F I H G R O U P P L C
F I H G R O U P P L C
A N N U A L R E P O R T
A N N U A L R E P O R T
2 0 2 0
2 0 2 0
Contents
Financial Highlights For The Year Ended 31 March 2020
Chairman’s Statement 2020
Chief Executive’s Strategic Review
Board of Directors and Secretary
Corporate Governance Statement
Audit Committee Report
Directors’ Report
KPMG Independent Auditor’s Report
Consolidated Income Statement For The Year Ended 31 March 2020
Consolidated Statement of Comprehensive Income For The Year Ended 31 March 2020
Consolidated Balance Sheet For The Year Ended 31 March 2020
Company Balance Sheet At 31 March 2020
Consolidated Cash Flow Statement For The Year Ended 31 March 2020
Company Cash Flow Statement For The Year Ended 31 March 2020
Consolidated Statement of Changes in Shareholders’ Equity For The Year Ended 31 March 2020
Company Statement of Changes in Shareholders’ Equity For The Year Ended 31 March 2020
Notes to the Financial Statements
Directors and Corporate Information
1
2
3
21
23
26
30
39
46
47
48
49
50
52
53
54
55
105
1
Financial Highlights
FOR THE YEAR ENDED 31 MARCH 2020
Turnover
Profit before tax
Underlying profit before tax*
Diluted earnings per share before Non-trading items
Diluted earnings per share
Cash flow from operations
* Defined as profit before tax and non-trading items
2020
£’m
44.6
(3.8)
3.7
21.7p
(37.8p)
4.68
2019
£’m
42.5
3.9
3.9
24.1p
24.1p
2.96
Change
%
4.9
(197.7)
(3.9)
(10.1)
(256.7)
158.0
Turnover (£’m)
Underlying profit before tax* (£’m)
44.60
43.83
42.53
40.49
39.00
3.08
3.24
2.40
3.86
3.71
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
Diluted earnings per share* (pence)
before non-trading items
Dividends per share (pence)
19.2
15.3
19.7
24.1
21.7
4.0
4.5
5.0
1.8
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
ANNUAL REPORT 2020 2
Chairman’s Statement 2020
The year to 31 March 2020 was a
successful one for the Group, only
affected for a few weeks by the
COVID-19 pandemic, but plainly since
then we have been operating in an
environment which has been adversely
transformed.
With turnover at £44.6 million (2019: £42.5 million) and pre-
tax profit, before goodwill impairments, at £3.7 million (2019:
£3.9 million), the financial results of the Group were on track to
improve on last year’s record levels, were it not for the downturn
in our UK businesses that took hold in March 2020, reducing
profitability by £0.25 million. Activity, particularly at FIC in the
Falklands, was ahead led by strong growth in housebuilding
and construction while in fine art logistics and storage Momart’s
performance improved in the second half. The Portsmouth
Harbour Ferry Company also produced satisfactory results,
albeit passenger numbers registered a further decline of 7.5%.
Basic earnings per share, before the impairment charge were
22.0p (2019: 24.4 pence). As a consequence of COVID-19,
a non-cash good will write down resulted in an impairment
charge of £7.5 million thereby reducing pre-tax profits to a loss
of £3.8 million (2019: £3.9 million profit).
The Chief Executive’s statement reviews the year and the
new environment. Shareholders should know that in both fine
art, logistics and ferry passenger journeys, the shutdown in
business levels since mid-March has been nearly complete.
Aside from art storage income, these two businesses have
been trading at less than 10% of normal levels. We are
fortunate that the Falklands Islands has so far avoided severe
lockdowns which might have also brought trading there down
too, but FIC has felt some effect and this will become more
pronounced when, as expected, the regular cruise ship and
other tourism business does not emerge in the Southern
hemisphere summer months.
Under the effects of COVID-19, the Group is therefore currently
incurring substantial monthly losses, which are only partially
offset by trading in FIC. This underlies our decision to cancel
any short-term plans for dividends to shareholders, and also
to place a substantial number of UK employees on furlough,
to take advantage of the Government Job Retention Scheme.
In addition, our UK businesses have been approved for a £5
million loan covered by the Government guarantee should we
need to draw this down. We are grateful for central Government
schemes as well as local Hampshire support initiatives for our
ferry business, but we are crucially dependent on a material
recovery in business levels once these programmes are
withdrawn, as well as the absence of a severe lockdown in the
Falklands Islands.
Salary cuts in the UK make the hardship and uncertainty all the
more painful for our staff and we thank them for their excellent
contribution in the past year, as well as their understanding of
the measures we have had to put in place to cope with a near
cessation of activity in parts of the Group’s business.
The Board has led with its own salary and fee cuts and continues
to keep its focus firmly on the emergence of our businesses
from the crisis in the best condition possible and not taking
any disproportionate short-term action that damages this
objective. Our balance sheet is strong, but cash is not unlimited
however, so we will also have to bear in mind the depletion of
our resources and balance these two conflicting priorities.
BOARD AND GOVERNANCE
To bring an extra insight to our Board and Committee
discussions, also as we do not have a Chief Financial Officer
on the Board, we were delighted that Dominic Lavelle agreed
to join the Board in December 2019 as an independent non-
executive director, and we welcome his input generally and
contribution as Chairman of the Audit Committee.
OUTLOOK
We are unable to forecast the outturn for the year to March 2021
until the pace of recovery in the areas most affected becomes
apparent, but we currently expect a significant loss. We hope to
be able to see some signs of the restoration of business levels
over the summer and be able to give shareholders an update
at our AGM in September and more fully when we publish our
half year results in November. With its strong liquidity position
the Board is confident that the Group has the cash resources
to weather the current crisis and to see a return to more normal
profitable trading.
The senior management are working hard, often at reduced
remuneration, to manage the situation and I am confident they
will steer the right course through this crisis that affects each
one of us.
Robin Williams
Chairman
23 June 2020
ANNUAL REPORT 2020 3
Chief Executive’s Strategic Review
BUSINESS REVIEW
Introduction
Review of operations
I am pleased to report that even with the adverse effects of
COVID-19 on the last month of trading, the Group’s results
for year to 31 March 2020 were satisfactory and reflect well
on the underlying strength of our business model.
The Falkland Islands Company (“FIC”) grew strongly
producing record results and at the Group’s art handling
subsidiary Momart, after a weaker first half, trading
recovered well in the last six months of the financial year.
At the Group’s passenger ferry in Portsmouth Harbour
(“PHFC”), profits were on a par with the prior year until the
impact of COVID-19.
The Group first began to experience the effects of the virus
in March 2020 affecting profits at both Momart and PHFC
and reducing overall group profits by £0.25 million. Without
the virus the Group would have produced record pre-tax
profits of approaching £4 million.
The Group’s liquidity position was also strong with cash
balances on hand at 31 March 2020 of £9.1 million (2019:
£6.2 million) and this cash reserve provides an important
buffer for the Group as it weathers the financial effects of
the pandemic.
Overview of Group Results for the year
ended 31 March 2020
In a year where activity was curtailed in the last month by
the adverse effects of the commencement of COVID-19,
revenues still saw healthy growth overall. Group revenue
for the year ended 31 March 2020 increased by 4.9% to a
record £44.6 million (2019: £42.5 million) driven by strong
growth in the Group’s Falklands business, FIC.
Separate from current trading, as a result of COVID-19
and the review of medium to long-term detailed forecasts,
the goodwill held in respect of both Momart and PHFC
has been impaired. Goodwill at Momart has been written
down by £3.5 million and the goodwill held in respect of
PHFC, has been reduced by £4.0 million, eliminating all the
previously recorded balance in relation to the ferry company.
Taken together the write down of goodwill relating to both
PHFC and Momart resulted in an impairment charge of
£7.5 million.
After this non-cash charge the Group recorded a loss before
tax of £3.8 million (2019: Profit £3.9 million). The Group’s
cash position, trading and prospects are unaffected by the
impairment charge.
The FIH group plc company only distributable reserves
have reduced by £2.0 million as a result and after making
this adjustment stood at £12.3 million as at 31 March 2020.
The group’s overall trading profits were at a similar level to
the prior year with strong growth in FIC offsetting weaker
trading in the Group’s UK businesses.
Group revenue and Underlying Pre-Tax profits* are analysed
below:
Group revenue
Year ended 31 March
2020
£m
2019
£m
Change
%
Falkland Islands Company (“FIC”)
21.67
17.55
23.5
Portsmouth Harbour Ferry (“PHFC”)
4.13
4.37
Momart
Total Revenue
Group Underlying Pre Tax profit**
Falkland Islands Company***
Portsmouth Harbour Ferry***
Momart***
Total Underlying Pre Tax Profit *
Non-trading items
(see notes below)**
18.80
20.61
44.60
42.53
2.06
0.64
1.01
3.71
1.51
0.78
1.57
3.86
-5.5
-8.7
4.9
36.7
-19.0
-35.2
-3.9
(7.48)
-
-
Reported Profit Before Tax
(3.77)
3.86
-197.0
Underlying Diluted Earnings
per share in pence
21.7p
24.1p
-10.1
Diluted Earnings per share in pence
-37.8p
24.1p
-255.2
* Underlying Pre-Tax Profit is defined as, profit before tax,
before non–trading items,
** In the current year the only non-trading items were the £4.0
million impairment of the Group’s investment in PHFC, and the
£3.5 million impairment of the Group’s investment in Momart. In
the prior year there were no non-trading or exceptional items.
*** As in prior years the profits reported for each operating
company are stated after the allocation of head office
management and plc costs which have been applied to each
subsidiary on a consistent basis.
Before the non-trading impairment charge and despite the
initial impact of COVID-19, the Group’s underlying Pre-Tax
Profits held up well at £3.7 million (2019: £3.9 million).
With a reversal in the government’s planned reduction in
corporation tax rates and a consequent increase in deferred
tax, the overall group tax rate increased sharply from 21.4% to
25.8% leading to a reduction in underlying post tax earnings of
9.2%. Reflecting this increased tax charge fully diluted EPS on
underlying profits (before the impairment) were 10% lower at
21.7 pence (2019: 24.1 pence).
Earnings per share were a loss of 37.8 pence, reflecting the loss
before tax after the £7.48 million impairment charge. (2019:
24.1p). The group paid an interim dividend to shareholders in
January 2020 of 1.80 pence (2019: 1.65 pence) but with the
adverse impact of COVID-19 no final dividend will be payable
for the year ended 31 March 2020.
ANNUAL REPORT 2020 Group Revenue 2020
Group Revenue 2019
4
Momart
42%
FIC
49%
Momart
49%
FIC
41%
PHFC
9%
PHFC
10%
Underlying operating profit 2020
Underlying operating profit 2019
Momart
32%
FIC
47%
Momart
39%
FIC
36%
PHFC
21%
PHFC
25%
Falkland Islands Company
FIC Operating results
In the year to 31 March 2020 trading at FIC was largely
unaffected by the impact of COVID-19.
FIC revenue increased by 23.5% to a record £21.7 million,
an increase of £4.1 million on the prior year of which £3.5
million was due to an increase in sales at FIC’s housebuilding
arm Falkland Building Services (“FBS”) and £0.2 million
was due to increased rental income from FIC’s portfolio of
residential properties in Stanley.
As a result, of the increased activity of FBS and the growth
in FIC’s rental portfolio, the company’s Operating Profit grew
by an encouraging 36% to £2.1 million (2019: £1.6 million).
With net interest costs (linked to liabilities under an
historic pension scheme) unchanged from the prior year,
FIC’s Profit Before Tax grew by 36.7% to £2.1 million (2019:
£1.5 million).
FIC Operating results
Year ended 31 March
2020
£m
2019
£m
Change
%
Revenues
Retail
Falklands 4x4
FBS (property and construction)
Freight & Port Services
Support services
Property rental
10.02
3.18
5.01
0.75
2.04
0.67
Total FIC revenue
21.67
17.55
FIC underlying operating profit
2.12
1.57
Net interest expense
(0.06)
(0.06)
FIC underlying Profit Before Tax
2.06
1.51
36.7
FIC underlying operating
profit margin
9.8% 8.9%
9.9
9.72
3.05
3.1
4.3
1.53
224.8
0.78
2.00
0.47
-4.2
1.9
43.3
23.5
35.5
6.7
ANNUAL REPORT 2020
5
Chief Executive’s Strategic Review
BUSINESS REVIEW
FIC Divisional Activity
Retail sales increased by 3.1% in overall terms with
growth evenly spread across FIC’s 5 main retail outlets.
After absorbing higher staff costs linked to an uplift in the
minimum wage, the overall contribution from the West Store
increased on the previous year broadly in line with sales
but pressure on gross margins at both Home Builder and
Home Living saw their contributions slip back offsetting the
increase at the West Store. In overall terms the contribution
from FIC’s retail activities was essentially unchanged year
on year.
At Falklands 4x4 revenues increased by 4.3% and helped
by healthy growth in income from FIC’s car rental fleet of 46
vehicles as long- term corporate rentals increased, 4x4’s
contribution also saw a modest increase.
FBS which saw sales grow to more than three times the
level of the prior year to £5.0 million (2019: £1.5 million),
benefited from the renewed availability of government
housing plots for first time buyers at Sappers Hill. As a
result, FBS was able to complete and sell 22 kit homes
in the year compared to only six units in 2019. In addition,
the house building team commenced its first significant
housing contract for government for the construction of
18 houses on FIG land. By 31 March 2020 this contract
was estimated as being 63% complete and in accordance
with the Group’s policy on Revenue Recognition under
IFRS 15 £1.9 million of revenue and an appropriate level of
attributable profits was generated in the year. This increase
in FBS activity and related improvement in contribution was
the biggest factor driving the increased profitability of FIC
during the period.
Rental Properties. During the year the FBS construction
team also made further additions to FIC’s portfolio of
domestic rental properties and by year end the total number
of properties available for rent had increased from 54 to 65
with a further 10 under construction. With strong demand
for rental properties and a shortage of supply, FIC enjoyed
effective occupancy of 100% throughout the year. As a
result, rental income from FIC’s property rental portfolio
(which includes 10 mobile homes rented to staff), increased
by 43% to £0.7 million (2019: £0.5 million).
At 31 March 2020 the total net book value of the portfolio
was £5.7 million (2019: £4.5 million). The estimated market
value of FIC’s rental portfolio at 31 March 2020 was £7.3
million (2019: £5.8 million) an uplift of £2.2 million on book
value giving an average value per property of £112,000
(2019: £107,000)
Income from third party freight and port services was
relatively unchanged at £0.8 million (2019: £0.8 million)
Support Services income increased by 1.9% to £2.04
million (2019: £2.00 million) helped by continued growth in
financial services, travel and insurance and Health & Safety
consultancy services. This growth was achieved despite a
weaker illex squid catch in April and May 2019 which saw a
decrease in Fishing Agency revenues and by a slow down
at Penguin Travel particularly towards the end of the year.
FIC revenues 2020
FIC revenues 2019
Support
Services sales
9%
Freight &
Port Services
4%
Property
Rental
3%
Support
Services sales
11%
FBS
23%
Retail
46%
Freight &
Port Services
5%
FBS
9%
4x4
17%
4x4
15%
Property
Rental
3%
Retail
55%
ANNUAL REPORT 2020
6
Portsmouth Harbour Ferry Company
In the year to 31 March 2020 PHFC saw total revenues
fall by 5.5% to £4.1 million (2019: £4.4 million) with an
increased rate of decline in passenger numbers due to the
impact of COVID-19 which more than offset the effect of
annual fare rises in June 2019. As a result, underlying Profit
Before Tax at PHFC fell by £0.14 million to £0.64 million
(2019: £0.78 million).
PHFC Operating results
Year ended 31 March
2020
£m
2019
£m
Change
%
Revenues
Ferry fares
Cruising and Other revenue
Total PHFC revenue
PHFC underlying operating profit
Pontoon lease liability & Boat loan
finance expense
PHFC underlying Profit
Before Tax
3.93
0.20
4.13
0.98
4.15
-5.1
0.22
-13.0
4.37
1.08
-5.5
-9.9
(0.34)
(0.30)
14.1
0.64
0.78
-19.0
Passengers carried (000s)
2,365
2,556
-7.5
The further decline in passenger numbers in the year ended
31 March 2020 and the increased uncertainty following
the impact of COVID-19, has resulted in an impairment to
the carrying value of the PHFC business and a £4.0 million
impairment charge has been recorded in the period to
reflect the write off of remaining goodwill. This is a non-cash
accounting charge and will not recur. For more details on
the background to the impairment see note 11.
FIC Key Performance Indicators and
Operational Drivers
Year ended 31 March
2016
2017
2018
2019
2020
Staff Numbers
(FTE 31 March)
Capital Expenditure
£’000
172
151
146
169
187
1,229
578
389 2,348
2,685
Retail Sales growth %
1.3
-5.4
+0.6
+5.7
3.1
Number of vehicles sold
110
Number of FIC rental
properties
Average occupancy
during the year %
Number of 3rd party
houses sold
illex squid catch in
tonnes (000’s)
Cruise ship passengers
(000’s)
50*
51*
49*
54*
65*
93
12
81
77
17
89
77
22
84
76
89
71
6
22*
235.2
30.1
75.5
57.4
57.6
56.5
55.6
59.3
62.5
72.1
*Includes ten mobile homes rented to staff.
**The 22 houses sold in the year ended 31 March 2020
exclude the 18 house contract with the government.
FIC ended the year with a headcount of 208 staff, 39 higher
than the 169 in March 2019. Of the 208 headcount Retail
accounted for 74 (2019: 67), Falklands 4x4 accounted for
17 (2019: 14) and FBS 49 (2019: 42), with 68 (2019: 46) in
Support Services and administration.
In overall terms the Group’s Falkland operations performed
well in the period with solid growth from FIC’s core retail,
automotive and support service divisions augmented by a
sharp uplift in activity and profitability from FBS and FIC’s
expanded property rental portfolio.
A newly constructed house, built for the Falkland Islands Government
ANNUAL REPORT 2020
7
Chief Executive’s Strategic Review
BUSINESS REVIEW
During the year, passenger volumes held up relatively
well in the first half with a 3.2% rate of decline noted in
the Group’s half year results issued in November 2019. As
winter arrived, wetter weather particularly after Christmas
saw a further fall in passenger volumes which increased
the year to date decline by mid-March to -4.8%. In the last
2 weeks of March containment measures for COVID-19 hit
hard and volumes fell sharply moving the company into loss
making and taking passenger volumes down to -7.5% for
the year as a whole. In the year to 31 March 2020 the total
number of passengers carried fell from 2.56 to 2.37 million,
an average of 6½ thousand passenger journeys per day.
Ferry fares were increased by an average of 3% in June
2019 to make a contribution to the anticipated rise in
operating costs. These annual fare increases brought the
total cost of a standard adult return to £3.70, and the price
of a return journey using an Adult 10 Trip ticket to £3.30
(2019: £3.20).
Underlying operating costs were tightly controlled and
this shielded the business from the full effects of the £0.3
million decline in overall revenues (£4.4 million down to £4.1
million). As a result, the reduction in profit before tax was
limited to £0.14 million falling from £0.78 million down to
£0.64 million.
Significant marketing effort continued in the year using
mainstream and digital/social media to remind local people
of the benefits of travel by ferry including the bike friendly,
positive health aspects and the “green” credentials of the
service.
The company also continued to promote its unlimited
monthly ferry and car parking joint “Park & Float” ticket and
we are engaging with local councils to seek promotional
and practical support for this “green” transport service.
In overall terms, at under £1.65 per crossing for regular
adult travellers (using the 10 Trip ticket) and 95p for seniors
and children (using 10 Trip tickets) 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.
Key Operating Metrics
Average fare yield per passenger journey (including cycle
fares) increased by 4.3% to £1.69 (2019: £1.62).
Ferry reliability was again outstanding with on-time
departures running at 99.8% (2019: 99.8%).
PHFC Key Performance Indicators and
Operational Drivers
Year ended 31 March
2016
2017
2018
2019
2020
Staff Numbers
(FTE at 31 March)
Capital Expenditure
£’000’s
Ferry Reliability %
(on time departures)
Number of weekday
passengers ‘000
% change on prior
year
Number of weekend
passengers ‘000
% change on prior
year
Total number of
passengers ‘000’s
% change on prior
year
38
38
38
223
241
186
37
50
36
65
99.8
99.9
99.8
99.8
99.8
2,046
1,967
1,878
1,834
1,706
-3.6
-3.9
-4.5
-2.3
-7.0
780
744
734
722
659
-2.5
-4.6
-1.3
-1.6
-8.7
2,826
2,710
2,612
2,556
2,365
-3.3
-4.1
-3.6
-2.1
-7.5
Revenue growth %
-1.3
1.0
1.5
0.4
-5.5
Average yield per
passenger journey*
£1.45
£1.52
£1.58
£1.62
£1.69
*Total ferry fares divided by the total number of passengers.
The Gosport Ferry
ANNUAL REPORT 2020 8
Momart
Momart Operating results
After a very successful 2018-19, Momart, the Group’s art
handling and logistics business had a more challenging
year with declining confidence in the global commercial art
market leading to a sharp decline in revenues from galleries,
auction houses and private collectors.
Despite a welcome increase in storage revenues of 5.8%,
in the year to 31 March 2020 Momart’s overall revenues fell
by 8.7% from £20.6 million to £18.8 million and operating
profits declined by 15.1% to £1.5 million.
Momart revenues 2020
Storage
12%
Commercial
Gallery
Services
31%
Museums
and Public
Exhibitions
57%
Momart revenues 2019
Storage
10%
Commercial
Gallery
Services
37%
Museums
and Public
Exhibitions
53%
Year ended 31 March
Revenues
2020
£m
2019
£m
Change
%
Museum Exhibitions
10.77
11.00
-2.1
Galleries & Private Clients
Storage
5.85
2.18
7.54
-22.4
2.07
5.8
Total Momart revenue
18.80
20.61
-8.7%
Momart underlying operating profit
1.47
1.73
-15.1
Net Interest expense
(0.46)
(0.16)
180.7
Momart underlying
Profit Before Tax
Momart underlying
operating profit margin
1.01
1.57
-35.2
7.8% 8.4%
-29.0
In the year net finance costs increased by £0.3 million
to £0.46 million, following the draw-down of the £13.9
million long- term mortgage to finance the purchase of the
Leyton warehouse. The interest rate on the mortgage was
effectively fixed for 10 years at 2.9% with an interest rate
swap. Bank interest on bank loans including the mortgage
amounted to £394,000 (2019: £164,000 million) together
with £53,000 of interest expense in the current year (2019:
£nil) which related to finance charges under IFRS 16 linked
to warehouse and office leases. The hire purchase lease
interest charge for the year for the Momart trucks was
£9,000 (2019: £9,000).
Profit Before Tax after net interest expense and an allocation
of central costs reduced to £1.01 million, down £0.56
million on the prior year.
the more uncertain
Reflecting
trading outlook post
COVID-19 the carrying value of goodwill held in respect of
Momart has been written down by £3.5 million. This non-
cash impairment charge reduces Momart’s reported profit
before tax by £3.5 million creating a pre-tax loss of £2.5
million (2019: £1.6 million profit). For more details on the
background to the impairment see note 11.
ANNUAL REPORT 2020 9
Chief Executive’s Strategic Review
BUSINESS REVIEW
Momart Key Performance Indicators
and Operational Drivers
Year ended 31 March
2016
2017
2018
2019
2020
130
131
136
140
133
402
971
228 20,034
638
90.6% 90.4% 72.8% 81.1% 86.9%
£4.5m £4.8m £4.2m £4.6m
Note*
£9.2m £9.8m £10.9m £11.5m £10.8m
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
£5.8m £6.1m £7.1m £7.5m £6.2m
-3.4% 19.9% 17.0% -6.5% -2.1%
Storage
Galleries & Private Client Services
Gallery Services (“GS”) faced challenging conditions as the
commercial art market contracted sharply in the face of
investor concerns over the global economic outlook. After
a 26.5% decline in GS revenues in the first half, market
confidence recovered somewhat in the normally busier
second half and by the end of February 2020, GS revenues
were moving much nearer to prior year levels. However, in
February and March 2020 COVID-19 effects were already
becoming evident in overseas markets.
Overall GS revenues for the full year fell by £1.7 million
(-22.4%) to £5.9 million reflecting a weak but slowly
recovering commercial art market which was then hit hard
by the first effects of COVID-19.
On a more positive note Momart’s storage revenues
continued to grow building on the 3% improvement seen
at the half year of +£0.04 million of revenue. By year end
the company had made further progress in securing new
storage clients and occupancy had improved from 81% to
87% with revenues increased by £0.11 million (+5.8%) to
£2.18 million (2019: £2.07 million). By the end of the year in
March 2020 unsold spare capacity had reduced from 19%
to 13%.
Selling its remaining spare storage capacity represents
a continuing opportunity for Momart in the next few
years once the markets return to normal and renting out
all the remaining space would add £0.4 million (+18%) to
storage revenues without any significant increase in fixed
storage costs.
Gallery Services sales
growth
11.8% 8.1% 15.2% 4.0% -22.4%
Storage sales growth
10.1% -0.8% 8.5% -6.3% 5.8%
Total Sales growth
3.2% 13.0% 15.5% -2.9% -8.7%
Note*: Current year figures are suspended owing to
the impact of COVID-19. Until re-opening dates for the
related institutions are established, no meaningful metric is
available. Prior to the arrival of COVID-19 in January 2020
Momart’s 12-month order book, had been significantly
ahead of the prior year.
Museum Exhibitions
Following the 6.5% reduction in Exhibitions revenue seen
in the first half (£0.3 million down on the previous year),
overall Exhibition revenues in the second half held up well
delivering a small increase on the prior year, reducing the
overall decline in museum revenues over the year to £0.23
million (-2.1%).
its market share with the UK’s
With £10.77 million of revenue in the year, Momart
maintained
leading
museums. Notable museum exhibitions in the period
included: “Mary Quant”, “Cars” and “Kimono” at the
V&A; “Anthony Gormley” and “Lucian Freud” at the Royal
Academy; “Ashurbanipal” and “Inspired by the East” at the
British Museum; “Olafur Eliasson” at Tate Modern; “Van
Gogh” at Tate Britain; “Gauguin” at the National Gallery;
“David Hockney Drawings” at the National Portrait Gallery
and “Into the night” at the Barbican.
Momart installing artworks from the Government Art
Collection in public venues across Waltham Forest Borough.
Photography: Thierry Bal
ANNUAL REPORT 2020 10
Impact of Brexit
Trading outlook
In general, the Board believes that the Group is not highly
exposed to any potential adverse outcomes arising from
the UK leaving the European Union.
Momart the Group’s specialist art handing business is
potentially the most exposed and to avoid disruption to the
continued smooth flow of fine art between the UK and EU
practical arrangements will need to be put in place at the
borders to ensure future dislocation is minimised.
In the Falklands, FIC has almost no direct trading links with
the EU. However, 60% of Falklands GDP is dependent on
income from squid and offshore fisheries, and a significant
proportion of the squid catch is exported to Spain. In the
event of increased tariffs and friction at newly erected
external borders, some short-term impact on the pattern
of this trade could arise, albeit the majority of squid related
income is linked to the illex catch which is sold into markets
in the Far East and which has no connection to the EU.
