
to employees
26
Share based payments on
warrants granted to Banque
Havilland SA on Fund raising
Dividends
Issue of shares
Change in fair value of shares in
Falkland Oil and Gas Limited
Transfer to the income statement
on sale of shares in FOGL
Remeasurement of the defined
benefit liability, net of tax
Effect of tax rate changes on
deferred tax asset relating to
pension schemes
-
-
-
-
313
-
-
-
-
-
-
-
-
-
(4,873)
(521)
-
-
-
-
-
-
9,576
-
-
-
-
-
-
-
-
-
-
-
-
-
1,604
1,604
134
62
134
62
(1,362)
(1,362)
-
-
-
(189)
9,889
(4,873)
(521)
(189)
47
47
Balance at 31 March 2013
1,243
815
17,447
1,162
13,612
34,279
Profit for the year
Share based payments granted
to employees
Net Treasury share movements
Dividends
Change in fair value of shares in
Falkland Oil and Gas Limited
Remeasurement of the defined
benefit liability, net of tax
-
-
-
-
-
-
-
-
-
-
(129)
-
-
-
-
-
-
-
-
-
-
-
-
-
2,633
2,633
43
43
(126)
(126)
(1,423)
(1,423)
-
(129)
100
100
Balance at 31 March 2014
1,243
686
17,447
1,162
14,839
35,377
ANNUAL REPORT 2014
27
Company Statement of Changes in Shareholders’ Equity
FOR THE YEAR ENDED 31 MARCH 2014
Reconciliation of movement in capital
and reserves - Company
Balance at 1 April 2012
Profit for the year
Share based payments granted to employees
Share based payments on warrants granted to
Banque Havilland SA on Fund raising
Dividends
Issue of shares
Called up
share
capital
£’000
Share
premium
account
£’000
Other
reserves
£’000
Retained
earnings
£’000
Total equity
£’000
930
7,871
6,910
15,885
31,596
-
-
-
-
-
-
-
-
313
9,576
-
-
-
-
-
(1,597)
(1,597)
134
62
134
62
(1,362)
(1,362)
-
9,889
Balance at 31 March 2013
1,243
17,447
6,910
13,122
38,722
Profit for the year
Share based payments granted to employees
Net Treasury share movement
Dividends
-
-
-
-
-
-
-
-
-
-
-
-
1,632
1,632
43
(126)
43
(126)
(1,423)
(1,423)
Balance at 31 March 2014
1,243
17,447
6,910
13,248
38,848
A profit of £1,632,000 (2013 loss: £1,597,000) 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 own profit and loss account.
28
Notes to the financial statements
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 Strategic Report. The financial position of the Group, its cash flows, liquidity position and borrowing
facilities are also described in the Managing Director’s Strategic Report. 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. After making enquiries the Directors have a reasonable expectation that the Company and Group have
adequate facilities 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.
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. Investments in subsidiaries not classified as held-for-sale within the Company
balance sheet are stated at cost.
Joint Ventures
Jointly controlled entities are those entities over whose activities the Group has joint control, established by contractual agreement
and requiring the venturers’ unanimous consent for strategic financial and operating decisions. Jointly controlled entities are
accounted for using the equity method (equity accounted investees) and are initially recognised at cost. The Group’s investment
includes goodwill identified on acquisition, net of any accumulated impairment losses. The consolidated financial statements include
the Group’s share of the total comprehensive income and equity movements of equity accounted investees, from the date that
significant influence or joint control commences until the date that significant influence or joint control ceases. When the Group’s
share of losses exceeds its interest in an equity accounted investee, the Group’s carrying amount is reduced to nil and recognition of
further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments
on behalf of an investee.
FALKLAND ISLANDS HOLDINGS PLC 29
1 Accounting Policies CONTINUED
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 financial instruments and amortisation of intangible assets on acquisition. Such
items arise because of their size or nature, and in 2014, comprise:
• The net settlement gain on the disposal of the liabilities in the PHFC pension scheme; and
• The amortisation of intangible assets.
In 2013, these comprised the following:
• Expenses incurred on the fund raising;
• The gain on the sale of 1,175,000 FOGL shares;
• The net settlement loss on the disposal of the liabilities in the PHFC pension scheme; and
• The amortisation of intangible assets.
In 2013, the total fund raising costs incurred were £807,000, of which £125,000 was accounted for as a deduction from equity (share
premium), as these costs were considered to be incremental and directly attributable to the fund raising.
The remaining £682,000 of costs were considered by the Directors to be to incurred in generally researching
potential sources of finance and being advised on the generic terms on which such a fund raising might be achieved, and were
thus not directly attributable and incremental to the equity fund raising. This was on the basis that the Company considered that all
or substantially all of the costs would have been incurred had the fundraising not proceeded to completion. It was also considered
that this treatment was more open and gave greater prominence to material costs incurred during the year to all readers of the
accounts.
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.
ANNUAL REPORT 2014
30
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
indefinite
6 - 10 years
5 years
Computer software
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 seven 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 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.
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
recycled to profit and loss. Financial instruments classified as available-for-sale are initially recognised at fair value less directly
attributable transaction costs.
FALKLAND ISLANDS HOLDINGS PLC 31
1 Accounting Policies CONTINUED
Employee share awards
The Group provides benefits to certain employees (including Directors) in the form of share-based payment transactions, whereby
the recipient 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 weighted average 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.
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,
which approximates to the point when significant risks and rewards are transferred to the buyer, 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, where the costs incurred and the costs to complete the transaction can be
measured reliably, the amount of profit attributable to the stage of completion of a contract is recognised on the basis of the incurred
percentage of anticipated cost, which in the opinion of the Directors, is the most appropriate proxy for the stage of completion.
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
During the year to 31 March 2013, the Group also operated two pension schemes providing benefits based on final pensionable pay.
The scheme in Portsmouth Harbour Ferry Company Limited was transferred to Legal and General in March 2013. Therefore at 31
March 2014 and 31 March 2013, the Group has one remaining pension scheme providing benefits based on final pensionable pay,
which is unfunded and closed to future accrual.
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 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 recognised immediately within profit and loss.
ANNUAL REPORT 2014 32
Notes to the financial statements
CONTINUED
1 Accounting Policies CONTINUED
The net interest cost on the defined benefit liability for the period is determined by applying the discount rate used to measure the
defined benefit obligation at the end of the period to the net defined benefit liability at the beginning of the period. It takes into
account any changes in the net defined benefit liability during the period as a result of contributions and benefit payments.
Remeasurements of the defined benefit liability 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.
Dividends
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.
Income 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, in which case it is 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:
• Goodwill not deductible for tax purposes; and
• Initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor
taxable profits.
• Temporary differences related to investments in subsidiaries, to the extent that it is probable that they will not reverse in the
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.
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.
FALKLAND ISLANDS HOLDINGS PLC ANNUAL REPORT 2014
33
1 Accounting Policies CONTINUED
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.
New, amended and revised IFRSs and International Financial Reporting Interpretations Committee
pronouncements (“IFRICs”)
In the current year, the Group has applied IAS 19 Employee Benefits (as revised in 2011) and the related consequential amendments
for the first time. The amendments to IAS 19 Employee Benefits, have resulted in a change in presentation in these financial
statements, as the expected return on plan assets and the interest cost on the FIC and PHFC defined benefit obligation are replaced
with a “net interest” amount under IAS 19 (as revised in 2011).
Other than the minor amendments required by IAS 19 Employee Benefits, there were no amendments or revisions to IFRSs effective
for the first time in the year ended 31 March 2014 which had an impact on the consolidated financial statements.
