Financial Highlights
FOR THE YEAR ENDED 31 MARCH 2017
Turnover from continuing operations
Profit before tax
Underlying profit before tax*
ANNUAL REPORT 2017
1
2017
£m
2016
£m
Change
%
40.49
39.00
3.8
1.89
2.80
-32.6
2.40
3.08
-22.2
Diluted earnings per share before goodwill amortisation and non-trading items
15.3p
19.2p
-20.2
Cash flow from operations
Net asset value per share
2.46
4.29
-42.6
320p
310p
3.0
*Defined as profit before tax, amortisation and non-trading items.
Turnover (£’m) from continuing operations
Underlying profit before tax* (£’m)
38.26
38.56
39.00
40.49
35.60
3.65
3.56
3.29
3.08
2.40
2013
2014
2015
2016
2017
2013
2014
2015
2016
2017
Diluted earnings per share (pence)
before amortisation and non-trading items
Dividends per share (pence)
21.3
22.0
22.0
19.2
15.3
11.5
11.5
4.0
4.0
2013
2014
2015
2016
2017
2013
2014
2015
2016
2017
2
Chairman’s Statement 2017
60% of the share capital. That consultation was positive,
broadly consensual and supportive of the following three
objectives:
• to reinstate a dividend;
• to strengthen the board; and
• to grow by acquisition.
I am pleased to report that efforts on all three are underway.
A modest dividend is proposed for shareholder approval at
the forthcoming Annual General Meeting. Further details
are available in the Chief Executive’s Strategic Review and
Directors’ Report.
A search for a permanent, independent non-executive
chairman is advanced and I hope to be able to announce
the appointment soon. Thereafter, the intention is to
strengthen the board still further with the appointment of an
independent, fourth non-executive director.
Edmund Rowland, having relinquished the chairmanship
after the lapse of the Staunton offer, will step down as a non-
executive director and be replaced by Rob Johnston. This
reflects the recent transfer of the single largest shareholding
in the Group from Rowland family ownership to the Trust
that Rob Johnston represents. An announcement will follow
the release of these results.
After the distraction and expense of the recent offer period,
the search for a suitable complementary acquisition to add
to the Group is being driven forward in conjunction with
professional advisers. The aim is to acquire a sound and
profitable business for good value in order to increase the
earnings base and profitability of the Group. Renewed
energy is going into this project.
Having come through an unprecedented and uncertain six
months, I believe FIH will now benefit from its refreshed
shareholder base, new
independent non-executive
directors and a determined strategy. These are all positive
developments. There are good opportunities ahead.
I look forward to seeing as many of you as possible at the
Annual General Meeting at 11.30 a.m. on Thursday 31
August at the offices of FTI Consulting, 200 Aldersgate,
London EC1A 4HD.
Jeremy Brade
Interim Chairman
13 June 2017
It is a pleasure and an honour
to report to you as interim
chairman of FIH group
plc (the “Group” or “FIH”),
especially as the Group
has fulfilled another year of
profitable trading in line with
expectations.
I refer you to the Chief Executive’s Strategic Review for
details of that performance and the outlook. There you
will read about the contributions of our three constituent
companies, Momart, PHFC and of course the Falkland
Islands Company (“FIC”). The latter was very much the
centre of attention during the recent, now lapsed, take-over
bid from Staunton Holdings and the approach from the
Argentinian Dolphin Fund during the offer period.
Whenever I have visited the Falkland Islands I have been
struck by the warmth of the welcome I have received,
the energetic and independent spirit of the people, the
beauty of the land and seascapes, and the history of the
Islands and of FIC. Therefore, when events earlier this year
unfolded to reveal an Argentinian expression of interest in
acquiring the entire share capital of FIH (something that the
independent board members had to treat both fairly and
seriously), it came as no surprise to witness the concern
and objection at many levels in the Falkland Islands raised
by that expression of interest. The implications were very
clear: Argentinian control of FIC would be strongly opposed
by Islanders, damaging to the trading performance of FIC,
and potentially hazardous to FIC’s ownership of assets in
the Islands. With that in mind, and with a duty of care to
the welfare and prospects of FIC, the independent board
members refused to entertain that expression of interest.
It has been a privilege, as interim chairman, to steer FIH
to stability following the period of uncertainty caused by
the Argentinian interest and the failed offer for the Group
by Staunton. That offer provided an opportunity for
shareholders to realise value but it did not meet with sufficient
support and caused lively debate among shareholders. I,
along with the chief executive, took that debate to the
largest non-Staunton shareholders representing more than
FIH GROUP PLC
ANNUAL REPORT 2017
3
Chief Executive’s Strategic Review
BUSINESS REVIEW
John Foster
Chief Executive
Group Overview
I am pleased to report on another year of profitable trading
for the Group. Revenues were up £1.5 million on last
year at £40.5 million (2016: £39.0 million) and underlying
pre-tax profits, were lower by £0.7 million at £2.4 million
(2016: £3.1 million) because of the expected return to more
normal trading levels in the Falklands after a record year in
2015-16.
Reported profits before tax were £1.89 million (2016: £2.8
million). Operating cash flow remained strong and the
Group ended the year with record levels of cash of £15.1
million (2016: £14.0 million).
In the Falklands, with low oil prices contributing to the early
curtailment of exploration drilling in May 2016, demand in
the local economy returned to more normal levels compared
to the record activity seen in the prior year. In the absence of
oil related corporate demand, lucrative high value rental and
services income fell back and retail margins were squeezed
as the business faced the double impact of strengthened
local competition and weakening demand as it fought to
maintain market share. This was partially offset by healthy
growth in housebuilding and Penguin Travel tourist services
but overall revenues from the Group’s Falkland operations
still fell by 3.6% and FIC’s underlying pre-tax contribution
dropped by £0.78 million to £1.16 million from the record
levels seen in 2016 (£1.94 million).
In the UK both the Group’s businesses made progress
despite challenging market conditions. At the Group’s
fine art handling company Momart, like for like underlying
trading profits increased by £0.24 million (+50%), but
expected start-up losses of £0.2 million from its new art
storage warehouse, completed in March 2017, held back
Momart’s underlying pre-tax contribution to £0.52 million
slightly ahead of the prior year (2016: £0.46 million). At
Portsmouth Harbour Ferry Company (“PHFC”), despite
reduced passenger volumes, revenues remained stable
(+1%) and with tight control of operating costs, underlying
profits were slightly ahead at £0.71 million (2016: £0.68
million).
Review of Operations
Group revenue and Underlying Pre-Tax profits* are analysed
below:
Group revenue
Year ended 31 March
Falkland Islands Company
(“FIC”)
Portsmouth Harbour Ferry
(“PHFC”)
Momart
Total Revenue
2017
£m
2016
£m
Change
%
17.82
18.50
4.29
4.24
18.38
40.49
16.26
39.00
-3.6
1.0
13.1
3.8
Group underlying pre-tax profit*
Year ended 31 March
Falkland Islands Company
Portsmouth Harbour Ferry
Momart
Rounding
Total Underlying
Pre Tax Profit *
Non trading items
(see notes below)
Reported Profit
Before Tax
2017
£m
1.16
0.71
0.52
0.01
2.40
2016
£m
1.94
0.68
0.46
-
Change
%
-40.2
4.2
14.7
-
3.08
-22.2
-0.51
-0.28
-
1.89
2.80
-32.6
*Pre-tax profit before amortisation of intangibles and
non–trading items, but including the Group’s share of
the operating contribution from SAtCO (excluding any
impairments or reversal of impairments of fixed assets),
the Group’s Joint Venture with Trant Construction in the
Falkland Islands.
Non-trading items of £0.51 million comprised £0.53 million
of professional advisers costs incurred in dealing with the
failed bid by Staunton Holdings and the defence against
a possible bid by the Argentine controlled, Dolphin Fund,
amortisation costs of £0.14 million netted off against £0.16
million of profits on asset disposals.
The following detailed commentary refers to the underlying
trading performance of the business units underlying pre-
tax profits, and excludes non-trading items and charges
for the amortisation of intangibles from the acquisition of
Momart.
4
Chief Executive’s Strategic Review
BUSINESS REVIEW
Falkland Islands Company (“FIC”)
In the Falklands, the lack of oil related demand fed through
into weakened general demand for goods and services
in the Islands and the absence of oil related corporate
spending saw the contribution from FIC’s property portfolio
fall as premium corporate rental income was exchanged
for “local” rentals at a 30% discount. The contribution from
FIC was also adversely affected by the expansion and
further modernisation of FIC’s principal retail competitor,
the Chandlery. Despite encouraging sales growth at Home
Builder / Home Living, the more challenging H2 conditions,
compared to record H2 revenues experienced in the prior
year, meant total annual retail sales were 5.5% lower than
in 2015-16. (H1 -1.9%, H2 -8.3%, FY -5.5%) With margins
under pressure too, the contribution from FIC’s retail
operations fell sharply over the year.
Despite increased local competition and the absence
of the oil stimulus, together with the exceptionally poor
squid catch at the start of the financial year, the decline in
FIC’s profitability was mitigated by cost savings in central
administration, encouraging performances
from FIC’s
housebuilder, FBS, and Penguin Travel, combined with
continued growth from insurance and consumer finance.
Income from the Group’s construction Joint Venture, SAtCO,
also ceased with the departure of the oil rig in early summer
2016 and SAtCO’s contribution was minimal compared to
FIC’s share of JV profits of £0.2 million in the prior year. On
a more positive note, the successful disposal of fully written
down plant and machinery in SAtCO’s, was achieved by
shipping its crawler crane back to the UK and selling it to
a middle-eastern buyer at a small profit. The contribution
from this sale is included in non-trading income.
In overall terms the pre-tax contribution of the Group’s
Falklands’ business dropped back from the record levels
seen in the prior year, (2016: £1.94 million) and pre-tax
profits declined to more normal “pre-oil” levels of £1.16
million.
Oil developments
Although the Group has no direct interest in any of the oil
licences in the Falklands and no longer has any shares in
Falklands’ oil exploration companies, future oil development
in the Islands would be a significant value driver for both the
wider Falklands economy and by extension for FIC.
With the cessation of exploration drilling in May 2016, the
principal exploration licence holder, Premier Oil (“Premier”)
has focussed on completing the Front End Engineering and
Design (FEED) for the Sea Lion field in the North Falklands
Basin and reported in March 2017 that this work was now
substantially complete. The detailed FEED planning process
and engagement with suppliers has enabled Premier to
reduce the projected break-even cost of developing Sea
Lion to $45bbl with upfront capital expenditure to “First
Oil” now reduced to $1.5bn. Premier has also progressed
discussions with the Falklands Islands Government (FIG)
and agreed an extension to its licence over Sea Lion until
April 2020. Following the last round of drilling in 2015-16
Premier reported that Sea Lion has estimated recoverable
resources of at least 520mbbls with further potential from
the Isobel field to the South of Sea Lion. Although these
developments are positive, Premier’s balance sheet is
highly leveraged and the company’s management has
made it clear that it will need a strong farm-in partner to
take on the cash cost and upfront investment required to
move ahead to develop its Sea Lion licence. With crude
oil prices slipping back below $50bbl in the late spring of
2017, the economics of developing the Sea Lion licence
in the near term are uncertain. In the medium term, much
will depend on a stable and improving outlook for long
term oil prices together with the Falklands’ basin becoming
relatively more attractive compared to other alternative
sources of hydrocarbons.
Group Revenue 2017
Underlying Operating Profit 2017
Momart
45%
FIC
44%
PHFC
11%
Group Revenue 2016
Momart
42%
FIC
47%
PHFC
11%
Momart
19%
PHFC
37%
FIC
43%
SAtCO
(Share of joint
venture)
1%
SAtCO
(Share of
joint venture)
6%
Underlying Operating Profit 2016
Momart
13%
PHFC
29%
FIC
52%
FIH GROUP PLC ANNUAL REPORT 2017
5
Trading in Detail
Overall revenue in FIC dropped by 3.6% to £17.8 million
(2016: £18.5 million).
Total retail sales in FIC decreased by 5.5% to £9.14 million,
down £0.52 million from the record levels seen in the
previous year of £9.66 million.
FIC Operating results
Year ended 31 March
2017
£m
2016
£m
Change
%
Revenues
Retail
Falklands 4x4
FBS (property
and construction)
Freight & Port Services
Support services
Property rental
Total FIC revenue
FIC underlying
operating profit
9.14
3.02
9.66
3.93
-5.5
-23.0
2.68
1.81
48.5
0.93
1.63
0.42
0.90
1.63
0.57
3.8
-0.7
-25.0
17.82
18.50
-3.6
1.21
1.82
-33.5
Share of results of SAtCO JV
0.02
0.20
-88.0
Net interest expense
-0.07
-0.08
-9.8
FIC underlying
Profit Before Tax
FIC underlying
operating profit margin
1.16
1.94
-40.2
6.8% 9.8% -31.0
West Store retail sales declined due principally to the slow-
down in the Falklands economy resulting from the absence
of oil exploration activity. Sales were also adversely affected
by the expansion and further modernisation of FIC’s principal
retail competitor, the Chandlery, whose 33% expansion in
retail space in November 2016, inevitably drew customers
and sales from the FIC’s flagship West Store which saw a
6.2% reduction in sales over the year compared to only
a 1.6% reduction in the first half. However, the effects of
the Chandlery’s expansion will wash through in the first 7
months of the new financial year and thereafter West Store
sales are expected to stabilise.
Warehouse sales to local retailers and pubs (10% of West
Store sales) fell by 2.5%. Despite progress in winning back
local market share, weaker local demand and direct internet
based sourcing from the UK created challenging trading
conditions, albeit the much larger double digit declines in
sales seen in recent years were halted.
Sales at the Capstan gift shop decreased by 12.7%
despite total cruise ship numbers landing in Stanley being
maintained at close to prior year levels (55,600 vs 56,500
in 2015-16) as the absence of high spending oil support
workers was felt. The same effect also hit sales at FIC’s
The entrance to Crozier Place Retail Park, where Home Builder, Home Living and the child friendly café can be found
6
Chief Executive’s Strategic Review
BUSINESS REVIEW - CONTINUED
general store at the Mount Pleasant military base (“West
Store MPA”) where with fewer visiting workers transiting
through the airport base, sales at the MPA “airport store”
fell by 17.1% over the full year.
On a brighter note, at Home Living, sales recovered
from a poor 2015-16 as housing completions under
the government’s subsidised scheme surged, boosting
demand for home furnishings and this together with the
benefit of a full year’s trading from the new in-store café
helped revenues increase by 22.9% (+£0.1 million) over the
year. At FIC’s Builder’s Merchant “Home Builder”, despite
muted local demand, sales increased by 2.0%. Both
“Home” businesses benefited from the much improved
access and off street parking offered by the new customer
car park at Crozier Place, which was completed in February
2016.
Despite encouraging performances from Home Living
and Home Builder, and strict cost control across all retail
departments, the overall retail environment in the Falklands
was challenging with both revenues and margins under
pressure, particularly in H2. However positive steps to
reduce retail stock were successful and with hard work
from the local team, £1.1 million of cash was released
through the more effective management of stock.
