Contents
Financial Highlights For The Year Ended 31 March 2015
Chairman’s Statement 2015
Managing Director’s Strategic Report Business Review
Board Of Directors And Secretary
Directors’ Report
Independent Auditor’s Report To The Members Of Falkland Islands Holdings Plc
Consolidated Income Statement For The Year Ended 31 March 2015
Consolidated Statement Of Comprehensive Income For The Year Ended 31 March 2015
Consolidated Balance Sheet At 31 March 2015
Company Balance Sheet At 31 March 2015
Consolidated Cash Flow Statement For The Year Ended 31 March 2015
Company Cash Flow Statement For The Year Ended 31 March 2015
Consolidated Statement Of Changes In Shareholders’ Equity For The Year Ended 31 March 2015
Company Statement Of Changes In Shareholders’ Equity For The Year Ended 31 March 2015
Notes To The Financial Statements
Directors And Corporate Information
1
2
4
16
17
22
23
24
25
26
27
29
30
31
32
70
Financial Highlights
FOR THE YEAR ENDED 31 MARCH 2015
Turnover from continuing operations
Profit before tax
Underlying profit before tax*
1
2015
£m
2014
£m
Change
%
38.56
38.26
0.8
3.89
3.56
3.40
14.4
3.65
-2.4
Diluted earnings per share before goodwill amortisation and non-trading items
22.0p
22.0p
-
Cash flow from operations
Net asset value per share
6.38
295p
2.80
128.2
285p
3.5
*Defined as profit before tax, amortisation and non-trading items.
Turnover (£m) from continuing operations
Underlying profit before tax* (£m)
34.11
35.60
31.84
38.26
38.56
3.23
3.29
3.65
3.56
2.73
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
Diluted earnings per share (pence)
before goodwill amortisation and non-recurring items
Net assets (£m)
26.2
20.6
21.3
22.0
22.0
30.6
29.5
34.3
35.4
36.7
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
ANNUAL REPORT 2015
2
Chairman’s Statement 2015
In my first annual report
as Chairman I am
pleased to report that
the Group achieved an
encouraging trading
result for the year in
line with the Board’s
expectations.
Reported pre-tax profits were ahead of the prior year by
£0.5 million at £3.9 million and underlying pre-tax profits
(before amortisation and non-trading items) were lower by
2.4% at £3.6 million (2014: £3.7 million). Diluted earnings
per share based upon underlying profits were unchanged
at 22.0p. Reported diluted earnings per share increased
by 20% to 25.3p (2014: 21.1p).
Operations
A strong recovery in the Group’s Falkland’s business,
including encouraging growth from its South Atlantic
Construction Company (SAtCO) Joint Venture, meant that
despite the anticipated return to more normal trading levels
at Momart, following the string of exceptional overseas
exhibitions which boosted results in the prior year, the
Group achieved strong levels of operating profits overall at
£3.8 million, which is broadly equivalent to the record levels
achieved in the prior year (2014: £3.9 million).
In the Falklands, activity was boosted by a record illex squid
catch and preparations for the resumption of exploration
drilling in Falkland’s waters which recommenced in spring
2015 with further discoveries at the Zebedee and Isobel
Deep wells, a potential southern extension to the 2010 Sea
Lion discovery. On the back of these positive developments
the Falklands Islands Company (“FIC”) saw a welcome
return to growth with revenue ahead by 16.5% to a record
£18.5 million (2014: £15.9 million) and operating profits
increasing by 34% to £1.3 million (2014: £1.0 million).
Momart, the Group’s Fine Art handling business, saw activity
return to more normal levels of trading. Revenue was lower
by 14% at £15.8 million (2014: £18.3 million) and operating
profit, before amortisation of the intangible assets, fell back,
as expected, to £1.2 million from the record levels seen in
the prior year (2014: £1.8 million).
As previously announced, in line with our new policy of
reinvesting earnings and cash to accelerate the growth of
the Group, the Board is not recommending the payment of
a final dividend.
The Portsmouth Harbour Ferry Company (“PHFC”) saw
operating profits unchanged at just over £1.0 million, with
fare increases in June 2014 offsetting a small (2%) decrease
in the number of passengers using the ferry.
On 9 February 2015, David Hudd retired as Chairman after
13 years’ service, during which the Group saw significant
growth. On behalf of the Board and our shareholders, I
would like to express our grateful thanks to David for his
enormous contribution and wish him a happy retirement.
I would also like to thank Mike Killingley who retired on
13 April 2015 after 10 years’ service as a Non Executive
Director.
The Group’s financial position is strong and after capital
expenditure of £4.7 million, cash balances at the end of
the year were £7.4 million and bank borrowings £0.7
million. Net cash flow from operating activities before
capital expenditure, and after the payment of tax, increased
by £3.6 million to a record £6.4 million. This strong
operating cash flow and healthy liquidity position (with net
cash balances of £6.7 million) gives the Group significant
untapped borrowing potential and the Board intends to
make use of this to accelerate the Group’s growth through
further investment in its existing businesses and through
strategic acquisitions.
Falkland Oil and Gas (FOGL)
During the year the Group gradually divested its shares in
FOGL with the sale of 7.8 million shares in March 2015 at
a profit of £0.7 million and, following the year end, in April
2015, the Group’s residual holding of 5 million FOGL shares
was sold at a profit of £0.4 million. Over the course of the 11
years since FOGL’s flotation in 2004, the Group generated
over £8 million in cash proceeds and over £5 million in
profit from its investment. The sale of shares in FOGL was
implemented to augment the Group’s cash resources for
further investment in its future growth.
Outlook
A continuing uplift in economic activity is anticipated in the
Falklands in the first half of the new financial year, linked
to the ongoing drilling campaign and further infrastructure
investment by the Falkland Islands Government. Longer
term sustainable growth will depend on a recovery in the
oil price to a level at which oil companies can see reliable
commercial returns. Although there is no guarantee that
such a price recovery will occur in the near term, over
a longer horizon your Board remains confident that oil
FALKLAND ISLANDS HOLDINGS PLC 3
development in the Islands will take place and that this will
transform the prospects both for the Falklands and for FIC.
At Momart, the planned expansion of commercial storage
facilities will support growth, and this together with focussed
investment in sales and marketing and further strengthening
of the management team, is expected to produce renewed
progress. At the same time Momart will seek to develop its
existing international partnerships in order to increase its
global reach and reputation. Targeted acquisitions to widen
both the range of art related services and increase the
geographical reach of the business are also being pursued.
For PHFC, the successful delivery of its new vessel, “Harbour
Spirit” will underpin its ferry service to local passengers over
the long term. General economic recovery in the UK and
the positive local impact of the Navy’s planned investment
in infrastructure to support its expanding carrier fleet should
also begin to drive steady growth at the ferry over the
medium term.
In the year to date, the Group’s trading performance is in
line with our expectations and we anticipate a satisfactory
year.
In line with the strategy outlined in the Group’s pre-close
trading update in April 2015, the Board is also seeking to
accelerate growth and increase the scale of the Group
by means of strategic acquisitions using available cash
resources and borrowing capacity.
Edmund Rowland
Chairman
8 June 2015
ANNUAL REPORT 2015 4
Managing Director’s Strategic Report
BUSINESS REVIEW
John Foster
Managing Director
Group Overview
I am pleased to report another good year of trading for
the Group, with revenues ahead by 0.8% at £38.6 million
(2014: £38.3 million) and a small but expected reduction
in underlying pre-tax profits to £3.56 million (2014: £3.65
million), which remained ahead of underlying pre-tax profits
in 2012-13 of £3.29 million.
In the Falklands, FIC recovered strongly buoyed by a record
squid catch and increased economic activity linked to the
exploration drilling programme. At Momart, trading returned
to more normal levels following a bumper performance in
the prior year and at PHFC revenues and profits remained
stable.
Review of Operations
Group revenue and underlying pre-tax profits are analysed
below:
Group revenue
Year ended 31 March
Falkland Islands Company
Portsmouth Harbour Ferry
Momart
Total
2015
£m
18.51
4.30
15.75
38.56
2014
£m
15.88
4.12
18.26
38.26
Change
%
16.5
4.3
-13.7
0.8
Group underlying pre-tax profit*
Year ended 31 March
Falkland Islands Company
Portsmouth Harbour Ferry
Momart
Total
2015
£m
1.56
0.79
1.21
3.56
2014
£m
1.12
0.77
1.76
3.65
Change
%
39.4
3.4
-31.5
-2.4
* Pre-tax profit before amortisation of intangibles and
non–trading items but including the Group’s share of the
contribution from SAtCO, the Group’s Joint Venture with
Trant Construction in the Falkland Islands.
Group Revenue 2015
Underlying Operating Profit 2015
Momart
41%
FIC
48%
PHFC
11%
Momart
33%
FIC
35%
PHFC
27%
SAtCO
(Share of joint
venture)
5%
Group Revenue 2014
Underlying Operating Profit 2014
Momart
48%
FIC
41%
PHFC
11%
Momart
48%
FIC
25%
PHFC
26%
SAtCO
(Share of joint
venture)
1%
FALKLAND ISLANDS HOLDINGS PLC 5
Falkland Islands Company (“FIC”)
The Falklands had a particularly busy year. Preparations
for the 2015 offshore drilling campaign saw increased
corporate demand for rented houses, hire vehicles and
agency services and construction work related to the new
temporary dock facility, which led to a welcome recovery in
revenues. The record squid catch in the early part of the
year also improved confidence and boosted government
finances. At the same time, general retail activity picked up
and demand for new kit homes boosted house building. As
a result the pre-tax contribution of the Group’s Falklands
business recovered strongly, with pre-tax profits increasing
by £0.44 million (+39.4%) to £1.56 million (2014: £1.12
million).
Oil developments
During the year, oil companies led by Premier Oil (“Premier”)
and Noble Energy progressed detailed preparations for
the new round of exploration drilling, and in June 2014 the
harsh environment rig, Eirik Raude, was contracted to drill
six wells in Falklands’ waters. The distance from the UK
supply base has meant resources have been introduced
into Stanley to support the rig: 75 oil workers are based
onshore to co-ordinate supplies and maintenance for the
rig in addition to a 25 strong helicopter support team,
which air lifts the circa 120 rig workers to the platform and
provides Air Sea Rescue back-up. Offshore, rig workers
operate in four week shifts with 50% rotating back to the
UK every two weeks on a dedicated charter aircraft. The rig
is supplied by Platform Support Vessels (PSVs) in addition
to a number of Emergency Rescue and Response Vessels
(ERRVs) operating from the new temporary floating dock
facility commissioned by Noble Energy and Premier which
was completed in late 2014 by FIC’s Joint Venture SAtCO.
The fleet of support vessels has added a further 35 workers
to oil exploration establishment.
The overall economic impact of this activity is a key driver
behind the growth in FIC in the year under review and is
relatively modest in comparison to the much more extensive
impact that any future oil production in the Islands would
have.
In strategic terms the 2015 exploration drilling programme
will help establish the “ultimate resource potential” of the
North Falklands basin and in the Southern and Eastern
basin, the initial well planned at Humpback will give a strong
indication of this geologically separate basin’s potential.
In the context of determining “resource potential” the
early positive results from the Zebedee and Isobel Deep
wells announced by Premier in April and May 2015 were
encouraging but the outcome of drilling on the remaining
four wells over the course of the next four to five months
remains critical in determining the extent of oil resources in
Falkland’s waters.
In parallel with the 2015 drilling programme, Premier has
progressed its detailed planning for the development of the
Sea Lion field in the North Falklands basin. The sharp fall
in crude oil prices in late 2014 caused Premier to revisit
its planning assumptions and since late 2014 Premier has
been “engaging with its supply chain to capture lower
costs” in order to offset the fall in oil prices. Premier is still
progressing its Front End Engineering Design (FEED) plans
for a phased development of Sea Lion and is planning to
use a leased floating production storage and offloading unit
(“FPSO”) which will reduce its planned capital expenditure
compared to the previous Tension Leg Platform solution.
Premier estimates that capital expenditure prior to first
oil has now reduced to $1.8 billion and further savings
are being sought. Premier has also announced that cost
savings are expected in the areas of drilling, subsea and
fabrication. Depending on its success in driving down
production costs and its expectations on the trajectory of
future oil prices, the Premier Board has announced that any
decision to commit to the development of Sea Lion will not
take place before mid-2016 at the earliest.
Despite the current uncertainty on timing we remain
optimistic that Sea Lion and other commercially significant
oil reserves will be developed in Falkland’s waters in due
course. The FIH Group has made capital investments of
over £8 million in the Falklands in the last five years and
FIC remains exceptionally well placed with a broadly based,
modernised business
infrastructure, strong property
portfolio and an experienced team to take advantage of the
exploitation of the Falkland’s oil reserves.
FIC Revenues 2015
FBS
16%
Retail
51%
Support &
Services 9%
Freight & Port
Services 7%
Falklands 4x4
17%
FIC Revenues 2014
Retail
58%
FBS
9%
Support &
Services 8%
Freight & Port
Services 8%
Falklands 4x4
17%
ANNUAL REPORT 2015 6
Managing Director’s Strategic Report
BUSINESS REVIEW - CONTINUED
Trading
Overall revenue in FIC increased by £2.63 million (+16.5%)
to £18.51 million (2014: £15.88 million).
16 with the completion of the Crozier Place redevelopment
which will provide both operations with improved customer
access, parking and café amenities.
