TIDMFIH
RNS Number : 7161Q
FIH Group PLC
23 June 2020
23 June 2020
FIH group plc
("FIH" or "Group" or "Company")
Final results for the year ended 31 March 2020
FIH, the AIM quoted international services group that owns
essential services businesses in the Falkland Islands and the UK,
is pleased to announce its final results for the year ended 31
March 2020. A copy of the Group's results is also available on the
Company's website.
FY2020 Group Financial Highlights
-- Group revenue increased by 4.9% to GBP44.6 million (2019: GBP42.5 million)
-- Underlying pre-tax profits were GBP3.7 million (2019: GBP3.9
million) reduced by GBP0.25 million due to COVID-19
-- GBP7.5 million non-cash write down of goodwill led to a loss
before tax of GBP3.7 million (2019: GBP3.9 million)
-- Underlying diluted earnings per share was 21.7 pence (2019: 24.1 pence)
-- Diluted earnings per share was a loss of 37.8 pence (2019: 24.1 pence)
-- As at 31 March 2020, cash balances of GBP9.1 million (2019: GBP6.2 million)
Operating Highlights
Falkland Islands Company ("FIC")
-- A good performance with revenues up by 23% benefiting from
increased housebuilding and rental income and remaining largely
unaffected by COVID-19
-- Pre-tax profits up 37% to GBP2.1 million (2019: GBP1.5 million)
Momart
-- Following on from a successful prior year, FY2020 was more
challenging reflecting a weaker global commercial art market
leading to reduced income from galleries, auction houses and
private collectors
-- Pre-tax profits were GBP1.0 million (2019: GBP1.6 million)
Portsmouth Harbour Ferry Company ("PHFC")
-- A small decline in passenger numbers over the year was
significantly increased in March 2020 which offset the benefits of
annual fare rises in June 2019
-- Pre-tax profits were GBP0.6 million (2019: GBP0.8 million)
Outlook & COVID-19 Update
-- While FIC has not been significantly impacted, trading at
both Momart and PHFC has fallen to below 10% of normal levels as a
result the Group incurred losses for the first three months of
FY2021
-- In response, the Group has suspended dividend payments in the
short term, placed 78% of employees at Momart and in Gosport on
furlough, reduced employee and Board pay and curtailed all capital
expenditure
-- Critically, the Group remains well placed financially with
sufficient liquidity to meet all current and expected needs, as at
31 March 2020 the Group had cash balances of GBP9.1 million and has
added an interest free GBP5 million debt facility under the
Government business interruption scheme for use if required
-- Management focus now is on returning the Group to its
pre-COVID-19 position as quickly as practical whilst minimising the
fallout from this unprecedented event
John Foster, Chief Executive said:
"We were on track to announce another strong trading performance
for the year and while COVID-19 prevented us from doing so, we
still recorded a good overall result. Like most businesses our
focus is now on ensuring a smooth return to profitability whilst
avoiding unnecessary damage to the long-term prospects of the
business. Fortunately, FIH is well placed to do so backed by a
strong balance sheet with good additional liquidity should it be
required.
We believe we took the necessary cost reducing actions
sufficiently early and that we have the resources to support the
return to normal trading levels. This is of course subject to a
reasonable time period for the recovery in passenger numbers in
Portsmouth and a return in confidence and activity levels in the
global commercial art market.
Given the environment, FIH is reasonably well positioned and I
believe the fundamentals of the Group remain strong. We are
therefore confident with regard to the medium to long term
prospects for the business whilst also being mindful that the
current crisis might bring M&A opportunities that would not
normally arise."
Enquiries:
FIH group plc
John Foster, Chief Executive Tel: 01279 461630
WH Ireland Ltd. - NOMAD and Broker
to FIH Tel: 0207 220 1666
Adrian Hadden / Lydia Zychowska
--------------------------
Novella Communications
Tim Robertson / Chris Marsh Tel: 020 3151 7008
--------------------------
Chairman's Statement
Dear Shareholder,
The year to 31 March 2020 was a successful one for the Group,
only affected for a few weeks by the COVID-19 pandemic, but plainly
since then we have been operating in an environment which has been
adversely transformed.
With turnover at GBP44.6 million (2019: GBP42.5 million) and
pre-tax profit, before goodwill impairments, at GBP3.7 million
(2019: GBP3.9 million), the financial results of the Group were on
track to improve on last year's record levels, were it not for the
downturn in our UK businesses that took hold in March 2020,
reducing profitability by GBP0.25 million. Activity, particularly
at FIC in the Falklands, was ahead led by strong growth in
housebuilding and construction while in fine art logistics and
storage Momart's performance improved in the second half. The
Portsmouth Harbour Ferry Company also produced satisfactory
results, albeit passenger numbers registered a further decline of
7.5%. Basic earnings per share, before the impairment charge were
22.0p (2019: 24.4 pence). As a consequence of COVID-19, a non-cash
good will write down resulted in an impairment charge of GBP7.5
million thereby reducing pre-tax profits to a loss of GBP3.8
million (2019: GBP3.9 million profit).
The Chief Executive's statement reviews the year and the new
environment. Shareholders should know that in both fine art,
logistics and ferry passenger journeys, the shutdown in business
levels since mid-March has been nearly complete. Aside from art
storage income, these two businesses have been trading at less than
10% of normal levels. We are fortunate that the Falklands Islands
has so far avoided severe lockdowns which might have also brought
trading there down too, but FIC has felt some effect and this will
become more pronounced when, as expected, the regular cruise ship
and other tourism business does not emerge in the Southern
hemisphere summer months.
Under the effects of COVID-19, the Group is therefore currently
incurring substantial monthly losses, which are only partially
offset by trading in FIC. This underlies our decision to cancel any
short-term plans for dividends to shareholders, and also to place a
substantial number of UK employees on furlough, to take advantage
of the Government Job Retention Scheme. In addition, our UK
businesses have been approved for a GBP5 million loan covered by
the Government guarantee should we need to draw this down. We are
grateful for central Government schemes as well as local Hampshire
support initiatives for our ferry business, but we are crucially
dependent on a material recovery in business levels once these
programmes are withdrawn, as well as the absence of a severe
lockdown in the Falklands Islands.
Salary cuts in the UK make the hardship and uncertainty all the
more painful for our staff and we thank them for their excellent
contribution in the past year, as well as their understanding of
the measures we have had to put in place to cope with a near
cessation of activity in parts of the Group's business.
The Board has led with its own salary and fee cuts and continues
to keep its focus firmly on the emergence of our businesses from
the crisis in the best condition possible and not taking any
disproportionate short-term action that damages this objective. Our
balance sheet is strong, but cash is not unlimited however, so we
will also have to bear in mind the depletion of our resources and
balance these two conflicting priorities.
Board and Governance
To bring an extra insight to our Board and Committee
discussions, also as we do not have a Chief Financial Officer on
the Board, we were delighted that Dominic Lavelle agreed to join
the Board in December 2019 as an independent non-executive
director, and we welcome his input generally and contribution as
Chairman of the Audit Committee.
Outlook
We are unable to forecast the outturn for the year to March 2021
until the pace of recovery in the areas most affected becomes
apparent, but we currently expect a significant loss. We hope to be
able to see some signs of the restoration of business levels over
the summer and be able to give shareholders an update at our AGM in
September and more fully when we publish our half year results in
November. With its strong liquidity position the Board is confident
that the Group has the cash resources to weather the current crisis
and to see a return to more normal profitable trading.
The senior management are working hard, often at reduced
remuneration, to manage the situation and I am confident they will
steer the right course through this crisis that affects each one of
us.
Robin Williams
Chairman
23 June 2020
Chief Executive's Strategic Review
Introduction
I am pleased to report that even with the adverse effects of
COVID-19 on the last month of trading, the Group's results for year
to 31 March 2020 were satisfactory and reflect well on the
underlying strength of our business model.