The following amendments and revisions to IFRSs which were effective for the first time in the year ended 31 March 2014 did not
have any material impact on the consolidated financial statements:
Amendments and revisions to IFRSs
IFRS 7 Financial Instruments: Disclosures
IFRS 13 Fair Value Measurement
IAS 19 Employee Benefits (revised)
The following IFRSs and amendments and revisions to IFRSs, have been adopted by the EU, and were available for early adoption
but have not yet been applied in the preparation of the consolidated financial statements:
New IFRSs
IFRS 10 Consolidated Financial Statements
IFRS 11 Joint Arrangements
IFRS 12 Disclosure of Interests in Other Entities
IAS 27 Separate Financial Statements
IAS 28 Investments in Associates and Joint Ventures
Amendments and revisions to IFRSs
IAS 32 Financial Instruments: Presentation
Various Improvements to IFRSs – minor amendments
Effective date
(accounting periods commencing on or after):
1 January 2014
1 January 2014
1 January 2014
1 January 2014
1 January 2014
1 January 2014
various
The Directors do not anticipate that the adoption of these new IFRSs and amendments and revisions to IFRSs will have a material
impact on the consolidated financial statements in the period of initial application.
34
FALKLAND ISLANDS HOLDINGS PLC
Notes to the financial statements
CONTINUED
2 Segmental Information 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: goods and essential services 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.
ANNUAL REPORT 2014
35
2 Segmental Information Analysis CONTINUED
2014
Revenue
Segment operating profit before tax & amortisation
Net settlement gain on the PHFC pension scheme
Amortisation
Segment operating profit
Share of results of Joint Venture
Profit before net financing costs
Interest income
Interest expense
Segment profit before tax
Assets and liabilities
Segment assets
Segment liabilities
Segment net assets
Other segmental information
Capital expenditure:
Goods and
essential
services
(Falklands)
£’000
15,881
977
-
-
977
36
1,013
121
(108)
1,026
Ferry Services
(Portsmouth)
£’000
Art logistics
& storage
(UK)
£’000
Unallocated
£’000
4,124
1,013
-
-
1,013
-
18,258
1,826
-
(307)
1,519
-
1,013
1,519
-
(246)
767
-
(29)
1,490
-
-
64
-
64
-
64
99
(42)
121
Total
£’000
38,263
3,816
64
(307)
3,573
36
3,609
220
(425)
3,404
20,129
14,437
13,492
9,008
(8,950)
(6,541)
(4,818)
(1,380)
11,179
7,896
8,674
7,628
57,066
(21,689)
35,377
Property, plant, equipment
2,057
1,958
Investment properties
Computer software
Depreciation - property, plant and equipment
Depreciation - investment properties
Depreciation of computer software
Amortisation of intangible assets on acquisition
of Momart
Underlying profit before tax
Segment operating profit
Share of results of Joint Venture
Profit before net financing costs
Interest income
Interest expense
Underlying profit before tax
658
-
429
48
-
-
977
36
1,013
121
(108)
1,026
260
-
41
307
-
117
307
-
-
332
-
-
-
1,013
1,826
-
-
1,013
1,826
-
(246)
-
(29)
767
1,797
-
-
-
-
-
-
-
-
-
99
(42)
57
4,275
658
41
1,068
48
117
307
3,816
36
3,852
220
(425)
3,647
The £9,008,000 (2013: £14,838,000) unallocated assets above include the Group cash balance of £5,715,000 (2013: £11,416,000),
and the Group’s investment in Falkland Oil and Gas of £3,270,000 (2013: £3,399,000) together with £23,000 (2013: £23,000) of
prepayments held in Falkland Islands Holdings plc. The £1,380,000 (2013: £2,031,000) unallocated liabilities above include the
Group’s bank loan of £785,000 (2013: £1,569,000), together with the accruals and tax balances held within Falkland Islands Holdings
plc.
36
FALKLAND ISLANDS HOLDINGS PLC
Notes to the financial statements
CONTINUED
2 Segmental Information Analysis CONTINUED
Goods and
essential
services
(Falklands)
£’000
Ferry
Services
(Portsmouth)
£’000
Art logistics
& storage
(UK)
£’000
Unallocated
£’000
15,222
4,076
16,298
Segment operating profit before tax & amortisation
1,325
984
1,193
2013
Revenue
Fund raising costs
Gain on sale of 1.175 million FOGL shares
Net settlement loss on the PHFC pension scheme
Amortisation
Segment operating profit
Share of results of Joint Venture
Profit before net financing costs
Interest income
Interest expense
Segment profit before tax
Assets and liabilities
Segment assets
Segment liabilities
Segment net assets
Other segmental information
Capital expenditure:
Property, plant, equipment
Investment properties
Depreciation - property, plant & equipment
Depreciation - investment properties
Amortisation
Underlying profit before tax
-
-
-
-
1,325
-
1,325
91
(118)
1,298
-
-
-
-
984
-
984
2
(263)
723
-
-
-
(398)
795
-
795
-
(29)
766
1,332
262
466
23
-
223
-
301
-
-
598
-
414
-
398
Segment operating profit
1,325
984
1,193
Share of results of Joint Venture
-
-
-
Profit before net financing costs
1,325
984
1,193
Interest income
Interest expense
Underlying profit before tax
91
(118)
1,298
2
(263)
723
-
(29)
1,164
164
(58)
106
-
-
(682)
768
(182)
-
(96)
-
(96)
164
(58)
10
-
-
-
-
-
-
-
-
Total
£’000
35,596
3,502
(682)
768
(182)
(398)
3,008
-
3,008
257
(468)
2,797
2,153
262
1,181
23
398
3,502
-
3,502
257
(468)
3,291
15,059
12,792
13,532
14,838
(8,664)
(6,650)
(4,597)
(2,031)
6,395
6,142
8,935
12,807
56,221
(21,942)
34,279
ANNUAL REPORT 2014
37
3 Geographical analysis
The tables below analyse revenue and other information by geography:
2014
Revenue (by source)
United
Kingdom
£’000
Falkland
Islands
£’000
22,382
15,881
Non-current segment assets, excluding deferred tax and financial instruments
23,377
9,823
Capital expenditure
2,259
2,715
2013
Revenue (by source)
United
Kingdom
£’000
Falkland
Islands
£’000
20,374
15,222
Non-current segment assets, excluding deferred tax and financial instruments
22,199
6,818
Capital expenditure
821
1,594
Total
£’000
38,263
33,200
4,974
Total
£’000
35,596
29,017
2,415
4 Revenue
Sale of goods
Rendering of services
Total revenue
5 Amortisation of intangible assets and non-trading items
Amortisation charge on Momart intangible assets acquired
Amortisation charge
Profit before tax as reported
adjusted for
Amortisation
Fund raising expenses
Gain on sale of FOGL shares
Net settlement (gain)/ loss on the PHFC pension scheme
Total amortisation and non-trading items
Underlying profit before tax
2014
£’000
2013
£’000
12,392
12,345
25,871
23,251
38,263
35,596
2014
£’000
(307)
(307)
3,404
307
-
-
(64)
243
2013
£’000
(398)
(398)
2,797
398
682
(768)
182
494
3,647
3,291
Note 9 includes an analysis of the tax charged on the amortisation and non-trading items in the year ended 31 March 2013.
