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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Fih Group Plc | LSE:FIH | London | Ordinary Share | GB00BD0CWJ91 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 15.00 | 6.52% | 245.00 | 240.00 | 250.00 | 245.00 | 230.00 | 230.00 | 13,312 | 11:46:23 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Ferries | 52.71M | 3.12M | 0.2494 | 9.82 | 30.67M |
From Apr 2022 to Apr 2024
TIDMFIH
RNS Number : 2840R
FIH Group PLC
05 July 2022
FIH group plc
("FIH" or the "Group")
Final Results
FIH, the AIM quoted international specialist services group with businesses in the Falkland Islands and the UK, is pleased to announce the Group's audited results for the year ended 31 March 2022 ("the period").
Significantly Improved Cash-Backed Profit as Trading Continues to
Move Towards Pre-Pandemic Levels
Highlights
-- Revenue increased by GBP7.7 million (24%) to GBP40.3 million (2021: GBP32.6 million) with trading continuing to head towards pre-pandemic levels.
-- Pre-tax profit of GBP2.0 million (2021: GBP0.2 million).
-- Underlying pre-tax profit of GBP2.3 million (2021: GBP0.1 million) despite COVID-related government support reducing to GBP0.5 million (2021: GBP1.8 million).
-- Results underpinned by net cash flow from operating activities of GBP5.1 million.
-- Underlying pre-tax profit of GBP1.8 million in the Falkland Islands Company ("FIC") is consistent with the year ended 31 March 2021, despite a second year without tourists.
-- Momart and the Portsmouth Harbour Ferry Company ("PHFC") both delivered much improved performances as trading activity continued to recover.
o Momart delivered an underlying pre-tax profit of GBP0.6 million (2021: GBP0.5 million loss).
o PHFC delivered an underlying pre-tax loss of GBP0.1 million (2021: GBP1.2 million loss).
-- The Group balance sheet remains strong with underlying cash as at 31 March 2022 in line with prior year at GBP9.6 million (after adjusting for the repayment of GBP5.0 million CBILS loans).
-- Good progress on the GBP17.3 million contract, awarded to FIC in November 2021, to build 70 houses for the Falkland Islands Government ("FIG") and the UK Ministry of Defence ("MOD") and further opportunities to work with FIG and the MOD are being explored.
-- The value of Momart's property in Leyton has risen substantially since acquisition.
-- A final dividend of 2.0 pence per share will be proposed at the Annual General Meeting, taking the total dividend for the year to 3.0 pence per share (2021: nil).
Post Year-End
-- The Falkland Islands re-opened to tourists from 4 May 2022.
-- John Foster stepped down as Chief Executive on 14 April 2022 and was succeeded by Stuart Munro, who was previously the Chief Financial Officer. Progress is well advanced towards securing a replacement CFO.
Stuart Munro, Chief Executive, said:
"After a challenging two years for the Group, I'm delighted to be able to report a significant improvement in pre-tax profit. Whilst this has been driven by a welcome step towards pre-COVID levels of trading activity, it is also due to the hard work of our employees and the actions taken to reduce our cost base in the early stages of the pandemic.
The overall trading outlook remains positive. In FIC, the lifting of the ban on tourists visiting the Falkland Islands on 4 May 2022, together with a strong order book and potential opportunities for further work, all bode well for the future. As the impact of COVID hopefully continues to reduce, further improvement in activity levels is also expected at Momart and PHFC.
The improvements already delivered, together with the potential for further progress and the continuing financial strength of the Group, give me confidence for the future."
Enquiries:
Hot Features
Premium
FIH group plc
Stuart Munro, Chief Executive Tel: 01279 461630
WH Ireland Ltd. - NOMAD and Broker
to FIH Tel: 0207 220 1666
Jessica Cave / Megan Liddell
-------------------------
Novella Communications
Tim Robertson / Chris Marsh Tel: 020 3151 7008
-------------------------
Market Abuse Regulation (MAR) Disclosure
The information contained within this announcement is deemed by the Company to constitute inside information. Upon the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.
Chairman's Statement
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 back towards pre-pandemic levels of trading, have resulted in an underlying pre-tax trading profit of GBP2.3 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 GBP0.6 million (2021: GBP0.5 million loss) and PHFC delivering an underlying loss of GBP0.1 million (2021: GBP1.2 million loss).
The balance sheet remains strong, with cash of GBP9.6 million at 31 March 2022 remaining in line with the balance at the prior year end after adjusting for the repayment of GBP5.0 million of CBILS loans, net bank borrowings reducing to GBP4.6 million (2021: GBP5.5 million) and net debt including lease liabilities improving to GBP11.7 million (2021: GBP13.6 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
Chief Executive's Strategic Review
Overview
With trading activity continuing to head 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.
Revenue of GBP40.3 million for the year ended 31 March 2022, an increase of 24%, resulted in a pre-tax profit of GBP2.0 million and an underlying pre-tax profit of GBP2.3 million, compared to a broadly break-even result for the year ended 31 March 2021. This included GBP0.5 million of COVID-related support from UK and local government, which was GBP1.3 million less than the prior year.
FIC, the division least affected by the pandemic, delivered an underlying pre-tax profit of GBP1.8 million, which was consistent with the prior year. Momart and PHFC each improved their underlying pre-tax results by GBP1.1 million, with Momart delivering a profit of GBP0.6 million and PHFC a loss of GBP0.1 million.
The Group results were underpinned by a net cash flow from operating activities of GBP5.1 million, with working capital remaining broadly in line with the prior year, despite a significant increase in trading activity. The closing cash balance of GBP9.6 million was in line with the balance at the prior year end, after adjusting for the repayment of GBP5.0 million of CBILS loans in June 2021. It also reflected GBP2.7 million of capital investment, some GBP1.2 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 GBP19.6 million. Indications are that the value of this property has risen substantially since acquisition.
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.
Group revenue 2022 2021 Change Year ended 31 March GBPm GBPm % --------------------------------------- ----- ----- ------ Falkland Islands Company 21.6 20.9 3.3 Momart 15.6 10.3 51.5 Portsmouth Harbour Ferry 3.1 1.4 121.4 Total revenue 40.3 32.6 23.6 --------------------------------------- ----- ----- ------ Group underlying pre-tax profit* GBPm GBPm GBPm Falkland Islands Company** 1.8 1.8 - Momart** 0.6 (0.5) 1.1 Portsmouth Harbour Ferry** (0.1) (1.2) 1.1 Total underlying pre-tax profit * 2.3 0.1 2.2 Non-trading items (see notes below)*** (0.3) 0.1 (0.4) --------------------------------------- ----- ----- ------ Reported profit before tax 2.0 0.2 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 GBP0.3 million of people-related costs including employee redundancies and compensation payable to the former Chief Executive. The net non-trading profit of GBP0.1 million in the prior year included GBP0.4 million of restructuring costs, which were offset by GBP0.5 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.
Group Operating Company Performance
Falkland Islands Company
Total revenue of GBP21.6 million was GBP0.7 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 GBP1.8 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 2021 Change
GBPm GBPm %
--------------------------------------- ----- ----- ------
Revenues
Retail 9.7 9.7 -
Falklands 4x4 2.8 2.8 -
FBS (housing and construction) 5.8 5.3 9.4
Support services 2.5 2.3 8.7
Property rental 0.8 0.8 -
Total FIC revenue 21.6 20.9 3.3
FIC underlying operating profit 1.9 1.9 -
Net interest expense (0.1) (0.1) -
--------------------------------------- ----- ----- ------
FIC underlying profit before tax 1.8 1.8 -
--------------------------------------- ----- ----- ------
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 GBP17.3 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 GBP1.1 million secured in May 2022.
Support Services income increased by GBP0.2 million to GBP2.5 million (2021: GBP2.3 million) due predominantly to increased shipping agency revenues, following the reopening of Stanley Harbour to fishing vessels.
Rental Properties . Further additions at a cost of GBP1.2 million (2021: GBP0.7 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 GBP0.8 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 GBP7.2 million (2021: GBP5.8 million). The estimated market value of FIC's rental portfolio at 31 March 2022 was GBP10.1 million (2021: GBP8.5 million) an uplift of GBP3.0 million on book value giving an average value per property of GBP122,000 (2021: GBP113,000).
FIC Key Performance Indicators and Operational Drivers
Year ended 31 March 2018 2019 2020 2021 2022
Staff numbers (FTE 31
March)* 152 175 214 206 232
---- ----- ------ ----- -----
Capital expenditure
GBP'000 389 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** 49 54 65 75 83
---- ----- ------ ----- -----
Average occupancy during
the year % 89 84 89 93 86
---- ----- ------ ----- -----
Number of vehicles sold 77 76 71 71 81
---- ----- ------ ----- -----
Number of 3(rd) party
houses sold*** 22 6 22 15 11
---- ----- ------ ----- -----
Illex squid catch in
tonnes (000's) 75.5 57.4 57.6 106.1 123.8
---- ----- ------ ----- -----
Cruise ship passengers
(000's) 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.
Momart
Revenue of GBP15.6 million for the year ended 31 March 2022, whilst not yet back to pre-pandemic levels, was GBP5.3 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 GBP0.4 million of pandemic-related support from UK and local government (2021: GBP1.4 million), this resulted in an underlying pre-tax profit of GBP0.6 million (2021: GBP0.5 million loss).
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 GBP2.4 million with an 84% utilisation of storage capacity (2021: 83%).
Momart Operating Results
Year ended 31 March 2022 2021 Change
GBPm GBPm %
----------------------------------------- ----- ----- ------
Revenues
Museum Exhibitions 7.4 4.5 64.4
Gallery Services 5.8 3.4 70.6
Storage 2.4 2.4 -
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 0.6 (0.5) 220.0
----------------------------------------- ----- ----- ------
Momart underlying operating profit
margin 6.4% - -
----------------------------------------- ----- ----- ------
Momart Key Performance Indicators and Operational Drivers
Year ended 31 March 2018 2019 2020 2021 2022
Staff numbers (FTE
31 March) 136 140 133 107 99
--------- --------- --------- -------- --------
Capital expenditure
GBP'000's 228 20,034 638 540 258
--------- --------- --------- -------- --------
Warehouse % fill vs
capacity 72.8% 81.1% 86.9% 82.9% 84.0%
--------- --------- --------- -------- --------
Exhibition order book GBP4.2m GBP4.6m Note* Note* GBP4.3m
31 March
--------- --------- --------- -------- --------
Momart services charged GBP10.9m GBP11.5m GBP10.8m GBP6.5m GBP9.1m
out
--------- --------- --------- -------- --------
Revenues from overseas GBP7.1m GBP7.5m GBP6.2m GBP2.7m GBP5.5m
clients
--------- --------- --------- -------- --------
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%
--------- --------- --------- -------- --------
Total sales growth 15.5% -2.9% -8.7% -45.5% 51.5%
--------- --------- --------- -------- --------
Note*: Due to the impact of COVID-19, meaningful data for secure forward orders was not available.
Portsmouth Harbour Ferry Company
Passenger numbers at PHFC returned to circa 80% of pre-COVID levels over the autumn, but dipped in 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 GBP1.7 million increase in revenue, an underlying operating profit of GBP0.2 million (2021: GBP0.9 million loss) and an underlying pre-tax loss of GBP0.1 million (2021: GBP1.2 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.