PHFC is much more focussed on its local market and has
no direct trading links with the European Union. Some ferry
components are manufactured by European companies
but spare parts are available in the UK market and little or
no impact is anticipated.
For Momart, the movement of art to and from the EU
represents a relatively small proportion (c. 20%) of its overall
activity with most movements relating to domestic transfers
within UK and to and from the United States. The Far East
is also growing in importance as a source of both buyers
and sellers of art. Nonetheless, of the Group’s companies,
Momart has the greatest exposure to any failure to secure
continued seamless access to the EU by the end of the
agreed transition period which ends on 31 December 2020
but which can be extended by mutual agreement by up to 2
years. Contingency plans using alternative routes onto the
continent have been investigated to mitigate any adverse
potential impact of a failure to reach a practical solution.
The other area of potential disruption lies with VAT and
import duty payable on art works as they enter and leave
the UK and EU. If the VAT regime between the UK and EU is
changed in a mutually competitive manner then the status
of the UK as a convenient entry point for European art
purchases and sales may be constrained. However, as with
logistical arrangements at the border, provided sensible
regulations are put in place that mirror the status quo, little
disruption is anticipated and London’s place as a leading
global centre should remain largely unaffected.
Prior to the onset of COVID-19, the outlook for the Group
was quite positive with a recovery in the global art market
and growing storage revenues assisting progress at
Momart and the strong demand for housing in the Falklands
supporting continued growth at FIC. Substantial medium-
term upside was in prospect in the Falklands from increased
government investment in infrastructure, support services,
tourism and potentially from offshore oil development.
In principle these opportunities are still open but with
the global effects of the virus impacting the Group such
progress may be delayed for many months and potentially
longer.
In addition, to husband the Group’s cash resources, all
significant capital expenditure programmes across the
Group have been halted and the Board has taken the
decision to suspend dividends until we have greater visibility
over future trading.
FIC
The Falklands are currently virus free, and effectively
quarantined from the outside world. Apart from some
modest disruption in April when construction activity was
suspended by precautionary social distancing rules which
have since been relaxed, FIC remains profitable and has
been substantially unaffected by COVID-19. With practical
quarantine measures now in place and a robust supply
chain from the UK underpinned by British government
and Ministry of Defence support, FIC’s domestic economy
looks reasonably well protected. However, the significant
seasonal growth in economic activity from tourist visitors in
the austral summer seems likely to be significantly diluted
in the coming year. Looking beyond this year any extended
global recession and potential cut backs in government
spending programmes would hamper growth.
UK businesses
In the UK the position is of greater concern. In the very near
term, in the Group’s two UK based service businesses,
which have both seen demand for their services fall by over
90% in April and May, we expect to see continued losses.
This is despite extensive use of the UK Government’s very
welcome Job Retention Scheme where furlough grants
covering 80% of the wage costs of those earning less
than £37,500 per annum have been received since 1 April.
In addition, all UK staff have accepted a 20% cut in pay
and the Group Board has agreed to a 30% reduction in
salaries and fees together with the suspension of all bonus
schemes for the current year.
With heavy fixed costs in both UK businesses, the Board
will be monitoring the situation closely as the furlough
scheme begins to wind down from 1 August.
ANNUAL REPORT 2020
11
Chief Executive’s Strategic Review
BUSINESS REVIEW
PHFC
Group Strategy
At PHFC, marking its status as a provider of a critical
transport link for essential workers, exceptional grants of
£90,000 have been agreed by local councils to help mitigate
the worst effects of the dramatic loss of passengers caused
by the UK lockdown.
The Group, with its diverse spread of niche service
businesses remains fundamentally strong, with prospects
for sustainable growth evident at Momart, a strong and
steady cash flow anticipated from PHFC and real upside
achievable at FIC.
However, all of this has been put on hold by COVID-19.
The Board’s priority now is ensure that the three operating
businesses survive intact sustaining as few losses as
possible while minimising any damage and loss of capacity
so that they can emerge from this crisis in the best possible
shape to deliver on the promise of long term and sustainable
growth that has been our vision for many years.
To support this approach the Group’s liquidity position is
sound with cash balances of £9.1 million at 31 March 2020
and this provides significant reserves with which to cope
with short term losses and gives us the ability to weather
the storm with some security.
To augment group liquidity the Group has applied for
and been granted £5.0 million of loan facilities under the
government’s Business Interruption Loan Scheme. This
loan which is expected it be drawn down in the next few
weeks represents a prudent insurance policy in the face
of global uncertainty but it is not anticipated that it will be
retained beyond 12 months when the initial interest free
period expires.
With healthy cash reserves augmented by new loans,
the Group will also be in a position to take advantage of
strategic opportunities that may emerge as the crisis in
each of the Group’s markets unfolds.
Although serious near-term challenges remain, the Group’s
fundamental position remains strong and the Board looks
to the future with confidence.
John Foster
Chief Executive
23 June 2020
Over the next few months, the gradual re-opening of
businesses, schools and retail outlets should see a
significant recovery in passenger volumes but it appears
likely that passenger volumes are likely to be subdued
until a complete recovery in business and public health
confidence is achieved.
Momart
At Momart, the business benefits from having a regular
monthly income from storage clients which accounted for
£2.2 million in the year ended 31 March 2020. In addition,
the purchase of the freehold of the art storage warehouse
at Leyton in December 2018 removed external annual
rental costs of £0.8 million which has further improved core
cash flow.
However almost 90% of the company’s revenue is linked
to movements in privately and institutionally owned art
works and in April 2020 this came to a complete halt
while Momart’s costs for providing these services (people,
property and vehicle costs) remained largely unchanged.
The timing and scale of the recovery in the markets served
by Momart is hard to judge and the picture is made more
complex by the inter-connections in the global market where
the pattern and timing of recovery will vary greatly between
countries. For museums and commercially funded galleries
which depend on ticket sales for their income, it seems that
significant activity will not resume until the requirements for
social distancing are lifted. As things stand in June 2020 it
seems likely that full recovery will be delayed until at least
well into 2021.
Summary
It is understandably hard to forecast trading activity for
the current year. The Group’s UK businesses have been
severely affected in the first three months and it will take
time for them to recover to previous trading levels. While the
outlook for FIC is reasonable, it is likely that the Group as
a whole will be loss making, with the extent of such losses
depending on the duration and rate of recovery in the end
markets served.
Like many businesses, beyond the current financial year,
the outlook looks significantly more promising and there is
good reason to hope that the Group can begin to move
back to the much more positive longer-term growth
prospects in evidence prior to the onset of the virus.
ANNUAL REPORT 2020 12
Financial Review
Revenue
Group revenue increased by 4.9% to £44.6 million, as
the 23.5% increase in the Falklands due to the increase
in house building activity was offset by falls in revenue at
PHFC and Momart.
Underlying Operating Profit and IFRS 16
in the Falkland Islands of expenditure on commercial and
industrial buildings. In 2019-20, the effective blended tax
rate for the Group on underlying profits was 25.8% and in
the prior year, the effective blended rate was 21.4%. The
increase in rate from the prior year, is largely due to the
19% UK corporation rate, to be effective from 1 April 2020
(and which was substantively enacted on 17 March 2020)
which will increase the company’s future current tax charge,
and therefore has increased the UK deferred tax rate at 31
March 2020 from 17% to 19%.
Before
impairment charges and net finance costs,
underlying operating profit increased 4.3% to £4.6 million
(2019: £4.4 million).
Earnings per share
The adoption of IFRS 16 for Leases saw the removal from
overheads of £0.4 million of rental costs that were previously
categorised as an operating expense and their replacement
by increased depreciation charges of £0.33 million which
are also included in overheads and an additional interest
expense of £0.11 million. In accordance with the rules that
govern the adoption of the new standard, the prior year
comparatives have not been restated. The overall effect of
adopting IFRS 16 on the Group’s profit and loss account
was to reduce reported Profit Before Tax by £0.04 million.
Net financing costs
The Group’s net financing costs increased by £0.3 million
to £0.9 million due to the loan drawn down in December
2018 to fund the Leyton property purchase; interest was
payable for the full 12 months in the year ended 31 March
2020 compared to three and a half months in the prior
year. In addition, the adoption of IFRS 16 at the start of the
year increased reported interest expense by £0.11 million
(2019: £nil).
Reported pre-tax profit
The reported pre-tax result for the year ended 31 March
2020 has fallen to a loss of £3.8 million (2019: £3.9 million
profit) after the £7.5 million impairment charge to write
down goodwill which arose on the acquisition of the PHFC
and Momart. There were no other non-trading items in
the current year and none in the prior year. The Group’s
“Underlying Profit Before Tax” before these non-trading,
non-cash charges was £3.7 million (£3.9 million).
Taxation
The Group pays corporation tax on its UK earnings at
19% 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 now pays all its corporation tax in the
Falkland Islands and no longer pays UK corporation tax.
As a result, FIC enjoys the full benefit of the tax deductibility
Year ended 31 March
2020
£m
2019
£m
Change
%
Reported (loss) / profit before tax
(3.77)
3.86
Impairment charge
Underlying profit before tax
7.48
3.71
-
3.86
Taxation on underlying profit
(0.96)
(0.83)
Underlying profit after tax
2.75
3.03
-
-
-3.9
15.8
-9.2
Diluted average number of shares
in issue (thousands)
12,684
12,560
1.0
Effective underlying tax rate
25.8% 21.4%
Basic EPS on underlying profit
22.0p
24.4p
20.5
-9.7
Diluted EPS on underlying profit
21.7p
24.1p
-10.1
Basic EPS on reported loss / profit
-37.8p
24.4p
-255.2
Diluted EPS on reported
loss / profit
-37.8p
24.1p
-256.7
Fully diluted Earnings per Share (“EPS”) derived from
reported profits, fell to a loss of 37.8 pence (2019: 24.1
pence), due to the £7.5 million impairment of goodwill
noted above. Fully diluted Earnings per Share (“EPS”)
derived from underlying profits fell slightly to 21.7 pence
(2019: 24.1 pence).
Balance sheet
The Group’s balance sheet remains strong, however during
the year, total net assets decreased £5.8 million to £38.8
million from £44.6 million in the prior year, due to the £7.5
million impairment charge to reduce goodwill in respect of
Momart and PHFC. Retained earnings fell by £4.8 million
to £19.8 million (2019: £24.6 million) after payment of
a final dividend in respect of the previous financial year
paid in September 2019 and the interim dividend paid in
January 2020 totalling £0.6 million. The hedging reserve
has increased to a loss of £0.5 million due to the fixed
interest rate swap taken out to effectively fix the interest
rate payable on the ten-year £13.875 million loan.
ANNUAL REPORT 2020
13
Chief Executive’s Strategic Review
BUSINESS REVIEW
Opening reserves were restated and decreased by £0.2
million under the new accounting standard, IFRS 16:
Leases, which requires operating leases to be brought onto
the balance as a right-to-use asset and a corresponding
lease liability of all future lease payments. There was no
material impact on current year profits as a result of this
change in policy.
Bank borrowings increased to £15.7 million (2019: £12.8
million), as a result of the £13.875 million loan drawn down
in June 2019 to repay the £10.0 million short term loan, and
the Group’s cash balances increased to £9.1 million (2019:
£6.2 million).
As a result of the adoption of IFRS 16, the Group’s rights
under normal rental and finance contracts which extend
for more than 12 months are now shown as “Right-to-Use
Assets”, which include the £4.1 million (2019: £4.1 million)
net book value for the Gosport pontoon and £0.8 million
(2019: £0.4 million) of leased trucks at Momart, which were
all previously classified as long leasehold property or plant
and equipment respectively.
At 31 March 2020 the total net book value of leased assets
amounted to £7.6 million, which are held as “Right-to-Use
Assets” in fixed assets, these include the pontoon, and
trucks together with a balance of £2.74 million of newly
categorised assets which relate to shorter term rental
contracts and which had not been previously shown in the
Balance Sheet. The net effect of the adoption of IFRS 16
on 1 April 2019 was the addition of £2.3 million to the Fixed
Assets in the Balance Sheet, matched by the recognition of
£2.5 million of additional lease liabilities and a reduction in
the Group’s reserves of £0.2 million.
The carrying value of intangible assets has been reduced by
£7.5 million from £11.8 million to £4.3 million to reflect the
impairment of the goodwill at Momart and PHFC.
The net book value of property, plant and equipment
increased by £3.0 million to £41.7 million (2019: £38.7
million) after the £2.3 million of rental leases have been
included under IFRS 16, together with a £0.8 million
renewed lease signed during the year for a warehouse
rented by Momart, along with capital investment of £2.0
million including £1.4 million incurred by FIC due to
increased activity and £0.6 million spent on the purchase
of two new trucks and two sprinters by Momart, with these
trucks funded by hire purchase leases.
At 31 March 2020, the Group had 65 (2019: 54) completed
investment properties, comprising commercial and
residential properties in the Falkland Islands, which are held
for rental. The 65 investment properties available for rental
include 55 investment properties, which are mainly houses
or flats in Stanley and ten mobile homes, which are rented
to staff. Ten properties were under construction at 31 March
2020, including a block of eight flats and two houses.
In addition, FIC holds 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 net book value of the investment properties and
undeveloped land of £6.5 million (2019: £5.2 million) has
been reviewed by the directors resident in the Falkland
Islands and at 31 March 2020 the fair value of this property
portfolio, including undeveloped land, was estimated at
£10.0 million (2019: £8.7 million), an uplift of £3.5 million on
net book value.
FIC’s 65 houses and flats had an estimated fair value of
£7.3 million (2019: £5.8 million), the ten houses under
construction were valued at cost of £0.6 million (2019: £0.7
million) and the value of FIC’s 700 acres of undeveloped
land was estimated at £2.1 million (2019: £2.2 million).
Deferred tax assets relating to future pension liabilities
stood at £0.7 million (2019: £0.7 million). These balances
relate to the deferred tax benefit of expected future pension
payments in the FIC unfunded scheme calculated by
applying the 26% Falklands’ tax rate to the pension liability.
The deferred tax asset decreased very slightly in line with
the fall in the pension liability due to the increase in the
discount rate.
Inventories, which largely represent stock held for resale
and work in progress at FIC and Momart decreased by
£0.4 million to £5.4 million at 31 March 2020 (2019: £5.8
million), due a £0.3 million fall in Momart work-in-progress
as a result of reduced activity due to COVID-19.
Trade and Other Receivables increased to £8.7 million from
£7.8 million at 31 March 2019 reflecting increased sales
activity at FIC from housebuilding.
In the year the Group refinanced its short-term loans used
to assist in the acquisition of the Leyton warehouse for
Momart in December 2018. With the repayment of this
£10.0 million loan and the £13.875 million draw down of a
long-term mortgage, bank borrowings increased to £15.7
million from £12.8 million. The Group’s cash balances on
hand at year end increased to £9.1 million (2019: £6.2
million).
Outstanding lease liabilities totalled £8.4 million (2019: £5.0
million), £4.7 million (2019: £4.7 million) of the balance
is in respect of the 50-year lease from Gosport Borough
Council for the Gosport Pontoon, which runs until June
2061. £3.0 million of the increase in the total is because
the Group adopted IFRS 16 from 1 April 2019. IFRS 16
replaces IAS 17 Leases. Under IFRS 16 there is no longer
a distinction between the accounting for finance and
operating leases and therefore in addition to those leases
previously categorised as finance leases, the liability for
other leases previously recognised as operating leases
has been recognised as from 1 April 2019 together with
ANNUAL REPORT 2020 14
The £11.4 million (2019: £0.6 million) bank loan and
lease liabilities principal repayments made during the
year, included the £10.0 million repayment of the short-
term facility drawn down in December 2018 to fund the
acquisition of the warehouses in Leyton. This facility has
been replaced with a £13.875 million facility to be repaid
over ten years from June 2019. In addition, £0.3 million was
paid on property rental leases, which have been treated as
finance leases since 1 April 2019, £0.1 million was paid for
on truck hire purchase leases at Momart and £1.0 million
of further repayments were paid on the five bank loans.
The £0.3 million repaid to Gosport Council on the 50-year
pontoon lease is included within the lease liability interest
paid due to the remaining 41-year length of the lease.
Cash flows
Net cash flow from operating activities increased to £4.7
million (2019: £3.0 million) due to a reduced increase in
working capital balances in the current year.
The Group’s operating cash flow can be summarised as
follows:
Year ended 31 March
Underlying profit before tax
Depreciation & Amortisation
Net Interest payable
Underlying EBITDA
Decrease in hire purchase debtors
2020
£m
2019
£m
Change
£m
3.7
2.1
0.8
6.6
0.1
3.9
1.4
0.5
5.8
0.2
(0.2)
0.7
0.3
0.8
(0.1)
1.1
Increase in working capital
(1.4)
(2.5)
Tax paid and other
(0.6)
(0.5)
(0.1)
Net cash inflow from operating
activities
Financing and Investing Activities
4.7
3.0
1.7
Capital expenditure
(3.4)
(22.4)
19.0
Net bank and lease liabilities
interest paid
(0.8)
(0.4)
(0.4)
Bank and lease liability repayments
(11.4)
(0.6)
(10.8)
Dividends paid
Bank and lease liabilities draw down
Net cash outflow from financing
and investing activities
Net cash inflow / (outflow)
Cash balance b/fwd.
Cash balance c/fwd.
(0.6)
14.4
(0.6)
10.2
-
4.2
(1.8)
(13.8)
12.0
2.9
6.2
9.1
(10.8)
13.7
17.0
(10.8)
6.2
2.9
a related right-to-use asset. These new lease liabilities
from former operating leases include leases for the head
offices of Momart and Bishops Stortford, two third party
warehouse leases at Momart and for the lease of the
Gosport pontoon. In accordance with the standard the
Group elected to apply IFRS 16 retrospectively with the
cumulative effect of initial application being recognised at
1 April 2019, and comparatives have therefore not been
restated. Lease liabilities have also increased in the year
by £0.5 million due to the two new large trucks and two
new sprinters purchased by Momart, which have all been
funded by hire purchase agreements.
In common with most large UK companies, the Group
pays most 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 (2019: £0.4 million) as
£0.2 million had been paid by the year end in respect of
the corporation tax charge for the year to 31 March 2020.
Trade and other payables decreased by £1.0 million to £8.6
million at 31 March 2020 (2019: £9.6 million).
At 31 March 2020, the liability due in respect of the
Group’s only defined benefit pension scheme, in FIC, was
£2.6 million (2019: £2.8 million). This pension scheme,
which was closed to new entrants in 1988 and to further
accrual in 2007, is unfunded and liabilities are met from
operating cash flow. A decrease in the liability has been fed
through reserves in accordance with IAS 19. Eleven former
employees receive a pension from the scheme at 31 March
2020 and there are three deferred members.
The Group’s deferred tax liabilities, excluding the pension
asset at 31 March 2020, were £2.8 million and increased
by £0.3 million from the prior year (2019: £2.5 million); £2.7
million (2019: £2.4 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 FIC, where capital allowances of 10% are
available on the majority of properties. With such assets
depreciated over 20-50 years, a temporary difference
arises on which deferred tax is provided.
Financing outflows
During the year, the Group incurred £3.4 million of capital
expenditure, including £1.3 million spent on investment
property, £0.2 million on the purchase of one new rental
property, and £1.1 million on the construction of additional
properties for rent including eight flats and five houses at
Fitzroy Road and John Street in FIC. At Momart, the £0.6
million of capital expenditure included the purchase of two
large Mercedes Actros trucks with refrigerated holds and
two sprinter vans. The balance of £1.5 million of capital
expenditure was almost exclusively incurred in further
investment in plant and equipment for FIC.
ANNUAL REPORT 2020 15
Chief Executive’s Strategic Review
RISK MANAGEMENT
Risk Management and Principal risks and impact
The Board is ultimately responsible for setting the Group’s risk appetite and for overseeing the effective management
of risk. The Group faces a diverse range of risks and uncertainties which could have an adverse effect on results if not
managed. The principal risks facing the Group have been identified by the Board and the mitigating actions agreed with
senior management and are discussed in the following table:
COVID-19
Potential Impact
Comment
The lock down measures introduced by the UK
government to suppress COVID-19 have had
an unprecedented impact on the fundamental
conditions of supply and demand in the Group’s UK
businesses.
The impact was immediate and severe but with the
gradual relaxation of the lock down activity is reviving.
The economic costs were mitigated in both
businesses by the use of the UK Government’s
furlough grant scheme.
At Momart, demand from the company’s museum
and gallery clients fell away as the prohibition on
public gatherings effectively closed client operations
completely, with the consequent cessation of
Momart’s art handling activities in late March.
Activity in the commercial sector is reviving as lock
down measures are relaxed although there are
expected to be restrictions on open public access to
art fairs until a vaccine has been developed.
Museums are planning new exhibition regimes with
restrictions on the numbers of visitors in order to meet
ongoing social distancing requirements. Some smaller
commercial galleries may find it uneconomic to re-
open until all social distancing restrictions are lifted.
Impact/ Risk Level
Very high but reducing
as the lock- down is
relaxed.
Very high – The
commercial sector is
reviving as the lock
down is eased but the
adverse impact on art
fairs and the museum
sector is expected
to continue until an
effective vaccine is
developed.
Momart’s storage activities which account for 12%
of its revenues were largely unaffected.
Some limited impact was felt from those clients unable
to meet their regular monthly / quarterly storage bills.
Low
Revised staff safety protocols and the need to
use PPE for staff will slow down installations and
increase the cost of operations.
Safe working practices have been reviewed and
updated in great detail with reference to government
guidance and in consultation with staff.
Low
The additional costs of operating will where-ever
possible be passed on to clients. (All competitors face
a similar challenge).
At PHFC, the lock down saw ferry customers cease
their normal daily travel to work and leisure activities,
causing a 90% fall in ferry traffic.
The impact was immediate and severe but with the
gradual relaxation of the lock down activity at PHFC is
slowly reviving.
Social distancing requirements set limits on the full
utilisation of ferry capacity.
PHFC is better placed than many public transport
businesses and can maintain 40% capacity while
enforcing social distancing. As passenger volumes
recover the use of the second vessel to cover peak
demand at rush hour will help limit any effective
constraints on effective carrying capacity.
Very high but reducing
in intensity as the lock
down is eased.
Moderate – reducing
over time.
Low
PHFC’s programme of Solent leisure cruises has
been cancelled due to lock down restrictions and
concerns over social distancing on cruises where
passenger volumes need to be higher to generate
a return.
Longer term changes in customer behaviour may
result from the pandemic: an increased reluctance to
use public transport.
Increased local and central government action to
encourage the use of healthier greener modes of
transport e.g. cycling via ferry.
PHFC’s programme of summer cruises for 2020 has
been cancelled.
Moderate but only
affecting current year.
This could be significant until a vaccine is developed
and confidence is restored.
New pop up cycle lanes and increased public
awareness of the adverse health consequences
of obesity may encourage longer term changes
in behaviour mitigating some of the impact of a
reluctance to use public transport.
Moderate – but
expected to diminish
with the development
of a vaccine.
Positive but difficult to
quantify
ANNUAL REPORT 2020 Chief Executive’s Strategic Review
RISK MANAGEMENT
16
COVID-19 CONTINUED
Potential Impact
Comment
There may be longer term changes to customer
behaviour at both PHFC and at Momart resulting
from the COVID-19 pandemic which could have
an adverse effect on the demand for the services
offered by both companies.
The extent of these potential effects is uncertain and
difficult to judge.
In the Falkland Islands the limited medical facilities
left them initially vulnerable to the pandemic.
With assistance from the UK the government has
strengthened local medical facilities and created local
testing capacity.
Impact/ Risk Level
The potential for more
long-lasting effects
has been recognised
in the impairment
of goodwill at both
Momart and PHFC.
Low as a result of
government action.
Initial social distancing protocols led to the
temporary cessation of certain of FIC’s activities in
April including housebuilding and café opening but
government grants largely offset operating costs.
The small tightly knit community means any necessary
lock down measures are more effectively implemented
and enforced.
Low
The isolated geographical location has enabled
effective quarantining of all visitors. The timing of the
outbreak, coming at the end of the tourist season
was fortuitous.
Vulnerability remains from virus transmission from
inbound visitors particularly cruise ship passengers
and land-based tourists arriving by air.
Until a vaccine is developed the negative impact on
tourism could continue in future years.
Moderate
ANNUAL REPORT 2020 17
Chief Executive’s Strategic Review
RISK MANAGEMENT
POLITICAL RISKS
Potential impact
Comment
Historically, Argentina has maintained a claim to the
Falkland Islands, and this dispute has never been
officially resolved.
Uncertainty caused by the UK’s decision to leave the
European Union.
With the arrival of the new Fernandez regime in
November 2019 relations with Argentina have cooled.
However, in early November, a new weekly flight to
the Falkland Islands from Brazil which passes through
Argentinian airspace was established and permission
for that service to continue operating has not been
withdrawn by Buenos Aires.
With relations now more strained than in recent
years the security afforded by the UK Government’s
commitment to the Islands provides a guarantee of the
freedom and livelihood of the people of the Falklands
and thereby to FIC.
Provided UK Government support is maintained the
security of the people of the Falklands is not in doubt.
The final terms for the UK’s departure from the EU
are yet to be determined. Of the Group’s companies,
Momart faces the biggest potential threat and failure
to negotiate pragmatic border arrangements could
affect the flow of art works in and out of Europe to
the UK. Also, any attempts to undertake competitive
changes in VAT between EU governments and the UK
could also destabilise the current position Transfers of
art between government institutions and museums are
less likely to be affected and the level of commercial
business with the EU represents a relatively small
proportion of Momart’s overall activity. The decision
whether or not to extend the transition period beyond
31 December 2020 will affect the timing of any of
these effects, however when it does arrive it seems
likely that some short-term dislocation of Momart’s
business should be expected.
Risk/ Impact Level
Low – Unchanged
Low / Moderate –
Increased
ECONOMIC CONDITIONS
Potential impact
Comment
Risk/ Impact Level
There is a link between demand for the Group’s
services and general economic activity.
The impact of COVID-19 is unprecedented and is
likely to result in sustained damage to the UK and
global economy, with higher levels of unemployment
suppressing consumer demand and the need for
governments to repay borrowings accumulated as a
result of the pandemic, limiting wider spending plans
in the future.
In the near term the trading performance of both the
Group’s UK companies has been severely affected by
the effects of the lock down introduced to suppress
the virus. Revenues have fallen by up to 90% and both
businesses have made heavy losses despite taking
full advantage of the UK government’s furlough grant
scheme.
High impact on UK
operations
International air transport and travel are likely to be
particularly badly affected. With the failure of many
carriers likely and restrictions in the numbers of
passengers that can be carried, the economics of
air transport are likely to change dramatically. The
costs of air freight and travel can be expected to rise
significantly increasing operating costs particularly at
Momart and reducing tourist visitors to the Falkland
Islands.
Prospects for the development of oil in Falklands
waters have been dampened and delayed by
the recent collapse in oil prices below $40 barrel.
Economic activity in the Falkland Islands is subject
to fluctuation, dependent upon Oil sector activity.
The Falklands to date have been less badly disrupted.