The Falkland Islands Company ("FIC") grew strongly producing
record results and at the Group's art handling subsidiary Momart,
after a weaker first half, trading recovered well in the last six
months of the financial year. At the Group's passenger ferry in
Portsmouth Harbour ("PHFC"), profits were on a par with the prior
year until the impact of COVID-19.
The Group first began to experience the effects of the virus in
March 2020 affecting profits at both Momart and PHFC and reducing
overall group profits by GBP0.25 million. Without the virus the
Group would have produced record pre-tax profits of approaching
GBP4 million.
The Group's liquidity position was also strong with cash
balances on hand at 31 March 2020 of GBP9.1 million (2019: GBP6.2
million) and this cash reserve provides an important buffer for the
Group as it weathers the financial effects of the pandemic.
Overview of Group Results for the year ended 31 March 2020
In a year where activity was curtailed in the last month by the
adverse effects of the commencement of COVID-19, revenues still saw
healthy growth overall. Group revenue for the year ended 31 March
2020 increased by 4.9% to a record GBP44.6 million (2019: GBP42.5
million) driven by strong growth in the Group's Falklands business,
FIC.
Separate from current trading, as a result of COVID-19 and the
review of medium to long-term detailed forecasts, the goodwill held
in respect of both Momart and PHFC has been impaired. Goodwill at
Momart has been written down by GBP3.5 million and the goodwill
held in respect of PHFC, has been reduced by GBP4.0 million,
eliminating all the previously recorded balance in relation to the
ferry company. Taken together the write down of goodwill relating
to both PHFC and Momart resulted in an impairment charge of GBP7.5
million.
After this non-cash charge the Group recorded a loss before tax
of GBP3.8 million (2019: Profit GBP3.9 million).
The Group's cash position, trading and prospects are unaffected
by the impairment charge.
The FIH group plc company only distributable reserves have
reduced by GBP2.0 million as a result and after making this
adjustment stood at GBP12.3 million as at 31 March 2020.
The group's overall trading profits were at a similar level to
the prior year with strong growth in FIC offsetting weaker trading
in the Group's UK businesses. See below for further details.
Review of operations
Group revenue and Underlying Pre-Tax profits* are analysed
below:
Group revenue 2020 2019 Change
Year ended 31 March GBPm GBPm %
-------------------------------------- ------ ----- ------
Falkland Islands Company ("FIC") 21.67 17.55 23.5
Portsmouth Harbour Ferry ("PHFC") 4.13 4.37 -5.5
Momart 18.80 20.61 -8.7
-------------------------------------- ------ ----- ------
Total Revenue 44.60 42.53 4.9
-------------------------------------- ------ ----- ------
Group Underlying Pre-Tax profit* *
Falkland Islands Company*** 2.06 1.51 36.7
Portsmouth Harbour Ferry*** 0.64 0.78 -19.0
Momart*** 1.01 1.57 -35.2
Total Underlying Pre-Tax Profit * 3.71 3.86 -3.9
Non-trading items (see notes below)** (7.48) - -
-------------------------------------- ------ ----- ------
Reported Profit Before Tax (3.77) 3.86 -197.0
-------------------------------------- ------ ----- ------
Underlying Diluted Earnings per share
in pence 21.7p 24.1p -10.1
Diluted Earnings per share in pence -37.8p 24.1p -255.2
-------------------------------------- ------ ----- ------
* Underlying Pre-Tax Profit is defined as, profit before tax,
before non-trading items,
** In the current year the only non-trading items were the
GBP4.0 million impairment of the Group's investment in PHFC, and
the GBP3.5 million impairment of the Group's investment in Momart.
In the prior year there were no non-trading or exceptional
items.
*** As in prior years the profits reported for each operating
company are stated after the allocation of head office management
and plc costs which have been applied to each subsidiary on a
consistent basis.
Before the non-trading impairment charge and despite the initial
impact of COVID-19, the Group's underlying Pre-Tax Profits held up
well at GBP3.7 million (2019: GBP3.9 million).
With a reversal in the government's planned reduction in
corporation tax rates and a consequent increase in deferred tax,
the overall group tax rate increased sharply from 21.4% to 25.8%
leading to a reduction in underlying post tax earnings of 9.2%
Reflecting this increased tax charge fully diluted EPS on
underlying profits (before the impairment) were 10% lower at 21.7
pence (2019: 24.1 pence).
Earnings per share were a loss of 37.8 pence, reflecting the
loss before tax after the GBP7.48 million impairment charge. (2019:
24.1p).
The group paid an interim dividend to shareholders in January
2020 of 1.80 pence (2019: 1.65 pence) but with the adverse impact
of COVID-19 no final dividend will be payable for the year ended 31
March 2020.
Group Operating Company Performance
Falkland Islands Company
In the year to 31 March 2020 trading at FIC was largely
unaffected by the impact of COVID-19.
FIC revenue increased by 23.5% to a record GBP21.7 million, an
increase of GBP4.1 million on the prior year of which GBP3.5
million was due to an increase in sales at FIC's housebuilding arm
Falkland Building Services ("FBS") and GBP0.2 million was due to
increased rental income from FIC's portfolio of residential
properties in Stanley.
As a result, of the increased activity of FBS and the growth in
FIC's rental portfolio, the company's Operating Profit grew by an
encouraging 36% to GBP2.1 million (2019: GBP1.6 million).
With net interest costs (linked to liabilities under an historic
pension scheme) unchanged from the prior year, FIC's Profit Before
Tax grew by 36.7% to GBP2.1 million (2019: GBP1.5 million).
See details below:
FIC Operating results
Year ended 31 March 2020 2019 Change
GBPm GBPm %
--------------------------------------- ------ ------ ------
Revenues
Retail 10.02 9.72 3.1
Falklands 4x4 3.18 3.05 4.3
FBS (property and construction) 5.01 1.53 224.8
Freight & Port Services 0.75 0.78 -4.2
Support services 2.04 2.00 1.9
Property rental 0.67 0.47 43.3
Total FIC revenue 21.67 17.55 23.5
FIC underlying operating profit 2.12 1.57 35.5
Net interest expense (0.06) (0.06) 6.7
--------------------------------------- ------ ------ ------
FIC underlying Profit Before Tax 2.06 1.51 36.7
--------------------------------------- ------ ------ ------
FIC underlying operating profit margin 9.8% 8.9% 9.9
--------------------------------------- ------ ------ ------
FIC Divisional Activity
Retail sales increased by 3.1% in overall terms with growth
evenly spread across FIC's 5 main retail outlets. After absorbing
higher staff costs linked to an uplift in the minimum wage, the
overall contribution from the West Store increased on the previous
year broadly in line with sales but pressure on gross margins at
both Home Builder and Home Living saw their contributions slip back
offsetting the increase at the West Store. In overall terms the
contribution from FIC's retail activities was essentially unchanged
year on year.
At Falklands 4x4 revenues increased by 4.3% and helped by
healthy growth in income from FIC's car rental fleet of 46 vehicles
as long- term corporate rentals increased, 4x4's contribution also
saw a modest increase.
FBS which saw sales grow to more than three times the level of
the prior year to GBP5.0 million (2019: GBP1.5 million), benefited
from the renewed availability of government housing plots for first
time buyers at Sappers Hill. As a result, FBS was able to complete
and sell 24 kit homes in the year compared to only six units in
2019. In addition, the house building team commenced its first
significant housing contract for government for the construction of
18 houses on FIG land. By 31 March 2020 this contract was estimated
as being 63% complete and in accordance with the Group's policy on
Revenue Recognition under IFRS 15 GBP1.9 million of revenue and an
appropriate level of attributable profits was generated in the
year. This increase in FBS activity and related improvement in
contribution was the biggest factor driving the increased
profitability of FIC during the period.
