FIH Group Plc
Annual Report 2022

Plain-text annual report

F I H G R O U P P L C A N N U A L R E P O R T 2 0 2 2 F I H G R O U P P L C A N N U A L R E P O R T 2 0 2 2 Contents Financial Highlights For The Year Ended 31 March 2022 Chairman’s Statement 2022 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 2022 Consolidated Statement of Comprehensive Income For The Year Ended 31 March 2022 Consolidated Balance Sheet At 31 March 2022 Company Balance Sheet At 31 March 2022 Consolidated Cash Flow Statement For The Year Ended 31 March 2022 Company Cash Flow Statement For The Year Ended 31 March 2022 Consolidated Statement of Changes in Shareholders’ Equity For The Year Ended 31 March 2022 Company Statement of Changes in Shareholders’ Equity For The Year Ended 31 March 2022 Notes to the Financial Statements Directors and Corporate Information 1 2 3 15 17 20 22 31 38 39 40 41 42 44 45 46 47 95 1 Financial Highlights FOR THE YEAR ENDED 31 MARCH 2022 Turnover from continuing operations Profit before tax Underlying profit before tax* Cash flow from operations Diluted earnings per share before non-trading items Diluted earnings per share * Defined as profit before tax and non-trading items 2022 £’m 40.3 2.0 2.3 5.1 9.5p 7.6p Change £’m 7.7 1.8 2.2 1.4 2021 £’m 32.6 0.2 0.1 3.7 0.0p 0.1p Turnover (£’m) Underlying profit before tax* (£’m) 43.8 42.5 44.6 40.3 3.9 3.7 32.6 3.2 2.3 0.1 2018 2019 2020 2021 2022 2018 2019 2020 2021 2022 Diluted earnings per share* (pence) before non-trading items Dividends per share (pence) 5.0 4.5 24.1 21.7 19.7 9.5 0.0 3.0 1.8 0.0 2018 2019 2020 2021 2022 2018 2019 2020 2021 2022 Profit before tax was as follows: 2022: £2m, 2021: £0.2m, 2020: £3.8m loss, 2019: £3.9m, 2018: £3.3m Diluted EPS was as follows: 2022: 7.6p, 2021: 0.1p, 2020: (37.8p), 2019: 24.1p, 2018: 20.1p ANNUAL REPORT 2022Chairman’s Statement 2022 2 The last two years have been extremely challenging for the Group. It is therefore gratifying to see that the decisive action taken to address the impact of the pandemic, the hard work of our employees and a significant move towards pre-pandemic levels of trading, have resulted in an underlying pre-tax trading profit of £2.3 million, compared to a broadly break-even result in the prior year. I would like to take this opportunity to thank each of the Group’s employees for their part in delivering such a substantial improvement. The Falkland Islands Company (“FIC”) continued to trade consistently and both Momart and The Portsmouth Harbour Ferry Company (“PHFC”) delivered considerable improvements over the prior year, with Momart returning an overall underlying pre-tax profit of £0.6 million (2021: £0.5 million loss) and PHFC delivering an underlying loss of £0.1 million (2021: £1.2 million loss). The balance sheet remains strong, with cash of £9.6 million at 31 March 2022 remaining in line with the balance at the prior year end after adjusting for the repayment of £5.0 million of CBILS loans, net bank borrowings reducing to £4.6 million (2021: £5.5 million) and net debt including lease liabilities improving to £11.7 million (2021: £13.6 million). Dividend Following the payment of an interim dividend of 1.0 pence per share paid in January 2022 and reflecting the continued improvement in trading since the half year, I am pleased to announce that a final dividend of 2.0 pence per share will be proposed at our forthcoming Annual General Meeting. This will take the total dividend paid for the year ended 31 March 2022 to 3.0 pence per share (2021: nil). Board and Governance As part of the Board’s succession planning and in line with his wishes, John Foster stepped down from his position as CEO on 14 April 2022 and was succeeded by Stuart Munro, who joined as CFO in April 2021. I would like to take this opportunity to thank John for his significant contribution to the business over the past seventeen years and to wish him well in his future endeavours. Jeremy Brade steps down at the AGM purely as a result of his long service which has been of great benefit to the Group, particularly when serving as interim Chair to handle the offers made in 2017 to acquire FIC. We thank him for his contribution and will look to appoint a replacement in due course. Additionally, progress is well advanced towards securing a CFO for the Group. Outlook and Strategy Group trading continues to improve as the effects of the pandemic recede. Equally importantly, FIH is in a strong financial position and has a clear plan going forward to accelerate the recovery of the businesses and generate additional value through a series of initiatives outlined in our CEO’s Strategic Review. Robin Williams Chairman 5 July 2022 ANNUAL REPORT 20223 Chief Executive’s Strategic Review BUSINESS REVIEW Overview trading activity continuing With towards pre-pandemic levels, it is pleasing to report that the progress demonstrated in the Group’s first half results continued in the traditionally stronger second half of the year. to head Group Trading Results for the Year Ended 31 March 2022 A summary of the trading performance of the Group is given in the table below: Revenue of £40.3 million for the year ended 31 March 2022, an increase of 24%, resulted in a pre-tax profit of £2.0 million and an underlying pre-tax profit of £2.3 million, compared to a broadly break-even result for the year ended 31 March 2021. This included £0.5 million of COVID-related support from UK and local government, which was £1.3 million less than the prior year. Group revenue Year ended 31 March Falkland Islands Company Momart Portsmouth Harbour Ferry 2022 £m 21.6 15.6 3.1 2021 £m Change % 20.9 10.3 3.3 51.5 1.4 121.4 Total revenue 40.3 32.6 23.6 FIC, the division least affected by the pandemic, delivered an underlying pre-tax profit of £1.8 million, which was consistent with the prior year. Momart and PHFC each improved their underlying pre-tax results by £1.1 million, with Momart delivering a profit of £0.6 million and PHFC a loss of £0.1 million. The Group results were underpinned by a net cash flow from operating activities of £5.1 million, with working capital remaining broadly in line with the prior year, despite a significant increase in trading activity. The closing cash balance of £9.6 million was in line with the balance at the prior year end, after adjusting for the repayment of £5.0 million of CBILS loans in June 2021. It also reflected £2.7 million of capital investment, some £1.2 million ahead of the prior year. As noted previously, the Group owns the freehold of Momart’s art storage warehouses in East London, which was acquired in December 2018 at a cost of £19.6 million. Indications are that the value of this property has risen substantially since acquisition. Group underlying pre-tax profit* Falkland Islands Company** Momart** Portsmouth Harbour Ferry** Total underlying pre-tax profit * Non-trading items (see notes below)*** Reported profit before tax 1.8 0.6 (0.1) 2.3 (0.3) 2.0 1.8 (0.5) (1.2) 0.1 0.1 0.2 - 1.1 1.1 2.2 (0.4) 1.8 * Underlying pre-tax profit is defined as profit before tax before non–trading 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. *** In the current year, non-trading items comprised £0.3 million of people-related costs including employee redundancies and compensation payable to the former Chief Executive. The net non-trading profit of £0.1 million in the prior year included £0.4 million of restructuring costs, which were offset by £0.5 million of income relating to the release of accruals where it is now probable that no future economic outflow will arise. Management consider that separate presentation of these items is appropriate to facilitate year on year comparison of performance of the Group. ANNUAL REPORT 2022 Group Revenue 2022 Group Revenue 2021 4 Momart 39% FIC 54% Momart 32% FIC 64% PHFC 7% PHFC 4% Group Operating Company Performance Falkland Islands Company Total revenue of £21.6 million was £0.7 million ahead of the year ended 31 March 2021, with the majority of the improvement arising in Falkland Building Services (“FBS”) and Support services. These improvements were offset by a reduction in Retail contribution arising from a change in sales mix and increased overheads, resulting in an underlying pre-tax profit of £1.8 million, which was in line with the prior year. The previous year’s ban on tourists visiting the Falkland Islands continued, although these restrictions were lifted on 4 May 2022, which should facilitate their return in the southern hemisphere tourist season. FIC Operating results Year ended 31 March 2022 £m 2021 £m Change % Revenues Retail Falklands 4x4 FBS (housing and construction) Support services Property rental 9.7 2.8 5.8 2.5 0.8 9.7 2.8 5.3 2.3 0.8 Total FIC revenue 21.6 20.9 FIC underlying operating profit 1.9 1.9 Net interest expense (0.1) (0.1) FIC underlying profit before tax 1.8 1.8 - - 9.4 8.7 - 3.3 - - - FIC underlying operating profit margin 8.7% 9.1% (4.4) FIC Divisional Activity Year on year Retail sales were broadly flat. A continued lack of tourist-related earnings for Falkland Islands residents, the relaxation of international restrictions allowing islanders to travel overseas, and shortages of certain products, resulted in a reduction in discretionary expenditure on home improvement and electrical items. However, this was offset by increased sales elsewhere, particularly from retail outlets that had been partially closed in the prior year. At Falklands 4x4, vehicle sales and rental income both improved over the prior year, although this was offset by a reduction in servicing and spares revenues, leaving overall income largely unchanged. FIC has now been confirmed as the representative for Ineos for the sale of their Grenadier 4x4 vehicle in the Falkland Islands with first deliveries targeted for late 2022. FBS revenue increased by 9.4% driven mainly by civils contracts for the Falkland Islands Government (“FIG”), including culvert and road capping works on West Falkland, together with road preparation works, drainage and paving at a mobile home park in Port Stanley. The order book remains strong and includes the £17.3 million contract to build a total of 70 houses for FIG and the UK Ministry of Defence (“MOD”) over four years secured in November 2021 and a three-year road capping contract for roads on East Falkland for £1.1 million secured in May 2022. Support Services income increased by £0.2 million to £2.5 million (2021: £2.3 million) due predominantly to increased shipping agency revenues, following the reopening of Stanley Harbour to fishing vessels. ANNUAL REPORT 2022 5 Chief Executive’s Strategic Review BUSINESS REVIEW Rental Properties. Further additions at a cost of £1.2 million (2021: £0.7 million) were made during the year to FIC’s portfolio of domestic rental properties taking the total number of rented properties at 31 March 2022 to 83 (2021: 75) with a further 2 under construction. Average occupancy rates reduced during the year, due mainly to properties being held vacant for overseas employees and service providers ahead of their arrival in the Falkland Islands in line with immigration procedures. Notwithstanding this, revenue remained broadly in line with the prior year at £0.8 million. At 31 March 2022, the total net book value of the portfolio excluding assets under construction (with buildings being fully depreciated over 50 years) was £7.2 million (2021: £5.8 million). The estimated market value of FIC’s rental portfolio at 31 March 2022 was £10.1 million (2021: £8.5 million) an uplift of £3.0 million on book value giving an average value per property of £122,000 (2021: £113,000). FIC Key Performance Indicators and Operational Drivers Year ended 31 March 2018 2019 2020 2021 2022 Staff Numbers (FTE 31 March)* Capital Expenditure £’000 152 175 214 206 232 389 2,348 2,685 1,060 2,434 Retail Sales growth % +0.6 +5.7 +3.1 -3.0 -0.1 Number of FIC rental properties** Average occupancy during the year % Number of vehicles sold Number of 3rd party houses sold*** Illex squid catch in tonnes (000’s) Cruise ship passengers (000’s) 49 54 65 75 89 77 22 84 76 6 89 71 22 93 71 15 83 86 81 11 75.5 57.4 57.6 106.1 123.8 59.3 62.5 72.1 Nil Nil * Restated to include FIC staff in the UK. **Includes ten mobile homes rented to staff. ***Relates to kit home sales to third parties and excludes houses built under contract for FIG. FIC revenues 2022 FIC revenues 2021 Support Services 12% Property Rental 4% Support Services 11% Property Rental 4% FBS 27% Retail 44% FBS 26% Retail 46% 4x4 13% 4x4 13% ANNUAL REPORT 20226 Momart Momart Operating results Revenue of £15.6 million for the year ended 31 March 2022, whilst not yet back to pre-pandemic levels, was £5.3 million (52%) ahead of the prior year, with improvements in both Museum Exhibitions and Gallery Services and a consistent level of storage income. Combined with £0.4 million of pandemic-related support from UK and local government (2021: £1.4 million), this resulted in an underlying pre-tax profit of £0.6 million (2021: £0.5 million loss). Year ended 31 March Revenues Museum Exhibitions Gallery Services Storage 2022 £m 2021 £m Change % 7.4 5.8 2.4 4.5 3.4 2.4 64.4 70.6 - Total Momart revenue 15.6 10.3 51.5% Momart underlying operating profit 1.0 - - Net Interest expense (0.4) (0.5) 20.0 Momart underlying profit/(loss) before tax Momart underlying operating profit margin 0.6 (0.5) 220.0 6.4% - - Museum Exhibitions activity benefitted from the relaxation of COVID restrictions during the year which allowed institutions to plan a programme of events. Whilst activity levels in terms of the number of exhibitions has now returned to near pre-pandemic levels, the overall investment in exhibitions remains suppressed as institutions rely on more of their own collections, rather than extensive loans. Commercial galleries, auction houses and private client activity also benefited from the lifting of COVID restrictions, driven mainly by the return of art fairs, which historically have been a significant part of Momart’s Gallery Services business. The return of Art Basel in September (traditionally taking place in June) and Frieze London in October, contributed to a strong start to the second half of the year and both delivered record revenues as pent-up demand unwound. Storage revenues remained broadly consistent with the prior year at £2.4 million with an 84% utilisation of storage capacity (2021: 83%). Momart revenues 2022 Momart revenues 2021 Storage 15% Commercial Gallery Services 37% Museums and Public Exhibitions 48% Storage 23% Commercial Gallery Services 33% Museums and Public Exhibitions 44% ANNUAL REPORT 20227 Chief Executive’s Strategic Review BUSINESS REVIEW Momart Key Performance Indicators and Operational Drivers PHFC Operating results Year ended 31 March 2018 2019 2020 2021 2022 Year ended 31 March 2022 £m 2021 £m Change % Staff Numbers (FTE at 31 March) Capital Expenditure £’000’s Warehouse % fill vs capacity Exhibition order book 31 March Momart services charged out Revenues from overseas clients 136 140 133 107 99 Revenues Ferry fares 228 20,034 638 540 258 Total PHFC revenue 72.8% 81.1% 86.9% 82.9% 84.0% £4.2m £4.6m Note* Note* £4.3m £10.9m £11.5m £10.8m £6.5m £9.1m £7.1m £7.5m £6.2m £2.7m £5.5m PHFC underlying operating profit/(loss) Pontoon lease liability & Boat loan finance expense PHFC underlying loss before tax 3.1 3.1 0.2 1.4 1.4 121.4 121.4 (0.9) 122.2 (0.3) (0.3) - (0.1) (1.2) 91.7 Exhibitions sales growth 17.0% -6.5% -2.1% -58.3% 64.4% Gallery Services sales growth 15.2% 4.0% -22.4% -41.4% 70.6% Storage sales growth 8.5% -6.3% 5.8% 9.1% 0.0% PHFC Key Performance Indicators and Operational Drivers Total sales growth 15.5% -2.9% -8.7% -45.5% 51.5% Year ended 31 March 2018 2019 2020 2021 2022 Note*: Due to the impact of COVID-19, meaningful data for secure forward orders was not available. Portsmouth Harbour Ferry Company levels over the autumn, but dipped Passenger numbers at PHFC returned to circa 80% of in pre-COVID December following Government guidance to work from home. Recovery resumed following the lifting of guidance at the end of January, and volumes were at circa 76% of pre-pandemic levels for the month ended 31 March 2022, compared to 60% for the same period last year. Overall passenger numbers for the year ended 31 March 2022 of 1.7 million were broadly double those of the prior year, resulting in a £1.7 million increase in revenue, an underlying operating profit of £0.2 million (2021: £0.9 million loss) and an underlying pre-tax loss of £0.1 million (2021: £1.2 million loss) after financing expense. Price increases introduced in April 2022, should further improve revenue in the current year, although this is also heavily dependent on continued recovery in passenger numbers. As noted at the half year, a “Park & Float” scheme was introduced as a six-month trial in late June, offering a combined parking and ferry fare in order to provide people not living within walking distance of the ferry with an alternative to driving around the harbour to get to Portsmouth. This received a low level of customer uptake, which is likely to have been influenced by the operation of Portsmouth Council’s own subsidised park and ride scheme on the outskirts of the city, and was discontinued in December. Investigations are ongoing as to how PHFC can work in partnership with Hampshire Council as part of the development of a fully integrated transport plan for the region. Staff numbers (FTE at 31 March) Capital expenditure £’000’s Ferry reliability (on time departures) Number of weekday passengers ‘000’s % change on prior year Number of weekend passengers ‘000’s % change on prior year Total number of passengers ‘000’s % change on prior year 38 186 37 50 36 65 25 - 26 52 99.8 99.8 99.8 99.9 99.9 1,878 1,834 1,706 613 1,188 -4.5 -2.3 -7.0 -64.1 93.8 734 722 659 195 500 -1.3 -1.6 -8.7 -70.4 156.4 2,612 2,556 2,365 808 1,688 -3.6 -2.1 -7.5 -65.8 108.9 Revenue growth % 1.5 0.4 -5.5 -65.9 114.2 Average yield per passenger journey* £1.58 £1.62 £1.69 £1.76 £1.76 *Total ferry fares divided by the total number of passengers. Trading Outlook The overall trading outlook for the Group remains positive. In FIC, the expected return of tourism to the Falkland Islands, along with a strong order book and potential opportunities for further work with FIG and the MOD, all bode well for the future. Further progress is expected at Momart and PHFC, although the pace of recovery remains dependent on the rate of return of customer activity as the impact of COVID hopefully continues to recede. As trading levels continue to ANNUAL REPORT 2022 8 recover, the challenge for the Group will inevitably move to satisfying the growing demand. Decisive action was taken to reduce staff numbers and costs during the pandemic and their growth must continue to be carefully managed as activity increases, particularly given the high levels of inflation currently being experienced. Group Strategy The aim of the Board is to build a Group of greater scale providing consistent earnings growth and cash generation that will provide shareholders with both predictable capital growth and regular dividend income. To deliver this, the Group strategy has three key strands: Build the profits of the existing businesses back to and beyond the pre-COVID position. Good progress was made in the year ended 31 March 2022, but more