FIC has seen its revenue largely maintained and has
avoided slipping into loss making but faces reduced
tourist revenues later in the financial year.
Moderate impact in
second half
The substantial delays already experienced in the
development of Sea Lion have reduced expectations
and the negative impact on the economy as
businesses have largely discounted the possibility of
any imminent boost to the economy and adjusted their
spending plans accordingly.
Low impact but
reduced upside
ANNUAL REPORT 2020 Chief Executive’s Strategic Review
RISK MANAGEMENT
18
ECONOMIC CONDITIONS CONTINUED
Potential impact
Comment
Budgets available to museums for exhibitions
can fluctuate with Government spending and the
commercial art market exhibits cyclicality; both have
a direct impact on Momart. Both these effects have
been exacerbated by COVID-19.
Reduced museum budgets are likely to result from
the pandemic and force a reduction in the number
and technical complexity (and expense) of exhibitions
with a consequent reduction in demand for Momart’s
services until government finances and confidence
recovers.
Mitigation
Risk/ Impact Level
Moderate to High
depending on
government policy
towards levels of
public subsidy
Prudent management through the different phases of the economic cycle.
Flexibility in the business model. Significant cash reserves and the potential to take on additional borrowing.
Management carefully monitors developments around the oil sector in the Falklands and adjusts investment levels accordingly.
CREDIT RISK
Potential Impact
Comment
Credit risk is the risk of financial loss if a customer
fails to meet its contractual obligations.
Effective processes are in place to monitor and
recover amounts due from customers.
Risk Level
Moderate – This
risk has increased
particularly for
Momart as a result of
COVID-19
Mitigation
Management in all businesses have credit control policies in place to manage risk on an ongoing basis. These include the use of
customer specific credit limits and active cash collection procedures.
COMPETITION
Potential impact
Comment
FIC is considered by the senior management to be a
market leader in a number of business activities but
faces competition from local entrepreneurs in many
of the sectors in which it operates.
Local competition is healthy for FIC and stimulates
continuing business improvement in FIC.
Momart sits in a highly competitive market with
both UK and International competitors investing
for growth.
Largely unchanged.
Mitigation
Being responsive to the needs of our customers and focussing on the quality of service delivery.
Understanding changing market conditions and our competitors.
Driving down costs and improving margins.
Continuing investment to maintain and enhance the quality of service offered to customers.
Risk Level
Low - Unchanged
Moderate -
Unchanged
ANNUAL REPORT 2020 19
Chief Executive’s Strategic Review
RISK MANAGEMENT
FOREIGN CURRENCY AND INTEREST RATE RISK
Potential Impact
Comment
Largely unchanged.
Momart is exposed to foreign currency risk arising
from trading and other payables denominated in
foreign currencies.
The Group is exposed to interest rate risks on
large loans.
FIC retail outlets accept foreign currency and are
exposed to fluctuations in the value of the dollar
and euro.
Mitigation
Risk Level
Low -
Unchanged
Forward exchange contracts are used to mitigate this risk, with the exchange rate fixed for all significant contracts.
Interest rate risk on large loans is mitigated by the use of interest rate swaps.
INVENTORY
Potential Impact
Comment
Inventory risk relates to losses on realising the
carrying value on ultimate sale. Losses include
obsolescence, shrinkage or changes in market
demand such that products are only saleable at
prices that produce a loss.
A thorough review of old and slow-moving stock in
Stanley has been undertaken by senior management
and a programme to address problem areas, maximise
cash realisation and to prevent reoccurrence has been
implemented.
Risk Level
Moderate-
Unchanged
FIC is the only Group business that holds significant
inventories and does face such risk in the Falklands,
where it is very expensive to return excess or
obsolete stock back to the UK.
Mitigation
The EPOS and stock system used by FIC allows monitoring of sales, stock levels and stock turnover by line item. Local management
and senior leadership review of stock levels and slow-moving stock.
PEOPLE
Potential Impact
Comment
Loss of one or more key members of the senior
management team or failure to attract and retain
experienced and skilled people at all levels across
the business could have an adverse impact on
the business.
In the Falklands business there is a reliance on being
able to attract staff from overseas including many
from St Helena. Development of those locations
might reduce the pool of available staff.
In the Falklands business there is a reliance on being
able to attract staff from overseas generally.
None of the Group’s businesses is reliant on the skills
of any one person. The wide spread of the Group’s
operations further dilutes the risk.
Risk Level
Low - Unchanged
The development of tourism on St Helena has been
slow and the Falklands remain an attractive location
for St Helenian people to work.
Low – Reduced
Immigration procedures in the Falklands are
bureaucratic and slow although some effort is
being made by the Falklands Government to
improve matters.
Moderate -
Unchanged
Mitigation
Consultation with employees, where appropriate, on key issues concerning them as employees.
Management review of local salary trends.
Long term incentive plans for key senior staff. Incentivising staff through performance related bonuses.
Staff are supported with immigration applications and to acquire relevant employment related qualifications.
ANNUAL REPORT 2020 Chief Executive’s Strategic Review
RISK MANAGEMENT
20
LAWS AND REGULATION
Potential Impact
Comment
Failure to comply with the frequently changing
regulatory environment could result in reputational
damage or financial penalty.
The regulatory environment continues to become
increasingly complex.
Mitigation
Risk Level
Low – Unchanged
Use of specialist and local advisers on regulatory and legislation matters.
Evolving policies and practices to take account of changes in legal obligations.
We monitor regulatory and legislation changes to ensure our policies and practices reflect them and we comply with relevant
legislation. During the year training has taken place in respect of customs practices.
GENERAL HEALTH AND SAFETY
The Group is required to comply with laws and
regulation governing occupational health and safety
matters. Furthermore, accidents could happen which
might result in injury to an individual, claims against
the Group and damage to our reputation.
Low
Health & Safety matters are considered a key priority
for the Board of FIH and all its operating companies.
Particular attention has been paid to updating risk
assessments and safe working practices in the light of
COVID-19.
All staff receive relevant Health and Safety training
when joining the Group and receive refresher and
additional training as is necessary. Training courses
cover maritime safety, lifting and manual handling,
asbestos awareness and fire extinguisher training.
External HSE audits are conducted on a regular basis.
John Foster
Chief Executive
23 June 2020
ANNUAL REPORT 2020 21
Board of Directors and Secretary
Robin Williams, Non-executive Chairman
Robin joined the Board in September 2017. He has a wide breadth of corporate experience, gained at a range of quoted
and private businesses as well as from an early career in investment banking. He is currently Chairman at Keystone
Law Group plc and a non-executive director at van Elle Plc. Robin qualified as an accountant in 1982 after graduating
in engineering science from the University of Oxford. He worked in corporate finance for ten years at investment banks
including Salomon Brothers and UBS before leaving the City in 1992 to co-found the packaging business, Britton Group
plc. In 1998, he moved to Hepworth plc, the building materials group, and since 2004 he has focused on non-executive
work in public, private and private equity backed businesses. His financial background provides the experience required
as Chairman of the Group to review and challenge decisions and opportunities. Robin is a member of the Audit and
Remuneration Committees and is Chairman of the Nominations Committee.
John Foster, Chief Executive
John joined the Board in 2005. He is a Chartered Accountant and previously served as Group Finance Director for
Macro 4 plc (2000 - 2003) and Hamleys plc (1998 - 2000). Prior to joining Hamleys, he spent three years as Corporate
Finance Director of Ascot plc, an industrial holding company with a turnover of £300 million and over 1,600 employees.
Before becoming a plc director, John spent 11 years working in Private Equity for a leading UK investment bank following
training and CA qualification with Arthur Andersen in 1983. John’s finance background, together with his strong analytical
skills developed during his nine years working as a venture capitalist with a leading investment bank is well fitted to his
commitment to perform the Chief Executive role at FIH group plc.
Jeremy Brade, Non-executive Director
Jeremy joined the Board in 2009, he is a Director of Harwood Capital Management where he is the senior private equity
partner and has worked in UK private equity for over 19 years. He has led several successful acquisitions and public-
to-private transactions. Previously Jeremy was with the Foreign and Commonwealth Office (FCO) where he served at
the British High Commission in New Delhi and as the representative of Cyrus Vance and Lord Owen at the International
Conference on the Former Yugoslavia, and prior to joining the diplomatic service, Jeremy was an army officer. Using his
experience of acquisitions and various corporate transactions through Harwood Capital Management Limited, Jeremy
brings a wealth of knowledge and expertise on restructuring, funding and transforming companies. Jeremy is a member of
the Nominations, Audit and Remuneration Committees.
Robert Johnston, Non-executive Director
Robert joined the Board on 13 June 2017; he is an experienced non-executive director and investment professional
and has served on the boards of several quoted companies in both North America and in UK, including Fyffes PLC and
Supremex, Inc. Robert Johnston has been the Chief Strategy Officer and Executive Vice President at The InterTech Group,
Inc. and has over 20 years of experience in various financial and strategic roles. He is the principal representative of the
Jerry Zucker Revocable Trust. Robert brings experience on many transactions at both the corporate and asset level,
including debt and equity, and his experience in the banking sector will prove invaluable to developing the Group. Robert
represents the Company’s largest shareholder, “The Article 6 Marital Trust, created under the First Amended and Restated
Jerry Zucker Revocable Trust dated 4-2-07”, which has a beneficial holding of 3,596,553 ordinary Shares, representing
28.8% of the Company’s issued share capital.
He is currently on the boards of Colabor Group Inc, Corning Natural Gas Holding Corp, Supremex Inc, and
Circa Enterprises Inc. Robert is a member of the Nominations and Audit Committees and is Chairman of the
Remuneration Committee.
ANNUAL REPORT 2020 22
Board of Directors and Secretary
Dominic Lavelle, Non-executive Director
Dominic joined the Board on 1 December 2019; Dominic brings to FIH a wide breadth of corporate experience. Most
recently, Dominic was Chief Financial Officer of SDL plc from 2013 to 2018. He has over 15 years’ experience as a UK plc
Main Board Director and has been Finance Director/Chief Financial Officer of seven UK publicly traded companies including
Mothercare plc, Alfred McAlpine plc, Allders plc and Oasis plc. His experience in both permanent roles and turnaround
and restructuring projects across several business sectors: technology and services, retail, building, construction, support
services, property (agency, management, valuation, investment, development), leisure, care home and insurance is a great
benefit to the Group, particularly with the various business streams operated by FIC.
After graduating in Civil and Structural Engineering from the University of Sheffield in 1984, Dominic trained with Arthur
Andersen and qualified as a chartered accountant in 1989. He is currently on the board of McColls Retail Group plc, as
a non-executive director and Chair of the Audit & Risk Committee, and a director of Steenbok Newco 10 SARL, a wholly
owned subsidiary of the Steinhoff Group. Dominic is a member of the Nominations and Remuneration Committees and is
Chairman of the Audit Committee.
Carol Bishop, Company Secretary
Carol Bishop joined the Company in December 2011. She is a chartered accountant and has previously worked for London
Mining plc, an AIM listed company as Group reporting manager. Prior to this she spent three years at Hanson plc and prior
to that, six years at the Peninsular and Oriental Steam Navigation Company.
ANNUAL REPORT 2020 23
Corporate Governance Statement
Dear Shareholder,
As Chairman of the Company, I am responsible for leading the Board in applying good corporate governance and the
Board is committed to good governance across the business, both at an executive level and throughout its operations.
The Board strives to ensure that the objectives of the business, the principles and risks are underpinned by values of good
governance throughout the organisation.
The FIH group plc Board values include embedding a culture of ethics and integrity, and the adoption of higher governance
standards, to maintain its reputation by fostering good relationships with employees, shareholders and other stakeholders
to deliver long term business success.
In 2018 the AIM Rules for Companies were updated to acknowledge a change in investor expectations toward corporate
governance for companies admitted to trading on AIM, and the Board, took the decision to adopt the revised Quoted
Companies Alliance Corporate Governance Code 2018 (the “QCA Code”) which they believe is the most appropriate
recognised governance code for the Company.
The QCA Code has ten principles of corporate governance that the Company has committed to apply within the
foundations of the business, which are discussed in detail on the Company’s website www.fihplc.com in the Corporate
Governance section.
The Board is aware of the need to protect the interests of minority shareholders, and balancing those interests with those
of any more substantial shareholders, including those interests of the Jerry Zucker Revocable Trust, a major shareholder
holding nearly 29% of the issued share capital and voting rights, which are represented on the Board by the non-executive
director, Robert Johnston.
Beyond the Annual General Meeting, the Chief Executive and the Chairman offer to meet with all significant shareholders
after the release of the half year and full year results. The Chief Executive and the Chairman are the primary points of contact
for the shareholders and are available to answer queries over the phone or via email from shareholders throughout the year.
Business model and strategy.
The Group’s strategy is to continue to develop the potential of its existing companies: to fill storage capacity and make
further progress at Momart, to maintain the strong cash flow from PHFC and to invest in FIC to take full advantage of
the longer-term growth opportunities in the Falklands. While doing this management are also alert to the benefits of a
well-judged complimentary acquisition that would give increased scale to the Group and enhance the liquidity of FIH shares.
As set out in the Chief Executive’s Strategic Report, this established strategy has been affected by the impact of COVID-19
which has necessitated a temporary focus on cost saving, husbanding cash resources and restricting investment whilst
the damaging short term effects of the virus are dealt with in a way which ensures maximisation of the long term value of
the Group’s businesses
Risk Management
The Board has overall responsibility for the systems of risk management and internal control and for reviewing their
effectiveness. The internal controls are designed to manage rather than eliminate risk and provide reasonable but not
absolute assurance against material misstatement or loss. The key risks of the Group are presented in the Chief Executive’s
Strategic Report.
The Board has determined that an internal audit function is not required due to the small size of the Group and its
administrative function and the high level of director review and authorisation of transactions.
A Directors’ and Officers’ Liability Insurance policy is maintained for all directors and each director has the benefit of a Deed
of Indemnity.
Director independence
The Board considers itself sufficiently independent. The QCA Code suggests that a board should have at least two
independent non-executive directors. The Board has considered each non-executive director’s length of service and
interests in the share capital of the Group and consider that Mr Williams, Mr Brade, Mr Johnston and Mr Lavelle are
ANNUAL REPORT 2020
24
independent of the executive management and free from any undue extraneous influences which might otherwise affect
their judgement. All Board members are fully aware of their fiduciary duty under company law and consequently seek at all
times to act in the best interests of the Company as a whole.
Whilst the Company is guided by the provisions of the Code in respect of the independence of directors, it gives regard
to the overall effectiveness and independence of the contribution made by directors to the Board in considering their
independence, and does not consider a director’s period of service in isolation to determine this independence. The
Board acknowledges that Robert Johnston, who joined the Board on 13 June 2017, represents the Company’s largest
shareholder, “The Article 6 Marital Trust, created under the First Amended and Restated Jerry Zucker Revocable Trust
dated 4-2-07”, (the “Zucker Trust”), which has a beneficial holding of 3,596,553 ordinary Shares, representing 29% of the
Company’s issued share capital. The Board has considered Mr Johnston’s independence, given his representation of this
shareholding and all Board members have satisfied themselves that they consider Mr Johnston to be independent. This
is as a consequence of (i) the fact that Mr Johnston has considerable international investment expertise, and (ii) that the
shareholding of his employer in FIH represents only a small part of its wider portfolio, but nonetheless aligns him with the
interests of FIH shareholders generally. It is also relevant that Mr Johnston has relatively recently joined the Board of FIH and
does not have long established relations with any of the Group’s management, external advisers or businesses.
Jeremy Brade’s tenure, at over the suggested nine years for PLC directors, is not the determining factor in his independence,
which the Board judges in relation to his contribution and depth of knowledge of the Group’s operations and history. The
Board has asked Jeremy to stand for re-election at the AGM and will consider his position again before the AGM next year
with the Company’s and shareholders’ interests as the priority consideration. All directors retire by rotation and are subject
to election by shareholders at least once every three years. Any non-executive directors who have served on the Board for
over least nine years will be subject to annual re-election.
Time commitment of directors
John Foster, Chief Executive of the company, is the only full-time executive director. Robin Williams, Jeremy Brade Robert
Johnston and Dominic Lavelle have all been appointed on service contracts for an initial term of three years. Overall, it is
anticipated that non-executive directors spend 10-15 days a year on the Group’s business after the initial induction, which
includes a trip to the Group’s subsidiary in the Falkland Islands. However, the non-executive directors and the Chairman in
particular spend significantly more time than this on the business of the group.
All directors are expected to attend all Board meetings, the Annual General Meeting and any extraordinary general meetings.
Non-executive directors are expected to devote additional time in respect of any ad hoc matters, such as significant
investment opportunities, responding to market changes, such as the COVID-19 pandemic, consideration of any business
acquisitions, and any significant recruitment or corporate governance changes.
Skills and qualities of each director
The Board recognised the importance of having directors with a diverse range of skills, experience and attributes, which we
have across our current Board. Each Board member contributes a different skill set based on their own experience, which
is discussed in detail in the “Board of Directors and Secretary”.
Board Meetings
The Board meets frequently throughout the year to consider strategy, corporate governance matters, and performance.
Prior to each meeting, all directors receive appropriate and timely information. Since the last annual report was published
on 11 June 2019 there have been seventeen Board meetings, Robin Williams, John Foster and Robert Johnston have
attended all meetings. Jeremy Brade attended sixteen of the seventeen, and Dominic Lavelle has attended all meetings
since his appointment to the Board.
There have been two Remuneration Committee meetings in the past 12 months since 11 June 2019 and two Audit
Committee meetings, which were attended by all members of each committee. The appointment of the additional non-
executive director was handled by the Board and the Nominations Committee meets on an ad hoc basis to consider Board
composition and succession.
ANNUAL REPORT 2020 25
Corporate Governance Statement
CONTINUED
Board directors
The Board comprises Robin Williams, the non-executive Chairman, John Foster, the full time Chief Executive and three
other non-executive directors, Jeremy Brade, Robert Johnston and Dominic Lavelle.
Details of how each director keeps their skill set up to date
The Board as a whole is kept abreast by the Company’s lawyers with developments of governance, and by WH Ireland,
the Company’s Nominated Adviser, of updates to AIM regulations. The Group’s auditors, KPMG, meet with the Board as a
whole twice a year and keep the Board updated with any regulatory changes in finance and accounting.
Any external advice sought by the Board
During the year, KPMG provided advice on the new accounting standards and the control environments at the subsidiaries.
RSM Tenon, the Group’s tax advisors ensure compliance with taxation law and transfer pricing and the Company’s lawyers
advised on a number of areas.
Internal advisory responsibilities
The company secretary helps keep the Board up to date on areas of new governance and liaises with the Nominated
Adviser on areas of AIM requirements, and with the Company’s lawyers on areas such as Modern Slavery, Data Protection
and other legal matters. She also liaises with the Company’s tax advisers with regards to tax matters and with the Group’s
auditors with respect to the application of current and new accounting standards, and on the status on compliance
generally around the Group. The company secretary has frequent communication with the Chief Executive and access to
the Chairman, and is available to other members of the Board as and when required.
Board performance effectiveness
The directors have considered the effectiveness of the Board, committees and individual performance, and this was
discussed by the Board in the April 2019 meeting. The Board meets formally five times a year with update Board meetings
held in between these meetings as required. There is a strong flow of communication between the directors, in particular
the relationship between the Chief Executive and Chairman, who have regular additional calls or meetings. The agenda
for the formal meetings are set with the consultation of both the Chief Executive and Chairman, and papers are circulated
a week in advance of the meetings, giving directors ample time to review the documentation and enabling an effective
meeting. Resulting actions are tracked as matters arising and followed up at subsequent Board meetings to ensure that
they have been addressed.
Board performance evaluation
In 2019, the Chairman conducted an effectiveness review by means of a questionnaire, with comment on the Chairman
passed to Jeremy Brade as the Senior Independent Director at that time. The outcome of the appraisal is that the Board
has been effective in discharging its duties during the year. The review was conducted in March 2019 and discussed at the
April 2019 Board meeting, with useful conclusions in the areas of major shareholder representation in the Board, how the
non-executive directors interact with only one executive on the Board, the development of strategy and the presentation
of recommendations to the Board.
In a small but highly diversified and geographically dispersed group such as FIH, the Board recognise that creating an
effective leadership team is of vital importance. In 2020, the Board widened its review to include the thoughts of the
senior management team of the FIH group, with focus on the only executive director, the Chief Executive, to seek their
perspectives on the organisation and their suggestions for improvement.
Robin Williams
Chairman
23 June 2020
ANNUAL REPORT 2020 26
Audit Committee Report
The Audit Committee comprises the four non-executive directors: Jeremy Brade, Robin Williams, Robert Johnston and
Dominic Lavelle, and is chaired by Dominic Lavelle. The Audit Committee reviews the external audit activities, monitors
compliance with statutory requirements for financial reporting and reviews the half year and annual financial statements
before they are presented to the Board for approval. The Audit Committee also keeps under review the scope and results
of the audit and its cost effectiveness and the independence and objectivity of the Auditor and the effectiveness of the
Group’s internal control systems.
The Committee meets twice a year to review both the year end and half year results and KPMG, the Company’s auditors,
attend both of these meetings in person. It is the Audit Committee’s role to provide formal and transparent arrangements,
to consider how to apply financial reporting under IFRS, the Companies Act 2006, and the requirements of the QCA Code
and also to maintain an appropriate relationship with the independent auditor of the Group.
The current terms of reference of the Audit Committee were reviewed and updated in January 2018.
Effectiveness of the external audit process
The Audit Committee is committed to ensuring that the external audit process remains effective on a continuing basis as
set out below:
• Reviewing the independence of the incumbent auditor;
• Considering if the audit engagement planning, including the team quality and numbers is sufficient and appropriate;
•
•
•
Ensuring that the quality and transparency of communications with the external auditors are timely, clear, concise and
relevant and that any suggestions for improvements or changes are constructive;
Exercising professional scepticism, including but not limited to, looking at contrary evidence, the reliability of evidence,
the appropriateness and accuracy of management responses to queries, considering potential fraud and the need for
additional procedures and the willingness of the auditor to challenge management assumptions; and
Feedback is provided to the external auditor twice a year to the Audit Committee, after the full year audit and half year
review, with one-to-one discussions held beforehand between the Chair of the Audit Committee and the audit firm
partner.
Non-audit services provided by the external auditor
The Audit Committee keeps the appointment of external auditors to perform non-audit services for the Group under
continual review, receiving a report at each Audit Committee meeting. In the year ended 31 March 2020, there were no
non-audit fees paid to the external auditors, in the year ended 31 March 2019, £12,000 was payable for non-audit services,
less than 10% of the audit service fee.
Emerging Risks
The risk management approach is subject to continuous review and updates in order to reflect new and developing issues
which might impact business strategy. Emerging or topical risks are examined to understand their significance to the
business. Risks are identified and monitored through risk registers at the Group level and discussed at each Board meeting
to consider new threats.
Risks faced in relation to investments in material joint ventures
The Group has one joint venture, which has been dormant in the current and prior year. The balance sheet consists mainly
of debtors due from each of the parent companies and the Group is responsible for maintaining the accounting records of
the joint venture, therefore there are currently no significant risks which have been identified.
ANNUAL REPORT 2020 27
Audit Committee Report
CONTINUED
Areas of judgement
In making its recommendation that the financial statements be approved by the Board, the Audit Committee has taken
account of the following significant issues and judgements:
Going concern
The Group’s balance sheet and liquidity position at 31 March 2020 was strong with cash balances of £9.1 million (2019:
£6.2 million).
However, COVID-19 and the lockdown measures introduced in the UK on 23 March 2020 have significantly affected the
Group’s businesses, particularly in the UK, resulting in significant losses in the short term. The Group is currently incurring
losses at both Momart and PHFC, which are only partially offset by continued profitable trading at FIC.
At PHFC, where passenger numbers fell initially by 90%, a modest recovery in passenger volumes is being seen as
lockdown is gradually eased; further improvement is expected as business and retail activity around Portsmouth Harbour
slowly returns to normal.
At Momart, commercial gallery clients, auction houses and museums across the globe had closed their doors by the end
of March 2020 leading to a cessation in art handling throughout the lock down period, leaving income from art storage as
the company’s only source of revenue. However, commercial galleries have been steadily re-opening from early June and
further openings are expected from UK and international museums and galleries during the summer.
As a result of the lockdown and curtailment in demand for services at PHFC and at Momart, the Group has utilised
the UK Government’s Job Retention Scheme and a substantial number of the Group’s UK employees have been placed
on furlough.
In the Falkland Islands the limited number of infections have been successfully contained leaving the Islands quarantined
and effectively virus free with domestic business activity at close to normal levels. However, for the October 2020 - March
2021 tourist and cruise season, visitor numbers are highly uncertain and the significant uplift in commercial activity normally
seen at FIC is likely to be markedly reduced in the second half of the current financial year.
Since the emergence of the pandemic the Board has met regularly to review the financial implications for the Group.
Detailed monthly financial projections, including a twenty-four month cash-flow forecast, have been prepared in
discussion with the local management teams of each business. These forecast cash flows have been carefully
reviewed after consideration of the impact of the pandemic on revenue, cost saving measures, agreed salary cuts,
the curtailment of capital expenditure programmes, cessation of dividends, bank loan repayment holidays and the
various central and local government support measures. These forecasts have been updated regularly and reviewed
on fortnightly Board calls.
All loan facility terms have been reviewed with particular attention paid to covenants, none of which will be breached by
any currently foreseeable events.
After careful consideration of current cash balances, the cash flow forecasts, existing loan facilities plus an additional
interest free loan of £5.0 million under the UK Government’s CBILS loan guarantee scheme, the directors are satisfied that
the Group’s existing resources (including committed banking facilities) are sufficient to meet its medium-term needs, and
the Group is well placed to manage the impact of COVID-19 on its businesses and they have a reasonable expectation that
the Company and Group have adequate resources to continue in operational existence for the foreseeable future.
As a result, the directors have continued to adopt the going concern basis in preparing the financial statements.
Large housing construction contract
In 2019, FIC started construction of 18 houses for the Falklands Islands Government. This is the largest residential
construction contract for FIC. In accordance with IFRS 15: Revenue from Contracts with Customers, the revenue is
being recognised under the “input method” permitted under the standard, and therefore at each reporting period, the
“inputs” are assessed, including the materials consumed, the labour hours expended, and all other costs incurred.
ANNUAL REPORT 2020
28
These costs are then compared to the total expected costs to assess the revenue recognised. In order to use this method,
a reliable system of forecasting the outcome of the contract is required, and if these forecasts are found to be inaccurate
this would result in an over or understatement of revenue for that reporting period.
Impairment testing
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. Impairment is necessary when the recoverable amount
is less than the carrying value.
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 the carrying values.
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 advisers. The intangible assets, which have not been
fully amortised at 31 March 2020, include goodwill and the brand name. Goodwill is not subject to amortisation but to at
least annual impairment testing, and the Momart brand name was deemed to have an indefinite life, and amortisation was
ceased from 1 October 2013.
