TIDMFKL
RNS Number : 8549U
Falkland Islands Holdings PLC
12 April 2016
12 April 2016
Falkland Islands Holdings plc
("FIH" or "the Group")
Pre-Close Trading Update
Falkland Islands Holdings plc ("FIH"), the AIM quoted
international specialist services group with businesses in the
Falkland Islands and UK, is pleased to provide the following update
on trading for the year ended 31 March 2016.
-- Trading in the second half was satisfactory; profitability,
although lower compared to H2 last year, was broadly in line with
expectations, albeit the Full Year Underlying Profit before Tax is
likely to be some 10-15% lower than the prior year at c
GBP3.0-GBP3.2million, principally due to the reduced contribution
from Momart.
-- The Group's cash flow was strong and FIH ended the year with
record cash balances of GBP14.0million, an increase of over
GBP6million compared to 31 March 2015 (GBP7.4million).
Operational Highlights:
-- Falkland Islands Company - In the Falklands, trading was
buoyant with FIC's contribution at record levels as the business
took advantage of the significant boost to the economy from the
offshore oil exploration drilling.
Momart - At the Group's art handling and logistics business,
Momart, profitability improved in H2, compared to the first half,
helped by modest sales growth, although profits were still markedly
lower for the full year, following significant investment in
marketing and sales infrastructure and continuing competitive
pressure in a slowing global art market.
-- Portsmouth Harbour Ferry Company - Passenger numbers were
3.3% lower than in the prior year, but trading at the Group's
passenger ferry business was broadly satisfactory, at levels only
slightly below 2014-15.
-- Group Trading performance - The Group's overall trading
performance for the year to 31 March 2016 (i.e. underlying pre-tax
profits, before amortisation and non-trading items), is expected to
show a 10-15% decrease in comparison to the prior year, principally
due to the reduced contribution from Momart.
-- At a non-trading level, restructuring in the UK and
Falklands, designed to reduce ongoing overheads, was more than
offset by the GBP0.4million of profits generated in the first half
from the sale of the Group's residual holding of 5million shares in
Falkland Oil and Gas in April 2015.
-- Cash and Bank Borrowings - At 31 March 2016, the Group had
cash balances of GBP14.0 million and bank borrowings of
GBP3.3million, i.e. net cash of GBP10.7million (GBP6.7million at 31
March 2015)
Strategic Highlights:
-- The impact of low oil prices and market backdrop has delayed
oil development in the Falklands, resulting in the Group shifting
its strategic growth focus in the near term towards developing its
UK operations through further investment in existing businesses and
through the pursuit of high quality acquisitions.
-- Strategy is aimed at creating a larger quoted entity with a
wider appeal to investors that will in turn enhance shareholder
liquidity and the Group's rating.
-- Execution of this strategy will be aided by the Group's
record cash reserves of GBP14million (GBP1.13 per share) and the
Group's solid existing earnings base which provides untapped
borrowing capacity.
Operational detail:
Falkland Islands Company ("FIC") - As expected, the Group's
Falklands business continued to benefit from the uplift in economic
activity linked to the exploration drilling programme seen in the
first half. Although drilling was brought to an end in February
2016, support company activity continued through to 31 March and
will not tail off until early in the next financial year. Retail
demand grew and sales at FIC's flagship West Store increased to
record levels. Property income was boosted by corporate oil related
lets and vehicle hire and new vehicle sales also reached record
levels. Construction activity remained buoyant and although the
Group's construction Joint Venture, "SAtCO" had largely completed
oil related construction contracts in the prior year, equipment
rental to support the drilling programme and local work for
government and Ministry of Defence lead contractors at MPA helped
SAtCO's contribution remain at healthy levels. Some limited
restructuring of the local management team was undertaken at the
end of the financial year in order to right- size the business for
the quieter trading period that will follow the departure of the
oil rig next year.
Momart - After a first half with flat sales and profits impacted
by the effects of increased investment spend on marketing, business
development and improved systems, Momart saw a modest increase in
revenue in H2 and this helped lift profitability. However the
fiercely competitive UK and international art market saw a
continued squeeze on margins. This, coupled with a lower level of
lucrative, high added value, overseas sales, meant that Momart's H2
contribution, although showing some improvement on the first half,
remained lower than the prior year. For the full year, the impact
of increased investment, a less lucrative sales mix and continuing
competitive pressure saw a marked fall in full year profitability.
Despite this dip, prospects for future growth over the medium term
remain positive, and construction is now well advanced on a new
state of the art storage facility at the company's Leyton site
which will add 33% to capacity. Completion is scheduled for
mid-summer 2016 and Momart's pre-letting of this additional space
is now underway.