remains to be done. As noted above, a key challenge will be to manage costs in line with the ongoing trading recovery. in developing the existing businesses. Invest The Board are particularly focussed on capitalising on potential opportunities for further work for FIG and the MOD, building on the £17.3 million housing contract awarded in November 2021, as well as on maximising returns from existing FIC land assets. The potential for additional opportunities arising from the development of the Sea Lion oil field will also be monitored closely. However, the Board does not rely in its planning on any such development due to the uncertain and lengthy timescales involved and the undefined nature of any benefit which might accrue to FIC. Explore the potential for strategic acquisitions. This could provide a step change in the scale of FIH, but acquisitions will only be considered if they either add to existing activities or bring growth potential from other attractive sectors, can be secured at an appropriate price and are within the capacity of the senior executive team to integrate and optimise without negatively impacting the performance of the existing businesses. Financial Review Revenue Underlying Operating Profit Underlying operating profit before net finance costs increased by £2.1 million (210%) to £3.1 million (2021: £1.0 million). This was despite grant income received under furlough schemes and other government support reducing by £1.3 million to £0.5 million (2021: £1.8 million) and reflected the revenue increases noted above. Net Financing Costs The Group’s net financing costs of £0.8 million were broadly in line with the prior year. Two UK Government-backed CBILS loans totalling £5.0 million were repaid in June 2021, but interest payments on these loans had been covered by the UK Government and therefore this had no impact on net financing costs in the year. Reported Pre-tax Profit The reported pre-tax result for the year ended 31 March 2022 was a profit of £2.0 million (2021: £0.2 million). Non-trading items in the current year included £0.3 million of people related costs including employee redundancies and compensation payable to the former Chief Executive. The Group’s underlying profit before tax before these non-trading items was £2.3 million (2021: £0.1 million). Non-trading items in the prior year included £0.4 million of restructuring costs and £0.5 million income from the derecognition of historic liabilities, which were previously included within accruals, but are no longer enforceable. Taxation Tax on current year profits has increased by £0.8 million. This is mainly due to increased profitability (£0.3 million) and the increase in UK deferred tax (£0.5 million) due to the increase in the UK corporation tax rate from 19% to 25% from 1 April 2023. Earnings per Share Basic and Diluted Earnings per Share (“EPS”) derived from reported profits was 7.6 pence (2021: 0.1 pence). Basic and Diluted EPS derived from underlying profits was 9.5 pence (2021: 0.0 pence). to pre-pandemic trading headed back increased by £7.7 million levels, As Group revenue (24%) to £40.3 million. The majority of the improvement arose in Momart and PHFC, where the effects of COVID-19 had previously been felt most severely, with revenue improving by £5.3 million and £1.7 million respectively. FIC revenue improved by £0.7 million, despite the previous year’s COVID-related ban on tourists visiting the Falkland Islands continuing during the year. One of the three ferries at work ANNUAL REPORT 20229 Chief Executive’s Strategic Review BUSINESS REVIEW Balance Sheet The Group’s balance sheet remained strong, with total net assets growing to £40.7 million (2021: £38.9 million). Retained earnings increased by £1.1 million to £20.7 million (2021: £19.6 million) and the hedging reserve improved by £0.7 million, reflecting an increase in the fair value of hedges taken through other comprehensive income in accordance with IFRS 9. Net Debt Year ended 31 March 2022 £m 2021 £m Change £m Bank loans (14.2) (20.1) 5.9 Cash and cash equivalents 9.6 14.6 (5.0) Bank loans net of cash and cash equivalents Lease liabilities Net debt (4.6) (5.5) 0.9 (7.1) (8.1) (11.7) (13.6) 1.0 1.9 Bank loans reduced to £14.2 million (2021: £20.1 million) as a result of the £5.0 million CBILS loans repayment in June 2021 and scheduled loan repayments of £0.9 million. The Group’s cash balances reduced by £5.0 million to £9.6 million (2021: £14.6 million) reflecting the repayment of the £5.0 million CBILS loans. Overall net debt improved by £1.9 million to £11.7 million (2021: £13.6 million). The Group’s outstanding lease liabilities totalled £7.1 million (2021: £8.1 million) with £5.2 million of the balance (2021: £5.8 million) relating to the 50-year leases from Gosport Borough Council for the Gosport Pontoon and associated ground rent, which run until June 2061. The carrying value of intangible assets remains unchanged from the prior year at £4.2 million following an annual impairment review which indicated that no impairment was required at Momart. The net book value of property, plant and equipment (2021: decreased by £1.3 million £40.4 million) with additions of £1.4 million being offset by depreciation charges of £2.2 million and a net reduction of £0.4 million on right of use assets following a lease modification relating to the Gosport pontoon ground rent. to £39.1 million At 31 March 2022, the Group had 83 (2021: 75) completed investment properties, comprising commercial and residential properties in the Falkland Islands, which are held for rental. Two properties were under construction at 31 March 2022 (2021: 7). In addition, FIC held 400 acres of land in and around Stanley, including 18 acres zoned for industrial development and 25 acres of prime mixed-use land, and a further 300 acres of undeveloped land outside Stanley. The net book value of the investment properties and undeveloped land of £8.2 million (2021: £7.1 million) has been reviewed by the directors of FIC resident in the Falkland Islands. At 31 March 2022 the fair value of this property portfolio, including undeveloped land, was estimated at £12.5 million (2021: £11.1 million), an uplift of £4.3 million on net book value. FIC’s 83 houses and flats had an estimated fair value of £10.1 million (2021: £8.5 million). The value of FIC’s 700 acres of land was estimated at £2.2 million (2021: £2.2 million). The properties under construction at 31 March 2022 were valued at cost of £0.2 million (2021: £0.5 million). Deferred tax assets relating to future pension liabilities stood at £0.7 million (2021: £0.7 million). This balance relates to the deferred tax benefit of expected future pension payments in the FIC unfunded scheme calculated by applying the 26% Falkland Islands’ tax rate to the pension liability. Inventories, which largely represent stock held for resale and work in progress at FIC increased by £0.8 million to £6.7 million at 31 March 2022 (2021: £5.9 million). This was mainly due to an increase in housebuilding related stock and work in progress at FIC as a result of the timing of deliveries and the phasing of the related works. Trade and other receivables increased by £2.0 million to £7.9 million at 31 March 2022 (2021: £5.9 million) due mainly to increased sales activity in Momart towards the end of the year. Trade and other payables increased by £3.2 million to £10.0 million at 31 March 2022 (2021: £6.8 million) reflecting increased trading activity in Momart before year end and an increase in amounts received in advance of service delivery in FIC. At 31 March 2022, the liability due in respect of the Group’s only defined benefit pension scheme, in FIC, was £2.6 million (2021: £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 largely arose as a result of an increase in interest rates on relevant corporate bonds and has been fed through reserves in accordance with IAS 19. Eleven former employees receive a pension from the scheme at 31 March 2022 and there are three deferred members. liabilities, excluding The Group’s deferred the tax pension asset at 31 March 2022, were £3.9 million (2021: £3.1 million) with the increase due largely to the change in the UK Corporation tax rate from 19% to 25% effective 1st April 2023. ANNUAL REPORT 202210 Cash Flows Financing and Investing Activities Net cash inflow from operating activities of £5.1 million was £1.4 million more than the prior year inflow of £3.7 million. The increase was principally due to a £2.2 million increase in underlying EBITDA, which was partly offset by the working capital improvement in the prior year not being repeated in the year ended 31 March 2022. Overall, working capital remained in line with the prior year, despite the increase in trading activity. The Group’s operating cash flow can be summarised as follows: During the year, the Group invested £2.7 million of capital expenditure, comprising £1.2 million of investment property, £1.4 million on fixed asset property, plant and equipment and £0.1 million on computer software. The £6.6 million of bank and lease liabilities repayments in the year included the £5.0 million CBILS loans repaid in June 2021. The £5.4 million of bank and lease liabilities drawn down in the prior year included £5.0 million CBILS drawn down in June 2020 and the funding of vehicles in Momart of £0.4 million. Year ended 31 March Underlying profit before tax Depreciation & amortisation Net interest payable Underlying EBITDA 2022 £m 2021 £m Change £m 2.3 2.4 0.8 5.5 0.1 2.3 0.9 3.3 2.2 0.1 (0.1) 2.2 0.4 Non-trading, cash items - (0.4) Increase in hire purchase debtors (0.1) - (0.1) Decrease / (increase) in working capital - 1.0 (1.0) Tax paid and other (0.3) (0.2) (0.1) Net cash inflow from operating activities Financing and investing activities Capital expenditure Disposal of fixed assets Net bank and lease liabilities interest paid Bank and lease liability repayments Dividends paid Bank and lease liabilities draw down Net cash (outflow) / inflow from financing and investing activities 5.1 3.7 1.4 (2.7) (1.5) 0.1 - (1.2) 0.1 (0.8) (0.8) - (6.6) (0.1) - (1.3) - 5.4 (5.3) (0.1) (5.4) (10.1) 1.8 (11.9) Net cash (outflow) / inflow Cash balance b/fwd. (5.0) 14.6 5.5 9.1 (10.5) 5.5 Cash balance c/fwd. 9.6 14.6 (5.0) Museum art cases in storage ANNUAL REPORT 202211 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 Issue The lockdown measures introduced by the UK Government to suppress COVID-19 had an unprecedented impact on the fundamental conditions of supply and demand in the Group’s UK businesses. 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. Revised staff safety protocols and the need to use PPE for staff slowed down installations at Momart and increased the cost of operations. The impact on FIC and PHFC was minimal. At PHFC, the initial lockdown in 2020 saw ferry customers cease their normal daily travel to work and leisure activities, causing a 90% fall in ferry traffic. Longer term changes in customer behaviour may result from the pandemic: an increased reluctance to use public transport and more hybrid/working from home. Despite a successful vaccination programme, the Falkland Islands remained closed to overseas visitors in the year, which removed an important source of income for the economy. Comment The impact was immediate and severe but activity is reviving since the cessation of lockdown measures. The economic costs were mitigated in both businesses by the use of the UK Government’s furlough grant scheme. Activity is increasing following the cessation of lockdown measures. Impact Moderate (decreased from very high) and continuing to decrease Moderate (decreased from very high) - and continuing to decrease Safe working practices were reviewed and updated in great detail with reference to UK Government guidance and in consultation with staff. Low - decreased as lockdown restrictions removed. Wherever possible, the additional costs of operating have been passed on to clients. (All competitors face a similar challenge). Passenger numbers increased as lock down measures were relaxed during the year. Government guidance to work from home, issued in December 2021, resulted in a dip in numbers, but recovery continued once this was lifted at the end of January 2022. Leisure traffic has recovered more quickly than commuter traffic, where a significant number of people are working from home for at least part of their working week. Current high costs of vehicle fuel may push people towards using public transport. Moderate - decreased Low - unchanged Restrictions on tourists visiting were lifted in May 2022, which should facilitate their return. Low - decreased ANNUAL REPORT 202212 POLITICAL RISKS Risk 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. Comment Relations between the UK and Argentina have become more strained in recent years. However, the security afforded by the UK Government’s commitment to the Islands upholds the freedom and livelihood of the people of the Falkland Islands and thereby of FIC. Provided UK Government support is maintained the security of the people of the Falkland Islands is judged to at low risk. To date, there has been little direct impact on the Group’s businesses arising from Brexit and although the position has been heavily clouded by the effects of the coronavirus pandemic it seems unlikely that any material adverse effects will subsequently emerge. Potential Impact Low - unchanged Low - unchanged ECONOMIC CONDITIONS Risk Comment Although the impact of COVID-19 was unprecedented, it has been matched by equally unprecedented government interventions on a global scale which has sustained economic confidence and activity. International travel continued to be badly affected by COVID-19. The trading performance of both the Group’s UK companies has been severely affected by the effects of COVID-19 but UK Government economic support and the success of the vaccination programme mean that the adverse effects are being steadily reduced as the Group’s businesses return to more normal levels of activity. Despite this, FIC continued to maintain its revenue and profitability in 2022. Restrictions on travel to the Falkland Islands were lifted in May 2022 which should facilitate the return of tourists. Potential Impact High but steadily reducing impact on UK operations Low - reduced Economic activity in the Falkland Islands has been subject to fluctuation, dependent upon oil sector activity. Oil-related activity in recent years has been minimal and the success of the Falkland Islands’ economy is not predicated on the development of oil reserves. Low - unchanged 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. Inflationary pressures across all Group businesses impact the cost of wages, services and products. Activity is increasing following the cessation of lockdown measures. Impact has been mitigated by a reduction in Momart’s cost base and careful cost control as activity returns. Moderate - unchanged but reducing as public confidence returns. Continued focus on cost efficiency as activity returns to pre-pandemic levels. Customer and supplier contracts structured to limit or pass on inflation risk. Cost inflation monitored closely and passed on to customers via price increases wherever possible. High - new CREDIT RISK Risk 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. Even with COVID-19, bad debt experience has been minimal. Potential Impact Low - unchanged COMPETITION Risk 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. Comment Local competition is healthy for FIC and stimulates continuing business improvement in FIC. Potential Impact Low - unchanged Momart sits in a highly competitive market, with both UK and International competitors investing for growth. Largely unchanged. Large capital infrastructure investment projects may entice larger overseas businesses to look at the opportunities available and reduce the ability of FIC to undertake the work. FIC has been successful in winning work against overseas competitors and has built up strong links with FIG and MOD. Being located in the Falkland Islands gives FIC a competitive advantage against overseas companies. Moderate - unchanged Moderate - new risk. ANNUAL REPORT 202213 Chief Executive’s Strategic Review RISK MANAGEMENT FOREIGN CURRENCY AND INTEREST RATE RISK Risk Comment Momart is exposed to foreign currency risk arising from trading and other payables denominated in foreign currencies. Forward exchange contracts are used to mitigate this risk, with the exchange rate fixed for all significant contracts. The Group is exposed to interest rate risks on large loans. Interest rate risk on large loans is mitigated by the use of interest rate swaps. Potential Impact Low - unchanged FIC retail outlets accept foreign currency and are exposed to fluctuations in the value of the dollar and euro. INVENTORY Risk 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. FIC is the only Group business that holds significant inventories and does face such risk in the Falkland Islands, where it is very expensive to return excess or obsolete stock back to the UK. PEOPLE Risk 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. FIC has 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. FIC has a reliance on being able to attract staff from overseas generally. All Group companies are experiencing a shortage of skilled employees as the businesses grow and recover from the pandemic. In the UK, Momart has suffered from shortages in drivers and art technicians. Comment Reviews of old and slow-moving stock in Stanley are regularly undertaken by senior management and appropriate action taken. Potential Impact Moderate - unchanged Comment 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. Potential Impact Low - unchanged The development of tourism on St Helena has been slow and the Falkland Islands remain an attractive location for St Helenian people to work. Low - unchanged Immigration procedures in the Falkland Islands are bureaucratic and slow, although FIG is aware and seeking to streamline the process. Moderate - unchanged This has driven wages costs up and constrained the growth of the businesses. Moderate - new ANNUAL REPORT 202214 Potential Impact Low - unchanged Low - unchanged LAWS AND REGULATION Risk 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. The Group uses specialist advisers to help evolve appropriate policies and practices. Close monitoring of regulatory and legislation changes is maintained to ensure our policies and practices continue to comply with relevant legislation. Staff training is provided where required. Health & Safety (“HSE”) 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 HSE 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 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. Stuart Munro Chief Executive 5 July 2022 ANNUAL REPORT 202215 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 also Chairman at Keystone Law Group 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 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. Stuart Munro, Chief Executive Stuart joined the Board on 28 April 2021 as Chief Financial Officer before taking over as Chief Executive on 14 April 2022. He qualified as a chartered accountant with Ernst & Young and worked as a divisional finance director in number of UK companies including Balfour Beatty, Alfred McAlpine Infrastructure Services and FirstGroup as well as Transport for London. From 2015 until joining FIH group, Stuart provided strategic, financial and operational consultancy to a number of medium sized Private Equity backed services companies across a variety of sectors. 