FIC Operating results
Year ended 31 March
2015
£m
2014
£m
Change
%
Revenues
Retail
Falklands 4x4
Freight & Port
Services
Support services
FBS (property and
construction)
Total FIC revenue
FIC operating
profit
Underlying
operating profit
margin
Share of results
of SAtCO Joint
venture
Net interest
income
FIC Profit Before
Tax
9.54
3.07
1.24
1.66
3.00
18.51
1.31
9.26
2.66
1.26
1.30
3.0
15.6
-1.7
28.1
1.40
113.5
15.88
16.5
0.98
34.3
7.1%
6.2%
15.2
0.18
0.07
1.56
0.04
400.0
0.10
-37.9
1.12
39.4
Total retail sales in FIC increased by 3.0% to £9.54 million
(2014: £9.26 million).
Despite this modest overall increase, retail sales in FIC’s
flagship West Store, which accounts for 60% of FIC’s retail
activity, increased by an encouraging 6.6% helped by a
sharp increase in sales of BHS sourced clothing and an
improved fresh food and delicatessen offer. The Capstan
gift shop on Stanley’s waterfront also performed well with
sales ahead by 7.5% compared to the prior year. In contrast
lower margin Warehouse sales to local retailers and pubs
declined by 22% as some larger operators switched to
purchasing direct from the UK.
Sales at Home Living FIC’s home furnishing store increased
by 36.5% helped by continued growth in new house building
however Home Builder had a quieter year, with sales
restrained by preparations for a substantial expansion in the
store with the conversion of warehousing into retail space
to deliver a better presented and widened customer offer,
including work and leisure wear, garden products and guns
and ammunition as well as tools and building materials. The
full benefits of this expansion will not be seen until 2015-
Retail performance was also improved by the recruitment of
an experienced retail executive from the UK, Kevin Ironside,
who was instrumental in driving through improvement
in gross margins and reductions in stockholding of £0.5
million.
In the automotive business, Falklands 4x4, revenues grew
by 15.6% to a record £3.07 million, with strong growth in
maintenance and service revenues following the acquisition
of local operator “Turbo Tim”. Total vehicle sales fell slightly
from the prior year to 76 from 79 units (-4%).
Revenues from third party freight and port services dropped
marginally by 1.7% to £1.24 million (2014: £1.26 million)
as price competition eroded increased volumes. However,
Support Services revenues increased by 28.1% helped by
another strong illex squid catch which boosted revenues
at the Fishing Agency, a healthy increase in cruise ship
passenger numbers which saw Penguin Travel income rise
by 32% and further progress at the insurance agency.
Revenue from Falkland Building Services (“FBS”) more
than doubled to £3.0 million (2014: £1.4 million) as
housing completions doubled from eight to sixteen. FBS
also saw a sharp increase in the level of subcontracted
labour it provided for work on the construction of the
Temporary Dock Facility for Noble Energy and Premier and
a Government contract to upgrade Moody Brook Road.
Corporate demand for rental property rose sharply and total
property rental revenue included within FBS increased to a
record level of £0.36 million (2014: £0.22 million).
FBS was also engaged on internal capital projects and
expenditure of £2.1 million was incurred in the year to
further modernise FIC’s business infrastructure to prepare it
for the expected growth from oil development.
Key projects included:
• The construction of new warehouse/freezer facilities at
Airport Road, East Stanley which will replace FIC’s aging
retail warehouse facilities and make available a prime 2
acre site on the waterfront in central Stanley;
• Refurbishment of the Company’s Head Office at Crozier
place, with new office space for external tenants and car
parking facilities for visitors to adjacent retail stores;
• Completion of an enlarged Home Builder store, which
includes a new mezzanine floor and garden centre
department; and
• £0.4 million spent on the purchase and installation of 10
mobile homes for staff rental, of which nine were occupied
by 31 March 2015.
FALKLAND ISLANDS HOLDINGS PLC 7
In addition £0.5 million was invested in the investment
property portfolio:
• £0.3 million on the purchase of a four bed-roomed
detached house for rental to corporate tenants; and
• £0.2 million spent on finishing three houses in central
Stanley, held for external rental
FIC’s property rental portfolio now comprises 40 properties
in central Stanley, which are available to let to corporate
clients, private individuals and staff.
With the construction of a Temporary Dock Facility capable
of supporting both oil exploration and the more limited
phased approach to the proposed development of Sea
Lion, plans for a new deep water port at Port William in
Stanley’s outer harbour have been put on hold. A revival
of interest in these plans will depend upon further oil
discoveries and a recovery in the oil price.
In its second year of operation, FIC’s construction joint
the South Atlantic Construction Company,
venture,
(“SAtCO”) made
further progress winning additional
infrastructure contracts from FIG and completing the
construction of a new floating dock (TDF) in Stanley Harbour
to support the 2015 exploration drilling programme. In
addition SAtCO has leased its heavy lift crane to Premier
and its associates for the duration of the current drilling
programme. In the year to 31 March 2015 SAtCO increased
its revenues from £0.1 million to £0.6 million and its profit
before tax to £0.49 million (2014: £0.10 million). All staff
involved in construction activities were contracted directly
from parent companies FIC and Trant Construction and at
31 March 2015 SAtCO had no permanent employees.
FIC Key Performance
Operational Drivers
Indicators and
Year ended 31 March
2015
2014
2013
2012
Staff Numbers
(FTE 31 March )
Capital Expenditure
£’000
Retail Sales growth
%
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)
184
165
129
119
2,598
2,715
1,594
632
3.0% -4.8% 3.0% -2.8%
40
36
32
33
93% 82% 88% 83%
76
16
79
48
50
8
3
0
364.0
188.0
58.2
67.3
50.0
39.5
29.6
35.2
Temporary floating dock, this photo has been reproduced with the permission of Stephen Luxton
ANNUAL REPORT 2015 8
Managing Director’s Strategic Report
BUSINESS REVIEW - CONTINUED
The latest addition to Gosport Ferry’s fleet
Portsmouth Harbour Ferry Company
(“PHFC”)
2014-15 saw another steady performance from PHFC with
revenues increasing by 4.3% despite a 2.1% decline in
passenger numbers. Profit before tax, after pontoon lease
interest charges, was unchanged at £0.8 million.
PHFC Operating results
Year ended 31 March
2015
£m
2014
£m
Change
%
Revenues
Ferry fares
Cruising and Other
revenue
Total PHFC revenue
PHFC operating profit
Pontoon finance
lease interest
PHFC Profit Before
Tax
Underlying operating
profit margin
Passengers carried
(000s)
4.13
0.17
4.30
1.03
3.95
4.5%
0.17
0.6%
4.12
4.3%
1.01
1.9%
(0.24) (0.24)
-2.9%
0.79 0.77
3.4%
24.0% 24.6% -2.3%
2,923
2,986
-2.1%
After increases in like for like passenger numbers in the
first quarter, passenger volumes slipped into decline with
the closure in summer 2014 of the BAE Systems shipyard
in Portsmouth, which involved the loss of 1,000 jobs. A
further adverse effect on passenger volumes came from the
introduction of a heavily subsidised Park & Ride scheme by
Portsmouth City Council in August 2014 which, coupled
with cheaper fuel, encouraged increased car usage.
Ferry fares increased by an average of 6% in June 2014,
bringing the total cost of an adult return to £3.10. This
above inflationary rise was introduced to cover the
increased operating costs linked to the arrival of the
new ferry. Discounted fares for regular customers were
maintained (£1.45 per ferry journey for adults), and lower
tariffs for seniors and children (£2.10 return), which reinforce
the value for money and convenience offered by the ferry
service compared to bus and car travel.
Both weekend and weekday traffic declined by 2.1%
compared to the prior year.
To stimulate ferry usage a number of new fare offerings were
introduced during the year, including discounted family
fares over the Christmas holiday period with return fares for
a family of 5 for £5. Additionally, in association with Gosport
Borough Council, a joint ferry and car parking ticket was
introduced in November 2014 offering return ferry travel
and all day car-parking for regular users for less than £3
per day. From August 2014 a discounted ticket was also
FALKLAND ISLANDS HOLDINGS PLC 9
introduced for all military personnel in the Dockyard and
at the same time PHFC joined the newly launched Solent
Go electronic travel card scheme, which offers discounted
travel across bus and ferry services throughout the Solent
region.
In March 2015 PHFC took delivery of a third modern
ferry vessel “Harbour Spirit” which was built in Croatia
at a cost of £3.2 million. The cost of the new vessel has
been substantially financed by a 10 year bank loan, drawn
down in April 2015. With improved passenger seating,
increased space for cycles and better facilities for the
disabled, Harbour Spirit will underpin PHFC’s service to
passengers well into the middle of this century. Once fully
commissioned, Harbour Spirit will replace one of PHFC’s
1966 vintage vessels, Portsmouth Queen and her sister
ship Gosport Queen will be retained as a back-up. With
three new ferry vessels built since 2002 and an estimated
service life of over 30 years, no further significant vessel
expenditure is anticipated for over 15 years.
Average fares per passenger journey increased by 6.8% to
£1.41 (2014: £1.32).
Ferry reliability was again outstanding with on time
departures running at 99.8% (2014: 99.7%).
Looking ahead, the outlook for passenger growth is positive
as the Naval Base expands to support the Royal Navy’s
new aircraft carriers. The first of these, Queen Elizabeth II,
is expected to arrive in Portsmouth in 2017.
PHFC Key Performance Indicators and
Operational Drivers
Year ended 31 March
2015
2014
2013
2012
Staff Numbers
( FTE at 31 March )
Capital Expenditure
£’000
Ferry Reliability
( on time
departures)
Number of
weekday
passengers (‘000s)
% change on prior
year
Number of
weekend
passengers (‘000s)
% change on prior
year
Total number of
passengers (‘000’s)
% change on prior
year
39
37
35
35
1,483
1,958
223
5,080
99.8% 99.7% 99.5% 99.9%
2,123
2,169
2,230
2,497
-2.1% -2.7% -10.7% -1.6%
800
817
803
831
-2.1% 1.8% -3.4% -4.1%
2,923
2,986
3,033
3,328
-2.1% -1.6% -8.9% -2.1%
Revenue growth % 4.3% 1.2% -1.9% 11.5%
Average yield per
passenger journey
£1.41
£1.32
£1.28
£1.19
ANNUAL REPORT 2015 10
Managing Director’s Strategic Report
FINANCIAL REVIEW
Momart technicians de-installing artwork at the Royal Academy. Photography: Ben Quinton
Momart
Momart, the Group’s art handling and logistics business,
saw a return to more normal levels of activity following the
string of exceptional overseas exhibitions which boosted
results in the prior year. Total revenue for the year decreased
by 13.7% to £15.8 million (2014: £18.3 million) while
underlying operating profit reduced by 32.1% to £1.24
million (2014: £1.83 million).
Finance costs were reduced in the year as borrowings were
repaid. Underlying profit before tax before amortisation of
intangibles was £1.21 million (2014: £1.76 million).
Momart Operating results
Exhibitions
After an exceptional year in 2013-14 which included
an unusual sales mix of high added value contracts for
overseas clients, Momart’s museum exhibition activity fell
back to more normal levels and Exhibitions revenue of
£8.7 million was comparable to the level seen in 2012-
13 of £9.0 million. This decline is not unusual, given the
fragmented and irregular nature of client projects which
vary significantly in both technical content and added value
between years. There was also an adverse mix effect seen
in the increase in work subcontracted to overseas agents
from mainstream UK clients and at the same time a much
lower level of specialist overseas work handled directly by
Momart. Both changes contributed to lower margins and a
decline in Exhibition profitability.
2015
£m
2014
£m
Change
%
8.68
10.86
-20.0
Although the order book of large exhibition contracts was
lower at 31 March 2015, (down £0.6 million at £3.26 million)
an inflow of contracts early in the new financial year saw this
deficit eliminated.
Year ended 31 March
Revenues
Museums and public
exhibitions
Commercial gallery
services
Storage
5.21
1.86
5.57
1.83
-6.5
1.3
-13.7
Total Momart revenue
15.75
18.26
Underlying Momart
operating profit
1.24
1.83
-32.1
Net Interest expense
(0.03)
(0.07)
-50.8%
Underlying Pre Tax
Profit
Underlying operating
profit margin
1.21
1.76
-31.5%
7.9% 10.0%
-21.4
Despite the modest decline in underlying activity, Momart
continued to be a market leader in the UK, and was
involved in the installation of a number of prestigious and
high profile exhibitions including Anselm Keifer and Rubens
at the Royal Academy, Matisse at Tate Modern, Virginia
Woolf at the National Portrait Gallery and Ming at the British
Museum.
Gallery Services
Gallery Services revenues were 6.5% lower in 2014-15 at
£5.21 million (2014: £5.57 million). Competition in the core
UK market increased and the level of low added value work
FALKLAND ISLANDS HOLDINGS PLC
11
from smaller galleries reduced. At the same time there was
good progress with prestigious blue chip clients such as
Christies, White Cube, Gagosian and Sadie Coles, and
Momart continued to win healthy levels of work from world
renowned UK artists, Damien Hirst and Antony Gormley.
Storage
Storage revenues increased by 1.3% to £1.86 million (2014:
£1.83 million) despite work to create a dedicated new
storage area for the Royal Academy which necessitated
closure of a significant section of the warehouse during the
last quarter of the financial year. Adjusting for this, Momart’s
storage facilities once again operated at full capacity. The
lack of storage space to offer to new commercial clients
has proved an effective barrier to growth and accordingly
detailed plans have been agreed with the company’s
landlord to construct new facilities on the company’s
existing East London site to increase capacity by 33% and
to offer improved client reception and viewing facilities.
Subject to the receipt of final planning permission this
increased capacity is due to come on stream in early 2016.