Portsmouth Harbour Ferry Company ("PHFC") - Ferry trading
performance was satisfactory. Revenues were essentially flat, with
a continuing 3.3% decline in passenger numbers, caused by the
increased appeal of car travel linked to cheap petrol, a subsidised
Park & Ride scheme, and the passenger disruption caused by
Portsmouth Council's modernisation and reshaping of the passenger
interchange at Portsmouth Hard. However these negative factors were
largely offset by the 3% fare increase put through in June 2015.
Additional activity from the highly successful Americas Cup racing
off Portsmouth Harbour helped boost cruising income in summer 2015.
Increased wage costs and additional depreciation from the company's
newly commissioned ferry, "Harbour Spirit", were partially offset
by a fall in marine diesel fuel costs. Overall operating costs
increased by 2-3% in the year leading to a small decrease in
profitability.
Outlook:
For the year ahead, we anticipate a quieter period in the
Falklands. The squid catch this Spring has dropped back from the
exceptional levels seen in the previous two years and in retailing,
FIC's principal competitor has recently launched a 33% expansion of
its store. Given this and the conclusion of exploration drilling
for the foreseeable future, FIC will face significant headwinds in
the coming year and profits at FIC are expected to revert to the
more normal "pre-oil" levels seen in prior years.
At PHFC, in the coming year the emphasis will be on tight cost
control, in the face of short term pressures on passenger numbers
caused by cheap petrol and physical disruption caused by the
reconfiguration of the passenger interchange at the Portsmouth
ferry terminal. In the longer term, plans to expand the Portsmouth
naval base and new proposals to redevelop the harbour at Gosport
should help to reverse the decline seen in recent years.
At Momart, we anticipate a stabilising of the core trading
position as we see the benefit of the recent investment in sales
and marketing feed through to underpin continued sales growth and
shore up margins. Initially though, the warehouse expansion will be
a drag on profits, with an increase in fixed costs not fully
covered by new storage revenue in the first year. Over the medium
term however, as Momart's new facilities reach capacity, prospects
for a steady and sustained recovery in profitability are good.
Future Group Strategy
The low price of oil means that the development of proven oil
reserves in the Falklands will now be delayed and although the
board of FIH remains confident that oil production and dramatic
economic growth will ensue in the Falklands in due course, the
timing of this remains uncertain. However, following the
substantial capital and human investment in FIC seen in the past
few years, the company is well placed to take full advantage of the
growth that will ultimately emerge.
With further growth in the Falklands now delayed, the Group's
focus in the near term has shifted to developing its UK operations
through further investment in its existing businesses and through
the pursuit of high quality acquisitions. This strategy, to create
a platform for sustainable long term growth, is aimed at creating a
larger quoted entity with a wider appeal to investors that will in
turn enhance shareholder liquidity and the Group's rating.
Execution of this strategy will be aided by the Group's record cash
reserves of GBP14million (GBP1.13 per share) and the Group's solid
existing earnings base which provides untapped borrowing
capacity.
The Board's policy of re-investing profits to support
accelerated growth will continue and the Group currently has no
plans to reintroduce the payment of a dividend.
The Group's Preliminary Results for the year ended 31 March 2016
are expected to be released on Tuesday 14(th) June 2016.
Chairman of FIH, Edmund Rowland, commented:
"The Group has delivered another solid trading performance, in
line with expectations, and with strong positive cash flow closing
the year with record cash balances of GBP14million, giving cash per
FIH share of GBP1.13.
"As Chairman, I remain keen to build on the secure foundations
already established and to build the Group's long term success with
a focus on growth through investment and selective acquisitions.
The Group's strong cash position and significant borrowing capacity
will be key factors facilitating this growth.
(MORE TO FOLLOW) Dow Jones Newswires
April 12, 2016 02:00 ET (06:00 GMT)
"In the Falklands, we remain confident about FIC's exceptional
long term potential following a recovery in the oil price and in
the near term we have a healthy profitable business that has little
immediate need for heavy further investment.
"In the UK, the Group continues to benefit from its two
established specialist services businesses, Momart and PHFC, and
beyond this solid base we see further opportunities to develop the
scale of the Group's activities through selective, focussed
acquisitions and organic growth. I look forward to updating the
market on our growth strategy as the year progresses, as we seek
out opportunities that will create an enhanced platform for
sustainable long term growth."
- Ends -
Enquiries:
Falkland Islands Holdings plc
Edmund Rowland, Chairman Tel: 020 7087 7970
John Foster, Managing Director Tel: 01279 461 630
WH Ireland Ltd. - NOMAD and Broker
to FIH
Adrian Hadden / Mark Leonard Tel: 020 7220 1666
FTI Consulting
Edward Westropp / Eleanor Purdon Tel: 020 3727 1000
This information is provided by RNS
The company news service from the London Stock Exchange
END
TSTLLFSDSIILLIR
(END) Dow Jones Newswires
April 12, 2016 02:00 ET (06:00 GMT)
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