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 20 years. He has led several successful acquisitions and public-to-private transactions. Previously, Jeremy was with the Foreign and Commonwealth Office (FCO) and prior to that, he was an army officer. Using his experience of acquisitions and various corporate transactions, 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 and holds a number of other non-executive directorships including one at Fulcrum Utility Services Limited. 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 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 28.7% of the Company’s issued share capital. He is currently on the boards of Colabor Group Inc, Corning Natural Gas Holding Corp, Supremex Inc. (where he is Chairman), Circa Enterprises Inc., Swiss Water Decaffeinated Coffee Inc and RGC Resources Inc. Robert is a member of the Nominations and Audit Committees and is Chairman of the Remuneration Committee. ANNUAL REPORT 202216 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 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 senior independent non-executive director and Chair of the Audit Committee of the AIM quoted Fulcrum Utility Services Limited 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 Chair of the Audit Committee. Iain Harrison, Company Secretary Iain Harrison joined the Company in April 2019. Iain has a BSc in Mathematics from Edinburgh University and qualified as a Chartered Accountant in Scotland in 1993. He has previously worked at RBS group and Heriot Watt University and was Company Secretary at Dawson International plc from 2003-2004. ANNUAL REPORT 202217 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 appropriate 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 complied with as set out 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 circa 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 offers to meet with all significant shareholders after the release of the half year and full year results and the Chairman is available throughout. 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 Falkland Islands. While doing this, management are also alert to the benefits of a well-judged complementary acquisition that would give increased scale and growth potential for the Group and enhance the liquidity of FIH shares. 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 justified 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 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. ANNUAL REPORT 202218 Whilst the Company is guided by the provisions of the QCA 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 circa 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. 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. In view of his long service, Jeremy will step down from the Board at the AGM in 2022. 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 at least nine years are subject to annual re-election. Time Commitment of Directors Stuart Munro, 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, 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 6 July 2021 there have been eight Board meetings. Robin Williams, Stuart Munro, Robert Johnston and Dominic Lavelle have attended all meetings. Jeremy Brade has attended eight meetings. John Foster attended six out of the seven meetings held prior to him ceasing to be a director on 14 April 2022. The Remuneration committee has met twice since 6 July 2021 to review executive base pay and bonus structure, as well as the issue of grants under the Long Term Incentive Plan and all members of the committee were in attendance. There have also been two Audit Committee meetings since 6 July 2021, which were attended by all members of the committee. The Nominations Committee meets on an ad hoc basis to consider Board composition and succession and met a number of times during the year to consider the succession of the Chief Executive role and the future shape of the Board. ANNUAL REPORT 202219 Corporate Governance Statement CONTINUED Board Directors The Board comprises Robin Williams, the non-executive Chairman, Stuart Munro, 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 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 Chief Executive 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. He 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 Chief Executive has frequent communication with 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 2022 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 wherever possible, 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 2022, 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 2022 and discussed at the April 2022 Board meeting, with useful conclusions in the areas of major shareholder representation on the Board, the content of briefings to the Board prior to meetings, the development of strategy and the presentation of recommendations to the Board. The frequency of meetings was reviewed as the recovery from the pandemic became more visible and the Board has put in place a more structured programme of interaction with operating management. Robin Williams Chairman 5 July 2022 ANNUAL REPORT 202220 Audit Committee Report The Audit Committee comprises the four non-executive directors: Jeremy Brade, Robert Johnston, Dominic Lavelle and Robin Williams, 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 by 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. External Auditor The external 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 2021 and will step down after the audit for the year ended 31 March 2025. The analysis of the auditor’s remuneration is shown in note 6. Tax advisory services are provided by RSM UK Tax and Accounting Limited. 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 2022, there were no non-audit fees paid to KPMG LLP (2021: £nil). 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. ANNUAL REPORT 202221 Audit Committee Report CONTINUED Areas of Judgement and Estimation 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 involving estimation: 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 testing of the tangible assets of PHFC and the goodwill and intangible assets of Momart have been carried out in the current year with no impairment charge being deemed necessary and there being adequate headroom in the impairment assessments. Inventory 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. Dominic Lavelle Independent Non-executive Director 5 July 2022 ANNUAL REPORT 202222 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 2022. Results and Dividend As set out in the Group Income Statement, the Group profit for the year after taxation amounted to £947,000 (2021: £9,000). Basic earnings per share on underlying profits were 9.5 pence (2021: 0.0 pence). With the Group’s recovery further underpinned by the continued profit improvement in the second half of the year, the Board is pleased to announce that a final dividend of 2.0 pence per share will be recommended for approval at the Annual General Meeting. Together with the interim dividend of 1.0 pence paid on 14 January 2022, the proposed dividend will take the total dividend for the year ended 31 March 2022 to 3.0 pence per share (2021: nil). Principal Activities The business of the Group during the year ended 31 March 2022 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 Stuart Munro was appointed as a director on 28 April 2021 and John Foster resigned as a director on 14 April 2022. 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, gender identity, sexual orientation, 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 202223 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 £29,000 of trade creditors at 31 March 2022 (2021: nil). Share Capital and Substantial Interests in Shares During the year 4,915 shares were issued following the exercise of options. 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 has been notified of the following interests in 3% or more of the issued ordinary shares of the Company as at 5 July 2022: 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 Bonafide Investment Fund – Opportunities I Christian Struck 3,596,553 1,057,158 897,324 797,214 680,001 380,000 28.73 8.44 7.17 6.37 5.43 3.04 Charitable and Political Donations Charitable donations made by the Group during the year amounted to £16,214 (2021: £7,654), these were largely paid to local community charities in the Falkland Islands. There were no political donations in the year (2021: nil). Disclosure of Information to the External 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 external 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 external auditor is aware of that information. External 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, as a low energy user, is not required to make the detailed disclosures of 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. ANNUAL REPORT 2022 24 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 2022, 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/ Portsmouth (where PHFC provide the ferry service), 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 maintains close contact with its customer base via social media and regularly tweets and posts information on Facebook about local pantomimes, football matches, and local events of interest to the local community and visiting tourists. PHFC are also involved in marking the 40th anniversary of the Falkland Islands conflict in 2022 and maintaining its close links to the Navy based in Portsmouth. Momart engage with industry working groups to propose and implement sustainability improvements in delivering fine art logistics services. 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: Across the Group, we aim to build long-term relationships with our suppliers that help ensure the continued delivery of the high-quality services the Group provides. 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. All suppliers are vetted to ensure compliance with the Group’s zero tolerance approach to modern slavery. 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 communities in Gosport/Portsmouth 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. PHFC also work closely with local government to ensure representation in local transport developments. ANNUAL REPORT 202225 Directors’ Report CONTINUED Environment: The Group is committed to doing its part to protect the local and global environment, minimising the environmental impacts of its activities, products and services, and to the continual improvement of its environmental performance. Steps already taken include: FIC • Elimination of plastic bags from all retail outlets and use of paper cups, straws, and other recyclable packaging in the FIC cafés wherever possible. LED lighting in offices, warehouses and retail outlets. • • Utilisation of best practice insulation methods for building construction and renovation. • Incorporation of ground heat source systems into new build structures. Momart • Conversion of vehicles to meet the Euro 6 emissions standard. • LED lighting and movement sensors across all warehouse units and offices. • Renewable energy from solar panels installed at the Leyton warehouse unit 14. • Sourcing of materials for packing cases from sustainable sources wherever possible. • Wood waste repurposed or burnt for energy rather than going to landfill. Installation of new exhaust cleaners on the vessels reducing NOx and Co2 emissions. PHFC • • Smart LED lighting across the estate. • Provision of coffee cup recycling. • Investigation of smart apps to promote environmentally friendly journey planning. Governments and Regulatory Authorities Our work brings us into regular contact with the MOD, FIG 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. The Momart Security Manager liaises with the Civil Aviation Authority to ensure that Momart’s security procedures and staff training remain compliant. Media All businesses are active on social media, using Twitter, Instagram, LinkedIn and Facebook. ANNUAL REPORT 202226 Non-governmental Organisations: 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 specialised 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 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. Debt Providers: The Group has several debt facilities provided by HSBC, who are kept fully informed on all relevant areas of the business, through regular meetings and presentations. The relationship with HSBC dates back to the Company’s incorporation in 1997. Annual General Meeting The Company’s Annual General Meeting will be held on 19 September 2022. 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. ANNUAL REPORT 202227 Directors’ Report CONTINUED 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 2022 and in the preceding year is as follows: Salary / Fees £’000 Health insurance £’000 Compensation payment £’000 Bonus £’000 2022 Total £’000 2021 Total £’000 John Foster Stuart Munro* Robin Williams Jeremy Brade Robert Johnston Dominic Lavelle Total 222 202 60 30 30 30 574 1 1 - - - - 2 259 - - - - - 40 68 - - - - 259 108 522 271 60 30 30 30 943 197 - 51 26 26 26 326 * Appointed 28 April 2021 The Chief Executive, Stuart Munro, participates in an annual performance related bonus arrangement, with the potential during the year to earn up to 60% of his salary. The bonuses are subject to the achievement of specified corporate and personal objectives and are payable in cash. John Foster participated in an annual performance related bonus arrangement, with the potential during the year of earning up to 100% of his salary. Any bonus is subject to the achievement of specified corporate and personal objectives and 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. The bonus for the year ended 31 March 2022 is payable wholly in cash. Given the impact of COVID-19 on the Group’s finances, no bonus was paid for the year ended 31 March 2021. None of the directors of the Company receive any pension contributions or benefit from any Group pension scheme. ANNUAL REPORT 2022 28 Directors’ Interests in Shares Full details of historic awards of deferred shares to John Foster are provided in note 24 Employee benefits: share based payments. During the year ending 31 March 2022, 9,273 nil cost options (2021: 12,488) were exercised by him and the remaining 3,591 nil cost share options were forfeited on his resignation on 14 April 2022. During the year, Stuart Munro was granted 55,814 LTIP share options in December 2021 at an exercise price of 10 pence. The exercise of the LTIP awards is subject to achieving share price performance and earnings targets which have been determined by the remuneration committee, after discussion with the Company’s advisers. The directors’ options extant at 31 March 2021 related to John Foster and totalled 12,864 nil cost options. 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: In addition to the share options set out above, the interests of the directors, their immediate families and related trusts in Ordinary shares as at 31 March 2021 the shares of the Company according to the register kept pursuant to the Companies Act 2006 were as shown below: 5,625 Ordinary shares as at 31 March 2022 Robin Williams 5,625 Stuart Munro John Foster Jeremy Brade Robert Johnston* Dominic Lavelle 4,400 118,542 15,022 *3,654,053 2,000 - 113,627 15,022 *3,647,853 2,000 * Robert Johnston holds 57,500 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 3,654,053 Shares in total, representing 29.2 per cent. of the Company’s 12,519,900 total voting rights. Approved by the Board and signed on its behalf by: Iain Harrison Company Secretary 5 July 2022 Kenburgh Court 133-137 South Street Bishop’s Stortford Hertfordshire CM23 3HX ANNUAL REPORT 202229 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 UK-adopted international accounting standards and applicable law and they 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 the Group’s 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 UK-adopted international accounting standards; 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 2022 30 FIC vessels supporting the squid fishing fleets FIC start 70 House contract with FIG & MOD ANNUAL REPORT 2022Independent auditor’s report Overview Materiality: group financial statements as a whole £140,000 (2021:£140,000) 5.2% of average profit before tax before non-trading items (2021: 4.5% of group profit before tax before goodwill impairment) Coverage 100% (2022:100%) of group profit before tax Key audit matters vs 2021 Recurring risks New risks Recoverability of parent Company’s investment in subsidiaries Accuracy of revenue in FIC due to complexity of the business ▼ ◄► to the members of FIH Group plc 1. Our opinion is unmodified We have audited the financial statements of FIH Group plc (“the Company”) for the year ended 31 March 2022 which comprise the Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Consolidated Balance Sheet, Company Balance Sheet, Consolidated Cash Flow Statements, Company Cash Flow Statements, Consolidated Statement of Changes in Shareholders’ Equity, Company Statement of Changes in Shareholders’ Equity, and the related notes, including the accounting policies in note 1. In our opinion: — the financial statements give a true and fair view of the state of the Group’s and of the parent Company’s affairs as at 31 March 2022 and of the Group’s profit for the year then ended; — the Group financial statements have been properly prepared in accordance with UK-adopted international accounting standards; — the parent Company financial statements have been properly prepared in accordance with UK-adopted international accounting standards and as applied in accordance with the provisions of the Companies Act 2006; and — the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are described below. We have fulfilled our ethical responsibilities under, and are independent of the Group in accordance with, UK ethical requirements including the FRC Ethical Standard as applied to listed entities. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. 30 2. Key audit matters: our assessment of risks of material misstatement The risk Our response 32 Recoverability of Parent Company’s investment in, and debt due from, subsidiaries Key audit matters are those matters that, in our professional judgement, 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: — Our sector experience: we evaluated Forecast-based valuation Our procedures included: (£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) Accuracy of revenue in FIC due to complexity of the business (£21.7 million; 2021: £20.9 million) Refer to page 56 (accounting policy) and page 82-83 (financial disclosures). Refer to page 52 (accounting Refer to page 53 (accounting policy) and page 60 (financial policy) and page 61 (financial disclosures). disclosures). 