In FIC’s automotive business, Falklands 4x4, after a record
year in 2016, overall revenues dropped by 23% to £3.02
million (2016: £3.93 million) as sales of new vehicles fell by
47% reflecting weakened local demand and the tailing off
of sales of the old but much loved Land-Rover Defender
which has now been discontinued by the manufacturer.
Income from car hire also decreased as oil related corporate
demand fell away. However, revenues from used vehicle
sales increased modestly and income from servicing and
repairs also increased helping to mitigate the decline.
Vehicle unit sales fell from 110 (including 54 new vehicle
sales) in the prior year, to 77 of which 29 were new vehicles.
Falkland Building Services (FBS), which focusses on
building kit homes and small local construction projects,
saw revenues increase by 49% to £2.68 million (2016:
£1.81 million) as the number of new houses completed for
local residents rose from 12 last year to 17. With new house
sales at just below £2 million, revenue was also boosted
by healthy increases in small contracts and government
work for FIG, and this more than compensated FBS for the
decline in oil related construction activity.
FBS also completed the final phase of FIC’s warehouse
expansion at Airport road on the outskirts of Stanley with
the construction of a new smaller warehouse for third party
freight. This now leaves the old warehouse site in central
Stanley available for future development and has removed
heavy container traffic from the town centre and tourist sea
front areas.
Despite a drop in southbound volumes as the economy
slowed, revenues from Third Party Freight and Port
Services were largely unchanged at £0.93 million because
of an offsetting increase in northbound cargoes as the oil
exploration companies withdrew their support infrastructure
in Stanley.
Support Services income held up well at £1.63 million
(2016: £1.63 million) despite a fall in Fishing Agency
revenues following the sharp fall in the illex squid catch early
in the year. Penguin Travel had another strong year with
income ahead by 17% as relationships with leading cruise
operators were strengthened and income from consumer
finance, reported as interest income, continued to rise.
As in previous years there was steady progress at FIC’s
insurance agency.
As expected with the departure of the oil companies the level
of corporate demand for Property Rental, from FIC’s estate
of 51 rental properties (which include 10 mobile homes
rented to staff), fell back as premium rentals declined, and
occupancy levels were initially affected. Rental income fell
by 25% and average occupancy went down from 93% to
81% albeit it recovered steadily throughout the year as local
tenants replaced outgoing corporate lets.
As expected, activity in FIC’s joint venture, the South Atlantic
Construction Company, (“SAtCO”) which was linked very
closely to infrastructure projects for the oil industry, fell
FIC Revenues 2017
FIC Revenues 2016
Property
Rental 3%
Support &
Services 9%
Freight & Port
Services 5%
Property
Rental 3%
Support &
Services 9%
Freight & Port
Services 5%
Retail
52%
FBS
10%
4x4
21%
Retail
51%
FBS
15%
4x4
17%
FIH GROUP PLC ANNUAL REPORT 2017
7
sharply in the year and SAtCO’s contribution in the year was
minimal. In the year to 31 March 2017 the Group’s share
of the after tax profits of SAtCO was £0.02 million (2016:
£0.2 million). However FIC was successful in arranging the
repatriation and ultimate sale of SAtCO’s 250 tonne crawler
crane generating £205,000 of net proceeds of which the
Group’s share after tax amounted to £81,000.
FIC Key Performance
Operational Drivers
Indicators and
Portsmouth Harbour Ferry Company
(“PHFC”)
2016-17 saw another steady performance from PHFC, with
total revenue increasing by 1.0% after a 4.1% decline in
passenger numbers, was more than offset by increases in
the yield from ferry fares. Profit Before Tax after pontoon
lease and boat loan interest charges, was 4.2% ahead of
the prior year at £0.71 million (2016: £0.68 million).
PHFC Operating results
Year ended 31 March
2013
2014
2015
2016
2017
Staff Numbers
(FTE 31 March )
129
165
184
172
151
Capital
Expenditure £’000 1,594 2,715 2,598 1,229
578
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)
3.0% -4.8% 3.0% 1.3% -5.5%
32
36
50*
50*
51*
88% 82% 93% 93% 81%
48
79
76
110
77
3
8
16
12
17
58.2 188.0 364.0 235.2
30.1
Cruise ship
passengers (000’s) 29.6
39.5
50.0
56.5
55.6
*Includes ten mobile homes rented to staff.
FIC ended the year with a headcount of 151, 21 lower
than in March 2016. Year on year savings of c £0.2 million
were effected in early 2016 by a reduction in administrative
overheads and further headcount cuts were made in retail
operations during the year in anticipation of the return to
more normalised trading. Of the 151 headcount, Retail
accounted for 56, Falklands 4x4 for 19 and FBS for 38, with
the balance of 38 in Support Services and administration.
In overall terms profitability in the Group’s Falkland
operations fell back from the record levels of £1.9 million
seen in 2015-16 to a similar level to that seen in the year to
31 March 2014, (£1.0 million PBTa) when there was little oil
exploration activity in the Islands.
While oil development remains subject to continuing
uncertainty, the Falklands’ economy is expected to stabilise
around current levels sustained by the traditional areas of
squid fishing and tourism ensuring a healthy base level of
profitability is maintained at FIC.
Year ended 31 March
2017
£m
2016
£m
Change
%
Revenues
Ferry fares
Cruising and Other
revenue
Total PHFC revenue
PHFC underlying
operating profit
Boat loan & Pontoon
finance lease interest
PHFC underlying Profit
Before Tax
PHFC underlying
operating profit margin
Passengers carried
(000s)
4.13
0.16
4.29
1.06
4.09
0.15
4.24
1.03
-0.35
-0.35
0.71
0.68
24.7%
24.2%
0.8
7.2
1.0
2.9
0.3
4.2
1.9
2,710
2,826
-4.1
2016-17 saw a continued decline in ferry passenger
numbers, which reduced 4.1% over the year to 2.710 million
(an average of 7,400 passengers per day), from 2.826
million in the prior year. The rate of decline was exacerbated
by the impact of the redevelopment by Portsmouth City
Council of the passenger interchange at the Portsmouth
terminal which continued throughout the entire year. The
overall rate of decline slowed in the second half down from
the -4.7% reported in H1 to -3.6% in H2.
Ferry fares were increased by an average of 3% in June
2016, bringing the total cost of a standard adult return
to £3.40, and the price of Adult 10 Trip tickets for regular
customers was increased to £15.00 (£1.50 per ferry
journey). Discounted tariffs for seniors and children were
also increased by 10p (£2.30/£2.20 return). Monthly and
quarterly season tickets which offer the best value for
money for very frequent users allowing unlimited ferry
travel continued to be available priced at £61 and £170
respectively.
During the summer months the annual “Bikes Go Free”
promotion (normal tariff £1.20 return) was offered once
more from 1st June to 1st September to encourage long
term cycle use. Cyclists now account for over 10% of all
ferry users.
8
Chief Executive’s Strategic Review
BUSINESS REVIEW - CONTINUED
The Spirit of Gosport
Customer interest in the unlimited monthly ferry and car
parking joint ticket “Park & Float” ticket at £89 increased
by 58% over the year but despite its outstanding value
for money, total take up remained modest at just over 1%
of passenger traffic. In contrast the discounted ticket for
military personnel was more popular accounting for 3.8%
of passenger journeys in the year, up 0.2% on the prior
year. Demand for the Solent Go regional “Oyster” travel
card continued to increase further to 3.6% of ferry users,
up 50% on the prior year.
In overall terms at under £1.60 per crossing for adults,
(£1.05 for seniors and children) the ferry service still
represents excellent value compared to any alternative
mode of transport other than for groups travelling by car
with free or subsidised parking.
As in prior years, the car continues to be the only serious
transport alternative to the ferry for travelling between
Gosport and Portsmouth. The subsidised Park & Ride
scheme operated by Portsmouth City Council remained
a major factor in increasing the appeal of car travel with
dedicated buses departing every 10 minutes to Portsmouth
town centre, the Naval Dockyard and the Gunwharf Quays
shopping centre. With keen Park & Ride pricing including
new 10 trip tickets at £3 per car, low petrol prices ( 20%
cheaper than in 2014 ) and increasingly efficient cars, the
economics of car travel under the scheme are attractive
for family leisure travel and daily commuting when there
are more than 2 passengers per vehicle. As such the
scheme continues to have a direct, adverse impact on ferry
passenger volumes.
In the year to 31 March 2017, in contrast to the prior year,
weekday traffic was marginally less affected than traffic at
weekends with an overall decline of -3.9% compared to
-4.6% at weekends although peak time commuter traffic
experienced slightly greater declines of 4.3% compared to
only 2.8% for weekday off peak passengers.
Cruising income continued to make a modest but profitable
contribution to the business with 38 leisure cruises in
the Solent area over the summer and together with ferry
advertising income other revenues increased by 7.2% from
£0.15 million to £0.16 million. In early 2017 PHFC benefited
from the sale of the last of its 1966 vintage vessels, Gosport
Queen, which was sold to a Thames river cruise operator.
The profit on sale of £0.08 million is included in non-trading
income.
With the sale of the last of the “Queens”, PHFC has 3
reliable modern vessels to support its passenger service
(2 on daily operations and one on stand-by) and with an
estimated service life of over 30 years, no further significant
vessel expenditure is anticipated for over 15 years.
Key Operating Metrics
Average fare yield per passenger journey increased by
4.8% to £1.52 (2016: £1.45).
Ferry reliability was again outstanding with on-time
departures running at 99.9% (2016: 99.8%).
Outlook
Looking ahead for 2017-18 completion of the passenger
interchange at the Portsmouth Hard is scheduled for June
FIH GROUP PLC 2017 and with its wider pedestrian walkways and more
comfortable and efficient links between ferry buses and
taxis the modernised passenger terminus should provide
a more attractive and seamless interchange for public
transport users and help boost ferry numbers.
The arrival of the Royal Navy’s new aircraft carriers has
been subject to delay but HMS Queen Elizabeth, the largest
ship ever built for the Royal Navy, is finally due to arrive in
Portsmouth Harbour in late 2017, after completion of sea
trials. The significant maintenance regime to keep her fully
operational is expected to boost employment at the naval
dockyard and be a positive factor for passenger volumes.
Plans for the redevelopment of the Gosport bus station
adjacent to the ferry terminal are developing slowly although
there is now firm private sector interest in creating new retail
and leisure facilities which should increase the appeal of
the Gosport waterfront / ferry terminal area as a destination
and thus enhance the medium term outlook for passenger
numbers.
ANNUAL REPORT 2017
9
PHFC Key Performance Indicators and
Operational Drivers
Year ended 31
March
Staff
Numbers
(FTE at 31
March)
Capital
Expenditure
£’000’s
Ferry
Reliability
(on time
departures)
Number of
weekday
passengers
‘000
2013
2014
2015
2016
2017
35
37
39
38
38
223
1,958
1,483
223
241
99.5% 99.7% 99.8% 99.8% 99.9%
2,230
2,169
2,123
2,046
1,967
% change
on prior year -10.7% -2.7% -2.1% -3.6% -3.9%
Number of
weekend
passengers
‘000
800
780
803
817
744
% change
on prior year
Total
number of
passengers
‘000’s
% change
on prior year
Revenue
growth %
Average
yield per
passenger
journey*
-3.4% 1.8% -2.1% -2.5% -4.6%
3,033
2,986
2,923
2,826
2,710
-8.9% -1.6% -2.1% -3.3% -4.1%
-1.9% 1.2% 4.3% -1.3% 1.0%
£1.28
£1.32
£1.41
£1.45
£1.52
*Total ferry fares divided by the total number of passengers
10
FIH GROUP PLC
Chief Executive’s Strategic Review
BUSINESS REVIEW - CONTINUED
Installation of artwork at the National Maritime Museum, London
Momart
Momart, the Group’s art handling and logistics business,
delivered a modest increase in Operating Profit, despite
challenging market conditions. Overall revenues increased
by 13.0% to £18.4 million (2016: £16.3 million) led by
exceptionally strong growth in the value of work done
for leading museums (+19.9%). Despite a less lucrative
sales mix, and pressure on margins, the strong growth
in revenue meant that on a like for like basis, underlying
profits increased by £0.25 million to £0.71 million, although
start-up costs of £0.18 million from the newly expanded
storage facilities at Leyton held back profit growth, so that
underlying operating profits increased only marginally to
£0.54 million from £0.46 million in 2016.
Net finance costs in the year were negligible as borrowings
were repaid during the year, although a further £1.0 million
bank loan was drawn down in December 2016 to finance
the fit out of the new warehouse extension at Leyton.
Underlying Profit Before Tax before amortisation of
intangibles was £0.52 million (2016: £0.46 million).
Momart Operating results
Year ended 31 March
Revenues
2017
£m
2016
£m
Change
%
Museum Exhibitions
10.06
Galleries & Private
Clients
Storage
Total Momart
revenue
Momart underlying
operating profit
8.39
5.82
2.05
6.29
2.03
18.38
16.26
19.9
8.1
-0.8
13.0
0.54
0.46
17.0
Net Interest expense
-0.02
-
-
Momart underlying
Profit Before Tax
Momart underlying
operating profit
margin
0.52 0.46
14.7
2.9%
2.8%
1.4
11
Museum Exhibitions
After an exceptionally strong start in H1 with revenue +30%
compared to H1 in the prior year, the rate of Exhibition
revenue growth slowed in H2 but still showed healthy
growth with museum sales up by 11.4% on the prior
year, leading to annual sales growth of 19.9% and record
levels of activity with UK museums. Revenue from large
UK museum exhibitions, continue to form the bedrock
of Momart’s market-leading reputation, and accounted
for more than half of total Exhibition activity with sales to
the top 10 UK museums representing 55% of Exhibitions
revenue (2016: 51%). Work with overseas museums, either
directly or through agents accounted for 28% of Exhibitions
revenue (2016: 29%) with services to smaller UK museums
accounting for 17% of Exhibitions revenue.
Although the increase in Exhibitions’ Museum sales was
encouraging, museum budgets in the UK and overseas
are under intense and increasing pressure with ever more
emphasis being placed on price in the tender process and
this has led to pressure on margins and contract profitability
becoming increasingly squeezed. In addition, fluctuations
in sales mix, particularly the proportion of works provided
by lenders located overseas, plays a major factor in
determining gross margin, as work that requires outsourcing
to overseas partners commands only a modest mark up for
the co-ordinating agent. In 2016-17 the proportion of low
margin work that required outsourcing to overseas agents
increased by 3.4% points on the prior year, and these lower
margin sales accounted for £1.6 million (75%) of the total
increase in Exhibitions revenues of £2.1 million. Revenue
from Momart’s own added value services to Exhibition
clients increased by £0.5 million (+7.3%) helped by a £0.4
million increase (+16.6%) in work for international clients.