Momart Key Performance Indicators and
Operational Drivers
Momart Revenues 2015
Museum
and public
exhibitions
55%
Commercial Gallery
Services 33%
Storage 12%
Momart Revenues 2014
Commercial Gallery
Services 31%
Museum
and public
exhibitions
59%
Storage 10%
Year ended 31
March
Staff Numbers
(FTE 31 March)
Capital
Expenditure
£’000
Warehouse %
fill vs capacity
Exhibition
Order Book
31 March
Own labour
charged out
Revenues
from overseas
clients
Exhibitions
sales growth
Gallery
Services sales
growth
Storage sales
growth
Total Sales
growth %
2015
2014
2013
2012
128.6
124.6
119.0
115.9
FOGL investment
Details of the Group’s shareholding in FOGL at 31 March
2015 are set out below:
648
260
598
524
31 March
91.2% 92.9% 94.2% 95.1%
£3.26m £3.89m £3.83m £4.16m
Number of shares held
FOGL share price (bid price)
Market value of holding
Cost
£9.07m £11.67m £9.02m £8.58m
Book cost per share
2015
5,000,000
30.0p
£1.5m
£1.0m
20.0p
£7.5m £8.3m £4.6m £5.7m
(20.0%)
20.4% 27.8% 5.7%
(6.5%)
1.3% (12.7)%
26%
1.3% 2.6% 10.5% 6.6%
(13.7%)
12.0% 8.9% 13.5%
In April 2015, the Group disposed of its remaining 5 million
shares in Falkland Oil and Gas for £1.4 million, an average
share price of 28 pence, generating a profit on disposal of
£0.4 million.
Trading outlook
The medium term outlook for the Group remains positive
and in the near term increased activity in the Falkland
Islands linked to the 2015 drilling programme should ensure
another strong trading performance in the new financial
year.
In the Falklands, we look forward to another year of
progress. The remaining four exploration wells will be drilled
in the first half of the new financial year and any further
ANNUAL REPORT 2015
12
Managing Director’s Strategic Report
FINANCIAL REVIEW - CONTINUED
discoveries will add to business confidence. Falkland
Government finances have been bolstered by the record
squid catches of recent years and the increased taxation
inflows linked to oil company operations. This incremental
government income should allow increased spending on
capital and infrastructure projects which in turn will further
stimulate the economy. Despite the currently weakened
oil price, the Board believes the longer term prospects for
the development of oil production in the Falkland Islands
remain very good and that FIC is well placed to fully benefit
from the dramatic growth in the economy that would result.
At PHFC, the recent arrival of a new modern ferry provides
a solid foundation for the long term future of the business
although in the near term the increased operating costs
linked to the new vessel will place a drag on profits.
information systems,
At Momart, despite the quieter year seen in 2014-15,
further
improved management
investment in increased storage space, a strengthened
management team and more focussed marketing provide
a strong platform from which to develop the business. In
addition growth will be accelerated by selective acquisitions.
Underlying growth prospects in this high quality business
remain sound.
With bank borrowings reduced to £0.7 million (2014:
£1.0 million) and cash on hand of £7.4 million (2014: £5.7
million), together with significant further borrowing capacity,
the Group has significant capacity to exploit opportunities
over the medium term, in line with its growth strategy.
Summary income statement
Year ended 31 March
2015
£m
2014
£m
Change
%
Group revenue
38.56
38.26
0.8
Underlying Operating
profit*
3.76
3.85
-2.3
Net financing costs
(0.20)
(0.20)
-0.5
Underlying profit
before tax
Amortisation and
Non-trading items
Gain on sale of FOGL
shares
Termination payments
Gain on transfer of the
PHFC pension scheme
Amortisation of
intangibles
Profit before tax as
reported
3.56
3.65
-2.4
0.71
(0.24)
-
-
-
0.06
-
-
-
(0.14)
(0.31)
-53.7
3.89
3.40
14.4
*Underlying operating profit excludes amortisation and
non-trading items but includes £0.18 million (2014: £0.04
million) of the Group’s share of the results of the SAtCO
joint venture.
Revenue and underlying operating profit
Group revenue rose 0.8% to £38.56 million, however
underlying operating profit decreased 2.3% to £3.76 million
in the year ended 31 March 2015. These variances are
discussed in more detail above in the Review of Operations.
Non-trading items
Non-trading items comprise a £0.71 million gain on the sale
of 7,825,000 Falkland Oil and Gas shares, offset against
£0.24 million of termination costs, relating to the retirement
of the Chairman, David Hudd, and a fall in the amortisation
charge to £0.14 million on the intangible assets (2014: £0.31
million) due to certain customer relationships, together with
the five year Director service contracts, having been fully
amortised in April 2014. Following a review of the useful
life of the Momart brand name, which is now expected to
have an indefinite useful life, amortisation ceased on 30
September 2013, therefore the prior year included a six
month charge of £0.07 million, but no charge has been
included in the current year.
The prior year included a further gain of £0.06 million on the
transfer of the Portsmouth Harbour Ferry pension scheme,
which was transferred to Legal and General on 7 March
2013.
Net financing costs
The Group’s net financing costs remain relatively little
changed to the prior year at £0.2 million, with the fall in
interest income on reduced bank deposits being offset by
a decrease in bank interest payable as £1.0 million of bank
loans were repaid. In March 2015, a £0.7 million loan was
drawn down secured against vessels in Portsmouth.
Underlying pre-tax profit
The Group reported underlying pre-tax profits of £3.56
million, slightly down on the prior year, (2014: £3.65 million).
Reported pre-tax profit
After the £0.7 million gain on the sale of 7,825,000 shares
in Falkland Oil and Gas, and charges of £0.1 million for
the amortisation of intangible assets (2014: £0.3 million),
and the £0.2 million payment on the retirement of the
former Chairman, reported Profit Before Tax for the Group
increased by 14.4% to £3.89 million (2014: £3.40 million).
Taxation
The Group pays corporation tax on its UK earnings at
21% 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
FALKLAND ISLANDS HOLDINGS PLC 13
UK corporation tax in respect of FIC and will gain the full
benefit of the tax deductibility in the Falkland Islands of
expenditure on commercial and industrial buildings. The
effective tax rate on underlying profits is 23.2% (2014:
24.7%).
Earnings per share
Year ended 31 March
Underlying profit
before tax
Taxation on
underlying profit
2015
£m
3.56
2014
£m
Change
%
3.65
-2.4
(0.83)
(0.90)
-8.4
Underlying profit after
tax
2.73
2.75
-0.4
Diluted average
number of shares in
issue (thousands)
Effective underlying
tax rate
Diluted EPS on
underlying profit
12,446
12,461
-0.1
23.2% 24.7%
-6.2
22.0p
22.0p
-
Fully diluted Earnings per Share (“EPS”) derived from
underlying profits, remained at 22.0 pence (2014: 22.0p),
as the fall in the underlying profit before tax has been offset
by a fall in the taxation on underlying profit, due to the tax
rates on profits earned in the UK falling to 21% from 23%
in the prior year.
Balance sheet
The Group’s Balance Sheet remains strong. Total net
assets increased to £36.7 million from £35.4 million in the
prior year.
Retained earnings after the payment of tax and dividends
increased by £1.5 million to £16.3 million (2014: £14.8
million). Bank borrowings were reduced to £0.7 million
(2014: £1.0 million), due to repayment in the year of all
liabilities at 31 March 2014, together with the drawdown
of a £0.7 million loan in the Ferry business in March 2015,
and the Group had cash balances of £7.4 million (2014:
£5.7 million).
The carrying value of intangible assets at £12.2 million has
not fallen from the £12.2 million at 31 March 2014, due to
investment in computer software offsetting the amortisation
charge.
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 £0.3 million to £3.7 million (2014: £3.4 million)
due to £0.5m of additions, offset against £0.2 million
of depreciation. These properties are all situated in the
Falkland Islands, and the £0.5 million additions include £0.3
million for the purchase of a four bedroomed property on
Biggs Road, Stanley and further development of residential
properties to increase the Group’s portfolio.
The Group owns 40 investment properties, which are mainly
houses, in Stanley. These are all held at depreciated cost.
The net book value of these properties and undeveloped
land of £3.7 million (2014: £3.4 million) has been reviewed
by the Directors resident in the Falkland Islands and at
31 March 2015 the fair value of this property portfolio
was estimated at £7.3 million (2014: £6.3 million). If oil
development proceeds, the value of all these properties is
expected to increase significantly.
The Group’s residual 1.0% shareholding in FOGL was sold
in April 2015 for proceeds of £1.4 million, resulting in a
profit of £0.4 million. This transaction will be reported in the
results for the year ending 31 March 2016.
Deferred tax assets relating to future pension liabilities
increased to £0.8 million (2014: £0.6 million). These assets
now only include the deferred tax on the FIC unfunded
scheme calculated by applying the 26% Falklands tax rate
to the pension liability.
Inventories, which largely represents stock held for resale
in the Falkland Islands, decreased by £1.3 million to £5.4
million at 31 March 2015 (2014: £6.7 million). The decrease
largely relates to stock held in the Falkland Islands, where
better stock controls have been implemented during the
year.
Trade and Other Receivables decreased by £1.7 million
to £5.3 million at 31 March 2015, due to the decreased
activity and improved debtor collection at Momart. Average
debtor days outstanding fell to 36.0 (2014: 47.0) due to
new procedures introduced at Momart to speed up the
collection of debtors.
The net book value of property, plant and equipment
increased by £3.0 million to £19.6 million (2014: £16.6
million) after capital investment of £4.1 million, including
£2.1 million in the Falkland Islands. This has been offset
against a £1.1 million depreciation charge in the year.
Outstanding finance lease liabilities totalled £5.1 million
(2014: £5.2 million). £4.9 million (2014: £4.9 million) of the
finance leases balance is in respect of the 50 year lease
from Gosport Borough Council for the Gosport Pontoon.
ANNUAL REPORT 2015 14
Managing Director’s Strategic Report
FINANCIAL REVIEW - CONTINUED
Corporation tax due for payment within the next 12 months
is £0.03 million (2014: £0.4 million). This is lower than the
£0.8 million total charge for taxation on underlying profit,
as £0.4 million of this charge relates to deferred tax. The
£0.4 million current tax charge includes £0.1 million, which
relates to adjustments to prior years, and has already been
paid by 31 March 2015, and in addition £0.3 million of the
2015 tax charge had already been paid in instalments by 31
March 2015. The effective tax rate on underlying profits was
23.2% (2014: 24.7%)
Trade and other payables decreased from £11.0 million to
£10.2 million at 31 March 2015 as the prior year reflected
increased trading activity at Momart at the year end, which
has not been repeated in the March 2015 year.
At 31 March 2015 the liability due in respect of the Group’s
defined benefit pension schemes was £2.9 million (2014:
£2.5 million). The increased liability is due principally to
lower medium term interest rates used to discount the
schemes future liabilities. 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 2015, were £2.0 million and increased £0.4
million from the prior year (2014: £1.6 million), largely due
to the delivery of the new vessel for Portsmouth Harbour
Ferry. £1.7 million of this balance arises on property, plant
and equipment, and is principally due to the new vessel and
also 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 295p at 31 March 2015 (2014:
285p).
Cash flows
Operating cash flow
Net cash flow from operating activities increased from £2.8
million last year to £6.4 million, due to continued strong
cash flow from trading and an increased focus on reducing
working capital across the group.
The Group’s Operating Cash Flow can be summarised as
follows:
Year ended 31 March
2015
£m
2014
£m
Change
£m
Underlying profit before tax
Depreciation
Amortisation of computer
software
Net Interest payable
EBITDA
Share based payments
Decrease / (increase) in work-
ing capital
Tax paid
Other
Net cash inflow from
operating activities
Financing and Investing
Activities
Sale of 7.825 million
FOGL shares
Less:
Dividends paid
Capital expenditure
3.6
1.4
-
0.2
5.2
0.1
2.1
(0.8)
(0.2)
3.6
1.1
-
0.3
0.1
(0.1)
0.2
5.0
-
(1.7)
(0.8)
-
0.2
0.1
3.8
-
0.3
(0.5)
6.4
2.8
3.6
2.3
-
2.3
(1.4)
(4.9)
(1.4)
-
(5.0)
0.1
Net bank interest received
-
0.1
(0.1)
Loan repayments from / (loan
to) joint venture
0.2
(0.5)
0.7
Net cash outflow on sale &
purchase of treasury shares
-
(0.1)
0.1
Bank and other loan
repayments
(1.4)
(1.4)
-
Bank and Hire purchase loan
draw down
0.8
-
0.8
Increase in hire purchase
debtors
Net cash outflow from
financing and investing
activities
Net cash inflow / (outflow)
Cash balance b/fwd
Cash balance c/fwd
(0.3)
(0.2)
(0.1)
(4.7)
(8.5)
3.8
1.7
5.7
7.4
(5.7)
7.4
11.4
(5.7)
5.7
1.7
FALKLAND ISLANDS HOLDINGS PLC 15
Financing outflows
During the year the Group paid dividends of £1.4 million
(2014: £1.4 million) and made fixed asset investments
of £4.7 million of expenditure to strengthen the Group’s
operating base, including final payments of £1.3 million
(2014: £1.8 million) in respect of the new vessel for Gosport
ferry; £2.6 million was invested in Stanley with £0.5 million
of expenditure on investment land and buildings, £0.7
million on plant and machinery, £0.3 million spend on the
new Homebuilder/Garden Centre store, £0.4 million spent
on the purchase of ten mobile homes for rental to staff, £0.1
million spend on finalising the refurbishment of the Stanley
head office and £0.6 million building on the new retail
warehouse and freezer facilities at Airport Road.