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. The risk Complexity of the FIC business: They are significant and at risk of irrecoverability due to weak demand in the Art Logistics and Ferry Services businesses FIC is a diverse business with a large number as a result of the Covid-19 pandemic. The of revenue streams, some of which are Group has recognised an impairment loss of recognised at a point in time and some of £3,700,000 on the investment in the Art which are recognised over time. In certain Logistics subsidiary as a result of changes in revenue streams there are large volumes of the market resulting in significant changes transactions where in others there is a in forecast cash flows. The estimated degree of complexity which requires recoverable amount of the remaining management to forecast total contract costs balances is subjective due to the inherent in order to recognise revenue over time on uncertainty involved in forecasting and an input basis. discounting future cash flows. The accounting relies on a significant The effect of these matters is that, as part degree of manual intervention which adds of our risk assessment, we determined that to the complexity and increases the risk of the recoverable amount of the cost of error. 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. assumptions used in the relevant cash flow forecasts, in particular those relating to forecast revenue growth and profit margins, through enquiries with the divisional Our response managers and those responsible for preparing and delivering the forecasts; Our procedures included: — Historical comparison: we evaluated the — Benchmarking assumptions: we compared the Process understanding: We obtained an group’s assumptions in relation to key inputs understanding of the revenue processes by such as, projected economic growth and, with observing transactions from customer initiation to the assistance of specialist valuation tools, cash received for material revenue streams. compared the discount rate to historical information and externally derived data; Test of details: We assessed the appropriateness of revenue recognised by: adequacy of the budgets and forecasts used in the value in use calculation by assessing the • For revenue recognised at a point in time we historical accuracy of the Group’s previous compared a sample of revenue transactions, budgets; including credit notes, to supporting evidence e.g. invoices, orders, proof of delivery/service — Sensitivity analysis: we performed a sensitivity and cash received (all where applicable), and analysis on the key assumptions noted above; assessed whether it was appropriate to recognise revenue at a point in time. — Comparing valuations: we compared the carrying value of the parent Company’s investments in subsidiaries and receivables whether performance obligations had been met due from group entities to value in use and challenged the forecast used to determine calculations for the relevant CGUs and to the percentage of completion by: assessing the market capitalisation of the Group; historical accuracy of previous forecasts; comparing the level of cost contingency to adequacy of the parent Company’s disclosures industry benchmarks; and, comparing the in respect of investments in subsidiaries and overall forecast margin to achieved on similar group debtor balances. contracts. Where revenue is recognised on an input basis we selected a sample of cost items and compared to supporting evidence, such as invoices and timesheet records, to verify that costs had been appropriately allocated to the contract. • For revenue recognised over time we assessed — Assessing transparency: we assessed the We performed the detailed tests above rather than seeking to rely on controls because our knowledge of the design of these controls indicated that we would be unlikely to obtain the required evidence to support reliance on controls. 31 ANNUAL REPORT 2022 33 3. Our application of materiality and an overview of the 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). Refer to page 21 (Audit Committee Report), page 50 (accounting policy) and page 72 (financial disclosures). 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. 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. The components within the scope of our work accounted for the percentages illustrated opposite. Profit before tax before goodwill impairment £3.7 million (2019: £3.9 million profit before tax) Group Materiality £150,000 (2019: £150,000) £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 Group revenue Group profit before tax 100% 100 Group total assets 100% 100 Full scope for group audit purposes 2020 Full scope for group audit purposes 2019 Residual components ANNUAL REPORT 2022 The picture can't be displayed. 34 3. Our application of materiality and an overview of the Our application of materiality and an overview of 3. Our application of materiality and an overview of the scope of our audit the scope of our audit scope of our audit Materiality for the Group financial statements as a Materiality for the Group financial statements as a whole was set at £150,000 (2019: £150,000), whole was set at £140,000 (2021: £140,000), determined with reference to a benchmark of Group determined with reference to a benchmark of profit before tax before goodwill impairment of which Group profit before tax (PBT), of which it it represents 4.0% (2019: 3.9% of group profit before represents 5.2% (2021: 4.5%). In 2022, we tax). normalised PBT to exclude the non-trading items disclosed in note 5 and by averaging over the last Materiality for the parent company financial five years due to the continuing impact of the statements as a whole, as communicated by the group COVID-19 pandemic on the Group’s financial audit team, was set at £80,000 (2019: results. In the prior year we also took the same £100,000). This is lower than the materiality we would approach to determine the benchmark value. otherwise have determined with reference to a benchmark of the Company’s net assets, of which it Materiality for the parent company financial represents 0.36% (2019: 0.24%). statements as a whole, as communicated by the group audit team, was set at £80,000 (2021: £60,000). 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 0.20% (2021: 0.20%). 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. 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. In line with our audit methodology, our procedures on individual account balances and disclosures were performed to a lower threshold, performance materiality, so as to reduce to an acceptable level the risk that individually immaterial misstatements in individual account balances add up to a material amount across the financial statements as a whole. The components within the scope of our work accounted for the percentages illustrated opposite. Performance materiality was set at 75% (2021: 75%) of materiality for the financial statements as a whole, which equates to £105,000 (2021: £105,000) for the group and £60,000 (2021: £45,000) for the parent company. We applied this percentage in our determination of performance materiality because we did not identify any factors indicating an elevated level of risk. We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding £7,000 (2021: £7,000), in addition to other identified misstatements that warranted reporting on qualitative grounds. Of the Group’s four (2021: four) components, we subjected all (2021: all) to full scope audits for group purposes. The group team performed the audits of each of the components and this included a visit by the group team to the Falkland Islands. 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. The components within the scope of our work accounted for the percentages illustrated opposite. The scope of the audit work performed was fully substantive as we did not rely upon the Group’s internal control over financial reporting. Profit before tax before goodwill impairment Normalised group profit before tax £2.7m (2021: £3.1m) £3.7 million (2019: £3.9 million profit before tax) Group Materiality Group materiality £150,000 (2019: £150,000) £140,000 (2021: £140,000) £150,000 Whole financial statements materiality (2019: £150,000) £140,000 Whole financial statements materiality (2021: £140,000) £100,000 £105,000 Range of materiality at 4 Whole financial components (£80,000 - statements performance £100,000) materiality (2021: £105,000) (2019: £100,000) £110,000 Range of materiality at 4 components (£80,000-£110,000) (2021: £60,000 to £100,000) £7,500 Misstatements reported to the audit committee (2019: £7,500) £7,000 Misstatements reported to the audit committee (2021: £7,000) Normalised PBT Group materiality Profit before tax before goodwill impairment Group materiality Group revenue Group revenue Group profit before tax Group profit before tax 100% 100% (2021 100%) 100% (2021 100%) 100 Group total assets Group total assets 100% 100% (2021 100%) 100 Full scope for group audit purposes 2022 Full scope for group audit purposes 2020 Full scope for group audit purposes 2021 Full scope for group audit purposes 2019 Residual components 33 ANNUAL REPORT 2022 35 4. Going concern 3. Our application of materiality and an overview of the scope of our audit The Directors have prepared the financial statements on the Materiality for the Group financial statements as a going concern basis as they do not intend to liquidate the Group whole was set at £150,000 (2019: £150,000), or the Company or to cease their operations, and as they have determined with reference to a benchmark of Group concluded that the Group and the Company’s financial position means that this is realistic. They have also concluded that there profit before tax before goodwill impairment of which are no material uncertainties that could have cast significant it represents 4.0% (2019: 3.9% of group profit before doubt over their ability to continue as a going concern for at least tax). a year from the date of approval of the financial statements (“the going concern period”). Materiality for the parent company financial statements as a whole, as communicated by the group We used our knowledge of the Group, its industry, and the audit team, was set at £80,000 (2019: general economic environment to identify the inherent risks to £100,000). This is lower than the materiality we would its business model and analysed how those risks might affect the otherwise have determined with reference to a Group’s and Company’s financial resources or ability to continue benchmark of the Company’s net assets, of which it operations over the going concern period. The risks that we represents 0.36% (2019: 0.24%). considered most likely to adversely affect the Group’s and Company’s available financial resources over this period were: We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements • A delay in the recovery of the business as a result of the exceeding £7,500 (2019: £7,500), in addition to other current economic uncertainty. identified misstatements that warranted reporting on We considered whether these risks could plausibly affect the qualitative grounds. liquidity in the going concern period by comparing severe, but plausible downside scenarios that could arise from these risks Of the group’s four (2019: four) components, we individually and collectively against the level of available financial subjected all (2019: all) to full scope audits for group resources indicated by the Group’s financial forecasts. purposes. The group team performed the audits of each of the components. The audit was performed We considered whether the going concern disclosure in note 1 to using the materiality levels set out opposite, having the financial statements gives a full and accurate description of regard to the mix of size and risk profile of the Group the Directors’ assessment of going concern, including the across the components. identified risks and, dependencies, and related sensitivities. Our conclusions based on this work: The components within the scope of our work accounted for the percentages illustrated opposite. — we consider that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate; — we have not identified, and concur with the directors’ assessment that there is not, a material uncertainty related to events or conditions that, individually or collectively, may cast significant doubt on the Group’s or Company's ability to continue as a going concern for the going concern period; and — we found the going concern disclosure in note 1 to be acceptable 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 above conclusions are not a guarantee that the Group or the Company will continue in operation. Profit before tax before 5. Fraud and breaches of laws and regulations – ability to detect goodwill impairment £150,000 (2019: £150,000) Group Materiality £3.7 million (2019: £3.9 million profit before tax) Identifying and responding to risks of material misstatement due to fraud £150,000 Whole financial statements materiality (2019: £150,000) To identify risks of material misstatement due to fraud (“fraud risks”) we assessed events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud. Our risk assessment procedures included: £100,000 Range of materiality at 4 components (£80,000 - £100,000) (2019: £100,000) Enquiring of directors, and inspection of policy documentation as to the Group’s high-level policies and procedures to prevent and detect fraud including the Group’s channel for “whistleblowing”, as well as whether they have knowledge of any actual, suspected or alleged fraud; Reading Board, audit committee and remuneration committee minutes. £7,500 Misstatements reported to the audit committee (2019: £7,500) Considering remuneration incentive schemes and performance targets for directors and how these are impacted by separately disclosed items; and Profit before tax before goodwill impairment Group materiality Using analytical procedures to identify any unusual or unexpected relationships. • • • • We communicated identified fraud risks throughout the audit team and remained alert to any indications of fraud throughout the audit. Group revenue As required by auditing standards, and taking into account possible pressures to meet profit targets, we perform procedures to address the risk of management override of controls, in particular that management may be in a position to make inappropriate accounting entries, and the risk of bias in accounting estimates and judgements. Group profit before tax 100% On this audit we do not believe there is a fraud risk related to revenue recognition due to the simple recognition criteria for the majority of revenue streams and the limited opportunity for management to manipulate the revenue recognised. In addition to this, there was limited activity on contracts recognised with reference to percentage of completion, with there being few large contracts spanning year end and for those that were in progress the contracts were in the very early stages or almost complete. Because of this we determined that there was not a significant risk of bias in accounting estimates driving revenue and profit recognition. 100 Group total assets We also performed procedures including: • • • Identifying journal entries and other adjustments to test for all full scope components based on risk criteria and comparing the identified entries to supporting documentation. These included: unusual revenue pairings; unusual journals with a credit or debit to entry to cash; and, unusual journals in seldom used pairings. 100% Evaluated the business purpose of significant unusual transactions. Assessing significant accounting estimates for bias. 100 We did not identify any additional fraud risks. Full scope for group audit purposes 2020 Full scope for group audit purposes 2019 Residual components 34 ANNUAL REPORT 2022 Identifying and responding to risks of material misstatement due to non-compliance with laws and regulations The risk 6. We have nothing to report on the other information in the Annual Report Our response 36 Our procedures included: 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 — Our sector experience: we evaluated information and, accordingly, we do not express an audit opinion assumptions used in the relevant cash flow or, except as explicitly stated below, any form of assurance forecasts, in particular those relating to conclusion thereon. forecast revenue growth and profit margins, Our responsibility is to read the other information and, in doing through enquiries with the divisional so, consider whether, based on our financial statements audit managers and those responsible for preparing work, the information therein is materially misstated or and delivering the forecasts; inconsistent with the financial statements or our audit — Benchmarking assumptions: we compared the knowledge. Based solely on that work we have not identified group’s assumptions in relation to key inputs material misstatements in the other information. such as, projected economic growth and, with Strategic report and directors’ report the assistance of specialist valuation tools, compared the discount rate to historical information and externally derived data; — we have not identified material misstatements in the Based solely on our work on the other information: strategic report and the directors’ report; — Historical comparison: we evaluated the — in our opinion the information given in those reports for the adequacy of the budgets and forecasts used in financial year is consistent with the financial statements; and the value in use calculation by assessing the historical accuracy of the Group’s previous budgets; — in our opinion those reports have been prepared in accordance with the Companies Act 2006. — Sensitivity analysis: we performed a sensitivity 7. We have nothing to report on the other matters on which analysis on the key assumptions noted above; we are required to report by exception Under the Companies Act 2006, we are required to report to you if, in our opinion: — Comparing valuations: we compared the carrying value of the parent Company’s investments in subsidiaries and receivables — adequate accounting records have not been kept by the due from group entities to value in use parent Company, or returns adequate for our audit have calculations for the relevant CGUs and to the not been received from branches not visited by us; or market capitalisation of the Group; — the parent Company financial statements are not in — Assessing transparency: we assessed the agreement with the accounting records and returns; or adequacy of the parent Company’s disclosures — certain disclosures of directors’ remuneration specified by in respect of investments in subsidiaries and group debtor balances. 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. 8. Respective responsibilities Directors’ responsibilities As explained more fully in their statement set out on page 29, As explained more fully in their statement set out on page 31, 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. 