Rental Properties . During the year the FBS construction team
also made further additions to FIC's portfolio of domestic rental
properties and by year end the total number of properties available
for rent had increased from 54 to 65 with a further 10 under
construction. With strong demand for rental properties and a
shortage of supply, FIC enjoyed effective occupancy of 100%
throughout the year. As a result, rental income from FIC's property
rental portfolio (which includes 10 mobile homes rented to staff),
increased by 43% to GBP0.7 million (2019: GBP0.5 million).
At 31 March 2020 the total net book value of the portfolio was
GBP5.7 million (2019: GBP4.5 million). The estimated market value
of FIC's rental portfolio at 31 March 2020 was GBP7.3 million
(2019: GBP5.8 million) an uplift of GBP2.2 million on book value
giving an average value per property of GBP112,000 (2019:
GBP107,000)
Income from third party freight and port services was relatively
unchanged at GBP0.8 million (2019: GBP0.8 million)
Support Services income increased by 1.9% to GBP2.04 million
(2019: GBP2.00 million) helped by continued growth in financial
services, travel and insurance and Health & Safety consultancy
services. This growth was achieved despite a weaker illex squid
catch in April and May 2019 which saw a decrease in Fishing Agency
revenues and by a slow down at Penguin Travel particularly towards
the end of the year.
FIC Key Performance Indicators and Operational Drivers
Year ended 31 March 2016 2017 2018 2019 2020
Staff Numbers (FTE
31 March) 172 151 146 169 187
----- ---- ----- ----- -----
Capital Expenditure
GBP'000 1,229 578 389 2,348 2,685
----- ---- ----- ----- -----
Retail Sales growth
% 1.3 -5.4 +0.6 +5.7 3.1
----- ---- ----- ----- -----
Number of FIC rental
properties 50* 51* 49* 54* 65*
----- ---- ----- ----- -----
Average occupancy during
the year % 93 81 89 84 89
----- ---- ----- ----- -----
Number of vehicles
sold 110 77 77 76 71
----- ---- ----- ----- -----
Number of 3(rd) party
houses sold 12 17 22 6 22*
----- ---- ----- ----- -----
illex squid catch in
tonnes (000's) 235.2 30.1 75.5 57.4 57.6
----- ---- ----- ----- -----
Cruise ship passengers
(000's) 56.5 55.6 59.3 62.5 72.1
----- ---- ----- ----- -----
*Includes ten mobile homes rented to staff.
** The 22 houses sold in the year ended 31 March 2020 exclude
the 18 house contract with the government.
FIC ended the year with a headcount of 208 staff, 39 higher than
the 169 in March 2019. Of the 208 headcount Retail accounted for 74
(2019: 67), Falklands 4x4 accounted for 17 (2019: 14) and FBS 49
(2019: 42), with 68 (2019: 46) in Support Services and
administration.
In overall terms the Group's Falkland operations performed well
in the period with solid growth from FIC's core retail, automotive
and support service divisions augmented by a sharp uplift in
activity and profitability from FBS and FIC's expanded property
rental portfolio.
Portsmouth Harbour Ferry Company
In the year to 31 March 2020 PHFC saw total revenues fall by
5.5% to GBP4.1 million (2019: GBP4.4 million) with an increased
rate of decline in passenger numbers due to the impact of COVID-19
which more than offset the effect of annual fare rises in June
2019. As a result, underlying Profit Before Tax at PHFC fell by
GBP0.14 million to GBP0.64 million (2019: GBP0.78 million).
PHFC Operating results
Year ended 31 March 2020 2019 Change
GBPm GBPm %
-------------------------------------- ------- ------ ------
Revenues
Ferry fares 3.93 4.15 -5.1
Cruising and Other revenue 0.20 0.22 -13.0
Total PHFC revenue 4.13 4.37 -5.5
-------------------------------------- ------- ------ ------
PHFC underlying operating profit 0.98 1.08 -9.9
Pontoon lease liability & Boat loan
finance expense (0.34) (0.30) 14.1
-------------------------------------- ------- ------ ------
PHFC underlying Profit Before Tax 0.64 0.78 -19.0
-------------------------------------- ------- ------ ------
Passengers carried (000s) 2,365 2,556 -7.5
-------------------------------------- ------- ------ ------
The further decline in passenger numbers in the year ended 31
March 2020 and the increased uncertainty following the impact of
COVID-19, has resulted in an impairment to the carrying value of
the PHFC business and a GBP4.0 million impairment charge has been
recorded in the period to reflect the write off of remaining
goodwill. This is a non-cash accounting charge and will not recur.
For more details on the background to the impairment see note
11.
During the year, passenger volumes held up relatively well in
the first half with a 3.2% rate of decline noted in the Group's
half year results issued in November 2019. As winter arrived,
wetter weather particularly after Christmas saw a further fall in
passenger volumes which increased the year to date decline by
mid-March to -4.8%. In the last 2 weeks of March containment
measures for COVID-19 hit hard and volumes fell sharply moving the
company into loss making and taking passenger volumes down to -7.5%
for the year as a whole. In the year to 31 March 2020 the total
number of passengers carried fell from 2.56 to 2.37 million, an
average of 6 1/2 thousand passenger journeys per day.
Ferry fares were increased by an average of 3% in June 2019 to
make a contribution to the anticipated rise in operating costs.
These annual fare increases brought the total cost of a standard
adult return to GBP3.70, and the price of a return journey using an
Adult 10 Trip ticket to GBP3.30 (2019: GBP3.20).
Underlying operating costs were tightly controlled and this
shielded the business from the full effects of the GBP0.3 million
decline in overall revenues (GBP4.4 million down to GBP4.1
million). As a result, the reduction in profit before tax was
limited to GBP0.14 million falling from GBP0.78 million down to
GBP0.64 million.
Significant marketing effort continued in the year using
mainstream and digital/social media to remind local people of the
benefits of travel by ferry including the bike friendly, positive
health aspects and the "green" credentials of the service.
The company also continued to promote its unlimited monthly
ferry and car parking joint "Park & Float" ticket and we are
engaging with local councils to seek promotional and practical
support for this "green" transport service.
In overall terms, at under GBP1.65 per crossing for regular
adult travellers (using the 10 Trip ticket) and 95p for seniors and
children (using 10 Trip tickets) the ferry service still represents
excellent value compared to any alternative mode of transport other
than for groups travelling by car with free or subsidised
parking.
Key Operating Metrics
Average fare yield per passenger journey (including cycle fares)
increased by 4.3% to GBP1.69 (2019: GBP1.62).
Ferry reliability was again outstanding with on-time departures
running at 99.8% (2019: 99.8%).
PHFC Key Performance Indicators and Operational Drivers
Year ended 31 March 2016 2017 2018 2019 2020
Staff Numbers (FTE at
31 March) 38 38 38 37 36
-------- -------- -------- -------- --------
Capital Expenditure GBP'000's 223 241 186 50 65
-------- -------- -------- -------- --------
Ferry Reliability (on
time departures) 99.8 99.9 99.8 99.8 99.8
-------- -------- -------- -------- --------
Number of weekday passengers
'000 2,046 1,967 1,878 1,834 1,706
-------- -------- -------- -------- --------
% change on prior year -3.6 -3.9 -4.5 -2.3 -7.0
-------- -------- -------- -------- --------
Number of weekend passengers
'000 780 744 734 722 659
-------- -------- -------- -------- --------
% change on prior year -2.5 -4.6 -1.3 -1.6 -8.7
-------- -------- -------- -------- --------
Total number of passengers
'000's 2,826 2,710 2,612 2,556 2,365
-------- -------- -------- -------- --------
% change on prior year -3.3 -4.1 -3.6 -2.1 -7.5
-------- -------- -------- -------- --------
Revenue growth % -1.3 1.0 1.5 0.4 -5.5
-------- -------- -------- -------- --------
Average yield per passenger GBP1.45 GBP1.52 GBP1.58 GBP1.62 GBP1.69
journey*
-------- -------- -------- -------- --------
*Total ferry fares divided by the total number of passengers
Momart
After a very successful 2018-19, Momart, the Group's art
handling and logistics business had a more challenging year with
declining confidence in the global commercial art market leading to
a sharp decline in revenues from galleries, auction houses and
private collectors.