38
FALKLAND ISLANDS HOLDINGS PLC
Notes to the financial statements
CONTINUED
6 Expenses and auditor’s remuneration
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
Depreciation of computer software
Amortisation of intangible assets
Foreign currency differences
Impairment loss on trade and other receivables
Cost of inventories recognised as an expense
Operating lease payments
2014
£’000
131
2013
£’000
102
1,116
1,204
117
307
(50)
(44)
9,025
822
-
398
(153)
61
8,368
773
Auditor’s 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 auditor’s remuneration
2014
£’000
2013
£’000
-
-
-
-
-
-
-
-
2014
£’000
29
61
-
90
-
-
-
-
-
-
-
-
2013
£’000
28
61
37
126
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.
The 2014 auditor’s remuneration for statutory audit services and non-audit services relates solely to amounts paid to KPMG LLP. The
2013 amounts relate solely to amounts paid to KPMG Audit plc.
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:
Ferry services
Falkland Islands: in Stanley
in UK
Art logistics & storage
Head office
Total average staff numbers
Number of employees
Group
Number of employees
Company
2014
38
142
5
121
5
311
2013
38
123
5
116
5
287
2014
2013
-
-
-
-
5
5
-
-
-
-
5
5
ANNUAL REPORT 2014
39
7 Staff numbers and cost CONTINUED
The aggregate payroll cost of these persons was as follows:
Wages and salaries
Share-based payments (see note 25)
Social security costs
Contributions to defined contribution plans
Group
Company
2014
£’000
10,490
43
910
243
2013
£’000
8,747
134
802
222
2014
£’000
638
7
80
8
Total employment costs
11,686
9,905
733
2013
£’000
583
52
76
8
719
8 Finance income and expense
Details of audited Directors’ remuneration are provided in the Directors’ Report, under the heading ‘Details of Directors’ Remuneration
and Emoluments and Directors’ interests in shares
Bank interest receivable
Finance lease interest receivable
Net interest income on the PHFC net defined benefit liabilities
Total financial income
Interest payable on bank loans
Net interest cost on the FIC defined benefit pension scheme liabilities
Amortisation of loan fees
Finance lease interest payable
Total financial expense
Net financing cost
2014
£’000
99
121
-
220
(39)
(108)
(16)
(262)
(425)
(205)
2013
£’000
164
91
2
257
(85)
(111)
(16)
(256)
(468)
(211)
40
FALKLAND ISLANDS HOLDINGS PLC
Notes to the financial statements
CONTINUED
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) / expense
Total tax expense
Reconciliation of effective tax rate
Profit on ordinary activities before tax
Tax using the UK corporation tax rate of 23% (2013:24%)
Expenses not deductible for tax purposes
Deduction in respect of exercised stock options
Marginal relief
Effect of higher tax rate overseas
Reduction in deferred tax rate
Income from joint ventures
Deferred tax arising on change in tax regime
Adjustments to tax charge in respect of previous periods
Total tax expense
Tax recognised directly in other comprehensive income
Deferred tax recognised directly in other comprehensive income
Total tax credit recognised directly in other comprehensive income
2014
£’000
801
34
835
47
(136)
25
(64)
771
2014
£’000
3,404
783
78
-
-
(5)
(136)
(8)
-
59
771
2014
£’000
35
35
2013
£’000
665
(74)
591
620
(60)
42
602
1,193
2013
£’000
2,797
671
53
(6)
(1)
4
(60)
-
564
(32)
1,193
2013
£’000
(108)
(108)
Factors affecting the future tax charges
Reductions in the UK corporation tax rate from 26% to 24% (effective from 1 April 2012) and to 23% (effective 1 April 2013) were
substantively enacted on 26 March 2012 and 3 July 2012 respectively. Further reductions to 21% (effective from 1 April 2014) and
20% (effective from 1 April 2015) were substantively enacted on 2 July 2013. This will reduce the company’s future current tax charge
accordingly. The deferred tax liabilities and assets at 31 March 2014 have been calculated based on the rate of 20% substantively
enacted at the balance sheet date, with the Falklands tax rate of 26% applied to all Falkland Islands assets and liabilities. It has not
yet been possible to quantify the full anticipated effect of the announced reductions, although this will further reduce the Group and
Company deferred tax assets and liabilities accordingly.
The tax charge in the year to 31 March 2013 on the amortisation and non-trading items of the Group was £397,000. This included the
£167,000 deferred tax credit on the amortisation of intangibles and the net settlement loss of the pension scheme, offset against a
£564,000 deferred tax charge arising in the year to 31 March 2013 from the temporary differences on commercial industrial buildings
in the Falklands. This needed to be provided for following a change in the Group’s tax situation that arose from HMRC’s acceptance
of a foreign branch exemption, which in practice meant that it became necessary to account for deferred tax from this date in
accordance with Falklands tax law rather than UK tax law. Unlike under UK tax law, Falklands tax law allows capital allowances to
be claimed on commercial buildings at 10% on a straight line basis. With such assets depreciated over 20-50 years for accounting
purposes, a temporary difference arises, on which deferred tax had to be provided.
ANNUAL REPORT 2014
41
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 in Treasury and 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 in Treasury
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
2014
£’000
2,633
2013
£’000
1,604
2014
Number
2013
Number
12,431,623
11,612,626
(12,764)
(37,785)
-
(38,364)
12,381,074
11,574,262
79,911
129,600
12,460,985
11,703,862
2014
21.3p
21.1p
2013
13.9p
13.7p
To provide a comparison of earnings per share on underlying performance, the calculation below sets out basic and diluted earnings
per share based on underlying profits.
Earnings per share on underlying profit
Underlying profit before tax (see note 5)
Taxation
Underlying profit after tax
Effective tax rate
Weighted average number of shares in issue excluding Treasury share and the ESOP
(from above)
Diluted weighted average number of shares
Basic earnings per share on underlying profit
Diluted earnings per share on underlying profit
2014
£’000
3,647
(901)
2,746
2013
£’000
3,291
(796)
2,495
24.7%
24.2%
12,381,074
11,574,262
12,460,985
11,703,862
22.2p
22.0p
21.6p
21.3p
42
FALKLAND ISLANDS HOLDINGS PLC
Notes to the financial statements
CONTINUED
11 Intangible assets
Group
Computer
Software
£’000
Customer
relationships
£’000
Brand
names
£’000
Non-compete
Agreements
£’000
Goodwill
£’000
Total
£’000
Cost:
At 1 April 2012 at 31 March 2013
Additions
Transfer from plant and machinery
At 31 March 2014
Accumulated amortisation:
At 1 April 2012
Amortisation for the year
At 31 March 2013
Depreciation of computer software
Amortisation of other intangibles
for the year
At 31 March 2014
Net book value:
At 31 March 2012
At 31 March 2013
At 31 March 2014
-
41
306
347
-
-
-
117
-
1,882
2,823
72
11,539
16,316
-
-
-
-
-
-
-
-
41
306
1,882
2,823
72
11,539
16,663
989
243
1,232
-
236
574
141
715
-
70
57
14
71
-
1
1,983
-
1,983
-
-
117
1,468
785
72
1,983
-
-
230
893
650
414
2,249
2,108
2,038
15
1
-
9,556
9,556
9,556
3,603
398
4,001
117
307
4,425
12,713
12,315
12,238
Amortisation and impairment charges are recognised in operating expenses in the income statement.
Customer relationships - are ongoing relationships, both contractual and otherwise, with customers considered to be of future
econimic benefit to the Group with estimated econimic lives of 6-10 years.
Non-compete agreements - are contractual binding agreements with senior Momart personel not to compete with the Group for five
years in the event of their leaving the Group service.