Notable museum exhibitions delivered for UK clients in the
period included the installation of “Abstract Expressionism”
at the Royal Academy, “Sunken Cities” at the British
Museum, “Painters Paintings” and “Beyond Caravaggio”
at the National Gallery, “Francis Bacon Invisible Rooms”
at Tate Liverpool, “William Eggleston” and “Picasso” at the
National Portrait Gallery, “You Say You Want a Revolution”
at the V&A, and “The Radical Eye” at Tate Modern.
As at 31 March 2017, the value of Momart’s 12 month
order-bank of large UK Exhibitions had increased by £0.3
million compared to the prior year-end, to a record level
of £4.8 million (See KPI’s below). This healthy order book
provides a solid platform for Exhibition sales in the coming
year.
Galleries & Private Client Services
Gallery Services had an encouraging year despite fierce
competition at a period when there was a notable softening
in the global art market. During 2016 international auction
houses experienced weaker client demand and hammer
prices fell below expectations particularly in the early part
of the year. Despite this unpromising backdrop, Momart’s
Gallery Services team delivered sales growth of 8.1%
achieving record revenues of £6.3 million (2016: £5.8
million) whilst still maintaining healthy margins.
International galleries remain the most important client
category and after strong sales growth in the prior year,
revenue from galleries grew by a further 25% to reach
record levels. Sales to auction houses fell back slightly
(-1.4%) reflecting the slow-down in the commercial art
market, although run rates picked up towards the end of
the financial year as confidence returned at the start of
2017. Activity with private clients fell back by 11% mirroring
market uncertainty but revenues from corporate clients
increased by a welcome 3%. Momart’s close connection
with major artists, as an art handler able to meet the most
demanding technical requirements and standards of care,
was reinforced by encouraging sales growth of 17% with
living artists. After commercial galleries and auction houses
this key client group remains central to Momart’s activities
and reflects the company’s core values of client service,
attention to detail and respect for the works themselves.
During the year, further resources were invested in sales
and marketing, business development, staff training and
improved IT systems, increasing general overheads by £0.4
million compared to the prior year. This strengthening of the
company’s sales infrastructure will support further organic
growth in the coming years.
Momart Revenues 2017
Momart Revenues 2016
Storage
11%
Commercial
Gallery
Services
34%
Museum
and public
exhibitions
55%
Storage
12%
Museum
and public
exhibitions
52%
Commercial
Gallery
Services
36%
ANNUAL REPORT 2017 12
FIH GROUP PLC
Chief Executive’s Strategic Review
BUSINESS REVIEW - CONTINUED
Storage
Storage revenues were essentially unchanged at £2.03
million (2016: £2.05 million), as existing facilities remained
at full capacity. During the year the main strategic focus
was to ensure the completion and client readiness of the
new storage unit at Leyton although snagging issues and
contractor insolvency meant final commissioning of the new
facilities was delayed until March 2017. Storage revenues
earned in the 2016-17 financial year from the new “Unit14”
were negligible and start-up costs (rent & rates etc) of £0.18
million were incurred while the unit remained subject to
final completion. Early reaction to the new facilities which
offer improved client facilities, discrete dedicated space
for specific collections and enhanced viewing areas, has
been very positive and sales and promotional initiatives are
underway to ensure the speediest possible fill of the new
unit which will add 33% to storage capacity together with
£0.5 million in annual operating costs. Depending on market
conditions it is hoped to fill the new unit within 18 months,
with cash break-even on a monthly basis achieved within 7
months. Given the profile of fixed property costs from the
outset and a steady build-up of revenue, if the unit is 2/3rd
full by March 2018, and at that point covering its cash costs
and monthly depreciation, deficits in the early months will
still lead to a further small loss of c £0.2 million in the first
year of operation, after which once mature and fully let it will
become a steady profit and cash flow generator.
Momart Key Performance Indicators and
Operational Drivers
Year ended
31 March
Staff
Numbers
(FTE 31
March)
Capital
Expenditure
£’000’s
Warehouse
% fill vs
capacity
Exhibition
Order Book
31 March
Momart
services
charged out
Revenues
from
overseas
clients
Exhibitions
sales growth
Gallery
Services
sales growth
Storage
sales growth
Total Sales
growth
2013
2014
2015
2016
2017
119
125
129
130
131
598
260
648
402
971
94.2% 92.9% 91.2% 90.6% 90.4%
£3.8m £3.9m £3.3m £4.5m £4.8m
£9.0m £11.7m £9.1m £9.2m £9.8m
£4.6m £8.3m £7.5m £5.8m £6.1m
27.8% 20.4% -20.0% -3.4% 19.9%
-12.7% 1.3% -6.5% 11.8% 8.1%
10.5% 2.6% 1.3% 10.1% -0.8%
8.9% 12.0% -13.7% 3.2% 13.0%
13
Acquisitions
from Staunton
Following the abortive take-over bid
Holdings, the search for complementary value enhancing
acquisitions has been resumed, with the aim of increasing
the group’s earnings base, market capitalisation and appeal
for investors. This appeal will be further enhanced by the
resumption of dividends set at a sensible level in order to
provide a modest yield whilst preserving the Group’s cash
resources for meaningful and accretive acquisitions. To avoid
dilution of management resources, the main geographic
focus will be on businesses based in the UK. A number of
discussions have been held with businesses in the field of
art logistics which, if progressed, would complement and
extend Momart. These opportunities will continue to be
explored but only on the basis of sensible purchase prices,
clear synergies and a pathway to sustainable growth. If
these opportunities do not yield positive results, expansion
and investment in other high value specialist services will
be considered as an alternative. Strategic opportunities for
expansion and further investment in the Falklands will also
be considered working in partnership with other specialist
service providers on any larger projects which may emerge.
The guiding principle of our strategy is to deliver long-term
sustainable growth, through continued organic growth and
enhancing value for shareholders through selective, well-
priced acquisitions. The Board is taking active measures to
search for opportunities.
John Foster
Chief Executive
13 June 2017
Trading outlook
FIC
For the year ahead, we anticipate another quiet trading
period in the Falklands. Local competition remains a
significant factor, particularly in Retail, as the full effects of
the Chandlery’s expansion wash through in the first half.
However property rental income has now stabilised and
housebuilding remains buoyant on the back of continued
government subsidies for first time local buyers. Further
growth in FIC’s consumer finance business is anticipated
and a steady performance is also expected from insurance
broking, 4x4 sales and vehicle maintenance.
In the near term, an improved squid catch should help
general confidence and a further stimulus from government
infrastructure projects may emerge following the quadrennial
Legislative Assembly elections in November 2017. Further
oil development awaits an improved outlook for the global
oil price and the emergence of a financially strong “farm-in”
partner to help develop Premier Oil’s “Sea Lion” acreage.
With respect to tourism, continued growth is expected
from cruise ship activity but negotiations with Argentina
concerning flight permissions for new scheduled flights
from South America which have the potential to unlock
land-based tourism, remain unresolved and no significant
stimulus from new flights is expected in the coming year.
PHFC
At PHFC, the emphasis in the coming year will continue
to be on tight cost control and on maintaining the ferry’s
excellent safety and reliability record. The disruptive
council construction works at the passenger interchange
in Portsmouth are expected to be complete by June 2017;
this and the arrival of the new carrier HMS Queen Elizabeth
late in 2017, should provide some modest stimulus to
passenger volumes over the year. With its core fleet of 3
modern passenger vessels, ongoing capital expenditure at
the ferry will be modest and underlying cash flow from ferry
operations will continue to be strong.
Momart
At Momart, increased confidence in the global art market
was reflected in more buoyant auction house sales, in
spring 2017 and although competition remains intense,
this should help drive further growth in Momart’s services
to private collectors, galleries and auction houses. Museum
exhibitions work remains very price competitive and only
limited growth is anticipated in this sector and the focus
will be on higher added value contracts where Momart’s
unique expertise can come fully into play. In the coming
year, the key priority will be to fill the company’s newly
opened storage facility at Leyton as quickly as possible to
expand business with private collectors and galleries and to
create a platform for further growth.
ANNUAL REPORT 2017 14
FIH GROUP PLC
Chief Executive’s Strategic Review
FINANCIAL REVIEW
Financial Review
Revenue and underlying operating profit
Group revenue rose 3.8% to £40.5 million, however,
underlying operating profit decreased 19.3% to £2.8 million
in the year ended 31 March 2017 (2016: £3.5 million)
as profits at FIC fell back as oil exploration activity in the
Falklands ceased in early 2016, and underlying operating
profits in the Falklands, including the joint venture result,
which had benefited from crane hire to Premier in the prior
year, fell £0.8 million to £1.2 million. On a more positive
note, trading profits at PHFC and Momart were slightly
ahead of the prior year.
Non-trading items
Non-trading items amounted to a net cost of £0.51 million
(2016: £0.28 million), and comprised a £0.08 million profit
on the sale of “Gosport Queen”, which had been purchased
by Portsmouth Harbour Ferry Company in 1966, and a
£0.08 million profit incurred in the Joint Venture on the sale
of the SAtCO crawler crane, which had been returned to the
UK following the end of the drilling contract in the Falklands.
These non-trading gains have been offset against:
• £0.53 million of professional fees incurred from the failed
Takeover Bid by Staunton Holdings Limited, and the
further costs incurred in defending the Group against a
possible bid by the Argentine controlled, Dolphin Fund.
• £0.14 million amortisation charge of intangible assets, in
relation to the net book value of Customer relationships
acquired within Momart in March 2008.
Net financing costs
The Group’s net financing costs at £0.4 million are similar
to the prior year, as the slight increase in bank interest
payable from the new bank loan drawn down by Momart
in December 2016, has been offset against the reduction in
interest payable at the Ferry, as the loans have been repaid
during the year.
Underlying pre-tax profit
As expected, the Group reported underlying pre-tax profits
of £2.40 million, 22.2% down on the prior year, (2016:
£3.08 million).
Reported pre-tax profit
After the non-trading items noted above, reported Profit
Before Tax for the Group decreased by 32.6% to £1.89
million (2016: £2.80 million).
Taxation
The Group pays corporation tax on its UK earnings at
20% and on earnings in the Falkland Islands at 26%. The
Falkland Islands Company Limited, which is resident in both
jurisdictions, has been granted a foreign branch exemption,
and as a result no longer pays UK corporation tax. As a
result FIC enjoys the full benefit of the tax deductibility in
the Falkland Islands of expenditure on commercial and
industrial buildings. The effective blended tax rate on
underlying profits is 20.5% (2016: 22.7%).
Earnings per share
Year ended 31 March
Underlying profit
before tax
Taxation on
underlying profit
Underlying profit
after tax
Diluted average
number of shares
in issue (thousands)
Effective underlying
tax rate
Basic EPS on
underlying profit
Diluted EPS on
underlying profit
Basic EPS on
reported profit
Diluted EPS on
reported profit
2017
£m
2016
£m
Change
%
2.40
3.08
-22.2
(0.49)
(0.70)
-29.9
1.91
2.38
-19.9
12,431
12,384
0.4
20.5% 22.7%
-1.2
15.4p
19.2p
-20.1
15.3p
19.2p
-20.2
11.5p
18.0p
-36.0
11.5p
17.9p
-36.0
Fully diluted Earnings per Share (“EPS”) derived from
Underlying Profits, fell to 15.3 pence (2016: 19.2 pence),
due to the fall in the underlying profit before tax.
Dividend
As noted in the Chairman’s Statement, the Board is also
pleased to recommend the reinstatement of a dividend. By
setting the dividend at an affordable level, the new dividend
payment policy will allow the retention of the majority
of profits to fund organic growth and to help finance
acquisitions, whilst at the same time providing an attractive
running yield for shareholders. Our new policy will be to pay
a cash dividend which will be targeted to be three times
covered by after tax profits. For the year ended 31 March
2017, subject to approval by shareholders at our AGM on
31 August 2017 the Company will declare a final dividend
of 4 pence per share to be paid on 22 September 2017
to shareholders on the register at close of business on 1
September 2017.
Balance sheet
The Group’s Balance Sheet remains strong. Total net
assets, including intangible assets of £11.8 million (2016:
£12.0 million), increased to £39.7 million from £38.6 million
in the prior year. The carrying value of intangible assets
at £11.8 million has reduced from the £12.0 million at 31
March 2016, due to the amortisation charge.
Retained earnings, after providing for corporation tax,
increased by £1.2 million to £20.0 million (2016: £18.8
15
The Group’s cash balances increased to £15.1 million
(2016: £14.0 million).
Bank borrowings rose to £3.8 million from £3.3 million due
to the new loan drawn down in December 2016 by Momart
to fund the storage expansion.
Outstanding finance lease liabilities totalled £5.0 million
(2016: £5.1 million). £4.8 million (2016: £4.9 million) of the
finance lease balance is in respect of the 50 year lease from
Gosport Borough Council for the Gosport Pontoon, which
runs until June 2061.
In common with most large UK companies, the Group pays
the majority of its corporation tax by means of payments on
account. Residual corporation tax due for payment within
the next 12 months is £0.2 million (2016: £0.03 million).
Trade and other payables increased to £12.3 million from
£11.2 million at 31 March 2016, reflecting increased trading
activity.
At 31 March 2017, the liability due in respect of the Group’s
defined benefit pension scheme in the Falkland Islands was
£3.0 million (2016: £2.6 million). The increased liability is
due principally to lower medium term interest rates used
to discount the scheme’s future liabilities. The pension
scheme in the Falklands, 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 increase in
liability has been fed through reserves in accordance with
IAS 19.
The Group’s deferred tax liabilities, excluding the pension
asset at 31 March 2017, were £2.2 million and increased
by £0.1 million from the prior year (2016: £2.1 million).
£2.0 million of this balance arises on property, plant and
equipment, and is principally due to accelerated capital
allowances on the new vessel in PHFC 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 temporary
difference arises, on which deferred tax is provided.
Net assets per share were 320 pence at 31 March 2017
(2016: 310 pence).
million). Bank borrowings increased to £3.8 million (2016:
£3.3 million), due to the drawdown of a £1.0 million loan
at Momart to cover the storage facility development. The
Group’s cash balances increased by £1.1 million to £15.1
million (2016: £14.0 million).
The net book value of property, plant and equipment
increased by £0.2 million to £20.1 million (2016: £19.9
million) after capital investment of £1.8 million, including
£1.0 million at Momart, largely due to the new storage
facilities in Leyton. This has been offset against a £1.3 million
depreciation charge in the year and £0.1 million of the hire
fleet transferred to stock and sold through Falklands 4x4.
investment properties, comprising
The Group owns
commercial and residential properties in the Falkland
Islands held for rental, together with approximately 400
acres of land in and around Stanley. This includes 18 acres
for industrial development and 25 acres of prime mixed-use
land. The Group owns 51 properties for rental, including 41
investment properties, which are mainly houses, in Stanley
and ten mobile homes, which are rented to staff. The
number of properties, which all are held at depreciated cost,
has increased by one compared to the prior year due to the
rental of a former FIC warehouse to a third party. The net
book value of the investment properties and undeveloped
land of £3.7 million (2016: £3.6 million) has been reviewed
by the Directors resident in the Falkland Islands and at 31
March 2017 the fair value of this property portfolio was
estimated at £7.2 million (2016: £7.0 million), an uplift of
£3.5 million on net book value. FIC’s portfolio of 700 acres
of freehold land has a net book value of £0.7 million and an
estimated current value at 31 March 2017 of £2.2 million
(2016: £2.2 million).