Despite a welcome increase in storage revenues of 5.8%, in the
year to 31 March 2020 Momart's overall revenues fell by 8.7% from
GBP20.6 million to GBP18.8 million and operating profits declined
by 15.1% to GBP1.5 million.
Momart Operating results
Year ended 31 March 2020 2019 Change
GBPm GBPm %
------------------------------------------ ------ ------ ------
Revenues
Museum Exhibitions 10.77 11.00 -2.1
Galleries & Private Clients 5.85 7.54 -22.4
Storage 2.18 2.07 5.8
Total Momart revenue 18.80 20.61 -8.7%
Momart underlying operating profit 1.47 1.73 -15.1
Net Interest expense (0.46) (0.16) 180.7
------------------------------------------ ------ ------ ------
Momart underlying Profit Before Tax 1.01 1.57 -35.2
------------------------------------------ ------ ------ ------
Momart underlying operating profit margin 7.8% 8.4% - 29.0
------------------------------------------ ------ ------ ------
In the year. net finance costs increased by GBP0.3 million to
GBP0.46 million, following the draw-down of the GBP13.9 million
long- term mortgage to finance the purchase of the Leyton
warehouse. The interest rate on the mortgage was effectively fixed
for 10 years at 2.9% with an interest rate swap. Bank interest on
bank loans including the mortgage amounted to GBP394,000 (2019:
GBP164,000 million) together with GBP53,000 of interest expense in
the current year (2019: GBPnil) which related to finance charges
under IFRS 16 linked to warehouse and office leases. The hire
purchase lease interest charge for the year for the Momart trucks
was GBP9,000 (2019: GBP9,000).
Profit Before Tax after net interest expense and an allocation
of central costs reduced to GBP1.01 million, down GBP0.56 million
on the prior year.
Reflecting the more uncertain trading outlook post COVID-19 the
carrying value of goodwill held in respect of Momart has been
written down by GBP3.5 million. This non-cash impairment charge
reduces Momart's reported profit before tax by GBP3.5 million
creating a pre-tax loss of GBP2.5 million (2019: GBP1.6 million
profit). For more details on the background to the impairment see
note 11.
Momart Key Performance Indicators and Operational Drivers
Year ended 31 March 2016 2017 2018 2019 2020
Staff Numbers (FTE
31 March) 130 131 136 140 133
-------- -------- --------- --------- ---------
Capital Expenditure
GBP'000's 402 971 228 20,034 638
-------- -------- --------- --------- ---------
Warehouse % fill vs
capacity 90.6% 90.4% 72.8% 81.1% 86.9%
-------- -------- --------- --------- ---------
Exhibition Order Book GBP4.5m GBP4.8m GBP4.2m GBP4.6m Note*
31 March
-------- -------- --------- --------- ---------
Momart services charged GBP9.2m GBP9.8m GBP10.9m GBP11.5m GBP10.8m
out
-------- -------- --------- --------- ---------
Revenues from overseas GBP5.8m GBP6.1m GBP7.1m GBP7.5m GBP6.2m
clients
-------- -------- --------- --------- ---------
Exhibitions sales growth -3.4% 19.9% 17.0% -6.5% -2.1%
-------- -------- --------- --------- ---------
Gallery Services sales
growth 11.8% 8.1% 15.2% 4.0% -22.4%
-------- -------- --------- --------- ---------
Storage sales growth 10.1% -0.8% 8.5% -6.3% 5.8%
-------- -------- --------- --------- ---------
Total Sales growth 3.2% 13.0% 15.5% -2.9% -8.7%
-------- -------- --------- --------- ---------
Note*: Current year f igures are suspended owing to the impact
of COVID-19. Until re-opening dates for the related institutions
are established, no meaningful metric is available. Prior to the
arrival of COVID-19 in January 2020 Momart's 12-month order book,
had been significantly ahead of the prior year.
Museum Exhibitions
Following the 6.5% reduction in Exhibitions revenue seen in the
first half (GBP0.3 million down on the previous year), overall
Exhibition revenues in the second half held up well delivering a
small increase on the prior year, reducing the overall decline in
museum revenues over the year to GBP0.23 million (-2.1%).
With GBP10.77 million of revenue in the year, Momart maintained
its market share with the UK's leading museums. Notable museum
exhibitions in the period included: "Mary Quant", "Cars" and
"Kimono" at the V&A; "Anthony Gormley" and "Lucian Freud" at
the Royal Academy; "Ashurbanipal" and "Inspired by the East" at the
British Museum; "Olafur Eliasson" at Tate Modern; "Van Gogh" at
Tate Britain; "Gauguin" at the National Gallery; "David Hockney
Drawings" at the National Portrait Gallery and "Into the night" at
the Barbican.
Galleries & Private Client Services
Gallery Services ("GS") faced challenging conditions as the
commercial art market contracted sharply in the face of investor
concerns over the global economic outlook. After a 26.5% decline in
GS revenues in the first half, market confidence recovered somewhat
in the normally busier second half and by the end of February 2020,
GS revenues were moving much nearer to prior year levels. However,
in February and March 2020 COVID-19 effects were already becoming
evident in overseas markets.
Overall GS revenues for the full year fell by GBP1.7 million
(-22.4%) to GBP5.9 million reflecting a weak but slowly recovering
commercial art market which was then hit hard by the first effects
of COVID-19.
Storage
On a more positive note Momart's storage revenues continued to
grow building on the 3% improvement seen at the half year of
+GBP0.04 million of revenue. By year end the company had made
further progress in securing new storage clients and occupancy had
improved from 81% to 87% with revenues increased by GBP0.11 million
(+5.8%) to GBP2.18 million (2019: GBP2.07 million). By the end of
the year in March 2020 unsold spare capacity had reduced from 19%
to 13%.
Selling its remaining spare storage capacity represents a
continuing opportunity for Momart in the next few years once the
markets return to normal and renting out all the remaining space
would add GBP0.4 million (+18%) to storage revenues without any
significant increase in fixed storage costs.
Impact of Brexit
In general, the Board believes that the Group is not highly
exposed to any potential adverse outcomes arising from the UK
leaving the European Union.
Momart the Group's specialist art handing business is
potentially the most exposed and to avoid disruption to the
continued smooth flow of fine art between the UK and EU practical
arrangements will need to be put in place at the borders to ensure
future dislocation is minimised.
In the Falklands, FIC has almost no direct trading links with
the EU. However, 60% of Falklands GDP is dependent on income from
squid and offshore fisheries, and a significant proportion of the
squid catch is exported to Spain. In the event of increased tariffs
and friction at newly erected external borders, some short-term
impact on the pattern of this trade could arise, albeit the
majority of squid related income is linked to the illex catch which
is sold into markets in the Far East and which has no connection to
the EU.
PHFC is much more focussed on its local market and has no direct
trading links with the European Union. Some ferry components are
manufactured by European companies but spare parts are available in
the UK market and little or no impact is anticipated.
For Momart, the movement of art to and from the EU represents a
relatively small proportion (c. 20%) of its overall activity with
most movements relating to domestic transfers within UK and to and
from the United States. The Far East is also growing in importance
as a source of both buyers and sellers of art. Nonetheless, of the
Group's companies, Momart has the greatest exposure to any failure
to secure continued seamless access to the EU by the end of the
agreed transition period which ends on 31 December 2020 but which
can be extended by mutual agreement by up to 2 years. Contingency
plans using alternative routes onto the continent have been
investigated to mitigate any adverse potential impact of a failure
to reach a practical solution.