Prior to 1 October 2013, the brand name was amortised over 20 years. If the brand name had continued to be amortised over 20
years, the additional amortisation charged in these accounts would have been £71,000.
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 2012
Balance at 31 March 2013
Balance at 31 March 2014
Arts logistics and
storage (UK)
£’000
Ferry Services
(Portsmouth)
£’000
5,577
5,577
5,577
3,979
3,979
3,979
Total
£’000
9,556
9,556
9,556
43
11 Intangible assets CONTINUED
Impairment
The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill and /or indefinite life
assets 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 and indefinite life intangibles for each CGU was separately assessed and tested for impairment, with
no impairment charges resulting (2013: nil).
As part of testing goodwill and indefinite life intangibles for impairment, 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 of as to future performance and relevant external sources of information. Sensitivity
analysis as at 31 March 2014 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, the cash flows of the Art Logistics and Storage CGU have been discounted using a pre tax
discount rate of 13.7% (2013: 14.1%), and the cash flows of the Ferry Services have been discounted using a pre-tax discount
rate of 12.5% (2013: 12.9%). Management have determined that each 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.
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. For both Ferry Services and Art Logistics
and Storage, the future cash flows are based on the latest budgets and business plans, which take account of known business
conditions, and are therefore consistent with past experience.
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 assumption 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.
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 (2013: £nil). 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. The key
assumptions made in the estimation of future cash flows are the passenger numbers and the average revenue per passenger.
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 (2013: nil). 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. The key
assumptions made in the estimation of future cash flows are in relation to revenue.
ANNUAL REPORT 2014 44
FALKLAND ISLANDS HOLDINGS PLC
Notes to the financial statements
CONTINUED
12 Property, plant and equipment
Cost:
At 1 April 2012
Additions in year
Transfer to investment properties
Disposals
At 31 March 2013
Additions in year
Transfer to computer software
Disposals
At 31 March 2014
Accumulated depreciation:
At 1 April 2012
Charge for the year
Transfer to investment properties
Disposals
At 31 March 2013
Charge for the year
Disposals
At 31 March 2014
Net book value:
At 1 April 2012
At 31 March 2013
At 31 March 2014
Group
Freehold
land &
buildings
£’000
Long
leasehold
land &
buildings
£’000
Vehicles,
plant &
equipment
£’000
Ships
£’000
Total
£’000
4,180
6,452
3,332
6,623
20,587
382
(218)
146
-
-
(149)
201
1,424
-
-
-
(373)
2,153
(218)
(522)
4,344
6,449
3,533
7,674
22,000
1,336
166
1,825
-
(140)
-
-
-
-
948
(306)
(155)
4,275
(306)
(295)
5,540
6,615
5,358
8,161
25,674
1,779
116
(133)
-
1,762
95
(138)
1,719
531
232
-
(94)
669
196
-
954
138
-
-
4,412
695
-
(355)
1,092
4,752
140
-
637
(140)
865
1,232
5,249
2,401
5,921
2,378
2,211
2,582
5,780
2,441
2,922
3,821
5,750
4,126
2,912
7,676
1,181
(133)
(449)
8,275
1,068
(278)
9,065
12,911
13,725
16,609
The Company has no tangible fixed assets.
At 31 March 2014 the net carrying amount of leased long leasehold land and buildings and vehicles, plant and equipment was
£4,683,000 and £302,000 respectively (2013: £4,783,000 and £397,000). During the year to 31 March 2014 the Group acquired no
further leased assets. (In the year ended March 2013, £122,000 of leased assets were purchased).
At 31 March 2014, the group had entered into contractual commitments for the acquisition of the new vessel for Portsmouth
amounting to a further £837,000 (2013: £nil). £1,873,000 has been included in the cost of ships in respect of this vessel which is
under construction. £623,000 is included within Freehold properties above in respect of the new warehouse and other developments
under construction in the Falklands.
ANNUAL REPORT 2014
45
13 Investment properties
At 1 April 2012
Transfer from Freehold land and buildings
Transfer from properties held as stock
Additions
At 31 March 2013
Additions
At 31 March 2014
Accumulated depreciation:
At 1 April 2012
Charge for the year
Transfer from Freehold land and buildings
At 31 March 2013
Charge for the year
At 31 March 2014
Net book value
At 1 April 2012
At 31 March 2013
At 31 March 2014
Residential
and commercial
property
£’000
Group
Freehold land
£’000
809
163
1,010
262
2,244
658
2,902
75
23
133
231
48
279
734
2,013
2,623
718
55
-
-
773
-
773
-
-
-
-
-
-
718
773
773
Total
£’000
1,527
218
1,010
262
3,017
658
3,675
75
23
133
231
48
279
1,452
2,786
3,396
The investment properties comprise residential and commercial property held for rental in the Falkland Islands including 36 residential
properties available for rent in and around Central Stanley, and one property, under construction at 31 March 2014. These together
with the land have a net book value of £3,396,000 (2013: £2,786,000). Investment properties include 400 acres, including 70 acres of
land in Stanley, 58 acres of which have planning permission, and 300 acres of land at Fairy Cove, adjacent to the site of the proposed
deep water port at Port William. These investment properties held by FIC have been reviewed by a Director of FIC who is resident in
the Falkland Islands and is considered to have the relevant knowledger and experience to undertake the valuation.
At 31 March 2014 the fair value of this property portfolio was estimated at £6.3 million (31 March 2013: £5.7 million) including
development land valued at £2.2 million (2013: £2.3 million) As oil development proceeds, the value of these properties is expected
to increase significantly. The fair value estimate of £6.3 million is a level 3 valuation under IFRS 13 amd equates to the highest and
best use as defined by that standard.
During the year to 31 March 2014, the Group received rental income of £221,000 (2013: £296,000) on these properties.
£199,000 is included within investment properties above in respect of properties under construction in the Falklands.
The Company does not own any investment properties.
46
FALKLAND ISLANDS HOLDINGS PLC
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 %
2014
2013
The Falkland Islands Company Limited
UK
Ordinary shares of £1
100% 100%
The Falkland Islands Trading Company Limited
UK
Ordinary shares of £1
100% 100%
Falkland Islands Shipping Limited*
Falkland Islands
Ordinary shares of £1
100% 100%
Erebus Limited*
Falkland Islands
Ordinary shares of £1
100% 100%
Preference shares of £10
100% 100%
Paget Limited*
Falkland Islands
Ordinary shares of £1
100% 100%
Preference shares of £1
100% 100%
The Portsmouth Harbour Ferry Company Limited
Portsea Harbour Company Limited*
Clarence Marine Engineering Limited*
Gosport Ferry Limited*
Momart International Limited
Momart Limited*
Dadart Limited*
UK
UK
UK
UK
UK
UK
UK
Ordinary shares of £1
100% 100%
Ordinary shares of £1
100% 100%
Ordinary shares of £1
100% 100%
Ordinary shares of £1
100% 100%
Ordinary shares of £1
100% 100%
Ordinary shares of £1
100% 100%
Ordinary shares of £1
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
Impairment of investment in Erebus Limited
Decrease in cost of investment in Momart
Cost of share-based payments recognised in subsidiaries
Total investment in group undertakings
Company
2014
£’000
2013
£’000
29,097
31,488
(129)
(2,457)
-
36
(16)
82
29,004
29,097
The Company’s investment in Erebus Limited comprises the Group’s shareholding in Falkland Oil and Gas Limited (see Note 15).