At PHFC, the key assumptions made in the estimation of future cash flows are: passenger numbers and the average
fare yield per passenger. In late March 2020, the impact of the lockdown initially resulted in falls in passenger numbers of
90% and volumes have remained low throughout the three-month lock down period. A slow recovery is expected in the
medium-term as children return to school and non-essential retail shops re-open. But there is a clear risk that the impact
of COVID-19 may continue in the medium-term, with increased numbers of employees working from home and/or some
choosing to avoid public transport and to travel by car, reducing the number of commuters using the ferry. In past years,
the small annual decline in passenger numbers, due to changing demographic and travel patterns, has been offset by
increases in ticket prices. Given the negative factors noted above, PHFC’s ability to maintain its profitability and cash flow
by offsetting volume declines by fare increases has been brought into question and this directly affects the recoverable
value of the Group’s investment in this company resulting in an impairment of historic goodwill of £4.0 million.
A more cautious view of Momart’s long-term growth prospects has been taken, driven by the weakness seen in the
international commercial art market in 2019 (pre COVID-19) and by the long-term implications of the virus on the global
economy. A widespread recession and market dislocation are likely to further dilute demand from ultra-high-net-worth
collectors and commercial buyers for some time. In the public sector, museum budgets are likely to be squeezed by
anticipated cuts in government spending and in addition visitor numbers are likely to be restricted by the need for social
distancing, resulting in less frequent, less complex exhibitions and a reduced demand for Momart’s services from museum
clients. These effects are likely to restrict the speed and extent of Momart’s expected recovery and have resulted in an
impairment of historic goodwill of £3.5 million.
Parent Company Investment in subsidiaries
The reviews of the recoverable amounts of Momart and PHFC were compared to the cost of investments held in the Parent
Company’s balance sheet, and during the year ended 31 March 2020, the Company’s investment in the Momart was
impaired by £3,713,000. No impairment was required to the PHFC cost of investment. Further detail has been provided in
note 11 with regards to the sensitivities of the assumptions.
New accounting standards
In the year commencing 1 April 2019, the Group adopted IFRS 16: Leases for the first time. This requires operating
leases to be brought onto the balance as a right-to-use asset with a corresponding lease liability of all future lease
payments. From 1 April 2019 there is no longer a distinction between finance and operating leases. There was no material
impact on current year profits as a result of this change in policy: profit before interest increased by £0.1 million and
the interest charge increased by £0.1 million due to the discounting of these liabilities. Our significant leases include
the 50-year ground rent at Gosport, which is payable at £60,000 a year until June 2061, two warehouses leased from
third parties by Momart for a remaining eight and nine years, and two head office leases for Momart and the FIC UK
head office.
ANNUAL REPORT 2020
29
Audit Committee Report
CONTINUED
The impact on the Group’s balance sheet at 31 March 2020, was to increase fixed assets by £2.3 million and increase
liabilities by £2.5 million. The £0.2 million difference was taken to reserves at 1 April 2019, as the Group has elected to
apply the modified retrospective approach.
Stock provisions
An inventory provision is booked when the realisable value from sale of the inventory is estimated to be lower than the
inventory carrying value, or where the stock is slow-moving, obsolete or damaged, and is therefore unlikely to be sold. The
quantification of the inventory provision requires the use of estimates and judgements and if actual future demand were to
be lower or higher than estimated, the potential amendments to the provisions could have a material effect on the results
of the Group.
Defined benefit pension liabilities
A significant degree of estimation is involved in predicting the ultimate benefit payments to pensioners in the FIC defined
benefit pension scheme. 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 advisers. The actuarial valuation includes estimates about discount rates and mortality rates, and the long-term
nature of these plans, make the estimates subject to significant uncertainties.
There are eleven pensioners currently receiving a monthly pension under the scheme and three deferred members.
Independent auditor
The independent auditor (KPMG LLP) was appointed in 1997. The current audit engagement partner has been in place
since the audit for the year ended 31 March 2016 and will step down after the audit for the year ended 31 March 2020.
The analysis of the auditor’s remuneration is shown in note 6. Total non-audit fees paid to KPMG were £12,000 in the
prior year and no non audit fees were payable in the year ended 31 March 2020. Tax advisory services are provided by
RSM UK Tax and Accounting Limited, and where possible, accounting services are provided by in-house support to the
subsidiaries of the Group, by the Company Secretary. The Audit Committee is responsible for ensuring that the Group’s
risks are understood, managed and mitigated as far as practicable.
Dominic Lavelle
Independent Non-executive Director
23 June 2020
ANNUAL REPORT 2020 30
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 2020.
Results and dividend
The Group’s result for the year is set out in the Group Income Statement. After the £7.5 million impairment of goodwill,
the Group loss for the year after taxation amounted to £4,728,000 (2019: Profit £3,031,000). Basic earnings per share on
underlying profits were 22.0 pence (2019: 24.4 pence).
Prior to the onset of COVID-19, an interim dividend of 1.80 pence per share was paid in January 2020. Given the adverse
impact of COVID-19 on the financial position of the Group the directors have decided not to recommend the payment of
a final dividend.
With the interim dividend of 1.80 pence paid in January 2020 the total dividend for the year to 31 March 2020 was
1.80 pence per share (2019: 5.0 pence per share). The total paid out in dividends during the year was £644,000 (2019:
£579,000). The suspension of dividends will be kept under close review and dividend payments will be resumed as soon
as the directors consider it prudent to do so.
Principal activities
The business of the Group during the year ended 31 March 2020 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
On 1 December 2019, an additional non-executive director, Dominic Lavelle, was appointed to the Board.
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 their 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.
ANNUAL REPORT 2020 31
Directors’ Report
CONTINUED
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
2020 or 31 March 2019.
Share capital and substantial interests in shares
During the year, 2,382 shares were issued following the exercise of options by the Chief Executive. Further information
about the Company’s share capital is given in note 25. Details of the Company’s executive share option scheme 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 23 June 2020:
Number of shares
Percentage of shares in issue
The Article 6 Marital Trust created under
the First Amended and Restated Jerry
Zucker Revocable Trust dated 2 April 2007
Quaero Capital Funds (Lux) – Argonaut
Martin Janser
J.F.C Watts
Deep Blue Ventures Holdings SPC DBVF
IV Segregated Portfolio
Christian Struck
3,596,553
1,057,158
897,324
797,214
680,001
380,000
28.76
8.45
7.18
6.38
5.44
3.04
Charitable and political donations
Charitable donations made by the Group during the year amounted to £19,312 (2019: £19,268), these were largely paid
to local community charities in Gosport and the Falkland Islands. There were no political donations in the year (2019: 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.
Greenhouse gas emissions
The 2018 Regulations introduced requirements under Part 15 of the Companies Act 2006 for large unquoted companies to
disclose their annual energy use and greenhouse gas emissions, and related information. However, the Group has applied
the option permitted to exclude any energy and carbon information relating to its subsidiary which the subsidiary would not
itself be obliged to include if reporting on its own account, this applies to all subsidiaries within the group. FIH group plc,
itself consumes less than 40MWh and therefore as a low energy user, it is not required to make the detailed disclosures of
ANNUAL REPORT 2020 32
energy and carbon information but is required to state, in its relevant report, that its energy and carbon information is not
disclosed for that reason. FIH group plc’s annual energy use and greenhouse gas emissions, and related information has
not been disclosed in this annual report as it is a low energy user.
Statement by the directors in performance of their statutory duties in accordance
with s172(1) Companies Act 2006
As an experienced Board, our intention is to behave responsibly and we consider that we, both as individuals and as a
collective Board, as representatives of FIH group plc and the Group as a whole, during the year ended 31 March 2020,
have acted in good faith, to promote the success of the Company for the benefit of its members as a whole, having regard
to the wider stakeholders as set out in s172 of the Companies Act. In the Falkland Islands and in Gosport, the subsidiaries
of the group work closely with local government and local communities and Momart, is an active and founding member of
several art communities and its employees give talks at conferences, sharing their experiences on the import and export of
art work. The details of the Group’s interaction with its wider stakeholders is as follows:
Customers:
PHFC’s commitment to provide a service between 5.30 and midnight 364 days a year means at certain times the service is
run at a loss but we recognize the social importance of the service to the local community. For special events, such as the
Great South Run, the ferry provides a two vessel rush hour service all day, for the convenience of customers.
PHFC tweets and posts information on Facebook about local pantomimes, football matches, special events offered by
local restaurants and other events of interest to the local community and visiting tourists.
The crews and customers are encouraged to post their own photos of the ferries, and sightings of any HMS warships in
the harbour.
The Environmental and Sustainability workgroup at Momart is planning to work with clients to share environmentally
conscious ideas.
Colleagues:
We have an experienced, diverse and dedicated workforce which we recognise as a key asset of our businesses. Therefore,
it is important that we continue to create the right environment to encourage and create opportunities for individuals and
teams to realise their full potential.
We have an open, collaborative and inclusive management structure and engage regularly with our employees. We do this
through an appraisal process, structured career conversations, employee surveys, company presentations, away days and
our well-being programme.
Suppliers:
At FIC, through effective collaboration, we aim to build long-term relationships with our suppliers so that we can develop
and operate great spaces for our occupiers. We are clear about our payment practices. We expect our suppliers to adopt
similar practices throughout their supply chains to ensure fair and prompt treatment of all creditors.
Communities:
We are committed to supporting the communities in which we operate, including local businesses, residents and the
wider public.
We engage with the local community at Gosport and in the Falkland Islands through our community donations, and
providing employment and work experience opportunities. Apprentices have been taken on at both Momart and PHFC, in
areas including Customs and Excise and Engineering.
ANNUAL REPORT 2020
33
Directors’ Report
CONTINUED
PHFC donates cruise tickets to charities and makes various donations and gifts to local charities as well as public
organisations such as the Fire Service. PHFC staff conduct organized collections on the pontoons, for example for the
Poppy Appeal, and permits local school children to collect charitable donations on board the vessels.
The business is actively lobbying local government for a bike hub at Gosport.
Environment:
At Momart, an Environmental and Sustainability workgroup has been set up to investigate current practices which include
areas such as, (i) transport, (ii) buildings and facilities, (iii) materials purchased for packaging, (iv) office practice. The group
is looking into steps which can be taken to make the current practices more environmentally favourable.
Steps already taken at Momart include:
• Use of LED lighting across all warehouse units
• Use of light sensors in the head office and Leyton site, so lights are triggered by movement.
• Use of renewable energy from solar panels installed on unit 14 of the warehouse.
•
Introduction of a rolling vehicle replacement program ensuring that the lowest emissions are achieved based not
only on current emissions regulations (currently EU6), but on emissions over the lifecycle of the vehicle including
manufacture and decommissioning.
Introduction of high-quality fleet maintenance procedures and selection of most effective parts such as low-rolling
resistance tyres, brake pads, filters, catalytic converters.
•
• Purchase of electrical vehicles is being considered.
•
• Route and load planning to reduce driving time and empty load journeys including collaboration with overseas partners
Training and monitoring drivers in environmental conscious driving techniques.
or customers to assist with this.
• An investigation of the life cycle of the packing materials is underway. Wood is purchased from sustainable sources
and where possible the crates are re-used, and the wood is fully recycled at the end of the life cycle.
• Waste segregation bins available in office areas to separate recyclable materials, organic waste and general waste.
At PHFC, tickets are from sustainable resources and coffee cup recycling is provided on the ferries and the pontoon.
The FIC supermarkets only offer paper bags for sale now, plastic bags are no longer available. The paper bag proceeds
are donated to charity. Environmentally friendly cups are available as an option in the FIC cafes, and all straws are paper.
Electricity used by FIC’s operations is largely provided by the wind turbines near Stanley, which provide the bulk of the
town’s energy supplies.
No disposable cups are used in any of the Group’s offices.
Governments and regulatory authorities
Our work brings us into regular contact with the Falkland Islands Government, and local authorities, as we deliver
construction projects, repairs and other work. We strive to be proactive and transparent, consulting with them to ensure
that our planning reflects local sensitivities.
PHFC staff attend meetings with the local government members and Gosport Borough Council.
The Momart Business Process and Compliance Manager attends quarterly industry forums, such as those Freight Transport
Association, discussing difficulties faced by the industry with the forum and any attending HMRC officers.
Media
All businesses are active on social media, using Twitter, Instagram, LinkedIn and Facebook.
ANNUAL REPORT 2020 34
Non-governmental organizations:
PHFC is a Heritage committee member
Momart representatives attend the UK Registrars’ Group conference and the European Registrars’ Group conference
and speak on issues such as customs procedures, Brexit, or specialized Export licences, such as the “Convention
on International Trade in Endangered Species of Wild Fauna and Flora”, which requires permits for the export of ivory,
rosewood and mahogany.
With over 40 years of experience and expertise in handling, transportation and storage of art, since 1993, Momart has held
a Royal Warrant from Her Majesty The Queen for our work with the Royal Collection.
Momart is a founding member of ARTIM, “the Art Transporter International Meeting” and attends the annual conference to
discuss the best practices and the key business issues concerning the packing, transportation and movement of works
of art.
Momart is also a member of the UK Registrars’ Group, which is a non-profit association, which provides a forum for
exchanging ideas and expertise between registrars, collection managers and other museum professionals in the United
Kingdom, Europe and worldwide.
Shareowners and analysts:
Beyond the Annual General Meeting, the Chief Executive and the Chairman offer to meet with all significant shareholders
after the release of the half year and full year results. The Chief Executive and the Chairman are the primary points of contact
for the shareholders and are available to answer queries over the phone or via email from shareholders throughout the year.
The Annual General Meeting provides a chance with investors and analysts to meet the Board face-to-face each year.
Debt providers:
We have several debt facilities provided by HSBC, with whom we engage through regular meetings and presentations to
ensure that they remain fully informed on all relevant areas of our business. This high-level engagement helps to support
our significant lines of credit available to us.
The relationship with HSBC spans back over the two decades since the Company has been in operation.
Capital allocation and dividend policy:
This year’s budget was approved by the Board following a comprehensive review of our strategic priorities, risks to and
potential opportunities arising in, our three businesses. We considered the input from our locally based directors about
expected changes in the market and anticipated customer needs.
Due to the impact of the COVIC-19 pandemic, the dividend payment will be suspended and will be kept under close review,
dividend payments will be resumed as soon as the directors consider it prudent to do so.
The capital allocation priorities are to support continued investment in organic business growth, funded by a strong balance
sheet, with the focus on long-term decisions to position the Group for success. In line with this policy, on 30 June 2019,
the Group refinanced the short-term temporary bank facility of £10 million, which was drawn down in December 2018 to
purchase the £19.6 million warehouse in Leyton, with a drawdown of a £13.9 million long-term mortgage, which increased
overall bank borrowings by £3.9 million and boosted the Group’s cash reserves by £3.9 million. Net borrowings were
unaffected. Capital repayments are £500,000 per annum for the first five years and £600,000 per annum for the following
five years, to be paid quarterly, with a bullet capital repayment of £8.375 million at the end of ten years, which the Group
and HSBC expect to be refinanced. Immediately following the draw down the Group entered into an interest rate swap
which fixed the cost of borrowing for the loan at 3.0% p.a. for 10 years. In late March 2020, a six-month repayment holiday
was granted by HSBC on the 10-year property loans.
ANNUAL REPORT 2020 35
Directors’ Report
CONTINUED
Annual General Meeting
The Company’s Annual General Meeting will be held at 14.00 on 17 September 2020. 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 2020 and in the preceding year is as follows:
John Foster
Robin Williams
Jeremy Brade
Robert Johnston
Dominic Lavelle**
Total
Salary / Fees
£’000
Health insurance
£’000
222
60
30
30
10
352
2
-
-
-
-
2
2020
Total
£’000
224
60
30
30
10
354
2019
Total
£’000
254
60
30
30
-
374
*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. However, for the year ended 31 March 2020,
given the impact of COVID-19 on the Group’s finances no bonus will be payable.
Full details of historic awards of deferred shares to John Foster and other options issued to senior staff, including all
grants and exercises are provided in note 24 Employee Benefits: Share based payments. During the year ending 31 March
2020, 15,171 nil cost options and 44,550 other share options were exercised by the Chief Executive (2019: 17,035 nil
cost options)
** From date of appointment
None of the directors of the Company receive any pension contributions or benefit from any Group pension scheme.
The Chief Executive participates in an annual performance related bonus arrangement, with 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.
Share Incentive Plan
In November 2012, the Company implemented an HMRC approved Share Incentive Plan 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 2020 the
Company purchased £600 of matching shares for John Foster.
Directors’ interests in shares
As at 31 March 2020, the nil cost share options issued to the executive director were as follows:
ANNUAL REPORT 2020 36
Date of grant
Number of options J L Foster
Exercisable from
16 Jun 2017
15 Jun 2018
15 Jun 2018
17 Jun 2019
17 Jun 2019
17 Jun 2019
Total
3,217
5,682
5,681
3,590
3,591
3,591
25,352
16 Jun 2020
15 Jun 2020
15 Jun 2021
17 Jun 2020
17 Jun 2021
17 Jun 2022
Expiry date
16 Jun 2021
15 Jun 2022
15 Jun 2022
17 Jun 2023
17 Jun 2023
17 Jun 2023
The mid-market price of the Company’s shares on 31 March 2020 was 194 pence and the range in the year was 194
pence to 328 pence.
The directors’ options extant at 31 March 2020 totalled 25,352 nil cost options. In total these options represented 0.2%
of the Company’s issued share capital.
The 331,648 options, granted to 33 other employees of the Group including subsidiary directors and senior management,
include 135,535 LTIP options granted in July 2019 and 99,199 LTIP options granted in March 2018 all at a 10 pence
exercise price and 96,914 options granted under the Company’s executive share option scheme between December 2010
and January 2015, with exercise prices of £2.675 to £3.535.
The 96,914 options granted under the Company’s executive share option scheme, are options to acquire ordinary shares
in the Company after a period of three years from the date of the grant and have been granted at an option price of not
less than market value at the date of the grant. The 234,734 LTIP awards have been granted at an exercise price of 10
pence. The exercise of the LTIP awards is subject to various performance conditions, which have been determined by the
remuneration committee after discussion with the Company’s advisers. The 25,352 nil cost options granted to the Chief
Executive are exercisable at no cost to him, and will vest provided he remains in employment for the required service
periods.
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:
Robin Williams
John Foster*
Jeremy Brade
Robert Johnston
Ordinary shares as at 31 March 2020
Ordinary shares as at 31 March 2019
1,935
*107,009
15,032
**3,647,853
1,935
*96,136
15,029
**3,647,853
*John Foster’s shareholding above includes all Shares held in the Company’s share incentive plan in which he has a
beneficial interest.
** Robert Johnston holds 51,300 shares in his own name, and as he is also the representative of the Company’s largest
shareholder, “The Article 6 Marital Trust, created under the First Amended and Restated Jerry Zucker Revocable Trust
dated 4-2-07”, which holds 3,596,553 Shares, Robert Johnston is interested in 3,647,853 Shares in total, representing
29.2 per cent. of the Company’s 12,504,519 total voting rights.
Approved by the Board and signed on its behalf by:
Carol Bishop
Company Secretary
23 June 2020
Kenburgh Court,133-137 South Street,
Bishop’s Stortford, Hertfordshire, CM23 3HX
ANNUAL REPORT 2020 37
Directors’ Report
CONTINUED
Statement of Directors’ responsibilities in respect of the Annual Report
and the Financial Statements
The directors are responsible for preparing the Annual Report, Strategic Report, Directors’ Report, and the Group and
Company 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 the AIM Rules of the London Stock Exchange, they are required to prepare the Group financial statements in
accordance with International Financial Reporting Standards as adopted by the EU (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, relevant and reliable;
• State whether they have been prepared in accordance with IFRSs as adopted by the EU;
• Assess the Group and Parent Company’s ability to continue as a going concern, disclosing, as applicable, matters
related to going concern; and
• Use the going concern basis of accounting unless they either intend to liquidate the Group or the Parent Company or
to cease operations, or have no realistic alternative but to do so.
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 are responsible for such
internal control as they determine is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error, and 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.
Under applicable law and regulations, the directors are also responsible for preparing a Strategic Report and a Directors’
Report that complies with that law and those regulations.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the
Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
ANNUAL REPORT 2020 38
Eight two bed units built for FIC’s rental portfolio
Our workboat ‘Darwin’ arriving in Stanley for the first time accompanied by the Clio FI launch
ANNUAL REPORT 2020 Independent
Independent
auditor’s
auditor’s
report
report
to the members of FIH group plc
to the members of FIH group plc
Overview
Overview
Materiality:
Materiality:
group financial
group financial
statements as a
statements as a
whole
whole
Coverage
Coverage
£150,000 (2019: £150,000) 4.0% of
£150,000 (2019: £150,000) 4.0% of
group profit before tax before
group profit before tax before
goodwill impairment (2019: 3.9% of
goodwill impairment (2019: 3.9% of
group profit before tax)
group profit before tax)
100% (2019: 100%) of group profit
100% (2019: 100%) of group profit
before tax
before tax
Key audit matters vs 2019
Key audit matters vs 2019
New risk
New risk
Going concern
Going concern
Recurring risks
Recurring risks
Recoverability of Art
Recoverability of Art
Logistics and Storage
Logistics and Storage
Brand Name and
Brand Name and
Goodwill and Ferry
Goodwill and Ferry
Services Goodwill and
Services Goodwill and
Property, Plant and
Property, Plant and
Equipment
Equipment
Recoverability of parent
Recoverability of parent
Company’s investment
Company’s investment
in, and debt due from,
in, and debt due from,
subsidiaries
subsidiaries
1. Our opinion is unmodified
1. Our opinion is unmodified
We have audited the financial statements of FIH group
We have audited the financial statements of FIH group
plc (“the Company”) for the year ended 31 March 2020
plc (“the Company”) for the year ended 31 March 2020
which comprise the Consolidated Income Statement,
which comprise the Consolidated Income Statement,
Consolidated Statement of Comprehensive Income,
Consolidated Statement of Comprehensive Income,
Consolidated Balance Sheet, Company Balance Sheet,
Consolidated Balance Sheet, Company Balance Sheet,
Consolidated Cash Flow Statement, Company Cash
Consolidated Cash Flow Statement, Company Cash
Flow Statement, Consolidated Statement of Changes in
Flow Statement, Consolidated Statement of Changes in
Shareholders’ Equity, Company Statement of Changes
Shareholders’ Equity, Company Statement of Changes
in Shareholders’ Equity, and the related notes,
in Shareholders’ Equity, and the related notes,
including the accounting policies in note 1.
including the accounting policies in note 1.
In our opinion:
In our opinion:
— the financial statements give a true and fair view
— the financial statements give a true and fair view
of the state of the Group’s and of the parent
of the state of the Group’s and of the parent
Company’s affairs as at 31 March 2020 and of the
Company’s affairs as at 31 March 2020 and of the
Group’s loss for the year then ended;
Group’s loss for the year then ended;
— the group financial statements have been
— the group financial statements have been
properly prepared in accordance with
International Financial Reporting Standards as
properly prepared in accordance with
International Financial Reporting Standards as
adopted by the European Union (IFRSs as
adopted by the European Union (IFRSs as
adopted by the EU);
adopted by the EU);
— the parent Company financial statements have
— the parent Company financial statements have
been properly prepared in accordance with IFRSs
been properly prepared in accordance with IFRSs
as adopted by the EU and as applied in accordance
as adopted by the EU and as applied in accordance
with the provisions of the Companies Act 2006;
with the provisions of the Companies Act 2006;
and
and
— the financial statements have been prepared in
— the financial statements have been prepared in
accordance with the requirements of the
accordance with the requirements of the
Companies Act 2006.
Companies Act 2006.
Basis for opinion
Basis for opinion
We conducted our audit in accordance with
We conducted our audit in accordance with
International Standards on Auditing (UK) (“ISAs (UK)”)
International Standards on Auditing (UK) (“ISAs (UK)”)
and applicable law. Our responsibilities are described
and applicable law. Our responsibilities are described
below. We have fulfilled our ethical responsibilities
below. We have fulfilled our ethical responsibilities
under, and are independent of the Group in
under, and are independent of the Group in
accordance with, UK ethical requirements including the
accordance with, UK ethical requirements including the
FRC Ethical Standard as applied to listed entities. We
FRC Ethical Standard as applied to listed entities. We
believe that the audit evidence we have obtained is a
believe that the audit evidence we have obtained is a
sufficient and appropriate basis for our opinion.
sufficient and appropriate basis for our opinion.
2. Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial statements
and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those
which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the
engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters. In arriving at our audit opinion above, the key audit matters,
in decreasing order of audit significance, were as follows:
40
Going concern
Refer to page 55
(accounting policy)
The risk
Our response
Disclosure quality
Our procedures included:
— Funding assessment: we performed an
inspection of bank correspondence to
corroborate the committed level of financing
and related covenant requirements;
— Our sector experience: we evaluated and
challenged assumptions used in the forecasts,
in particular those relating to revenue trends
and profit margins, through enquiries with
divisional managers and those responsible for
preparing and delivering the forecasts;
— Historical comparison: we evaluated the
adequacy of the budgets and forecasts used
by assessing the historical accuracy of the
Group’s previous budgets;
— Sensitivity analysis: We considered
sensitivities over the level of available financial
resources indicated by the Group’s financial
forecasts taking account of reasonably
possible (but not unrealistic) adverse effects
that could arise from these risks individually
and collectively, in particularly around the
impact of Covid-19 on the operations;
— Assessing transparency: Assessed the
completeness and accuracy of the matters
covered in the going concern disclosure
including that sufficient details were provided
concerning the impact of Covid-19 on the
Directors’ assessment and the additional
banking facilities that the Group has put in
place.
The financial statements explain how the
Board has formed a judgement that it is
appropriate to adopt the going concern
basis of preparation for the group and
parent company.
That judgement is based on an evaluation of
the inherent risks to the Group’s and
Company’s business model and how those
risks might affect the Group’s and
Company’s financial resources or ability to
continue operations over a period of at
least a year from the date of approval of the
financial statements.
The risks most likely to adversely affect the
Group’s and Company’s available financial
resources over this period were:
• Continued reduction in passenger
numbers in the Ferry Services CGU as a
result of Covid-19;
• Continued closure of museums and
galleries in the Art Logistics CGU as a result
of Covid-19;
• Restrictions on imports and exports in the
Art Logistics CGU as a result of Covid-19.
There are also less predictable but realistic
second order impacts, such as future
availability of funding and the erosion of
customer or supplier confidence as a result
of Covid-19, which could result in a rapid
reduction of available financial resources.
The risk for our audit was whether or not
those risks were such that they amounted
to a material uncertainty that may have cast
significant doubt about the ability to
continue as a going concern. Had they been
such, then that fact would have been
required to have been disclosed.
ANNUAL REPORT 2020
41
Brand Name
Recoverability of Art Logistics and
Storage
and
Goodwill and Recoverability of
Ferry Services Goodwill and
Property, Plant and Equipment
(£4.1 million; 2019: £11.6 million)
Refer to page 26
(Audit Committee Report),
page 58 (accounting policy) and
page 75-77 (financial disclosures).