The other area of potential disruption lies with VAT and import
duty payable on art works as they enter and leave the UK and EU. If
the VAT regime between the UK and EU is changed in a mutually
competitive manner then the status of the UK as a convenient entry
point for European art purchases and sales may be constrained.
However, as with logistical arrangements at the border, provided
sensible regulations are put in place that mirror the status quo,
little disruption is anticipated and London's place as a leading
global centre should remain largely unaffected.
Trading outlook
Prior to the onset of COVID-19, the outlook for the Group was
quite positive with a recovery in the global art market and growing
storage revenues assisting progress at Momart and the strong demand
for housing in the Falklands supporting continued growth at FIC.
Substantial medium-term upside was in prospect in the Falklands
from increased government investment in infrastructure, support
services, tourism and potentially from offshore oil
development.
In principle these opportunities are still open but with the
global effects of the virus impacting the Group such progress may
be delayed for many months and potentially longer.
In addition, to husband the Group's cash resources, all
significant capital expenditure programmes across the Group have
been halted and the Board has taken the decision to suspend
dividends until we have greater visibility over future trading.
FIC
The Falklands are currently virus free, and effectively
quarantined from the outside world. Apart from some modest
disruption in April when construction activity was suspended by
precautionary social distancing rules which have since been
relaxed, FIC remains profitable and has been substantially
unaffected by COVID-19. With practical quarantine measures now in
place and a robust supply chain from the UK underpinned by British
government and Ministry of Defence support, FIC's domestic economy
looks reasonably well protected. However, the significant seasonal
growth in economic activity from tourist visitors in the austral
summer seems likely to be significantly diluted in the coming year.
Looking beyond this year any extended global recession and
potential cut backs in government spending programmes would hamper
growth.
UK businesses
In the UK the position is of greater concern. In the very near
term, in the Group's two UK based service businesses, which have
both seen demand for their services fall by over 90% in April and
May, we expect to see continued losses. This is despite extensive
use of the UK Government's very welcome Job Retention Scheme where
furlough grants covering 80% of the wage costs of those earning
less than GBP37,500 per annum have been received since 1 April. In
addition, all UK staff have accepted a 20% cut in pay and the Group
Board has agreed to a 30% reduction in salaries and fees together
with the suspension of all bonus schemes for the current year.
With heavy fixed costs in both UK businesses, the Board will be
monitoring the situation closely as the furlough scheme begins to
wind down from 1 August.
PHFC
At PHFC, marking its status as a provider of a critical
transport link for essential workers, exceptional grants of
GBP90,000 have been agreed by local councils to help mitigate the
worst effects of the dramatic loss of passengers caused by the UK
lock-down.
Over the next few months, the gradual re-opening of businesses,
schools and retail outlets should see a significant recovery in
passenger volumes but it appears likely that passenger volumes are
likely to be subdued until a complete recovery in business and
public health confidence is achieved.
Momart
At Momart, the business benefits from having a regular monthly
income from storage clients which accounted for GBP2.2 million in
the year ended 31 March 2020. In addition, the purchase of the
freehold of the art storage warehouse at Leyton in December 2018
removed external annual rental costs of GBP0.8 million which has
further improved core cash flow.
However almost 90% of the company's revenue is linked to
movements in privately and institutionally owned art works and in
April 2020 this came to a complete halt while Momart's costs for
providing these services (people, property and vehicle costs)
remained largely unchanged.
The timing and scale of the recovery in the markets served by
Momart is hard to judge and the picture is made more complex by the
inter-connections in the global market where the pattern and timing
of recovery will vary greatly between countries. For museums and
commercially funded galleries which depend on ticket sales for
their income, it seems that significant activity will not resume
until the requirements for social distancing are lifted. As things
stand in June 2020 it seems likely that full recovery will be
delayed until at least well into 2021.
Summary
It is understandably hard to forecast trading activity for the
current year. The Group's UK businesses have been severely affected
in the first three months and it will take time for them to recover
to previous trading levels. While the outlook for FIC is
reasonable, it is likely that the Group as a whole will be loss
making, with the extent of such losses depending on the duration
and rate of recovery in the end markets served.
Like many businesses, beyond the current financial year, the
outlook looks significantly more promising and there is good reason
to hope that the Group can begin to move back to the much more
positive longer-term growth prospects in evidence prior to the
onset of the virus.
Group Strategy
The Group, with its diverse spread of niche service businesses
remains fundamentally strong, with prospects for sustainable growth
evident at Momart, a strong and steady cash flow anticipated from
PHFC and real upside achievable at FIC.
However, all of this has been put on hold by COVID-19. The
Board's priority now is ensure that the three operating businesses
survive intact sustaining as few losses as possible while
minimising any damage and loss of capacity so that they can emerge
from this crisis in the best possible shape to deliver on the
promise of long term and sustainable growth that has been our
vision for many years.
To support this approach the Group's liquidity position is sound
with cash balances of GBP9.1 million at 31 March 2020 and this
provides significant reserves with which to cope with short term
losses and gives us the ability to weather the storm with some
security.
To augment group liquidity the Group has applied for and been
granted GBP5.0 million of loan facilities under the government's
Business Interruption Loan Scheme. This loan which is expected it
be drawn down in the next few weeks represents a prudent insurance
policy in the face of global uncertainty but it is not anticipated
that it will be retained beyond 12 months when the initial interest
free period expires.
With healthy cash reserves augmented by new loans, the Group
will also be in a position to take advantage of strategic
opportunities that may emerge as the crisis in each of the Group's
markets unfolds.
Although serious near-term challenges remain, the Group's
fundamental position remains strong and the Board looks to the
future with confidence.
John Foster
Chief Executive
23 June 2020
Chief Executive's Strategic Review (continued)
Financial Review
Revenue
Group revenue increased by 4.9% to GBP44.6 million, as the 23.5%
increase in the Falklands due to the increase in house building
activity was offset by falls in revenue at PHFC and Momart.
Underlying Operating Profit and IFRS 16
Before impairment charges and net finance costs, underlying
operating profit increased 4.3% to GBP4.6 million (2019: GBP4.4
million).
The adoption of IFRS 16 for Leases saw the removal from
overheads of GBP0.4 million of rental costs that were previously
categorised as an operating expense and their replacement by
increased depreciation charges of GBP0.33 million which are also
included in overheads and an additional interest expense of GBP0.11
million. In accordance with the rules that govern the adoption of
the new standard, the prior year comparatives have not been
restated. The overall effect of adopting IFRS 16 on the Group's
profit and loss account was to reduce reported Profit Before Tax by
GBP0.04 million.
Net financing costs
The Group's net financing costs increased by GBP0.3 million to
GBP0.9 million due to the loan drawn down in December 2018 to fund
the Leyton property purchase; interest was payable for the full 12
months in the year ended 31 March 2020 compared to three and a half
months in the prior year. In addition, the adoption of IFRS 16 at
the start of the year increased reported interest expense by
GBP0.11 million (2019: GBPnil).
Reported pre-tax profit
The reported pre-tax result for the year ended 31 March 2020 has
fallen to a loss of GBP3.8 million (2019: GBP3.9 million profit)
after the GBP7.5 million impairment charge to write down goodwill
which arose on the acquisition of the PHFC and Momart. There were
no other non-trading items in the current year and none in the
prior year. The Group's "Underlying Profit Before Tax" before these
non-trading, non-cash charges was GBP3.7 million (GBP3.9
million).
Taxation
The Group pays corporation tax on its UK earnings at 19% and on
earnings in the Falkland Islands at 26%. The Falkland Islands
Company Limited, which is resident in both jurisdictions, has been
granted a foreign branch exemption, and now pays all its
corporation tax in the Falkland Islands and no longer pays UK
corporation tax. As a result, FIC enjoys the full benefit of the
tax deductibility in the Falkland Islands of expenditure on
commercial and industrial buildings. In 2019-20, the effective
blended tax rate for the Group on underlying profits was 25.8% and
in the prior year, the effective blended rate was 21.4%. The
increase in rate from the prior year, is largely due to the 19% UK
corporation rate, to be effective from 1 April 2020 (and which was
substantively enacted on 17 March 2020) which will increase the
company's future current tax charge, and therefore has increased
the UK deferred tax rate at 31 March 2020 from 17% to 19%.