PHFC Operating Results
Year ended 31 March 2022 2021 Change
GBPm GBPm %
------------------------------------------------ --------- --------- -------
Revenues
Ferry fares 3.1 1.4 121.4
Total PHFC revenue 3.1 1.4 121.4
------------------------------------------------ --------- --------- -------
PHFC underlying operating profit / (loss) 0.2 (0.9) 122.2
Pontoon lease liability & Boat loan
finance expense (0.3) (0.3) -
------------------------------------------------ --------- --------- -------
PHFC underlying loss before tax (0.1) (1.2) 91.7
------------------------------------------------ --------- --------- -------
PHFC Key Performance Indicators and Operational Drivers
Year ended 31 March 2018 2019 2020 2021 2022
Staff numbers (FTE at 31
March) 38 37 36 25 26
-------- -------- -------- -------- --------
Capital expenditure GBP'000's 186 50 65 - 52
-------- -------- -------- -------- --------
Ferry reliability (on time
departures) 99.8 99.8 99.8 99.9 99.9
-------- -------- -------- -------- --------
Number of weekday passengers
'000's 1,878 1,834 1,706 613 1,188
-------- -------- -------- -------- --------
% change on prior year -4.5 -2.3 -7.0 -64.1 93.8
-------- -------- -------- -------- --------
Number of weekend passengers
'000's 734 722 659 195 500
-------- -------- -------- -------- --------
% change on prior year -1.3 -1.6 -8.7 -70.4 156.4
-------- -------- -------- -------- --------
Total number of passengers
'000's 2,612 2,556 2,365 808 1,688
-------- -------- -------- -------- --------
% change on prior year -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 GBP1.58 GBP1.62 GBP1.69 GBP1.76 GBP1.76
journey*
-------- -------- -------- -------- --------
*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 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.
Invest in developing the existing businesses. The Board are particularly focussed on capitalising on potential opportunities for further work for FIG and the MOD, building on the GBP17.3 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
As trading headed back to pre-pandemic levels, Group revenue increased by GBP7.7 million (24%) to GBP40.3 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 GBP5.3 million and GBP1.7 million respectively. FIC revenue improved by GBP0.7 million, despite the previous year's COVID-related ban on tourists visiting the Falkland Islands continuing during the year.
Underlying Operating Profit
Underlying operating profit before net finance costs increased by GBP2.1 million (210%) to GBP3.1 million (2021: GBP1.0 million). This was despite grant income received under furlough schemes and other government support reducing by GBP1.3 million to GBP0.5 million (2021: GBP1.8 million) and reflected the revenue increases noted above.
Net Financing Costs
The Group's net financing costs of GBP0.8 million were broadly in line with the prior year. Two UK Government-backed CBILS loans totalling GBP5.0 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 GBP2.0 million (2021: GBP0.2 million). Non-trading items in the current year included GBP0.3 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 GBP2.3 million (2021: GBP0.1 million). Non-trading items in the prior year included GBP0.4 million of restructuring costs and GBP0.5 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 GBP0.8 million. This is mainly due to increased profitability (GBP0.3 million) and the increase in UK deferred tax (GBP0.5 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).
Balance Sheet
The Group's balance sheet remained strong, with total net assets growing to GBP 40.7 million (2021: GBP38.9 million) . Retained earnings increased by GBP1.1 million to GBP 20.7 million (2021: GBP19.6 million) and the hedging reserve improved by GBP0.7 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 2021 Change
GBPm GBPm GBPm
--------------------------------- ------- ------- -------
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 (4.6) (5.5) 0.9
Lease liabilities (7.1) (8.1) 1.0
Net debt (11.7) (13.6) 1.9
--------------------------------- ------- ------- -------
Bank loans reduced to GBP14.2 million (2021: GBP20.1 million) as a result of the GBP5.0 million CBILS loans repayment in June 2021 and scheduled loan repayments of GBP0.9 million. The Group's cash balances reduced by GBP5.0 million to GBP9.6 million (2021: GBP14.6 million) reflecting the repayment of the GBP5.0 million CBILS loans. Overall net debt improved by GBP1.9 million to GBP11.7 million (2021: GBP13.6 million).
The Group's outstanding lease liabilities totalled GBP7.1 million (2021: GBP8.1 million) with GBP5.2 million of the balance (2021: GBP5.8 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 GBP4.2 million following an annual impairment review which indicated that no impairment was required at Momart.
The net book value of property, plant and equipment decreased by GBP1.3 million to GBP39.1 million (2021: GBP40.4 million) with additions of GBP1.4 million being offset by depreciation charges of GBP2.2 million and a net reduction of GBP0.4 million on right of use assets following a lease modification relating to the Gosport pontoon ground rent.
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 GBP8.2 million (2021: GBP7.1 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 GBP12.5 million (2021: GBP11.1 million), an uplift of GBP4.3 million on net book value. FIC's 83 houses and flats had an estimated fair value of GBP10.1 million (2021: GBP8.5 million). The value of FIC's 700 acres of land was estimated at GBP2.2 million (2021: GBP2.2 million). The properties under construction at 31 March 2022 were valued at cost of GBP0.2 million (2021: GBP0.5 million).
Deferred tax assets relating to future pension liabilities stood at GBP0.7 million (2021: GBP0.7 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 GBP0.8 million to GBP6.7 million at 31 March 2022 (2021: GBP5.9 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 GBP2.0 million to GBP7.9 million at 31 March 2022 (2021: GBP5.9 million) due mainly to increased sales activity in Momart towards the end of the year.
Trade and other payables increased by GBP3.2 million to GBP10.0 million at 31 March 2022 (2021: GBP6.8 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 GBP2.6 million (2021: GBP2.8 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.
The Group's deferred tax liabilities, excluding the pension asset at 31 March 2022, were GBP3.9 million (2021: GBP3.1 million) with the increase due largely to the change in the UK Corporation tax rate from 19% to 25% effective 1(st) April 2023.
Cash Flows
Net cash inflow from operating activities of GBP5.1 million was GBP1.4 million more than the prior year inflow of GBP3.7 million. The increase was principally due to a GBP2.2 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:
Year ended 31 March 2022 2021 Change
GBPm GBPm GBPm
-------------------------------------------- ------- -------- -------
Underlying profit before tax 2.3 0.1 2.2
Depreciation & amortisation 2.4 2.3 0.1
Net interest payable 0.8 0.9 (0.1)
-------------------------------------------- ------- -------- -------
Underlying EBITDA 5.5 3.3 2.2
Non-trading, cash items - (0.4) 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 5.1 3.7 1.4
Financing and investing activities
Capital expenditure (2.7) (1.5) (1.2)
Disposal of fixed assets 0.1 - 0.1
Net bank and lease liabilities interest
paid (0.8) (0.8) -
Bank and lease liability repayments (6.6) (1.3) (5.3)
Dividends paid (0.1) - (0.1)
Bank and lease liabilities draw down - 5.4 (5.4)
-------------------------------------------- ------- -------- -------
Net cash (outflow) / inflow from financing
and investing activities (10.1) 1.8 (11.9)
-------------------------------------------- ------- -------- -------
Net cash (outflow) / inflow (5.0) 5.5 (10.5)
Cash balance b/fwd. 14.6 9.1 5.5
-------------------------------------------- ------- -------- -------
Cash balance c/fwd. 9.6 14.6 (5.0)
-------------------------------------------- ------- -------- -------
Financing and Investing Activities
During the year, the Group invested GBP2.7 million of capital expenditure, comprising GBP1.2 million of investment property, GBP1.4 million on fixed asset property, plant and equipment and GBP0.1 million on computer software.
The GBP6.6 million of bank and lease liabilities repayments in the year included the GBP5.0 million CBILS loans repaid in June 2021. The GBP5.4 million of bank and lease liabilities drawn down in the prior year included GBP5.0 million CBILS drawn down in June 2020 and the funding of vehicles in Momart of GBP0.4 million.
Risk Management, 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 Comment Impact
----------------------------------- ----------------
The lockdown measures introduced The impact was immediate Moderate
by the UK Government to suppress and severe but activity (decreased
COVID-19 had an unprecedented is reviving since the cessation from very
impact on the fundamental of lockdown measures. high) and
conditions of supply and demand continuing
in the Group's UK businesses. The economic costs were to decrease
mitigated in both businesses
by the use of the UK Government's
furlough grant scheme.
----------------------------------- ----------------
At Momart, demand from the Activity is increasing Moderate
company's museum and gallery following the cessation (decreased
clients fell away as the prohibition of lockdown measures. from very
on public gatherings effectively high) - and
closed client operations completely, continuing
with the consequent cessation to decrease
of Momart's art handling activities.
----------------------------------- ----------------
Revised staff safety protocols Safe working practices Low - decreased
and the need to use PPE for were reviewed and updated as lockdown
staff slowed down installations in great detail with reference restrictions
at Momart and increased the to UK Government guidance removed.
cost of operations. The impact and in consultation with
on FIC and PHFC was minimal. staff.
Wherever possible, the
additional costs of operating
have been passed on to
clients. (All competitors
face a similar challenge).
----------------------------------- ----------------
At PHFC, the initial lockdown Passenger numbers increased Moderate
in 2020 saw ferry customers as lock down measures were - decreased
cease their normal daily travel relaxed during the year.
to work and leisure activities, Government guidance to
causing a 90% fall in ferry work from home, issued
traffic. in December 2021, resulted
in a dip in numbers, but
recovery continued once
this was lifted at the
end of January 2022.
----------------------------------- ----------------
Longer term changes in customer Leisure traffic has recovered Low - unchanged
behaviour may result from more quickly than commuter
the pandemic: an increased traffic, where a significant
reluctance to use public transport number of people are working
and more hybrid/working from from home for at least
home. part of their working week.
Current high costs of vehicle
fuel may push people towards
using public transport.
----------------------------------- ----------------
Despite a successful vaccination Restrictions on tourists Low - decreased
programme, the Falkland Islands visiting were lifted in
remained closed to overseas May 2022, which should
visitors in the year, which facilitate their return.
removed an important source
of income for the economy.
----------------------------------- ----------------
POLITICAL RISKS
Risk Comment Potential
Impact
------------------------------------- -------------------
Historically, Argentina has Relations between the UK Low - unchanged
maintained a claim to the and Argentina have become
Falkland Islands, and this more strained in recent years.
dispute has never been officially However, the security afforded
resolved. 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.
------------------------------------- -------------------
Uncertainty caused by the To date, there has been Low - unchanged
UK's decision to leave the little direct impact on the
European Union. 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.
------------------------------------- -------------------
ECONOMIC CONDITIONS
------------------------------------- -------------------
Risk Comment Potential
Impact
------------------------------------- -------------------
Although the impact of COVID-19 The trading performance High but
was unprecedented, it has of both the Group's UK companies steadily reducing
been matched by equally unprecedented has been severely affected impact on
government interventions on by the effects of COVID-19 UK operations
a global scale which has sustained but UK Government economic
economic confidence and activity. 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.
------------------------------------- -------------------
International travel continued Despite this, FIC continued Low - reduced
to be badly affected by COVID-19. 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.
------------------------------------- -------------------
Economic activity in the Oil-related activity in Low - unchanged
Falkland Islands has been recent years has been minimal
subject to fluctuation, dependent and the success of the Falkland
upon oil sector activity. Islands' economy is not predicated
on the development of oil
reserves.
------------------------------------- -------------------
Budgets available to museums Activity is increasing following Moderate
for exhibitions can fluctuate the cessation of lockdown - unchanged
with government spending and measures. Impact has been but reducing
the commercial art market mitigated by a reduction as public
exhibits cyclicality; both in Momart's cost base and confidence
have a direct impact on Momart. careful cost control as activity returns.
Both these effects have been returns.
exacerbated by COVID-19 .
------------------------------------- -------------------
Inflationary pressures across Continued focus on cost High - new
all Group businesses impact efficiency as activity returns
the cost of wages, services to pre-pandemic levels. Customer
and products. 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.
------------------------------------- -------------------
CREDIT RISK
Risk Comment Potential
Impact
----------------------------------- ----------------
Credit risk is the risk of Effective processes are Low - unchanged
financial loss if a customer in place to monitor and recover
fails to meet its contractual amounts due from customers.
obligations. Even with COVID-19, bad debt
experience has been minimal.
----------------------------------- ----------------
COMPETITION
----------------------------------- ----------------
Risk Comment Potential
Impact
----------------------------------- ----------------
FIC is considered by the Local competition is healthy Low - unchanged
senior management to be a for FIC and stimulates continuing
market leader in a number business improvement in FIC
of business activities, but
faces competition from local
entrepreneurs in many of the
sectors in which it operates. Largely unchanged. Moderate
- unchanged
Momart sits in a highly competitive
market, with both UK and International
competitors investing for
growth.