Scheduled loan repayments of £1.4 million (2014: £1.4
million) were made, including £0.3 million of payments to
Gosport Council on the 50 year pontoon finance lease, £0.1
million of repayments on hire purchase leases for trucks at
Momart and £1.0 million of bank loan repayments which
repaid all the bank loans outstanding at 31 March 2014. In
March 2015, the Group drew down a further £0.7 million
bank loan secured against the Spirit of Gosport and the
Spirit of Portsmouth, which were delivered to PHFC in 2002
and 2005 respectively.
John Foster
Managing Director
8 June 2015
ANNUAL REPORT 2015 16
Board of Directors and Secretary
Edmund Rowland Chairman
Edmund was appointed to the Board on 16 April 2013, and became Chairman on 9 February 2015. He currently serves
as a Director of Blackfish Capital Management, a specialist asset manager based in London and as Chief Executive
Officer 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 S.A and Blackfish. He has broad experience of principal investing
in both equity and credit capital markets, with a focus on special situations. He sits on the board of Banque Havilland
(Monaco) SAM and Certus Trust Limited.
Edmund is a member of the Remuneration Committee.
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.
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.
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.
FALKLAND ISLANDS HOLDINGS PLC 17
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 2015.
Results and dividend
The Group’s result for the year is set out in the Group Income Statement on page 23. The Group profit for the year after taxation
amounted to £3,144,000 (2014: £2,633,000). Basic earnings per share on underlying profits were 22.1p (2014: 22.2p).
It is the Board’s considered view that the Group can best take full advantage of existing and emerging opportunities by maximising
the reinvestment of profits and suspending dividend payments in order to accumulate resources to build a much more substantial
group with greater critical mass in its respective markets. We believe this more focused long term approach will have more appeal
for existing and prospective investors and offer much greater shareholder liquidity. The Board is confident that this new approach
and focus will lead to more certain capital growth and greater overall returns for shareholders in the long term. Therefore dividend
payments have been suspended in line with the increased focus of investment and long term growth.
Dividends paid during the year comprise a dividend of 7.5p per share in respect of the previous year ended 31 March 2014 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 2015 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 4 to 15 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
On 9 February 2015, the Chairman, David Hudd resigned from the Board and was succeeded on the same day by Edmund
Rowland, the Non-Executive Deputy Chairman.
On 13 April 2015, Mike Killingley, the Senior Non-Executive retired from the Board after ten years’ service.
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 pages 19 and 20. 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 57 to 59.
Corporate Governance
As an AIM company, Falkland Islands Holdings plc is not required to comply with the UK Corporate Governance Code (the ‘Code’)
which applies only to fully listed UK companies and adherence to which requires the commitment of significant resources and cost.
However high standards of Corporate Governance are a key priority of the Board and details of how the Company addresses key
governance issues are set out in the Corporate Governance section of its website by reference to the 12 principles of Corporate
Governance developed by the Quoted Companies Alliance.
The Board has established Audit, Remuneration, Nominations, and AIM Rules Compliance Committees and the Company
receives regular feedback from its external auditors on the state of its internal controls. The Board attaches great importance to
providing shareholders with clear and transparent information on the Group’s activities, strategy and financial position. Details of
ANNUAL REPORT 2015 18
Directors’ Report
CONTINUED
all shareholder communications are provided on the Group’s website. The Board holds regular meetings with larger shareholders
and regards the annual general meeting as a good opportunity to communicate directly with shareholders via an open question
and answer session.
Share capital and substantial interests in shares
During the year no share capital was issued. Further information about the Company’s share capital is given in note 26 on pages
61 and 62. Details of the Company’s executive share option scheme and employee ownership plan can be found on page 19 and
in note 25 on page 60 and 61.
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 2015.
Blackfish Capital Management
Fidelity investments
L S Licht
Argos Argonaut Fund
Number of shares
Percentage of shares in issue
net of shares held in Treasury
2,500,000
892,114
535,000
460,000
20.1
7.2
4.3
3.7
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 2015 or 31 March 2014.
Charitable and political donations
Charitable donations made by the Group during the year amounted to £28,030 (2014: £23,709), largely to local community
charities in Gosport and the Falkland Islands. There were no political donations in the year (2014: nil).
Disclosure of information to auditor
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.
Auditor
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 10.00 a.m. on 8 September 2015. 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.
FALKLAND ISLANDS HOLDINGS PLC 19
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 2015 and in the preceding year is as follows:
David Hudd
John Foster
Mike Killingley
Jeremy Brade
Edmund Rowland
Total
Salary
£’000
Termination
payment
£’000
Bonuses
£’000
107
203
35
30
28
200
-
-
-
-
-
*60
-
-
-
2015
Total
£’000
307
263
35
30
28
2014
Total
£’000
177
280
35
30
23
403
200
60
663
545
None of the Directors of the Company receive any pension contributions or benefit from any Group pension scheme.
*The Remuneration Committee has decided to split the Managing Director’s bonus for the year into an equal split of deferred
shares and cash, with the shares requiring a service condition to remain in employment for up to three years. Therefore for the
year ended 31 March 2015, John Foster has been awarded a cash bonus of £60,000 and a further £60,000 of deferred shares,
to be issued at the share price at the close of business on 9 June 2015. These deferred shares will be provided at no cost to him
in three equal tranches over the next three years.
The Executive Directors participate in annual performance related bonus arrangements. The Managing Director had the potential
during the year of earning up to 100% of his salary. The bonuses are subject to the achievements of specified corporate and
personal objectives.
Directors’ interests in shares
As at 31 March 2015, the share options of executive Directors may be summarised as follows:
Date of grant
14 Jun 2005
7 Aug 2007
15 Jul 2009
13 Aug 2012
Total
Number
of options
J L Foster
14,117
27,517
44,550
76,700
162,884
Exercise price
Exercisable from
Expiry date
£4.25
14 Jun 2008
13 Jun 2015
£3.30
7 Aug 2010
6 Aug 2017
£2.90
15 Jul 2012
14 Jul 2019
£4.04
13 Aug 2015
12 Aug 2022
ANNUAL REPORT 2015 20
Directors’ Report
CONTINUED
The mid-market price of the Company’s shares on 31 March 2015 was 276.5 pence and the range in the year was 264.8 pence
to 366.3 pence.
The Directors’ options extant at 31 March 2015 totalled 162,884 and represented 1.3% of the Company’s issued share capital, in
addition David Hudd has been granted a six month period from his retirement date in which to exercise his 154,966 options. The
409,348 remaining options are held by 48 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
Ordinary shares as at
31 March 2015
Ordinary shares as at
31 March 2014
n/a
61,867
30,000
15,000
116,199
61,153
30,000
15,000
Edmund Rowland
**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 £150
per month or 10% of salary, whichever is lower. For every 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 2015 the Company purchased £600
of matching shares (2014: £500) for Mr D Hudd and £600 of matching shares (2014: £500) for Mr J Foster.
FALKLAND ISLANDS HOLDINGS PLC 21
Statement of Directors’ responsibilities in respect of the Annual Report, Directors’ Report,
Strategic Report and the Financial Statements
The Directors are responsible for preparing the Annual Report, Directors’ Report, Strategic Report and the financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare Group and Parent 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 EU and applicable law 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 Parent
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 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.
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
8 June 2015
Kenburgh Court
133-137 South Street
Bishop’s Stortford
Hertfordshire
CM23 3HX
ANNUAL REPORT 2015 22
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 2015 which comprise the
Group Income Statement, the Group Statement of Comprehensive Income, the Group and Parent Company Balance Sheets, the
Group and Parent Company Cash Flow Statements, the Group and Parent Company Statements of Changes in 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 auditor
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 website 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
2015 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 the Directors’ Report for the financial year for which the financial
statements are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in
our opinion:
• 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
8 June 2015
For and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
St Nicholas House, Park Row
Nottingham, NG1 6FQ
FALKLAND ISLANDS HOLDINGS PLC
23
Total
2014
£’000
38,263
(22,212)
16,051
(12,235)
-
-
64
Consolidated Income Statement
FOR THE YEAR ENDED 31 MARCH 2015
Operating expenses
(12,050)
Notes
4
Revenue
Cost of sales
Gross profit
Other administrative
expenses
Board restructuring costs
15
Gain on sale of FOGL shares
Pension settlement profit
11
Amortisation of intangible
assets
Operating profit
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
Taxation
Profit / (loss) for the year
attributable to equity
holders of the company
8
9
10
Earnings per share
Basic
Diluted
Before
amortisation
& non-trading
items
Amortisation
& non-trading
items
2015
£’000
2015
£’000
Before
amortisation
& non-trading
items
Amortisation
& non-trading
items
2014
£’000
2014
£’000
Total
2015
£’000
38,560
(22,927)
15,633
(12,050)
-
-
-
-
38,560
38,263
(22,927)
(22,212)
15,633
16,051
(12,050)
(12,235)
-
-
-
-
(234)
(234)
711
-
711
-
(142)
(142)
-
-
-
-
-
-
-
-
-
-
64
(307)
(307)
335
335
-
(11,715)
(12,235)
(243)
(12,478)
3,918
180
3,816
(243)
3,573
36
-
36
3,583
180
3,763
335
4,098
3,852
(243)
3,609
187
(391)
(204)
3,559
(825)
-
-
335
75
187
(391)
(204)
3,894
(750)
220
(425)
(205)
-
-
220
(425)
(205)
3,647
(243)
3,404
(901)
130
(771)
2,734
410
3,144
2,746
(113)
2,633
22.1p
22.0p
25.4p
25.3p
22.2p
22.0p
21.3p
21.1p
ANNUAL REPORT 2015
24
Consolidated Statement of Comprehensive Income
FOR THE YEAR ENDED 31 MARCH 2015
Unrealised profit / (loss) on the revaluation of shares in Falkland Oil and Gas
Transfer to the income statement on sale of shares in Falkland Oil and Gas
Items which will ultimately be recycled to the income statement
(Increase) / decrease in the FIC defined benefit pension liability
Movement 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
2015
£’000
225
(419)
(194)
(412)
107
(305)
(499)
3,144
2,645
2014
£’000
(129)
-
(129)
135
(35)
100
(29)
2,633
2,604
FALKLAND ISLANDS HOLDINGS PLC
Consolidated Balance Sheet
AT 31 MARCH 2015
Notes
11
12
13
15
16
17
18
19
20
17
21
22
23
22
24
18
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
Finance leases receivable
Deferred tax assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Finance leases receivable
Cash and cash equivalents
Total current assets
TOTAL ASSETS
Current liabilities
Interest-bearing loans and borrowings
Income tax payable
Trade and other payables
Total current liabilities
Non-current liabilities
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
25
2015
£’000
12,226
19,621
3,693
1,500
266
378
458
750
2014
£’000
12,238
16,609
3,396
3,270
86
529
342
645
38,892
37,115
5,391
5,308
647
7,435
18,781
57,673
(293)
(27)
(10,214)
(10,534)
(5,580)
(2,884)
(1,987)
(10,451)
(20,985)
36,688
1,243
17,447
1,162
16,344
492
36,688
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
35,377
These financial statements were approved by the Board of Directors on 8 June 2015 and were signed on its behalf by:
J L Foster
Director
ANNUAL REPORT 2015 26
Company Balance Sheet
AT 31 MARCH 2015
Notes
14
20
18
20
21
22
23
Non-current assets
Investment in subsidiaries
Loans to subsidiaries
Deferred tax
Total non-current assets
Current assets
Trade and other receivables
Corporation tax receivable
Cash and cash equivalents
Total current assets
TOTAL ASSETS
Current liabilities
Interest-bearing loans and borrowings
Corporation tax payable
Trade and other payables
Total current liabilities
Net assets
26
Capital and reserves
Equity share capital
Share premium account
Other reserves
Retained earnings
Total equity
2015
£’000
28,249
1,813
6
30,068
12
27
9,379
9,418
39,486
-
-
(562)
(562)
38,924
1,243
17,447
6,910
13,324
38,924
2014
£’000
29,004
1,952
4
30,960
19
-
9,280
9,299
40,259
(785)
(48)
(578)
(1,411)
38,848
1,243
17,447
6,910
13,248
38,848
These financial statements were approved by the Board of Directors on 8 June 2015 and were signed on its behalf by:
J L Foster
Director
Registered company number: 03416346
FALKLAND ISLANDS HOLDINGS PLC Consolidated Cash Flow Statement
FOR THE YEAR ENDED 31 MARCH 2015
27
Cash flows from operating activities
Profit for the year
Adjusted for:
(i) Non-cash items:
Depreciation
Depreciation of computer software
Amortisation
Profit on disposal of fixed assets
Share of Joint Venture profit
Amortisation of loan fees
Past service cost of pension scheme
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 payable
Gain on disposal of FOGL shares
Pension settlement profit
Corporation and deferred tax expense
Other adjustments
Operating cash flow before changes in working capital and provisions
Decrease / (increase) in trade and other receivables
Decrease / (increase) in inventories
(Decrease) / increase in trade and other payables
Decrease in provisions and employee benefits
Changes in working capital and provisions
Cash generated from operations
Corporation taxes paid
Net cash flow from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of computer software
Proceeds from the disposal of property, plant & equipment
Proceeds received from the sale of FOGL shares
Cash received on transfer of pension scheme
Acquisition of a business
Loans to Joint Venture
Interest received
Net cash flow from investing activities
2015
£’000
3,144
1,387
39
142
-
(180)
15
-
107
90
1,600
(15)
17
246
(711)
-
750
287
5,031
1,733
1,406
(879)
(115)
2,145
7,176
(792)
6,384
2014
£’000
2,633
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
(4,597)
(4,933)
(132)
86
2,287
-
(215)
151
15
(2,405)
(41)
21
-
46
-
(529)
99
(5,337)
ANNUAL REPORT 2015 28
Consolidated Cash Flow Statement CONTINUED
FOR THE YEAR ENDED 31 MARCH 2015 (CONTINUED)
Cash flow from financing activities
Increase in finance leases receivable
Repayment of secured loan
Bank loan drawn down
Interest paid
Hire purchase loan drawn down
Net cash flows from sale and purchase of Treasury shares
Dividends paid
Net cash flow from financing activities
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at start of year