Earnings per share
Year ended 31 March 2020 2019
------
Change
GBPm GBPm %
------------------------------------------ ------ ------ ------
Reported (loss) / profit before tax (3.77) 3.86 -
Impairment charge 7.48 - -
Underlying profit before tax 3.71 3.86 -3.9
Taxation on underlying profit (0.96) (0.83) 15.8
Underlying profit after tax 2.75 3.03 -9.2
Diluted average number of shares in issue
(thousands) 12,684 12,560 1.0
Effective underlying tax rate 25.8% 21.4% 20.5
Basic EPS on underlying profit 22.0p 24.4p -9.7
Diluted EPS on underlying profit 21.7p 24.1p -10.1
------------------------------------------ ------ ------ ------
Basic EPS on reported loss / profit -37.8p 24.4p -255.2
Diluted EPS on reported loss / profit -37.8p 24.1p -256.7
------------------------------------------ ------ ------ ------
Fully diluted Earnings per Share ("EPS") derived from reported
profits, fell to a loss of 37.8 pence (2019: 24.1 pence), due to
the GBP 7.5 million impairment of goodwill noted above. Fully
diluted Earnings per Share ("EPS") derived from underlying profits
fell slightly to 21.7 pence (2019: 24.1 pence).
Balance sheet
The Group's balance sheet remains strong, however during the
year, total net assets decreased GBP 5.8 million to GBP 38.8
million from GBP44.6 million in the prior year, due to the GBP 7.5
million impairment charge to reduce goodwill in respect of Momart
and PHFC . Retained earnings fell by GBP4.8 million to GBP 19.8
million (2019: GBP24.6 million) after payment of a final dividend
in respect of the previous financial year paid in September 2019
and the interim dividend paid in January 2020 totalling GBP0.6
million . The hedging reserve has increased to a loss of GBP0.5
million due to the fixed interest rate swap taken out to
effectively fix the interest rate payable on the ten-year GBP13.875
million loan.
Opening reserves were restated and decreased by GBP0.2 million
under the new accounting standard, IFRS 16: Leases, which requires
operating leases to be brought onto the balance as a right-to-use
asset and a corresponding lease liability of all future lease
payments. There was no material impact on current year profits as a
result of this change in policy.
Bank borrowings increased to GBP15.7 million (2019: GBP12.8
million), as a result of the GBP13.875 million loan drawn down in
June 2019 to repay the GBP10.0 million short term loan, and the
Group's cash balances increased to GBP9.1 million (2019: GBP6.2
million).
As a result of the adoption of IFRS 16, the Group's rights under
normal rental and finance contracts which extend for more than 12
months are now shown as "Right-to-Use Assets", which include the
GBP4.1 million (2019: GBP4.1 million) net book value for the
Gosport pontoon and GBP0.8 million (2019: GBP0.4 million) of leased
trucks at Momart, which were all previously classified as long
leasehold property or plant and equipment respectively.
At 31 March 2020 the total net book value of leased assets
amounted to GBP7.6 million, which are held as "Right-to-Use Assets"
in fixed assets, these include the pontoon, and trucks together
with a balance of GBP2.74 million of newly categorised assets which
relate to shorter term rental contracts and which had not been
previously shown in the Balance Sheet. The net effect of the
adoption of IFRS 16 on 1 April 2019 was the addition of GBP2.3
million to the Fixed Assets in the Balance Sheet, matched by the
recognition of GBP2.5 million of additional lease liabilities and a
reduction in the Group's reserves of GBP0.2 million.
The carrying value of intangible assets has been reduced by
GBP7.5 million from GBP11.8 million to GBP4.3 million to reflect
the impairment of the goodwill at Momart and PHFC.
The net book value of property, plant and equipment increased by
GBP3.0 million to GBP41.7 million (2019: GBP38.7 million) after the
GBP2.3 million of rental leases have been included under IFRS 16,
together with a GBP0.8 million renewed lease signed during the year
for a warehouse rented by Momart, along with capital investment of
GBP2.0 million including GBP1.4 million incurred by FIC due to
increased activity and GBP0.6 million spent on the purchase of two
new trucks and two sprinters by Momart, with these trucks funded by
hire purchase leases.
At 31 March 2020, the Group had 65 (2019: 54) completed
investment properties, comprising commercial and residential
properties in the Falkland Islands, which are held for rental. The
65 investment properties available for rental include 55 investment
properties, which are mainly houses or flats in Stanley and ten
mobile homes, which are rented to staff. Ten properties were under
construction at 31 March 2020, including a block of eight flats and
two houses.
In addition, FIC holds approximately 400 acres of land in and
around Stanley. This includes 18 acres for industrial development
and 25 acres of prime mixed-use land.
The net book value of the investment properties and undeveloped
land of GBP6.5 million (2019: GBP5.2 million) has been reviewed by
the directors resident in the Falkland Islands and at 31 March 2020
the fair value of this property portfolio, including undeveloped
land, was estimated at GBP10.0 million (2019: GBP8.7 million), an
uplift of GBP3.5 million on net book value.
FIC's 65 houses and flats had an estimated fair value of GBP7.3
million (2019: GBP5.8 million), the ten houses under construction
were valued at cost of GBP0.6 million (2019: GBP0.7 million) and
the value of FIC's 700 acres of undeveloped land was estimated at
GBP2.1 million (2019: GBP2.2 million).
Deferred tax assets relating to future pension liabilities stood
at GBP0.7 million (2019: GBP0.7 million). These balances relate to
the deferred tax benefit of expected future pension payments in the
FIC unfunded scheme calculated by applying the 26% Falklands' tax
rate to the pension liability. The deferred tax asset decreased
very slightly in line with the fall in the pension liability due to
the increase in the discount rate.
Inventories, which largely represent stock held for resale and
work in progress at FIC and Momart decreased by GBP0.4 million to
GBP5.4 million at 31 March 2020 (2019: GBP5.8 million), due a
GBP0.3 million fall in Momart work-in-progress as a result of
reduced activity due to COVID-19.
Trade and Other Receivables increased to GBP8.7 million from
GBP7.8 million at 31 March 2019 reflecting increased sales activity
at FIC from housebuilding.
In the year the Group refinanced its short-term loans used to
assist in the acquisition of the Leyton warehouse for Momart in
December 2018. With the repayment of this GBP10.0 million loan and
the GBP13.875 million draw down of a long-term mortgage, bank
borrowings increased to GBP15.7 million from GBP12.8 million. The
Group's cash balances on hand at year end increased to GBP9.1
million (2019: GBP6.2 million).
Outstanding lease liabilities totalled GBP8.4 million (2019:
GBP5.0 million), GBP4.7 million (2019: GBP4.7 million) of the
balance is in respect of the 50-year lease from Gosport Borough
Council for the Gosport Pontoon, which runs until June 2061. GBP3.0
million of the increase in the total is because the Group adopted
IFRS 16 from 1 April 2019. IFRS 16 replaces IAS 17 Leases. Under
IFRS 16 there is no longer a distinction between the accounting for
finance and operating leases and therefore in addition to those
leases previously categorised as finance leases, the liability for
other leases previously recognised as operating leases has been
recognised as from 1 April 2019 together with a related
right-to-use asset. These new lease liabilities from former
operating leases include leases for the head offices of Momart and
Bishops Stortford, two third party warehouse leases at Momart and
for the lease of the Gosport pontoon. In accordance with the
standard the Group elected to apply IFRS 16 retrospectively with
the cumulative effect of initial application being recognised at 1
April 2019, and comparatives have therefore not been restated.