The risk
Our response
Forecast based valuation:
Our procedures included:
— Our sector experience: we evaluated and
challenged assumptions used in the forecasts,
in particular those relating to revenue trends
and profit margins, through enquiries with the
divisional managers and those responsible for
preparing and delivering the forecasts;
— Benchmarking assumptions: we compared the
group’s assumptions in relation to key inputs
such as, projected economic growth and, with
the assistance of specialist valuation tools, the
discount rate to historical information and
externally derived data;
— Historical comparison: we evaluated the
adequacy of the budgets and forecasts used in
the value in use calculations by assessing the
historical accuracy of the Group’s previous
budgets;
— Sensitivity analysis: we performed a sensitivity
analysis on the key assumptions noted above;
— Comparing valuations: we compared the net
asset value of the Group with the market
capitalisation of the Group and assessed
whether any difference was an indicator of
impairment with reference to why that
difference has arisen;
— Assessing transparency: we assessed whether
the group’s disclosures about the sensitivity of
the outcome of the impairment assessment to
changes in key assumptions reflected the risks
inherent in the recoverable amounts of the Art
Logistics and Storage CGU and Ferry Services
CGU.
The carrying amount of the Art Logistics
and Storage CGU is significant and the
recoverable amount of that CGU is at risk of
fluctuation due primarily to fluctuating
future demand in the art logistics and
storage markets along with the inherent
uncertainty involved in forecasting and
discounting future cash flows. The Group
has recognised an impairment loss of
£3,500,000 on the goodwill on the Art
Logistics CGU as a result of changes in the
market resulting in significant changes in
forecast cash flows. The remaining carrying
amount of goodwill and intangible assets
associated with the Art Logistics CGU is
particularly sensitive to changes in key
assumptions.
The effect of these matters is that, as part
of our risk assessment for audit planning
purposes, we determined that the value in
use of the Art Logistics and Storage CGU
had a high degree of estimation
uncertainty, with a potential range of
reasonable outcomes greater than our
materiality for the financial statements as a
whole.
The carrying amount of the Ferry Services
CGU is significant and the recoverable
amount is at risk due primarily to
reductions in passenger numbers which has
been exacerbated by the Covid-19
pandemic. The estimated recoverable
amount is subjective due to the inherent
uncertainty involved in forecasting and
discounting future cash flows. The Group
has recognised an impairment loss of
£3,979,000 on the goodwill on the Ferry
Services CGU as a result of changes in the
market resulting in significant changes in
forecast cash flows. As a result, the carrying
amount of goodwill and property, plant and
equipment associated with the Ferry
Services CGU is particularly sensitive to
changes in key assumptions.
The effect of these matters is that, as part
of our re-assessment of audit risk, we
determined that the value in use of the
Ferry Services CGU, had a high degree of
estimation uncertainty, with a potential
range of reasonable outcomes greater than
our materiality for the financial statements
as a whole.
ANNUAL REPORT 2020
Recoverability of Parent
Company’s investment in, and
debt due from, subsidiaries
(£23.9 million investment in, and
£10.2 million debt due from,
subsidiaries; 2019: £27.6 million
investment in and £8.7 million debt
due from subsidiaries)
Refer to page 56
(accounting policy) and page 82-83
(financial disclosures).
42
The risk
Our response
Forecast-based valuation
The carrying amount of the parent
company’s investment in subsidiaries and
intra-group debtor balance represents
60.1% (2019: 46.7%) of the parent
company’s total assets.
They are significant and at risk of
irrecoverability due to weak demand in the
Art Logistics and Ferry Services businesses
as a result of the Covid-19 pandemic. The
Group has recognised an impairment loss of
£3,700,000 on the investment in the Art
Logistics subsidiary as a result of changes in
the market resulting in significant changes
in forecast cash flows. The estimated
recoverable amount of the remaining
balances is subjective due to the inherent
uncertainty involved in forecasting and
discounting future cash flows.
The effect of these matters is that, as part
of our risk assessment, we determined that
the recoverable amount of the cost of
investment in subsidiaries has a high degree
of estimation uncertainty, with a potential
range of reasonable outcomes greater than
our materiality for the financial statements
as a whole.
Our procedures included:
— Our sector experience: we evaluated
assumptions used in the relevant cash flow
forecasts, in particular those relating to
forecast revenue growth and profit margins,
through enquiries with the divisional
managers and those responsible for preparing
and delivering the forecasts;
— Benchmarking assumptions: we compared the
group’s assumptions in relation to key inputs
such as, projected economic growth and, with
the assistance of specialist valuation tools,
compared the discount rate to historical
information and externally derived data;
— Historical comparison: we evaluated the
adequacy of the budgets and forecasts used in
the value in use calculation by assessing the
historical accuracy of the Group’s previous
budgets;
— Sensitivity analysis: we performed a sensitivity
analysis on the key assumptions noted above;
— Comparing valuations: we compared the
carrying value of the parent Company’s
investments in subsidiaries and receivables
due from group entities to value in use
calculations for the relevant CGUs and to the
market capitalisation of the Group;
— Assessing transparency: we assessed the
adequacy of the parent Company’s disclosures
in respect of investments in subsidiaries and
group debtor balances.
ANNUAL REPORT 2020
43
3. Our application of materiality and an overview of the
3. Our application of materiality and an overview of the
Profit before tax before
goodwill impairment
scope of our audit
scope of our audit
Materiality for the Group financial statements as a
whole was set at £150,000 (2019: £150,000),
determined with reference to a benchmark of Group
profit before tax before goodwill impairment of which
it represents 4.0% (2019: 3.9% of group profit before
tax).
£3.7 million (2019: £3.9
Materiality for the Group financial statements as a
million profit before tax)
whole was set at £150,000 (2019: £150,000),
determined with reference to a benchmark of Group
profit before tax before goodwill impairment of which
it represents 4.0% (2019: 3.9% of group profit before
tax).
Materiality for the parent company financial
statements as a whole, as communicated by the group
audit team, was set at £80,000 (2019:
£100,000). This is lower than the materiality we would
otherwise have determined with reference to a
benchmark of the Company’s net assets, of which it
represents 0.36% (2019: 0.24%).
Materiality for the parent company financial
statements as a whole, as communicated by the group
audit team, was set at £80,000 (2019:
£100,000). This is lower than the materiality we would
otherwise have determined with reference to a
benchmark of the Company’s net assets, of which it
represents 0.36% (2019: 0.24%).
We agreed to report to the Audit Committee any
corrected or uncorrected identified misstatements
exceeding £7,500 (2019: £7,500), in addition to other
identified misstatements that warranted reporting on
qualitative grounds.
We agreed to report to the Audit Committee any
corrected or uncorrected identified misstatements
Profit before tax before
exceeding £7,500 (2019: £7,500), in addition to other
goodwill impairment
identified misstatements that warranted reporting on
Group materiality
qualitative grounds.
Of the group’s four (2019: four) components, we
subjected all (2019: all) to full scope audits for group
purposes. The group team performed the audits of
each of the components. The audit was performed
using the materiality levels set out opposite, having
regard to the mix of size and risk profile of the Group
across the components.
Of the group’s four (2019: four) components, we
subjected all (2019: all) to full scope audits for group
purposes. The group team performed the audits of
each of the components. The audit was performed
using the materiality levels set out opposite, having
regard to the mix of size and risk profile of the Group
across the components.
Group revenue
Profit before tax before
Group Materiality
£150,000 (2019: £150,000)
goodwill impairment
Group Materiality
£150,000 (2019: £150,000)
£3.7 million (2019: £3.9
£150,000
million profit before tax)
Whole financial
statements materiality
(2019: £150,000)
£100,000
Range of materiality at 4
components (£80,000 -
£100,000)
(2019: £100,000)
£150,000
Whole financial
statements materiality
(2019: £150,000)
£100,000
Range of materiality at 4
components (£80,000 -
£100,000)
(2019: £100,000)
£7,500
Misstatements reported to the audit
committee (2019: £7,500)
Profit before tax before
goodwill impairment
Group materiality
£7,500
Misstatements reported to the audit
committee (2019: £7,500)
Group revenue
Group profit before tax
Group profit before tax
The components within the scope of our work
accounted for the percentages illustrated opposite.
The components within the scope of our work
accounted for the percentages illustrated opposite.
100%
100%
100
Group total assets
100
Group total assets
100%
100%
100
100
Full scope for group audit purposes 2020
Full scope for group audit purposes 2020
Full scope for group audit purposes 2019
Full scope for group audit purposes 2019
Residual components
Residual components
ANNUAL REPORT 2020
4. We have nothing to report on going concern
5. We have nothing to report on the other information in the
Annual Report
44
The Directors have prepared the financial statements on the
going concern basis as they do not intend to liquidate the
Company or the Group or to cease their operations, and as they
have concluded that the Company’s and the Group’s financial
position means that this is realistic. They have also concluded
that there are no material uncertainties that could have cast
significant doubt over their ability to continue as a going concern
for at least a year from the date of approval of the financial
statements (“the going concern period”).
Our responsibility is to conclude on the appropriateness of the
Directors’ conclusions and, had there been a material
uncertainty related to going concern, to make reference to that
in this audit report. However, as we cannot predict all future
events or conditions and as subsequent events may result in
outcomes that are inconsistent with judgements that were
reasonable at the time they were made, the absence of
reference to a material uncertainty in this auditor's report is not
a guarantee that the group or the company will continue in
operation.
We identified going concern as a key audit matter (see section 2
of this report). Based on the work described in our response to
that key audit matter we are required to report to you if we have
concluded that the use of the going concern basis of accounting
is inappropriate or there is an undisclosed material uncertainty
that may cast significant doubt over the use of that basis for a
period of at least a year from the date of approval of the financial
statements.
We have nothing to report in these respects.
The directors are responsible for the other information
presented in the Annual Report together with the financial
statements. Our opinion on the financial statements does not
cover the other information and, accordingly, we do not express
an audit opinion or, except as explicitly stated below, any form
of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing
so, consider whether, based on our financial statements audit
work, the information therein is materially misstated or
inconsistent with the financial statements or our audit
knowledge. Based solely on that work we have not identified
material misstatements in the other information.
Strategic report and directors’ report
Based solely on our work on the other information:
— we have not identified material misstatements in the
strategic report and the directors’ report;
— in our opinion the information given in those reports for the
financial year is consistent with the financial statements;
and
— in our opinion those reports have been prepared in
accordance with the Companies Act 2006.
6. We have nothing to report on the other matters on which
we are required to report by exception
Under the Companies Act 2006, we are required 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.
We have nothing to report in these respects.
7. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 37,
the directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and fair
view; such internal control as they determine is necessary to
enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error; assessing
the Group and parent Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going
concern; and using the going concern basis of accounting unless
they either intend to liquidate the Group or the parent Company
or to cease operations, or have no realistic alternative but to do
so.
ANNUAL REPORT 2020
45
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to
issue our opinion in an auditor’s report. Reasonable assurance
is a high level of assurance, but does not guarantee that an
audit conducted in accordance with ISAs (UK) will always detect
a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually
or in aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of the
financial statements.
A fuller description of our responsibilities is provided on the
FRC’s website at www.frc.org.uk/auditorsresponsibilities.
8. The purpose of our audit work and to whom we owe our
responsibilities
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.
Craig Parkin
(Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
St Nicholas House
Park Row
Nottingham
NG1 6FQ
23 June 2020
ANNUAL REPORT 2020
Consolidated Income Statement
FOR THE YEAR ENDED 31 MARCH 2020
46
Before
Before
non-trading
Non-trading
non-trading
Non-trading
items
2020
£’000
Total
2020
£’000
items
2019
£’000
items
2019
£’000
Notes
4
Revenue
Cost of sales
Gross profit
Other administrative
expenses
Consumer Finance
interest income
items
2020
£’000
44,600
(26,521)
18,079
(13,745)
231
-
-
-
-
-
44,600
42,528
(26,521)
(24,777)
18,079
17,751
(13,745)
(13,546)
231
172
-
36
(555)
(519)
3,858
(827)
3,031
5
6
8
9
Goodwill impairment
-
(7,479)
(7,479)
Operating expenses
(13,514)
(7,479)
(20,993)
(13,374)
4,565
(7,479)
(2,914)
4,377
Operating
profit / (loss)
Finance income
Finance expense
Net financing costs
13
(869)
(856)
-
-
-
13
(869)
(856)
Profit before tax
3,709
(7,479)
(3,770)
Taxation
(958)
-
(958)
2,751
(7,479)
(4,728)
Profit / (loss) for the
year
attributable to
equity holders of
the company
10
Earnings per share
Basic
Diluted
22.0p
21.7p
-37.8p
24.4p
-37.8p
24.1p
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
2019
£’000
42,528
(24,777)
17,751
(13,546)
172
-
(13,374)
4,377
36
(555)
(519)
3,858
(827)
3,031
24.4p
24.1p
* The Group’s results are being reported under IFRS 16 for the first time in the year to 31 March 2020 following
the mandatory adoption of the standard from 1 April 2019. In accordance with the transitional provisions, the
group has elected not to restate the comparatives. See Note 1.
The accompanying notes form part of these Financial Statements.
ANNUAL REPORT 2020
47
Consolidated Statement of Comprehensive Income
FOR THE YEAR ENDED 31 MARCH 2020
Notes
Cash flow hedges: effective portion of changes in fair value
17
Deferred tax on effective portion of changes in fair value
Items that are or may be reclassified subsequently to profit or loss
23
17
Re-measurement of the FIC defined benefit pension scheme
Movement on deferred tax asset relating to the pension scheme
Items which will not ultimately be recycled to the income statement
Other comprehensive (loss) / income
(Loss) / profit for the year
Total comprehensive (loss) / income
The accompanying notes form part of these Financial Statements.
2020
£’000
(521)
102
(419)
136
(35)
101
(318)
(4,728)
(5,046)
2019
£’000
4
-
4
36
(9)
27
31
3,031
3,062
ANNUAL REPORT 2020 Consolidated Balance Sheet
AT 31 MARCH 2020
48
Notes
11
12
13
15
16
17
18
19
16
20
22
21
Non-current assets
Intangible assets
Property, plant and equipment
Investment properties
Investment in Joint venture
Debtors due in more than one year
Hire purchase lease receivables
Deferred tax assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Hire purchase lease receivables
Cash and cash equivalents
Total current assets
TOTAL ASSETS
Current liabilities
Trade and other payables
Interest-bearing loans and borrowings
Derivative financial instruments
Corporation tax payable
Total current liabilities
Non-current liabilities
21
Interest-bearing loans and borrowings
Derivative financial instruments
23
17
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
2020
£'000
4,246
41,712
6,458
259
88
519
677
2019
£'000
11,766
38,664
5,239
259
88
584
721
53,959
57,321
5,374
8,696
596
9,108
23,774
77,733
(8,611)
(1,165)
(537)
(233)
5,756
7,761
659
6,184
20,360
77,681
(9,605)
(10,645)
(16)
(399)
(10,546)
(20,665)
(22,942)
(7,148)
-
-
(2,604)
(2,849)
(28,395)
(38,941)
38,792
1,250
17,590
703
19,784
(535)
38,792
(2,772)
(2,529)
(12,449)
(33,114)
44,567
1,250
17,590
1,162
24,579
(14)
44,567
These financial statements, of which the accompanying notes form part, were approved by the Board of directors on
23 June 2020 and were signed on its behalf by:
J L Foster
Director
ANNUAL REPORT 2020
49
Company Balance Sheet
AT 31 MARCH 2020
Notes
13
14
19
17
Non-current assets
Investment properties
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
22
21
Total current assets
TOTAL ASSETS
Current liabilities
Trade and other payables
Interest-bearing loans and borrowings
Derivative financial instruments
Corporation tax payable
Total current liabilities
Non-current liabilities
21
Interest-bearing loans and borrowings
TOTAL LIABILITIES
Net assets
25
Capital and reserves
Equity share capital
Share premium account
Other reserves
Retained earnings
Hedging reserve
Total equity
2020
£'000
19,373
23,989
10,207
121
2019
£'000
19,582
27,653
8,717
4
53,690
55,956
30
-
5,766
5,796
30
24
1,768
1,822
59,486
57,778
(7,019)
(5,716)
(243)
(537)
(21)
(10,000)
(16)
-
(7,820)
(15,732)
(13,207)
-
(21,027)
(15,732)
38,459
42,046
1,250
1,250
17,590
17,590
5,389
6,910
14,765
16,310
(535)
(14)
38,459
42,046
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 £2,592,000 (2019: Profit of £1,716,000).
These financial statements, of which the accompanying notes form part, were approved by the Board of directors on
23 June 2020 and were signed on its behalf by:
J L Foster
Director
Registered company number: 03416346
ANNUAL REPORT 2020
Consolidated Cash Flow Statement
FOR THE YEAR ENDED 31 MARCH 2020
50
Notes
11
12
13
11
23
24
Cash flows from operating activities
(Loss)/profit for the year after taxation
Adjusted for:
(i) Non-cash items:
Amortisation
Depreciation: Property, plant and equipment
Depreciation: Investment properties
Goodwill impairment
Loss on disposal of fixed assets
Interest cost on pension scheme liabilities
Equity-settled share-based payment expenses
Non-cash items adjustment
(ii) Other items:
Exchange gains
Bank interest receivable
Bank interest payable
Lease liability finance expense
Decrease in hire purchase leases receivable
Corporation and deferred tax expense
Other adjustments
Operating cash flow before changes in working capital
Increase in trade and other receivables
Decrease/(increase) in inventories
Decrease in trade and other payables
Changes in working capital
Cash generated from operations
Payments to pensioners
Corporation taxes paid
Net cash flow from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of software
Interest received
Net cash flow from investing activities
Continued on next page.
2020
£'000
2019
£'000
(4,728)
3,031
68
1,863
132
7,479
78
65
97
66
1,272
99
-
20
72
69
9,782
1,598
(54)
(13)
464
340
128
958
1,823
6,877
(935)
471
(980)
(1,444)
5,433
(97)
(659)
4,677
-
(36)
248
235
191
827
1,465
6,094
(418)
(1,128)
(924)
(2,470)
3,624
(103)
(560)
2,961
(3,361)
(22,432)
(27)
13
-
36
(3,375)
(22,396)
ANNUAL REPORT 2020
51
Consolidated Cash Flow Statement Continued
FOR THE YEAR ENDED 31 MARCH 2020
Notes
Cash flow from financing activities
Bank loan drawn down
Repayment of bank loans
Bank interest paid
Hire purchase loan drawn down
Repayment of lease liabilities principal
Lease liabilities interest paid
Cash inflow on option exercises
Cash outflow on nil cost option exercise
Dividends paid
Net cash flow from financing activities
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at start of year
Exchange gains on cash balances
Cash and cash equivalents at end of year
The accompanying notes form part of these Financial Statements.
2020
£'000
13,875
(10,955)
(478)
534
(395)
(340)
-
(29)
(644)
1,568
2,870
6,184
54
9,108
2019
£'000
10,000
(514)
(234)
172
(131)
(235)
150
(28)
(579)
8,601
(10,834)
17,018
-
6,184
ANNUAL REPORT 2020
52
Company Cash Flow Statement
FOR THE YEAR ENDED 31 MARCH 2020
Notes
Cash flows from operating activities
2020
£'000
2019
£'000
Holding Company (loss) / profit for the year
(2,592)
1,716
Adjusted for:
Bank interest receivable
Bank interest payable
Equity-settled share-based payment expenses
14
13
Impairment of subsidiary
Depreciation
Corporation and deferred tax expense
Non-cash and other items adjustment
Operating cash flow before changes in working capital
Decrease in trade and other receivables
Increase in trade and other payables
Changes in working capital and provisions
Cash generated from operations
Corporation taxes paid
Net cash flow from operating activities
Cash generated from investing activities
Interest received
Purchase of property, plant and equipment
Net cash flow from investing activities
Cash flow from financing activities
Bank loan drawn down
Bank loan repaid
Interest paid
Cash outflows in inter-company borrowing
Cash inflows in inter-company borrowing
Cash inflow on option exercise
Cash inflow outflow on nil cost option exercise
Dividends paid
Net cash flow from financing activities
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at start of year
Cash and cash equivalents at end of year
The accompanying notes form part of these Financial Statements.
(13)
372
48
3,713
209
72
4,401
1,809
-
9
9
1,818
(17)
1,801
13
-
13
(36)
139
46
-
60
25
234
1,950
(18)
128
110
2,060
(17)
2,043
36
(19,642)
(19,606)
13,875
10,000
(10,425)
(358)
-
(125)
(1,515)
(2,693)
1,280
-
(29)
(644)
2,184
3,998
1,768
5,766
-
150
(28)
(579)
6,725
(10,838)
12,606
1,768
ANNUAL REPORT 2020
53
Consolidated Statement of Changes in
Shareholders’ Equity
FOR THE YEAR ENDED 31 MARCH 2020
Equity share
capital
£’000
Share premium
account
£’000
Other
reserves
£’000
Retained
earnings
£’000
Hedge
reserve
£’000
Total
equity
£’000
Balance 1 April 2018
1,243
17,447
1,162
22,059
(18)
41,893
-
4
-
4
-
-
-
-
(14)
-
(14)
-
-
(521)
3,031
4
27
3,062
122
69
(579)
(388)
44,567
(153)
44,414
(4,728)
-
(419)
-
101
Profit for the year
Cash flow hedges: effective
portion of changes in fair
value
Re-measurement of the
defined benefit pension
liability, net of tax
Total comprehensive
income
Transactions with owners in
their capacity as owners:
Share option exercise
Share based payments
Dividends paid
Total transactions with
owners
-
-
-
-
7
-
-
7
-
-
-
-
143
-
-
143
-
-
-
-
-
-
-
-
3,031
-
27
3,058
(28)
69
(579)
(538)
Balance at 31 March 2019
1,250
17,590
1,162
24,579
-
-
-
(153)
1,250
17,590
1,162
24,426
Restatement related to the
application of IFRS 16
Restated balance 31
March 2019
Loss for the year
Reserves transfer
Cash flow hedges: effective
portion of changes in fair
value
Re-measurement of the
defined benefit pension
liability, net of tax
Total comprehensive loss
Transactions with owners in
their capacity as owners:
Share option exercise
Share based payments
Dividends paid
Total transactions with
owners
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(4,728)
(459)
-
-
459
102
101
(459)
(4,066)
(521)
(5,046)
-
-
-
-
(29)
97
(644)
(576)
-
-
-
-
(29)
97
(644)
(576)
Balance at 31 March 2020
1,250
17,590
703
19,784
(535)
38,792
The accompanying notes form part of these Financial Statements.
ANNUAL REPORT 2020 54
Company Statement of Changes in
Shareholders’ Equity
FOR THE YEAR ENDED 31 MARCH 2020
Equity share
capital
£’000
Share premium
account
£’000
Other
reserves
£’000
Retained
earnings
£’000
Hedge
reserve
£’000
Total
equity
£’000
Balance at 1 April 2018
1,243
17,447
6,910
15,132
(18)
40,714
Profit for the year
Cash flow hedges: effective
portion of changes in fair
value
Total comprehensive
income
Transactions with owners in
their capacity as owners:
Share option exercise
Share based payments
Dividends paid
Total transactions with
owners
-
-
-
7
-
-
7
-
-
-
143
-
-
143
-
-
-
-
-
-
-
1,716
-
1,716
(28)
69
(579)
(538)
-
4
4
-
-
-
-
1,716
4
1,720
122
69
(579)
(388)
Balance at 31 March 2019
1,250
17,590
6,910
16,310
(14)
42,046
Loss for the year
Reserves transfer
Cash flow hedges: effective
portion of changes in fair
value
Total comprehensive loss
Transactions with owners in
their capacity as owners:
Share option exercise
Share based payments
Dividends paid
Total transactions with
owners
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(2,592)
(1,521)
-
1,521
102
-
-
(521)
(2,592)
-
(419)
(1,521)
(969)
(521)
(3,011)
-
-
-
-
(29)
97
(644)
(576)
-
-
-
-
(29)
97
(644)
(576)
Balance at 31 March 2020
1,250
17,590
5,389
14,765
(535)
38,459
The £2,592,000 loss for the year includes a £3,713,000 impairment of the Company’s investment in Momart Limited.
The accompanying notes form part of these Financial Statements.
ANNUAL REPORT 2020 55
Notes to the Financial Statements
1. Accounting policies
General information
FIH group plc (the “Company”) is a company limited by shares 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 a result of COVID-19 and the resulting lockdown in the UK, together with the closure of UK and international museums
and art galleries, the Group is currently incurring substantial monthly losses at PHFC and Momart, which are only partially
offset by continued trading in FIC. A substantial number of UK employees have been placed on furlough, as the Group
has taken advantage of the UK Government’s Job Retention Scheme. Since the severity of the situation has been known,
the Group has prepared detailed twenty-four month cash flows forecasts in discussion with the local management teams
of each business, which factor in the likely cash flows after consideration of the impact of the pandemic on revenue,
salary cuts, bank loan repayment holidays and government assistance. These have been updated regularly and reviewed
at fortnightly Board calls where key assumptions have been monitored against actual performance to ensure that there
was no increased risk of more adverse outcomes developing including a deterioration in FIC trading or a more protracted
lockdown, beyond those contemplated in the “realistic worst case” scenario.
Loan facility terms have been reviewed with particular attention paid to covenants, none of which are forecast to be
breached by any currently foreseeable events. After careful consideration of the cash flow forecasts, including the “realistic
worst case” scenario, by the Board, together with the additional £5.0 million facility arranged under the UK Government’s
CBILS loan guarantee scheme, the directors are satisfied the Group’s existing resources (including committed banking
facilities) are sufficient to meet its needs. As a consequence, the directors believe that the Group is well placed to manage
the impact of COVID-19 on its businesses and have a reasonable expectation that the Company and Group have adequate
resources to continue in operational existence for the foreseeable future, and have continued to adopt the going concern
basis in preparing the financial statements.
ANNUAL REPORT 2020 56
The Group’s business activities, together with the factors likely to affect its future development, performance and position
are set out in more detail in the Chief Executive’s Strategic Report. The financial position of the Group, its cash flows,
liquidity position and 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 areas considered by the Board in relation to its review of the Group’s status as a “going concern” are highlighted in the
report of the Audit Committee on page 26.
After a detailed review, the directors consider that it remains appropriate to continue 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 non-trading items.
Such items arise because of their size or nature. In the year ended 31 March 2020, there were two non-trading items,
the impairment of the £3,979,000 goodwill which arose on the 2005 PHFC acquisition and the £3,500,000 impairment
of the goodwill, which arose on the 2008 acquisition of Momart. There were no non-trading items in the year ended
31 March 2019.
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.
ANNUAL REPORT 2020 57
Notes to the Financial Statements
CONTINUED
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:
Right to use assets
Freehold buildings
Long leasehold land and buildings
Vehicles, plant and equipment
Ships
5 – 50 years
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 - Group
Investment properties are properties held either to earn rental income or for capital appreciation or for both. Investment
properties 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 property. The investment property portfolio in the Falkland Islands consists mainly of properties built by
FIC, and these and the few properties purchased are depreciated over an estimated useful life of 50 years.
Investment properties - Company
The investment property in the Company consists of the Leyton site purchased in December 2018, with five warehouses
which are rented to Momart. The purchase price allocated to land has not been depreciated, and the purchase price
allocated to each property has been depreciated on a straight-line basis over the expected useful life, after consideration
of the age and condition of each property, down to an estimated residual value of nil.