----------------------------------- ----------------
Large capital infrastructure FIC has been successful Moderate
investment projects may entice in winning work against overseas - new risk.
larger overseas businesses competitors and has built
to look at the opportunities up strong links with FIG
available and reduce the ability and MOD.
of FIC to undertake the work.
Being located in the Falkland
Islands gives FIC a competitive
advantage against overseas
companies.
----------------------------------- ----------------
FOREIGN CURRENCY AND INTEREST
RATE RISK
----------------------------------- ----------------
Risk Comment Potential
Impact
----------------------------------- ----------------
Momart is exposed to foreign Forward exchange contracts Low -
currency risk arising from are used to mitigate this unchanged
trading and other payables risk, with the exchange rate
denominated in foreign currencies. 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
FIC retail outlets accept use of interest rate swaps.
foreign currency and are exposed
to fluctuations in the value
of the dollar and euro.
----------------------------------- ----------------
INVENTORY
----------------------------------- ----------------
Risk Comment Potential
Impact
----------------------------------- ----------------
Inventory risk relates to Reviews of old and slow-moving Moderate-
losses on realising the carrying stock in Stanley are regularly unchanged
value on ultimate sale. Losses undertaken by senior management
include obsolescence, shrinkage and appropriate action taken.
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 Comment Potential
Impact
-------------------------------------- ------------------
Loss of one or more key members None of the Group's businesses Low - unchanged
of the senior management team is reliant on the skills
or failure to attract and of any one person. The wide
retain experienced and skilled spread of the Group's operations
people at all levels across further dilutes the risk.
the business could have an
adverse impact on the business.
-------------------------------------- ------------------
FIC has a reliance on being The development of tourism Low - unchanged
able to attract staff from on St Helena has been slow
overseas including many from and the Falkland Islands
St Helena. Development of remain an attractive location
those locations might reduce for St Helenian people to
the pool of available staff. work.
-------------------------------------- ------------------
FIC has a reliance on being Immigration procedures in Moderate
able to attract staff from the Falkland Islands are - unchanged
overseas generally. bureaucratic and slow, although
FIG is aware and seeking
to streamline the process.
-------------------------------------- ------------------
All Group companies are experiencing This has driven wages costs Moderate
a shortage of skilled employees up and constrained the growth - new
as the businesses grow and of the businesses.
recover from the pandemic.
In the UK, Momart has suffered
from shortages in drivers
and art technicians.
-------------------------------------- ------------------
LAWS AND REGULATION
-------------------------------------- ------------------
Risk Comment Potential
Impact
-------------------------------------- ------------------
Failure to comply with the The regulatory environment Low - unchanged
frequently changing regulatory continues to become increasingly
environment could result in complex.
reputational damage or financial
penalty. 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.
-------------------------------------- ------------------
GENERAL HEALTH AND SAFETY Health & Safety ("HSE")
matters are considered a Low - unchanged
The Group is required to key priority for the Board
comply with laws and regulation of FIH and all its operating
governing occupational health companies. Particular attention
and safety matters. Furthermore, has been paid to updating
accidents could happen which risk assessments and safe
might result in injury to working practices in the
an individual, claims against light of COVID-19.
the Group and damage to our
reputation. 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
-------------------------------------- ------------------
Stuart Munro
Chief Executive
5 July 2022
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.
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.
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.
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 up prior to him ceasing to be a director on 14 April 2021.
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.
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
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 suf cient 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 rm 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: GBPnil).
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 signi cance to the business. Risks are identi ed and monitored through risk registers at the Group level and discussed at each Board meeting to consider new threats.
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
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 GBP947,000 (2021: GBP9,000). 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.
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 GBP29,000 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 3,596,553 28.73
----------------- ---------------------
Quaero Capital Funds (Lux) - Argonaut 1,057,158 8.44
----------------- ---------------------
Martin Janser 897,324 7.17
----------------- ---------------------
J.F.C. Watts 797,214 6.37
----------------- ---------------------
Bonafide Investment Fund - Opportunities
I 680,001 5.43
----------------- ---------------------
Christian Struck 380,000 3.04
----------------- ---------------------
Charitable and Political Donations
Charitable donations made by the Group during the year amounted to GBP16,214 (2021: GBP7,654), 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.
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 40(th) 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.
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 cafes 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.
* 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.
PHFC
* Installation of new exhaust cleaners on the vessels
reducing NOx and Co2 emissions.
* 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.
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.
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:
Health Compensation 2022 2021
Salary / insurance payment Bonus Total Total
Fees GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
GBP'000
John Foster 222 1 259 40 522 197
Stuart Munro* 202 1 - 68 271 -
Robin Williams 60 - - - 60 51
Jeremy Brade 30 - - - 30 26
Robert Johnston 30 - - - 30 26
Dominic Lavelle 30 - - - 30 26
Total 574 2 259 108 943 326
=========== =========== ============= ========== ========= =========
* 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.
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:
Ordinary shares as at Ordinary shares
31 March 2022 as at
31 March 2021
Robin Williams 5,625 5,625
---------------------- ----------------
Stuart Munro 4,400 -
---------------------- ----------------
John Foster 118,542 113,627
---------------------- ----------------
Jeremy Brade 15,022 15,022
---------------------- ----------------
Robert Johnston* *3,654,053 *3,647,853
---------------------- ----------------
Dominic Lavelle 2,000 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
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.
Consolidated Income Statement
FOR THE YEARED 31 MARCH 2022
Notes Non-trading Non-trading
Items Items
(Note (Note
Underlying 5) Total Underlying 5) Total
2022 2022 2022 2021 2021 2021
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- ------------ ------------- ------------ -------------
4 Revenue 40,319 - 40,319 32,578 - 32,578
Cost of sales (23,405) - (23,405) (19,437) - (19,437)
Gross profit 16,914 - 16,914 13,141 - 13,141
6 Operating expenses (13,834) (300) (14,134) (12,115) 57 (12,058)
Operating profit /
(loss) 3,080 (300) 2,780 1,026 57 1,083
8 Finance expense (796) - (796) (881) - (881)
Profit / (loss) before
tax 2,284 (300) 1,984 145 57 202
9 Taxation (1,094) 57 (1,037) (147) (46) (193)
Profit / (loss) for
the
year
attributable to equity
holders of the company 1,190 (243) 947 (2) 11 9
----------------------- ------------ ------------- ---------- ------------ ------------- ----------
10 Earnings per share
Basic 9.5p 7.6p 0.0p 0.1p
Diluted 9.5p 7.6p 0.0p 0.1p
---------- ----------
The accompanying notes form part of these Financial Statements.
Consolidated Statement of Comprehensive Income
FOR THE YEARED 31 MARCH 2022
2022 2021
GBP'000 GBP'000
---------------------------------------------------- -------- --------
Profit for the year 947 9
Cash flow hedges: effective portion of changes
in fair value 878 303
Deferred tax on share options and other financial
17 liabilities 58 30
Deferred tax on effective portion of changes in
17 fair value (205) (58)
---------------------------------------------------- -------- --------
Items that are or may be reclassified subsequently
to profit or loss 731 275
--------------------------------------------------------- -------- --------
Re-measurement of the FIC defined benefit pension
23 scheme 237 (272)
Movement on deferred tax asset relating to the
17 pension scheme (62) 71
---------------------------------------------------- -------- --------
Items which will not ultimately be recycled to
the income statement 175 (201)
--------------------------------------------------------- -------- --------
Total other comprehensive income 906 74
Total comprehensive income 1,853 83
--------------------------------------------------------- -------- --------
The accompanying notes form part of these Financial Statements.
Consolidated Balance Sheet
AT 31 MARCH 2022
2022 2021
Notes GBP'000 GBP'000
-------------------------------------- --------- ---------
Non-current assets
11 Intangible assets 4,229 4,183
12 Property, plant and equipment 39,0 80 40,361
13 Investment properties 8,164 7,123
15 Investment in Joint venture 259 259
19 Debtors due in more than one year 44 88
16 Hire purchase lease receivables 725 590
17 Deferred tax assets 666 739
Derivative financial instruments 644 -
Total non-current assets 53,811 53,343
Current assets
18 Inventories 6,740 5,871
19 Trade and other receivables 7,947 5,868
16 Hire purchase lease receivables 511 558
20 Cash and cash equivalents 9,572 14,556
Total current assets 24,770 26,853
TOTAL ASSETS 78,581 80,196
Current liabilities
22 Trade and other payables (9,970) (6,775)
21 Interest-bearing loans and borrowings (1,536) (3,424)
Corporation tax payable (229) (113)
Total current liabilities (11,735) (10,312)
Non-current liabilities
21 Interest-bearing loans and borrowings (19,713) (24,799)
Derivative financial instruments - (234)
23 Employee benefits (2,562) (2,842)
17 Deferred tax liabilities (3,914) (3,113)
Total non-current liabilities (26,189) (30,988)
TOTAL LIABILITIES (37,924) (41,300)
Net assets 40,657 38,896
-------------------------------------- --------- ---------
25 Capital and reserves
Equity share capital 1,251 1,251
Share premium account 17,590 17,590
Other reserves 703 703
Retained earnings 20,672 19,584
Hedging reserve 441 (232)
Total equity 40,657 38,896
-------------------------------------- --------- ---------
These financial statements, of which the accompanying notes form part, were a pproved by the Board of directors on 5 July 2022 and were signed on its behalf by:
S I Munro
Director
Company Balance Sheet
AT 31 MARCH 2022
2022 2021
Notes GBP'000 GBP'000
------------------------------------------ --------- -----------
Non-current assets
13 Investment properties 18,956 19,164
14 Investment in subsidiaries 23,995 23,970
19 Loans to subsidiaries 10,057 10,207
17 Deferred tax - 44
Derivative financial instruments 644 -
Total non-current assets 53,652 53,385
Current assets
19 Trade and other receivables 45 118
Corporation tax receivable 84 54
20 Cash and cash equivalents 4,376 5,462
Total current assets 4,505 5,634
TOTAL ASSETS 58,157 59,019
Current liabilities
22 Trade and other payables (5,849) (6,391)
21 Interest-bearing loans and borrowings (529) (520)
Total current liabilities (6,378) (6,911)
Non-current liabilities
21 Interest-bearing loans and borrowings (12,139) (12,668)
Derivative financial instruments - (234)
17 Deferred tax (146) -
Total non-current liabilities (12,285) (12,902)
------------------------------------------ --------- -----------
TOTAL LIABILITIES (18,663) (19,813)
------------------------------------------ --------- -----------
Net assets 39,494 39,206
------------------------------------------ --------- -----------
25 Capital and reserves
Equity share capital 1,251 1,251
Share premium account 17,590 17,590
Other reserves 5,389 5,389
Retained earnings 14,823 15,208
Hedging reserve 441 (232)
Total equity 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 GBP293,000 (2021: Profit GBP500,000).