Lease liabilities have also increased in the year by GBP0.5 million
due to the two new large trucks and two new sprinters purchased by
Momart, which have all been funded by hire purchase agreements.
In common with most large UK companies, the Group pays most of
its corporation tax by means of payments on account. Residual
corporation tax due for payment within the next 12 months is GBP0.2
million (2019: GBP0.4 million) as GBP0.2 million had been paid by
the year end in respect of the corporation tax charge for the year
to 31 March 2020.
Trade and other payables decreased by GBP1.0 million to GBP8.6
million at 31 March 2020 (2019: GBP9.6 million).
At 31 March 2020, the liability due in respect of the Group's
only defined benefit pension scheme, in FIC, was GBP2.6 million
(2019: 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 has been fed through reserves in accordance with IAS 19.
Eleven former employees receive a pension from the scheme at 31
March 2020 and there are three deferred members.
The Group's deferred tax liabilities, excluding the pension
asset at 31 March 2020, were GBP2.8 million and increased by GBP0.3
million from the prior year (2019: GBP2.5 million); GBP2.7 million
(2019: GBP2.4 million) of this balance arises on property, plant
and equipment, and is principally due to accelerated capital
allowances on the new vessel in PHFC and also to properties in FIC,
where capital allowances of 10% are available on the majority of
properties. With such assets depreciated over 20-50 years, a
temporary difference arises on which deferred tax is provided.
Cash flows
Net cash flow from operating activities increased to GBP4.7
million (2019: GBP3.0 million) due to a reduced increase in working
capital balances in the current year.
The Group's operating cash flow can be summarised as
follows:
Year ended 31 March 2020 2019 Change
GBPm GBPm GBPm
----------------------------------------------- ------- ------- -------
Underlying profit before tax 3.7 3.9 (0.2)
Depreciation & Amortisation 2.1 1.4 0.7
Net Interest payable 0.8 0.5 0.3
Underlying EBITDA 6.6 5.8 0.8
Decrease in hire purchase debtors 0.1 0.2 (0.1)
Increase in working capital (1.4) (2.5) 1.1
Tax paid and other (0.6) (0.5) (0.1)
Net cash inflow from operating activities 4.7 3.0 1.7
Financing and Investing Activities
Capital expenditure (3.4) (22.4) 19.0
Net bank and lease liabilities interest
paid (0.8) (0.4) (0.4)
Bank and lease liability repayments (11.4) (0.6) (10.8)
Dividends paid (0.6) (0.6) -
Bank and lease liabilities draw down 14.4 10.2 4.2
----------------------------------------------- ------- ------- -------
Net cash outflow from financing and investing
activities (1.8) (13.8) 12.0
----------------------------------------------- ------- ------- -------
Net cash inflow / (outflow) 2.9 (10.8) 13.7
Cash balance b/fwd. 6.2 17.0 (10.8)
----------------------------------------------- ------- ------- -------
Cash balance c/fwd. 9.1 6.2 2.9
----------------------------------------------- ------- ------- -------
Financing outflows
During the year, the Group incurred GBP3.4 million of capital
expenditure, including GBP1.3 million spent on investment property,
GBP0.2 million on the purchase of one new rental property, and
GBP1.1 million on the construction of additional properties for
rent including eight flats and five houses at Fitzroy Road and John
Street in FIC. At Momart, the GBP0.6 million of capital expenditure
included the purchase of two large Mercedes Actros trucks with
refrigerated holds and two sprinter vans. The balance of GBP1.5
million of capital expenditure was almost exclusively incurred in
further investment in plant and equipment for FIC.
The GBP11.4 million (2019: GBP0.6 million) bank loan and lease
liabilities principal repayments made during the year, included the
GBP10.0 million repayment of the short-term facility drawn down in
December 2018 to fund the acquisition of the warehouses in Leyton.
This facility has been replaced with a GBP13.875 million facility
to be repaid over ten years from June 2019. In addition, GBP0.3
million was paid on property rental leases, which have been treated
as finance leases since 1 April 2019, GBP0.1 million was paid for
on truck hire purchase leases at Momart and GBP1.0 million of
further repayments were paid on the five bank loans. The GBP0.3
million repaid to Gosport Council on the 50-year pontoon lease is
included within the lease liability interest paid due to the
remaining 41-year length of the lease.
Chief Executive's Strategic Review (continued)
Risk Management and Principal risks and impact
The Board is ultimately responsible for setting the Group's risk
appetite and for overseeing the effective management of risk. The
Group faces a diverse range of risks and uncertainties which could
have an adverse effect on results if not managed. The principal
risks facing the Group have been identified by the Board and the
mitigating actions agreed with senior management and are discussed
in the following table:
COVID-19
Potential Impact Comment Impact/ Risk
Level
----------------------------------- ------------------
The lock down measures introduced The impact was immediate Very high
by the UK government to suppress and severe but with the but reducing
COVID-19 have had an unprecedented gradual relaxation of the as the lock-
impact on the fundamental lock down activity is reviving. down is relaxed.
conditions of supply and demand The economic costs were
in the Group's UK businesses. mitigated in both businesses
by the use of the UK Government's
furlough grant scheme.
----------------------------------- ------------------
At Momart, demand from the Activity in the commercial Very high
company's museum and gallery sector is reviving as lock - The commercial
clients fell away as the prohibition down measures are relaxed sector is
on public gatherings effectively although there are expected reviving as
closed client operations completely, to be restrictions on open the lock down
with the consequent cessation public access to art fairs is eased but
of Momart's art handling activities until a vaccine has been the adverse
in late March. developed. impact on
art fairs
Museums are planning new and the museum
exhibition regimes with sector is
restrictions on the numbers expected to
of visitors in order to continue until
meet ongoing social distancing an effective
requirements. Some smaller vaccine is
commercial galleries may developed.
find it uneconomic to re-open
until all social distancing
restrictions are lifted.
----------------------------------- ------------------
Momart's storage activities Some limited impact was Low
which account for 12% of its felt from those clients
revenues were largely unaffected. unable to meet their regular
monthly / quarterly storage
bills
----------------------------------- ------------------
Revised staff safety protocols Safe working practices Low
and the need to use PPE for have been reviewed and
staff will slow down installations updated in great detail
and increase the cost of operations. with reference to government
guidance and in consultation
with staff.
The additional costs of
operating will where-ever
possible be passed on to
clients. (All competitors
face a similar challenge).
----------------------------------- ------------------
At PHFC, the lock down saw The impact was immediate Very high
ferry customers cease their and severe but with the but reducing
normal daily travel to work gradual relaxation of the in intensity
and leisure activities, causing lock down activity at PHFC as the lock
a 90% fall in ferry traffic. is slowly reviving. down is eased.
Moderate -
reducing over
time.
----------------------------------- ------------------
COVID-19 continued
Potential Impact Comment Impact/ Risk
Level
------------------------------------ -----------------------
Social distancing requirements PHFC is better placed than Low
set limits on the full utilisation many public transport businesses
of ferry capacity. and can maintain 40% capacity
while enforcing social
distancing. As passenger
volumes recover the use
of the second vessel to
cover peak demand at rush
hour will help limit any
effective constraints on
effective carrying capacity.
------------------------------------ -----------------------
Social distancing requirements PHFC is better placed than Low
set limits on the full utilisation many public transport businesses
of ferry capacity. and can maintain 40% capacity
while enforcing social
distancing. As passenger
volumes recover the use
of the second vessel to
cover peak demand at rush
hour will help limit any
effective constraints on
effective carrying capacity.