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 is not depreciated.
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.
Intangible assets
Goodwill
Goodwill arises on the acquisition of subsidiaries and businesses.
ANNUAL REPORT 2020
58
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. At 31 March 2020, all goodwill arising on acquisitions prior to 1 April 2006 has either been offset against other
reserves on acquisition, or written off through the income statement as an impairment.
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. 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.
ANNUAL REPORT 2020 59
Notes to the Financial Statements
CONTINUED
Employee share awards
The Group provides benefits to certain employees (including directors) in the form of share-based payment transactions,
whereby the recipient renders service in return for shares or rights over future shares (“equity settled transactions”). The
cost of these equity settled transactions with employees is measured by reference to an estimate of their fair value at
the date on which they were granted using an option input pricing model taking into account the terms and conditions
upon which the options were granted. The amount recognised as an expense is adjusted to reflect the actual number of
share options for which the related service and non-market performance conditions are expected to be met, such that
the amount ultimately recognised as an expense is based on the number of share options that meet the related service
and non-market performance conditions at the vesting date. For share-based payment awards with 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. 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.
Consumer Finance interest income
Consumer Finance interest income consists of interest receivable on the hire purchase debtors, which is calculated on a
sum of digits basis, which allocates more interest on the earlier periods, when the debt is higher, and interest receivable
from charge cards, which are FIC credit cards issued to customers including staff.
Pensions
Defined contribution pension schemes
The Group operates defined contribution schemes at PHFC and Momart, and FIC employees are enrolled in the FIPS,
“Falkland Islands Pension Scheme”. The assets of all these 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. 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.
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. 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.
ANNUAL REPORT 2020 60
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.
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 loss.
ANNUAL REPORT 2020 61
Notes to the Financial Statements
CONTINUED
Revenue recognition
IFRS 15 Revenue, requires revenue to be recognised under a ‘five-step’ approach when a customer obtains control of
goods or services in line with the performance obligations identified on the contract. Under IFRS 15, revenue recognition
must reflect the standard’s five-step approach which requires the following:
Identification of the contract with the customer;
Identification of the performance obligations in the contract;
•
•
• Determination of the transaction price;
• Allocation of the transaction price to the performance obligations;
• Recognition of the revenue when (or as) each performance obligation is satisfied.
In accordance with the standard, revenue is recognised, net of discounts, VAT, Insurance Premium Tax and other sales
related taxes, either at the point in time a performance obligation has been satisfied or over time as control of the asset
associated with the performance obligation is transferred to the customer.
For all contracts identified, the Group determines if the arrangement with the customer creates enforceable rights and
obligations. For contracts with multiple components to be delivered, such as the inbound and outbound leg of moving art
exhibitions as well as delivering, handling and administration services, management applies judgement to consider whether
those promised goods and services are:
• Distinct – to be accounted for as separate performance obligations;
• Not distinct – to be combined with other promised goods or services until a bundle is identified that is distinct; or
• Part of a series of distinct goods and services that are substantially the same and have the same pattern of transfer to
the customer.
At contract inception the total transaction price is estimated, being the amount to which the Group expects to be entitled
and to which it has present enforceable rights under the contract. Once the total transaction price is determined, the Group
allocates this to the identified performance obligations in proportion to their relative standalone selling prices and revenue
is then recognised when (or as) those performance obligations are satisfied.
Discounts are allocated proportionally across all performance obligations in the contract unless directly observable evidence
exists that the discount relates to one or more, but not all, performance obligations.
For each performance obligation, the Group determines if revenue will be recognised over time or at a point in time. For
each performance obligation to be recognised over time, the Group applies a revenue recognition method that faithfully
depicts the Group’s performance in transferring control of the goods or services to the customer. This decision requires
assessment of the nature of the goods or services that the Group has promised to transfer to the customer. The Group
applies an appropriate methodology, typically based on the expected profile of the deferral event (for example claims cost
through the policy term or time elapsed).
Revenue streams of the Group
The revenues streams of the Group have been analysed and considered in turn.
Retail revenues arising from the sale of goods and recognised at the point of sale
The retail revenues in the Falkland Islands arise from the sale of goods in the retail outlets and the sale of vehicles and
parts at Falklands 4x4, are recognised at the point of sale, which is usually at the till, when the goods are paid for by cash
or credit or debit card.
Housing revenue is generally recognised on completion of the single performance obligation of supplying a house, once the
keys are handed over on legal completion. However, the contract for the 18 houses for the Falklands Islands Government
has been deemed to be a contract on which revenue should be recognised over time, as an activity schedule with
milestone payments was agreed before the work commenced.
Revenue from cars sold is recognised in full when the asset is physically transferred and the benefits and risks of ownership
pass to the customer.
ANNUAL REPORT 2020 62
Revenues arising from the rendering of services and recognised over a period of time
Transportation and storage of art
In the UK, Momart earns revenue from moving or installations or de-installations of artwork. The revenue is invoiced when
the installation or de-installation is complete, however at each month end accrued revenue is recognised for fine art
exhibition logistical work undertaken, where the costs incurred and the costs to complete the transaction can be measured
reliably, and the amount of revenue attributable to the stage of completion of a performance obligation is recognised on
the basis of the incurred percentage of anticipated cost. This, in the opinion of the directors, is the most appropriate proxy
for the stage of completion. Momart classifies this income into either Exhibitions revenue, which includes the income
from UK and International museums, or Gallery Services revenue, which includes revenue earned from Gallery services,
such as Sothebys, where the inbound and outbound exhibitions installations and dispersal are provided as one quote to
customers, but are fulfilled up to several months apart. The allocation of revenue in the inbound installations and outbound
dispersals has been reviewed. Momart operates a very transparent method of setting out prices in both quotes and
invoices, allocating revenues per trips, as these are considered separate obligations.
Storage income in Momart is charged based on the actual volume occupied, at an agreed weekly rate per cubic
metre. Clients can be invoiced weekly, monthly or quarterly, and income is recognised as it is accrued, on a monthly or
weekly basis.
Long term construction contracts
The housing contract for the Falkland Islands Government is a long-term contract, with an outcome that can be reliably
estimated and as it is considered probable that the contract will be profitable. Revenue and costs are recognised by
reference to the stage of completion of the contract activity at the reporting date, with revenue recognised over time by
reference to the stage of completion, using the input method, based on regular assessments of the costs incurred to date,
which includes using the resources consumed, labour hours expended, and any other costs incurred.
The Group receives payments from the Falkland Islands Government based on an activity schedule, which is a contractual
schedule of value that reflects the timing and performance of service delivery. Revenue is therefore recognised over time.
Un-invoiced amounts are presented as contract assets. Revenue is recognised under IFRS 15 by the application of the
input method using the direct measurement of the goods or services provided to date, including materials and labour.
Where a modification is required, the Group assesses the nature of the modification and whether it represents a separate
performance obligation required to be satisfied by the Group or whether it is a modification to the existing performance
obligation. No margin is recognised until the outcome of the contract can be estimated with reasonable certainty. Revenue
in respect of variations to contracts and incentive payments is recognised when there is an enforceable right to payment
and it is highly probable it will be agreed by the customer. Variation orders, claims and liquidated damages, are re-assessed
at each reporting period using the expected outcome approach. If it were considered probable that total contract costs
would exceed total contract revenue, the expected loss would be recognised as an expense immediately.
Other revenues
Other revenues recognised over time, include rental income from the rental property portfolio, which is recognised monthly
as the properties are occupied, and car hire income, which is recognised over the hire period.
ANNUAL REPORT 2020 63
Notes to the Financial Statements
CONTINUED
Revenues arising from the rendering of services and recognised immediately
The majority of revenues recognised immediately from the rendering of services arise from the ferry fare income, which is
taken on a daily basis for daily tickets. Season tickets are available, however the revenue earned from these is negligible
as most passengers purchase daily tickets. Quarterly and monthly season tickets are recognised over the life of the ticket
with a balance held in deferred income.
Other revenues arising from the rendering of services and recognised immediately include:
• Agency services provided to cruise or fishing vessels for supplying provisions, trips to and from the airport and
medical evacuations;
Third party port services;
•
• Car maintenance revenue, which generally arises on short term jobs;
• Penguin travel income earned from tourist tours and airport trips, which is recognised on the day of the tour or
•
•
airport trip;
Third party freight revenue, which is recognised when the ship arrives in the Falkland Islands;
Insurance commission earned by FIC for providing insurance services in the Falkland Islands under the terms of an
agency agreement with Caribbean Alliance. The insurance commission is recognised in full on inception of each policy,
offset by a refund liability held within accruals, for the expected refunds over the next year calculated from a review of
the historic refunded premiums.
IFRS 9 Financial instruments
Impairment
Loans and receivables, which include trade debtors and hire purchase receivables, are held initially at cost. IFRS 9 mandates
the use of an expected credit loss model to calculate impairment losses rather than an incurred loss model, and therefore it
is not necessary for a credit event to have occurred before credit losses are recognised. The Group has elected to measure
loss allowances utilising probability-weighted estimates of credit losses for trade receivables at an amount equal to lifetime
expected credit losses. A detailed review has been conducted of the five year history of impairment of the Group’s financial
assets, which primarily comprise its portfolio of current trade receivables at Momart and FIC, and the hire purchase debtors
in FIC, these assets all have a consistent history of low levels of impairment, the inclusion of specific expected credit loss
considerations did not have a material impact on transition.
Hedging
The Group has two open hedging relationships at 31 March 2020, one interest swap taken out in July 2019 to hedge
the £13,875,000 mortgage. This swap had an initial notional value of £13,875,000, with interest payable at the difference
between 1.1766% and the LIBOR rate. This interest rate swap notional value decreases at £125,000 per quarter over ten
years until June 2029 when it will expire. The notional value of the swap at 31 March 2020 is £13,500,000. The accrual
held in respect of this swap at the year-end was £526,000. The second swap was taken out in October 2015 to hedge the
bank loans drawn down to fund the Harbour Spirit ferry purchase. The swap had an initial 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 2020 is £1,703,750 (2019: £2,138,750). The accrual held in respect of this swap at the year-end was
£11,000 (2019: £16,000).
IFRS 9 introduces three hedge effectiveness requirements:
IFRS 9 requires the existence of an economic relationship between the hedged item and the hedging instrument. There
must be an expectation that the value of the hedging instrument and the value of the hedged item would move in the
opposite direction as a result of the common underlying or hedged risk. As the LIBOR and base rates increase, the interest
payable on the loans will increase, and the interest payable on the swaps will fall.
The hedge accounting model is based on a general notion of there being an offset between the changes of the swap
as the hedging instrument and those of the hedged bank loans, both of these balances will be affected by the base rate
movements, so it has been concluded the offset is justifiable. The size of the hedging instrument and the hedged items
must be similar for the hedge to be effective.
ANNUAL REPORT 2020 64
Standards and revisions adopted in the year to 31 March 2020
Impact of initial application of IFRS 16: Leases
The date of initial application of IFRS 16 for the Group is 1 April 2019. The Group has applied IFRS 16 using the modified
retrospective approach and therefore comparative information has not been restated and is presented under IAS 17.
The adoption of IFRS 16, and the resulting change in the accounting treatment of operating leases, has had a significant
impact on the Group’s financial statements resulting from the revised treatment of the ground rent payable on the 50-year
lease for the Gosport pontoon, and the lease payments incurred on the two external storage facilities and the head office
facilities at Momart. The Group recognised £2,307,000 of right-of-use assets and £2,494,000 of lease liabilities upon
transition to IFRS 16. The difference of £187,000 has been recognised in retained earnings, net of £34,000 of associated
deferred tax.
The acquisition of the Momart warehouse facilities by the Group in December 2018, combined with the age of some
of those leases, which extend back nearly 20 years, was the key driver in the decision to adopt the modified
retrospective approach.
Leased assets treatment for the year ended 31 March 2019 only
IAS 17 has been applied to the results for the year ended 31 March 2019, though IFRS 16 has been applied from 1 April
2019. Prior to 31 March 2019, leases in which the Group assumes substantially all the risks and rewards of ownership were
classified as finance leases. All other leases were classified as operating leases, and rental operating leases were charged
to the income statement on a straight-line basis over the lease term, with lease incentives, such as rent-free periods,
recognised as an integral part of the total rental income.
Following the transition to IFRS 16, equity as at 31 March 2019 has been restated as follows:
Equity at 1 April 2019
Right-of-use assets recognised
Lease liabilities recognised
Associated deferred tax asset recognised
Equity at 1 April 2019, after IFRS 16 transitional adjustments
Group
£’000
44,567
2,307
(2,494)
34
44,414
The Group has applied IFRS 16 using the modified retrospective approach which:
• Requires the Group to recognise the cumulative effect of initially applying IFRS 16 as an adjustment to the opening
balance of retained earnings at the date of initial application;
• Does not permit restatement of comparatives, which continue to be presented under IAS 17;
(a)
Impact of the new definition of a lease
The Group has made use of the practical expedient available on transition to IFRS 16 not to reassess whether a contract is,
or contains, a lease. Accordingly, the definition of a lease in accordance with IAS 17 and IFRIC 4 will continue to be applied
to those leases before 1 April 2019.
IFRS 16 determines whether a contract contains a lease on the basis of whether the customer has the right to control
the use of an identified asset for a period of time in exchange for consideration. This is in contrast to the focus on ‘risks
and rewards’ in IAS 17. The Group applies the definition of a lease and related guidance set out in IFRS 16 to all lease
contracts entered into or changed on or after 1 January 2019 (whether it is a lessor or a lessee in the lease contract).
In preparation for this first-time application of IFRS 16, the Group has carried out an implementation project, which has
shown that the new definition in IFRS 16 will not significantly change the scope of contracts that meet the definition of a
lease for the Group.
ANNUAL REPORT 2020
65
Notes to the Financial Statements
CONTINUED
(b)
Impact on Lessee Accounting
(i) Former operating leases
IFRS 16 changes how the Group accounts for leases previously classified as operating leases under IAS 17,
which were off balance sheet. Applying IFRS 16, for all leases (except as noted below), the Group:
a) Recognises right-of-use assets and lease liabilities in the consolidated statement of financial position, initially
measured at the present value of the future lease payments;
b) Recognises depreciation of right-of-use assets and interest on lease liabilities in the consolidated statement of
profit or loss;
c) Separates the total amount of cash paid into a principal portion (presented within financing activities) and
interest (presented within financing activities) in the consolidated statement of cash flows.
Lease incentives (e.g. rent-free periods) are recognised as part of the measurement of the right-of-use assets and lease
liabilities whereas under IAS 17 they resulted in the recognition of a lease incentive, amortised as a reduction of rental
expenses on a straight-line basis.
For short-term leases (lease term of 12 months or less) and leases of low-value assets (which includes tablets and personal
computers, small items of office furniture and telephones), the Group has opted to recognise a lease expense on a straight-
line basis as permitted by IFRS 16. This expense is presented within ‘other expenses’ in profit or loss.
Under IFRS 16, right-of-use assets are tested for impairment in accordance with IAS 36.
The Group has used the following practical expedients when applying the modified retrospective approach to leases
previously classified as operating leases applying IAS 17:
• Applied a single discount rate to a portfolio of leases with reasonably similar characteristics, this portfolio of assets are
•
the two warehouses and head office rental agreements within Momart;
Elected not to recognise right-of-use assets and lease liabilities to leases for which the lease term ends within 12
months of the date of initial application;
Excluded initial direct costs from the measurement of the right-of-use asset at the date of initial application;
•
• Used hindsight when determining the lease term when the contract contains options to extend or terminate the lease;
• Concluded that there is no residual value included in any of the rental leases.
(ii) Former finance leases
For leases that were previously classified as finance leases, the carrying amount of the leased assets and
obligations under finance leases measured applying IAS 17 immediately before the date of initial application is
reclassified to right-of-use assets and lease liabilities respectively without any adjustments from 1 April 2019.
(c)
The Group as a lessor
IFRS 16 does not change substantially how a lessor accounts for leases. Under IFRS 16, a lessor continues to classify
leases as either finance leases or operating leases and account for those two types of leases differently.
The hire purchase receivables in FIC continue to be reported as receivables, the goods are removed from the balance sheet
when the finance lease agreements are signed and instead a receivable due from the customer is recorded, as the title of
the vehicles, or other goods, such as furniture, white goods or other electrical items, are deemed to have passed to the
customer at that point.
Hire purchase debtors 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. Finance lease income is allocated to accounting periods so as to reflect a constant periodic
rate of return on the Group’s net investment outstanding in respect of the leases.
The FIC rental property agreements which are only ever for a maximum of 12 months, and with titles that will never pass
to the customer, continue to be classified as operating leases. Rental income from operating leases is recognised on a
straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating
lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term.
ANNUAL REPORT 2020
66
The rental property portfolio, which is 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.
Other than IFRS 16, the Group has consistently applied the accounting policies set out in this note to all periods presented
in these consolidated financial statements.
Standards and revisions not yet adopted in the year to 31 March 2020
No standards not yet adopted are expected to have any significant impact on the financial statements of the Group
or Company.
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.
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.
ANNUAL REPORT 2020 67
Notes to the Financial Statements
CONTINUED
2. Segmental Information Analysis CONTINUED
2020
Revenue
Segment operating profit before tax &
non-trading items
Impairment of goodwill
Profit / (loss) before net financing costs
Finance income
Finance expense
Net finance expense
General
Trading
(Falklands)
£’000
21,671
2,121
-
2,121
5
(69)
(64)
Ferry
Services
(Portsmouth)
£’000
Art Logistics
and Storage
(UK)
£’000
Unallocated
£’000
4,125
975
(3,979)
(3,004)
4
(344)
(340)
18,804
1,469
(3,500)
(2,031)
4
(456)
(452)
-
-
-
-
-
-
-
-
Segment profit / (loss) before tax
2,057
(3,344)
(2,483)
Assets and liabilities
Segment assets
Segment liabilities
Segment net assets
Other segment information
Capital expenditure:
Property, plant and equipment
Investment properties
Computer software
Total Capital expenditure
Capital expenditure: cash
Capital expenditure: non-cash
Total Capital expenditure
Depreciation and amortisation:
Property, plant and equipment
Investment properties
Computer software
Total Depreciation and Amortisation
Impairment of goodwill
Total Depreciation & impairment
Underlying profit before net
financing costs
Interest income
Interest expense
Underlying profit before tax
28,492
(9,208)
19,284
10,983
(8,834)
2,149
32,462
(20,331)
12,131
5,796
(568)
5,228
1,343
1,351
-
2,694
2,685
9
2,694
564
132
-
696
-
696
2,121
5
(69)
2,057
65
-
-
65
65
-
65
459
-
-
459
3,979
4,438
975
4
(344)
635
1,363
-
27
1,390
638
752
1,390
840
-
68
908
3,500
4,408
1,469
4
(456)
1,017
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
£’000
44,600
4,565
(7,479)
(2,914)
13
(869)
(856)
(3,770)
77,733
(38,941)
38,792
2,771
1,351
27
4,149
3,388
761
4,149
1,863
132
68
2,063
7,479
9,542
4,565
13
(869)
3,709
ANNUAL REPORT 2020 Ferry
Services
(Portsmouth)
£’000
Art Logistics
and Storage
(UK)
£’000
Unallocated
£’000
2. Segmental Information Analysis CONTINUED
2019
Revenue
Segment operating profit before tax &
non-trading items
General
Trading
(Falklands)
£’000
17,554
1,565
4,367
1,082
Profit before net financing costs
1,565
1,082
Finance income
Finance 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 and amortisation
Property, plant and equipment
Investment properties
Computer software
Total Depreciation and Amortisation
Underlying profit before
net financing costs
Interest income
Interest expense
Underlying profit before tax
12
(72)
(60)
1,505
25,913
(8,772)
17,141
1,055
1,293
2,348
395
99
-
494
1,565
12
(72)
1,505
12
(310)
(298)
784
14,756
(8,237)
6,519
50
-
50
437
-
-
437
1,082
12
(310)
784
20,607
1,730
1,730
12
(173)
(161)
1,569
35,214
(15,457)
19,757
20,034
-
20,034
440
-
66
506
1,730
12
(173)
1,569
-
-
-
-
-
-
-
1,798
(648)
1,150
-
-
-
-
-
-
-
-
-
-
-
68
Total
£’000
42,528
4,377
4,377
36
(555)
(519)
3,858
77,681
(33,114)
44,567
21,139
1,293
22,432
1,272
99
66
1,437
4,377
36
(555)
3,858
ANNUAL REPORT 2020 69
Notes to the Financial Statements
CONTINUED
2. Segmental Information Analysis CONTINUED
The £5,796,000 (2019: £1,798,000) unallocated assets above include £5,766,000 (2019: £1,768,000) of cash and £30,000
(2019: £30,000) of prepayments held in FIH group plc.
The £568,000 (2019: £648,000) 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:
2020
Revenue (by source)
Assets and Liabilities:
United
Kingdom
£’000
Falkland
Islands
£’000
Total
£’000
22,929
21,671
44,600
Non-current segment assets, excluding deferred tax
37,826
15,456
53,282
Capital expenditure: cash
703
2,685
3,388
2019
Revenue (by source)
Assets and Liabilities:
United
Kingdom
£’000
Falkland
Islands
£’000
Total
£’000
24,974
17,554
42,528
Non-current segment assets, excluding deferred tax
Capital expenditure: cash
43,110
20,084
13,490
2,348
56,600
22,432
ANNUAL REPORT 2020 70
Total
Revenue
£’000
10,014
3,187
5,015
745
2,041
669
Sale of goods,
recognised
immediately
on sale
£’000
Rendering
of services:
recognised
immediately
£’000
Rendering
of services,
provided over
a period of
time
£’000
10,014
2,187
3,141
-
-
-
15,342
-
-
-
631
-
745
2,010
-
3,386
4,125
-
15,342
7,511
-
369
1,874
-
31
669
2,943
21,671
-
18,804
21,747
4,125
18,804
44,600
4. Revenue
2020
Falkland Islands
Retail sales
Automotive sales
Construction
Freight & Port Services
Support Services
Rental property income
FIC (Falklands)
PHFC (Portsmouth)
Art logistics and storage
Total Revenue
At 31 March 2020, a contract asset of £73,000 has been included in Trade and other receivables (note 19) in respect of the
long-term housing contract with the Falkland Islands Government. There were no associated contract liabilities at this date.
2019
Falkland Islands
Retail sales
Automotive sales
Construction
Freight & Port Services
Support Services
Rental property income
FIC (Falklands)
PHFC (Portsmouth)
Art logistics and storage
Total Revenue
Sale of goods,
recognised
immediately
on sale
£’000
Rendering
of services:
recognised
immediately
£’000
Rendering
of services,
provided over
a period of
time
£’000
9,716
2,078
1,544
-
-
-
13,338
-
-
-
628
-
778
1,908
-
3,314
4,367
-
13,338
7,681
-
343
-
-
92
467
902
-
20,607
21,509
Total
Revenue
£’000
9,716
3,049
1,544
778
2,000
467
17,554
4,367
20,607
42,528
ANNUAL REPORT 2020 71
Notes to the Financial Statements
CONTINUED
5. Non-trading items
(Loss) / profit before tax as reported
Non-trading items:
Impairment of goodwill
Underlying profit before tax
Tax on non-trading items
2020
£’000
(3,770)
7,479
3,709
2019
£’000
3,858
-
3,858
There has not been any tax impact from the impairment of goodwill. There were no non-trading items in the prior year.
6. Expenses and auditor’s remuneration
The following expenses have been included in the profit and loss
Group
Company
2020
£’000
380
1,995
68
(5)
7,479
31
12,608
-
2019
£’000
316
1,371
66
69
-
17
8,735
895
2020
£’000
-
204
-
-
-
-
-
-
Direct operating expenses of rental properties
Depreciation
Amortisation of computer software
Foreign currency (gain) / loss
Impairment of goodwill
Impairment loss on trade and other receivables
Cost of inventories recognised as an expense
Operating lease payments
Auditor’s remuneration
Audit of these financial statements
Audit of subsidiaries' financial statements pursuant to legislation
Tax advisory services
Other assurance services
Total auditor's remuneration
2020
£’000
40
110
-
-
150
2019
£’000
-
60
-
-
-
-
-
-
2019
£’000
39
86
2
10
137
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.
ANNUAL REPORT 2020
72
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:
PHFC
Falkland Islands:
in Stanley
in UK
Art logistics & storage
Head office
Total average staff numbers
Number of employees
Group
Number of employees
Company
2020
2019
2020
2019
35
180
7
140
6
368
37
158
5
140
6
346
-
-
-
-
6
6
-
-
-
-
6
6
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 (see note 23)
Group
Company
2020
£’000
2019
£’000
12,771
12,002
97
939
527
69
966
436
2020
£’000
571
48
76
19
2019
£’000
582
46
85
19
Total employment costs
14,334
13,473
714
732
Details of audited directors’ remuneration are provided in the Directors’ Report, which forms part of these audited financial
statements, 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 liability
Lease liabilities finance charge
Total finance expense
2020
£’000
13
13
2020
£’000
(464)
(65)
(340)
(869)
2019
£’000
36
36
2019
£’000
(248)
(72)
(235)
(555)
ANNUAL REPORT 2020
73
Notes to the Financial Statements
CONTINUED
9. Taxation
Recognised in the income statement
Current tax expense
Current year
Adjustments for prior years
Current tax expense
Deferred tax expense
Origination and reversal of temporary differences
Change in UK tax rate to 19%
Adjustments for prior years
Deferred tax expense (see note 17)
Total tax expense
Reconciliation of the effective tax rate
(Loss) / Profit on ordinary activities before tax
Tax using the UK corporation tax rate of 19% (2019: 19%)
Expenses not deductible for tax purposes
Impairment of goodwill not deductible for tax purposes
Effect of increase in rate of deferred tax
Effect of higher tax rate overseas
Adjustments to tax charge in respect of previous periods
Total tax expense
Tax recognised directly in equity and other comprehensive income
Deferred tax on effective portion of changes in fair value
Movement on deferred tax asset relating to the pension scheme
Deferred tax expense recognised directly in other comprehensive income
Deferred tax on IFRS 16 transitional adjustment
Deferred tax expense recognised directly in equity
2020
£’000
2019
£’000
480
13
493
376
144
(55)
465
958
2020
£’000
(3,770)
(716)
85
1,421
199
11
(42)
958
2020
£’000
102
(35)
67
34
101
635
(22)
613
183
-
31
214
827
2019
£’000
3,858
733
14
-
6
65
9
827
2019
£’000
-
(9)
(9)
-
(9)
A UK corporation rate of 19% (effective 1 April 2020) was substantively enacted on 17 March 2020, reversing the previously
enacted reduction in the rate from 19% to 17%. This will increase the company’s future current tax charge accordingly. The
deferred tax asset at 31 March 2020 has been calculated at 19% (2019: 17%).
The deferred tax assets and liabilities in FIC have been calculated at the Falklands Islands’ tax rate of 26%.
ANNUAL REPORT 2020 74
10. Earnings per share
The calculation of basic earnings per share is based on profits on ordinary activities after taxation, and the weighted
average number of shares in issue in the period, excluding shares held under the Employee Share Ownership Plan (‘ESOP’)
(see note 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.