Cash and cash equivalents at end of year
2015
£’000
(260)
(1,391)
701
(17)
132
-
(1,424)
(2,259)
1,720
5,715
7,435
2014
£’000
(238)
(1,396)
-
(39)
-
(66)
(1,423)
(3,162)
(5,701)
11,416
5,715
FALKLAND ISLANDS HOLDINGS PLC Company Cash Flow Statement
FOR THE YEAR ENDED 31 MARCH 2015
Notes Cash flows from operating activities
Profit for the year
Adjusted for:
Bank interest receivable
Bank interest payable
Amortisation of loan fees
Equity-settled share-based payment expenses
Impairment of investment in Erebus
Reversal of loan impairment due to loan repayment in the year by Erebus
(1,309)
Corporation and deferred tax expense
Operating cash flow before changes in working capital and provisions
Decrease in trade and other receivables
(Decrease) / increase in trade and other payables
Changes in working capital and provisions
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 received
Interest paid
Net cash flows from sale and purchase of Treasury shares
Dividends paid
Net cash flow from financing activities
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at start of year
Cash and cash equivalents at end of year
(1)
958
7
(16)
(9)
949
(76)
873
1,448
(800)
12
(10)
-
(1,424)
(774)
99
9,280
9,379
29
2015
£’000
2014
£’000
1,410
1,632
(12)
10
15
55
790
(95)
26
16
7
129
-
72
1,787
2
57
59
1,846
(75)
1,771
(825)
(800)
95
(26)
(66)
(1,423)
(3,045)
(1,274)
10,554
9,280
ANNUAL REPORT 2015 30
Consolidated Statement of Changes in Shareholders’ Equity
FOR THE YEAR ENDED 31 MARCH 2015
Balance at 1 April 2013
Profit for the year
Share-based payments
Net Treasury share movements
Dividends
Change in fair value of shares in
Falkland Oil and Gas Limited
Remeasurement of the defined benefit
pension liability, net of tax
Balance at 31 March 2014
Profit for the year
Share based payments
Dividends
Transfer to the income statement on sale
of shares in Falkland Oil and Gas Limited
Change in fair value of shares in
Falkland Oil and Gas Limited
Remeasurement of the defined benefit
pension liability, net of tax
Equity
share
capital
£’000
Share
premium
account
£’000
Other
reserves
£’000
Retained
earnings
£’000
Financial
assets
fair value
reserve
£’000
Total
equity
£’000
1,243
17,447
1,162
13,612
815
34,279
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,633
43
(126)
(1,423)
-
-
-
2,633
43
(126)
(1,423)
-
(129)
(129)
100
-
100
1,243
17,447
1,162
14,839
686
35,377
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,144
90
(1,424)
-
-
-
-
-
(419)
225
3,144
90
(1,424)
(419)
225
(305)
-
(305)
Balance at 31 March 2015
1,243
17,447
1,162
16,344
492
36,688
FALKLAND ISLANDS HOLDINGS PLC Company Statement of Changes in Shareholders’ Equity
FOR THE YEAR ENDED 31 MARCH 2015
31
Equity
share
capital
£’000
Share
premium
account
£’000
Other
reserves
£’000
Retained
earnings
£’000
Total
equity
£’000
Balance at 1 April 2013
Profit for the year
Share-based payments
Net Treasury share movements
Dividends
Balance at 31 March 2014
Profit for the year
Share based payments
Dividends
1,243
17,447
6,910
13,122
-
-
-
-
-
-
-
-
-
1,632
43
(126)
(1,423)
1,243
17,447
6,910
13,248
-
-
-
-
-
-
-
-
-
1,410
90
(1,424)
(1,424)
38,722
1,632
43
(126)
(1,423)
38,848
1,410
90
Balance at 31 March 2015
1,243
17,447
6,910
13,324
38,924
A profit of £1,410,000 (2014: profit: £1,632,000) 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.
ANNUAL REPORT 2015 32
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.
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 32.
The financial statements are presented in pounds sterling, rounded to the nearest thousand. They are prepared on the historical
cost basis, except for the investment in Falkland Oil and Gas limited, which is stated at 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. Control is determined by
Falklands Islands Holdings exposure or rights, to variable returns from its involvement with the subsidiary and the ability to affect
those returns. 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 within the Company balance sheet are stated
at cost.
Presentation of income statement
Due to the non-prescriptive nature under IFRS as to the format of the income statement, the format used by the Group is explained
below.
Operating profit is the pre-finance profit of continuing activities and acquisitions of the Group, and in order to achieve consistency
and comparability, is analysed to show separately the results of normal trading performance (“underlying profit”), individually
significant charges and credits, changes in the fair value of financial instruments and amortisation of intangible assets on acquisition.
FALKLAND ISLANDS HOLDINGS PLC 33
1 Accounting Policies CONTINUED
Such items arise because of their size or nature, and in 2015 comprise:
• Restructuring costs:
• The gain on the sale of 7,825,000 Falkland Oil and Gas Limited; and
• the amortisation of intangible assets
In 2014 these comprised:
• The net settlement profit on the disposal of the liabilities in the PHFC pension scheme; and
• the amortisation of intangible assets
Foreign currencies
Transactions in foreign currencies are translated to the functional currencies of Group entities at exchange rates ruling at the dates
of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated to the functional currency
using the relevant rates of exchange ruling at the balance sheet date and the gains or losses thereon are included in the income
statement.
Non-monetary assets and liabilities are translated using the exchange rate at the date of the initial transaction.
Property, plant and equipment
Property, plant and equipment are measured at cost less accumulated depreciation and impairment losses. Cost comprises
purchase price and directly attributable expenses. Depreciation is charged to the income statement on a straight-line basis over
the estimated useful lives of each part of an item of property, plant and equipment, except for trucks owned by Momart, which are
depreciated on a 33.3% reducing balance basis. 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 under 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, as stated
under property, plant and equipment above) and any impairment losses.
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. Falkland Islands Holdings plc has
joint control over an investee when it has exposure or rights to variable returns from its involvement with the joint venture and has
the ability to affect those returns through its joint power over the entity.
Jointly controlled entities are accounted for using the equity method (equity accounted investees) and are initially recognised at
cost. 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.
Intangible assets
Goodwill
Goodwill arises on the acquisition of subsidiaries and businesses.
ANNUAL REPORT 2015 34
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 life
6 - 10 years
5 years
In the year ended 31 March 2014, the Directors reviewed the life of the brand name at Momart and after considerations of
its strong reputation in a niche market and its history of stable earnings and cash flow, which is expected to continue into the
foreseeable future, determined that its useful life is indefinite, and amortisation ceased from 1 October 2013.
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, at least 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 and interest receivable which 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 classified as available-for-sale
The investment in Falkland Oil and Gas Limited is 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 the 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 35
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 market performance 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 is 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
The Group has one pension scheme providing benefits based on final pensionable pay, which is unfunded and closed to further
accrual. The Group’s net obligation in respect of the 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 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 benefit recognised is limited to the present value of any reductions in
future contributions to the plan.
ANNUAL REPORT 2015 36
Notes to the financial statements
CONTINUED
1 Accounting Policies CONTINUED
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. 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 pension 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. Lease
incentives granted are recognised as an integral part of the total rental income.
FALKLAND ISLANDS HOLDINGS PLC 37
1 Accounting Policies CONTINUED
As lessor
Assets under hire purchase agreements are shown in the balance sheet under current assets to the extent they are due within one
year, and under non-current assets to the extent that they are due after more than one year, and are stated at the value of the net
investment in the agreements. The income from such agreements is credited to the income statement each year so as to give a
constant rate of return on the funds invested.
Assets held for leasing out under operating leases are included in investment property (where they constitute land and buildings)
or in property, plant and equipment (where they do not constitute land and buildings) at cost less accumulated depreciation and
impairment losses. Rental income is recognised on a straight-line basis.
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.
New, amended and revised IFRSs and International Financial Reporting Interpretations Committee pronouncements (“IFRICs”)
The following IFRSs and amendments and revisions to IFRSs which were effective for the first time in the year ended 31 March
2015 did not have any material impact on 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
Effective date
Periods beginning on or after:
1 January 2014
1 January 2014
1 January 2014
1 January 2014
1 January 2014
Effective date
Periods beginning on or after:
1 January 2014
The following 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:
Amendments and revisions to IFRSs
IAS 19 Defined Benefit Plans: Employee Contributions
Various Improvements to IFRSs – minor amendments
Effective date
Periods beginning on or after:
1 February 2015
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.
ANNUAL REPORT 2015 38
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 and any other assets purchased through the acquisition of a business.
FALKLAND ISLANDS HOLDINGS PLC 39
2 Segmental Information Analysis CONTINUED
2015
Revenue
Segment operating profit before
tax, amortisation & non-trading
items
Board restructuring costs
Gain on the sale of 7,825,000
FOGL shares
Amortisation
Segment operating profit
Share of result 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 segment information
Capital expenditure:
Property, plant and equipment
Investment properties
Computer software
Total Capital Expenditure
Depreciation:
Property, plant and equipment
Investment properties
Computer software
Total Depreciation
Amortisation of intangible assets
on acquisition of Momart
Underlying profit before tax
Segment operating profit
Share of results of joint venture
Underlying profit before net
financing costs
Interest income
Interest expense
Underlying profit before tax
General
trading
(Falklands)
£’000
18,506
1,312
-
-
-
1,312
180
1,492
177
(113)
1,556
26,439
(9,737)
16,702
2,090
508
-
2,598
541
211
-
752
-
1,312
180
1,492
177
(113)
1,556
Ferry
Services
(Portsmouth)
£’000
Art logistics
and storage
(UK)
£’000
Unallocated
£’000
4,301
1,032
-
-
-
1,032
-
1,032
3
(239)
796
15,937
(7,277)
8,660
1,483
-
-
1,483
349
-
-
349
-
1,032
-
1,032
3
(239)
796
15,753
1,239
-
-
(142)
1,097
-
1,097
7
(39)
1,065
13,785
(3,452)
10,333
516
-
132
648
286
-
39
325
142
1,239
-
1,239
7
(39)
1,207
-
-
(234)
711
-
477
-
477
-
-
477
1,512
(519)
993
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
£’000
38,560
3,583
(234)
711
(142)
3,918
180
4,098
187
(391)
3,894
57,673
(20,985)
36,688
4,089
508
132
4,729
1,176
211
39
1,426
142
3,583
180
3,763
187
(391)
3,559
Unallocated Assets and Liabilities
The £1,512,000 (2014: £3,293,000) unallocated assets above include the Group’s investment in Falkland Oil and Gas
of £1,500,000 (2014: £3,270,000), together with £12,000 (2014: £23,000) of prepayments held in Falkland Islands Holdings plc.
The £519,000 (2014: £595,000) unallocated liabilities above consist of accruals and tax balances held in Falkland Islands Holdings
plc.
ANNUAL REPORT 2015
40
Notes to the financial statements
CONTINUED
2 Segmental Information Analysis CONTINUED
2014
Revenue
Segment operating profit before
tax, amortisation & non-trading
items
Pension settlement profit
Amortisation
Segment operating profit
Share of result 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 segment information
Capital expenditure:
Property, plant and equipment
Investment properties
Computer software
Total Capital Expenditure
Depreciation:
Property, plant and equipment
Investment properties
Computer software
Total Depreciation
Amortisation of intangible assets
on acquisition of Momart
Underlying profit before tax
Segment operating profit
Share of results of joint venture
Underlying profit before net
financing costs
Interest income
Interest expense
Underlying profit before tax
General trading
(Falklands)
£’000
Ferry
Services
(Portsmouth)
£’000
Art logistics
and storage
(UK)
£’000
Unallocated
£’000
15,881
4,124
18,258
977
1,013
1,826
-
-
977
36
1,013
211
(108)
1,116
24,432
(8,950)
15,482
2,057
658
-
2,715
429
48
-
477
-
977
36
1,013
211
(108)
1,116
-
-
1,013
-
1,013
3
(246)
770
14,809
(6,541)
8,268
1,958
-
-
1,958
332
-
-
332
-
1,013
-
1,013
3
(246)
770
-
(307)
1,519
-
1,519
6
(71)
1,454
14,532
(5,603)
8,929
260
-
41
301
307
-
117
424
307
1,826
-
1,826
6
(71)
1,761
Total
£’000
38,263
3,816
64
(307)
3,573
36
3,609
220
(425)
3,404
-
-
64
-
64
-
64
-
-
64
3,293
(595)
2,698
57,066
(21,689)
35,377
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,275
658
41
4,974
1,068
48
117
1,233
307
3,816
36
3,852
220
(425)
3,647
FALKLAND ISLANDS HOLDINGS PLC
41
3. Geographical analysis
The tables below analyse revenue and other information by geography:
2015
Revenue (by source)
Assets and Liabilities
Non-current segment assets, excluding deferred tax and
the investment in Falkland Oil and Gas Limited
Capital expenditure
2014
Revenue (by source)
Assets and Liabilities
Non-current segment assets, excluding deferred tax
and the investment in Falkland Oil and Gas Limited
Capital expenditure
4. Revenue
Sale of goods
Rendering of services
Total revenue
United
Kingdom
£’000
20,054
24,692
2,131
Falkland Islands
£’000
18,506
11,950
2,598
United
Kingdom
£’000
22,382
Falkland Islands
£’000
15,881
23,377
2,259
9,823
2,715
2015
£’000
12,584
25,976
38,560
Total
£’000
38,560
36,642
4,729
Total
£’000
38,263
33,200
4,974
2014
£’000
11,701
26,562
38,263
5. Amortisation of intangible assets acquired on purchase of Momart, and non-trading
items
Amortisation charge on Momart intangible assets acquired
Profit before tax as reported
Board restructuring costs
Gain on the sale of 7,825,000 FOGL shares
Amortisation
Net settlement profit on the transfer of the PHFC pension scheme
Total amortisation and non-trading items
Underlying profit before tax
2015
£’000
(142)
3,894
234
(711)
142
-
(335)
3,559
2014
£’000
(307)
3,404
-
-
307
(64)
243
3,647
A £75,000 tax credit has been included in the Group’s income statement in respect of the £335,000 non-trading items for the year
ending 31 March 2015. This has been calculated as the £28,000 credit on the amortisation of the non-trading intangible assets,
and the tax deductibility at 21% of the £234,000 Board restructuring costs, excluding the accelerated charge for share options,
which the Remuneration Committee deemed to vest on the date of retirement. No tax charge has arisen on the £711,000 gain
on the sale of the 7,825,000 shares in Falkland Oil and Gas Limited.
