Falkland Islands Holdings (“FIH”), an AIM listed company operating a range of businesses in the Falkland Islands, and the Portsmouth Harbour Ferry Company in the UK, announces its unaudited interim results for the six months ended 30 September 2005.
Financial Highlights
• Turnover up 50% to £8.1 million (2004: £5.4m)
• Profit before taxation rose to £729,000 (2004: £299,000)
• Underlying profits before exceptional profits on sale of subsidiary and goodwill amortisation rose to £747,000 (2004: £299,000 )
• EPS on underlying profits increased 91% to 6.1p (2004: 3.2p)
• No interim dividend is proposed (2004: Nil)
Operating Highlights
• Satisfactory trading in Falklands Winter half despite poor illex squid catches
• First full contribution from Portsmouth Harbour Ferry Company (“PHFC”) also benefiting from International Festival of the Sea and new ferry
• Cargo shipping agreement set up with UK Ministry of Defence
• Ongoing exploration activity:
- Falkland Oil & Gas extending seismic activity and looking to identify 20 drillable prospects
- Falkland Gold & Minerals working through 23 identified onshore targets
• Disposal of Cobham Travel
Outlook
• Second half outlook remains positive
• Future of ferry boosted by demise of SHRT plan for tunnel under Portsmouth Harbour
• Growth prospects in Falklands linked to recovery in illex fishing catches
• Solid contribution expected from PHFC in quieter winter half
• Exposure to oil and minerals exploration through shareholdings in FOGL and FGML
• Continue to seek earnings enhancing complementary acquisitions
David Hudd, Chairman of Falkland Islands Holdings plc, said:
“We have continued to make good progress in the first six months and the performance from PHFC has been especially pleasing. Whilst the poor illex fishing season continues to impact, the outlook for the second half remains positive and we are optimistic of further solid contributions from our principal trading operations.”
Financials
Turnover has increased from £5.4million in the first half of last year to £8.1million and Profits Before Tax rose from £299,000 to £729,000 in the 6 months to 30 September 2005.Underlying profits after stripping out profits from the sale of the Cobham Travel subsidiary and before the amortisation of Goodwill increased from £299,000 to £747,000. The profit after tax attributable to shareholders was £461,000 compared to £201,000 last year.
Operations
Trading activity in the Falkland Islands during the winter half was satisfactory. Turnover rose from £5.4million to £5.8million reflecting the reopening of the Upland Goose Hotel following its refurbishment in the summer of 2004 and insurance commission which continued to grow. Profits from the Group’s Falklands business saw a small decline in the first half compared to the same period last year with contribution lower by £30,000 at £448,000.This flat performance reflected the generally less buoyant economic conditions in the Islands resulting from the poor illex fishing season in 2004/5 and the sharp increase in global vessel charter and fuel costs which saw a rise in the cost of transporting goods to the Falklands. In September 2005 the Group moved away from chartering its own vessels and started shipping cargo to the islands on UK Ministry of Defence vessels. These arrangements are expected to provide an important buffer against continuing rises in global freight and transportation costs as well as improving the efficiency of the Group’s supply chain.
The 6 months to 30 September 2005 saw the first full contribution of £580,000 from the Group’s main UK trading subsidiary, Portsmouth Harbour Ferry Company (“PHFC”). PHFC performed well in the summer period. Underlying passenger numbers were slightly lower than in the previous year following the introduction of car parking charges in Gosport in November 2004; however profitability benefited from an increase in ferry fares in June 2005 and in particular from the additional ferry and cruising activity linked to the Trafalgar celebrations and the International Festival of the Sea in June and July 2005. The company’s pleasure cruising activity also performed well, helped by the interest surrounding these events and also by the commissioning in June of the company’s new vessel, the Spirit of Portsmouth which operates as a cruise boat in the summer and a ferry in the winter. In July the Group was successful in selling its non core Cobham Travel subsidiary at a premium to Net Assets.
On 29 November 2005 the Department for Transport issued a statement confirming that it would not provide support for Hampshire County Council’s longstanding plans for a Rapid Transit Scheme incorporating a tunnel under Portsmouth harbour. This announcement is seen very positively by your Board and effectively removes the threat of the SHRT, opening the door for alternative public transport schemes that will work in harmony with the existing ferry services provided by PHFC.
Investments
The Group also owns strategic stakes in the AIM listed exploration companies, Falkland Oil and Gas and Falkland Gold and Minerals.
Falkland Oil and Gas (“FOGL”)
Offshore exploration work is continuing in the Falklands basin with the 2D seismic survey progressing whilst interpretation, analysis and mapping of that data is carried out in the UK.
The current 2D survey which has been extended to cover 15,000km is concentrated on the large number of leads revealed by the previous survey of 9,450km which was completed in May 2005. This survey is now 60% complete and is anticipated to be finished by the end of January and the data will be processed in the first half of 2006. Interpretation and mapping is being progressed as the data becomes available and this will form the basis of a 3D seismic programme in the most prospective areas. The objective remains to identify around 20 drillable prospects.
Discussions have commenced to introduce potential farm-out partners in order to share the costs and accelerate the exploration of this large area.
The market value of the Group’s shareholding of 16,803,000 shares in FOGL (18.3%) at 30 September 2005 was £18.9million compared to a book value of £2.7million.
Falkland Gold and Minerals (“FGML”)
Onshore the two drilling rigs operated by FGML are working their way through the 23 targets identified by the aeromagnetic survey carried out in 2004. To date seven have been completed and the results have added considerably to FGML’s understanding of the geology of the Islands.
The selection of the remaining drilling targets is being enhanced by ground geophysics and soil sampling and the current expectation is that the initial drilling programme will be completed by the end of 2006. The expectation is that at that stage FGML will have available cash balances of some £5.5million to carry out the further work required.
The market value of the Group’s shareholding of 11,250,000 shares in FGML (14.4%) at 30 September 2005 was £ 2.2million compared to a book value of £0.2million.