(Loss) / Profit on ordinary activities after taxation
Weighted average number of shares in issue
Less: shares held under the ESOP
Average number of shares in issue excluding the ESOP
Maximum dilution with regards to share options
Diluted weighted average number of shares
Basic earnings per share
Diluted earnings per share
2020
£’000
(4,728)
2019
£’000
3,031
2020
Number
2019
Number
12,504,000
12,451,125
(1,633)
(9,964)
12,502,367
12,441,161
181,663
119,277
12,684,030
12,560,438
2020
-37.8p
-37.8p
2019
24.4p
24.1p
The diluted earnings per share for the year ended 31 March 2020 are the same as the basic earnings, as IAS 33 states that
potential shares shall only be treated as dilutive when, and only when, their conversion to ordinary shares would decrease
earnings per share or increase loss per share from continuing operations.
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)
Underlying taxation
Underlying profit after tax
Effective tax rate
2020
£’000
3,709
(958)
2,751
2019
£’000
3,858
(827)
3,031
25.8%
21.4%
Weighted average number of shares in issue excluding the ESOP (from above)
12,502,367
12,441,161
Diluted weighted average number of shares (from above)
12,684,030
12,560,438
Basic earnings per share on underlying profit
Diluted earnings per share on underlying profit
22.0p
21.7p
24.4p
24.1p
ANNUAL REPORT 2020 75
Notes to the Financial Statements
CONTINUED
11. Intangible assets
Cost:
At 1 Apr 2018 and 31 March 2019
Additions
At 31 March 2020
Accumulated amortisation:
At 1 Apr 2018
Amortisation
At 31 March 2019
Amortisation
Impairment
At 31 March 2020
Net book value:
At 1 April 2018
At 31 March 2019
At 31 March 2020
Computer
Software
£’000
Brand name
£’000
Goodwill
£’000
Total
£’000
537
27
564
336
66
402
68
-
470
201
135
94
2,823
11,576
14,936
-
-
27
2,823
11,576
14,963
785
-
785
-
-
785
2,038
2,038
2,038
1,983
-
1,983
-
7,479
9,462
9,593
9,593
2,114
3,104
66
3,170
68
7,479
10,717
11,832
11,766
4,246
Amortisation and impairment charges are recognised in operating expenses in the income statement. 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.
During the year ended 31 March 2020, following the review for impairment, the goodwill of PHFC has been deemed to
be fully impaired as passenger numbers have fallen significantly due to COVID-19 and working practices, and therefore
commuter transport services, are likely to be affected beyond the short term. The Art logistics and storage business has
also impaired its goodwill by £3.5 million as revenue has fallen significantly due to COVID-19 and art logistics services are
likely to be affected beyond the short term.
Goodwill
Goodwill is allocated to the Group’s Cash Generating Units (CGUs) which principally comprise its business segments.
A segment level summary of goodwill for each cash-generating-unit is shown below:
Goodwill at 1 April 2018 and 1 April 2019
Goodwill at 31 March 2020
Art Logistics
and Storage
£’000
5,577
2,077
Ferry
Services
£’000
3,979
-
Falkland
Islands
£’000
37
37
Total
£’000
9,593
2,114
ANNUAL REPORT 2020 76
Recoverable amounts
A segment level summary of the recoverable amounts for the Art Logistics and Storage, and Ferry Services cash-generating
unit is shown below:
Recoverable amounts at 31 March 2019
Recoverable amounts at 31 March 2020
Impairment
Art Logistics
and Storage
£’000
Ferry Services
£’000
34,414
25,361
24,206
9,764
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. Goodwill is impaired when the recoverable
amount is less than the carrying value. During the year the goodwill and indefinite life intangibles for each CGU was
separately assessed and tested for impairment, and the goodwill allocated to the Ferry Services CGU was deemed to be
fully impaired, and that related to the Art Logistics and Storage CGU was deemed to be impaired by £3.5 million. There
were no impairment charges in the year ended 31 March 2019. As part of testing goodwill and indefinite life intangibles
for impairment, forecast operating cash flows for the next five years ended 31 March 2021-2025 and then to perpetuity
have been used to assess the value-in-use of Momart and a forty year model has been used to assess the value-in-use of
PHFC. 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 forty-year model has been considered to be appropriate for PHFC,
as this is the expected remaining useful economic life of the boats currently in operation. Detailed forecasts have been
prepared for five years, with high level assumptions applied after the fifth year.
These forecasts show heavy initial impacts of COVID-19 in year 1 followed by a gradual recovery over the following years
and are discussed in more detail in the assumption sections for each CGU.
A number of key assumptions are used for 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 12.9% (2019: 9.8%), and the cash flows of the Ferry Services CGU have been discounted using a pre-
tax discount rate of 8.5% (2019: 8.5%). Management have determined that each rate is appropriate as the risk adjustment
applied within the discount rate reflects the risks 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% (2019: 2%) have been used for the Art Logistics and Storage CGU as part of the impairment
testing model. For the Ferry Services CGU, long term growth rates assume no growth.
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.
ANNUAL REPORT 2020 77
Notes to the Financial Statements
CONTINUED
Assumptions specific to Ferry Services CGU
As a result of the expected impact on commuter services arising from the current COVID-19 pandemic, in the medium
to long term, management have forecast a slight decrease in cash flows year on year, in line with expected declines in
passenger numbers. The carrying value was determined to exceed the value-in-use and an impairment of £3,979,000
to fully write down the goodwill held on this CGU has been recognised (2019: £nil). The key assumptions made in the
estimation of future cash flows are the passenger numbers and the average revenue per passenger. The pandemic
initially resulted in falls in passenger traffic of 90% in late March 2020, which has remained low throughout the three-month
lock down period. A slow recovery is expected in the medium term as children return to school and non-essential retail
shops re-open, but the impact of COVID-19 is likely to continue in the long-term, with increased numbers of employees
working from home, reducing the number of commuters using the ferry which is the most significant factor affecting future
cash flows.
While the directors believe in the assumptions used in this impairment test, there remains some uncertainty around the
timescale of recovery from the current COVID-19 pandemic, and accordingly a scenario was performed which assessed
a 10% reduction in business cashflows in years 3 to 5 and there is a clear risk that the impact of COVID-19 may continue
in the medium to long-term, with higher than expected numbers of employees working from home, reducing the number
of commuters using the ferry, and should this materialise, a further impairment of £1.0 million would be required. An
additional scenario was performed which increased the pre-tax discount rate by 1.0% and should this materialise, a further
impairment of £0.9 million would be required.
At PHFC, the key assumptions made in the estimation of future cash flows are: passenger numbers and the average fare
yield per passenger.
Assumptions specific to Arts Logistics and Storage CGU
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 was determined exceed its value-in-use and an impairment of £3,500,000 to write down
the goodwill held on this CGU has been recognised (2019: £nil). The key assumptions made in the estimation of future
cashflows are in relation to Momart’s future revenue, and the extent to which the company’s income will recover from the
effects of the pandemic.
While the directors believe in the assumptions used in this impairment test, there remains some uncertainty around the
timescale of recovery from the current COVID-19 pandemic, and accordingly a scenario was performed which assessed a
10% reduction in profits in years 3 to 5 as it is possible that an even more cautious view of Momart’s long-term prospects
could be impacted into the medium-term by higher than anticipated cuts in government spending, resulting in significantly
less frequent, less complex exhibitions. Should this materialise, a further impairment of £1.8 million would be required, An
additional scenario was performed which increased the pre-tax discount rate by 0.5% and should this materialise, a further
impairment of £1.9 million would be required.
ANNUAL REPORT 2020 78
Total
£’000
30,959
21,139
(86)
(94)
Notes to the Financial Statements
CONTINUED
12. Property, plant and equipment
Right
to use
assets
£’000
Freehold
Land &
buildings
£’000
Group
Long
leasehold
Land and
buildings
£’000
Vehicles, plant
and equipment
£’000
Ships
£’000
Cost:
At 1 April 2018
Additions in year
Transfer to stock
Disposals
At 31 March 2019
IFRS 16 transition
Additions in year
Transfer to stock
Reclassification of leased assets
Disposals
-
-
-
-
-
3,537
1,217
-
5,661
-
At 1 April 2018
Charge for the year
Transfer to stock
Disposals
At 31 March 2019
IFRS 16 transition
Charge for the year
Transfer to stock
Reclassification of leased assets
Disposals
-
-
-
-
-
1,230
527
-
1,075
-
At 31 March 2020
10,415
27,698
Accumulated depreciation:
At 31 March 2020
2,832
3,332
Net book value:
At 1 April 2018
At 31 March 2019
At 31 March 2020
-
-
7,583
5,376
24,748
24,366
7,858
19,716
-
-
7,768
6,826
80
-
(17)
33
-
-
8,507
1,310
(86)
(77)
27,574
7,831
6,859
9,654
51,918
-
124
-
-
-
2,482
344
-
-
-
506
-
-
-
-
81
-
(5,089)
(112)
2,711
1,548
167
-
(12)
-
18
-
-
-
-
1,331
(196)
(572)
(106)
3,537
2,771
(196)
-
(218)
6,877
10,111
57,812
2,061
243
-
-
6,023
12,114
518
(58)
(62)
1,272
(58)
(74)
-
71
-
(906)
(51)
817
6,220
6,128
1,894
-
244
-
-
-
-
515
(107)
(169)
(89)
1,230
1,863
(107)
-
(140)
2,548
6,571
16,100
4,765
4,555
4,329
2,484
3,233
3,540
18,845
38,664
41,712
2,826
1,703
2,304
6,421
13,254
ANNUAL REPORT 2020 79
Notes to the Financial Statements
CONTINUED
12. Property, plant and equipment (continued)
Right to use assets
Cost:
At 31 March 2019
IFRS 16 transition
Additions in year
Reclassification from property,
plant and equipment
At 31 March 2020
At 31 March 2019
IFRS 16 transition
Charge for the year
Reclassification from property,
plant and equipment
At 31 March 2020
Net book value:
At 31 March 2019
At 31 March 2020
Group
Short leasehold
lease
£’000
Long leasehold
Pontoon lease
£’000
Momart
Trucks
£’000
Office
Equipment
£’000
Total
£’000
-
3,537
1,217
5,661
-
-
456
572
-
9
9
-
1,028
18
10,415
-
-
100
169
269
-
759
-
2
4
-
6
-
12
-
1,230
527
1,075
2,832
-
7,583
-
2,384
752
-
3,136
-
1,067
299
-
-
1,144
-
5,089
6,233
-
161
124
906
1,366
1,191
-
1,770
-
5,042
During the year to 31 March 2020, Momart acquired three trucks financed by a three hire purchase loans totalling £534,000,
and renewed a Momart warehouse lease for £752,000.
At 31 March 2019 the net carrying amount of leased long leasehold land and buildings and vehicles, plant and equipment
was £4,183,000 and £379,000 for the Gosport Pontoon and trucks at Momart respectively.
The Company has no tangible fixed assets, other than the investment property purchased in December 2018, which is
included within Investment Property (note 13).
ANNUAL REPORT 2020 80
Residential and
commercial
property
£’000
Group
Freehold land
£’000
4,052
1,293
5,345
1,330
6,675
768
99
867
132
999
3,284
4,478
5,676
761
-
761
21
782
-
-
-
-
-
761
761
782
Total
£’000
4,813
1,293
6,106
1,351
7,457
768
99
867
132
999
4,045
5,239
6,458
13. Investment properties
Cost:
At 1 April 2018
Additions in year
At 31 March 2019
Additions in year
At 31 March 2020
Accumulated depreciation:
At 1 April 2018
Charge for the year
At 31 March 2019
Charge for the year
At 31 March 2020
Net book value:
At 1 April 2018
At 31 March 2019
At 31 March 2020
The investment properties comprise residential and commercial property held for rental in the Falkland Islands. Investment
properties include 65 properties held for rental and 400 acres of land, including 70 acres 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.
The net book value of the 700 acres of land held in investment properties is £0.78 million (2019: £0.76 million).
Estimated Fair Value
At 31 March 2020 the fair value of this property portfolio, including £2.1 million of land, £7.3 million of properties available
for rent and £0.6 million of properties under construction, was estimated at £10.0 million, which has increased by £1.3
million from the £8.7 million at 31 March 2019, due to the £1.3 million capital investment in the year ended 31 March 2020.
The 65 rental properties are estimated to have a current market value of £7.3 million (2019: £5.8 million); the increase from
the prior year is due to the addition of 11 further properties into the investment property portfolio, a block of 9 houses at
Camber View, which together with one at Fitzroy Road has been built by the FIC building team, and one complete house
purchased in March 2020.
The land portfolio in the Falkland Islands has been owned for many years and the estimated value of the land at £2.1 million
now exceeds the net book value by £1.4 million. The rental property portfolio is valued at £7.9 million, £2.1 million more
than the net book value at 31 March 2020.
A level 3 valuation technique has been applied, using a market approach to value these properties; the properties have been
valued based on their expected market value after review by the 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 after consideration of
current market prices in the Falkland Islands.
ANNUAL REPORT 2020 81
Notes to the Financial Statements
CONTINUED
13. Investment properties CONTINUED
Estimated fair value:
Freehold land
Properties available for rent
Properties under construction
At 31 March
Uplift on net book value:
Freehold land
Properties available for rent
Properties under construction
At 31 March
Number of rental properties
Available for rent
Under construction
Undeveloped freehold land (acres)
Rental income
Group
2020
£’000
2,128
7,251
624
10,003
1,346
2,199
-
3,545
65
10
700
2019
£’000
2,229
5,788
718
8,735
1,447
2,028
-
3,475
54
10
700
During the year to 31 March 2020, the Group received rental income of £669,000 (2019: £467,000) from its
investment properties.
Assets under construction
At 31 March 2020, ten investment properties were under construction, including a block of 8 flats and two houses at Davis
Street with a total cost to date of £624,000. At 31 March 2019, ten investment properties were under construction, with
a total cost of £718,000, these ten houses were all completed during the year to 31 March 2020 and are now all available
for rent.
Company
Cost:
At 1 April 2018
Additions in year
At 31 March 2019 and 31 March 2020
Accumulated depreciation:
At 1 April 2018
Charge for the year
At 31 March 2019
Charge for the year
At 31 March 2020
Net book value:
At 1 April 2018
At 31 March 2019
At 31 March 2020
Commercial property
£’000
-
19,642
19,642
-
60
60
209
269
-
19,582
19,373
ANNUAL REPORT 2020 82
13. Investment properties CONTINUED
The investment property in the Company consists of the five warehouses leased by Momart, the Group’s art handling
subsidiary which were purchased in December 2018. In the year ending 31 March 2019, the buildings were depreciated
from the 20 December 2018 date of purchase.
The directors have reviewed the market value of the Leyton warehouses and are satisfied that there is no indication
of impairment.
14. Investment in subsidiaries
Country of
incorporation
Class of shares held
Ownership at
31 March 2020
Ownership at
31 March 2019
The Falkland Islands Company Limited (1)
UK
Ordinary shares of £1
Preference shares of £10
The Falkland Islands Trading Company Limited (1)
UK
Ordinary shares of £1
Falkland Islands Shipping Limited (2) (6)
Falkland Islands
Ordinary shares of £1
Erebus Limited (2)(6)(7)
Falkland Islands
Ordinary shares of £1
South Atlantic Support Services Limited (3) (6) (7)
Falkland Islands
Ordinary shares of £1
Paget Limited (2) (6) (7)
Falkland Islands
Ordinary shares of £1
Preference shares of £1
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) (7)
UK
UK
UK
UK
UK
UK
UK
Ordinary shares of £1
Ordinary shares of £1
Ordinary shares of £1
Ordinary shares of £1
Ordinary shares of £1
Ordinary shares of £1
Ordinary shares of £1
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
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.
(7) These investments have all been dormant for the current and prior year.
At 1 April 2019
Impairment
Share based payments charge capitalised into subsidiaries
At 31 March 2020
Company
2020
£’000
27,653
(3,713)
49
23,989
2019
£’000
27,630
-
23
27,653
ANNUAL REPORT 2020 83
Notes to the Financial Statements
CONTINUED
14. Investment in subsidiaries CONTINUED
During the year ended 31 March 2020, the Company’s investment in the Art Logistics business, Momart, was impaired
by £3,713,000 due to lower future expected levels of profitability following the COVID-19 pandemic, as the expected
widespread recession and market dislocation are likely to further dilute demand from ultra-high-net-worth collectors and
commercial buyers for some time. In the public sector, museum budgets are likely to be squeezed by anticipated cuts in
government spending and visitor numbers are likely to be restricted by the need for social distancing. Further detail has
been provided in note 11 with regards to the sensitivities of the assumptions.
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 FIC contributed £50,000 of ordinary share capital. SAtCO is registered and operates in
the Falkland Islands. The net assets of SAtCO are shown below:
Joint Venture’s balance sheet
Current assets
Liabilities due in less than one year
Net assets of SAtCO
Group share of net assets
2020
£’000
519
(1)
518
259
2019
£’000
519
(1)
518
259
There were no recognised gains or losses for the years ended 31 March 2020 (2019: none).
The current assets balances above include £17,000 of cash (2019: £66,000), £4,000 of other debtors (2019: £4,000) and
£498,000 (2019: £449,000) of loans due from SAtCO’s parent companies.
SAtCO had no contingent liabilities or capital commitments as at 31 March 2020 or 31 March 2019 and the Group had no
contingent liabilities or commitments in respect of its joint venture at 31 March 2020 or 31 March 2019.
SAtCO’s registered office is 56 John Street, Stanley, Falkland Islands FIQQ 1ZZ
16. Leases receivable
As lessor, FIC has sold assets to customers as hire purchase leases, the present value of the lease payments, together with
any unguaranteed residual value, is recognised as a receivable, net of allowances for expected bad debt losses.
The difference between the gross receivable and the present value of future lease payments, is recognised as unearned
lease income. Lease income is recognised in interest income over the term of the lease using the sum of digits method so
as to give a constant rate of return on the net investment in the leases. Lease receivables are reviewed regularly to identify
any impairment.
Lease receivables arise on the sale of vehicles and customer goods, such as furniture and electrical items, by FIC.
No contingent rents have been recognised as income in the period. No residual values accrue to the benefit of the lessor.
ANNUAL REPORT 2020 84
Group
2020
£’000
519
596
1,115
2019
£’000
584
659
1,243
Non-Current: Lease debtors due after more than one year
Current: Lease debtors due within one year
Total lease debtors
The difference between the gross investment in the hire purchase leases and the present value of future lease payments
due represents unearned lease income of £176,000 (2019: £211,000). The cost of assets acquired for the purpose of
renting out under hire purchase agreements by the Group during the year amounted to £786,000 (2019: £883,000).
The total cash received during the year in respect of hire purchase agreements was £1,115,000 (2019: £1,116,000).
Gross investment in hire purchase leases
Unearned lease income
Bad debt provision against hire purchase leases
Present value of future lease receipts
Present value of future lease payments due:
Within one year
Within two to five years
Group
2020
£’000
1,318
(176)
(27)
1,115
596
519
2019
£’000
1,484
(211)
(30)
1,243
659
584
Present value of future lease receipts
1,115
1,243
17. Deferred tax assets and liabilities
Recognised deferred tax assets and (liabilities)
Property, plant & equipment
Intangible assets
Inventories (unrealised intragroup profits)
Other financial liabilities
Derivative 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
2020
£’000
(2,713)
(387)
32
48
102
41
28
(2,849)
677
(2,172)
2019
£’000
(2,396)
(346)
43
26
-
26
118
(2,529)
721
(1,808)
ANNUAL REPORT 2020 85
Notes to the Financial Statements
CONTINUED
17. Deferred tax assets and liabilities CONTINUED
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.
Other temporary differences
Net tax asset
Movement in deferred tax assets / (liabilities) in the year:
Property, plant & equipment
Intangible assets
Inventories (unrealised intragroup profits)
Other financial liabilities
Derivative financial liabilities
Share-based payments
Tax losses
Pension
1 April 2019
£’000
(2,396)
(346)
43
26
-
26
118
721
Company
2020
£’000
121
121
2019
£’000
4
4
Group
Recognised in
income
£’000
Recognised in
equity
£’000
31 March 2020
£’000
(351)
(41)
(11)
22
-
15
(90)
(9)
34
(2,713)
-
-
-
102
-
(35)
101
(387)
32
48
102
41
28
677
(2,172)
Deferred tax movements
(1,808)
(465)
The £34,000 recognised in equity for Property, plant & equipment relates to the transition to IFRS 16 and therefore is shown
net of the £187,000 gross movement in the Statement of Changes to Shareholders’ equity.
Unrecognised deferred tax assets
Deferred tax assets of £113,000 (2019: £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 asset in the year:
Other temporary difference
Deferred tax asset movements
Company
1 April 2019
£’000
Recognised in
income
£’000
Recognised in
equity
£’000
31 March 2020
£’000
4
4
15
15
102
102
121
121
ANNUAL REPORT 2020 86
Group
Recognised in
income
£’000
Recognised in
equity
£’000
31 March 2019
£’000
(263)
-
34
(9)
(1)
33
(8)
-
-
-
-
-
(9)
(9)
(2,396)
(346)
43
26
26
118
721
(1,808)
Movement in deferred tax assets / (liabilities) in the prior year:
Property, plant & equipment
Intangible assets
Inventories
Other financial liabilities
Share-based payments
Tax losses
Pension
1 April 2018
£’000
(2,133)
(346)
9
35
27
85
738
Deferred tax movements
(1,585)
(214)
Movement in deferred tax assets / (liabilities) in the prior year:
Other temporary difference
Deferred tax asset movements
18. Inventories
Work in progress
Goods in transit
Goods for resale
Total Inventories
Company
1 April 2018
£’000
Recognised in
income
£’000
Recognised in
equity
£’000
31 March 2019
£’000
16
16
(12)
(12)
-
-
4
4
Group
2020
£’000
697
1,228
3,449
5,374
2019
£’000
1,253
692
3,811
5,756
Goods in transit are retail goods in transit to the Falkland Islands. During the year £307,000 (2019: £249,000) of stock write
downs was included in the cost of inventories as disclosed in note 6.
The Company has no inventories.
ANNUAL REPORT 2020 87
Notes to the Financial Statements
CONTINUED
19. Trade and other receivables
Non-Current
Rental deposits
Amount owed by subsidiary undertakings
Total trade and other receivables
Current:
Trade and other receivables
Contract asset, long term housing project
Prepayments
Accrued income
Total trade and other receivables
20. Cash and cash equivalents
Cash and other cash equivalents in the balance sheet
Year ended 31 March
Net increase / (decrease) in cash and cash equivalents
Exchange gains
Net increase / (decrease) in cash and cash equivalents
after exchange gains
Bank loan draw downs
Bank loan repayments
1 April 2019: lease liabilities on IFRS16 application
Lease liabilities drawdown: non-cash
Lease liabilities drawdown: cash
Lease liabilities repayments
Increase in interesting bearing loans and borrowings
Net (decrease) / increase in debt
Net debt brought forward
Net debt at 31 March
Group
Company
2020
£’000
2019
£’000
2020
£’000
88
-
88
88
-
88
-
10,207
10,207
2019
£’000
-
8,717
8,717
Group
Company
2020
£’000
6,284
73
1,123
1,216
8,696
2019
£’000
6,310
-
918
533
7,761
2020
£’000
2019
£’000
3
-
27
-
30
-
-
30
-
30
Group
Company
2020
£’000
9,108
2019
£’000
6,184
2020
£’000
5,766
2019
£’000
1,768
Group
Company
2020
£’000
2,870
54
2019
£’000
(10,834)
-
2020
£’000
3,998
-
2019
£’000
(10,838)
-
2,924
(10,834)
3,998
(10,838)
(13,875)
(10,000)
(13,875)
(10,000)
10,955
(2,494)
(761)
(534)
395
(6,314)
(3,390)
514
10,425
-
-
(172)
131
-
-
-
-
-
-
-
-
-
(9,527)
(3,450)
(10,000)
(20,361)
548
(20,838)
(11,609)
8,752
(14,999)
(11,609)
(8,232)
(7,684)
12,606
(8,232)
ANNUAL REPORT 2020 88
Net debt
Cash balances
Group
Company
2020
£’000
9,108
2019
£’000
6,184
2020
£’000
5,766
2019
£’000
1,768
Less: Total interest-bearing loans and borrowings
(24,107)
(17,793)
(13,450)
(10,000)
Net debt
(14,999)
(11,609)
(7,684)
(8,232)
The bank loan and lease liability repayments noted above exclude any interest payments as any interest paid or received
has been included within the movement in cash and cash equivalents balance. The bank interest paid in the year of
£478,000 is £14,000 more than the bank interest expense of £464,000 due to an accrual of £14,000 at 31 March 2019,
which was paid in the year ended 31 March 2020.
21. Interest-bearing loans and borrowings
This note provides information about the contractual terms of the 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’s and the Company’s exposure to interest rate and foreign currency risk, see note 26.
Group
Company
Non-current liabilities:
Secured bank loans
Lease liabilities
Total non-current interest-bearing loans and lease liabilities
Current liabilities:
Secured bank loans
Lease liabilities
2020
£’000
15,127
7,815
22,942
2019
£’000
2,284
4,864
7,148
607
558
10,530
115
Total current interest-bearing loans and lease liabilities
1,165
10,645
2020
£’000
2019
£’000
13,207
-
13,207
243
-
243
-
-
-
10,000
-
10,000
Total liabilities:
Secured bank loans
Lease liabilities
15,734
12,814
13,450
10,000
8,373
4,979
-
-
Total interest-bearing loans and lease liabilities
24,107
17,793
13,450
10,000
ANNUAL REPORT 2020 89
Notes to the Financial Statements
CONTINUED
21. Interest-bearing loans and borrowings CONTINUED
Lease liabilities
Year ended 31 March
Less than one year
Between one and two years
Between two and five years
More than five years
Total
Future minimum lease
payments
Interest
Present value of minimum
lease payments
2020
£’000
902
871
2,057
2019
£’000
347
336
882
12,246
9,685
16,076
11,250
2020
£’000
344
329
854
6,176
7,703
2019
£’000
232
226
660
5,153
6,271
2020
£’000
558
542
1,203
6,070
8,373
2019
£’000
115
110
222
4,532
4,979
The Group adopted IFRS 16: Leases from 1 April 2019. IFRS 16 replaces IAS 17 Leases and there is no longer a distinction
between the accounting for finance and operating leases. The liabilities shown above at 31 March 2020 now include
the liabilities for rental lease payments committed for the head offices of Momart and Bishops Stortford, two third party
warehouse leases at Momart and for the ground rent of the Gosport pontoon, with a rental agreement running for a
remaining 41 years until June 2061.
The Group elected to apply the standard retrospectively with the cumulative effect of initial application being recognised
at 1 April 2019, and comparatives have therefore not been restated. In the year ended 31 March 2019, these lease
commitments were shown as operating leases, and no liability was recognised at the year end.