ANNUAL REPORT 2015 42
Notes to the financial statements
CONTINUED
6. Expenses and auditor’s remuneration
The following expenses / (incomes) have been included in the
profit and loss
Group
Company
Direct operating expenses of rental properties
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
Auditor’s remuneration
Audit of these financial statements
Other taxation services
Audit of subsidiaries’ financial statements pursuant to legislation
Total auditor’s remuneration
2015
£’000
142
1,237
39
142
(60)
16
9,853
864
2014
£’000
131
1,116
117
307
(50)
(44)
9,025
822
2015
£’000
2014
£’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2015
£’000
2014
£’000
30
4
62
96
25
4
61
90
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.
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
2015
£’000
2014
£’000
2015
£’000
2014
£’000
40
180
5
131
6
362
38
142
5
121
5
311
-
-
-
-
6
6
-
-
-
-
5
5
FALKLAND ISLANDS HOLDINGS PLC 43
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
Total employment costs
Group
Company
2015
£’000
2014
£’000
11,307
10,490
90
901
274
43
910
243
12,572
11,686
2015
£’000
761
55
72
9
897
2014
£’000
638
7
80
8
733
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’.
8. Finance income and expense
Bank interest receivable
Finance lease interest receivable
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
Unwinding of deferred consideration payable
Total finance expense
2015
£’000
15
172
187
2015
£’000
(17)
(107)
(15)
(246)
(6)
(391)
2014
£’000
99
121
220
2014
£’000
(39)
(108)
(16)
(262)
-
(425)
ANNUAL REPORT 2015 44
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 expense / (credit)
Total tax expense
Reconciliation of the effective tax rate
Profit on ordinary activities before tax
Tax using the UK corporation tax rate of 21% (2014: 23%)
Expenses not deductible for tax purposes
Gain on disposal of investment
Marginal relief
Effect of higher tax rate overseas
Difference in the rate of deferred tax
Income from joint ventures
Adjustments to tax charge in respect of previous periods
Total tax expense
Tax recognised directly in other comprehensive income
2015
£’000
2014
£’000
323
77
400
412
-
(62)
350
750
2015
£’000
3,894
818
124
(149)
(1)
13
(32)
(38)
15
750
801
34
835
47
(136)
25
(64)
771
2014
£’000
3,404
783
78
-
-
(5)
(136)
(8)
59
771
Deferred tax credit / (expense) recognised directly in other comprehensive income
2015
£’000
107
2014
£’000
(35)
Reductions in the UK corporation tax rate from 23% to 21% (effective 1 April 2014) and to 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 assets and liabilities in the United Kingdom at 31 March 2015 have been calculated based on the rate of 20% substantively
enacted at the balance sheet date. The deferred tax assets and liabilities in the Falkland Islands have been calculated at the
Falklands tax rate of 26%.
FALKLAND ISLANDS HOLDINGS PLC 45
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
2015
£’000
3,144
2014
£’000
2,633
2015
Number
2014
Number
12,431,623 12,431,623
(18,381)
(28,016)
(12,764)
(37,785)
Average number of shares in issue excluding the ESOP and shares held in Treasury
12,385,226
12,381,074
Maximum dilution with regards to share options
Diluted weighted average number of shares
Basic earnings per share
Diluted earnings per share
60,871
79,911
12,446,097 12,460,985
2015
25.4p
25.3p
2014
21.3p
21.1p
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
2015
£’000
3,559
(825)
2,734
2014
£’000
3,647
(901)
2,746
23.2%
24.7%
Weighted average number of shares in issue excluding Treasury share and the ESOP
(from above)
12,385,226
12,381,074
Diluted weighted average number of shares (from above)
12,446,097 12,460,985
Basic earnings per share on underlying profit
Diluted earnings per share on underlying profit
22.1p
22.0p
22.2p
22.0p
ANNUAL REPORT 2015 46
Notes to the financial statements
CONTINUED
11 Intangible assets
Cost:
At 1 April 2013
Additions
Transfer from plant and machinery
At 31 March 2014
Goodwill arising on acquisition of a
business (note 31)
Additions
Disposals
At 31 March 2015
Accumulated amortisation:
At 1 April 2013
Depreciation of computer software
Amortisation for the year
At 31 March 2014
Depreciation of computer software
Amortisation of other intangibles
for the year
Disposals
At 31 March 2015
Net book value:
At 1 April 2013
At 31 March 2014
At 31 March 2015
Computer
Software
£’000
Customer
relationships
£’000
Brand names
£’000
Non-compete
agreements
£’000
Goodwill
£’000
Total
£’000
-
41
306
347
-
132
-
479
-
117
117
39
-
-
156
-
230
323
1,882
2,823
-
-
-
-
1,882
2,823
-
-
(608)
1,274
1,232
-
236
1,468
-
142
(608)
1,002
650
414
272
-
-
-
2,823
715
-
70
785
-
-
-
785
2,108
2,038
2,038
72
-
-
72
-
-
(72)
-
71
-
1
72
-
-
(72)
-
1
-
-
11,539
16,316
-
-
41
306
11,539
16,663
37
-
-
11,576
1,983
-
-
1,983
-
-
-
1,983
9,556
9,556
9,593
37
132
(680)
16,152
4,001
117
307
4,425
39
142
(680)
3,926
12,315
12,238
12,226
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
economic benefit to the Group with estimated economic lives of 6 - 10 years.
Prior to 1 October 2013, the Momart brand name was amortised over 20 years, however following a review of the economic life,
the brand name has been determined to have an indefinite life. It is reviewed annually for impairment as part of the art logistics
and storage review.
Non-compete agreements are contractual binding agreements with senior Momart personnel not to compete with the Group for
five years in the event of their leaving the Group’s service.
Goodwill
Goodwill is allocated to the Group’s cash generating units (CGUs) which principally comprise its business segments. A segment
level summary of goodwill is shown below:
At 1 April 2013
At 31 March 2014
At 31 March 2015
Art logistics and
storage
£’000
Ferry Services
(Ports-mouth)
£’000
Falklands
Islands
£’000
5,577
5,577
5,577
3,979
3,979
3,979
-
-
37
Total
£’000
9,556
9,556
9,593
FALKLAND ISLANDS HOLDINGS PLC
47
11 Intangible assets CONTINUED
Impairment
The Group tests material 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 (2014: 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 as to future performance and relevant external sources of information. Sensitivity
analysis as at 31 March 2015 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% (2014: 13.7%), and the cash flows of the Ferry Services have been discounted using a pre-tax discount
rate of 12.4% (2014: 12.5%). 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% over up to fifty years 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 current tax rates. 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 (2014: £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 over the forecast period, with a long term growth rate of 2%. The carrying
value of the unit was determined to not be higher than its recoverable amount and no impairment was recognised (2014: 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 2015 48
Notes to the financial statements
CONTINUED
12 Property, plant and equipment
Cost:
At 1 April 2013
Additions in year
Transfer to computer software
Disposals
At 31 March 2014
Additions in year
Acquired on purchase of a business
(note 31)
Disposals
At 31 March 2015
Accumulated depreciation:
At 1 April 2013
Charge for the year
Disposals
At 31 March 2014
Charge for the year
Disposals
At 31 March 2015
Net book value:
At 1 April 2013
At 31 March 2014
At 31 March 2015
Freehold
Land &
buildings
£’000
Long leasehold
Land and
buildings
£’000
4,344
1,336
-
(140)
5,540
1,243
170
(9)
6,449
166
-
-
6,615
480
-
-
Group
Ships
£’000
3,533
1,825
-
-
5,358
1,344
-
-
6,944
7,095
6,702
Vehicles,
plant and
equipment
£’000
7,674
948
(306)
(155)
8,161
1,022
15
(585)
8,613
1,762
95
(138)
1,719
119
(9)
669
196
-
865
202
-
1,092
4,752
140
-
637
(140)
1,232
5,249
-
-
855
(499)
1,829
1,067
1,232
5,605
2,582
3,821
5,115
5,780
5,750
6,028
2,441
4,126
5,470
2,922
2,912
3,008
Total
£’000
22,000
4,275
(306)
(295)
25,674
4,089
185
(594)
29,354
8,275
1,068
(278)
9,065
1,176
(508)
9,733
13,725
16,609
19,621
The Company has no tangible fixed assets.
At 31 March 2015 the net carrying amount of leased long leasehold land and buildings and vehicles, plant and equipment was
£4,584,000 and £328,000 for the Gosport Pontoon and trucks at Momart respectively, (2014: £4,683,000 and £302,000). During
the year to 31 March 2015 the Group acquired one truck for Momart, which was purchased for £175,000, and financed with a
£132,000 finance lease, and ten mobile homes for staff rentals were purchased by FIC at a total cost of £366,000 and installed
on land leased from the Falkland Islands government. During the year to 31 March 2014 the Group acquired no leased assets
At 31 March 2015, the group had entered into contractual commitments of £141,000 for trucks at Momart. At 31 March 2014 the
Group had a capital commitment of £130,000 to purchase a truck at Momart and a commitment of £837,000 for the acquisition
of the new vessel for Portsmouth.
£1,273,000 has been included within Freehold properties above in respect of the new warehouse under construction in the
Falklands, and £79,000 has been included within plant and machinery of assets under construction for ticket vending machines
for the Ferry. At March 2014 £1,873,000 of assets under construction was included in the cost of ships in respect of the new
vessel, which was delivered in 31 March 2015.
FALKLAND ISLANDS HOLDINGS PLC 49
Group
Residential and
commercial
property
£’000
Freehold land
£’000
Total
£’000
2,244
658
2,902
508
50
3,460
231
48
279
211
490
2,013
2,623
2,970
773
-
773
-
(50)
723
-
-
-
-
-
773
773
723
3,017
658
3,675
508
-
4,183
231
48
279
211
490
2,786
3,396
3,693
13 Investment properties
Cost:
At 1 April 2013
Additions in year
At 31 March 2014
Additions in year
Transferred on development of land
At 31 March 2015
Accumulated depreciation:
At 1 April 2013
Charge for the year
At 31 March 2014
Charge for the year
At 31 March 2015
Net book value:
At 1 April 2013
At 31 March 2014
At 31 March 2015
The investment properties comprise residential and commercial property held for rental in the Falkland Islands. Investment
properties include 400 acres, including 70 acres of land in Stanley, 58 acres of which have planning permission. In addition, the
Group has 300 acres of land at Fairy Cove, adjacent to the site of the possible 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 knowledge and experience to undertake the valuation. At 31 March 2015 the fair value of this property portfolio was
estimated at £7.3 million (31 March 2014: £6.3 million) including development land valued at £2.2 million (2014: £2.2 million). As
oil development proceeds, the value of these properties is expected to increase significantly.
During the year to 31 March 2015, the Group received rental income of £355,000 (2014: £221,000) on these properties.
At 31 March 2015 no investment properties were under construction (2014: £199,000).
The Company does not own any investment properties.
ANNUAL REPORT 2015 50
Notes to the financial statements
CONTINUED
14 Investment in subsidiaries
Country of
incorporation
Class of shares held
Ownership
at
31 March
2015
Ownership
at
31 March
2014
The Falkland Islands Company Limited
UK
Ordinary shares of £1
100%
100%
Preference shares of £10
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%
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.
Balance brought forward
Impairment of investment in Erebus
Cost of share based payments capitalised into subsidiaries
Total investments in Group undertaking
Company
2015
£’000
2014
£’000
29,004
29,097
(790)
35
(129)
36
28,249
29,004
The Company’s investment in Erebus Limited comprises the Group’s shareholding in Falkland Oil and Gas Limited (see Note
15). The Company’s investment in Erebus is held at impaired cost, and in the year to 31 March 2015, this investment has been
impaired by £790,000 due to the disposal of the 7,825,000 shares in Falkland Oil and Gas, and the resulting fall in the investment,
however this loss has been offset by the £1,309,000 reversal of an impairment of a loan due from Erebus to Falkland Islands
Holdings plc, as this was repaid in the year from the proceeds received on the disposal.