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. We identified areas of laws and regulations that could reasonably Recoverability of Parent Forecast-based valuation be expected to have a material effect on the financial statements Company’s investment in, and from our general commercial and sector experience and through debt due from, subsidiaries discussion with the directors and other management (as required by auditing standards), and discussed with the directors and other (£23.9 million investment in, and management the policies and procedures regarding compliance £10.2 million debt due from, with laws and regulations. subsidiaries; 2019: £27.6 million investment in and £8.7 million debt We communicated identified laws and regulations throughout due from subsidiaries) our team and remained alert to any indications of non- compliance throughout the audit. The potential effect of these Refer to page 56 laws and regulations on the financial statements varies (accounting policy) and page 82-83 considerably. (financial disclosures). Firstly, the Group is subject to laws and regulations that directly affect the financial statements including financial reporting legislation (including related companies legislation), distributable profits legislation, taxation legislation and pensions legislation and we assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items. 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. Secondly, the Group is subject to many other laws and regulations where the consequences of non-compliance could have a material effect on amounts or disclosures in the Financial Statements, for instance through the imposition of fines or litigation. We identified the following areas as those most likely to have such an effect: health and safety, anti-bribery, employment law. Auditing standards limit the required audit procedures to identify non- compliance with these laws and regulations to enquiry of the Directors and other management and inspection of regulatory and legal correspondence, if any. Therefore, if a breach of operational regulations is not disclosed to us or evident from relevant correspondence, an audit will not detect that breach. 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. Context of the ability of the audit to detect fraud or breaches of law or regulation Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non- compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it. In addition, as with any audit, there remained a higher risk of non- detection of fraud, as these may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material misstatement. We are not responsible for preventing non- compliance or fraud and cannot be expected to detect non- compliance with all laws and regulations. 35 ANNUAL REPORT 2022 37 Auditor’s responsibilities 3. Our application of materiality and an overview of the scope of our audit Our objectives are to obtain reasonable assurance about whether the financial Materiality for the Group financial statements as a statements as a whole are free from material whole was set at £150,000 (2019: £150,000), misstatement, whether due to fraud or error, determined with reference to a benchmark of Group and to issue our opinion in an auditor’s report. profit before tax before goodwill impairment of which Reasonable assurance is a high level of it represents 4.0% (2019: 3.9% of group profit before assurance, but does not guarantee that an audit tax). conducted in accordance with ISAs (UK) will always detect a material misstatement when it Materiality for the parent company financial exists. Misstatements can arise from fraud or statements as a whole, as communicated by the group error and are considered material if, individually audit team, was set at £80,000 (2019: or in aggregate, they could reasonably be £100,000). This is lower than the materiality we would expected to influence the economic decisions of otherwise have determined with reference to a users taken on the basis of the financial benchmark of the Company’s net assets, of which it statements. represents 0.36% (2019: 0.24%). A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities. We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding £7,500 (2019: £7,500), in addition to other 9. The purpose of our audit work and to whom we owe our identified misstatements that warranted reporting on responsibilities qualitative grounds. This report is made solely to the Company’s Of the group’s four (2019: four) components, we members, as a body, in accordance with Chapter subjected all (2019: all) to full scope audits for group 3 of Part 16 of the Companies Act 2006. Our purposes. The group team performed the audits of audit work has been undertaken so that we each of the components. The audit was performed might state to the Company’s members those using the materiality levels set out opposite, having matters we are required to state to them in an regard to the mix of size and risk profile of the Group auditor’s report and for no other purpose. To across the components. the fullest extent permitted by law, we do not accept or assume responsibility to anyone other The components within the scope of our work than the Company and the Company’s members, accounted for the percentages illustrated opposite. as a body, for our audit work, for this report, or for the opinions we have formed. Mark Flanagan (Senior Statutory Auditor) for and on behalf of KPMG LLP, Statutory Auditor Chartered Accountants KPMG LLP St Nicholas House 31 Park Row Nottingham NG1 6FQ 5 July 2022 Profit before tax before goodwill impairment £3.7 million (2019: £3.9 million profit before tax) Group Materiality £150,000 (2019: £150,000) £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 Group revenue Group profit before tax 100% 100 Group total assets 100% 100 Full scope for group audit purposes 2020 Full scope for group audit purposes 2019 Residual components 36 ANNUAL REPORT 2022 38 Non-trading Items (Note 5) 2021 £’000 - - - 57 57 - 57 Total 2021 £’000 32,578 (19,437) 13,141 (12,058) 1,083 (881) 202 Consolidated Income Statement FOR THE YEAR ENDED 31 MARCH 2022 Notes 4 Revenue Underlying 2022 £’000 40,319 Cost of sales (23,405) Gross profit 16,914 Non-trading Items (Note 5) 2022 £’000 - - - Total 2022 £’000 Underlying 2021 £’000 40,319 32,578 (23,405) (19,437) 16,914 13,141 Operating expenses (13,834) (300) (14,134) (12,115) Operating profit / (loss) 3,080 (300) 2,780 1,026 Finance expense (796) - (796) (881) 2,284 (300) 1,984 145 6 8 9 Profit / (loss) before tax Taxation Profit / (loss) for the year attributable to equity holders of the company (1,094) 57 (1,037) (147) (46) (193) 1,190 (243) 947 (2) 11 9 10 Earnings per share Basic Diluted 9.5p 9.5p 7.6p 7.6p 0.0p 0.0p 0.1p 0.1p The accompanying notes form part of these Financial Statements. ANNUAL REPORT 2022 39 Consolidated Statement of Comprehensive Income FOR THE YEAR ENDED 31 MARCH 2022 Notes Profit for the year 17 17 23 17 Cash flow hedges: effective portion of changes in fair value Deferred tax on share options and other financial liabilities Deferred tax on effective portion of changes in fair value Items that are or may be reclassified subsequently to profit or loss 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 Total other comprehensive income Total comprehensive income The accompanying notes form part of these Financial Statements. 2022 £’000 947 878 58 (205) 731 237 (62) 175 906 1,853 2021 £’000 9 303 30 (58) 275 (272) 71 (201) 74 83 ANNUAL REPORT 2022Consolidated Balance Sheet AT 31 MARCH 2022 40 Notes 11 12 13 15 19 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 Derivative financial instruments 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 Corporation tax payable Total current liabilities Non-current liabilities 2022 £'000 4,229 39,080 8,164 259 44 725 666 644 2021 £'000 4,183 40,361 7,123 259 88 590 739 - 53,811 53,343 6,740 7,947 511 9,572 24,770 78,581 (9,970) (1,536) (229) 5,871 5,868 558 14,556 26,853 80,196 (6,775) (3,424) (113) (11,735) (10,312) 21 Interest-bearing loans and borrowings (19,713) (24,799) 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 - (2,562) (3,914) (26,189) (37,924) 40,657 1,251 17,590 703 20,672 441 40,657 (234) (2,842) (3,113) (30,988) (41,300) 38,896 1,251 17,590 703 19,584 (232) 38,896 These financial statements, of which the accompanying notes form part, were approved by the Board of directors on 5 July 2022 and were signed on its behalf by: S I Munro Director ANNUAL REPORT 2022 41 Company Balance Sheet AT 31 MARCH 2022 Notes 13 14 19 17 Non-current assets Investment properties Investment in subsidiaries Loans to subsidiaries Deferred tax Derivative financial instruments Total non-current assets Current assets 19 Trade and other receivables Corporation tax receivable 20 Cash and cash equivalents Total current assets TOTAL ASSETS Current liabilities Trade and other payables Interest-bearing loans and borrowings Total current liabilities Non-current liabilities 22 21 21 Interest-bearing loans and borrowings Derivative financial instruments 17 Deferred tax 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 2022 £'000 18,956 23,995 10,057 - 644 2021 £'000 19,164 23,970 10,207 44 - 53,652 53,385 45 84 4,376 4,505 118 54 5,462 5,634 58,157 59,019 (5,849) (529) (6,391) (520) (6,378) (6,911) (12,139) (12,668) - (146) (234) - (12,285) (12,902) (18,663) (19,813) 39,494 39,206 1,251 17,590 5,389 14,823 441 1,251 17,590 5,389 15,208 (232) 39,494 39,206 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 £293,000 (2021: Profit £500,000). These financial statements, of which the accompanying notes form part, were approved by the Board of directors on 5 July 2022 and were signed on its behalf by: S I Munro Director Registered company number: 03416346 ANNUAL REPORT 2022 Consolidated Cash Flow Statement FOR THE YEAR ENDED 31 MARCH 2022 42 Notes 11 12 13 23 24 Cash flows from operating activities Profit for the year after taxation Adjusted for: (i) Non-cash items: Amortisation Depreciation: Property, plant and equipment Depreciation: Investment properties (Gain) / 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 losses Bank interest payable Lease liability finance expense Increase in hire purchase leases receivable Corporation and deferred tax expense Other adjustments Operating cash flow before changes in working capital (Increase) / decrease in trade and other receivables Increase in inventories Increase / (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 intangibles Purchase of investment properties Proceeds from sale of property, plant and equipment 2022 £'000 2021 £'000 947 9 21 2,216 197 (9) 56 45 63 2,193 37 53 64 1 2,526 2,411 13 436 304 (88) 1,037 1,702 5,175 (2,035) (869) 3,195 291 5,466 (99) (256) 5,111 (1,333) (67) (1,238) 76 3 469 348 (33) 193 980 3,400 2,828 (497) (1,836) 495 3,895 (98) (64) 3,733 (898) - (702) - Net cash flow from investing activities (2,562) (1,600) Continued on next page. ANNUAL REPORT 2022 43 Consolidated Cash Flow Statement FOR THE YEAR ENDED 31 MARCH 2022 Notes Net cash flow from investing activities 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 (decrease) / increase in cash and cash equivalents Cash and cash equivalents at start of year Exchange losses on cash balances Cash and cash equivalents at end of year The accompanying notes form part of these Financial Statements. 2022 £'000 (2,562) 2021 £'000 (1,600) - 5,000 (5,927) (436) - (716) (304) - (12) (125) (7,520) (4,971) 14,556 (13) 9,572 (624) (469) 389 (649) (348) 19 - - 3,318 5,451 9,108 (3) 14,556 ANNUAL REPORT 2022 Company Cash Flow Statement FOR THE YEAR ENDED 31 MARCH 2022 44 Notes Cash flows from operating activities Holding Company (loss) / profit for the year Adjusted for: Bank interest payable Equity-settled share-based payment expenses 13 Depreciation: Investment properties Corporation and deferred tax (income) / expense Non-cash and other items adjustment Operating cash flow before changes in working capital Decrease / (increase) in trade and other receivables Increase / (decrease) in trade and other payables Changes in working capital and provisions Cash generated from operations Corporation taxes paid Net cash flow from operating activities Cash flow from investing activities Cash outflows in inter-company borrowing Cash inflows in inter-company borrowing Net cash flow from investing activities Cash flow from financing activities Bank loan repaid Interest paid Cash outflows in inter-company borrowing Cash inflows in inter-company borrowing Cash inflow on option exercise Cash outflow on nil cost option exercise Dividends paid Net cash flow from financing activities Net 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. 2022 £’000 (293) 387 20 208 (31) 584 291 73 333 406 697 (14) 683 (150) 850 700 (520) (387) (1,875) 450 - (12) (125) (2,469) (1,086) 5,462 4,376 2021 £’000 500 395 2 209 8 614 1,114 (88) (292) (380) 734 (64) 670 - - - (262) (381) (2,569) 2,219 19 - - (974) (304) 5,766 5,462 ANNUAL REPORT 2022 45 Consolidated Statement of Changes in Shareholders’ Equity FOR THE YEAR ENDED 31 MARCH 2022 Equity share capital £’000 Share premium account £’000 Other reserves £’000 Retained earnings £’000 Balance 1 April 2020 1,250 17,590 703 19,784 Profit for the year Cash flow hedges: effective portion of changes in fair value Deferred tax on cash flow hedges Deferred tax on other financial liabilities 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 - - - - - - 1 - - 1 - - - - - - - - - - - - - - - - - - - - Hedge reserve £’000 (535) - 303 - - - 9 - (58) 30 (201) (220) 303 19 1 - 20 - - - - Total equity £’000 38,792 9 303 (58) 30 (201) 83 20 1 - 21 Balance at 31 March 2021 1,251 17,590 703 19,584 (232) 38,896 Profit for the year Cash flow hedges: effective portion of changes in fair value Deferred tax on cash flow hedges Deferred tax on share options and other financial liabilities 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 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 947 - - 58 175 - 878 947 878 (205) (205) - - 58 175 1,180 673 1,853 (12) 45 (125) (92) - - - - (12) 45 (125) (92) Balance at 31 March 2022 1,251 17,590 703 20,672 441 40,657 The accompanying notes form part of these Financial Statements. ANNUAL REPORT 202246 Company Statement of Changes in Shareholders’ Equity FOR THE YEAR ENDED 31 MARCH 2022 Equity share capital £’000 Share premium account £’000 Other reserves £’000 Retained earnings £’000 Balance at 1 April 2020 1,250 17,590 5,389 14,765 Hedge reserve £’000 (535) Total equity £’000 38,459 Profit for the year Cash flow hedges: effective portion of changes in fair value Deferred tax on cash flow hedges Total comprehensive loss Transactions with owners in their capacity as owners: Share option exercise Share based payments Total transactions with owners - - - - 1 - 1 - - - - - - - - - - - - - - 500 - (58) 442 - 1 1 - 303 - 303 - - - 500 303 (58) 745 1 1 2 Balance at 31 March 2021 1,251 17,590 5,389 15,208 (232) 39,206 Loss for the year Cash flow hedges: effective portion of changes in fair value Deferred tax on cash flow hedges Total comprehensive income Transactions with owners in their capacity as owners: Share option exercise Share based payments Dividends paid Total transactions with owners - - - - - - - - - - - - - - - - - - - - - - - - (293) - - - 878 (293) 878 (205) (205) (293) 673 380 (12) 45 (125) (92) - - - - (12) 45 (125) (92) Balance at 31 March 2022 1,251 17,590 5,389 14,823 441 39,494 The accompanying notes form part of these Financial Statements. ANNUAL REPORT 202247 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. The consolidated financial statements of the Group for the year ended 31 March 2022 were authorised for issue in accordance with a resolution of the directors on 30 June 2022. 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 Accounting Standards in conformity with the requirements of the Companies Act 2006 and in accordance with UK-adopted International Accounting Standards (“Adopted IFRS”). On publishing the Parent Company financial statements 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 the 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. In the current year, cash flows between the parent Company and its subsidiaries have been classified as either financing or investing activities, depending on whether they relate to subsidiaries in a net payable or net receivable position respectively. In the prior year, this distinction between cash flows with subsidiaries was not made and all amounts were classified as financing activities. Had the cashflows been analysed separately, this would have resulted in payments of £1,700,000 and receipts of £1,600,000 being presented in investing activities, with a corresponding reduction in amounts presented as financing cash flows. The directors consider that the key cash flow metrics for the users of the Company financial statements are net cash from operating activities and the total net movement in cash and cash equivalents and as this change has no impact on either of these metrics, and no impact on the Company’s reported profit or loan covenants, the directors have concluded that the impact on the financial statements is not material and therefore the prior year presentation has not been restated. Going concern The directors are responsible for preparing a going concern assessment covering a period of at least 12 months from the date of approval of these financial statements (the going concern period). The financial statements have been prepared on a going concern basis which the Directors consider to be appropriate for the following reasons: As at 31 March 2022 the Group had net current assets of £13.0 million, cash balances of £9.6 million and net debt of approximately £11.7 million. Cash flow forecasts for the Group have been prepared covering the going concern period and the directors have considered downside scenarios to the base case forecasts to reflect emerging risks and uncertainties as a result of global economic conditions. The base case and sensitised forecasts indicate that the business will be cash generative over this period and that the Group will comply with its covenants and have sufficient funds to meet its liabilities as they fall due throughout the going concern period. ANNUAL REPORT 202248 Consequently, the directors are confident that the Group and Company will have sufficient funds to continue to meet its liabilities as they fall due for at least 12 months from the date of approval of the financial statements and the financial statements have therefore been prepared on a going concern basis. 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 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 2022, non-trading items were made up of £300,000 of people-related restructuring costs including employee redundancies and compensation payable to the former Chief Executive. In the year ended 31 March 2021, non-trading items were made up of £443,000 of restructuring costs which were offset by £500,000 of income from the release of historic liabilities included in accruals. Foreign currencies Transactions in foreign currencies are translated to the functional currencies of Group entities at exchange rates ruling at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated to the functional currency using the relevant rates of exchange ruling at the balance sheet date and the gains or losses thereon are included in the income statement. Non-monetary assets and liabilities are translated using the exchange rate at the date of the initial transaction. Property, plant and equipment Property, plant and equipment are measured at cost less accumulated depreciation and impairment losses. Cost comprises purchase price and directly attributable expenses. Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. The estimated useful lives are as follows: 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. ANNUAL REPORT 2022 49 Notes to the Financial Statements CONTINUED 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 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. 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. 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 2022, 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 in prior years. 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. ANNUAL REPORT 202250 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. 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. ANNUAL REPORT 202251 Notes to the Financial Statements CONTINUED Pensions Defined contribution pension schemes The Group operates defined contribution schemes at PHFC and Momart, and at FIC employees are enrolled in the Falkland Islands Pension Scheme (“FIPS”). 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. 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. 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. Taxation Taxation on the profit or loss for the year comprises current and deferred tax. Current 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. ANNUAL REPORT 202252 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. 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 identified, 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. ANNUAL REPORT 202253 Notes to the Financial Statements CONTINUED 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, larger, multi-house contracts such as the construction of houses for FIG are treated as long term construction contracts as detailed below. Revenue from cars sold is recognised in full when the asset is physically transferred. 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 Museum Exhibitions revenue, which includes the income from UK and International museums, or Gallery Services revenue, which includes revenue earned from art galleries and auction houses, 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 Revenue from long term construction contracts is recognised under IFRS 15 by the application of the input method on the basis that the nature of the construction contracts which the Group typically enters into is such that work performed creates or enhances an asset from which the customer benefits over time as the goods and services are provided. Construction contract revenue is measured using the direct measurement of the goods or services provided to date, including materials and labour. Un-invoiced amounts are presented as contract assets and amounts invoiced in advance of delivery are presented as contract liabilities. 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. ANNUAL REPORT 202254 Other revenues recognised over time Other revenues recognised over time, include rental income from the rental property portfolio at FIC, which is recognised monthly as the properties are occupied, and car hire income which is recognised over the hire period. 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 one open hedging relationship at 31 March 2022, which has two elements; an interest rate swap and an embedded 0% interest rate floor. This contract commenced on 9th December 2021, as a result of the banking industry moving from LIBOR to SONIA as the basis for determining interest rates. This contract replaced the previous 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 up until December 2021 when the LIBOR reference rate was replaced with a SONIA based equivalent. 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 2022 was £12,500,000 (2021: £13,000,000). The asset held in respect of this swap at the year-end was £644,000 (2021: liability £234,000). The movement in the year reflects anticipated interest rate rises over the remaining period of the swap. ANNUAL REPORT 2022 55 Notes to the Financial Statements CONTINUED 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, SONIA 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 loan, 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. IFRS 16 Leases The Group has applied IFRS 16 in accounting for leases as follows: At inception of a contract, the Group assesses whether it is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group uses the definition of a lease in IFRS 16. 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). (a) As a lessee 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. 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. Right-of-use assets are tested for impairment in accordance with IAS 36 as specified by IFRS16. (b) As a lessor In accordance with IFRS 16, leases where the Group is a lessor continue to be classified as either finance leases or operating leases and are accounted for differently. The hire purchase receivables in FIC are 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. ANNUAL REPORT 2022 56 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. The rental property portfolio, which is held for leasing out under operating leases is included in investment property (where it constitutes land and buildings) or in property, plant and equipment (where it do not constitute land and buildings) at cost less accumulated depreciation and impairment losses. Standards and revisions not yet adopted in the year to 31 March 2022 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 202257 Notes to the Financial Statements CONTINUED 2. Segmental information analysis CONTINUED Ferry Services (Portsmouth) £’000 Art Logistics and Storage (UK) £’000 Unallocated £’000 2022 Revenue Segment operating profit before tax & non-trading items Non-trading items Profit / (loss) before net financing costs Finance expense Segment profit / (loss) before tax Assets and liabilities Segment assets Segment liabilities Segment net assets Other segment information Capital expenditure: Property, plant and equipment Investment properties Computer software Total Capital expenditure Capital expenditure: cash Capital expenditure: non-cash Total Capital expenditure Depreciation and amortisation: Property, plant and equipment Investment properties Computer software Right of use assets General Trading (Falkland Islands) £’000 21,655 1,835 - 1,835 (56) 1,779 31,401 (9,582) 21,819 1,129 1,238 67 2,434 2,434 - 2,434 834 197 - 8 Total Depreciation and Amortisation 1,039 3,066 155 - 155 (276) (121) 15,598 1,090 (41) 1,049 (464) 585 9,840 32,275 (8,318) (19,045) 1,522 13,230 52 - - 52 52 - 52 316 - - 130 446 258 - - 258 152 106 258 423 - 21 505 949 Underlying profit / (loss) Segment operating profit before non-trading items Interest expense Underlying profit / (loss) before tax 1,835 (56) 1,779 155 1,090 (276) (121) (464) 626 Total £’000 40,319 3,080 (300) 2,780 (796) 1,984 78,581 (37,924) 40,657 1,439 1,238 67 2,744 2,638 106 2,744 1,573 197 21 643 2,434 3,080 (796) 2,284 - - (259) (259) - (259) 5,065 (979) 4,086 - - - - - - - - - - - - - - - ANNUAL REPORT 20222021 Revenue Segment operating profit / (loss) before non-trading items Non-trading items Profit / (loss) before net financing costs Finance expense Segment profit / (loss) before tax Assets and liabilities Segment assets Segment liabilities Segment net assets Other segment information Capital expenditure: Property, plant and equipment Investment properties Computer software Total Capital expenditure Capital expenditure: cash Capital expenditure: non-cash Total Capital expenditure Depreciation and amortisation: Property, plant and equipment Investment properties Computer software Right of use assets Total Depreciation and Amortisation Underlying profit / (loss) General Trading (Falkland Islands) £’000 20,874 1,852 500 2,352 (68) 2,284 29,498 (8,687) 20,811 358 702 - 1,060 1,060 - 1,060 787 37 - 29 853 Ferry Services (Portsmouth) £’000 Art Logistics and Storage (UK) £’000 Unallocated £’000 1,445 (856) (140) (996) (329) (1,325) 10,259 30 (221) (191) (484) (675) 11,411 33,648 (10,266) (22,062) 1,145 11,586 - - - - - - - 327 - - 124 451 540 - - 540 151 389 540 461 - 63 465 989 30 (484) (454) - - (82) (82) - (82) 5,639 (285) 5,354 - - - - - - - - - - - - - - - Segment operating profit / (loss) before non-trading items Interest expense Underlying profit / (loss) before tax 1,852 (856) (68) 1,784 (329) (1,185) 58 Total £’000 32,578 1,026 57 1,083 (881) 202 80,196 (41,300) 38,896 898 702 - 1,600 1,211 389 1,600 1,575 37 63 618 2,293 1,026 (881) 145 ANNUAL REPORT 202259 Notes to the Financial Statements CONTINUED 2. Segmental information analysis CONTINUED The £5,065,000 (2021: £5,639,000) unallocated assets above include £4,376,000 (2021: £5,462,000) of cash and £644,000 (2021: £177,000) of prepayments and £45,000 (2021: £nil) of trade and other receivables held in FIH group plc. The £979,000 (2021: £285,000) unallocated liabilities above consist of accruals and tax balances held within FIH group plc. 3. Geographical analysis The tables below analyse revenue and other information by geography: 2022 Revenue (by source) Assets and Liabilities: United Kingdom £’000 Falkland Islands £’000 Total £’000 18,664 21,655 40,319 Non-current segment assets, excluding deferred tax 36,071 17,074 53,145 Capital expenditure: cash 204 2,434 2,638 2021 Revenue (by source) Assets and Liabilities: United Kingdom £’000 Falkland Islands £’000 Total £’000 11,704 20,874 32,578 Non-current segment assets, excluding deferred tax 36,852 15,752 52,604 Capital expenditure: cash 151 1,060 1,211 ANNUAL REPORT 2022 60 Total Revenue £’000 9,666 2,770 5,797 2,545 877 Sale of goods, recognised immediately on sale £’000 Rendering of services: recognised immediately £’000 Rendering of services, provided over a period of time £’000 9,666 2,034 1,499 - - 13,199 - - - 372 - 1,677 - 2,049 3,066 - 13,199 5,115 9,701 2,016 2,069 - - 13,786 - - - 419 - 1,414 - 1,833 1,445 - 13,786 3,278 - 364 4,298 868 877 - 321 3,276 839 819 6,407 21,655 - 15,598 22,005 3,066 15,598 40,319 Total Revenue £’000 9,701 2,756 5,345 2,253 819 5,255 20,874 - 10,259 15,514 1,445 10,259 32,578 Sale of goods, recognised immediately on sale £’000 Rendering of services: recognised immediately £’000 Rendering of services, provided over a period of time £’000 4. Revenue 2022 Falkland Islands Retail sales Automotive sales Housebuilding and construction Support Services Rental property income FIC (Falkland Islands) PHFC (Portsmouth) Art logistics and storage Total Revenue 2021 Falkland Islands Retail sales Automotive sales Housebuilding and construction Support Services Rental property income FIC (Falkland Islands) PHFC (Portsmouth) Art logistics and storage Total Revenue ANNUAL REPORT 202261 Notes to the Financial Statements CONTINUED 5. Non-trading items Profit before tax as reported Non-trading items: Restructuring costs Other credits Underlying profit before tax 2022 £’000 1,984 300 - 2,284 2021 £’000 202 443 (500) 145 Restructuring costs comprise people-related costs including employee redundancies and compensation payable to the former Chief Executive. Other credits in 2021, relate to derecognition of historic liabilities, which were previously included within accruals, on the basis that the amounts are no longer enforceable. 6. Expenses and auditor’s remuneration The following expenses / (income) have been included in the profit and loss: Direct operating expenses of rental properties Depreciation Amortisation of computer software Foreign currency loss Expected credit loss on trade and other receivables Cost of inventories recognised as an expense COVID-19 and other government funding 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 2022 £’000 465 2,413 21 13 114 9,868 (500) 2022 £’000 66 179 - 5 250 2021 £’000 393 2,230 63 3 39 10,226 (1,760) 2021 £’000 41 129 - 5 175 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 2022 62 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 2022 27 208 6 102 7 350 2021 31 189 7 99 7 333 2022 2021 - - - - 7 7 - - - - 7 7 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 2022 £’000 2021 £’000 12,472 11,752 45 821 505 1 821 498 2022 £’000 769 45 90 5 2021 £’000 471 1 59 10 Total employment costs 13,843 13,072 909 541 During the year, the Group made use of support schemes from the UK Government to partially mitigate the loss of profit caused by the impact of COVID-19. The Coronavirus Job Retention Scheme (“CJRS”), the UK Government’s support measure relating to employment, provided grants to cover the cost of employees who were furloughed. Amounts received under this scheme are classified as government grants and are accounted for in accordance with IAS 20 Government Grants. Such grants totalling £210,000 for the year ended 31 March 2022 (2021: £1,760,000), are recognised in the Income Statement in the period in which the associated costs for which the grants are intended to compensate are incurred, and are presented as an offset against those associated costs. 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’. ANNUAL REPORT 2022 63 Notes to the Financial Statements CONTINUED 8. Finance expense Interest payable on bank loans Net interest cost on the FIC defined benefit pension scheme liability Lease liabilities finance charge Total finance expense 9. Taxation Recognised in the income statement Current tax expense / (credit) Current year Adjustments for prior years Current tax expense / (credit) Deferred tax expense Origination and reversal of temporary differences Change in UK tax rate to 25% Adjustments for prior years Deferred tax expense (see note 17) Total tax expense Reconciliation of the effective tax rate Profit on ordinary activities before tax Tax using the UK corporation tax rate of 19% (2021: 19%) Expenses not deductible for tax purposes Additional capital allowances – super deduction Effect of increase in rate of deferred tax Effect of higher tax rate overseas Adjustments to tax charge in respect of previous periods 2022 £’000 (436) (56) (304) (796) 2021 £’000 (469) (64) (348) (881) 2022 £’000 2021 £’000 397 (25) 372 92 523 50 665 1,037 2022 £’000 1,984 377 84 (7) 523 35 25 (52) - (52) 258 (12) (1) 245 193 2021 £’000 202 39 56 - - 99 (1) Total tax expense 1,037 193 ANNUAL REPORT 202264 Tax recognised directly 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 on share options and other financial liabilities Deferred tax expense / (credit) recognised directly in other comprehensive income In the UK, deferred tax has been calculated at 25% (2021: 19%). 2022 £’000 205 62 (58) 209 2021 £’000 58 (71) (30) (43) The deferred tax assets and liabilities in FIC have been calculated at the Falkland Islands’ tax rate of 26% (2021:26%). 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. 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, adjusted to assume the full issue of share options outstanding, to the extent that they are dilutive. Profit on ordinary activities after taxation Average number of shares in issue Maximum dilution with regards to share options Diluted weighted average number of shares Basic earnings per share Diluted earnings per share 2022 £’000 947 2021 £’000 9 2022 Number 2021 Number 12,518,567 12,470,827 - 281,490 12,518,567 12,752,317 2022 7.6p 7.6p 2021 0.1p 0.1p To provide a comparison of earnings per share on underlying performance, the calculation below sets out basic and diluted earnings per share based on underlying profits. ANNUAL REPORT 202265 Notes to the Financial Statements CONTINUED 10. Earnings per share CONTINUED Earnings per share on underlying profit Underlying profit before tax (see note 5) Underlying taxation Underlying profit / (loss) after tax Effective tax rate Weighted average number of shares in issue (from above) Diluted weighted average number of shares (from above) Basic earnings per share on underlying profit Diluted earnings per share on underlying profit 11. Intangible assets Cost: At 1 Apr 2020 and 31 March 2021 Additions At 31 March 2022 Accumulated amortisation and impairment: At 1 Apr 2020 Amortisation At 31 March 2021 Amortisation At 31 March 2022 Net book value: At 1 April 2020 At 31 March 2021 At 31 March 2022 2022 £’000 2,284 (1,094) 1,190 47.9% 2021 £’000 145 (147) (2) -101.4% 12,518,567 12,470,827 12,518,567 12,752,317 9.5p 9.5p 0.0p 0.0p Computer Software £’000 Brand name £’000 Goodwill £’000 Total £’000 564 67 631 470 63 533 21 554 94 31 77 2,823 11,576 14,963 - - 67 2,823 11,576 15,030 785 - 785 - 785 2,038 2,038 2,038 9,462 10,717 - 63 9,462 10,780 - 21 9,462 10,801 2,114 2,114 2,114 4,246 4,183 4,229 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. ANNUAL REPORT 202266 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 2020 Goodwill at 31 March 2021 Goodwill at 31 March 2022 Impairment Art Logistics and Storage £’000 2,077 2,077 2,077 Falkland Islands £’000 37 37 37 Total £’000 2,114 2,114 2,114 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 the higher of a value-in-use calculation and fair value less costs to sell, to their recoverable amounts. Goodwill is impaired when the recoverable amount is less than the carrying value. During the year ended 31 March 2020, following the review for impairment, the goodwill of the Ferry Services CGU was deemed to be fully impaired as passenger numbers had fallen significantly due to COVID-19 and working practices, and therefore commuter transport services, were likely to be affected beyond the short term. The Art Logistics and Storage CGU also impaired its goodwill by £3.5 million as revenue had fallen significantly due to COVID-19 and art logistics services were likely to be affected beyond the short term. Following these impairments in 2020, the only material goodwill and indefinite life assets remaining at 31 March 2022 relate to the Art Logistics and Storage CGU. No further impairment charge was deemed necessary following the review for impairment in the year ended 31 March 2022. Given the continued uncertainty as a result of COVID-19 and the possible longer-term impact on passenger numbers impacting the Ferry Services CGU, the directors consider that there is a potential indicator of impairment of right of use assets and ships associated with this CGU (see note 12). An impairment review has therefore been performed for the Ferry Services CGU in addition to the Art Logistics and Storage CGU and no impairment charge was deemed necessary. For the Ferry Services CGU, the recoverable amount was determined by reference to value-in-use, but for the Art Logistics and Storage CGU, the recoverable amount was determined by fair value less costs to sell, after having performed value-in- use calculations using the assumptions described below. Fair value less costs to sell for the Art Logistics and Storage CGU is underpinned by an independent valuation of the art storage warehouses in East London which indicates a fair value well in excess of the £24.7 million carrying value of the Art Logistics and Storage CGU. As part of testing goodwill and indefinite life intangibles for impairment, forecast operating cash flows for the five years ending 31 March 2023-2027 and then to perpetuity have been used to assess the value-in-use of the Art Logistics and Storage CGU. For testing right of use assets and ships associated with the Ferry Services CGU, a thirty-nine year model has been used, including forecast operating cash flows for the five years ending 31 March 2023-2027, with high level assumptions applied after the fifth year. 