Deferred tax assets relating to future pension liabilities
increased to £0.8 million (2016: £0.7 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. The deferred tax asset increased, as
the pension liability rose due to a change in assumptions
made at the year-end, principally due to the decrease in the
discount rate.
Inventories, which largely represent stock held for resale in
the Falkland Islands, were reduced by £0.8 million to £5.4
million at 31 March 2017 (2016: £6.2 million), as a result of
focussed stock management implemented in the Falkland
Islands.
Trade and Other Receivables increased by £1.6 million to
£5.5 million at 31 March 2017, due to the completion of
large sales contracts in March at Momart and an increase
in debtors at FIC due to a better start to the Fishing season
in March 2017. These timing differences are expected to
reverse in the coming financial year, Due to the increased
year end receivables at Momart, average debtor days
outstanding were 52 (2016: 33).
ANNUAL REPORT 2017 16
FIH GROUP PLC
Chief Executive’s Strategic Review
FINANCIAL REVIEW - CONTINUED
Financing outflows
During the year the Group incurred £1.8 million of capital
expenditure (2016: £1.9 million); which included £0.8
million of expenditure on the Unit 14 expansion at Leyton
and an additional £0.2 million spent at Momart on the
vehicle fleet. In the Falklands £0.3 million was spent on
expanding the vehicle hire fleet, which at 31 March 2017
includes 50 vehicles, (2016: 42) with 43 vehicles leased out
at the year end. £0.1 million has been spent on constructing
a dedicated warehouse for third party freight, and a
further £0.2 million was incurred on normal replacement
expenditure. At PHFC, £0.2 million of expenditure has
been incurred on restoring the Victorian Portsea pontoon,
including remediating and replacing the cast iron girders
underpinning the pontoon.
In addition to the three bank loans held by PHFC, a
further loan of £1.0 million was drawn down by Momart
in December 2016, to finance the storage expansion.
Scheduled loan repayments of £0.8 million (2016: £0.8
million) were made during the year, including £0.3 million
of repayments to Gosport Council on the 50 year pontoon
finance lease, £0.1 million of repayments on hire purchase
leases for trucks at Momart and £0.4 million of repayments
on the four bank loans.
John Foster
Chief Executive
13 June 2017
Cash flows
Operating cash flow
Net cash flow from operating activities was £2.5 million
(2016: £4.3 million); with the decrease due to the increased
level of debtors in Momart at the end of the current year.
The Group’s Operating Cash Flow can be summarised as
follows:
Year ended 31 March
2017
£m
2016
£m
Change
£m
Underlying profit before tax
Depreciation & Amortisation
Net Interest payable
EBITDA
Share based payments
Increase in hire purchase
debtors
Less share of joint venture
results in underlying profit
2.4
1.5
0.4
4.3
-
-
-
3.1
1.5
0.4
5.0
0.1
(0.7)
-
-
(0.7)
(0.1)
(0.5)
0.5
(0.2)
0.2
Increase in working capital
(1.1)
0.5
(1.6)
Professional fees paid for the
Takeover bid and defence
(0.4)
-
(0.4)
Tax paid
(0.3)
(0.3)
-
Restructuring costs paid
-
(0.3)
0.3
Net cash inflow from
operating activities
Financing and Investing
Activities
2.5
4.3
(1.8)
Sale of FOGL shares
-
1.4
(1.4)
Less:
Capital expenditure
(1.8)
(1.9)
0.1
Net bank interest paid
(0.1)
(0.1)
Proceeds on sale of fixed
assets
Net cash in from Treasury
share movements
Cash inflows from joint ven-
ture
Bank and other loan repay-
ments
Net cash outflow from
financing and investing
activities
Net cash inflow
Cash balance b/fwd.
-
-
0.1
0.1
-
0.1
(0.1)
0.2
0.4
(0.2)
(0.8)
(0.8)
-
(1.4)
2.3
(3.7)
1.1
14.0
6.6
7.4
(5.5)
6.6
1.1
Bank and Hire purchase loan
draw down
1.0
3.1
(2.1)
Cash balance c/fwd.
15.1
14.0
Board of Directors and Secretary
ANNUAL REPORT 2017
17
Jeremy Brade, Interim Chairman and 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 and has been Interim Chairman of FIH group plc since 2 May 2017.
John Foster, Chief Executive
John joined the Board in 2005. He is a chartered accountant and previously served as Finance Director at a number
of fully listed UK companies. Prior to this, John 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.
Edmund Rowland, Non-executive Director
Edmund was appointed to the Board on 16 April 2013, and became Chairman on 9 February 2015. He resigned as
Chairman of FIH group plc on 2 May 2017, but will remain on the board until a new non-executive director is appointed.
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.
18
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 2017.
Results and dividend
The Group’s result for the year is set out in the Group Income Statement. The Group profit for the year after taxation amounted to
£1,427,000 (2016: £2,222,000). Basic earnings per share on underlying profits were 15.4 pence (2016: 19.2 pence).
The Directors recommend a dividend of 4.0 pence per share, which, if approved by shareholders at the forthcoming Annual
General Meeting, will be paid on 22 September 2017 to shareholders on the register at close of business on 1 September 2017.
The proposed final dividend has not been included in creditors as it was not approved before the year end.
Principal activities
The business of the Group during the year ended 31 March 2017 was general trading in the Falkland Islands, the operation of a
passenger 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 Chief Executive’s Strategic Report and should be considered as part of
the Directors’ Report for the purposes of the requirements of the enhanced Directors’ Report guidance.
The principal activity of the Company is that of a holding company.
Directors
There have been no changes to the membership of the Board during the year. On 2 May 2017 Edmund Rowland stood down
as Chairman of the Group and agreed to stay on the Board until a further board appointment has been made. On 2 May 2017
Non-Executive Director Jeremy Brade agreed to become interim Non-Executive Chairman pending the appointment of a new
independent Non-Executive Chairman.
Directors’ interests
The interests of the Directors in the issued shares and share options over the shares of the Company are set out below under
the heading ‘Directors’ interests in shares’. During the year no Director had an interest in any significant contract relating to the
business of the Company or its subsidiaries other than his own service contract.
Health and safety
The Group is committed to the health, safety and welfare of its employees and third parties who may be affected by the Group’s
operations. The focus of the Group’s effort is to prevent accidents and incidents occurring by identifying risks and employing
appropriate control strategies. This is supplemented by a policy of investigating and recording all incidents.
Employees
The Board is aware of the importance of good relationships and communication with employees. Where appropriate, employees
are consulted about matters which affect the progress of the Group and which are of interest and concern to them as employees.
Within this framework, emphasis is placed on developing greater awareness of the financial and economic factors which affect the
performance of the Group. Employment policy and practices in the Group are based on non-discrimination and equal opportunity
irrespective of age, race, religion, sex, colour and marital status. In particular, the Group recognises its responsibilities towards
disabled persons and does not discriminate against them in terms of job offers, training or career development and prospects.
If an existing employee were to become disabled during the course of employment, every practical effort would be made to
retain the employee’s services with whatever retraining is appropriate. The Group’s pension arrangements for employees are
summarised in note 23.
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 2017 or 31 March 2016.
Corporate Governance
As an AIM company, FIH group 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
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.
FIH GROUP PLC ANNUAL REPORT 2017
19
Share capital and substantial interests in shares
During the year 2,795 shares were issued following the exercise of options by employees. Further information about the Company’s
share capital is given in note 25. Details of the Company’s executive share option scheme and employee ownership plan can be
found in note 24.
The Company was been notified of the following interests in 3% or more of the issued ordinary shares of the Company as at 31
May 2017:
The Article 6 Marital Trust created under the First Amended
and Restated Jerry Zucker Revocable Trust dated 4 - 2 - 2007
Argos Argonaut Fund
J.F.C Watts
Martin Janser
Bonafide Global Fish Fund
Christian Struck
Number of shares
Percentage of shares in issue
3,596,553
1,228,736
797,214
756,818
671,000
377,000
28.92
9.88
6.41
6.09
5.40
3.03
Charitable and political donations
Charitable donations made by the Group during the year amounted to £14,771 (2016: £19,229), largely to local community
charities in Gosport and the Falkland Islands. There were no political donations in the year (2016: 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 11.30 a.m. on 31 August 2017. 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.
Details of Directors’ remuneration and emoluments
The remuneration of non-executive Directors consists only of annual fees for their services both as members of the Board and of
Committees on which they serve.
An analysis of the remuneration and taxable benefits in kind (excluding share options) provided for and received by each Director
during the year to 31 March 2017 and in the preceding year is as follows:
John Foster
Jeremy Brade
Edmund Rowland
Mike Killingley
Total
Salary
£’000
Bonus
£’000
206
30
65
-
301
*-
-
-
-
-
2017
Total
£’000
206
30
65
-
301
2016
Total
£’000
238
30
65
**1
334
*The Chief Executive’s bonus for the year is normally split into equal parts of deferred shares and cash, with the shares requiring a
service condition to remain in employment for up to three years. For the year ended 31 March 2017, John Foster has waived his
cash bonus and taken a reduced deferred shares award of £27,500, to be issued on 16 June 2017. These deferred shares will be
provided at no cost to him in three equal tranches over the next three years.
**Until date of resignation
20
FIH GROUP PLC
Directors’ Report
CONTINUED
None of the Directors of the Company receive any pension contributions or benefit from any Group pension scheme.
The Executive Directors participate in annual performance related bonus arrangements. The Chief Executive 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 2017, the share options of executive Directors may be summarised as follows:
Date of grant
07 Aug 2007
15 Jul 2009
10 Jun 2015
10 Jun 2015
17 Jun 2016
17 Jun 2016
17 Jun 2016
Total
Number
of options
J L Foster
27,517
44,550
7,547
7,547
6,272
6,272
6,273
105,978
Exercise price
Exercisable from
Expiry date
£3.30
£2.90
£0.00
£0.00
£0.00
£0.00
£0.00
7 Aug 2010
15 Jul 2012
10 Jun 2017
10 Jun 2018
17 June 2017
17 June 2018
17 June 2019
6 Aug 2017
14 Jul 2019
10 Jun 2019
10 Jun 2019
17 Jun 2020
17 Jun 2020
17 Jun 2020
The mid-market price of the Company’s shares on 31 March 2017 was 302.50 pence and the range in the year was 179.00 pence
to 332.50 pence.
The Directors’ options extant at 31 March 2017 totalled 105,978 and represented 0.85% of the Company’s issued share
capital. The 203,994 remaining options are held by 36 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:
John Foster*
Jeremy Brade
Edmund Rowland
Ordinary shares as at
31 March 2017
Ordinary shares as at
31 March 2016
*78,127
15,010
**3,106,553
*72,830
15,010
**2,815,180
*John Foster’s shareholding above includes all Shares held in the Company’s share incentive plan in which he has a beneficial
interest.
** Blackfish Capital Alpha Fund SPC and Staunton Holdings Limited are companies connected with Edmund Rowland, a non-
executive director of the Company, and through this relationship with both Staunton Holdings Limited and Blackfish Capital
Management, at 31 March 2017, Edmund Rowland was interested in 3,106,553 shares in the Company, representing approximately
24.98 per cent of the issued share capital of the Company. These shareholdings were sold on 2 May 2017 to The Article 6 Marital
Trust, therefore Edmund Rowland no longer has any beneficial interest in the shares of FIH group plc.
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 year ended 31 March 2017 the Company purchased £600 of
matching shares for Mr J Foster.
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, Strategic Report, Directors’ 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. Under
that law they have elected to prepare both the group and the parent company financial statements in accordance with IFRSs as
adopted by the EU and applicable law. 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 Parent Company and of their profit or loss for that period. In preparing each of the
Group and Parent 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 Parent
Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Parent 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 Chief Executive’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
13 June 2017
Kenburgh Court
133-137 South Street
Bishop’s Stortford
Hertfordshire
CM23 3HX
ANNUAL REPORT 2017 22
Independent Auditor’s Report
TO THE MEMBERS OF FIH GROUP PLC
We have audited the financial statements of FIH group plc for the year ended 31 March 2017 set out on pages 26 to 71. 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
2017 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 matters prescribed by the Companies Act 2006
In our opinion the information given in the Strategic Report and the Directors’ Report for the financial year is consistent with the
financial statements.
Based solely on the work required to be undertaken in the course of the audit of the financial statements and from reading the
Strategic report and the Directors’ report:
• we have not identified material misstatements in those reports; and.
• in our opinion, those reports have been prepared in accordance with the Companies Act 2006.
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.