ANNUAL REPORT 2014
47
15 Shares held in Falkland Oil and Gas Limited - available-for-sale equity securities
Fair value of shares held in Falkland Oil and Gas Limited £’000
Falkland Oil and Gas Limited share price at 31 March
Shareholding at 31 March
Group interest in Falkland Oil and Gas Limited
Historic cost of shareholding to the Group
Historic cost per share to the Group
16 Investment in Joint Ventures
2014
3,270
25.5p
2013
3,399
26.5p
12,825,000
12,825,000
2.4%
2,586
20p
4.0%
2,586
20p
The Group has one joint venture (South Atlantic Construction Company Limited, “SAtCO” ), which was set up in June 2012 with Trant
Construction, to bid for the larger infrastructure contracts which are expected to be generated by oil activity. Both Trant Construction
and the Falkland Islands Company contributed £50,000 of share capital.
Share in Joint Venture’s balance sheet
Fixed assets
Current assets
Liabilities due in less than one year
Liabilities due in greater than one year
Group share of net assets
Share in Joint Venture’s results
Revenue
Cost of sales
Administrative expenses
Operating profit for the year
Taxation
Group share of results for the year
SAtCO had no contingent liabilities or capital commitments as at 31 March 2014 or 31 March 2013.
2014
£’000
2013
£’000
528
293
(192)
(543)
86
2014
£’000
559
(505)
(4)
50
(14)
36
-
50
-
-
50
2013
£’000
-
-
-
-
-
48
FALKLAND ISLANDS HOLDINGS PLC
Notes to the financial statements
CONTINUED
17 Other financial assets
Finance lease receivables relate to finance leases on the sale of vehicles and customer goods. No allowances for uncollectable
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
2014
£’000
342
503
845
2013
£’000
121
486
607
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 £84,000 (2013: £59,000).
The cost of assets acquired for the purpose of letting under hire purchase agreements by the Group during the year amounted to
£868,000 (2013: £635,000).
The aggregate rentals receivable during the year in respect of hire purchase agreements were £700,000 (2013: £599,000).
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
2014
£’000
930
503
342
845
2013
£’000
666
486
121
607
ANNUAL REPORT 2014
49
18 Deferred tax assets and liabilities
Recognised deferred tax assets and liabilities
Group
Assets
Liabilities
Property, plant & equipment
Intangible assets
Inventories
Other financial liabilities
Share-based payments
Tax losses
2014
£’000
2013
£’000
-
-
62
75
27
60
-
-
96
54
45
-
Tax assets / liabilities excluding the pension liability
224
195
Tax assets
Net deferred tax liability excluding the deffered tax asset on pensions
Pension
Total net deffered tax liability
2014
£’000
1,373
490
-
-
-
-
1,863
(224)
1,639
(645)
994
2013
£’000
1,254
635
-
-
-
-
1,889
(195)
1,694
(671)
1,023
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 & equipment
Intangible assets
Inventories
Other financial liabilities
Share-based payments
Tax losses
Pension
Deferred tax movements
Company
Assets
Liabilities
2014
£’000
2013
£’000
2014
£’000
4
4
4
4
-
-
2013
£’000
-
-
Group
1 April
2013
£’000
Recognised
in income
£’000
Recognised
in equity
£’000
1,254
635
(96)
(54)
(45)
-
(671)
1,023
119
(145)
34
(21)
18
(60)
(9)
(64)
-
-
-
-
-
35
35
31 March
2014
£’000
1,373
490
(62)
(75)
(27)
(60)
(645)
994
50
FALKLAND ISLANDS HOLDINGS PLC
Notes to the financial statements
CONTINUED
18 Deferred tax assets and liabilities CONTINUED
Unrecognised deferred tax assets
Deferred tax assets of £113,000 (2013: £132,000) in respect of capital losses have not been recognised as it is not considered
probable 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 & equipment
Intangible assets
Inventories
Other financial liabilities
Share-based payments
Pension
Deferred tax movements
Other financial liabilities
Deferred tax movements
Company
1 April
2013
£’000
Recognised
in income
£’000
Recognised
in equity
£’000
31 March
2014
£’000
4
4
-
-
-
-
4
4
Group
1 April
2012
£’000
Recognised
in income
£’000
Recognised
in equity
£’000
588
758
(75)
(83)
(66)
(593)
529
666
(123)
(21)
29
21
30
602
(108)
(108)
31 March
2013
£’000
1,254
635
(96)
(54)
(45)
(671)
1,023
Company
1 April
2012
Recognised
in income
Recognised
in equity
31 March
2013
5
5
(1)
(1)
-
-
4
4
ANNUAL REPORT 2014
51
Group
2014
£’000
852
1,492
4,348
6,692
2013
£’000
202
609
4,288
5,099
Company
2014
£’000
1,952
2013
£’000
1,709
19 Inventories
Work-in-progress
Goods-in-transit
Goods for resale
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
Prepayments and accrued income
Total trade and other receivables
21 Cash and cash equivalents / bank overdrafts
Cash and cash equivalents in the balance sheet and cash
flow statement
Group
Company
2014
£’000
5,601
1,440
7,041
2013
£’000
4,960
1,173
6,133
2014
£’000
-
19
19
2013
£’000
-
21
21
Group
Company
2014
£’000
2013
£’000
2014
£’000
2013
£’000
5,715
11,416
9,280
10,554
52
FALKLAND ISLANDS HOLDINGS PLC
Notes to the financial statements
CONTINUED
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 portion of secured bank loans
Finance lease liabilities
Total current interest-bearing loans and borrowings
Total interest-bearing loans and borrowings
Group
Company
2014
£’000
2013
£’000
2014
£’000
2013
£’000
34
5,027
5,061
985
124
1,109
6.170
1,003
5,136
6,139
1,000
149
1,149
7.288
-
-
-
785
-
785
785
769
-
769
800
-
800
1.569
Finance leases liabilties
Future minimum
lease payments
Interest
Present value of
minimum lease payments
Less than one year
2014
£’000
366
2013
£’000
396
Between one and five years
1,216
1,322
More than five years
Total
Net debt
10,985
11,245
12,567
12,963
2014
£’000
242
919
6,255
7,416
2013
£’000
247
950
6,481
7,678
2014
£’000
124
297
4,730
5,151
2013
£’000
149
372
4,764
5,285
Total interest-bearing loans and borrowings
Group
Company
2014
£’000
6,170
2013
£’000
7,288
2014
£’000
785
2013
£’000
1,569
less: cash balances (see note 21)
(5,715)
(11,416)
(9,280)
(10,554)
Net (cash) / debt
455
(4,128)
(8,495)
(8,985)
ANNUAL REPORT 2014
53
23 Trade and other payables
Non-current:
Amount owed to subsidiary undertakings
Current:
Trade payables
Other creditors, including taxation and social security
Accruals and deferred income
Total trade and other payables
24 Employee benefits: pension plans
Company
2014
£’000
-
Group
Company
2014
£’000
6,817
756
2013
£’000
6,031
825
3,408
3,156
10,981
10,012
2014
£’000
-
172
406
578
2013
£’000
582
2013
£’000
-
58
403
461
The Group operates three defined contribution pension schemes. In addition it also operated two defined benefit pension schemes,
both of which have been closed to new members and to future accrual. In March 2013 the Group transferred all liabilities in respect
of the Portsmouth Harbour defined benefit scheme to Legal and General.