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 thirty-nine year model has been considered to be appropriate for the Ferry Services CGU, as this is the life of the lease associated with the right of use asset. 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 15.2% (2021: 14.2%), and the cash flows of the Ferry Services CGU have been discounted using a pre-tax discount rate of 9.9% (2021: 9.7%). 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. ANNUAL REPORT 202267 Notes to the Financial Statements CONTINUED 11. Intangible assets CONTINUED Long term growth rates Long term growth rates of 2% (2021: 2%) have been used for the Art Logistics and Storage CGU as part of the impairment testing model. As noted above, a thirty-nine year model has been used to assess the Ferry Services CGU. For the period following the five year forecast, high level assumptions based on historic experience have been applied, including a gradual decline in passenger numbers which is mitigated by fare increases. Sensitivity to changes in assumptions Using a discounted cash flow methodology necessarily involves making 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 materially impact the forecast cashflows. However, for both the Ferry Services CGU and the Momart CGU, the directors do not consider that there are different reasonably possible outcomes that would lead to a material impairment. ANNUAL REPORT 202268 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 Total £’000 10,415 27,698 2,711 6,877 10,111 57,812 389 (28) - (50) 204 - - - 10,776 27,648 2,915 6,877 106 (82) 489 (1,144) 109 - - - 53 (3) - - 3 - - - 305 (830) 9,586 1,168 (396) - - 898 (908) 57,802 1,439 (481) 489 (1,144) Cost: At 1 April 2020 Additions in year Disposals At 31 March 2021 Additions in year Disposals Additions (non-cash) Disposals (non-cash) At 31 March 2022 10,145 27,757 2,965 6,880 10,358 58,105 Accumulated depreciation: At 1 April 2020 Charge for the year Disposals At 31 March 2021 Charge for the year Disposals Disposals (non-cash) At 31 March 2022 Net book value: At 1 April 2020 At 31 March 2021 At 31 March 2022 2,832 3,332 817 236 - 1,053 160 (3) - 2,548 6,571 16,100 242 - 2,790 243 - - 709 (830) 2,193 (852) 6,450 17,441 799 (336) - 2,216 (414) (218) 388 - 3,720 371 - - 4,091 1,210 3,033 6,913 19,025 24,366 23,928 23,666 1,894 1,862 1,755 4,329 4,087 3,847 3,540 3,136 3,445 41,712 40,361 39,080 618 (22) 3,428 643 (75) (218) 3,778 7,583 7,348 6,367 ANNUAL REPORT 202269 Notes to the Financial Statements CONTINUED 12. Property, plant and equipment CONTINUED Right to use assets Group Short leasehold lease £’000 Long leasehold Pontoon lease £’000 Momart Trucks £’000 Office Equipment £’000 Cost: At 1 April 2020 Additions in year Disposals At 31 March 2021 Additions in year Disposals Additions (non-cash) Disposals (non-cash) At 31 March 2022 Accumulated depreciation: At 1 April 2020 Charge for the year Disposals At 31 March 2021 Charge for the year Disposals Disposals (non-cash) At 31 March 2022 Net book value: At 1 April 2020 At 31 March 2021 At 31 March 2022 3,136 6,233 1,028 - - 389 (28) 6,233 1,389 - - 3,136 105 - - - 3,241 - - 489 (1,144) 5,578 1,366 1,191 303 - 1,669 303 - - 1,972 1,770 1,467 1,269 124 - 1,315 130 - (218) 1,227 5,042 4,918 4,351 1 (82) - - 1,308 269 182 (22) 429 209 (75) - 563 759 960 745 Total £’000 10,415 389 (28) 10,776 106 (82) 489 (1,144) 10,145 2,832 618 (22) 3,428 643 (75) (218) 3,778 7,583 7,348 6,367 18 - - 18 - - - - 18 6 9 - 15 1 - - 16 12 3 2 No property, plant or equipment was financed by hire purchase loans in the year to 31 March 2022. During the year to 31 March 2021, Momart acquired two trucks financed by two hire purchase loans totalling £389,000. 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 202270 Residential and commercial property £’000 Group Freehold land £’000 6,675 653 7,328 1,238 8,566 999 37 1,036 197 1,233 5,676 6,292 7,333 782 49 831 - 831 - - - - - 782 831 831 Total £’000 7,457 702 8,159 1,238 9,397 999 37 1,036 197 1,233 6,458 7,123 8,164 13. Investment properties Cost: At 1 April 2020 Additions in year At 31 March 2021 Additions in year At 31 March 2022 Accumulated depreciation: At 1 April 2020 Charge for the year At 31 March 2021 Charge for the year At 31 March 2022 Net book value: At 1 April 2020 At 31 March 2021 At 31 March 2022 The investment properties, held at cost, comprise land, plus residential and commercial property held for rental in the Falkland Islands. ANNUAL REPORT 202271 Notes to the Financial Statements CONTINUED 13. Investment properties CONTINUED Estimated Fair Value 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) Group 2022 £’000 2,177 10,139 173 12,489 1,346 2,979 - 4,325 83 2 700 2021 £’000 2,177 8,470 472 11,119 1,346 2,650 - 3,996 75 7 700 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. Rental income During the year to 31 March 2022, the Group received rental income of £877,000 (2021: £819,000) from its investment properties. Assets under construction At 31 March 2022, 2 investment properties were under construction (2021: 7) with a total cost to date of £173,000 (2021: £472,000). Company Cost: At 1 April 2020, 31 March 2021 and 31 March 2022 Accumulated depreciation: At 1 April 2020 Charge for the year At 31 March 2021 Charge for the year At 31 March 2022 Net book value: At 1 April 2020 At 31 March 2021 At 31 March 2022 Commercial property £’000 19,642 269 209 478 208 686 19,373 19,164 18,956 The investment property in the Company consists of the five warehouses leased to Momart, the Group’s art handling subsidiary, which were purchased in December 2018. ANNUAL REPORT 202272 The directors have reviewed the market value of the Leyton warehouses and have used valuation reports prepared by Colliers International Property Consultants Limited. The directors consider that the market value of the property is significantly higher than book value. Further detail is given in note 11. 14. Investment in subsidiaries Country of incorporation Class of shares held Ownership at 31 March 2022 Ownership at 31 March 2021 The Falkland Islands Company Limited (1) UK Ordinary shares of £1 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 Preference shares of £10 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) Portsmouth Harbour Waterbus Company Limited (4) (6) (7) Momart International Limited (5) (7) Momart Limited (5) (6) Dadart Limited (5) (6) (7) UK 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 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% 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 Share based payments charge capitalised into subsidiaries At 31 March Company 2022 £’000 23,970 25 23,995 2021 £’000 23,989 (19) 23,970 The directors note that the net assets of the Company balance sheet of £39.5 million exceed the market capitalisation of the Group which was circa £29.4 million at the balance sheet date and that this is a potential indicator of impairment of the investments in subsidiaries. An impairment review has therefore been performed as at 31 March 2022 using assumptions consistent with those used for testing impairment of goodwill, indefinite life assets, right of use assets and ships as described in note 11. In making their assessment of impairment of investments in subsidiaries, the directors have also considered the cash flows associated with the Falkland Islands CGU, using forecast operating cash flows for the two years ending 31 March 2023-2024 and then to perpetuity with a growth rate of 2%, discounted at a pre-tax rate of 16.8%. No scenarios have been identified in the current year leading to reasonably possible changes in estimates that would lead to a material impairment of the Company’s investments in subsidiaries at 31 March 2022. ANNUAL REPORT 202273 Notes to the Financial Statements CONTINUED 15. Investment in Joint Ventures The Group has one joint venture (South Atlantic Construction Company Limited, “SatCO”), which was set up in June 2012 in the Falkland Islands, 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 2022 £’000 519 (1) 518 259 2021 £’000 519 (1) 518 259 There were no recognised gains or losses for the years ended 31 March 2022 (2021: none). The current assets balances above include £16,000 of cash (2021: £17,000), £5,000 of other debtors (2021: £5,000) and £498,000 (2021: £498,000) of loans due from SatCO’s parent companies. SatCO had no contingent liabilities or capital commitments as at 31 March 2022 or 31 March 2021 and the Group had no contingent liabilities or commitments in respect of its joint venture at 31 March 2022 or 31 March 2021. 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. Non-Current: Lease debtors due after more than one year Current: Lease debtors due within one year Total lease debtors Group 2022 £’000 725 511 1,236 2021 £’000 590 558 1,148 ANNUAL REPORT 202274 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 £310,000 (2021: £147,000). The cost of assets acquired for the purpose of renting out under hire purchase agreements by the Group during the year amounted to £960,000 (2021: £825,000). The total cash received during the year in respect of hire purchase agreements was £985,000 (2021: £1,163,000). 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 2022 £’000 1,571 (310) (25) 1,236 511 725 2021 £’000 1,319 (147) (24) 1,148 558 590 Present value of future lease receipts 1,236 1,148 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 instruments Share-based payments Total net deferred tax liabilities Deferred tax asset arising on the defined benefit pension liabilities Net tax liabilities Group 2022 £’000 (3,537) (509) 81 104 (161) 108 (3,914) 666 (3,248) 2021 £’000 (2,938) (387) 62 66 44 40 (3,113) 739 (2,374) ANNUAL REPORT 202275 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 (liability) / asset Movement in deferred tax assets / (liabilities) in the year: Property, plant & equipment Intangible assets Inventories (unrealised intragroup profits) Other financial liabilities Derivative financial instruments Share-based payments Pension Deferred tax movements Unrecognised deferred tax assets 1 April 2021 £’000 (2,938) (387) 62 66 44 40 739 (2,374) Company 2022 £’000 (146) (146) 2021 £’000 44 44 Group Recognised in income £’000 Recognised in equity £’000 31 March 2022 £’000 (3,537) (509) 81 104 (161) 108 666 - - - 7 (205) 51 (62) (209) (3,248) (599) (122) 19 31 - 17 (11) (665) Deferred tax assets of £44,000 (2021: £44,000) 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 assets / (liabilities) in the year: Derivative financial liabilities instruments Other temporary differences Deferred tax asset movements Company 1 April 2021 £’000 Recognised in income £’000 Recognised in equity £’000 31 March 2022 £’000 44 - 44 - 15 15 (205) - (205) (161) 15 (146) ANNUAL REPORT 202276 Group Recognised in income £’000 Recognised in equity £’000 31 March 2021 £’000 (225) - 30 (12) - (1) (28) (9) - - - 30 (58) - - 71 43 (2,938) (387) 62 66 44 40 - 739 (2,374) Movement in deferred tax assets / (liabilities) in the prior year: Property, plant & equipment Intangible assets Inventories Other financial liabilities Derivative financial instruments Share-based payments Tax losses Pension 1 April 2020 £’000 (2,713) (387) 32 48 102 41 28 677 Deferred tax movements (2,172) (245) Movement in deferred tax asset in the prior year: Derivative financial instruments Other temporary differences Deferred tax asset movements Company 1 April 2020 £’000 Recognised in income £’000 Recognised in equity £’000 31 March 2021 £’000 102 19 121 - (19) (19) (58) - (58) 44 - 44 The UK deferred tax liability as at 31 March 2021 was calculated at 19%. An increase in the UK corporation rate from 19% to 25% (effective 1 April 2023) was substantively enacted on 24 May 2021. It has been assumed that all material UK deferred tax elements will reverse in 2023 or later and hence all elements are calculated at 25%. Deferred tax assets and liabilities relating to the Falkland Islands have been recognised at a rate of 26%. 18. Inventories Work in progress Goods in transit Goods held for resale Total Inventories Goods in transit are retail goods in transit to the Falkland Islands. The Company has no inventories. Group 2022 £’000 1,033 284 5,423 6,740 2021 £’000 691 972 4,208 5,871 ANNUAL REPORT 202277 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 Rental deposits Prepayments Accrued income Total trade and other receivables Group Company 2022 £’000 2021 £’000 2022 £’000 2021 £’000 44 - 44 88 - 88 - 10,057 10,057 - 10,207 10,207 Group Company 2022 £’000 5,362 88 1,515 982 7,947 2021 £’000 3,472 - 1,087 1,309 5,868 2022 £’000 2021 £’000 - - 45 - 45 - - 118 - 118 Amounts owed by subsidiary undertakings to the Company are interest free with no fixed repayment date. The accrued income primarily relates to contracts where the work has been completed but had not been billed at the balance sheet date. No allowance for expected credit losses was recognised in respect of accrued income as the impact was assessed as being immaterial. The only significant changes in the accrued income balance during the year related to the recognition of revenue for work performed and the transfer of billed amounts to trade receivables. 20. Cash and cash equivalents Cash and other cash equivalents in the balance sheet Group Company 2022 £’000 9,572 2021 £’000 14,556 2022 £’000 4,376 2021 £’000 5,462 ANNUAL REPORT 202278 Year ended 31 March Net (decrease) / increase in cash and cash equivalents Exchange losses Net (decrease) / increase in cash and cash equivalents after exchange gains Bank loan draw downs Bank loan repayments Lease modifications: non-cash Lease liabilities drawdown: cash Lease liabilities repayments Decrease / (increase) in interesting bearing loans and borrowings Net decrease / (increase) in debt Net debt brought forward Net debt at 31 March Net debt Cash balances Group Company 2022 £’000 (4,971) (13) (4,984) - 5,927 331 - 716 6,974 1,990 (13,667) (11,677) 2021 £’000 5,451 (3) 5,448 (5,000) 624 - (389) 649 (4,116) 1,332 (14,999) (13,667) 2022 £’000 (1,086) - (1,086) - 520 - - - 520 (566) (7,726) (8,292) 2021 £’000 (304) - (304) - 262 - - - 262 (42) (7,684) (7,726) Group Company 2022 £’000 9,572 2021 £’000 14,556 2022 £’000 4,376 2021 £’000 5,462 less: Total interest-bearing loans and borrowings (21,249) (28,223) (12,668) (13,188) Net debt (11,677) (13,667) (8,292) (7,726) 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. Non-current liabilities Secured bank loans Lease liabilities Total non-current interest-bearing loans and lease liabilities Current liabilities Secured bank loans Lease liabilities Total current interest-bearing loans and lease liabilities Total liabilities Secured bank loans Lease liabilities Total interest-bearing loans and lease liabilities Group Company 2022 £’000 2021 £’000 2022 £’000 2021 £’000 13,235 17,313 12,139 12,668 6,478 19,713 7,486 24,799 - - 12,139 12,668 948 588 1,536 2,797 627 3,424 529 - 529 520 - 520 14,183 20,110 12,668 13,188 7,066 21,249 8,113 28,223 - - 12,668 13,188 ANNUAL REPORT 202279 Notes to the Financial Statements CONTINUED 21. Interest-bearing loans and borrowings CONTINUED Lease liabilities Future minimum lease payments Interest Present value of minimum lease payments 2022 £’000 874 709 2021 £’000 955 853 1,616 1,952 10,094 11,727 13,293 15,487 2022 £’000 287 269 733 4,938 6,227 2021 £’000 337 317 869 5,851 7,374 2022 £’000 588 439 883 5,156 7,066 2021 £’000 618 536 1,083 5,876 8,113 Less than one year Between one and two years Between two and five years More than five years Total 22. Trade and other payables Current: Trade payables Contract liability 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 2022 £’000 2021 £’000 2022 £’000 2021 £’000 4,111 3,025 254 - 249 2,080 2,962 314 9,970 - - 249 1,435 1,843 223 6,775 29 - - - 5,085 5,960 - 120 615 - - 231 200 - 5,849 6,391 Amounts owed to subsidiary undertakings by the company are interest free with no fixed repayment date. 23. Employee benefits: pension plans Defined contribution schemes The Group operates defined contribution schemes at PHFC and Momart and current FIC employees are enrolled in the Falkland Islands Pension Scheme (“FIPS”). The assets of all these schemes are held separately from those of the Group in independently administered funds. The pension cost charge for the year represents contributions payable by the Group to the schemes and amounted to £505,000 (2021: £498,000). The Group anticipates paying contributions amounting to £525,000 during the year ending 31 March 2023. There were outstanding contributions of £11,000 (2021: £39,000) due to pension schemes at 31 March 2022. ANNUAL REPORT 202280 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 2023 are £100,000. During the year ended 31 March 2022, 11 pensioners (2021: 11) received benefits from this scheme, and there are three deferred members at 31 March 2022 (2021: 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 14 years (2021: 15 years). An actuarial report for IAS 19 purposes as at 31 March 2022 was 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 2022 2.7% 2.8% 3.9% 22.0 23.4 2021 2.5% 2.0% 3.4% 21.9 23.3 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. Assumptions relating to life expectancy have been based on UK mortality data on the basis that this is the best available data for the Falkland Islands. 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 2022 would have increased / (decreased) as a result of a change in the respective assumptions by 1.0%. Discount rate Inflation assumption Life expectancy Effect on obligation 2022 -1% pa £’000 380 (30) +1% pa £’000 (310) 15 Effect on obligation 2022 -1 year £’000 (120) +1 year £’000 125 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 202281 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: Value at 2018 £’000 2019 £’000 2020 £’000 2021 £’000 2022 £’000 Present value of scheme liabilities (2,839) (2,772) (2,604) (2,842) (2,562) Related deferred tax assets 738 721 677 677 666 Net pension liability (2,101) (2,051) (1,927) (2,165) (1,896) 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 2022 £’000 (2,842) 99 (56) 237 2021 £’000 (2,604) 98 (64) (272) Deficit in scheme at the end of the year (2,562) (2,842) 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 24. Employee benefits: share based payments 2022 £’000 56 2022 £’000 (43) 280 237 2021 £’000 64 2021 £’000 (21) (251) (272) The total number of options outstanding at 31 March 2022 is 439,834 including (i) 3,591 nil cost options (2021: 12,864), (ii) 431,243 options (2021: 210,474) granted under the Long Term Incentive Plan and (iii) 5,000 (2021: 58,152) Share options granted with an exercise price equal to the market price on the date of grant. ANNUAL REPORT 202282 (i) Nil cost options granted to John Foster: Date of Issue 17 Jun 19 Total Number 3,591 3,591 Share price at grant date pence Fair value per share pence Total fair value £ Earliest Exercise Date Latest Exercise date 316.0 301.0 10,809 17 Jun 22 17 Jun 23 10,809 Reconciliation of nil cost options: Outstanding at the beginning of the year Options exercised 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 2022 Number of options 2021 12,864 (9,273) 3,591 - - 25,352 (12,488) 12,864 - 1.8 (ii) Long term Incentive Plan grants at an exercise price of ten pence to local directors and executives: 255,304 Long term Incentive Plan grants were issued on 3 December 2021 at an exercise price of ten pence to local directors and executives, and expire in five years on 3 December 2026. During the year, 34,535 of these options were forfeited and all of the balance of these options remain outstanding at 31 March 2022. None of these grants are exercisable at 31 March 2022. 