Craig Parkin
Senior Statutory Auditor
13 June 2017
For and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
St Nicholas House
Park Row
Nottingham
NG1 6FQ
FIH GROUP PLC Consolidated Income Statement
FOR THE YEAR ENDED 31 MARCH 2017
ANNUAL REPORT 2017
23
Before
amortisation
& non-trading
items
Amortisation
& non-trading
items
Before
amortisation
& non-trading
items
Amortisation
& non-trading
items
2016
£’000
2016
£’000
Total
2017
£’000
Notes
4
Revenue
Cost of sales
Gross profit
Other administrative
expenses
Takeover bid costs
Restructuring costs
Gain on sale of FOGL shares
Consumer Finance interest
income
Gain on sale of vessel
11
Amortisation of intangible
assets
2017
£’000
40,494
(24,861)
15,633
(13,064)
-
-
-
236
-
-
2017
£’000
-
-
-
-
40,494
38,996
(24,861)
(23,497)
15,633
15,499
(13,064)
(12,398)
(530)
(530)
-
-
-
76
-
-
236
76
(136)
(136)
-
-
-
206
-
-
Operating expenses
(12,828)
(590)
(13,418)
(12,192)
Operating profit
2,805
(590)
2,215
3,307
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
8
9
24
81
105
200
2,829
(509)
2,320
3,507
21
(454)
(433)
-
-
-
21
(454)
(433)
27
(456)
(429)
2,396
(509)
1,887
3,078
(279)
2,799
Taxation
(490)
30
(460)
(699)
122
(577)
Profit / (loss) for the year
attributable to equity
holders of the company
10
Earnings per share
1,906
(479)
1,427
2,379
(157)
2,222
Basic
Diluted
15.4p
15.3p
11.5p
11.5p
19.2p
19.2p
18.0p
17.9p
Total
2016
£’000
38,996
(23,497)
15,499
(12,398)
-
(261)
388
206
60
-
-
-
-
-
(261)
388
-
60
(136)
(136)
51
51
(330)
(279)
-
-
-
(12,141)
3,358
(130)
3,228
27
(456)
(429)
24
FIH GROUP PLC
Consolidated Statement of Comprehensive Income
FOR THE YEAR ENDED 31 MARCH 2017
Cash flow hedges - effective portion of changes in fair value
Reclassification to profit or loss on sale of shares in Falkland Oil and Gas
Items that are or may be reclassified subsequently to profit or loss
(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
2017
£’000
15
-
15
(366)
95
(271)
(256)
1,427
1,171
2016
£’000
(82)
(492)
(574)
215
(56)
159
(415)
2,222
1,807
Consolidated Balance Sheet
AT 31 MARCH 2017
ANNUAL REPORT 2017
25
Notes
11
12
13
15
16
17
18
19
16
20
Non-current assets
Intangible assets
Property, plant and equipment
Investment properties
Investment in 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
21
Interest-bearing loans and borrowings
Income tax payable
22
Trade and other payables
Total current liabilities
Non-current liabilities
21
23
17
Interest-bearing loans and borrowings
Employee benefits
Deferred tax liabilities
Total non-current liabilities
TOTAL LIABILITIES
Net assets
25
Capital and reserves
Equity share capital
Share premium account
Other reserves
Retained earnings
Hedging reserve
Total equity
2017
£’000
11,846
20,147
3,723
241
763
776
2016
£’000
12,037
19,930
3,632
136
755
687
37,496
37,177
5,356
7,498
799
15,079
28,732
66,228
(615)
(182)
(12,286)
(13,083)
(8,224)
(2,985)
(2,191)
(13,400)
(26,483)
39,745
1,243
17,447
1,162
19,960
(67)
39,745
6,241
4,853
810
14,037
25,941
63,118
(546)
(191)
(11,244)
(11,981)
(7,855)
(2,644)
(2,069)
(12,568)
(24,549)
38,569
1,243
17,447
1,162
18,799
(82)
38,569
These financial statements were approved by the Board of Directors on 13 June 2017 and were signed on its behalf by:
J L Foster
Director
26
FIH GROUP PLC
Company Balance Sheet
AT 31 MARCH 2017
Notes
14
19
17
Non-current assets
Investment in subsidiaries
Loans to subsidiaries
Deferred tax
Total non-current assets
Current assets
19
Trade and other receivables
Corporation tax receivable
20
Cash and cash equivalents
Total current assets
TOTAL ASSETS
Current liabilities
22
Trade and other payables
Net assets
25
Capital and reserves
Equity share capital
Share premium account
Other reserves
Retained earnings
Hedging reserve
Total equity
2017
£’000
27,629
6,965
17
34,611
12
94
8,780
8,886
43,497
(3,387)
40,110
1,243
17,447
6,910
14,577
(67)
40,110
2016
£’000
28,164
3,465
9
31,638
15
46
11,761
11,822
43,460
(3,188)
40,272
1,243
17,447
6,910
14,754
(82)
40,272
As permitted by Section 408 of the Companies Act 2006, a separate profit and loss account of the Parent Company has not been
presented. The Parent Company’s loss for the financial year is £182,000 (2016: £1,356,000 profit).
These financial statements were approved by the Board of Directors on 13 June 2017 and were signed on its behalf by:
J L Foster
Director
Registered company number: 03416346
Consolidated Cash Flow Statement
FOR THE YEAR ENDED 31 MARCH 2017
Cash flows from operating activities
Profit for the year after taxation
Adjusted for:
(i) Non-cash items:
Depreciation and Amortisation
Professional fees incurred for Takeover bid and defence
Gain on disposal of fixed assets
Share of Joint Venture (profit) /loss, after impairment provision
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
Decrease / (Increase) in finance leases receivable
Gain on disposal of FOGL shares
Corporation and deferred tax expense
Other adjustments
Operating cash flow before changes in working capital and provisions
(Increase) / decrease in trade and other receivables
Decrease / (increase) in inventories
Increase in trade and other payables
Decrease in provisions and employee benefits
Changes in working capital and provisions
Cash generated from operations
Cash outflow on option exercise
Professional fees paid for Takeover bid and defence
Corporation taxes paid
Net cash flow from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Proceeds from the disposal of property, plant & equipment
Proceeds received from the sale of FOGL shares
Loans received from joint venture
Interest received
Net cash flow from investing activities
ANNUAL REPORT 2017
27
2017
£’000
2016
£’000
1,427
2,222
1,587
530
(76)
(105)
88
15
2,039
(21)
127
239
3
-
460
808
4,274
(2,645)
971
686
(113)
(1,101)
3,173
(10)
(365)
(336)
2,462
(1,790)
76
-
200
21
(1,493)
1,595
-
(49)
130
90
61
1,827
(27)
117
240
(460)
(388)
577
59
4,108
455
(742)
909
(115)
507
4,615
-
-
(324)
4,291
(1,854)
141
1,396
378
27
88
28
FIH GROUP PLC
Consolidated Cash Flow Statement CONTINUED
FOR THE YEAR ENDED 31 MARCH 2017
Cash flow from financing activities
Repayment of secured loan
Bank loan drawn down
Bank and HP interest paid
Hire purchase loan drawn down
Cash outflow on purchase of Treasury shares
Proceeds from sale of Treasury shares
Net cash flow from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at start of year
Cash and cash equivalents at end of year
2017
£’000
(829)
990
(126)
38
-
-
73
1,042
14,037
15,079
2016
£’000
(760)
2,890
(117)
158
(681)
733
2,223
6,602
7,435
14,037
Company Cash Flow Statement
FOR THE YEAR ENDED 31 MARCH 2017
ANNUAL REPORT 2017
29
Notes Cash flows from operating activities
Holding Company (Loss) / profit for the year
(182)
1,356
2017
£’000
2016
£’000
Adjusted for:
Bank interest receivable
Professional fees incurred on the failed Takeover
Ineffective portion of cash flow hedge
Equity-settled share-based payment expenses
14
Impairment of investment
Corporation and deferred tax expense
Operating cash flow before changes in working capital and provisions
Decrease / (increase) in trade and other receivables
Increase / (decrease) in trade and other payables
Changes in working capital and provisions
Cash generated from operations
Cash outflow on option exercise
Professional fees paid for Takeover bid and defence
Corporation taxes paid
Net cash flow from operating activities
Cash flow from financing activities
Cash flows in inter-company borrowing
Interest received
Cash outflow on purchase of Treasury shares
Proceeds from sale of Treasury shares
Net cash flow from financing activities
Net (decrease) / increase in cash and cash equivalents
Cash and cash equivalents at start of year
Cash and cash equivalents at end of year
(19)
530
(1)
39
511
37
915
3
47
50
965
(7)
(365)
(93)
500
(3,500)
19
-
-
(3,481)
(2,981)
11,761
8,780
(25)
-
5
44
102
41
1,523
(3)
(4)
(7)
1,516
-
-
(59)
1,457
848
25
(681)
733
925
2,382
9,379
11,761
30
FIH GROUP PLC
Consolidated Statement of Changes in Shareholders’ Equity
FOR THE YEAR ENDED 31 MARCH 2017
Equity
share
capital
£’000
Share
premium
account
£’000
Other
reserves
£’000
Retained
earnings
£’000
Financial
assets
fair value
reserve
£’000
Hedge
reserve
£’000
Total
equity
£’000
Balance at 1 April 2015
1,243
17,447
1,162
16,344
492
Profit for the year
Share based payments
Cash flow hedges - effective portion of
changes in fair value
Transfer to the income statement on sale of
shares in FOGL
Re-measurement of the defined benefit
pension liability, net of tax
Purchase of Treasury shares
Sale of Treasury shares
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,222
61
-
-
159
(720)
733
Balance at 31 March 2016
1,243
17,447
1,162
18,799
Profit for the year
Share based payments
Cash flow hedges - effective portion of
changes in fair value
Share option exercise
Re-measurement of the defined benefit
pension liability, net of tax
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,427
15
-
(10)
(271)
Balance at 31 March 2017
1,243
17,447
1,162
19,960
-
-
-
(492)
-
-
-
-
-
-
-
-
-
-
-
(82)
-
-
-
-
36,688
2,222
61
(82)
(492)
159
(720)
733
(82)
38,569
-
-
15
-
-
1,427
15
15
(10)
(271)
(67)
39,745
ANNUAL REPORT 2017
31
Company Statement of Changes in Shareholders’ Equity
FOR THE YEAR ENDED 31 MARCH 2017
Balance at 1 April 2015
Profit for the year
Share-based payments
Cash flow hedges - effective portion of changes
in fair value
Purchase of Treasury shares
Sale of Treasury shares
Balance at 31 March 2016
Loss for the year
Share based payments
Option exercise
Cash flow hedges - effective portion of changes
in fair value
Equity
share
capital
£’000
Share
premium
account
£’000
Other
reserves
£’000
Retained
earnings
£’000
Hedge
Reserve
£’000
Total
equity
£’000
1,243
17,447
6,910
13,324
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,356
61
-
(720)
733
-
-
-
(82)
-
-
38,924
1,356
61
(82)
(720)
733
1,243
17,447
6,910
14,754
(82)
40,272
-
-
-
-
-
-
-
-
-
-
-
-
(182)
15
(10)
-
-
-
-
15
(182)
15
(10)
15
Balance at 31 March 2017
1,243
17,447
6,910
14,577
(67)
40,110
A loss of £182,000 (2016: £1,356,000 profit) 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.
32
Notes to the financial statements
1. Accounting policies
General information
FIH group 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 30.
The financial statements are presented in pounds sterling, rounded to the nearest thousand and are prepared on the historical
cost basis.
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 Chief Executive’s Strategic Report. The financial position of the Group, its cash flows, liquidity position and borrowing
facilities are also described in the Chief Executive’s Strategic Report. In addition, note 26 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 FIH group plc and its subsidiaries (the “Group”).
A subsidiary is any entity FIH group plc has the power to control. Control is determined by FIH group plc’s 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 impaired 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
FIH GROUP PLC 33
1. Accounting Policies CONTINUED
(“amortisation and non-trading items”). Such items arise because of their size or nature.
In 2017 these non- trading items comprise:
• Professional costs incurred in dealing with the failed bid by Staunton Holdings and the defence against a possible bid by the,
Argentine controlled, Dolphin Fund - £530,000
• Profit on the sale of certain plant and machinery owned by SAtCO, following an impairment in the previous year - £81,000
• Gain on vessel disposal in PHFC - £76,000
• Amortisation of intangible assets - £136,000
In 2016 these items comprised:
• The impairment provision made against certain plant and machinery owned by SAtCO - £330,000
• Restructuring costs - £261,000
• Gain on the sale of the Portsmouth Queen ferry - £60,000
• Gain on the sale of Falkland Oil and Gas Limited shares - £388,000; and
• the amortisation of intangible assets - £136,000
Foreign currencies
Transactions in foreign currencies are translated to the functional currencies of Group entities at exchange rates ruling at the dates
of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated to the functional currency
using the relevant rates of exchange ruling at the balance sheet date and the gains or losses thereon are included in the income
statement.
Non-monetary assets and liabilities are translated using the exchange rate at the date of the initial transaction.
Property, plant and equipment
Property, plant and equipment are measured at cost less accumulated depreciation and impairment losses. Cost comprises
purchase price and directly attributable expenses. Depreciation is charged to the income statement on a straight-line basis over
the estimated useful lives of each part of an item of property, plant and equipment. The estimated useful lives are as follows:
Freehold buildings
Long leasehold land and buildings
Vehicles, plant and equipment
Ships
20 – 50 years
50 years
4 – 10 years
15 – 30 years
The carrying value of assets and their useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. If an
indication of impairment exists, the assets are written down to their recoverable amount and the impairment is charged to the
income statement in the period in which it arises. Freehold land and assets 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 joint venture partners’ unanimous consent for strategic financial and operating decisions. FIH group 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.
ANNUAL REPORT 2017 34
Notes to the financial statements
CONTINUED
1. Accounting Policies CONTINUED
Intangible assets
Goodwill
Goodwill arises on the acquisition of subsidiaries and businesses.
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
indefinite life
6 - 10 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.
FIH GROUP PLC 35
Financial instruments classified as available-for-sale
The investment in Falkland Oil and Gas Limited was stated at fair value, with any resultant gain or loss recognised in other
comprehensive income and presented in the fair value reserve in equity, except for impairment losses. When these items were
derecognised, the cumulative gain or loss previously recognised directly in equity was recycled to the profit and loss. Financial
instruments classified as available-for-sale are initially recognised at fair value less directly attributable transaction costs.
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. This is applied only to significant long term projects spanning the year end, however there were no such contracts at
the current or prior year end. 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.
ANNUAL REPORT 2017 36
Notes to the financial statements
CONTINUED
1. Accounting Policies CONTINUED
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.
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. Re-measurements 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.
FIH GROUP PLC 37
As lessee
Rental 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.
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.
Rental income is received from investment property rentals in the Falklands. This income from operating leases is 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. None of these lease agreements exceed a twelve month period.
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.
Cash-flow hedges
The effective portions of changes in the fair values of derivatives that are designated and qualify as cash-flow hedges are recognised
in equity. The gain or loss to any ineffective portion is recognised immediately in the income statement. Amounts accumulated in
the hedging reserve are recycled to the income statement in the periods when the hedged items will affect profit or less.
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
2017 did not have any material impact on the consolidated financial statements:
Amendments and revisions to IFRSs
Accounting for Acquisitions of Interests in Joint Operations – Amendments to IFRS 11
Clarification of Acceptable Methods of Depreciation and Amortisation – Amendments to IAS 16 and IAS 38
Equity Method in Separate Financial Statements – Amendments to IAS 27
Annual Improvements to IFRSs – 2012-2014 Cycle
Disclosure Initiative – Amendments to IAS 1
Effective date
Periods beginning on or
after:
1 January 2016
1 January 2016
1 January 2016
1 January 2016
1 January 2016
Future adoption of new standards
The following standards, which have not yet been applied in the preparation of the consolidated financial statements were in issue,
but were not yet effective, and in some cases, had not yet been adopted by the EU:
IFRS 9: Financial Instruments
IFRS 15: Revenue from Contracts with Customers
IFRS 16 : Leases
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, except for the adoption of IFRS 16: Leases,
as the change in the accounting treatment of operating leases, will have a significant impact on the Group’s financial statements
resulting from a the revised treatment of the ground rent payable on the 50 year lease for the Gosport pontoon, and the significant
rental payments incurred on the storage facilities at Momart.
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.
ANNUAL REPORT 2017 38
FIH GROUP PLC
Notes to the financial statements
CONTINUED
2. Segmental Information Analysis CONTINUED
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.