FALKLAND ISLANDS HOLDINGS PLC 51
15 Shares held in Falkland Oil and Gas Limited
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 (number of shares)
Group interest in Falkland Oil and Gas Limited
Historic cost of shareholding to the Group (£’000)
Historic cost per share to the Group
16. Investment in Joint Ventures
2015
£’000
1,500
30.0p
2014
£’000
3,270
25.5p
5,000,000 12,825,000
0.9%
1,008
20p
2.4%
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 ordinary share capital. SAtCO is registered and operates
in the Falkland Islands.
Joint Venture’s balance sheet
Fixed assets
Current assets
Liabilities due in less than one year
Liabilities due in greater than one year
Net assets of SAtCO
Group share of net assets
Joint Venture’s results
Revenue
Cost of sales
Administrative expenses
Operating profit for the year
Taxation
Group share of results for the year
Group share of results for the year
2015
£’000
962
1,020
(390)
2014
£’000
1,056
586
(384)
(1,060)
(1,086)
532
266
2015
£’000
591
(95)
(10)
486
(126)
360
180
172
86
2014
£’000
108
-
(8)
100
(28)
72
36
There were no recognised gains or losses, other than the profits disclosed above for the year ended 31 March 2015 (2014: none).
£95,000 of depreciation was charged in the year ended 31 March 2015 (2014: none).
The current assets balances above include £425,000 of cash (2014: £241,000). The liabilities due in less than one year are all
trade payables. The liabilities due in greater than one year include loans to the parent companies of £907,000 (2014: £1,058,000).
SAtCO had no contingent liabilities or capital commitments as at 31 March 2015 or 31 March 2014 and the Group had no
contingent liabilities or commitments in respect of its joint venture at 31 March 2015 or 31 March 2014.
ANNUAL REPORT 2015
52
Notes to the financial statements
CONTINUED
17 Finance leases receivable
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
2015
£’000
458
647
1,105
2014
£’000
342
503
845
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 £110,000 (2014: £84,000).
The cost of assets acquired for the purpose of letting under hire purchase agreements by the Group during the year amounted to
£881,000 (2014: £868,000).
The aggregate rentals receivable during the year in respect of hire purchase agreements were £793,000 (2014: £700,000).
Gross investment in hire purchase leases
Present value of future lease payments due:
Within one year
Within two to five years
Group
2015
£’000
1,215
647
458
1,105
2014
£’000
930
503
342
845
FALKLAND ISLANDS HOLDINGS PLC 53
18 Deferred tax assets and liabilities
Recognised deferred tax assets and (liabilities)
Property, plant & equipment
Intangible assets
Inventories
Other financial liabilities
Share-based payments
Tax losses
Total net deferred tax liabilities
Deferred tax asset arising on the defined benefit pension liabilities
Net tax liabilities
Group
2015
£’000
(1,669)
(462)
15
50
10
69
(1,987)
750
(1,237)
2014
£’000
(1,373)
(490)
62
75
27
60
(1,639)
645
(994)
The deferred tax asset on the defined benefit pension scheme (see note 24) arises under the Falkland Islands tax regime and
has been presented on the face of the consolidated balance sheet as a non-current asset as it is expected to be realised over a
relatively long period of time. 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
2015
£’000
6
6
2014
£’000
4
4
31 March
2015
£’000
(1,669)
(462)
15
50
10
69
-
-
-
-
-
-
107
107
750
(1,237)
Group
1 April
2014
£’000
Recognised
in income
£’000
Recognised
in equity
£’000
(1,373)
(490)
62
75
27
60
645
(994)
(296)
28
(47)
(25)
(17)
9
(2)
(350)
ANNUAL REPORT 2015 54
Notes to the financial statements
CONTINUED
18 Deferred tax assets and liabilities CONTINUED
Unrecognised deferred tax assets
Deferred tax assets of £113,000 (2014: £113,000) in respect of capital losses have not been recognised as it is not considered
probable that there will be suitable chargeable gains in the foreseeable future from which the underlying capital losses will reverse.
Movement in deferred tax in the year
Company
1 April 2014
£’000
Recognised in
income
£’000
Recognised in
equity
£’000
31 March 2015
£’000
Other temporary difference
Deferred tax asset movements
4
4
Movement in deferred tax in the prior year
Property, plant & equipment
Intangible assets
Inventories
Other financial liabilities
Share-based payments
Tax losses
Pension
Deferred tax movements
-
-
6
6
2
2
Group
1 April 2013
£’000
Recognised in
income
£’000
Recognised in
equity
£’000
31 March 2014
£’000
(1,254)
(635)
96
54
45
-
671
(1,023)
(119)
145
(34)
21
(18)
60
9
64
-
-
-
-
-
-
(35)
(35)
(1,373)
(490)
62
75
27
60
645
(994)
Movement in deferred tax in the prior year
Company
Other temporary difference
Deferred tax asset movements
1 April 2013
£’000
Recognised in
income
£’000
Recognised in
equity
£’000
31 March 2014
£’000
4
4
-
-
-
-
4
4
FALKLAND ISLANDS HOLDINGS PLC 55
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
Group
2015
£’000
715
556
4,120
5,391
2014
£’000
852
1,492
4,348
6,692
Company
2015
£’000
1,813
2014
£’000
1,952
Group
Company
2015
£’000
4,512
796
5,308
2014
£’000
5,601
1,440
7,041
2015
£’000
-
12
12
2014
£’000
-
19
19
Cash and other cash equivalents in the balance sheet
Group
Company
2015
£’000
7,435
2014
£’000
5,715
2015
£’000
9,379
2014
£’000
9,280
ANNUAL REPORT 2015 56
Notes to the financial statements
CONTINUED
22 Interest-bearing loans and borrowings
This note provides information about the contractual terms of the Group and the 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
Secured bank loans
Finance lease liabilities
Total current interest bearing loans and borrowings
Total liabilities
Secured bank loans
Finance lease liabilities
Total interest bearing loans and borrowings
Group
Company
2015
£’000
598
4,982
5,580
137
156
293
735
5,138
5,873
2014
£’000
34
5,027
5,061
985
124
1,109
1,019
5,151
6,170
2015
£’000
2014
£’000
-
-
-
-
-
-
-
-
-
-
-
-
785
-
785
785
-
785
Finance lease liabilities
Future minimum lease
payments
Interest
Present value of minimum
lease payments
Less than one year
Between one and two years
Between two and five years
More than five years
Total
Net debt
2015
£’000
395
350
852
2014
£’000
366
366
850
10,725
12,322
10,985
12,567
2015
£’000
239
233
680
6,032
7,184
2014
£’000
242
235
684
6,255
7,416
2015
£’000
156
117
172
4,693
5,138
2014
£’000
124
131
166
4,730
5,151
Total interest-bearing loans and borrowings
less: cash balances (see note 21)
Net (cash) / debt
Group
Company
2015
£’000
5,873
(7,435)
(1,562)
2014
£’000
6,170
(5,715)
455
2015
£’000
-
(9,379)
(9,379)
2014
£’000
785
(9,280)
(8,495)
FALKLAND ISLANDS HOLDINGS PLC 57
23 Trade and other payables
Current
Trade payables
Other creditors, including taxation and social security
Accruals and deferred income
Total trade and other payables
24 Employee benefits: pension plans
Group
Company
2015
£’000
5,398
1,368
3,448
2014
£’000
6,817
756
3,408
10,214
10,981
2015
£’000
-
109
453
562
2014
£’000
-
172
406
578
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. The FIC unfunded defined benefit
pension scheme had 19 pensioners (2014: 20) receiving benefits from this scheme, and three deferred members (2014: three).
The weighted average duration of the expected benefit payments from the Scheme is around 16 years (2014: 15).
Defined contribution schemes
The pension cost charge for the year represents contributions payable by the Group to the schemes and amounted to £274,000
(2014: £243,000). The Group anticipates paying contributions amounting to £290,000 during the year ending 31 March 2015.
There were £75,000 outstanding contributions due to pension schemes at 31 March 2015.
Defined benefit pension schemes
A summary of the fair value of the net pension scheme deficit is set out below:
Pension scheme deficit:
The Falkland Islands Company Limited Scheme
Deferred tax asset
Net pension scheme deficit
Group
2015
£’000
(2,884)
750
(2,134)
2014
£’000
(2,480)
645
(1,835)
ANNUAL REPORT 2015 58
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 2015, 2014, 2013, 2012 and 2011 were prepared by a qualified independent
actuary, Lane Clark and Peacock LLP. The major assumptions used in the 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
2015
2.3%
3.0%
3.2%
3.0%
22.6
24.7
2014
2.6%
3.0%
4.3%
3.4%
22.4
24.6
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.
Sensitivity Analysis
The calculation of the defined benefit liability is sensitive to the assumptions set out above. The following table summarises how
the impact of the defined benefit liability at 31 March 2015 would have increased / (decreased) as a result of a change in the
respective assumptions by 0.1%
Discount rate +/- 0.1%
Inflation assumption +/- 0.1%
Life expectancy +/- one year
Effect on obligation
2015
£’000
46
(9)
(126)
2014
£’000
38
(8)
(100)
These sensitivities have been calculated to show the movement in the defined benefit obligation in isolation, and assume no other
changes in market conditions at the accounting date.
Scheme liabilities
The present values 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 assets
Net pension liability
Value at
2015
£’000
(2,884)
750
(2,134)
2014
£’000
2013
£’000
2012
£’000
2011
£’000
(2,480)
(2,584)
(2,411)
(2,107)
645
671
579
548
(1,835)
(1,913)
(1,832)
(1,559)
FALKLAND ISLANDS HOLDINGS PLC 59
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 pension liability
Deficit in scheme at the end of the year
Analysis of amounts included in other finance costs
Interest on pension scheme liabilities
Analysis of amounts recognised in statement of comprehensive income:
Experience gains arising on scheme liabilities
Changes in assumptions underlying the present value of scheme liabilities
Remeasurement of the defined benefit pension liability
2015
£’000
(2,480)
115
-
(107)
(412)
2014
£’000
(2,584)
122
(45)
(108)
135
(2,884)
(2,480)
2015
£’000
(107)
2015
£’000
76
(488)
(412)
2014
£’000
(108)
2014
£’000
20
115
135
History of experience gains and losses:
2015
2014
2013
2012
2011
Experience gains / (losses) arising 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
Payment to pensioners
76
(2.6%)
(412)
14.3%
115
20
(34)
(30)
(7)
(0.8%)
1.3%
1.2%
0.3%
135
(173)
(289)
(82)
(5.4%)
6.7%
12.0%
3.9%
122
111
98
98
ANNUAL REPORT 2015 60
Notes to the financial statements
CONTINUED
25 Employee benefits: share based payments
The following options were outstanding at 31 March 2015
Date of Issue
14 June 05
14 June 05
14 June 05
7 Aug 07
4 Dec 07
3 Apr 08
8 Apr 09
15 Jul 09
15 Jul 09
9 Dec 09
21 Dec 10
28 Apr 11
27 Jun 11
16 Dec 11
13 Aug 12
13 Aug 12
27 Nov 13
2 Dec 13
3 Sep 14
19 Jan 15
Exercise Price
Share price
at grant date
Fair value
per share
Total fair
value
Earliest
Exercise
Latest
Exercise
Number
42,500
14,117
49,411
27,517
12,500
3,781
57,719
43,674
54,550
21,500
41,000
6,390
18,281
138,190
61,881
76,700
29,810
9,523
13,154
5,000
727,198
pence
425.0
425.0
425.0
330.0
319.0
365.0
207.5
290.0
290.0
390.0
342.5
313.0
302.5
267.5
404.0
404.0
369.0
367.5
353.5
272.5
pence
425.0
425.0
425.0
332.5
340.0
375.0
207.5
290.0
290.0
397.5
337.5
313.0
303.5
261.5
404.0
404.0
369.0
367.5
353.5
272.5
pence
166.0
214.0
214.0
73.0
119.0
131.0
56.0
72.0
72.0
145.0
124.0
106.0
94.0
68.0
92.0
92.0
109.0
109.0
100.0
63.0
£
date
date
70,550
14 Jun 08
13 Jun 15
30,210
14 Jun 08
13 Jun 15
105,740
14 Jun 08
13 Jun 15
20,087
7 Aug 10
6 Aug 17
14,875
4 Dec 10
3 Dec 17
4,953
3 Apr 11
2 Apr 18
32,323
8 Apr 12
7 Apr 19
31,445
15 Jul 12
4 Aug 15
39,276
15 Jul 12
14 Jul 19
31,175
9 Dec 12
8 Dec 19
50,840
21 Dec 13
20 Dec 20
6,773
28 Apr 14
27 Apr 21
17,184
27 Jun 14
26 Jun 21
93,969
16 Dec 14
15 Dec 21
56,931
9 Feb 15
4 Aug 15
70,564
13 Aug 15
12 Aug 22
32,493
27 Nov 16
26 Nov 23
10,380
02 Dec 16
1 Dec 23
13,154
3 Sep 17
2 Sep 24
3,150
19 Jan 18
18 Jan 25
736,072
The total number of options outstanding at 31 March 2015 was 727,198 (2014: 774,896). 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. All options are granted with the
condition that the employee remains in employment for three years. Certain option grants also have conditions attached in that
increases in earnings per share on underlying profits over the vesting period must exceed the UK Retail price index increase, and
options granted to directors of the Company have a condition that the Group’s total shareholder return increase must exceed that
of the FTSE AIM All-Share Index over the three year period.