These financial statements, of which the accompanying notes form part, were a pproved by the Board of directors on 5 July 2022 and were signed on its behalf by:
S I Munro
Director
Registered company number: 03416346
Consolidated Cash Flow Statement
FOR THE YEARED 31 MARCH 2022
2022 2021
GBP'000 GBP'000
-------------------------------------------- -------- --------
Note Cash flows from operating activities
Profit for the year after taxation 947 9
Adjusted for:
(i) Non-cash items:
11 Amortisation 21 63
12 Depreciation: Property, plant and equipment 2,216 2,193
13 Depreciation: Investment properties 197 37
(Gain) / Loss on disposal of fixed
assets (9) 53
23 Interest cost on pension scheme liabilities 56 64
Equity-settled share-based payment
24 expenses 45 1
-------------------------------------------- -------- --------
Non-cash items adjustment 2,526 2,411
(ii) Other items:
Exchange losses 13 3
Bank interest payable 436 469
Lease liability finance expense 304 348
Increase in hire purchase leases receivable (88) (33)
Corporation and deferred tax expense 1,037 193
-------------------------------------------- -------- --------
Other adjustments 1,702 980
Operating cash flow before changes
in working capital 5,175 3,400
(Increase) / decrease in trade and
other receivables (2,035) 2,828
Increase in inventories (869) (497)
Increase / (decrease) in trade and
other payables 3,195 (1,836)
-------------------------------------------- -------- --------
Changes in working capital 291 495
Cash generated from operations 5,466 3,895
Payments to pensioners (99) (98)
Corporation taxes paid (256) (64)
-------------------------------------------- -------- --------
Net cash flow from operating activities 5,111 3,733
Cash flows from investing activities
Purchase of property, plant and equipment (1,333) (898)
Purchase of Intangibles (67) -
Purchase of investment properties (1,238) (702)
Proceeds from sale of property, plant
and equipment 76 -
-------------------------------------------- -------- --------
Net cash flow from investing activities (2,562) (1,600)
Cash flow from financing activities
Bank loan drawn down - 5,000
Repayment of bank loans (5,927) (624)
Bank interest paid (436) (469)
Hire purchase loan drawn down - 389
Repayment of lease liabilities principal (716) (649)
Lease liabilities interest paid (304) (348)
Cash inflow on option exercises - 19
Cash outflow on nil cost option exercise (12) -
Dividends paid (125) -
-------------------------------------------- -------- --------
Net cash flow from financing activities (7,520) 3,318
-------------------------------------------- -------- --------
Net (decrease) / increase in cash
and cash equivalents (4,971) 5,451
Cash and cash equivalents at start
of year 14,556 9,108
Exchange losses on cash balances (13) (3)
-------------------------------------------- -------- --------
Cash and cash equivalents at end of
year 9,572 14,556
-------------------------------------------- -------- --------
The accompanying notes form part of these Financial Statements.
Company Cash Flow Statement
FOR THE YEARED 31 MARCH 2022
2022 2021
GBP'000 GBP'000
---------------------------------------------- -------- --------
Notes Cash flows from operating activities
Holding Company (loss) / profit for the
year (293) 500
Adjusted for:
Bank interest payable 387 395
Equity-settled share-based payment expenses 20 2
13 Depreciation : Investment properties 208 209
Corporation and deferred tax (income) /
expense (31) 8
---------------------------------------------- -------- --------
Non-cash and other items adjustment 584 614
Operating cash flow before changes in working
capital 291 1,114
Decrease / (increase) in trade and other
receivables 73 (88)
Increase / (decrease) in trade and other
payables 333 (292)
---------------------------------------------- -------- --------
Changes in working capital and provisions 406 (380)
Cash generated from operations 697 734
Corporation taxes paid (14) (64)
---------------------------------------------- -------- --------
Net cash flow from operating activities 683 670
Cash flow from investing activities
Cash outflows in inter-company borrowing (150) -
Cash inflows in inter-company borrowing 850 -
---------------------------------------------- -------- --------
Net cash flow from investing activities 700 -
Cash flow from financing activities
Bank loan repaid (520) (262)
Interest paid (387) (381)
Cash outflows in inter-company borrowing (1,875) (2,569)
Cash inflows in inter-company borrowing 450 2,219
Cash inflow on option exercise - 19
Cash outflow on nil cost option exercise (12) -
Dividends paid (125) -
Net cash flow from financing activities (2,469) (974)
Net decrease in cash and cash equivalents (1,086) (304)
Cash and cash equivalents at start of year 5,462 5,766
Cash and cash equivalents at end of year 4,376 5,462
---------------------------------------------- -------- --------
The accompanying notes form part of these Financial Statements.
Consolidated Statement of Changes in Shareholders' Equity
FOR THE YEARED 31 MARCH 2022
Equity Share
share premium Other Retained Hedge Total
capital account reserves earnings reserve equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance 1 April 2020 1,250 17,590 703 19,784 (535) 38,792
Profit for the year - - - 9 - 9
Cash flow hedges: effective
portion - - - - 303 303
of changes in fair value
Deferred tax on cash
flow hedges - - - (58) - (58)
Deferred tax on other
financial - - - 30 - 30
liabilities
Re-measurement of the
defined - - - (201) - (201)
benefit pension liability,
net of tax
--------------------------------- --------- --------- ---------- ---------- --------- ---------
Total comprehensive loss - - - (220) 303 83
--------------------------------- --------- --------- ---------- ---------- --------- ---------
Transactions with owners in their
capacity as owners:
Share option exercise 1 - - 19 - 20
Share based payments - - - 1 - 1
Dividends paid - - - - - -
Total transactions with
owners 1 - - 20 - 21
--------------------------------- --------- --------- ---------- ---------- --------- ---------
Balance at 31 March
2021 1,251 17,590 703 19,584 (232) 38,896
--------------------------------- --------- --------- ---------- ---------- --------- ---------
Profit for the year - - - 947 - 947
Cash flow hedges: effective
portion - - - - 878 878
of changes in fair value
Deferred tax on cash
flow hedges - - - - (205) (205)
Deferred tax on share
options - - - 58 - 58
and other financial liabilities
Re-measurement of the
defined - - - 175 - 175
benefit pension liability,
net of tax
Total comprehensive income - - - 1,180 673 1,853
--------------------------------- --------- --------- ---------- ---------- --------- ---------
Transactions with owners
in their capacity as
owners:
Share option exercise - - - (12) - (12)
Share based payments - - - 45 - 45
Dividends paid - - - (125) - (125)
Total transactions with
owners - - - (92) - (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.
Company Statement of Changes in Shareholders'
Equity
FOR THE YEARED 31 MARCH
2022
Equity Share
share premium Other Retained Hedge Total
capital account reserves earnings Reserve equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 April 2020 1,250 17,590 5,389 14,765 (535) 38,459
Profit for the year - - - 500 - 500
Cash flow hedges: effective
portion - - - - 303 303
of changes in fair value
Deferred tax on cash
flow hedges - - - (58) - (58)
Total comprehensive loss - - - 442 303 745
----------------------------- --------- ----------- ---------- ---------- --------- --------------
Transactions with owners
in their capacity as
owners:
Share option exercise 1 - - - - 1
Share based payments - - - 1 - 1
Total transactions with
owners 1 - - 1 - 2
----------------------------- --------- ----------- ---------- ---------- --------- --------------
Balance at 31 March
2021 1,251 17,590 5,389 15,208 (232) 39,206
Loss for the year - - - (293) - (293)
Cash flow hedges: effective
portion - - - - 878 878
of changes in fair value
Deferred tax on cash
flow hedges - - - - (205) (205)
Total comprehensive income - - - (293) 673 380
----------------------------- --------- ----------- ---------- ---------- --------- --------------
Transactions with owners
in their capacity as
owners:
Share option exercise - - - (12) - (12)
Share based payments - - - 45 - 45
Dividends paid - - - (125) - (125)
Total transactions with
owners - - - (92) - (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.
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
T he financial information set out above does not constitute the Group's statutory accounts for the years ended 31 March 2022 or 2021 but is derived from those accounts. Statutory accounts for the year ended 31 March 2021 have been delivered to the registrar of companies, and those for the year ended 31 March 2022 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. These condensed preliminary financial statements have been prepared in accordance with the recognition and measurement requirements of UK-adopted international financial reporting standards in conformity with the requirements of the Companies Act 2006, in line with the Group's statutory accounts.
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 GBP1,700,000 and receipts of GBP1,600,000 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 GBP13.0 million, cash balances of GBP9.6 million and net debt of approximately GBP11.7 million.
1. Accounting policies (continued)
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.
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 GBP300,000 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 GBP443,000 of restructuring costs which were offset by GBP500,000 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.
1. Accounting policies (continued)
Property, plant and equipment
Property, plant and equipment are measured at cost less accumulated depreciation and impairment losses. Cost comprises purchase price and directly attributable expenses. Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. The estimated useful lives are as follows:
Right of use assets 5 - 50 years Freehold buildings 20 - 50 years Long leasehold land and buildings 50 years Vehicles, plant and equipment 4 - 10 years Ships 15 - 30 years
The carrying value of assets and their useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. If an indication of impairment exists, the assets are written down to their recoverable amount and the impairment is charged to the income statement in the period in which it arises. Freehold land and assets under construction are not depreciated.
Investment properties - Group
Investment properties are properties held either to earn rental income or for capital appreciation or for both. Investment properties are measured at cost less accumulated depreciation and impairment losses. Cost comprises purchase price and directly attributable expenses. Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of each property. The investment property portfolio in the Falkland Islands consists mainly of properties built by FIC, and these and the 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.
1. Accounting policies (continued)
Intangible assets
Goodwill
Goodwill arises on the acquisition of subsidiaries and businesses.
Acquisitions prior to 1 April 2006
In respect to acquisitions prior to transition to IFRS, goodwill is recorded on the basis of deemed cost, which represents the amount recorded under previous Generally Accepted Accounting Principles ("GAAP") as at the date of transition. 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.
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.
1. Accounting policies (continued)
Employee share awards
The Group provides benefits to certain employees (including directors) in the form of share-based payment transactions, whereby the recipient renders service in return for shares or rights over future shares ("equity settled transactions"). The cost of these equity settled transactions with employees is measured by reference to an estimate of their fair value at the date on which they were granted using an option input pricing model taking into account the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the actual number of share options for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of share options that meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with market performance vesting conditions, the grant date fair value of the share-based payments is measured to reflect such conditions and there is no true up for differences between expected and actual outcomes.
The cost of equity settled transactions is recognised, together with a corresponding increase in reserves, over the period in which the performance conditions are fulfilled, ending on the date that the option vests. Where the Company grants options over its own shares to the employees of subsidiaries, it recognises, in its individual financial statements, an increase in the cost of investment in its subsidiaries equal to the equity settled share-based payment charge recognised in its consolidated financial statements with the corresponding credit being recognised directly in equity.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost includes all costs incurred in bringing each product to its present location and condition. The cost of raw materials, consumables and goods for resale comprises purchase cost, on a weighted average basis and where applicable includes expenditure incurred in transportation to the Falkland Islands. Work-in-progress and finished goods cost includes direct materials and labour plus attributable overheads based on a normal level of activity. Construction-in-progress is stated at the lower of cost and net realisable value. Net realisable value is estimated at selling price in the ordinary course of business less costs of disposal.
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.
1. Accounting policies (continued)
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.
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.
1. Accounting policies (continued)
Revenue recognition
IFRS 15 Revenue, requires revenue to be recognised under a 'five-step' approach when a customer obtains control of goods or services in line with the performance obligations identified on the contract. Under IFRS 15, revenue recognition must reflect the standard's five-step approach which requires the following:
-- Identification of the contract with the customer; -- Identification of the performance obligations in the contract; -- Determination of the transaction price; -- Allocation of the transaction price to the performance obligations; -- Recognition of the revenue when (or as) each performance obligation is satisfied.
In accordance with the standard, revenue is recognised, net of discounts, VAT, Insurance Premium Tax and other sales related taxes, either at the point in time a performance obligation has been satisfied or over time as control of the asset associated with the performance obligation is transferred to the customer.
For all contracts identified, the Group determines if the arrangement with the customer creates enforceable rights and obligations. For contracts with multiple components to be delivered, such as the inbound and outbound leg of moving art exhibitions as well as delivering, handling and administration services, management applies judgement to consider whether those promised goods and services are:
-- distinct - to be accounted for as separate performance obligations;
-- not distinct - to be combined with other promised goods or services until a bundle is identified that is distinct; or
-- part of a series of distinct goods and services that are substantially the same and have the same pattern of transfer to the customer.
At contract inception the total transaction price is 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.
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.
1. Accounting policies (continued)
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 f or 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.
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.
1. Accounting policies (continued)
Revenues arising from the rendering of services and recognised immediately
The majority of revenues recognised immediately from the rendering of services arise from the ferry fare income, which is taken on a daily basis for daily tickets. Season tickets are available, however the revenue earned from these is negligible as most passengers purchase daily tickets. Quarterly and monthly season tickets are recognised over the life of the ticket with a balance held in deferred income.