2017
Revenue
Segment operating profit before
tax, amortisation & non-trading
items
Restructuring costs
Gain on sale of vessel
Amortisation
General
trading
(Falklands)
£’000
17,828
1,209
-
-
-
Ferry
Services
(Portsmouth)
£’000
4,286
1,058
-
76
-
Segment operating profit
1,209
1,134
Share of result of joint venture
Reversal of Impairment
Profit before net financing costs
Interest income
Interest expense
Net finance 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
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
24
-
1,233
14
(88)
(74)
1,159
33,381
(11,419)
21,962
578
-
578
492
72
-
564
-
1,209
24
1,233
14
(88)
1,159
-
-
1,134
4
(349)
(345)
789
16,556
(9,359)
7,197
241
-
241
447
-
-
447
-
1,058
-
1,058
4
(349)
713
Art logistics
and storage
(UK)
£’000
18,380
538
-
-
(136)
402
-
-
402
3
(17)
(14)
388
16,279
(4,956)
11,323
971
-
971
385
-
55
440
136
538
-
538
3
(17)
524
Unallocated
£’000
-
-
(530)
-
-
(530)
-
81
(449)
-
-
-
(449)
12
(749)
(737)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
£’000
40,494
2,805
(530)
76
(136)
2,215
24
81
2,320
21
(454)
(433)
1,887
66,228
(26,483)
39,745
1,790
-
1,790
1,324
72
55
1,451
136
2,805
24
2,829
21
(454)
2,396
ANNUAL REPORT 2017
39
2. Segmental Information Analysis CONTINUED
2016
Revenue
Segment operating profit
before tax, amortisation &
non-trading items
Restructuring costs
Gain on sale of vessel
Gain on the sale of FOGL shares
Amortisation
Segment operating profit
Share of result of joint venture
Impairment of Joint Venture fixed
assets
Profit before net financing costs
Interest income
Interest expense
Net finance 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
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
18,495
1,819
(178)
-
-
-
1,641
200
(330)
1,511
17
(99)
(82)
1,429
Ferry
Services
(Portsmouth)
£’000
4,244
1,028
-
60
-
-
1,088
-
-
1,088
3
(347)
(344)
744
Art logistics
and storage
(UK)
£’000
16,257
460
(83)
-
-
(136)
241
-
-
241
7
(10)
(3)
238
33,150
(10,821)
22,329
16,323
(9,632)
6,691
13,630
(3,463)
10,167
1,213
16
1,229
581
71
-
652
-
1,819
200
2,019
17
(99)
1,937
223
-
223
440
-
-
440
-
1,028
-
1,028
3
(347)
684
402
-
402
314
-
53
367
136
460
-
460
7
(10)
457
Unallocated
£’000
-
-
-
-
388
-
388
-
-
388
-
-
-
388
15
(633)
(618)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
£’000
38,996
3,307
(261)
60
388
(136)
3,358
200
(330)
3,228
27
(456)
(429)
2,799
63,118
(24,549)
38,569
1,838
16
1,854
1,335
71
53
1,459
136
3,307
200
3,507
27
(456)
3,078
40
FIH GROUP PLC
Notes to the financial statements
CONTINUED
2. Segmental Information Analysis CONTINUED
The £12,000 (2016: £15,000) unallocated assets above include £12,000 (2016: £15,000) of prepayments held in FIH group plc.
The £749,000 (2016: £633,000) unallocated liabilities above consist of accruals and tax balances held in FIH group plc.
3. Geographical analysis
The tables below analyse revenue and other information by geography:
2017
Revenue (by source)
Assets and Liabilities:
Non-current segment assets, excluding deferred tax
Capital expenditure
2016
Revenue (by source)
Assets and Liabilities:
Non-current segment assets, excluding deferred tax
Capital expenditure
United
Kingdom
£’000
22,666
24,563
1,212
United
Kingdom
£’000
20,501
24,374
625
4. Revenue
Sale of goods
Rendering of services
Total revenue
5. Non-trading items and amortisation of intangible assets
Profit before tax as reported
Reverse non-trading items:
Costs incurred from the Takeover bid
Restructuring costs
Proceeds on the sale of vessels
(Reversal of impairment) / impairment of the joint venture fixed assets
Gain on the sale of 5,000,000 FOGL shares
Amortisation charge on Momart intangible assets acquired
Total non-trading items and amortisation
Underlying profit before tax
Falkland
Islands
£’000
17,828
12,157
578
Falkland
Islands
£’000
18,495
12,116
1,229
2017
£’000
11,206
29,288
40,494
2017
£’000
1,887
530
-
(76)
(81)
-
136
509
2,396
Total
£’000
40,494
36,720
1,790
Total
£’000
38,996
36,490
1,854
2016
£’000
12,653
26,343
38,996
2016
£’000
2,799
-
261
(60)
330
(388)
136
279
3,078
ANNUAL REPORT 2017
41
Tax on non-trading items
In the year ended 31 March 2017, a £30,000 tax credit has been included in the Group’s income statement in respect of the
£509,000 non-trading items, which includes a £45,000 deferred tax credit on the intangible assets purchased in Momart in 2008,
offset against the £15,000 income tax payable on the profit arising on the sale of fixed assets. The £530,000 of costs incurred
from the aborted Takeover bid have not been treated as a tax deductible expense.
In the year ended 31 March 2016, a £122,000 tax credit has been included in the Group’s income statement in respect of the
£279,000 non-trading items, which includes a £71,000 deferred tax credit on the intangible assets purchased in Momart in 2008,
and the £63,000 income tax deductible on the £261,000 restructuring costs, offset against the £12,000 income tax payable on
the profit arising on the sale of fixed assets. No tax charge has arisen on the £388,000 gain on the sale of shares in Falkland Oil
and Gas Limited.
6. Expenses and auditor’s remuneration
The following expenses / (incomes) have been included in
the profit and loss
Group
Company
2017
£’000
2016
£’000
2017
£’000
2016
£’000
Direct operating expenses of rental properties
Depreciation
Depreciation of computer software
Amortisation of intangible assets
Foreign currency losses
Impairment loss on trade and other receivables
Cost of inventories recognised as an expense
Operating lease payments
263
1,396
55
136
6
44
9,552
1,050
142
1,406
53
136
(2)
36
9,884
921
Auditor’s remuneration
Audit of these financial statements
Other taxation services
Audit of subsidiaries’ financial statements pursuant to legislation
Other assurance services
Total auditor’s remuneration
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2017
£’000
2016
£’000
33
4
73
-
110
30
4
62
20
116
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
2017
38
159
6
131
4
338
2016
38
172
5
129
4
348
2017
2016
-
-
-
-
4
4
-
-
-
-
4
4
42
FIH GROUP PLC
Notes to the financial statements
CONTINUED
7. Staff numbers and cost CONTINUED
The aggregate payroll cost of these persons was as follows:
Wages and salaries
Share-based payments (see note 24)
Social security costs
Contributions to defined contribution plans
Total employment costs
Group
Company
2017
£’000
2016
£’000
10,914
10,804
15
909
298
61
916
301
2017
£’000
457
39
50
9
2016
£’000
460
44
49
9
12,136
12,082
555
562
Details of audited Directors’ remuneration are provided in the Directors’ Report, under the heading ‘Details of Directors’
Remuneration and Emoluments’.
8. Finance income and expense
Bank interest receivable
Total financial income
Interest payable on bank loans
Net interest cost on the FIC defined benefit pension scheme
liabilities
Finance lease interest payable
Unwinding of deferred consideration payable
Total finance expense
2017
£’000
21
21
2017
£’000
(127)
(88)
(239)
-
(454)
2016
£’000
27
27
2016
£’000
(117)
(90)
(240)
(9)
(456)
ANNUAL REPORT 2017
43
2017
£’000
2016
£’000
357
(25)
332
166
(65)
27
128
460
2017
£’000
1,887
377
174
-
-
(72)
(21)
2
460
370
118
488
230
(119)
(22)
89
577
2016
£’000
2,799
560
58
(78)
23
(108)
26
96
577
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
Total tax expense
Reconciliation of the effective tax rate
Profit on ordinary activities before tax
Tax using the UK corporation tax rate of 20% (2016: 20%)
Expenses not deductible for tax purposes
Gain on disposal of investment
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
Deferred tax credit / (expense) recognised directly in other comprehensive income
2017
£’000
95
2016
£’000
(56)
Reductions in the UK corporation tax rate from 20% to 19% on 1 April 2017 and to 17% on 1 April 2020 were substantively
enacted on 18 November 2015 and 15 October 2016 respectively. This will reduce the Company’s future current tax charge
accordingly. The deferred tax assets and liabilities at 31 March 2017 have been calculated based on the rates substantively
enacted at the balance sheet date. In the UK deferred tax has been provided at 17%.
The deferred tax assets and liabilities in the Falkland Islands have been calculated at the Falklands’ tax rate of 26%.
44
FIH GROUP PLC
Notes to the financial statements
CONTINUED
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 25).
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
2017
£’000
1,427
2016
£’000
2,222
2017
Number
2016
Number
12,431,715 12,431,623
-
(31,725)
(24,849)
(28,016)
Average number of shares in issue excluding the ESOP and shares held in Treasury
12,406,866 12,371,882
Maximum dilution with regards to share options
Diluted weighted average number of shares
Basic earnings per share
Diluted earnings per share
23,639
11,830
12,430,505 12,383,712
2017
11.5p
11.5p
2016
18.0p
17.9p
To provide a comparison of earnings per share on underlying performance, the calculation below sets out basic and diluted
earnings per share based on underlying profits.
Earnings per share on underlying profit
Underlying profit before tax (see note 5)
Taxation
Underlying profit after tax
Effective tax rate
Weighted average number of shares in issue excluding Treasury shares and the ESOP
(from above)
Diluted weighted average number of shares (from above)
Basic earnings per share on underlying profit
Diluted earnings per share on underlying profit
2017
£’000
2,396
(490)
1,906
2016
£’000
3,078
(699)
2,379
20.5%
22.7%
12,406,866 12,371,882
12,430,505 12,383,712
15.4p
15.3p
19.2p
19.2p
ANNUAL REPORT 2017
45
11. Intangible assets
Cost:
At 31 March 2015 and 2016
Disposals
At 31 March 2017
Accumulated amortisation:
At 1 April 2015
Depreciation of computer software
Amortisation of other intangibles for the year
At 31 March 2016
Depreciation of computer software
Disposals
Amortisation of other intangibles for the year
At 31 March 2017
Net book value:
At 1 April 2015
At 31 March 2016
At 31 March 2017
Computer
Software
£’000
Customer
relationships
£’000
Brand name
£’000
Goodwill
£’000
Total
£’000
479
-
479
156
53
-
209
55
-
-
264
323
270
215
1,274
(1,274)
2,823
11,576
-
-
-
2,823
11,576
16,152
(1,274)
14,878
1,002
-
136
1,138
-
(1,274)
136
-
272
136
-
785
1,983
3,926
-
-
-
-
785
1,983
-
-
-
-
-
-
785
1,983
2,038
2,038
2,038
9,593
9,593
9,593
53
136
4,115
55
(1,274)
136
3,032
12,226
12,037
11,846
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.
As at 31 March 2017 these intangible assets were fully amortised. No further amortisation of these intangible assets will now arise.
The Momart brand name has a carrying value of £2,038,000 and is considered to be of future economic value to the Group with
an estimated indefinite useful economic life. It is reviewed annually for impairment as part of the art logistics and storage review.
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 2015
At 31 March 2016
At 31 March 2017
Art logistics and
storage
£’000
Ferry Services
(Portsmouth)
£’000
Falklands
Islands
£’000
5,577
5,577
5,577
3,979
3,979
3,979
37
37
37
Total
£’000
9,593
9,593
9,593
46
Notes to the financial statements
CONTINUED
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 (2016: nil). As part of testing goodwill and indefinite life intangibles for impairment, forecasts of
operating cash flows for the next 50 years at PHFC and 25 years for Momart, have been used, which are based on approved
budgets and plans by the Board of FIH group 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.
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 13.0% (2016: 13.5%), and the cash flows of the Ferry Services have been discounted using a pre-tax discount
rate of 12.4% (2016: 12.4%). 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 (2016: £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 (2016: nil). The
key assumptions made in the estimation of future cash flows are in relation to revenue. Sensitivity analysis as at 31 March 2017
indicated that should the discount rate increase by 1%, (existing assumption 13.0%) pre-tax cash flows decrease by 10% or the
growth rate by 1% (existing assumption 2%) this would result in an impairment charge being recognised of between £0.8 million
to £1.0 million in the financial statements in respect of the valuation of the goodwill and intangible in relation to Momart.
FIH GROUP PLC ANNUAL REPORT 2017
47
12. Property, plant and equipment
Cost:
At 1 April 2015
Additions in year
Transfer to stock
Disposals
At 31 March 2016
Additions in year
Transfer to investment properties
Transfer to stock
Disposals
At 31 March 2017
Accumulated depreciation:
At 1 April 2015
Charge for the year
Transfer to stock
Disposals
At 1 April 2016
Charge for the year
Transfer to stock
Transfer to investment properties
Disposals
At 31 March 2017
Net book value:
At 1 April 2015
At 31 March 2016
At 31 March 2017
Freehold
Land &
buildings
£’000
Long leasehold
Land and
buildings
£’000
6,944
7,095
948
-
(50)
7,842
122
(170)
-
-
161
-
(19)
7,237
818
-
-
-
Group
Ships
£’000
6,702
109
-
-
6,811
19
-
-
-
Vehicles,
plant and
equipment
£’000
Total
£’000
8,613
29,354
620
(202)
(1,225)
7,806
831
-
(221)
(155)
1,838
(202)
(1,294)
29,696
1,790
(170)
(221)
(155)
7,794
8,055
6,830
8,261
30,940
1,829
1,067
152
-
(50)
1,931
280
-
(7)
-
231
-
(16)
1,282
142
-
-
-
1,378
229
-
-
1,607
247
-
-
-
2,204
1,424
1,854
5,115
5,911
5,590
6,028
5,955
6,631
5,324
5,204
4,976
5,459
723
(94)
9,733
1,335
(94)
(1,142)
(1,208)
4,946
655
(135)
-
(155)
5,311
3,154
2,860
2,950
9,766
1,324
(135)
(7)
(155)
10,793
19,621
19,930
20,147
At 31 March 2017 the net carrying amount of leased long leasehold land and buildings and vehicles, plant and equipment was
£4,385,000 and £346,000 for the Gosport Pontoon and trucks at Momart respectively, (2016: £4,481,000 and £532,000). During
the year to 31 March 2017, Momart acquired one van on hire purchase, which cost £38,000 and was funded by a £25,000 finance
lease.
During the year ending 31 March 2016, Momart acquired two sprinter vans and a truck on hire purchase, which cost £177,000
and were funded by £158,000 of finance leases.
At 31 March 2016, £79,000 was included within long leasehold properties in respect of the construction of the storage facilities
for Momart which have now been completed.
The Company has no tangible fixed assets.