Expected Volatility (%)
Risk free interest rate (%)
Expected life of options (years)
Dividend yield (%)
Share price at grant date (pence)
27 Nov 13
2 Dec 13
3 Sep 14
19 Jan 15
39
2.09
6.5
3.12
39
2.19
6.5
3.13
38
2.07
6.5
3.25
37
1.23
6.5
4.22
369.0
367.5
353.5
272.5
FALKLAND ISLANDS HOLDINGS PLC 61
25 Employee benefits: share based payments (continued)
All share options are equity settled. Share options issued without share price conditions attached have been valued using the
Black-Scholes model. Share price options issued with share price conditions attached have been valued using a Monte Carlo
simulation model making explicit allowance for share price targets. During the year end 31 March 2015 no options (2014: 28,915)
were exercised over ordinary shares. The number and weighted average exercise prices of share options are as follows:
Outstanding at the beginning of the year
Forfeited during the year
Exercised during the year
Granted during the year
Lapsed during the year
Outstanding at the year end
Vested options exercisable at the year end
Weighted average life of outstanding options (years)
Weighted
average
exercise price
(£)
Number
of options
Weighted
average
exercise price
(£)
Number
of options
2015
774,896
(8,160)
-
18,154
(57,692)
727,198
593,011
2015
3.49
3.66
-
3.31
5.20
3.35
3.24
4.3
2014
861,344
(96,866)
(28,915)
39,333
-
774,896
431,621
2014
3.43
3.45
2.08
3.69
-
3.49
3.59
5.6
The range of exercise prices of outstanding options at 31 March 2015 is from £2.075 (2014: £2.075) to £4.250 (2014: £5.25).
Total share based payment expense recognised in the year
26 Capital and reserves
Share capital
Shares in issue at the start and end of the year
Allotted, called up and fully paid Ordinary shares of 10p each
2015
£’000
90
2014
£’000
43
Ordinary Shares
2015
2014
12,431,623
12,431,623
2015
£’000
1,243
2014
£’000
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.
On 31 March 2000, an Employee Share Ownership Plan was established. At 31 March 2015 the plan held 28,016 (2014: 28,016)
ordinary shares at a cost of £55,005 (2014: £55,005). The market value of the shares at 31 March 2015 was £77,464 (2014:
£87,970). Shares held in the ESOP receive a nominal 0.01p per share in each dividend payment, as in prior years.
ANNUAL REPORT 2015 62
Notes to the financial statements
CONTINUED
26 Capital and reserves (continued)
Treasury shares
Following 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.
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 88,381 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.
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.
Dividends
The following dividends were recognised in the period
Final: 7.5p (2014: Final: 7.5p) per qualifying ordinary share
Interim: 4.0p (2014: Final: 4.0p) per qualifying ordinary share
27 Financial instruments
(i) Fair values of financial instruments
2015
£’000
929
495
1,424
2014
£’000
928
495
1,423
Investments in equity securities
The fair value of the investment in Falkland Oil and Gas Limited is determined by reference to its 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
The fair value of interest-bearing borrowings, 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.
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.
FALKLAND ISLANDS HOLDINGS PLC 63
27. Financial instruments (continued)
The following table shows the carrying value, which is equal to fair value for each category of financial instrument:
Investment in Falkland Oil and Gas Limited
Cash and cash equivalents
Hire purchase debtors
Trade and other receivables
Total assets exposed to credit risk
Financial liabilities at amortised cost
Interest-bearing borrowings at amortised cost
Group
Company
2015
£’000
1,500
7,435
1,105
4,512
13,052
(10,214)
(5,873)
2014
£’000
3,270
5,715
845
5,601
12,161
(10,981)
(6,170)
2015
£’000
-
9,379
-
12
9,391
(562)
-
2014
£’000
-
9,280
-
19
9,299
(578)
(785)
Available for sale financial assets are valued using a level 1 methodology. All other financial instruments are based on 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 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 on-going 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 £13,052,000 (2014: £12,161,000) being the total
trade receivables, hire purchase debtors and cash and cash equivalents in the balance sheet. The credit risk on cash balances is
limited because the counterparties 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:
Falkland Islands
Europe
North America
United Kingdom
Other
Trade receivables
Group
2015
£’000
1,488
414
433
1,696
481
4,512
2014
£’000
1,540
1,254
383
1,966
458
5,601
ANNUAL REPORT 2015 64
Notes to the financial statements
CONTINUED
The Company has no trade debtors
Credit quality of financial assets and impairment losses
Group
Gross
Impairment
Not past due
Past due 0-30
days
Past due 31-120
days
More than 120
days
2015
£’000
3,473
633
228
399
4,733
2015
£’000
(221)
(221)
Net
2015
£’000
3,473
633
228
178
Gross
Impairment
2014
£’000
3,751
1,237
385
485
4,512
5,858
The movement in the allowances for impairment in respect of trade receivables during the year was:
Balance at 1 April 2014
Impairment loss recognised
Impairment loss reverse
Cash received
Utilisation of provision (debts written off)
Balance at 31 March 2015
2014
£’000
(257)
(257)
Group
2015
£’000
257
44
(28)
(14)
(38)
221
Net
2014
£’000
3,751
1,237
385
228
5,601
2014
£’000
402
85
(100)
-
(130)
257
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.
At the beginning of the period the Group had outstanding bank loans of £1.0 million. All payments during the year with respect to
these agreements were met as they fell due, and these facilities were repaid in full in the year to 31 March 2015. In March 2015,
a further bank loan of £0.7 million was drawn down.
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.
FALKLAND ISLANDS HOLDINGS PLC 65
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:
2015
Non-derivative financial instruments
Secured bank loans
Finance leases
Trade and other payables
Carrying
amount
Contract-ual
cash flows
1 year or less
1 to 2 years
2 to 5 years
5 years and
over
£’000
£’000
£’000
£’000
£’000
£’000
735
5,138
10,214
16,087
799
12,322
10,214
23,335
160
395
10,214
10,769
160
350
-
510
479
852
-
-
10,725
-
1,331
10,725
2014
Non-derivative financial instruments
Secured bank loans
Finance leases
Trade and other payables
Carrying
amount
Contract-ual
cash flows
1 year or less
1 to 2 years
2 to 5 years
5 years and
over
£’000
£’000
£’000
£’000
£’000
£’000
1,019
5,151
10,981
17,151
1,045
12,567
10,981
24,593
1,010
366
10,981
12,357
35
366
-
401
-
850
-
850
-
10,985
-
10,985
The contractual cash flows for finance leases in the years ended 31 March 2015 and 31 March 2014 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.
Liquidity risk – Company
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the effects
of netting agreements:
2015
Non-derivative financial instruments
Trade and other payables
Carrying
amount
Contract-ual
cash flows 1 year or less
1 to 2 years
2 to 5 years
5 years and
over
£’000
£’000
£’000
£’000
£’000
£’000
562
562
562
562
562
562
-
-
-
-
-
-
2014
Non-derivative financial instruments
Secured bank loans
Trade and other payables
Carrying
amount
Contract-ual
cash flows
1 year or less
1 to 2 years
2 to 5 years
5 years and
over
£’000
£’000
£’000
£’000
£’000
£’000
785
578
810
578
810
578
1,363
1,388
1,388
-
-
-
-
-
-
-
-
-
ANNUAL REPORT 2015 66
Notes to the financial statements
CONTINUED
27 Financial instruments CONTINUED
(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.
Group
31 March 2015
EUR
£’000
USD
£’000
Other
£’000
Cash and cash equivalents
Trade and other receivables
15
-
102
38
4
-
Total
Balance
sheet
exposure
£’000
121
38
GBP
£’000
7,314
5,270
Total
£’000
7,435
5,308
Trade payables and other payables
(315)
(197)
(48)
(560)
(9,654)
(10,214)
31 March 2014
EUR
£’000
USD
£’000
Other
£’000
Total
Balance
sheet
exposure
£’000
GBP
£’000
Total
£’000
Group
Cash and cash equivalents
Trade payables and other payables
15
(414)
211
(344)
1
(193)
227
(951)
5,488
5,715
(10,030)
(10,981)
The Company has no exposure to foreign currency risk.
Sensitivity analysis
Group
A 10% weakening of the following currencies against pound sterling at 31 March would have increased / (decreased) equity and
profit or loss by the amounts shown below. This calculation assumes that the change occurred at the balance sheet date and had
been applied to risk exposures existing at that date. This analysis assumes that all other variables, in particular other exchange
rates and interest rates, remain constant, and is performed on the same basis for year ended 31 March 2014.
EUR
USD
Equity
Profit or Loss
2015
£’000
2014
£’000
2015
£’000
2014
£’000
30
6
40
13
30
6
40
13
FALKLAND ISLANDS HOLDINGS PLC 67
27 Financial instruments CONTINUED
A 10% strengthening of the above currencies against pound sterling at 31 March would have 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
At the balance sheet date the interest rate profile for the Group’s interest-bearing financial instruments was:
Fixed rate financial instruments
Finance lease receivable
Finance lease payable
Variable rate financial instruments
Financial liabilities
Group
Company
2015
£’000
2014
£’000
2015
£’000
2014
£’000
1,105
(5,138)
(4,033)
(735)
(735)
845
(5,151)
(4,306)
(1,019)
(1,019)
-
-
-
-
-
-
-
-
(785)
(785)
The Group has drawn down a loan of £0.7 million in March 2015 secured against the two ferries delivered in 2005 and 2002. This
loan is repayable over 5 years at a rate of 2.8% above the Bank of England base rate. On draw down of this loan, the remaining
£34,000 of the £0.4 million loan against the Spirit of Portsmouth at 31 March 2014 was extinguished.
The Group also had a loan of £0.8 million at 31 March 2014 in respect of the acquisition of Momart International Limited, which
was repayable over five years from June 2008 bearing interest at 1.5% above the Bank of England base rate. This loan has been
fully repaid in the year ended 31 March 2015.
Sensitivity analysis
An 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 has 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 2014.
Equity
Decrease
Profit or Loss
Decrease
Group
2015
£’000
(7)
(7)
2014
£’000
(10)
(10)
Company
2015
£’000
2014
£’000
-
-
(8)
(8)
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 asset comprises its investment in FOGL. During the year ended 31 March 2015 FOGL
shares traded on the AIM market of the London Stock Exchange at an average price of 26.25p with a high of 36.5p and a low of
17.25p. Based upon this share price history the value of the 5 million shares (2014: 12,825,000 shares) held at the balance sheet
date could have varied between a low of £863,000 (2014: £3,046,000) and a high of £1,825,000 (2014: £4,008,000).
ANNUAL REPORT 2015 68
Notes to the financial statements
CONTINUED
27 Financial instruments CONTINUED
(v) Capital Management
The Group’s objectives when managing capital, which comprises equity and reserves at 31 March 2015 of £36,688,000 (2014:
£35,377,000) are to safeguard its ability to continue as a going concern, so that it can continue to provide returns to shareholders
and benefits to our 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
2015
£’000
841
3,104
7,402
11,347
2014
£’000
720
3,107
7,984
11,811
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.
During the year £864,000 was recognised as an expense in the income statement of operating leases (2014: £822,000).
29 Capital commitments
At the end of the year the Group had capital commitments of £141,000, in respect of trucks at Momart which have not been
provided for in these financial statements. At 31 March 2014, the Group had capital commitments of £967,000: £837,000 due to
the Boatyard for Gosport Ferry, and £130,000 for a new truck at Momart.
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 controlled 21.0% (2014: 21.9%) of the voting shares of the Company at
31 March 2015.
The compensation of key management personnel (including Directors) is as follows:
Group
Company
Key management emoluments including social security costs
Termination payments, including social security costs
Company contributions to defined contribution pension plans
Share-related awards
2015
£’000
1,504
217
81
69
2014
£’000
1,627
-
82
58
Total key management personnel compensation
1,871
1,767
2015
£’000
480
217
-
52
749
2014
£’000
575
-
-
4
579
In December 2013, the Group made a loan of £529,000 to its joint venture, SAtCO for the purchase of a 250 tonne crawler crane
and heavy duty forklift to service the needs of the oil industry in the Falklands. In the year ended 31 March 2015, £151,000 of
this loan was repaid.
All staff involved in construction activities were contracted directly from parent companies FIC and Trant Construction and at 31
March 2015 and 2014 SAtCO had no permanent employees.
FALKLAND ISLANDS HOLDINGS PLC 69
31 Acquisition of a business
On 1 August 2014, the Group acquired the trade and assets of a small business in the Falkland Islands, with assets acquired, as
presented below:
Property, plant and equipment
Stock
Net identifiable assets
Goodwill on acquisition
Total consideration
Less deferred consideration
Initial cash out flow on acquisition
Pre-acquisition
carrying amounts
£’000
Fair value
adjustments
£’000
Recognised value
on acquisition
£’000
185
105
290
-
-
-
185
105
290
37
327
(112)
215
The goodwill arising represents the synergies with FIC’s own automotive business.
32 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 (see note 24). 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.
33 Post balance sheet events
In April 2015, the Group’s residual holding of 5 million FOGL shares was sold for proceeds of £1.4 million, generating a profit of
£0.4 million for the Group.
In April 2015, the Group drew down a loan of £2,390,000 against Harbour Spirit, the new vessel delivered in March 2015, to be
repaid in monthly instalments over ten years at a margin of 2.6% over the Bank of England base rate.
ANNUAL REPORT 2015 70
Directors and Corporate Information
Directors
Edmund Rowland Chairman
John Foster Managing Director
Jeremy Brade*
*Non-executive Director
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
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
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
Peter Brayshaw
Commercial and Financial Director
Telephone: 020 7426 3000
Email: enquiries@momart.co.uk
www.momart.co.uk
FALKLAND ISLANDS HOLDINGS PLC