Other revenues arising from the rendering of services and recognised immediately include:
-- Agency services provided to cruise or fishing vessels for supplying provisions, trips to and from the airport and medical evacuations;
-- Third party port services; -- Car maintenance revenue, which generally arises on short term jobs;
-- Penguin travel income earned from tourist tours and airport trips, which is recognised on the day of the tour or airport trip;
-- Third party freight revenue, which is recognised when the ship arrives in the Falkland Islands;
-- I nsurance 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 9(th) 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 GBP13,875,000 mortgage. This swap had an initial notional value of GBP13,875,000, 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 GBP125,000 per quarter over ten years until June 2029 when it will expire. The notional value of the swap at 31 March 2022 was GBP12,500,000 (2020: GBP13,000,000). The asset held in respect of this swap at the year-end was GBP644,000 (2021: liability GBP234,000). The movement in the year reflects anticipated interest rate rises over the remaining period of the swap.
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.
1. Accounting policies (continued)
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.
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.
1. Accounting policies (continued)
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.
2. Segmental Information Analysis (continued)
2022
General Ferry Art Logistics Unallocated Total
Trading Services and Storage
(Falkland
Islands) (Portsmouth) (UK)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 21,655 3,066 15,598 - 40,319
---------------------------------- ---------- ------------- -------------- ------------ ---------
Segment operating profit
before non-trading items 1,835 155 1,090 - 3,080
Non-trading items - - (41) (259) (300)
Profit / (loss) before
net financing costs 1,835 155 1,049 (259) 2,780
Finance expense (56) (276) (464) - (796)
---------------------------------- ---------- ------------- -------------- ------------ ---------
Segment profit / (loss)
before tax 1,779 (121) 585 (259) 1,984
---------------------------------- ---------- ------------- -------------- ------------ ---------
Assets and liabilities
Segment assets 31,401 9,840 32,275 5,065 78,581
Segment liabilities (9,582) (8,318) (19,045) (979) (37,924)
Segment net assets 21,819 1,522 13,230 4,086 40,657
---------------------------------- ---------- ------------- -------------- ------------ ---------
Other segment information
Capital expenditure:
Property, plant and
equipment 1,129 52 258 - 1,439
Investment properties 1,238 - - - 1,238
Computer software 67 - - - 67
---------------------------------- ---------- ------------- -------------- ------------ ---------
Total Capital expenditure 2,434 52 258 - 2,744
---------------------------------- ---------- ------------- -------------- ------------ ---------
Capital expenditure:
cash 2,434 52 152 - 2,638
Capital expenditure:
non-cash - - 106 - 106
---------------------------------- ---------- ------------- -------------- ------------ ---------
Total Capital expenditure 2,434 52 258 - 2,744
---------------------------------- ---------- ------------- -------------- ------------ ---------
Depreciation and amortisation:
Property, plant and
equipment 834 316 423 - 1,573
Investment properties 197 - - - 197
Computer software - - 21 - 21
Right of use assets 8 130 505 - 643
Total Depreciation and
Amortisation 1,039 446 949 - 2,434
---------------------------------- ---------- ------------- -------------- ------------ ---------
Underlying profit /
(loss)
Segment operating profit
before non-trading items 1,835 155 1,090 - 3,080
Interest expense (56) (276) (464) - (796)
Underlying profit /
(loss) before tax 1,779 (121) 626 - 2,284
---------- ------------- -------------- ------------
2. Segmental Information Analysis (continued)
2021
General Ferry Art Logistics Unallocated Total
Trading Services and Storage
(Falkland
Islands) (Portsmouth) (UK)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 20,874 1,445 10,259 - 32,578
---------------------------------- ---------- ------------- -------------- ------------ ---------
Segment operating profit
/ (loss) before non-trading
items 1,852 (856) 30 - 1,026
Non-trading items 500 (140) (221) (82) 57
Profit / (loss) before
net financing costs 2,352 (996) (191) (82) 1,083
Finance expense (68) (329) (484) - (881)
---------------------------------- ---------- ------------- -------------- ------------ ---------
Segment profit / (loss)
before tax 2,284 (1,325) (675) (82) 202
---------------------------------- ---------- ------------- -------------- ------------ ---------
Assets and liabilities
Segment assets 29,498 11,411 33,648 5,639 80,196
Segment liabilities (8,687) (10,266) (22,062) (285) (41,300)
Segment net assets 20,811 1,145 11,586 5,354 38,896
---------------------------------- ---------- ------------- -------------- ------------ ---------
Other segment information
Capital expenditure:
Property, plant and
equipment 358 - 540 - 898
Investment properties 702 - - - 702
Computer software - - - - -
---------------------------------- ---------- ------------- -------------- ------------ ---------
Total Capital expenditure 1,060 - 540 - 1,600
---------------------------------- ---------- ------------- -------------- ------------ ---------
Capital expenditure:
cash 1,060 - 151 - 1,211
Capital expenditure:
non-cash - - 389 - 389
---------------------------------- ---------- ------------- -------------- ------------ ---------
Total Capital expenditure 1,060 - 540 - 1,600
---------------------------------- ---------- ------------- -------------- ------------ ---------
Depreciation and amortisation:
Property, plant and
equipment 787 327 461 - 1,575
Investment properties 37 - - - 37
Computer software - - 63 - 63
Right of use assets 29 124 465 - 618
---------------------------------- ---------- ------------- -------------- ------------ ---------
Total Depreciation and
Amortisation 853 451 989 - 2,293
---------------------------------- ---------- ------------- -------------- ------------ ---------
Underlying profit /
(loss )
---------------------------------- ---------- ------------- -------------- ------------ ---------
Segment operating profit
/ (loss) before non-trading
items 1,852 (856) 30 - 1,026
Interest expense (68) (329) (484) - (881)
Underlying profit /
(loss) before tax 1,784 (1,185) (454) - 145
---------- ------------- -------------- ------------
2. Segmental Information Analysis (continued)
The GBP5,065,000 (2021: GBP5,639,000) unallocated assets above include GBP4,376,000 (2021: GBP5,462,000) of cash and GBP644,000 (2021: GBP177,000) of prepayments and GBP45,000 (2021: GBPnil) of trade and other receivables held in FIH group plc.
The GBP979,000 (2021: GBP285,000) 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
United Falkland
Kingdom Islands Total
GBP'000 GBP'000 GBP'000
Revenue (by source) 18,664 21,655 40,319
------------------------------------------------ --------- --------- --------
Assets and Liabilities:
Non-current segment assets, excluding deferred
tax 36,071 17,074 53,145
------------------------------------------------ --------- --------- --------
Capital expenditure: cash 204 2,434 2,638
------------------------------------------------ --------- --------- --------
2021
United Falkland
Kingdom Islands Total
GBP'000 GBP'000 GBP'000
Revenue (by source) 11,704 20,874 32,578
------------------------------------------------ --------- --------- --------
Assets and Liabilities:
Non-current segment assets, excluding deferred
tax 36,852 15,752 52,604
------------------------------------------------ --------- --------- --------
Capital expenditure: cash 151 1,060 1,211
------------------------------------------------ --------- --------- --------
4. Revenue
2022
Sale of
goods, Rendering of
recognised Rendering of services, provided
immediately services: recognised over a period Total
on sale immediately of time Revenue
GBP'000 GBP'000 GBP'000 GBP'000
Falkland Islands
Retail sales 9,666 - - 9,666
Automotive sales 2,034 372 364 2,770
Housebuilding and construction 1,499 - 4,298 5,797
Support Services - 1,677 868 2,545
Rental property income - - 877 877
-------------------------------- ------------- ---------------------- -------------------- -----------------
FIC (Falkland Islands) 13,199 2,049 6,407 21,655
PHFC (Portsmouth) - 3,066 - 3,066
Art logistics and storage - - 15,598 15,598
-------------------------------- ------------- ---------------------- -------------------- -----------------
Total Revenue 13,199 5,115 22,005 40,319
-------------------------------- ------------- ---------------------- -------------------- -----------------
2021
Sale of
goods, Rendering of
recognised Rendering of services, provided
immediately services: recognised over a period Total
on sale immediately of time Revenue
GBP'000 GBP'000 GBP'000 GBP'000
Falkland Islands
Retail sales 9,701 - - 9,701
Automotive sales 2,016 419 321 2,756
Housebuilding and construction 2,069 - 3,276 5,345
Support Services - 1,414 839 2,253
Rental property income - - 819 819
-------------------------------- ------------- ---------------------- -------------------- -----------------
FIC (Falkland Islands) 13,786 1,833 5,255 20,874
PHFC (Portsmouth) - 1,445 - 1,445
Art logistics and storage - - 10,259 10,259
-------------------------------- ------------- ---------------------- -------------------- -----------------
Total Revenue 13,786 3,278 15,514 32,578
-------------------------------- ------------- ---------------------- -------------------- -----------------
5. Non-trading items
2022 2021
GBP'000 GBP'000
Profit before tax as reported 1,984 202
Non-trading items:
Restructuring costs 300 443
Other credits - (500)
Underlying profit before tax 2,284 145
-------------------------------- -------- --------
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
2022 2021
GBP'000 GBP'000
Direct operating expenses of rental
properties 465 393
Depreciation 2,413 2,230
Amortisation of computer software 21 63
Foreign currency loss 13 3
Expected credit loss on trade and
other receivables 114 39
Cost of inventories recognised
as an expense 9,868 10,226
COVID-19 and other government funding (500) (1,760)
-------------------------------------------- -------- --------
Auditor's remuneration 2022 2021
GBP'000 GBP'000
Audit of these financial statements 66 41
Audit of subsidiaries' financial statements pursuant
to legislation 179 129
Tax advisory services - -
Other assurance services 5 5
------------------------------------------------------ -------- --------
Total auditor's remuneration 250 175
------------------------------------------------------ -------- --------
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.
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:
Number of employees Number of employees
Group Company
2022 2021 2022 2021
PHFC 27 31 - -
Falkland Islands: in Stanley 208 189 - -
in UK 6 7 - -
Art logistics & storage 102 99 - -
Head office 7 7 7 7
----------------------------------------------- --------- ----------- --------- -----------
Total average staff numbers 350 333 7 7
----------------------------------------------- --------- ----------- --------- -----------
The aggregate payroll cost of these persons was as follows:
Group Company
2022 2021 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000
Wages and salaries 12,472 11,752 769 471
Share-based payments (see note 24) 45 1 45 1
Social security costs 821 821 90 59
Contributions to defined contribution
plans (see note 23) 505 498 5 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 GBP210,000 for the year ended 31 March 2022 (2021: GBP1,760,000), 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'.
8. Finance expense
2022 2021
GBP'000 GBP'000
Interest payable on bank loans (436) (469)
Net interest cost on the FIC defined benefit pension
scheme liability (56) (64)
Lease liabilities finance charge (304) (348)
Total finance expense (796) (881)
-------------------------------------------------------- -------- --------
9. Taxation
Recognised in the income statement
2022 2021
GBP'000 GBP'000
Current tax expense / (credit)
Current year 397 (52)
Adjustments for prior years (25) -
--------------------------------------- -------- --------
Current tax expense / (credit) 372 (52)
Deferred tax expense
Origination and reversal of temporary
differences 92 258
Change in UK tax rate to 25% 523 (12)
Adjustments for prior years 50 (1)
Deferred tax expense (see note
17) 665 245
----------------------------------------- -------- --------
Total tax expense 1,037 193
----------------------------------------- -------- --------
Reconciliation of the effective tax rate
2022 2021
GBP'000 GBP'000
Profit on ordinary activities before tax 1,984 202
--------------------------------------------------- -------- --------
Tax using the UK corporation tax rate of
19% (2021: 19%) 377 39
Expenses not deductible for tax purposes 84 56
Additional capital allowances - super deduction (7) -
Effect of increase in rate of deferred
tax 523 -
Effect of higher tax rate overseas 35 99
Adjustments to tax charge in respect of
previous periods 25 (1)
Total tax expense 1,037 193
--------------------------------------------------- -------- --------
Tax recognised directly and other comprehensive income
2022 2021
GBP'000 GBP'000
Deferred tax on effective portion of changes
in fair value 205 58
Movement on deferred tax asset relating
to the pension scheme 62 (71)
Deferred tax on share options and other
financial liabilities (58) (30)
------------------------------------------------- --------------- --------- --------
Deferred tax expense / (credit) recognised directly
in other comprehensive income 209 (43)
------------------------------------------------------------------- --------- --------
In the UK, deferred tax has been calculated at 25% (2021: 19%).