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 £243,000 (2013: £222,000). The Group anticipates paying contributions
amounting to £315,000 during the year ending 31 March 2015. 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:
The Falkland Islands Company Limited Scheme
Deferred tax
Net pension scheme deficit
2014
£’000
2013
£’000
(2,480)
(2,584)
645
671
(1,835)
(1,913)
54
FALKLAND ISLANDS HOLDINGS PLC
Notes to the financial statements
CONTINUED
24 Employee benefits: pension plans CONTINUED
The 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 2014, 2013, 2012, 2011 and 2010 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
Average longevity at age 65 for male current and deferred pensioners (years) at accounting
date
Average longevity at age 65 for male current and deferred pensioners (years) 20 years
after accounting date
2014
2013
2.6%
3.0%
4.3%
3.4%
22.4
24.6
2.6%
3.0%
4.3%
3.4%
22.6
24.8
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.
The FIC pension scheme has 20 members (2013: 21) and 3 deferred members (2013: 3)
The weighted average duration of the expected benefit payments from the Scheme is around 15 years (2013: 15 years).
Sensitivity analysis
The calcalation of the defined benefit liability is sensitive to the assumptions set out above. The following table summarises how the
impact of the impact of the defined benefit liability at 31 March 2014 would have increased / (decreased) as a result of a change in
the respective assumptions by 0.1%,
Discount rate +/- 0.1%
Increases in deferment (LPI 3%) +/- 0.1%
Life expectancy +/- One year
2014
Effect on obligation
£’000
38
(8)
(100)
These sensitivities have been calculated to show the movement in the defined benefit obligation in isolation, and assuming no other
changes in market conditions at the accounting date.
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:
Present value of scheme liabilities
Related deferred tax asset
Net pension liability
Value at
2014
£’000
(2,480)
645
(1,835)
Value at
2013
£’000
Value at
2012
£’000
Value at
2011
£’000
Value at
2010
£’000
(2,584)
(2,411)
(2,107)
(2,013)
671
579
548
558
(1,913)
(1,832)
(1,559)
(1,455)
ANNUAL REPORT 2014
55
24 Employee benefits: pension plans CONTINUED
Movement in deficit during the year:
Deficit in scheme at beginning of the year
Pensions paid
Past service cost
Other finance cost
Remeasurement of the defined benefit liability
Deficit in scheme at end of the year
Analysis of amounts included in other finance costs:
Interest on pension scheme liabilities
Analysis of amount recognised in statement of comprehensive income :
Experience gains and (losses) arising on scheme liabilities
Changes in assumptions underlying the present value of scheme liabilities
Remeasurement of the defined benefit liability
2014
£’000
2013
£’000
(2,584)
(2,411)
122
(45)
(108)
135
111
-
(111)
(173)
(2,480)
(2,584)
2014
£’000
(108)
2014
£’000
20
115
135
2013
£’000
(111)
2013
£’000
(34)
(139)
(173)
History of experience gains and losses:
2014
2013
2012
2011
2010
Experience (losses)/gains arising on scheme liabilities:
Amount (£’000)
20
(34)
(30)
(7)
89
Percentage of year end present value of scheme liabilities
(0.8%)
1.3%
1.2%
0.3%
(4.4%)
Total amount recognised in statement of comprehensive
income:
135
(173)
(289)
(82)
(195)
Amount (£’000)
Percentage of year end present value of scheme liabilities
(5.4%)
6.7%
12.0%
3.9%
9.7%
Payments to pensioners
122
111
98
98
98
56
FALKLAND ISLANDS HOLDINGS PLC
Notes to the financial statements
CONTINUED
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. This scheme was transferred to Legal and General at 7 March 2013. Actuarial reports for IAS
19 purposes for the 7 March date of transfer were prepared by a qualified independent actuary, JLT Benefit Solutions.
The major assumptions used in this valuation were:
Rate of increase in pensions in payment and deferred pensions
Discount rate applied to scheme liabilities
Inflation assumption
2014
-
-
-
2013
3.4%
4.3%
3.4%
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 for the years ending 31 March 2010 to 31 March 2012 were not intended to be realised
in the short term and therefore may have been subject to significant change should they have been realised, and the present value
of the scheme’s liabilities, which, for the years ended 31 March 2010 to 31 March 2012 were derived from cash flow projections over
long periods and thus inherently uncertain, were:
Movement in deficit during the year:
Projected benefit obligations
Opening projected benefit obligations
Interest thereon
Distributions
Remeasurement of the defined benefit liability
Liabilities discharged on settlement
Projected benefit obligations at 31 March
Plan assets
Opening plan assets
Distributions
Contributions
Return on assets
Remeasurement of the defined benefit asset
Assets discharged on settlement
Plan assets at 31 March
Deficit in scheme at 31 March
2014
£’000
2013
£’000
-
-
-
-
-
-
2014
£’000
-
-
-
-
-
-
-
-
(519)
(23)
56
(44)
530
-
2013
£’000
460
(56)
316
25
(33)
(712)
-
-
ANNUAL REPORT 2014
57
24 Employee benefits: pension plans CONTINUED
Value at
2014
£’000
Value at
2013
£’000
Value at
2012
£’000
Value at
2011
£’000
Value at
2010
£’000
Equities
Fixed interest
Other
Total market value of assets
Present value of scheme liabilities
Deficit in scheme
Related deferred tax asset
Net pension liability
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
286
145
29
460
(519)
(59)
14
(45)
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 amounts included in operating expenses:
Net settlement gain /(loss) on the transfer of the PHFC pension scheme
Included in other operating expenses
Analysis of amount recognised in statement of other comprehensive income:
Actual return less expected return on scheme assets
Changes in assumptions underlying the present value of scheme liabilities
Remeasurement of the defined benefit liability
301
101
30
432
(455)
(23)
6
(17)
2014
£’000
-
-
-
2014
£’000
64
64
2014
£’000
-
-
-
328
64
18
410
(634)
(224)
63
(161)
2013
£’000
25
(23)
2
2013
£’000
(182)
(182)
2013
£’000
(33)
(44)
(77)
History of experience gains and losses:
2014
2013
2012
2011
2010
Difference between the expected and actual return
on scheme assets:
Amount (£’000)
Percentage of year end scheme assets
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 scheme liabilities
-
-
-
-
-
-
(33)
(23)
(8)
86
-
-
-
(5.0%)
(1.9%)
21.0%
-
-
-
-
(1)
0.2%
(77)
(75)
(10)
(55)
-
14.5% 2.2%
8.7%
58
FALKLAND ISLANDS HOLDINGS PLC
Notes to the financial statements
CONTINUED
25 Employee benefits: share-based payments
The following options were outstanding at 31 March 2014:
Date of issue
Number
10 Feb 05
57,692
14 Jun 05
42,500
14 Jun 05
63,528
7 Aug 07
27,517
4 Dec 07
12,500
3 Apr 08
3,781
8 Apr 09
57,719
15 Jul 09
98,224
9 Dec 09
24,000
21 Dec 10*
44,160
28 Apr 11
6,390
27 Jun 11
18,281
16 Dec 11
140,690
13 Aug 12
138,581
27 Nov 13
29,810
02 Dec 13
9,523
774,896
Exercise
price pence
Share price
at grant date
pence
Fair value per
share pence
Total fair
value
Earliest
exercise date
Latest
exercise date
520.0
425.0
425.0
330.0
319.0
365.0
207.5
290.0
390.0
342.5
313.0
302.5
267.5
404.0
369.0
367.5
520.0
425.0
425.0
332.5
340.0
375.0
207.5
290.0
397.5
337.5
313.0
303.5
261.5
404.0
369.0
367.5
247.0
166.0
214.0
73.0
119.0
131.0
56.0
72.0
145.0
124.0
106.0
94.0
68.0
92.0
109.0
109.0
142,499
10 Feb 08
9 Feb 15
70,550
14 Jun 08
13 Jun 15
135,950
14 Jun 08
13 Jun 15
20,087
14,875
7 Aug 10
6 Aug 17
4 Dec 10
3 Dec 17
4,953
3 Apr 11
8 Apr 12
2 Apr 18
7 Apr 19
15 Jul 12
14 Jul 19
9 Dec 12
8 Dec 19
32,323
70,721
34,800
54,758
21 Dec 13
20 Dec 20
6,773
28 Apr 14
28 Apr 21
17,184
27 Jun 14
27 Jun 21
95,669
16 Dec 14
16 Dec 21
127,495
13 Aug 15
12 Aug 22
32,493
27 Nov 16
26 Nov 23
10,380
02 Dec 16
02 Dec 23
871,510
The total number of options outstanding at 31 March 2014 was 774,896 (2013: 861,344). A reconciliation of the movement in
options is shown below. 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 unvested options. Expected volatility is determined by reference to past performance of the
Company’s share price.