48
FIH GROUP PLC
Notes to the financial statements
CONTINUED
13. Investment properties
Cost:
At 1 April 2015
Additions in year
Disposals
At 31 March 2016
Transfer from Freehold properties
At 31 March 2017
Accumulated depreciation:
At 1 April 2015
Charge for the year
Disposals
At 31 March 2016
Transfer from Freehold properties
Charge for the year
At 31 March 2017
Net book value:
At 1 April 2015
At 31 March 2016
At 31 March 2017
Residential and
commercial
property
£’000
Group
Freehold
land
£’000
Total
£’000
3,460
723
4,183
16
(9)
3,467
132
3,599
490
71
(3)
558
7
72
637
2,970
2,909
2,962
-
-
723
38
761
-
-
-
-
-
-
723
723
761
16
(9)
4,190
170
4,360
490
71
(3)
558
7
72
637
3,693
3,632
3,723
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 on the North shore of Stanley Harbour at Fairy Cove. These investment properties held by FIC
have been reviewed by a Directors of FIC who are resident in the Falkland Islands and who are considered to have the relevant
knowledge and experience to undertake the valuation. Independent advice has also been taken from a local property expert. At
31 March 2017 the fair value of this property portfolio was estimated at £7.2 million (31 March 2016: £7.0 million) an uplift on book
value of £4.2 million. Development land was valued at £2.2 million (2016: £2.2 million), an uplift on book value of £1.4 million.
During the year to 31 March 2017, the Group received rental income of £424,000 (2016: £565,000) from its investment properties
and from the ten mobile homes rented to staff, which are held in long leasehold property.
At 31 March 2017 and 2016 no investment properties were under construction.
The Company does not own any investment properties.
ANNUAL REPORT 2017
49
14. Investment in subsidiaries
Country of
incorporation
Class of shares held
Ownership
at
31 March
2017
Ownership
at
31 March
2016
The Falkland Islands Company Limited (1)
UK
Ordinary shares of £1
100%
100%
The Falkland Islands Trading Company Limited (1)
UK
Ordinary shares of £1
100%
100%
Preference shares of £10
100%
100%
Falkland Islands Shipping Limited (2) (6)
Erebus Limited (2) (6)
South Atlantic Support Services Limited (3) (6)
Paget Limited (4) (6)
The Portsmouth Harbour Ferry Company Limited (4)
Portsea Harbour Company Limited (4) (6)
Clarence Marine Engineering Limited (4) (6)
Gosport Ferry Limited (4) (6)
Momart International Limited (5)
Momart Limited (5) (6)
Dadart Limited (5) (6)
Falkland
Islands
Falkland
Islands
Falkland
Islands
Falkland
Islands
Ordinary shares of £1
100%
100%
Ordinary shares of £1
100%
100%
Preference shares of £1
100%
100%
Ordinary shares of £1
100%
-
Ordinary shares of £1
100%
100%
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%
(1) The registered office for these companies is Kenburgh Court, 133-137 South Street, Bishop’s Stortford, Hertfordshire
CM23 3HX.
(2) The registered office for these companies is 5 Crozier Place, Stanley, Falkland Islands FIQQ 1ZZ.
(3) South Atlantic Support Services Limited’s registered office is 56 John Street, Stanley, Falkland Islands FIQQ 1ZZ
(4) The registered office for these companies is South Street, Gosport, Hampshire, PO12 1EP.
(5) The registered office for these companies is Exchange Tower, 6th Floor, 2 Harbour Exchange Square, London E14 9GE.
(6) These investments are not held by the Company but are indirect investments held through a subsidiary of the Company.
At 1 April 2016
Impairment of subsidiaries
Share based payments (credit) / charge capitalised into subsidiaries
At 31 March 2017
Company
2017
£’000
2016
£’000
28,164
28,249
(511)
(24)
(102)
17
27,629
28,164
The Company’s investment in Momart was impaired by £511,000 in the year to 31 March 2017, due to lower future expected
levels of profitability. In the year to 31 March 2016, Erebus Limited was impaired by £102,000 following to the disposal of the final
5,000,000 shares in Falkland Oil and Gas.
50
FIH GROUP PLC
Notes to the financial statements
CONTINUED
15. Investment in Joint Ventures
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 were 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. During the year ended 31 March 2016, an impairment was made against certain plant and machinery
owned by SAtCO, which was partly reversed in the year ended 31 March 2017 due to a sale of these assets during the year. The
net assets of SAtCO are shown below:
Joint Venture’s balance sheet
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
Impairment reversal / (impairment)
Profit before taxation
Taxation
Joint Venture retained profit / (loss) for the year
Group share of retained profit / (loss) for the year
2017
£’000
744
(262)
-
482
241
2017 Before
Impairment
£’000
2017
Impairment
£’000
2017 After
Impairment
£’000
64
-
(4)
60
-
60
(12)
48
24
-
-
-
-
206
206
(44)
162
81
64
-
(4)
60
206
266
(56)
210
105
2016
£’000
1,269
(470)
(527)
272
136
2016
£’000
616
(95)
(11)
510
(866)
(356)
96
(260)
(130)
There were no recognised gains or losses, other than the profits disclosed above for the year ended 31 March 2017 (2016: none).
There was no depreciation charged in the year ended 31 March 2017 (2016: £95.000).
The current assets balances above include £103,000 of cash (2016: £512,000). The liabilities due in less than one year are all
trade payables and corporation tax payable. The liabilities due in greater than one year in the prior year, consisted of loans to the
parent companies of £527,000.
SAtCO had no contingent liabilities or capital commitments as at 31 March 2017 or 31 March 2016 and the Group had no
contingent liabilities or commitments in respect of its joint venture at 31 March 2017 or 31 March 2016.
ANNUAL REPORT 2017
51
16. Finance leases receivable
Finance lease receivables relate to finance leases on the sale of vehicles and customer goods in the Falkland Islands.
No contingent rents have been recognised as income in the period. No residual values accrue to the benefit of the lessor.
Group
2017
£’000
2016
£’000
Non-Current:
Finance Lease debtors due after more than one year
763
755
Current:
Finance lease debtors due within one year
Total Finance Lease debtors
799
1,562
810
1,565
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 £314,000 (2016: £133,000).
The cost of assets acquired for the purpose of renting out under hire purchase agreements by the Group during the year amounted
to £962,000 (2016: £1,316,000).
The aggregate rentals receivable during the year in respect of hire purchase agreements were £1,167,000 (2016: £1,029,000).
Gross investment in hire purchase leases
Present value of future lease payments due:
Within one year
Within two to five years
Total present value of future lease payments
Group
2017
£’000
1,876
799
763
2016
£’000
1,698
810
755
1,562
1,565
52
FIH GROUP PLC
Notes to the financial statements
CONTINUED
17. 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
2017
£’000
2016
£’000
(2,032)
(1,865)
(346)
(391)
9
32
26
120
28
39
-
120
(2,191)
(2,069)
776
687
(1,415)
(1,382)
The deferred tax asset on the defined benefit pension scheme (see note 23) 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.
Recognised deferred tax asset
Other temporary differences
Net tax asset
Company
2017
£’000
17
17
2016
£’000
9
9
Movement in deferred tax assets / (liabilities) in the year:
Group
1 April
2016
£’000
Recognised
in income
£’000
Recognised
in equity
£’000
31 March
2017
£’000
Property, plant & equipment
Intangible assets
Inventories
Other financial liabilities
Share-based payments
Tax losses
Pension
(1,865)
(391)
28
39
-
120
687
(167)
45
(19)
(7)
26
-
(6)
Deferred tax movements
(1,382)
(128)
-
-
-
-
-
95
95
(2,032)
(346)
9
32
26
120
776
(1,415)
ANNUAL REPORT 2017
53
Unrecognised deferred tax assets
Deferred tax assets of £113,000 (2016: £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
Other temporary difference
Deferred tax asset movements
1 April 2016
£’000
Recognised in
income
£’000
Recognised in
equity
£’000
31 March 2017
£’000
9
9
8
8
-
-
17
17
Movement in deferred tax assets / (liabilities) in the prior
year:
Group
Property, plant & equipment
Intangible assets
Inventories
Other financial liabilities
Share-based payments
Tax losses
Pension
Deferred tax movements
1 April 2015
£’000
Recognised in
income
£’000
Recognised in
equity
£’000
31 March 2016
£’000
(1,669)
(462)
15
50
10
69
750
(1,237)
(196)
71
13
(11)
(10)
51
(7)
(89)
-
-
-
-
-
-
(56)
(56)
(1,865)
(391)
28
39
-
120
687
(1,382)
Movement in deferred tax asset in the prior year:
Company
Other temporary difference
Deferred tax asset movements
1 April 2015
£’000
Recognised in
income
£’000
Recognised in
equity
£’000
31 March 2016
£’000
6
6
3
3
-
-
9
9
54
FIH GROUP PLC
Notes to the financial statements
CONTINUED
18. 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.
19. 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
Group
2017
£’000
1,295
764
3,297
5,356
2016
£’000
912
606
4,723
6,241
Company
2017
£’000
6,965
2016
£’000
3,465
Group
Company
2017
£’000
5,507
1,991
7,498
2016
£’000
3,920
933
4,853
2017
£’000
-
12
12
2016
£’000
-
15
15
Trade and other receivables increased substantially at 31 March 2017 due to the later timing of sales in the year. Carrying values
have been reviewed to ensure the amounts shown are fully recoverable.
20. Cash and cash equivalents
Cash and other cash equivalents in the balance sheet
15,079
14,037
Group
2017
£’000
2016
£’000
Company
2017
£’000
8,780
2016
£’000
11,761
ANNUAL REPORT 2017
55
21. Interest-bearing loans and borrowings
This note provides information about the contractual terms of the Group’s interest bearing loans and borrowings owed by the
Group, which are stated at amortised cost. For more information regarding the maturity of the interest-bearing loans and lease
liabilities and about the Group and Company’s exposure to interest rate and foreign currency risk, see note 26.
Non-current liabilities
Secured bank loans
Lease liabilities
Total non-current interest bearing loans and lease liabilities
Current liabilities
Secured bank loans
Lease liabilities
Total current interest bearing loans and lease liabilities
Total liabilities
Secured bank loans
Lease liabilities
Total interest bearing loans and lease liabilities
Group
2017
£’000
3,321
4,903
8,224
507
108
615
3,828
5,011
8,839
2016
£’000
2,863
4,992
7,855
401
145
546
3,264
*5,137
8,401
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 cash
2017
£’000
341
332
853
2016
£’000
384
333
914
10,205
10,465
11,731
12,096
2017
£’000
233
229
670
5,588
6,720
2016
£’000
239
233
678
5,809
6,959
2017
£’000
108
103
183
4,617
5,011
2016
£’000
145
100
236
4,656
*5,137
Cash balances (see note 20)
15,079
14,037
8,780
11,761
less: Total interest-bearing loans and borrowings
*(8,839)
*(8,401)
-
-
Net cash
6,240
5,636
8,780
11,761
Group
Company
2017
£’000
2016
£’000
2017
£’000
2016
£’000
*Included within lease liabilities is £4,797,000 (2016: £4,828,000) in respect of the long term lease liability for the Gosport pontoon,
with quarterly payments of £65,000 payable to Gosport Borough Council over the next forty-four years until 2061.
56
FIH GROUP PLC
Notes to the financial statements
CONTINUED
22. Trade and other payables
Current
Trade payables
Amounts owed to subsidiary undertakings
Loan from joint venture
Other creditors, including taxation and social security
Interest rate swap liability
Accruals and deferred income
Total trade and other payables
23. Employee benefits: pension plans
Group
Company
2017
£’000
6,861
-
200
2016
£’000
6,612
-
-
1,257
1,482
71
87
3,897
3,063
2017
£’000
-
2016
£’000
-
2,500
2,500
-
129
71
687
-
134
87
467
12,286
11,244
3,387
3,188
The Group operates three defined contribution pension schemes. In addition, it also operates one unfunded defined benefit
pension scheme in the Falkland Islands, which has been closed to new members and to future accrual since 1 April 2007. During
the year ended 31 March 2017, 17 pensioners (2016: 18) received benefits from this scheme, and there are three deferred
members at 31 March 2017 (2016: three). Benefits are payable on retirement at the normal retirement age. The weighted average
duration of the expected benefit payments from the Scheme is around 16 years (2016: 16 years).
Defined contribution schemes
The pension cost charge for the year represents contributions payable by the Group to the schemes and amounted to £298,000
(2016: £301,000). The Group anticipates paying contributions amounting to £302,000 during the year ending 31 March 2018.
There were outstanding contributions of £23,000 (2016: £33,000) due to pension schemes at 31 March 2017.
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
2017
£’000
2016
£’000
(2,985)
(2,644)
776
687
(2,209)
(1,957)
The Falkland Islands Company Limited Scheme
The Falkland Islands Company Limited operates a defined benefit pension scheme for certain former employees. This scheme
was closed to new members in 1988 and to further accrual on 31 March 2007. The scheme has no assets and payments to
pensioners are made out of operating cash flows. The expected contributions for the year ended 31 March 2018 are £113,000.
Actuarial reports for IAS 19 purposes as at 31 March 2017, 2016, 2015, 2014, and 2013 were prepared by a qualified independent
actuary, Lane Clark and Peacock LLP. The major assumptions used in the valuation were:
ANNUAL REPORT 2017
57
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
2017
2.5%
2.5%
2.5%
3.0%
22.5
24.7
2016
2.3%
3.0%
3.4%
3.1%
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.
The estimated liabilities of the scheme increased from £2.6 million at 31 March 2016 to £2.9 million at 31 March 2017 due
principally to the use of lower discount rates to discount future liabilities.
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 2017 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
2017
£’000
49
(19)
(136)
2016
£’000
41
(17)
(111)
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:
Value at
2017
£’000
2016
£’000
2015
£’000
2014
£’000
2013
£’000
Present value of scheme liabilities
(2,985)
(2,644)
(2,884)
(2,480)
(2,584)
Related deferred tax assets
Net pension liability
776
687
750
645
671
(2,209)
(1,957)
(2,134)
(1,835)
(1,913)
58
FIH GROUP PLC
Notes to the financial statements
CONTINUED
23. Employee benefits: pension plans CONTINUED
Movement in deficit during the year:
Deficit in scheme at beginning of the year
Pensions paid
Other finance cost
Re-measurement 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
Re-measurement of the defined benefit pension liability
2017
£’000
2016
£’000
(2,644)
(2,884)
113
(88)
(366)
115
(90)
215
(2,985)
(2,644)
2017
£’000
88
2017
£’000
59
(425)
(366)
2016
£’000
90
2016
£’000
26
189
215
History of experience gains and losses:
2017
2016
2015
2014
2013
Experience gains / (losses) arising on scheme liabilities:
Amount (£’000)
59
26
76
20
(34)
Percentage of year end present value of scheme liabilities
(2.0%)
(1.0%)
(2.6%)
(0.8%)
1.3%
Total amount recognised in statement of comprehensive
income:
Amount (£’000)
(366)
215
(412)
135
Percentage of year end present value of scheme liabilities
12.3%
(8.1%)
14.3%
(5.4%)
Payment to pensioners
113
115
115
122
(173)
6.7%
111
ANNUAL REPORT 2017
59
24. Employee benefits: share based payments
The following options were outstanding at 31 March 2017:
Date of Issue
7 Aug 07
4 Dec 07
3 Apr 08
8 Apr 09
15 Jul 09
9 Dec 09
21 Dec 10
16 Dec 11
03 Sep 14
19 Jan 15
Number
27,517
7,500
3,517
51,719
44,550
13,000
10,586
99,518
13,154
5,000
276,061
Exercise
Price
pence
Share price
at grant date
pence
Fair value
per share
pence
Total fair
value
£
Earliest
Exercise
date
Latest
Exercise
date
330.0
319.0
365.0
207.5
290.0
390.0
342.5
267.5
353.5
272.5
332.5
340.0
375.0
207.5
290.0
397.5
337.5
261.5
353.5
272.5
73.0
119.0
131.0
56.0
72.0
145.0
124.0
68.0
100.0
63.0
20,087
7 Aug 10
6 Aug 17
8,925
4,607
4 Dec 10
3 Dec 17
3 Apr 11
2 Apr 18
28,963
8 Apr 12
7 Apr 19
32,076
15 Jul 12
14 Jul 19
18,850
9 Dec 12
8 Dec 19
13,127
21 Dec 13
20 Dec 20
67,672
16 Dec 14
15 Dec 21
13,154
03 Sep 17
02 Sep 24
3,150
19 Jan 18
18 Jan 25
210,611
The total number of options outstanding at 31 March 2017, excluding the 33,911 nil cost options, was 276,061 (2016: 500,615).