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.
2022 2021
GBP'000 GBP'000
Profit on ordinary activities after taxation 947 9
---------------------------------------------- -------- --------
2022 2021
Number Number
Average number of shares in issue 12,518,567 12,470,827
Maximum dilution with regards to share options - 281,490
------------------------------------------------ ----------- -----------
Diluted weighted average number of shares 12,518,567 12,752,317
------------------------------------------------ ----------- -----------
2022 2021
Basic earnings per share 7.6p 0.1p
Diluted earnings per share 7.6p 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.
Earnings per share on underlying profit 2022 2021
GBP'000 GBP'000
Underlying profit before tax (see note 5) 2,284 145
Underlying taxation (1,094) (147)
--------------------------------------------------------- ----------- -----------
Underlying profit / (loss) after tax 1,190 (2)
Effective tax rate 47.9% -101.4%
Weighted average number of shares in issue (from above) 12,518,567 12,470,827
Diluted weighted average number of shares (from above) 12,518,567 12,752,317
Basic earnings per share on underlying profit 9.5p 0.0p
Diluted earnings per share on underlying profit 9.5p 0.0p
--------------------------------------------------------- ----------- -----------
11. Intangible assets
Computer Brand
Software name Goodwill Total
GBP'000 GBP'000 GBP'000 GBP'000
Cost :
At 1 Apr 2020 and 31 March
2021 564 2,823 11,576 14,963
Additions 67 - - 67
------------------------------- ---------- -------- --------- --------
At 31 March 2022 631 2,823 11,576 15,030
------------------------------- ---------- -------- --------- --------
Accumulated amortisation
and impairment:
At 1 Apr 2020 470 785 9,462 10,717
Amortisation 63 - - 63
At 31 March 2021 533 785 9,462 10,780
Amortisation 21 - - 21
At 31 March 2022 554 785 9,462 10,801
------------------------------- ---------- -------- --------- --------
Net book value:
At 1 April 2020 94 2,038 2,114 4,246
------------------------------- ---------- -------- --------- --------
At 31 March 2021 31 2,038 2,114 4,183
------------------------------- ---------- -------- --------- --------
At 31 March 2022 77 2,038 2,114 4,229
------------------------------- ---------- -------- --------- --------
Amortisation and impairment charges are recognised in operating expenses in the income statement. The Momart brand name has a carrying value of GBP2,038,000 and is considered to be of future economic value to the Group with an estimated indefinite useful economic life. It is reviewed annually for impairment as part of the art logistics and storage review.
Goodwill
Goodwill is allocated to the Group's Cash Generating Units (CGUs) which principally comprise its business segments. A segment level summary of goodwill for each cash-generating-unit is shown below:
Art Logistics Falkland
and Storage Islands Total
GBP'000 GBP'000 GBP'000
Goodwill at 1 April 2020 2,077 37 2,114
------------------------------- -------------- --------- --------
Goodwill at 31 March 2021 2,077 37 2,114
------------------------------- -------------- --------- --------
Goodwill at 31 March 2022 2,077 37 2,114
------------------------------- -------------- --------- --------
Impairment
The Group tests material goodwill annually for impairment or more frequently if there are indications that goodwill and/or indefinite life assets might be impaired. An impairment test is a comparison of the carrying value of the assets of a CGU, based on 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 GBP3.5 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.
11. Intangible assets (continued)
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 GBP24.7 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.
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.
12. Property, plant and equipment
Group
Right Freehold Long leasehold Vehicles,
of use Land & Land and plant and
assets buildings buildings Ships equipment Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost:
At 1 April 2020 10,415 27,698 2,711 6,877 10,111 57,812
Additions in
year 389 - 204 - 305 898
Disposals (28) (50) - - (830) (908)
At 31 March 2021 10,776 27,648 2,915 6,877 9,586 57,802
Additions in
year 106 109 53 3 1,168 1,439
Disposals (82) - (3) - (396) (481)
Additions (non-cash) 489 - - - - 489
Disposals (non-cash) (1,144) - - - - (1,144)
At 31 March
2022 10,145 27,757 2,965 6,880 10,358 58,105
------------------------- -------- ----------- --------------- -------- ----------- --------------
Accumulated depreciation:
At 1 April 2020 2,832 3,332 817 2,548 6,571 16,100
Charge for the
year 618 388 236 242 709 2,193
Disposals (22) - - - (830) (852)
------------------------- -------- ----------- --------------- -------- ----------- --------------
At 31 March 2021 3,428 3,720 1,053 2,790 6,450 17,441
Charge for the
year 643 371 160 243 799 2,216
Disposals (75) - (3) - (336) (414)
Disposals (non-cash) (218) - - - - (218)
------------------------- -------- ----------- --------------- -------- ----------- --------------
At 31 March
2022 3,778 4,091 1,210 3,033 6,913 19,025
------------------------- -------- ----------- --------------- -------- ----------- --------------
Net book value:
At 1 April 2020 7,583 24,366 1,894 4,329 3,540 41,712
------------------------- -------- ----------- --------------- -------- ----------- --------------
At 31 March 2021 7,348 23,928 1,862 4,087 3,136 40,361
------------------------- -------- ----------- --------------- -------- ----------- --------------
At 31 March
2022 6,367 23,666 1,755 3,847 3,445 39,080
------------------------- -------- ----------- --------------- -------- ----------- --------------
12. Property, plant and equipment (continued)
Right of use assets
Group
Long
Short leasehold
leasehold Pontoon Momart Office
lease lease Trucks Equipment Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost:
At 1 April 2020 3,136 6,233 1,028 18 10,415
Additions in year - - 389 - 389
Disposals - - (28) - (28)
------------- ------------- -------- ----------- -------------
At 31 March 2021 3,136 6,233 1,389 18 10,776
Additions in
year 105 - 1 - 106
Disposals - - (82) - (82)
Additions
(non-cash) - 489 - - 489
Disposals
(non-cash) - (1,144) - - (1,144)
At 31 March
2022 3,241 5,578 1,308 18 10,145
----------------- --------------- ------------- ------------- -------- ----------- -------------
Accumulated depreciation:
At 1 April 2020 1,366 1,191 269 6 2,832
Charge for the year 303 124 182 9 618
Disposals - - (22) - (22)
----------------------------- --- ------------- ------------- -------- ----------- -------------
At 31 March 2021 1,669 1,315 429 15 3,428
Charge for the
year 303 130 209 1 643
Disposals - - (75) - (75)
Disposals
(non-cash) - (218) - - (218)
----------------- ----------- ----------------- ------------- -------- ----------- -------------
At 31 March
2022 1,972 1,227 563 16 3,778
----------------- ----------- ----------------- ------------- -------- ----------- -------------
Net book value:
At 1 April 2020 1,770 5,042 759 12 7,583
----------------------------- --- ------------- ------------- -------- ----------- -------------
At 31 March 2021 1,467 4,918 960 3 7,348
----------------------------- --- ------------- ------------- -------- ----------- -------------
At 31 March 2022 1,269 4,351 745 2 6,367
----------------------------- --- ------------- ------------- -------- ----------- -------------
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 GBP389,000.
The Company has no tangible fixed assets, other than the investment property purchased in December 2018, which is included within Investment Property (note 13).
13. Investment properties
Group
Residential
and commercial Freehold
property land Total
GBP'000 GBP'000 GBP'000
Cost:
At 1 April 2020 6,675 782 7,457
Additions in year 653 49 702
---------------- --------- --------
At 31 March 2021 7,328 831 8,159
Additions in year 1,238 - 1,238
----------------------------- ---------------- --------- --------
At 31 March 2022 8,566 831 9,397
----------------------------- ---------------- --------- --------
Accumulated depreciation:
At 1 April 2020 999 - 999
Charge for the year 37 - 37
---------------- --------- --------
At 31 March 2021 1,036 - 1,036
Charge for the year 197 - 197
At 31 March 2022 1,233 - 1,233
----------------------------- ---------------- --------- --------
Net book value:
At 1 April 2020 5,676 782 6,458
----------------------------- ---------------- --------- --------
At 31 March 2021 6,292 831 7,123
----------------------------- ---------------- --------- --------
At 31 March 2022 7,333 831 8,164
----------------------------- ---------------- --------- --------
The investment properties, held at cost, comprise land, plus residential and commercial property held for rental in the Falkland Islands.
Estimated Fair Value
Group
2022 2021
GBP'000 GBP'000
Estimated fair value:
Freehold land 2,177 2,177
Properties available for rent 10,139 8,470
Properties under construction 173 472
At 31 March 12,489 11,119
-------------------------------------- -------- --------
Uplift on net book value:
Freehold land 1,346 1,346
Properties available for rent 2,979 2,650
Properties under construction - -
----------------------------------- -------- --------
At 31 March 4,325 3,996
-------------------------------------- -------- --------
Number of rental properties
Available for rent 83 75
Under construction 2 7
Undeveloped freehold land (acres) 700 700
-------------------------------------- -------- --------
13. Investment properties (continued)
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 GBP877,000 (2021: GBP819,000) 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 GBP173,000 (2021: GBP472,000).
Company Commercial
property
GBP'000
Cost:
At 1 April 2020, 31 March 2021 and
31 March 2022 19,642
Accumulated depreciation:
At 1 April 2020 269
Charge for the year 209
At 31 March 2021 478
Charge for the year 208
At 31 March 2022 686
Net book value:
At 1 April 2020 19,373
At 31 March 2021 19,164
At 31 March 2022 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.
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 Class of shares Ownership Ownership
of held at at
incorporation 31 March 31 March
2022 2021
The Falkland Islands Company Ordinary shares
Limited (1) UK of GBP1 100% 100%
Preference shares
of GBP10 100% 100%
The Falkland Islands Trading Ordinary shares
Company Limited (1) UK of GBP1 100% 100%
Falkland Islands Shipping Limited Falkland Ordinary shares
(2) (6) Islands of GBP1 100% 100%
Falkland Ordinary shares
Erebus Limited(2) (6) (7) Islands of GBP1 100% 100%
Preference shares
of GBP1 100% 100%
South Atlantic Support Services Falkland Ordinary shares
Limited(3) (6) (7) Islands of GBP1 100% 100%
Falkland Ordinary shares
Paget Limited(2) (6) (7) Islands of GBP1 100% 100%
The Portsmouth Harbour Ferry Ordinary shares
Company Limited(4) UK of GBP1 100% 100%
Portsea Harbour Company Limited(4) Ordinary shares
(6) UK of GBP1 100% 100%
Clarence Marine Engineering Ordinary shares
Limited(4) (6) UK of GBP1 100% 100%
Ordinary shares
Gosport Ferry Limited(4) (6) UK of GBP1 100% 100%
Portsmouth Harbour Waterbus Ordinary shares
Company Limited(4) (6) (7) UK of GBP1 100% 100%
Momart International Limited(5) Ordinary shares
(7) UK of GBP1 100% 100%
Ordinary shares
Momart Limited(5) (6) UK of GBP1 100% 100%
Ordinary shares
Dadart Limited(5) (6) (7) UK of GBP1 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, 6(th) 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.
14. Investment in subsidiaries (continued)
Company
2022 2021
GBP'000 GBP'000
At 1 April 23,970 23,989
Share based payments charge capitalised
into subsidiaries 25 (19)
At 31 March 23,995 23,970
--------
The directors note that the net assets of the Company balance sheet of GBP39.5 million exceed the market capitalisation of the Group which was circa GBP29.4 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.