22. Trade and other payables
Current:
Trade payables
Amounts owed to subsidiary undertakings
Loan from joint venture
Other creditors, including taxation and social security
Accruals
Deferred income
Total trade and other payables
Group
Company
2020
£’000
2019
£’000
2020
£’000
2019
£’000
4,304
4,646
-
-
-
249
1,364
2,544
150
8,611
-
200
2,162
2,567
30
6,310
5,030
-
184
525
-
-
168
518
-
9,605
7,019
5,716
23. Employee benefits: pension plans
The Group operates defined contribution schemes at PHFC and Momart and current FIC employees are enrolled in
the FIPS, “Falkland Islands Pension Scheme”. The assets of all these schemes are held separately from those of the
Group in independently administered funds. The Group also has one unfunded defined benefit pension scheme in the
Falkland Islands.
ANNUAL REPORT 2020 90
Defined contribution schemes
The pension cost charge for the year represents contributions payable by the Group to the schemes and amounted
to £527,000 (2019: £436,000). The Group anticipates paying contributions amounting to £513,000 during the year
ending 31 March 2021. There were outstanding contributions of £34,000 (2019: £31,000) due to pension schemes at
31 March 2020.
The Falkland Islands Company Limited Scheme
FIC 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 2021 are £102,000. During the year ended
31 March 2020, 11 pensioners (2019: 13) received benefits from this scheme, and there are three deferred members at
31 March 2020 (2019: 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 15 years (2019: 16 years).
Actuarial reports for IAS 19 purposes as at 31 March 2020, 2019, 2018, 2017 and 2016 were prepared by a qualified
independent actuary, Lane Clark and Peacock LLP. The major assumptions used in the valuation were:
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
2020
2.2%
2.5%
2.8%
21.7
23.6
2019
2.5%
2.4%
3.5%
22.2
23.9
The assumptions used by the actuary are chosen from a range of possible actuarial assumptions which, due to the
timescale covered, may not necessarily be borne out in practice.
Sensitivity Analysis
The calculation of the defined benefit liability is sensitive to the assumptions set out above. The following table summarises
how the impact of the defined benefit liability at 31 March 2020 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
2020
£’000
40
(10)
(120)
2019
£’000
43
(13)
(130)
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.
ANNUAL REPORT 2020 91
Notes to the Financial Statements
CONTINUED
23. Employee benefits: pension plans CONTINUED
Scheme liabilities
The present values of the scheme’s liabilities, which are derived from cash flow projections over long periods and thus
inherently uncertain, were:
Present value of scheme
liabilities
Related deferred tax assets
Net pension liability
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
Value at
2016
£’000
2017
£’000
2018
£’000
2019
£’000
2020
£’000
(2,644)
(2,985)
(2,839)
(2,772)
(2,604)
687
776
738
721
677
(1,957)
(2,209)
(2,101)
(2,051)
(1,927)
2020
£’000
(2,772)
97
(65)
136
2019
£’000
(2,839)
103
(72)
36
Deficit in scheme at the end of the year
(2,604)
(2,772)
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
2020
£’000
65
2020
£’000
(23)
159
136
2019
£’000
72
2019
£’000
100
(64)
36
24. Employee benefits: share based payments
The total number of options outstanding at 31 March 2020 is 357,000 including (i) 25,352 nil cost options (2019: 29,751),
(ii) 234,734 options (2019: 104,689) granted under the Long Term Incentive Plan and (iii) 96,914 (2019: 163,254) Share
options granted with an exercise price equal to the market price on the date of grant.
ANNUAL REPORT 2020 92
(i)
Nil cost options granted to the Chief Executive:
Date of
Issue
16 Jun 17
15 Jun 18
15 Jun 18
17 Jun 19
17 Jun 19
17 Jun 19
Number
3,217
5,681
5,682
3,590
3,591
3,591
Total
25,352
Share price at
grant date
Fair value
per share
pence
285.0
352.0
352.0
316.0
316.0
316.0
pence
268.5
343.0
338.5
311.0
306.0
301.0
Total fair
value
Earliest Exercise
Latest Exercise
£
Date
date
8,638
16 Jun 20
16 Jun 21
15 Jun 20
15 Jun 22
15 Jun 21
15 Jun 22
17 Jun 20
17 Jun 23
17 Jun 21
17 Jun 23
17 Jun 22
17 Jun 23
19,486
19,234
11,165
10,988
10,809
80,320
Reconciliation of nil cost options:
Outstanding at the beginning of the year
Options exercised during the year
Options granted during the year
Outstanding at the year end
Vested options exercisable at the year end
Weighted average life of outstanding options (years)
Number of options
Number of options
2020
29,751
(15,171)
10,772
25,352
-
2.5
2019
29,741
(17,035)
17,045
29,751
-
2.6
(ii)
Long Term Incentive Plan awards, granted at an exercise price of 10 pence to subsidiary
directors and executives:
135,535 Long term Incentive Plan grants were issued on 4 July 2019 at an exercise price of ten pence to local directors
and executives, and expire in five years on 4 July 2024. There are various performance conditions attached to these grants.
None of these grants are exercisable at 31 March 2020.
104,689 Long term Incentive Plan grants were issued on 18 March 2018 at an exercise price of ten pence to local directors
and executives, which expire in five years on 19 March 2023. There are various performance conditions attached to these
grants. During the year 5,490 of these options were forfeited and 99,199 options remain outstanding at 31 March 2020.
None of these options are exercisable at 31 March 2020.
Date of
Issue
18 Mar 18
Number
99,199
4 Jul 19
135,535
Total
234,734
Share price at
Fair value per
Exercise Price
grant date
share
Total fair value
pence
10.0
10.0
Pence
305.0
314.0
Pence
70.7
96.8
Earliest
Exercise
Date
Latest
Exercise
date
£
70,134
18 Mar 21
17 Mar 22
131,198
4 Jul 22
3 Jul 23
201,332
ANNUAL REPORT 2020 93
Notes to the Financial Statements
CONTINUED
24. Employee benefits: share based payments CONTINUED
Reconciliation of LTIPs:
Outstanding at the beginning of the year
Options granted during the year
Options forfeited during the year
Outstanding at the year end
Vested options exercisable at the year end
Weighted average life of outstanding options (years)
Number of options
Number of options
2020
104,689
135,535
(5,490)
234,734
-
3.7
2019
104,689
-
-
104,689
-
3.0
(iii)
Share options with an exercise price equal to the market price on the date of grant
Date of
Issue
21 Dec 10
16 Dec 11
03 Sep 14
19 Jan 15
Number
7,742
71,018
13,154
5,000
Exercise
Share price at
Price
pence
342.5
267.5
353.5
272.5
grant date
pence
337.5
261.5
353.5
272.5
Fair value
per share
pence
124.0
68.0
100.0
63.0
Total fair
value
£
9,600
Earliest
Exercise
Date
Latest
Exercise
date
21 Dec 13
20 Dec 20
48,292
16 Dec 14
15 Dec 21
13,154
03 Sep 17
02 Sep 24
3,150
19 Jan 18
18 Jan 25
Total
96,914
74,196
The range of exercise prices of outstanding options at 31 March 2020 is from £2.675 (2019: £2.675) to £3.535
(2019: £3.90).
Reconciliation of options with an exercise price equal to the market price on the date of grant,
including the number and weighted average exercise price:
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
Number of
Weighted average
Number of
exercise price (£)
options
exercise price (£)
2020
2.94
2.90
2.84
3.90
2.85
2.85
2.2
2020
163,254
(44,550)
(10,790)
(11,000)
96,914
96,914
2019
2.74
2.22
2.68
3.65
2.94
2.94
2.2
options
2019
236,490
(67,719)
(2,000)
(3,517)
163,254
163,254
ANNUAL REPORT 2020 94
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. All options, other than certain nil cost options granted
to the Chief Executive, are granted with the condition that the employee remains in employment for three years.
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 2020, 15,171
nil cost options were exercised over ordinary shares and 44,550 other share options were exercised by the Chief Executive
(2019: 17,035 nil cost options were exercised by the Chief Executive and 67,719 other share options were exercised by
employees around the Group).
Total share-based payment expense recognised in the year
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
2020
£’000
97
2019
£’000
69
Ordinary Shares
Number
2020
2019
12,502,137
12,434,418
2,382
67,719
12,504,519
12,502,137
2020
£’000
1,250
2019
£’000
1,250
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 9 August 2019, the Employee Share Ownership Plan was terminated. At 31 March 2019 the plan held 7,664 ordinary
shares at a cost of £15,047. In June 2019, the ESOP issued these 7,664 shares in respect of the exercise of the nil cost
options which vested in June 2019. The market value of the shares at 31 March 2019 was £21,076.
During the year 2,382 shares were issued following the exercise of share options. On 17 June 2019, the Chief Executive
exercised 15,171 nil cost options, 7,131 options were cancelled to settle the employee tax liabilities and 7,664 shares were
transferred from the Employee Share Ownership Plan, the remaining 376 options were issued as new share capital. On 19
June 2019, the Chief Executive exercised 44,550 ordinary shares of £0.10 each in the Company under the terms of the
Company’s 2009 Executive Share Option Scheme, after sufficient options had been cancelled to meet the exercise price
and employee tax obligations, 2,006 options were issued as new share capital. A total cash outflow of £29,000 was paid
on the exercise of these options to settle the tax obligations arising.
For more information on share options see note 24.
ANNUAL REPORT 2020 95
Notes to the Financial Statements
CONTINUED
25. Capital and reserves CONTINUED
Other reserves
The other reserves in the Group of £703,000 at 31 March 2020 comprise £5,389,000 of merger relief which arose on the
1998 Scheme of Arrangement, when the Company issued 1 share for every 300 shares that shareholders had previously
held in Anglo United plc. Immediately following this Scheme of Arrangement, the Company acquired the Falklands’
businesses for £8.0 million and the £4,686,000 of goodwill on this acquisition was written off against this merger relief in
other reserves.
Dividends
The following dividends were recognised and paid in the period:
Final: 3.35 pence (2019: 3.0 pence) per qualifying ordinary share
Interim: 1.80 pence (2019: 1.65 pence) per qualifying ordinary share
Total dividends recognised in the period
26. Financial instruments
(i)
Fair values of financial instruments
Trade and other receivables
2020
£’000
419
225
644
2019
£’000
373
206
579
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.
Financial Instruments categories and fair values
The fair values of financial assets and financial liabilities are not materially different to the carrying values shown in the
consolidated balance sheet and Company balance sheet.
ANNUAL REPORT 2020 96
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
Total trade and other payables
Group
Company
2020
£’000
9,108
1,115
6,284
2019
£’000
6,184
1,243
6,310
16,507
13,737
(537)
(16)
2020
£’000
5,766
-
3
5,769
(537)
2019
£’000
1,768
-
-
1,768
(16)
(8,611)
(9,605)
(7,019)
(5,716)
Interest-bearing borrowings at amortised cost
(24,107)
(17,793)
(13,450)
(10,000)
The interest rate swaps have 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.
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 £16,507,000 (2019: £13,737,000)
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.
ANNUAL REPORT 2020 97
Notes to the Financial Statements
CONTINUED
26. Financial instruments CONTINUED
The maximum exposure to credit risk for trade receivables at the balance sheet date by geographic region was:
Group
Falkland Islands
Europe
North America
United Kingdom
Other
Total trade receivables
2020
£’000
1,824
786
952
2,472
250
6,284
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
2020
£’000
4,946
922
406
166
Impairment
2020
£’000
-
-
(58)
(98)
Net
2020
£’000
4,946
922
348
68
Gross
2019
£’000
4,710
1,210
366
190
Impairment
2019
£’000
-
(48)
(57)
(61)
2019
£’000
1,021
622
706
3,302
659
6,310
Net
2019
£’000
4,710
1,162
309
129
6,440
(156)
6,284
6,476
(166)
6,310
The movement in the allowances for impairment in respect of trade receivables during the year was:
Group
Balance at 1 April 2019
Impairment loss recognised
Cash received
Utilisation of provision (debts written off)
Balance at 31 March
Provided against hire purchase debtors
Provided against trade and other receivables
Balance at 31 March
2020
£’000
196
31
-
(44)
183
27
156
183
2019
£’000
285
17
5
(111)
196
30
166
196
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.
ANNUAL REPORT 2020 98
(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 £12.8 million. All payments due during the year with respect to these
agreements were met as they fell due.
At the start of the year, the Company had one bank loan of £10.0 million repayable within less than twelve months at 31
March 2019, which was drawn down by FIH group plc to fund the Leyton warehouse acquisition, and repaid in June 2019,
when the £13,875,000 ten-year mortgage was drawn down, net of £56,000 of arrangement and legal fees.
The Group manages its cash balances centrally 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:
2020
Financial liabilities
Secured bank loans
Leases liabilities
Trade payables
Interest rate swap liability
Other creditors, including taxation
Accruals
Contractual cash flows
Carrying
amount
£’000
Total
£’000
1 year or
less
£’000
1 to 2
years
£’000
2 to 5
years
£’000
5 years
and over
£’000
15,734
18,363
1,021
1,322
8,373
4,304
537
1,364
2,544
16,076
902
871
4,304
4,304
612
1,364
2,544
89
1,364
2,544
-
76
-
-
3,913
2,057
-
207
-
-
12,107
12,246
-
240
-
-
Total financial liabilities
32,856
43,263
10,224
2,269
6,177
24,593
2019
Financial liabilities
Secured bank loans
Lease liabilities
Trade payables
Interest rate swap liability
Other creditors, including taxation
Accruals
Contractual cash flows
Carrying
amount
£’000
Total
£’000
1 year or
less
£’000
1 to 2
years
£’000
12,814
13,057
10,594
4,979
4,646
16
2,162
2,567
11,250
4,646
16
2,162
2,567
347
4,646
11
2,162
2,567
449
336
-
5
-
-
2 to 5
years
£’000
1,347
882
-
-
-
-
5 years
and over
£’000
667
9,685
-
-
-
-
Total financial liabilities
27,184
33,698
20,327
790
2,229
10,352
ANNUAL REPORT 2020 99
Notes to the Financial Statements
CONTINUED
26. Financial instruments CONTINUED
Liquidity risk – Company
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the
effects of netting agreements:
2020
Financial liabilities
Secured bank loans
Interest rate swap liability
Other creditors, including taxation
Accruals and deferred income
Contractual cash flows
Carrying
amount
£’000
Total
£’000
1 year or
less
£’000
1 to 2
years
£’000
2 to 5
years
£’000
5 years
and over
£’000
13,450
15,901
537
184
525
612
184
525
595
89
184
525
869
76
-
-
2,552
11,885
207
240
-
-
-
-
Total financial liabilities
14,696
17,222
1,393
945
2,759
12,125
2019
Financial liabilities
Secured bank loans
Interest rate swap liability
Other creditors, including taxation
Accruals and deferred income
Contractual cash flows
Carrying
amount
£’000
Total
£’000
1 year or
less
£’000
1 to 2
years
£’000
2 to 5
years
£’000
5 years
and over
£’000
10,000
10,000
10,000
16
168
518
16
168
518
11
168
518
-
5
-
-
5
-
-
-
-
-
-
-
-
-
-
Total financial liabilities
10,702
10,702
10,697
(iv) Market Risk
Financial risk management
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will
affect the Group’s income or the value of its holdings of financial instruments.
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.
ANNUAL REPORT 2020 100
Group
2020
Cash and cash equivalents
Trade payables and other payables
Balance sheet exposure
Group
2019
Cash and cash equivalents
Trade payables and other payables
Balance sheet exposure
Total
Balance
sheet
exposure
£’000
377
(599)
(222)
Total
Balance
sheet
exposure
£’000
375
(428)
(53)
Other
£’000
38
(78)
(40)
Other
£’000
23
(154)
(131)
GBP
£’000
8,731
Total
£’000
9,108
(8,012)
(8,611)
719
497
GBP
£’000
5,809
Total
£’000
6,184
(9,177)
(9,605)
(3,368)
(3,421)
EUR
£’000
142
(316)
(174)
EUR
£’000
142
(148)
(6)
USD
£’000
197
(205)
(8)
USD
£’000
210
(126)
84
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 2019.
EUR
USD
Equity
Profit or Loss
2020
£’000
17
1
2019
£’000
1
(8)
2020
£’000
17
1
2019
£’000
1
(8)
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.
ANNUAL REPORT 2020 101
Notes to the Financial Statements
CONTINUED
26. Financial instruments CONTINUED
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
Leases receivable
Bank loans
Lease liabilities
Total Fixed rate financial instruments
Variable rate financial instruments
Effect of Interest rate swap liability
Bank loans
Group
Company
2020
£’000
2019
£’000
2020
£’000
2019
£’000
1,115
(702)
(8,373)
(7,960)
1,243
(794)
(4,979)
(4,530)
-
-
-
-
-
-
-
-
(537)
(16)
(537)
(16)
(15,032)
(12,020)
(13,450)
(10,000)
Total Variable rate financial instruments
(15,569)
(12,036)
(13,987)
(10,016)
At 31 March 2020, the Group had four bank loans:
(i)
(ii)
(iii)
(iv)
£13.4 million ten-year loan, which was drawn down on 28 June 2019, with interest charged at LIBOR plus 1.75%;
£1.3 million (2019: £1.5 million) repayable over ten years until May 2025, secured against the newest vessel in
PHFC, with interest charged at 2.6% above the bank of England base rate;
£0.3 million (2019: £0.3 million) repayable over ten years until May 2025, secured against freehold property held in
PHFC, with interest charged at 1.75% above the Bank of England base rate;
£0.7 million (2019: £0.8 million) drawn down by Momart, interest has been fixed on this loan at 2.73% for the full ten
years until December 2026.
The interest payable on the £13.4 million ten-year loan has been hedged by one interest swap, taken out on 4 July 2019
with an initial notional value of £13.875 million, with interest payable at the difference between 1.1766% and the three-
month LIBOR rate. This interest rate swap notional value decreases at £125,000 per quarter over five years until June
2024, and then at £150,000 per quarter for a further five years until June 2029 when the outstanding bullet payment of
£8,525,000 is likely to be refinanced. The notional value of the swap at 31 March 2020 is £13,500,000.
The interest payable on the loans regarding the vessel and the freehold property in PHFC noted above has been hedged
by one interest swap, taken out in October 2015 with an initial 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
2020 is £1,703,750 (2019: £2,138,750). Including the two swaps, the blended average interest rates on the Group’s bank
borrowings is 3.0% (2019: 2.7%) per annum.
Lease liabilities
At 31 March 2020, the Group had the following lease liabilities:
(i)
(ii)
(iii)
£5.8 million lease liabilities payable to Gosport Borough Council; £4.7 million for the Gosport pontoon and £1.1
million for the ground rent on the pontoon. Both of these leases run until June 2061 and finance charges accrue on
these liabilities at a fixed 4.75%.
£1.9 million of property rental leases, including two warehouses rented by Momart, and the Momart and Bishops
Stortford head offices, which run for between six to nine years from 1 March 2020. The weighted average interest
rate of these rental liabilities is 3.25%.
£0.7 million of lease liabilities taken out to finance trucks by hire purchase leases at Momart, £0.5 million of this
balance arises on three leases drawn down towards the end of the year ended 31 March 2020. The weighted
average interest rate of these truck liabilities is 3.0%.
ANNUAL REPORT 2020 102
The total blended average interest rate on the Group’s lease liabilities is 4.3% per annum.
Interest rate 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 2019
Group
Company
2020
£’000
152
(150)
152
(150)
2019
£’000
21
(120)
21
(120)
2020
£’000
152
(135)
152
(135)
2019
£’000
21
(100)
21
(100)
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
The Group’s objectives when managing capital, which comprises equity and reserves at 31 March 2020 of £38,792,000
(2019: £44,567,000) 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
The Group leases three office premises and two storage warehouses at Momart. Office leases typically run for a period of
3-10 years, with an option to renew the lease after that date. Warehouse leases typically run for a period of 25 years, with
an option to renew the lease after that date. From 1 April 2019, the group has recognised right-of-use assets for these
leases, except for short-term and low-value leases.
Non-cancellable operating lease rental commitments are payable as follows:
Less than one year
Between one and five years
More than five years
Group
2020
£’000
3
-
-
3
2019
£’000
365
1,075
2,549
3,989
During the year ended 31 March 2020, IFRS 16 has been adopted and therefore from 1 April 2019 all significant rental
leases have been recognised as a right-of-use asset within fixed assets, with a corresponding liability also recognised
within lease liabilities. The Gosport office rental of £7,000 per year is being extended on a rolling six-month basis and the
group has applied the short life exemption permitted by IFRS 16.
ANNUAL REPORT 2020 103
Notes to the Financial Statements
CONTINUED
27. Operating leases CONTINUED
During the year ended 31 March 2019, £895,000 was recognised as an expense in the income statement in respect of
operating leases.
Group
Operating lease commitments 31 March 2019
Effect of discounting at 31 March 2019
Lease liabilities recognised on transition to IFRS 16
2019
£’000
3,989
(1,495)
2,494
£1,466,000 of the unaccrued interest above at 31 March 2019 arises on the Gosport pontoon ground rent, which runs for
a further 41 years until June 2061. The remaining unaccrued interest arises on the property leases at Momart for the head
office lease at Canary Wharf with three years left to run, and two warehouses rented from third parties, with eight or nine
years remaining.
Leases as lessor
The Group leases out its investment properties, which consist of 55 houses and flats and ten mobile homes in the Falkland
Islands, these are leased to staff, fishing agency representatives and other short-term visitors to the Islands. These lease
agreements generally have an initial notice period of six months, and beyond the six months initial tenancy, one month’s
notice can be given by either party, therefore future minimum lease payments under non-cancellable leases receivable are
not material.
The Company had no operating lease commitments; however, as a result of the purchase of the five warehouses at Leyton,
the Company had the following non-cancellable operating lease rentals receivable:
Company
Less than one year
Between one and five years
More than five years
28. Capital commitments
2020
£’000
918
3,672
17,672
22,262
2019
£’000
763
3,157
4,748
8,668
At 31 March 2020, the Group had entered into contractual commitments of £389,000 for one 18 tonne truck and one 26
tonne truck at Momart.
At 31 March 2019, the Group had entered into contractual commitments of £421,000 for two heavy goods trucks and two
sprinter vans at Momart.
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 30.2% (2019: 30.0%) of the voting shares of the
Company at 31 March 2020.
The compensation of key management personnel, which includes the FIH group plc directors and the directors of the
subsidiaries, is as follows:
ANNUAL REPORT 2020 104
Group
Company
Key management emoluments including social security costs
Company contributions to defined contribution pension plans
Share-related awards
2020
£’000
1,325
74
85
2019
£’000
1,597
69
65
Total key management personnel compensation
1,484
1,731
2020
£’000
401
-
41
442
2019
£’000
431
-
44
475
At 31 March 2020, the Group’s joint venture, SAtCO, has debtors of £224,500 due from each of its parent companies.
30. Accounting estimates
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.
Defined benefit pension liabilities
At 31 March 2020, 11 pensioners were receiving payments from the FIC defined benefit pension scheme, and there are
three deferred members. A significant degree of estimation is involved in predicting the ultimate benefits payment to these
pensioners using actuarial assumptions 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 advisers.
There is a range of assumptions that may be appropriate, particularly when considering the projection of life expectancy
post-retirement, which is a key demographic assumption, and has been based on UK mortality data, if the life expectancy
assumption was one more year than the assumptions used, this would result in an increase of £120,000 in the liability.
Selecting a different assumption could significantly increase or decrease the IAS19 value of the Scheme’s liabilities. The
projections of life expectancy make no explicit allowance for specific individual risks, such as the possible impact of climate
change or a major medical breakthrough, the projections used reflect the aggregate impact of the many possible factors
driving changes in future mortality rates.
The figures are prepared on the basis that both the FIC pension scheme and the FIC are ongoing. If the scheme were to
be wound up, the position would differ, and would almost certainly indicate a much larger deficit.
Impairment testing
Impairment tests have been undertaken with respect to intangible assets (see note 11 for further details), with detailed
reviews of probable medium to long-term detailed forecasts of each of the businesses in the Group, and following these,
the goodwill held in respect of both Momart and PHFC has been reduced during the year. Goodwill at Momart has been
written down by £3.5 million to £2.1 million and the goodwill held in respect of PHFC, has been reduced by £4.0 million,
eliminating all the previously recorded balance in relation to the ferry company.
Investment in subsidiaries
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised. The following estimates are dependent upon assumptions
which could change in the next financial year and have a material effect on the carrying amounts of assets and liabilities
recognised at the balance sheet date. The estimates of the costs of investment in subsidiaries have been assessed for
impairment, with detailed reviews of probable medium to long-term detailed forecasts of each of the businesses. During the
year ended 31 March 2020, the Company’s investment in the Art Logistics business, Momart was impaired by £3,713,000
ANNUAL REPORT 2020 105
Notes to the Financial Statements
CONTINUED
30. Accounting estimates CONTINUED
due to lower future expected levels of profitability following COVID-19, as the expected widespread recession and market
dislocation are likely to further dilute demand from ultra-high-net-worth collectors and commercial buyers for some time.
In the public sector, museum budgets are likely to be squeezed by anticipated cuts in government spending and visitor
numbers are likely to be restricted by the need for social distancing. Further detail has been provided in note 11 with
regards to the sensitivities of the assumptions.
Revenue recognition on Falkland Islands Government Housing contract
The revenue from the housing contract for the Falkland Islands Government requires the future costs to be estimated, and
the current estimates consider it probable that the contract will be profitable. The key judgements in this assessment are (i)
the stage of completion of the contract activity at the reporting date, which is assessed and signed off by a Falkland Islands
Government representative, and (ii) the future costs to complete the project. A reasonable increase in costs to complete
would not result in a material change in the revenue or profit recognised to date.
Warranties on private builds
On the completion of each construction project, FIC set up a provision of 2.5% of the sales proceeds as a warranty against
any potential future work required.
Directors and Corporate Information
Directors
John Foster, Chief Executive
Robin Williams,
Non-executive Chairman
Jeremy Brade,
Non-executive Director
Rob Johnston,
Non-executive Director
Dominic Lavelle,
Non-executive Director
Company Secretary
Carol Bishop
Corporate Information
Stockbroker and
Nominated Adviser
W.H. Ireland Limited, 24 Martin Lane,
London EC4R 0DR
Solicitors
BDB Pitmans LLP
50 Broadway,
Westminster,
London SW1H 0BL
Auditor
KPMG LLP
St. Nicholas House,
Park Row,
Nottingham NG1 6FQ
Registrar
Link Asset Services
The Registry, 34 Beckenham Road,
Beckenham, Kent BR3 4TU
Financial PR
Novella Communications,
South Wing, Somerset House,
London WC2R 1LA
Registered Office
Kenburgh Court
133-137 South Street
Bishop’s Stortford
Hertfordshire CM23 3HX
T: 01279 461630
E: admin@fihplc.com
W: www.fihplc.com
Registered number 03416346
The Falkland Islands
Company
Kevin Ironside, Director
T: 00 500 27600
E: info@fic.co.fk
W: www.falklandislandscompany.com
The Portsmouth Harbour
Ferry Company
Clive Lane, Director
T: 02392 524551
E: admin@gosportferry.co.uk
W: www.gosportferry.co.uk
Momart Limited
Alan Sloan, Director
Kenneth Burgon, Director
T: 020 7426 3000
E: enquiries@momart.com
W: www.momart.com
www.fihplc.com
ANNUAL REPORT 2020