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 (%)
Risk free interest rate (%)
Expected life of options (years)
Dividend yield (%)
Share price at grant date (pence)
19 Jan 15
37
1.23
6.5
4.22
272.5
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.
60
FIH GROUP PLC
Notes to the financial statements
CONTINUED
24. 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 ending 31 March 2017, 24,761 options were
exercised over ordinary shares (None were exercised in the year ending 31 March 2016). The number and weighted average
exercise prices of share options are as follows:
Outstanding at the beginning of the year
Options exercised during the year
Forfeited 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
(£)
2017
3.10
2.75
3.20
3.83
2.82
2.78
3.3
Number
of options
2017
500,615
(24,761)
(90,677)
(109,116)
276,061
257,907
Weighted
average
exercise price
(£)
2016
3.35
-
3.82
3.89
3.10
3.06
4.6
Number
of options
2016
727,198
-
(25,000)
(201,583)
500,615
452,651
The range of exercise prices of outstanding options at 31 March 2017 is from £2.075 (2016: £2.075) to £3.90 (2016: £4.250).
In addition to the options above, 18,817 nil cost options were granted to John Foster on 17 June 2016. On 10 June 2015, 22,642
nil cost options were granted to John Foster and 7,548 of these options were exercised in June 2016. These outstanding options
are noted below:
Date of Issue
10 Jun 15
10 Jun 15
17 Jun 16
17 Jun 16
17 Jun 16
Number
7,547
7,547
6,272
6,272
6,273
33,911
Exercise
Price
pence
Share price
at grant date
pence
Fair value
per share
pence
Total
fair
value
Earliest
Exercise
Latest
Exercise
-
-
-
-
-
265.0
265.0
186.0
186.0
186.0
265.0
265.0
186.0
186.0
186.0
20,000
10 Jun 17
10 Jun 19
20,000
10 Jun 18
10 Jun 19
11,666
17 Jun 17
17 Jun 20
11,666
17 Jun 18
17 Jun 20
11,668
17 Jun 19
17 Jun 20
75,000
Total share based payment expense recognised in the year
2017
£’000
15
2016
£’000
61
ANNUAL REPORT 2017
61
25. Capital and reserves
Share capital
In issue at the start of the year
Share capital issued during the year
In issue at the end of the year
Allotted, called up and fully paid Ordinary shares of 10p each
Ordinary Shares
2017
2016
12,431,623
12,431,623
2,795
-
12,434,418
12,431,623
2017
£’000
1,243
2016
£’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 2017 the plan held 24,016 (2016: 28,016)
ordinary shares at a cost of £47,152 (2016: £55,005). The market value of the shares at 31 March 2017 was £72,648 (2016:
£56,312). Shares held in the ESOP are entitled to receive a nominal 0.01p per share in each dividend payment.
For more information on share options please see note 24.
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
No dividends were recognised in the current or prior period
62
FIH GROUP PLC
Notes to the financial statements
CONTINUED
26. Financial instruments
(i) Fair values of financial instruments
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.
The following table shows the carrying value, which is equal to fair value for each category of financial instrument:
Cash and cash equivalents
Hire purchase debtors
Trade and other receivables
Total assets exposed to credit risk
Interest rate swap liability
Other Financial liabilities at amortised cost
Total trade and other payables
Interest-bearing borrowings at amortised cost
Group
Company
2017
£’000
2016
£’000
15,079
14,037
1,562
5,507
1,565
3,920
22,148
19,522
(71)
(87)
(12,215)
(11,157)
(12,286)
(11,244)
(8,839)
(8,401)
2017
£’000
8,780
-
-
8,780
(71)
(3,316)
(3,387)
-
2016
£’000
11,761
-
-
11,761
(87)
(3,101)
(3,188)
-
Available for sale financial assets are valued using a level 1 methodology. The interest rate swap has been valued using a level 2
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.
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.
ANNUAL REPORT 2017
63
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 £22,148,000 (2016: £19,522,000) being the total
trade receivables, hire purchase debtors and cash and cash equivalents in the balance sheet. The credit risk on cash balances
and the interest rate swap 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
Total trade receivables
Group
2017
£’000
1,853
887
467
1,942
358
5,507
The Company has no trade debtors
Credit quality of financial assets and impairment losses
Group
Not past due
Past due 0-30
days
Past due 31-120
days
More than 120
days
Gross
2017
£’000
3,765
942
212
790
5,709
Impairment
2017
£’000
-
-
(28)
(174)
(202)
Net
2017
£’000
3,765
942
184
616
Gross
2016
£’000
2,932
619
133
445
5,507
4,129
Impairment
2016
£’000
-
-
-
(209)
(209)
The movement in the allowances for impairment in respect of trade receivables during the year was:
Balance at 1 April 2016
Impairment loss recognised
Impairment loss reversed
Cash received
Utilisation of provision (debts written off)
Balance at 31 March 2017
Group
2017
£’000
209
44
-
(4)
(47)
202
2016
£’000
980
401
345
1,687
507
3,920
Net
2016
£’000
2,932
619
133
236
3,920
2016
£’000
221
69
(33)
(30)
(18)
209
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.
64
FIH GROUP PLC
Notes to the financial statements
CONTINUED
26. Financial instruments (continued)
(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 £3.3 million. In December 2016, a further loan of £1.0
million was drawn down, to be repaid over ten years, which has been secured against the assets of Momart International and
Momart Limited. All payments due during the year with respect to these agreements were met as they fell due.
The Company had no bank loans at the start or end of the year.
The Group manages its cash balances centrally at head office and prepares rolling cash flow forecasts to ensure funds are
available to meet its secured and unsecured commitments as and when they fall due.
Liquidity risk – Group
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the effects
of netting agreements:
2017
Non-derivative financial liabilities
Secured bank loans
Finance leases
Trade payables
Interest rate swap liability
Other creditors, including taxation
Accruals and deferred income
Contractual cash flows
Carrying
amount
Total 1 year or less
1 to 2 years
2 to 5 years
5 years and
over
£’000
£’000
£’000
£’000
£’000
£’000
3,828
5,011
6,861
71
1,257
3,897
4,304
11,731
6,861
103
1,257
3,897
608
341
6,861
37
1,257
3,897
608
332
-
31
-
-
1,505
853
1,583
10,205
-
35
-
-
-
-
-
-
Total Non-derivative financial liabilities
20,925
28,153
13,001
971
2,393
11,788
2016
Non-derivative financial liabilities
Secured bank loans
Finance leases
Trade payables
Interest rate swap liability
Other creditors, including taxation
Accruals and deferred income
Contractual cash flows
Carrying
amount
Total 1 year or less
1 to 2 years
2 to 5 years
5 years and
over
£’000
£’000
£’000
£’000
£’000
£’000
3,264
5,137
6,612
87
1,482
3,063
3,684
12,096
6,612
146
1,482
3,063
494
384
6,612
43
1,482
3,063
494
333
-
37
-
-
1,322
914
1,374
10,465
-
66
-
-
-
-
-
-
Total non-derivative financial liabilities
19,645
27,083
12,078
864
2,302
11,839
The contractual cash flows for finance leases in the years ended 31 March 2017 and 31 March 2016 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 2061.
ANNUAL REPORT 2017
65
Liquidity risk – Company
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the effects
of netting agreements:
2017
Non-derivative financial liabilities
Interest rate swap liability
Other creditors, including taxation
Accruals and deferred income
Contractual cash flows
Carrying
amount
Total 1 year or less
1 to 2 years
2 to 5 years
5 years and
over
£’000
£’000
£’000
£’000
£’000
£’000
71
129
687
887
103
129
687
919
37
129
687
853
31
-
-
31
35
-
-
35
-
-
-
-
2016
Non-derivative financial liabilities
Interest rate swap liability
Other creditors, including taxation
Accruals and deferred income
(iv) Market Risk
Contractual cash flows
Carrying
amount
Total 1 year or less
1 to 2 years
2 to 5 years
5 years and
over
£’000
£’000
£’000
£’000
£’000
£’000
87
134
467
688
146
134
467
747
43
134
467
644
37
-
-
37
66
-
-
66
-
-
-
-
Financial risk management
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the
Group’s income or the value of its holdings of financial instruments.
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.
31 March 2017
Cash and cash equivalents
Trade payables and other payables
Balance sheet exposure
EUR
£’000
264
(472)
(208)
USD
£’000
163
(128)
35
Group
Other
£’000
25
(190)
(165)
Total
Balance
sheet
exposure
£’000
GBP
£’000
Total
£’000
452
14,627
15,079
(790)
(11,496)
(12,286)
(338)
3,131
2,793
66
FIH GROUP PLC
Notes to the financial statements
CONTINUED
26. Financial instruments CONTINUED
Group
USD
£’000
Other
£’000
Total
Balance
sheet
exposure
£’000
GBP
£’000
Total
£’000
204
(62)
142
4
(69)
(65)
282
13,755
14,037
(304)
(10,940)
(11,244)
(22)
2,815
2,793
EUR
£’000
74
(173)
(99)
31 March 2016
Cash and cash equivalents
Trade payables and other payables
Balance sheet exposure
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 2016.
EUR
USD
Equity
Profit or Loss
2017
£’000
2016
£’000
2017
£’000
2016
£’000
21
(4)
10
(14)
21
(4)
10
(14)
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
Financial liabilities
Lease liabilities
Variable rate financial instruments
Effect of Interest rate swap liability
Financial liabilities
Group
Company
2017
£’000
2016
£’000
2017
£’000
2016
£’000
1,562
(969)
(5,011)
(4,418)
(71)
(2,859)
(2,930)
1,565
-
(5,137)
(3,572)
(87)
(3,264)
(3,351)
-
-
-
-
(71)
-
(71)
-
-
-
-
(87)
-
(87)
ANNUAL REPORT 2017
67
At 31 March 2017, the group had four bank loans:
(i) £0.4 million (2016: £0.6 million) repayable over five years, which has been secured against two vessels in Portsmouth. Interest
is payable on this loan at 2.8% over the Bank of England base rate
(ii) £2.0 million (2016: £2.2 million) repayable over ten years, with interest charged at 2.6% above the Bank of England base rate
(iii) £0.4 million (2016: £0.5 million) repayable over ten years, with interest charged at 1.75% above the Bank of England base rate
(iv) £1.0 million drawn down in December 2016 by Momart Limited to fund the new storage facilities
The interest payable on the first three loans noted above has been hedged by one interest swap, taken out in October 2015 with
a notional value of £3.6 million, with interest payable at the difference between 1.325% and the Bank of England Base rate. This
interest rate swap notional value decreases at £36,250 per month over five years until September 2020 when it will expire. The
notional value of the swap at 31 March 2017 is £3,008,750 (2016: £3,443,750). The Swap effectively fixes the blended average
interest rates on the Group’s bank borrowings at 3.6% per annum.
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 2016.
Equity
Interest rate swap liability
Variable rate financial liabilities
Profit or Loss
Interest rate swap liability
Variable rate financial liabilities
Market risk – equity price risk
(v) Capital Management
Group
Company
2017
£’000
2016
£’000
2017
£’000
2016
£’000
30
(28)
30
(28)
34
(33)
34
(33)
30
-
30
-
34
-
34
-
The Group’s objectives when managing capital, which comprises equity and reserves at 31 March 2017 of £39,745,000 (2016:
£38,569,000) 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.
27. 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
2017
£’000
1,036
3,861
8,311
2016
£’000
910
3,785
8,895
13,208
13,590
The Group leases three office premises and a number of storage warehouses under operating leases. Office leases typically run
68
FIH GROUP PLC
Notes to the financial statements
CONTINUED
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 £1,050,000 was recognised as an expense in the income statement of operating leases (2016: £921,000).
The Company had no operating lease commitments.
28. Capital commitments
At 31 March 2017, the group had had no outstanding contractual commitments for capital expenditure.
At 31 March 2016, the group had entered into contractual commitments of £412,000, including £345,000 for the Momart storage
facility expansion at Unit 14 in Leyton, £32,000 for a truck at Momart and £35,000 for the pontoon refurbishment at Portsea.
29. 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 25.73% (2016: 23.4%) of the voting shares of the Company
at 31 March 2017. However on 2 May 2017, Blackfish Capital Alpha Fund SPC and Staunton Holdings Limited sold all their
shareholdings to The Article 6 Marital Trust, therefore Edmund Rowland no longer has any beneficial interest in the shares of FIH
group plc.
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
2017
£’000
1,147
-
76
34
2016
£’000
1,194
146
82
52
Total key management personnel compensation
1,257
1,474
2017
£’000
370
-
-
34
404
2016
£’000
382
-
-
39
421
During the year ended 31 March 2017, the Group’s joint venture, SAtCO, made a loan of £200,000 to each of its parent companies.
This £200,000 loan was still payable by the Group at 31 March 2017.
All staff involved in construction activities were contracted directly from parent companies FIC and Trant Construction and at 31
March 2017 and 2016 SAtCO had no permanent employees.
30. 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 liability (see note 23). 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.
69
Directors and Corporate Information
Directors
John Foster, Chief Executive
Jeremy Brade, Interim Chairman & Non-executive Director
Edmund Rowland, Non-executive Director
Solicitors
Bircham Dyson Bell LLP
50 Broadway,
Westminster,
London SW1H 0BL
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
Auditor
KPMG LLP
St. Nicholas House,
31 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
Kevin Ironside
Director
Telephone: 00 500 27600
Email: fic@horizon.co.fk
Website: www.the-falkland-islands-co.
com
The Portsmouth Harbour
Ferry Company
Clive Lane
Director
Telephone: 02392 524551
Email: admin@gosportferry.co.uk
Website: www.gosportferry.co.uk
Momart Limited
Kenneth Burgon
Director
Alan Sloan
Director
Telephone: 020 7426 3000
Email: enquiries@momart.co.uk
Website: www.momart.com
ANNUAL REPORT 2017