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 GBP50,000 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 2022 2021
GBP'000 GBP'000
Current assets 519 519
Liabilities due in less than one year (1) (1)
Net assets of SAtCO 518 518
Group share of net assets 259 259
There were no recognised gains or losses for the years ended 31 March 2022 (2021: none).
The current assets balances above include GBP16,000 of cash (2021: GBP17,000), GBP5,000 of other debtors (2021: GBP5,000) and GBP498,000 (2021: GBP498,000) 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.
16. Leases receivable (continued)
Group
2022 2021
GBP'000 GBP'000
Lease debtors due after more
Non-Current: than one year 725 590
Lease debtors due within one
Current: year 511 558
Total lease
debtors 1,236 1,148
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 GBP310,000 (2021: GBP147,000). The cost of assets acquired for the purpose of renting out under hire purchase agreements by the Group during the year amounted to GBP960,000 (2021: GBP825,000).
The total cash received during the year in respect of hire purchase agreements was GBP 985,000 (2021: GBP1,163,000).
Group
2022 2021
GBP'000 GBP'000
Gross investment in hire purchase leases 1,571 1,319
Unearned lease income (310) (147)
Bad debt provision against hire purchase
leases (25) (24)
Present value of future lease receipts 1,236 1,148
Present value of future lease payments due:
Within one year 511 558
Within two to five years 725 590
Present value of future lease receipts 1,236 1,148
17. Deferred tax assets and liabilities
Recognised deferred tax assets and (liabilities) Group
2022 2021
GBP'000 GBP'000
Property, plant & equipment (3,537) (2,938)
Intangible assets (509) (387)
Inventories (unrealised intragroup profits) 81 62
Other financial liabilities 104 66
Derivative financial instruments (161) 44
Share-based payments 108 40
Total net deferred tax liabilities (3,914) (3,113)
Deferred tax asset arising on the defined
benefit pension liabilities 666 739
Net tax liabilities (3,248) (2,374)
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.
17. Deferred tax assets and liabilities (continued)
Company
2022 2021
GBP'000 GBP'000
Other temporary differences (146) 44
Net tax (liability) / asset (146) 44
Movement in deferred tax assets
/ (liabilities) in the year:
Group
1 April Recognised Recognised 31 March
2021 in income in equity 2022
GBP'000 GBP'000 GBP'000 GBP'000
Property, plant & equipment (2,938) (599) - (3,537)
Intangible assets (387) (122) - (509)
Inventories (unrealised intragroup
profits) 62 19 - 81
Other financial liabilities 66 31 7 104
Derivative financial instruments 44 - (205) (161)
Share-based payments 40 17 51 108
Pension 739 (11) (62) 666
Deferred tax movements (2,374) (665) (209) (3,248)
Unrecognised deferred tax assets
Deferred tax assets of GBP44,000 (2021: GBP44,000) 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: Company
1 April Recognised Recognised 31 March
2021 in income in equity 2022
GBP'000 GBP'000 GBP'000 GBP'000
Derivative financial liabilities
instruments 44 - (205) (161)
Other temporary differences - 15 - 15
Deferred tax asset movements 44 15 (205) (146)
Movement in deferred tax assets / (liabilities)
in the prior year:
Group
Recognised Recognised 31 March
1 April 2020 in income in equity 2021
GBP'000 GBP'000 GBP'000 GBP'000
Property, plant & equipment (2,713) (225) - (2,938)
Intangible assets (387) - - (387)
Inventories 32 30 - 62
Other financial liabilities 48 (12) 30 66
Derivative financial instruments 102 - (58) 44
Share-based payments 41 (1) - 40
Tax losses 28 (28) - -
Pension 677 (9) 71 739
Deferred tax movements (2,172) (245) 43 (2,374)
17. Deferred tax assets and liabilities (continued)
Movement in deferred tax asset in
the prior year: Company
1 April Recognised Recognised 31 March
2020 in income in equity 2021
GBP'000 GBP'000 GBP'000 GBP'000
Derivative financial instruments 102 -- (58) 44
Other temporary differences 19 (19) - -
Deferred tax asset movements 121 (19) (58) 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
Group
2022 2021
GBP'000 GBP'000
Work in progress 1,033 691
Goods in transit 284 972
Goods held for resale 5,423 4,208
Total Inventories 6,740 5,871
Goods in transit are retail goods in transit to the Falkland Islands.
The Company has no inventories.
19. Trade and other receivables
Group Company
2022 2021 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000
Non-Current
Rental deposits 44 88 - -
Amount owed by subsidiary undertakings - - 10,057 10,207
Total trade and other receivables 44 88 10,057 10,207
Group Company
2022 2021 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000
Current
Trade and other receivables 5,362 3,472 - -
Rental deposits 88 - - -
Prepayments 1,515 1,087 45 118
Accrued income 982 1,309 - -
Total trade and other receivables 7,947 5,868 45 118
Amounts owed by subsidiary undertakings to the Company are interest free with no fixed repayment date.
19. Trade and other receivables (continued)
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
Group Company
2022 2021 2022 2020
GBP'000 GBP'000 GBP'000 GBP'000
Cash and other cash equivalents
in the balance sheet 9,572 14,556 4,376 5,462
Group Company
Year ended 31 March 2022 2021 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000
Net (decrease) / increase in cash
and cash equivalents (4,971) 5,451 (1,086) (304)
Exchange losses (13) (3) - -
-----
Net (decrease) / increase in cash
and cash equivalents after exchange
gains (4,984) 5,448 (1,086) (304)
-----
Bank loan draw downs - (5,000) - -
Bank loan repayments 5,927 624 520 262
Lease modifications: non-cash 331 - - -
Lease liabilities drawdown: cash - (389) - -
Lease liabilities repayments 716 649 - -
Decrease / (increase) in interesting
bearing loans and borrowings 6,974 (4,116) 520 262
Net decrease / (increase) in debt 1,990 1,332 (566) (42)
Net debt brought forward (13,667) (14,999) (7,726) (7,684)
Net debt at 31 March (11,677) (13,667) (8,292) (7,726)
Net debt
Group Company
2022 2021 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000
Cash balances 9,572 14,556 4,376 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.
Group Company
2022 2021 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000
Non-current liabilities
Secured bank loans 13,235 17,313 12,139 12,668
Lease liabilities 6,478 7,486 - -
Total non-current interest-bearing loans
and lease liabilities 19,713 24,799 12,139 12,668
Current liabilities
Secured bank loans 948 2,797 529 520
Lease liabilities 588 627 - -
Total current interest-bearing loans
and lease liabilities 1,536 3,424 529 520
Total liabilities
Secured bank loans 14,183 20,110 12,668 13,188
Lease liabilities 7,066 8,113 - -
Total interest-bearing loans and lease
liabilities 21,249 28,223 12,668 13,188
Lease liabilities
Future minimum lease Interest Present value
payments of minimum lease
payments
2022 2021 2022 2021 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Less than one year 874 955 287 337 588 618
Between one and two
years 709 853 269 317 439 536
Between two and five
years 1,616 1,952 733 869 883 1,083
More than five years 10,094 11,727 4,938 5,851 5,156 5,876
Total 13,293 15,487 6,227 7,374 7,066 8,113
22. Trade and other payables
Group Company
2022 2021 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000
Current
Trade payables 4,111 3,025 29 -
Contract liability 254 - - -
Amounts owed to subsidiary undertakings - - 5,085 5,960
Loan from joint venture 249 249 - -
Other creditors, including taxation
and social security 2,080 1,435 120 231
Accruals 2,962 1,843 615 200
Deferred income 314 223 - -
Total trade and other payables 9,970 6,775 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 GBP505,000 (2021: GBP498,000). The Group anticipates paying contributions amounting to GBP525,000 during the year ending 31 March 2023. There were outstanding contributions of GBP11,000 (2021: GBP39,000) due to pension schemes at 31 March 2022.
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 GBP100,000. 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:
2022 2021
Rate of increase in pensions in payment and deferred
pensions 2.7% 2.5%
Discount rate applied to scheme liabilities 2.8% 2.0%
Inflation assumption 3.9% 3.4%
Average longevity at age 65 for male current and
deferred pensioners 22.0 21.9
(years) at accounting date
Average longevity at age 65 for male current and
deferred pensioners 23.4 23.3
(years) 20 years after accounting date
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%.
Effect on Obligation
2022
-1%
pa +1% pa
GBP'000 GBP'000
Discount rate 380 (310)
Inflation assumption (30) 15
-1 year +1 year
GBP'000 GBP'000
Life expectancy (120) 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.
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 2019 2020 2021 2022
GBP'000 GBP'000 GBP'000 GBP'000 GBP'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: 2022 2021
GBP'000 GBP'000
Deficit in scheme at beginning of the year (2,842) (2,604)
Pensions paid 99 98
Other finance cost (56) (64)
Re-measurement of the defined benefit pension
liability 237 (272)
Deficit in scheme at the end of the year (2,562) (2,842)
Analysis of amounts included in other finance
costs: 2022 2021
GBP'000 GBP'000
Interest on pension scheme liabilities 56 64
Analysis of amounts recognised in statement of comprehensive
income: 2022 2021
GBP'000 GBP'000
Experience gains arising on scheme liabilities (43) (21)
Changes in assumptions underlying the present value
of scheme liabilities 280 (251)
Re-measurement of the defined benefit pension liability 237 (272)
24. Employee benefits: share based payments
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.
(i) Nil cost options granted to John Foster:
Share price Total
Date of Number at grant Fair value fair Earliest Latest
Issue date per share value Exercise Exercise
pence pence GBP Date date
17 Jun 17 Jun 17 Jun
19 3,591 316.0 301.0 10,809 22 23
Total 3,591 10,809
24. Employee benefits: share based payments (continued)
Reconciliation of nil cost options: Number Number of
of options options
2022 2021
Outstanding at the beginning of the year 12,864 25,352
Options exercised during the year (9,273) (12,488)
Outstanding at the year end 3,591 12,864
Vested options exercisable at the year end - -
Weighted average life of outstanding options
(years) - 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.
Share price Total
Date of Number Exercise at grant Fair value fair Earliest Latest
Issue Price date per share value Exercise Exercise
pence Pence pence GBP Date date
4 Jul 4 Jul 3 Jul
19 87,422 10.0 314.0 96.8 84,612 22 24
14 Jul 15 Jul 13 Jul
20 123,052 10.0 315.0 75.0 92,289 23 25
3 Dec 3 Dec 2 Dec
21 220,769 10.0 215.0 88.0 194,277 24 26
Total 431,243 371,178
Reconciliation of LTIPs: Number Number of
of options options
2022 2021
Outstanding at the beginning of the year 210,474 234,734
Options granted during the year 255,304 133,052
Options forfeited during the year (34,535) (102,651)
Options lapsed in year - (54,661)
Outstanding at the year end 431,243 210,474
Vested options exercisable at the year end - -
Weighted average life of outstanding options
(years) 4.4 3.9
24. Employee benefits: share based payments (continued)
(iii) Share options with an exercise price equal to the market price on the date of grant
Share price Total
Date of Number Exercise at grant Fair value fair Earliest Latest
Issue Price date per share value Exercise Exercise
pence Pence pence GBP Date date
19 Jan 19 Jan 18 Jan
15 5,000 272.5 272.5 63.0 3,150 18 25
Total 5,000 3,150
The exercise price of outstanding options at 31 March 2022 is GBP2.725.
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 Weighted
average average
exercise exercise
price Number of price Number
(GBP) options (GBP) of options
2022 2022 2021 2021
Outstanding at the beginning of
the year 2.68 58,152 2.85 96,914
Options exercised during the year - - 2.68 (3,848)
Forfeited during the year - - 3.09 (27,172)
Lapsed during the year 2.68 (53,152) 3.43 (7,742)
----------
Outstanding at the year end 2.73 5,000 2.68 58,152
----------
Vested options exercisable at the
year end 2.73 5,000 2.68 58,152
----------
Weighted average life of outstanding
options (years) 2.8 1.0
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 GBP23,183 (2021: GBP40,586). In the year to 31 March 2021, employees around the Group exercised 3,848 other share options at a gain of GBP2,375.