133,052 Long term Incentive Plan grants were issued on 14 July 2020 at an exercise price of ten pence to local directors and executives, and expire in five years on 14 July 2025. During the year, none of these options were forfeited (2021:10,000) and 123,052 of these options remain outstanding at 31 March 2022. None of these grants are exercisable at 31 March 2022. 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. During the year, none of these options were forfeited (2021:48,113) and 87,422 options remain outstanding at 31 March 2022. None of these grants are exercisable at 31 March 2022. There are various performance conditions attached to the Long term Incentive Plan grants. All have a primary performance condition of the Group share price exceeding a target threshold at the vesting date, and secondary financial performance conditions specific to the relevant operating segment. Date of Issue 4 Jul 19 Number 87,422 14 Jul 20 123,052 3 Dec 21 220,769 Total 431,243 Exercise Price pence Share price at grant date Pence Fair value per share Pence Total fair value £ Earliest Exercise Date Latest Exercise date 10.0 10.0 10.0 314.0 315.0 215.0 96.8 75.0 88.0 84,612 4 Jul 22 3 Jul 24 92,289 15 Jul 23 13 Jul 25 194,277 3 Dec 24 2 Dec 26 371,178 ANNUAL REPORT 202283 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 Options lapsed in 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 2022 210,474 255,304 (34,535) - 431,243 - 4.4 2021 234,734 133,052 (102,651) (54,661) 210,474 - 3.9 (iii) Share options with an exercise price equal to the market price on the date of grant Date of Issue 19 Jan 15 Total Number 5,000 5,000 Exercise Share price at Price pence 272.5 grant date pence 272.5 Fair value per share pence 63.0 Total fair Earliest Exercise Latest Exercise Date date 19 Jan 18 18 Jan 25 value £ 3,150 3,150 The exercise price of outstanding options at 31 March 2022 is £2.725. 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: Weighted average exercise price (£) 2022 Number of options 2022 Weighted average exercise price (£) 2021 Number of options 2021 Outstanding at the beginning of the year 2.68 58,152 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) - - 2.68 2.73 2.73 2.8 - - (53,152) 5,000 5,000 2.85 2.68 3.09 3.43 2.68 2.68 1.0 96,914 (3,848) (27,172) (7,742) 58,152 58,152 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 vesting period of the options. All options, other than certain nil cost options granted to John Foster, 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. Inputs into the valuation models include the estimated time to maturity, the risk-free rate, expected volatility, and dividend yield. During the year ending 31 March 2022, 9,273 nil cost options (2021: 12,488) were exercised over ordinary shares by John Foster at a gain of £23,183 (2021: £40,586). ANNUAL REPORT 202284 In the year to 31 March 2021, employees around the Group exercised 3,848 other share options at a gain of £2,375. 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 2022 £’000 45 2021 £’000 1 Ordinary Shares 2022 2021 12,514,985 12,504,519 4,915 10,466 12,519,900 12,514,985 2022 £’000 1,251 2021 £’000 1,251 By special resolution at an Annual General Meeting on 9 September 2010 the Company adopted new articles of association, principally to take account of the various changes in company law brought in by the Companies Act 2006. As a consequence, the Company no longer has an authorised share capital. The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. During the year 4,915 shares (2021: 10,466) were issued following the exercise of share options. On 8 July 2021, John Foster exercised 9,273 nil cost options, 4,358 options were cancelled to settle the employee tax liabilities and 4,915 shares were issued as new share capital for which the nominal value was paid in full. A total cash outflow of £10,896 was paid on the exercise of these options to settle the tax obligations arising. For more information on share options see note 24. Other reserves The other reserves in the Group of £703,000 at 31 March 2022 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 Falkland Islands’ businesses for £8.0 million and the £4,686,000 of goodwill on this acquisition was written off against the merger relief. ANNUAL REPORT 202285 Notes to the Financial Statements CONTINUED 25. Capital and reserves CONTINUED Dividends The following dividends were recognised and paid in the period: Final: nil pence (2021: nil pence) per qualifying ordinary share Interim: 1 pence (2021: nil pence) per qualifying ordinary share Total dividends recognised in the period 26. Financial instruments (i) Fair values of financial instruments Trade and other receivables 2022 £’000 - 125 125 2021 £’000 - - - 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 202286 The following table shows the carrying value, which management consider to be materially equal to fair value for each category of financial instrument: Cash and cash equivalents Hire purchase debtors Interest rate swap asset Trade and other receivables Rental deposits Group Company 2022 £’000 9,572 1,236 644 2021 £’000 14,556 1,148 - 5,362 3,472 132 - 2022 £’000 4,376 - 644 - - Total assets exposed to credit risk 16,946 19,176 5,020 2021 £’000 5,462 - - 60 - 5,522 (234) Interest rate swap liability Total trade and other payables - (234) - (9,119) (6,775) (5,849) (6,391) Interest-bearing borrowings at amortised cost (21,249) (28,223) (12,668) (13,188) 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 expected credit losses. Expected credit loss provisions are based on previous experience and other evidence, including forward-looking macroeconomic information, indicative of the recoverability of future cash flows. There have been no significant changes in the estimation techniques or significant assumptions made during the reporting period. 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 represents the maximum credit exposure. Therefore, the maximum exposure to credit risk at the balance sheet date was £16,946,000 (2021: £19,176,000) being the total trade receivables, hire purchase debtors, interest swap, rental deposits 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 202287 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 2022 £’000 1,773 775 254 2,365 195 5,362 The Company has no trade debtors. Credit quality of financial assets and expected credit losses Group Not past due Past due 0-30 days Past due 31-120 days More than 120 days Total trade receivables Hire purchase debtors Gross 2022 £’000 3,736 1,020 491 328 5,575 1,261 Impairment 2022 £’000 - (2) (58) (153) (213) (25) Net 2022 £’000 3,736 1,018 433 175 5,362 1,236 Gross 2021 £’000 2,880 447 184 64 3,575 1,172 Impairment 2021 £’000 (6) (8) (36) (53) (103) (24) 2021 £’000 712 237 166 2,184 173 3,472 Net 2021 £’000 2,874 439 148 11 3,472 1,148 The amount of hire purchase debt that is past due is immaterial. The movement in the allowances for impairment in respect of trade receivables and hire purchase debtors during the year was: Group Balance at 1 April Impairment loss recognised 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 2022 £’000 127 114 (3) 238 25 213 238 2021 £’000 183 39 (95) 127 24 103 127 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 expected credit losses are assessed as immaterial. ANNUAL REPORT 202288 (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 £20.1 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 £13.2 million. All payments due during the year with respect to these agreements were met as they fell due. The Group manages its cash balances centrally at head office and prepares rolling cash flow forecasts to ensure availability of funds. Liquidity risk – Group The following are the contractual maturities of financial liabilities, including estimated interest: 2022 Financial liabilities Secured bank loans Lease liabilities Trade payables Other creditors Loan from Joint Venture 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 14,183 16,410 1,346 1,332 7,066 4,111 1,797 249 13,293 4,111 1,797 249 874 4,111 1,797 249 3,486 1,616 10,246 10,094 - - - - - - - - 709 - - - - Accruals 2,962 2,962 2,962 Total financial liabilities 30,368 38,822 11,339 2,041 5,102 20,340 2021 Financial liabilities Secured bank loans Lease liabilities Trade payables Interest rate swap liability Other creditors Accruals Contractual cash flows Carrying amount £’000 Total £’000 1 year or less £’000 20,110 23,141 8,113 3,025 234 1,076 1,843 15,487 3,025 1,044 1,076 1,843 3,355 955 3,025 147 1,076 1,843 1 to 2 years £’000 3,926 853 - 141 - - 2 to 5 years £’000 5 years and over £’000 4,430 1,952 - 391 - - 11,430 11,727 - 365 - - Total financial liabilities 34,401 45,616 10,401 4,920 6,773 23,522 ANNUAL REPORT 202289 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: 2022 Financial liabilities Secured bank loans Trade payables 2021 Financial liabilities Secured bank loans 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 12,668 14,825 29 29 893 29 Amounts owed to subsidiary undertakings 5,085 5,085 5,085 Other creditors Accruals 89 615 89 615 89 615 879 2,807 10,246 - - - - - - - - - - - - Total financial liabilities 18,486 20,643 6,711 879 2,807 10,246 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 13,188 15,934 Amounts owed to subsidiary undertakings 5,960 Interest rate swap liability Other creditors Accruals 234 207 200 5,960 1,044 207 200 914 5,960 147 207 200 899 - 141 - - 2,777 11,344 - 391 - - - 365 - - Total financial liabilities 19,789 23,345 7,428 1,040 3,168 11,709 (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 202290 Group 2022 Cash and cash equivalents Trade payables and other payables Balance sheet exposure Group 2021 Cash and cash equivalents Trade payables and other payables Balance sheet exposure Total Balance sheet exposure £’000 283 GBP £’000 9,289 Total £’000 9,572 (1,426) (8,544) (9,970) (1,143) 745 (398) Total Balance sheet exposure £’000 GBP £’000 Total £’000 109 14,447 14,556 (455) (346) (6,320) (6,775) 8,127 7,781 Other £’000 40 (312) (272) Other £’000 10 (31) (21) EUR £’000 126 (635) (509) EUR £’000 59 (280) (221) USD £’000 117 (479) (362) USD £’000 40 (144) (104) 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 2022 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 2021. EUR USD Equity Profit or Loss 2022 £’000 51 36 2021 £’000 22 10 2022 £’000 51 36 2021 £’000 22 10 A 10% strengthening of the above currencies against pound sterling at 31 March 2022 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 202291 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 Bank loans Group Company 2022 £’000 2021 £’000 2022 £’000 2021 £’000 1,236 (508) (7,066) (6,338) 1,148 (607) (8,113) (7,572) - (234) - - - - - - - - - (234) (13,675) (19,503) (12,668) (13,188) Total Variable rate financial instruments (13,675) (19,737) (12,668) (13,422) At 31 March 2022, the Group had four bank loans: (i) £12.7 million (2021: £13.2 million) ten-year loan, which was drawn down on 28 June 2019, with interest charged at the compounded daily SONIA rate plus 1.8693% (2021: LIBOR plus 1.75%); (ii) £0.8 million (2021: £1.1 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; (iii) £0.2 million (2021: £0.2 million) repayable over ten years until May 2025, secured against freehold property held in (iv) PHFC, with interest charged at 1.75% above the Bank of England base rate; £0.5 million (2021: £0.6 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 £12.7 million ten-year loan has been hedged by one interest swap, taken out on 30 December 2021 with an initial notional value of £12.625 million, with interest payable at the difference between 1.1766% and the compounded daily SONIA rate plus 0.1193%.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 2022 is £12.5 million (2021: £13.0 million). As both the ten-year loan and the interest swap were moved to SONIA at the same point in time and are economically equivalent, there has been no material in-year accounting impact as a result of the change. Lease liabilities At 31 March 2022, the Group had the following lease liabilities: (i) £5.2 million lease liabilities payable to Gosport Borough Council; £4.5 million for the Gosport pontoon and £0.7 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 weighted average rate of 4.51%. (ii) £1.2 million of property rental leases, including two warehouses rented by Momart, and the Momart and Bishop’s Stortford head offices, which run for between 3 to 6 years as at 31 March 2022. The weighted average interest rate of these rental liabilities is 3.25%. (iii) £0.7 million of lease liabilities taken out to finance trucks by hire purchase leases at Momart, £0.3 million of this balance arises on two leases drawn down towards the end of the year ended 31 March 2021. The weighted average interest rate of these truck liabilities is 3.08%. The total blended average interest rate on the Group’s lease liabilities is 4.2 % per annum. ANNUAL REPORT 2022 92 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 2021. Equity Interest rate swap liability Variable rate financial liabilities Profit or Loss Interest rate swap liability Variable rate financial liabilities (v) Capital Management Group Company 2022 £’000 2021 £’000 2022 £’000 2021 £’000 127 (137) 127 (137) 130 (195) 130 (195) 127 (127) 127 (127) 130 (132) 130 (132) The Group’s objectives when managing capital, which comprises equity and reserves at 31 March 2022 of £40,657,000 (2021: £38,896,000) 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 Leases as lessor The Group leases out its investment properties, which consist of 73 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 2022 £’000 974 3,897 16,805 21,676 2021 £’000 919 3,675 16,753 21,347 ANNUAL REPORT 202293 Notes to the Financial Statements CONTINUED 28. Capital commitments At 31 March 2022, the Group had entered into the following contractual commitments: • • £385,000 in Momart comprising £272,000 for two new vehicles, £79,000 for an HGV trailer and other enhancements to existing vehicles and £34,000 for climate control systems. £270,000 in FIC comprising £190,000 for a new retail sales system and £80,000 for a warehouse office. At 31 March 2021, the Group had entered into contractual commitments of £21,000 for a spray booth and vehicle exhaust systems 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 30.3% (2021: 30.2%) of the voting shares of the Company at 31 March 2022. The compensation of key management personnel, which includes the FIH group plc directors and the directors of the subsidiaries, is as follows: Group Company Key management emoluments including social security costs Company contributions to defined contribution pension plans Share-related awards 2022 £’000 2,092 83 45 2021 £’000 1,610 74 1 Total key management personnel compensation 2,220 1,685 2022 £’000 795 - 20 815 2021 £’000 366 - 20 386 At 31 March 2022, the Group’s joint venture, SatCO, has debtors of £498,000 due from its parent companies. On 2 May 2017, KJ Ironside, the Managing Director of FIC, purchased a property which had been built on approximately 510 square metres of land owned by FIC. FIC provided a loan of £65,000 to Mr Ironside to purchase the freehold of this land. The loan is to be repaid in full in the event of the sale of the property, Mr Ironside ceasing to hold any permits or licenses required by law in respect of his ownership or occupation of the property, him ceasing to be employed by FIC at any time before his 65th birthday (unless due to ill health) or his death. £650 of interest is payable each year by Mr Ironside to FIC in respect of this loan. During the year, FIC entered into a contract with Pat Clunie, the FIC Finance director to build him a house on normal commercial arm’s length terms. The house is due to be completed in the year ended 31 March 2023, at which point it will be sold to Mr Clunie. The property is currently being constructed on FIC land and on completion of the build, FIC will provide a loan of £30,000 to Mr Clunie to purchase the freehold of this land. The loan is to be repaid in full in the event of the sale of the property, Mr Clunie ceasing to hold any permits or licenses required by law in respect of his ownership or occupation of the property, him ceasing to be employed by FIC at any time before his 65th birthday (unless due to ill health) or his death. £300 of interest is payable each year by Mr Clunie to FIC in respect of this loan. During the year, FIC paid £4,160 (2021: £104,430) to JK Contracting in respect of work performed at arm’s length for company. The proprietor of JK Contracting is the son-in-law of R Smith who was a director of FIC. ANNUAL REPORT 2022 94 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 2022, 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 £125,000 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 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. No impairment of goodwill was deemed necessary in the current or prior year. Inventory provisions The Group makes provisions in relation to inventory value, where the net realisable value of an item is expected to be lower than its cost, due to obsolescence. Historically, the calculation of inventory provisions has entailed the use of estimates and judgements combined with mechanistic calculations and extrapolations reflecting inventory ageing and stock turn. During the year ended 31 March 2022, inventory provisions increased to £1,089,000 (2021: £999,000). Inventory greater than 12 months old and with no sales in the twelve months before 31 March 2022 is provided against in full. If this provision was reduced to 50% of the gross inventory value, the provision would reduce by circa £169,000 (2021: £150,000). If this provision was extended to cover all inventory greater than six months old with no sales in the twelve months before 31 March 2022, the provision would increase by £94,000 (2021: £74,000). ANNUAL REPORT 202295 Stuart Munro Chief Executive Officer Jeremy Brade Non-executive Director Robert Johnston Non-executive Director Dominic Lavelle Non-executive Director Company Secretary Iain Harrison Directors and Company Information Directors Robin Williams, Non-executive Chairman Stockbroker and Nominated Adviser W.H. Ireland Limited 24 Martin Lane, London EC4R 0DR Registrar Link Group 10th Floor Central Square, 29 Wellington Street, Leeds LS1 4DL Solicitors BDB Pitmans LLP 50 Broadway, Westminster, London SW1H 0BL Auditor KPMG LLP St. Nicholas House, Park Row, Nottingham NG1 6FQ 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 Steve Lane, Director T: 020 7426 3000 E: enquiries@momart.com W: www.momart.com www.fihplc.com ANNUAL REPORT 2022F I H G R O U P P L C A N N U A L R E P O R T 2 0 2 2 F I H G R O U P P L C A N N U A L R E P O R T 2 0 2 2 

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