* The Remuneration Committee has not yet reached a decision on whether, and if so to what extent, the 20,000 options granted to
David Hudd and 20,000 options granted to John Foster on 21 December 2010, should vest. For accounting purposes they have
been treated as lapsed in the year to 31 March 2014 and disclosed accordingly in this Annual Report. If the options do vest, wholly
or partially, an accounting adjustment, which is not expected to be material, will be made in a future accounting period.
Expected volatility (%)
Risk-free interest rate (%)
Expected life of options (years)
Dividend yield (%)
28 Apr 11
27 Jun 11
16 Dec 11
13 Aug 12
27 Nov 13
02 Dec 13
40
2.94
6.5
2.60
40
2.53
6.5
3.10
39
1.42
6.5
3.60
39
0.97
6.5
2.70
39
2.09
6.5
3.12
39
2.19
6.5
3.13
Share price at grant date (pence)
313.0
303.5
261.5
404.0
369.0
367.5
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.
ANNUAL REPORT 2014
59
25 Employee benefits: share-based payments CONTINUED
During the year ended 31 March 2014 28,915 options (2013: 14,219) were exercised over ordinary shares.
The number and weighted average exercise prices of share options are as follows:
Weighted average
exercise price (£)
2014
Number
of options
2014
Weighted average
exercise price (£)
2013
Outstanding at the beginning of the year
Forfeited during the year
Exercised during the year
Granted during the year
Outstanding at the year end
Vested options exercisable at the year end
3.43
3.45
2.08
3.69
3.49
3.59
861,344
(96,866)
(28,915)
39,333
774,896
431,621
3.28
3.40
2.08
3.99
3.43
3.50
Number
of options
2013
730,510
(19,657)
(14,219)
164,710
861,344
417,376
26 Capital and reserves
Share capital
Issued at 1 April
Shares issued in fund raising
Share options exercised during the year
Issued at 31 March - fully paid
Allotted, called up and fully paid
Ordinary shares of 10p each
Ordinary shares of 10p each
2014
2013
12,431,623
9,297,567
-
-
3,119,837
14,219
12,431,623
12,431,623
2014
£’000
2013
£’000
1,243
1,243
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.
During the year ended 31 March 2013 the Group issued 3,119,837 shares by means of a placing and open offer at 320 pence per
share to raise £10.0 million before expenses to provide funds to invest in the Group’s businesses in the Falkland Islands.
In addition 14,219 share options were also exercised in the year ended 31 March 2013.
On 31 March 2000, an Employee Share Ownership Plan was established. At 31 March 2014 the plan held 28,016 (2013:39,021)
ordinary shares at a cost of £55,005 (2013: £76,612). The market value of the shares at 31 March 2014 was £87,970 (2013:
£129,745). 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 largely of merger relief arising in connection with the acquisition of Momart International
Limited. These have been offset by a recognised impairment of Momart in the year ended 31 March 2009.
60
FALKLAND ISLANDS HOLDINGS PLC
Notes to the financial statements
CONTINUED
26 Capital and reserves CONTINUED
Warrants issued to Banque Havilland SA
In July 2012, 100,000 warrants to subscribe for one ordinary share were granted to Banque Havilland SA, which can be exercised at
a price of £5 per share at any date from the date of grant until 31 December 2014. The share based payment charge of £62,000 was
calculated using the Black Scholes model with an assumed volatility of 45% and a dividend yield of 2.86%.
Dividends
The following dividends were recognised in the period:
Final: 7.5p (2013 Final: 7.0p) per qualifying ordinary share
Interim: 4.0p (2013 Interim: 4.0p) per qualifying ordinary share
2014
£’000
928
495
2013
£’000
866
496
1,423
1,362
After the balance sheet date a final dividend of 7.5p (£929,000) per qualifying ordinary share (2013: 7.5p, £929,000) were proposed
by the directors. The dividend has not been provided for.
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.
ANNUAL REPORT 2014
61
27 Financial instruments CONTINUED
The following table shows the carrying value, which is equal to fair value for each category of financial instrument:
Available-for-sale financial assets at fair value
Financial liabilities at amortised cost
Cash and cash equivalents
Hire purchase debtors
Interest-bearing borrowings at amortised cost
Trade and other receivables
Group
Company
2014
£’000
3,270
2013
£’000
3,399
(10,981)
(10,012)
5,715
845
11,416
607
(6,170)
(7,288)
5,601
4,960
2014
£’000
-
(578)
9,280
-
(785)
19
2013
£’000
-
(461)
10,554
-
(1,569)
21
Available for sale financial assets are valued using a level 1 methodology. All other financial instruments are based on a level 3
methodology.
(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.
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, other than available for sale financial assets represents the maximum credit exposure.
Therefore, the maximum exposure to credit risk at the balance sheet date was £12,161,000 (2013: £16,983,000) being the total trade
receivables, other financial assets and cash and cash equivalents in the balance sheet.
The credit risk on cash balances is limited because the couterparties are banks with high credit ratings assigned by international
credit-rating agencies.
The maximum exposure to credit risk for trade receivables at the balance sheet date by geographic region was:
Group
Falkland Islands
Europe
North America
United Kingdom
Other
Trade receivables
The Company has no trade debtors.
2014
£’000
1,540
1,254
383
1,966
458
5,601
2013
£’000
1,133
663
562
2,321
281
4,960
62
FALKLAND ISLANDS HOLDINGS PLC
Notes to the financial statements
CONTINUED
27 Financial instruments CONTINUED
Credit quality of financial assets and impairment losses
Group
Not past due
Past due 0 - 30 days
Past due 31 - 120 days
More than 120 days
Gross
2014
£’000
3,751
1,237
385
485
5,858
Impairment
2014
£’000
-
-
-
(257)
(257)
Net
2014
£’000
3,751
1,237
385
228
Gross
2013
£’000
2,745
1,689
272
656
5,601
5,362
The movement in the allowances for impairment in respect of trade receivables during the year was:
Group
Balance at 1 April 2013
Impairment loss recognised
Impairment loss reverse
Utilisation of provision
Balance at 31 March 2014
Impairment
2013
£’000
-
-
-
(402)
(402)
2014
£’000
402
85
(100)
(130)
257
Net
2013
£’000
2,745
1,689
272
254
4,960
2013
£’000
341
61
-
-
402
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 £2 million. All payments due during the year with respect to
these agreements were met as they fell due.
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.