2022 2021
GBP'000 GBP'000
Total share-based payment expense recognised
in the year 45 1
25. Capital and reserves
Share capital Ordinary Shares
2022 2021
In issue at the start of the year 12,514,985 12,504,519
Share capital issued during the year 4,915 10,466
In issue at the end of the year 12,519,900 12,514,985
2022 2021
GBP'000 GBP'000
Allotted, called up and fully paid Ordinary
shares of 10p each 1,251 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 GBP10,896 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 GBP703,000 at 31 March 2022 comprise GBP5,389,000 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 GBP8.0 million and the GBP4,686,000 of goodwill on this acquisition was written off against the merger relief.
Dividends
The following dividends were recognised and paid in the period:
2022 2021
GBP'000 GBP'000
Final: nil pence (2021: nil pence) per qualifying
ordinary share - -
Interim: 1 pence (2021: nil pence) per qualifying
ordinary share 125 -
Total dividends recognised in the period 125 -
26. Financial instruments
(i) Fair values of financial instruments
Trade and other receivables
The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the balance sheet date if the effect is material.
Trade and other payables
The fair value of trade and other payables is estimated as the present value of future cash flows, discounted at the market rate of interest at the balance sheet date if the effect is material.
Cash and cash equivalents
The fair value of cash and cash equivalents is estimated as its carrying amount where the cash is repayable on demand. Where it is not repayable on demand then the fair value is estimated at the present value of future cash flows, discounted at the market rate of interest at the balance sheet date.
Interest-bearing borrowings
The fair value of interest-bearing borrowings, which after initial recognition is determined for disclosure purposes only, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the balance sheet date.
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.
The following table shows the carrying value, which management consider to be materially equal to fair value for each category of financial instrument:
Group Company
2022 2021 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000
Cash and cash equivalents 9,572 14,556 4,376 5,462
Hire purchase debtors 1,236 1,148 - -
Interest rate swap asset 644 - 644 -
Trade and other receivables 5,362 3,472 - 60
Rental deposits 132 - - -
Total assets exposed to credit
risk 16,946 19,176 5,020 5,522
Interest rate swap liability - (234) - (234)
Total trade and other payables (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-
26. Financial instruments (continued)
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 GBP16,946,000 (2021: GBP19,176,000) 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.
The maximum exposure to credit risk for trade receivables at the balance sheet date by geographic region was:
Group
2022 2021
GBP'000 GBP'000
Falkland Islands 1,773 712
Europe 775 237
North America 254 166
United Kingdom 2,365 2,184
Other 195 173
Total trade receivables 5,362 3,472
The Company has no trade debtors.
Credit quality of financial assets and expected credit losses
Group Gross Impairment Net Gross Impairment Net
2022 2022 2022 2021 2021 2021
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Not past due 3,736 - 3,736 2,880 (6) 2,874
Past due 0-30 days 1,020 (2) 1,018 447 (8) 439
Past due 31-120 days 491 (58) 433 184 (36) 148
More than 120 days 328 (153) 175 64 (53) 11
Total trade receivables 5,575 (213) 5,362 3,575 (103) 3,472
Hire purchase debtors 1,261 (25) 1,236 1,172 (24) 1,148
The amount of hire purchase debt that is past due is immaterial.
26. Financial instruments (continued)
The movement in the allowances for impairment in respect of trade receivables and hire purchase debtors during the year was:
Group
2022 2021
GBP'000 GBP'000
Balance at 1 April 127 183
Impairment loss recognised 114 39
Utilisation of provision (debts written
off) (3) (95)
Balance at 31 March 238 127
Provided against hire purchase debtors 25 24
Provided against trade and other receivables 213 103
Balance at 31 March 238 127
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.
(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 GBP20.1 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 GBP13.2 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:
Contractual cash flows
2022 Carrying 1 year 1 to 2 to 5 years
amount Total or less 2 years 5 years and over
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Financial liabilities
Secured bank loans 14,183 16,410 1,346 1,332 3,486 10,246
Lease liabilities 7,066 13,293 874 709 1,616 10,094
Trade payables 4,111 4,111 4,111 - - -
Other creditors 1,797 1,797 1,797 - - -
Loan from Joint Venture 249 249 249 - - -
Accruals 2,962 2,962 2,962 - - -
Total financial liabilities 30,368 38,822 11,339 2,041 5,102 20,340
26. Financial instruments (continued)
Contractual cash flows
2021 Carrying 1 year 1 to 2 to 5 years
amount Total or less 2 years 5 years and over
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Financial liabilities
Secured bank loans 20,110 23,141 3,355 3,926 4,430 11,430
Lease liabilities 8,113 15,487 955 853 1,952 11,727
Trade payables 3,025 3,025 3,025 - - -
Interest rate swap liability 234 1,044 147 141 391 365
Other creditors 1,076 1,076 1,076 - - -
Accruals 1,843 1,843 1,843 - - -
Total financial liabilities 34,401 45,616 10,401 4,920 6,773 23,522
Liquidity risk - Company
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the effects of netting agreements:
Contractual cash flows
2022 Carrying 1 year 1 to 2 to 5 years
amount Total or less 2 years 5 years and over
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Financial liabilities
Secured bank loans 12,668 14,825 893 879 2,807 10,246
Trade payables 29 29 29 - - -
Amounts owed to subsidiary
undertakings 5,085 5,085 5,085 - - -
Other creditors 89 89 89 - - -
Accruals 615 615 615 - - -
Total financial liabilities 18,486 20,643 6,711 879 2,807 10,246
Contractual cash flows
2021 Carrying 1 year 1 to 2 to 5 years
amount Total or less 2 years 5 years and over
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Financial liabilities
Secured bank loans 13,188 15,934 914 899 2,777 11,344
Amounts owed to subsidiary
undertakings 5,960 5,960 5,960 - - -
Interest rate swap liability 234 1,044 147 141 391 365
Other creditors 207 207 207 - - -
Accruals 200 200 200 - - -
Total financial liabilities 19,789 23,345 7,428 1,040 3,168 11,709
26. Financial instruments (continued)
(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.
Group
2022 Total Balance
EUR USD Other sheet exposure GBP Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cash and cash equivalents 126 117 40 283 9,289 9,572
Trade payables and other
payables (635) (479) (312) (1,426) (8,544) (9,970)
-------
Balance sheet exposure (509) (362) (272) (1,143) 745 (398)
-------
2021 Total Balance
EUR USD Other sheet exposure GBP Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cash and cash equivalents 59 40 10 109 14,447 14,556
Trade payables and other
payables (280) (144) (31) (455) (6,320) (6,775)
-------
Balance sheet exposure (221) (104) (21) (346) 8,127 7,781
-------
The Company has no exposure to foreign currency risk.
Sensitivity analysis
Group
A 10% weakening of the following currencies against pound sterling at 31 March would have increased/(decreased) equity and profit or loss by the amounts shown below. This calculation assumes that the change occurred at the balance sheet date and had been applied to risk exposures existing at that date. This analysis assumes that all other variables, in particular other exchange rates and interest rates remain constant and is performed on the same basis for year ended 31 March 2021.
Equity Profit or Loss
2022 2021 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000
EUR 51 22 51 22
USD 36 10 36 10
A 10% strengthening of the above currencies against pound sterling at 31 March would have the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant.
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:
Group Company
2022 2021 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000
Fixed rate financial instruments
Leases receivable 1,236 1,148 - -
Bank loans (508) (607) - -
Lease liabilities (7,066) (8,113) - -
Total Fixed rate financial instruments (6,338) (7,572) - -
Variable rate financial instruments
Effect of Interest rate swap - (234) - (234)
Bank loans (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) GBP12.7 million (2021: GBP13.2 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) GBP0.8 million (2021: GBP1.1 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) GBP0.2 million (2021: GBP0.2 million) repayable over ten years until May 2025, secured against freehold property held in PHFC, with interest charged at 1.75% above the Bank of England base rate;
(iv) GBP0.5 million (2021: GBP0.6 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 GBP12.7 million ten-year loan has been hedged by one interest swap, taken out on 30 December 2021 with an initial notional value of GBP12.625 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 GBP125,000 per quarter over five years until June 2024, and then at GBP150,000 per quarter for a further five years until June 2029 when the outstanding bullet payment of GBP8,525,000 is likely to be refinanced. The notional value of the swap at 31 March 2022 is GBP12.5 million (2021: GBP13.0 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) GBP5.2 million lease liabilities payable to Gosport Borough Council; GBP4.5 million for the Gosport pontoon and GBP0.7 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) GBP1.2 million of property rental leases, including two warehouses rented by Momart, and the Momart and Bishops 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) GBP0.7 million of lease liabilities taken out to finance trucks by hire purchase leases at Momart, GBP0.3 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.
26. Financial instruments (continued)
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.
Group Company
2022 2021 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000
Equity
Interest rate swap liability 127 130 127 130
Variable rate financial liabilities (137) (195) (127) (132)
Profit or Loss
Interest rate swap liability 127 130 127 130
Variable rate financial liabilities (137) (195) (127) (132)
(v) Capital Management
The Group's objectives when managing capital, which comprises equity and reserves at 31 March 2022 of GBP40,657,000 (2021: GBP38,896,000) 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
2022 2021
GBP'000 GBP'000
Less than one year 974 919
Between one and five years 3,897 3,675
More than five years 16,805 16,753
21,676 21,347
28. Capital commitments
At 31 March 2022, the Group had entered into the following contractual commitments:
- GBP385,000 in Momart comprising GBP272,000 for two new vehicles, GBP79,000 for an HGV trailer and other enhancements to existing vehicles and GBP34,000 for climate control systems.
- GBP270,000 in FIC comprising GBP190,000 for a new retail sales system and GBP80,000 for a warehouse office.
At 31 March 2021, the Group had entered into contractual commitments of GBP21,000 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
2022 2021 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000
Key management emoluments including
social security costs 2,092 1,610 795 366
Company contributions to defined contribution
pension plans 83 74 - -
Share-related awards 45 1 20 20
Total key management personnel compensation 2,220 1,685 815 386
At 31 March 2022, the Group's joint venture, SAtCO, has debtors of GBP498,000 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 GBP65,000 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. GBP650 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 GBP30,000 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. GBP300 of interest is payable each year by Mr Clunie to FIC in respect of this loan.
During the year, FIC paid GBP4,160 (2021: GBP104,430) 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.
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 GBP125,000 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 GBP1,089,000 (2021: GBP999,000). 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 GBP169,000 (2021: GBP150,000). 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 GBP94,000 (2021: GBP74,000).
Company Information
Directors Registered Office
Robin Williams Non-executive Chairman Kenburgh Court
Stuart Munro Chief Executive Officer 133-137 South Street
Jeremy Brade Non-executive Director Bishop's Stortford
Robert Johnston Non-executive Director Hertfordshire CM23
3HX
Dominic Lavelle Non-executive Director T: 01279 461630
E: admin@fihplc.com
W: www.fihplc.com
Company Secretary Registered number 03416346
Iain Harrison
Stockbroker and Nominated
Adviser
W.H. Ireland Limited
24 Martin Lane,
London EC4R 0DR
Solicitors
BDB Pitmans LLP
50 Broadway,
Westminster,
London SW1H 0BL
Auditor
KPMG LLP
St. Nicholas House,
Park Row,
Nottingham NG1 6FQ
Registrar
Link Group
10(th) Floor Central Square,
29 Wellington Street,
Leeds LS1 4DL
Financial PR
Novella Communications,
South Wing, Somerset House,
London WC2R 1LA
The Falkland Islands Company The Portsmouth Harbour Momart Limited
Ferry Company
Kevin Ironside, Director Clive Lane, Director Steve Lane, Director
T: 00 500 27600 T: 02392 524551 T: 020 7426 3000
E: info@fic.co.fk E: admin@gosportferry.co.uk E: enquiries@momart.com
W: www.falklandislandscompany.com W: www.gosportferry.co.uk W: www.momart.com
www.fihplc.com
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