ANNUAL REPORT 2014
63
27 Financial instruments CONTINUED
Liquidity risk - Group
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the effects of
netting agreements:
2014
Non-derivative financial instruments
Carrying
amount
£’000
Contractual
cash flows
£’000
1 year or less
£’000
1 to 2 years
£’000
2 to 5 years
£’000
5 years and
over
£’000
Secured bank loans
1,019
1,045
1,010
Finance leases
5,151
12,567
366
Trade and other payables
10,981
10,981
10,981
17,151
24,593
12,357
35
366
-
401
-
-
850
10,985
-
-
850
10,985
The contractual cash flows for finance leases in the years ended 31 March 2014 and 31 March 2013 are significantly higher than the
liability at the year end, as the finance lease for the Gosport pontoon with Gosport Borough Council is a 50 year finance lease with
quarterly payments of £65,000 until June 2061.
2013
Non-derivative financial instruments
Carrying
amount
£’000
Contractual
cash flows
£’000
1 year or less
£’000
1 to 2 years
£’000
2 to 5 years
£’000
5 years and
over
£’000
Secured bank loans
2,003
2,071
1,026
1,010
Finance leases
5,285
12,963
396
Trade and other payables
10,012
10,012
10,012
366
-
-
11,245
35
956
-
17,300
25,046
11,434
1,376
991
11,245
64
FALKLAND ISLANDS HOLDINGS PLC
Notes to the financial statements
CONTINUED
27 Financial instruments CONTINUED
Liquidity risk - Company
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the effects of
netting agreements:
2014
Non-derivative financial instruments
Secured bank loans
Trade and other payables
Carrying
amount
£’000
Contractual
cash flows
£’000
1 year or less
£’000
1 to 2 years
£’000
2 to 5 years
£’000
5 years and
over
£’000
785
578
810
578
810
578
1,363
1,388
1,388
-
-
-
-
-
-
-
-
-
2013
Non-derivative financial instruments
Carrying
amount
£’000
Contractual
cash flows
£’000
1 year or less
£’000
1 to 2 years
£’000
2 to 5 years
£’000
5 years and
over
£’000
Secured bank loans
1,569
1,636
Trade and other payables
461
461
826
461
2,030
2,097
1,287
810
-
810
-
-
-
-
-
-
(iv) Market risk
Financial risk management
Market risk is the risk that changes in market prices, such as foreign exchange, interest rates and equity prices will affect the Group’s
income or the value of its holdings of financial instruments
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.
2014
Cash and cash equivalents
Trade payables and other payables
Balance sheet exposure
Group
USD
£’000
211
(344)
(133)
Other
£’000
1
(193)
(192)
EUR
£’000
15
(414)
(399)
Total
£’000
227
(951)
(724)
ANNUAL REPORT 2014
65
27 Financial instruments CONTINUED
2013
Cash and cash equivalents
Debtors
Trade payables and other payables
Balance sheet exposure
The Company has no exposure to foreign currency risk.
Sensitivity analysis
EUR
£’000
32
-
(321)
(289)
Group
USD
£’000
204
38
(261)
(19)
Other
£’000
7
-
(97)
(90)
Total
£’000
243
38
(679)
(398)
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 2013.
EUR
USD
Equity
Profit or loss
2014
£’000
40
13
2013
£’000
29
2
2014
£’000
40
13
2013
£’000
29
2
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.
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
2014
£’000
845
(5,151)
(4,306)
2013
£’000
607
(5,285)
(4,678)
2014
£’000
2013
£’000
-
-
-
-
-
-
(1,019)
(1,019)
(2,003)
(2,003)
(785)
(785)
(1,569)
(1,569)
66
FALKLAND ISLANDS HOLDINGS PLC
Notes to the financial statements
CONTINUED
27 Financial instruments CONTINUED
The Group has a loan of £0.2 million (2013: £0.4 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 1.1% above the Bank of England base rate, with a minimum base rate of 2.75%
The Group has a further loan of £0.8 million (2013: £1.6 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
A increase of 100 basis points in interest rates at the balance sheet date 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 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 2013.
Equity:
Decrease
Profit or loss:
Decrease
Group
2014
£’000
(10)
(10)
Company
2013
£’000
2014
£’000
(20)
(20)
(8)
(8)
2013
£’000
(16)
(16)
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)
Sensitivity analysis
The Group’s available-for-sale financial assets comprise its investment in FOGL. During the year ended 31 March 2014 FOGL shares
traded on the AIM market of the London Stock Exchange at an average price of 27.14p with a high of 31.25p and a low of 23.75p.
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 £3,046,000 (2013: £3,399,000) and a high of £4,008,000 (2013: £12,665,000).
(v) Capital Management
The Group’s objectives when managing capital, which comprises equity and reserves at 31 March 2014 of £35,377,000 (2013:
£34,279,000) are 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
2014
£’000
720
3,107
7,984
2013
£’000
611
2,975
8,759
11,811
12,345
ANNUAL REPORT 2014
67
28 Operating leases CONTINUED
The Group leases three office premises and a number of storage warehouses under operating leases. Office leases typically run for
a period of 3-10 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 £822,000 was recognised as an expense in the income statement in respect of operating leases (2013: £773,000).
The Company had no operating lease commitments.
29 Capital commitments
At the end of the year the Group had capital commitments of £837,000 due to the Boat yard for the new vessel for Gosport Ferry,
and a commitment to purchase a new truck for £130,000 at Momart, which have not been provided for in these financial statements.
There were no capital commitments at 31 March 2013.
30 Related parties
The Group 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 21.9% per cent of the voting shares of the Company.
The compensation of key management personnel (including Directors) is as follows:
Key management emoluments including social security costs
Company contributions to defined contribution pension plans
Share-related awards
Group
Company
2014
£’000
1,627
82
35
2013
£’000
1,536
83
155
2014
£’000
575
-
-
Total key management personnel compensation
1,744
1,774
575
2013
£’000
560
-
127
687
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 are 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
Directors and Corporate Information
Solicitors
Bircham Dyson Bell LLP
50 Broadway,
Westminster,
London SW1H 0BL
Auditor
KPMG Audit LLP
St. Nicholas House,
Park Row,
Nottingham NG1 6FQ
Registrar
Capita Asset Services
The Registry, 34 Beckenham Road,
Beckenham,
Kent BR3 4TU
Financial PR
FTI Consulting
200 Aldersgate
London EC1A 4HD
Directors
David Hudd Chairman
John Foster Managing Director
Mike Killingley*
Jeremy Brade*
Edmund Rowland*
*Non-executive Directors
Company Secretary
Carol Bishop
Registered Office
Kenburgh Court,
133-137 South Street,
Bishop’s Stortford,
Hertfordshire CM23 3HX
T: 01279 461630
F: 01279 461631
E: admin@fihplc.com
W: www.fihplc.com
Registered number 03416346
Corporate Information
Stockbroker and Nominated Adviser
W.H. Ireland Limited
24 Martin Lane,
London EC4R 0DR
The Falkland Islands Company
Roger Spink
Director and General Manager
Telephone: 00 500 27600
Email: info@fic.co.fk
www.the-falkland-islands-co.com
The Portsmouth Harbour
Ferry Company
Keith Edwards
Director and General Manager
Telephone: 02392 524551
Email: admin@gosportferry.co.uk
www.gosportferry.co.uk
Momart Limited
Kenneth Burgon Director
Anna Maris Director
Peter Brayshaw
Commercial and Financial Director
Telephone: 020 7426 3000
Email: enquiries@momart.co.uk
www.momart.co.uk
FALKLAND ISLANDS HOLDINGS PLC