------------------------------------ -----------------------
PHFC's programme of Solent PHFC's programme of summer Moderate but
leisure cruises has been cancelled cruises for 2020 has been only affecting
due to lock down restrictions cancelled current year.
and concerns over social distancing
on cruises where passenger
volumes need to be higher
to generate a return
------------------------------------ -----------------------
Longer term changes in customer This could be significant Moderate -
behaviour may result from until a vaccine is developed but expected
the pandemic: an increased and confidence is restored. to diminish
reluctance to use public transport. with the development
of a vaccine.
------------------------------------ -----------------------
Increased local and central New pop up cycle lanes Positive but
government action to encourage and increased public awareness difficult
the use of heathier greener of the adverse health consequences to quantify
modes of transport eg cycling of obesity may encourage
via ferry. longer term changes in
behaviour mitigating some
of the impact of a reluctance
to use public transport.
------------------------------------ -----------------------
There may be longer term changes The extent of these potential The potential
to customer behaviour at both effects is uncertain and for more long-lasting
PHFC and at Momart resulting difficult to judge effects has
from the COVID-19 pandemic been recognised
which could have an adverse in the impairment
effect on the demand for the of goodwill
services offered by both companies at both Momart
and PHFC.
------------------------------------ -----------------------
In the Falkland Islands the With assistance from the Low as a result
limited medical facilities UK the government has strengthened of government
left them initially vulnerable local medical facilities action.
to the pandemic. and created local testing
capacity.
------------------------------------ -----------------------
Initial social distancing The small tightly knit Low
protocols led to the temporary community means any necessary
cessation of certain of FIC's lock down measures are
activities in April including more effectively implemented
housebuilding and café and enforced.
opening but government grants
largely offset operating costs The isolated geographical
location has enabled effective
quarantining of all visitors.
The timing of the outbreak,
coming at the end of the
tourist season was fortuitous.
------------------------------------ -----------------------
Vulnerability remains from Until a vaccine is developed Moderate
virus transmission from inbound the negative impact on
visitors particularly cruise tourism could continue
ship passengers and land-based in future years.
tourists arriving by air.
------------------------------------ -----------------------
POLITICAL RISKS
Potential impact Comment Risk/ Impact
Level
----------------------------------- ------------------
Historically, Argentina has With the arrival of the new
maintained a claim to the Fernandez regime in November Low - Unchanged
Falkland Islands, and this 2019 relations with Argentina
dispute has never been officially have cooled. However, in
resolved. early November, a new weekly
flight to the Falkland Islands
from Brazil which passes
through Argentinian airspace
was established and permission
for that service to continue
operating has not been withdrawn
by Buenos Aires.
With relations now more
strained than in recent years
the security afforded by
the UK Government's commitment
to the Islands provides a
guarantee of the freedom
and livelihood of the people
of the Falklands and thereby
to FIC.
Provided UK Government support
is maintained the security
of the people of the Falklands
is not in doubt.
----------------------------------- ------------------
Uncertainty caused by the The final terms for the Low / Moderate
UK's decision to leave the UK's departure from the EU - Increased
European Union. are yet to be determined.
Of the Group's companies,
Momart faces the biggest
potential threat and failure
to negotiate pragmatic border
arrangements could affect
the flow of art works in
and out of Europe to the
UK. Also, any attempts to
undertake competitive changes
in VAT between EU governments
and the UK could also destabilise
the current position Transfers
of art between government
institutions and museums
are less likely to be affected
and the level of commercial
business with the EU represents
a relatively small proportion
of Momart's overall activity.
The decision whether or not
to extend the transition
period beyond 31 December
2020 will affect the timing
of any of these effects,
however when it does arrive
it seems likely that some
short-term dislocation of
Momart's business should
be expected.
----------------------------------- ------------------
ECONOMIC CONDITIONS
Potential impact Comment Risk/ Impact
Level
------------------------------------ ------------------
There is a link between demand
for the Group's services and
general economic activity.
------------------------------------ ------------------
The impact of COVID-19 is In the near term the trading High impact
unprecedented and is likely performance of both the Group's on UK operations
to result in sustained damage UK companies has been severely
to the UK and global economy, affected by the effects of
with higher levels of unemployment the lock down introduced
suppressing consumer demand to suppress the virus. Revenues
and the need for governments have fallen by up to 90%
to repay borrowings accumulated and both businesses have
as a result of the pandemic, made heavy losses despite
limiting wider spending plans taking full advantage of
in the future. the UK government's furlough
grant scheme.
------------------------------------ ------------------
International air transport The Falklands to date have Moderate impact
and travel are likely to be been less badly disrupted. in second
particularly badly affected. FIC has seen its revenue half
With the failure of many carriers largely maintained and has
likely and restrictions in avoided slipping into loss
the numbers of passengers making but faces reduced
that can be carried, the economics tourist revenues later in
of air transport are likely the financial year
to change dramatically. The
costs of air freight and travel
can be expected to rise significantly
increasing operating costs
particularly at Momart and
reducing tourist visitors
to the Falkland Islands.
------------------------------------ ------------------
Prospects for the development The substantial delays already Low impact
of oil in Falklands waters experienced in the development but reduced
have been dampened and delayed of Sea Lion have reduced upside
by the recent collapse in expectations and the negative
oil prices below $40 barrel. impact on the economy as
Economic activity in the Falkland businesses have largely discounted
Islands is subject to fluctuation, the possibility of any imminent
dependent upon Oil sector boost to the economy and
activity. adjusted their spending plans
accordingly.
------------------------------------ ------------------
Budgets available to museums Reduced museum budgets are Moderate to
for exhibitions can fluctuate likely to result from the High depending
with Government spending and pandemic and force a reduction on government
the commercial art market in the number and technical policy towards
exhibits cyclicality; both complexity (and expense) levels of
have a direct impact on Momart. of exhibitions with a consequent public subsidy
Both these effects have been reduction in demand for Momart's
exacerbated by COVID-19 . services until government
finances and confidence recovers
------------------------------------ ------------------
Mitigation
------------------------------------ ------------------
Prudent management through the different phases of the economic cycle.
Flexibility in the business model. Significant cash reserves and
the potential to take on additional borrowing.
Management carefully monitors developments around the oil sector
in the Falklands and adjusts investment levels accordingly.
CREDIT RISK
------------------------------------ ------------------
Potential Impact Comment Risk Level
------------------------------------ ------------------
Credit risk is the risk of Effective processes are in Moderate -
financial loss if a customer place to monitor and recover This risk
fails to meet its contractual amounts due from customers has increased
obligations. particularly
for Momart
as a result
of COVID-19
------------------------------------ ------------------
Mitigation
------------------------------------ ------------------
Management in all businesses have credit control policies in place
to manage risk on an ongoing basis. These include the use of customer
specific credit limits and active cash collection procedures.
COMPETITION
Potential impact Comment Risk Level
----------------------------------- ----------------
FIC is considered by the senior Local competition is healthy Low - Unchanged
management to be a market for FIC and stimulates continuing
leader in a number of business business improvement in FIC
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.
----------------------------------- ----------------
Mitigation
----------------------------------- ----------------
Being responsive to the needs of our customers and focussing on the
quality of service delivery.
Understanding changing market conditions and our competitors.
Driving down costs and improving margins
Continuing investment to maintain and enhance the quality of service
offered to customers
FOREIGN CURRENCY AND INTEREST
RATE RISK
----------------------------------- ----------------
Potential Impact Comment Risk Level
----------------------------------- ----------------
Momart is exposed to foreign Largely unchanged. Low -
currency risk arising from Unchanged
trading and other payables
denominated in foreign currencies.
The Group is exposed to interest
rate risks on large loans.
FIC retail outlets accept
foreign currency and are exposed
to fluctuations in the value
of the dollar and euro.
----------------------------------- ----------------
Mitigation
----------------------------------- ----------------
Forward exchange contracts are used to mitigate this risk, with the
exchange rate fixed for all significant contracts.
Interest rate risk on large loans is mitigated by the use of interest
rate swaps.
INVENTORY
----------------------------------- ----------------
Potential Impact Comment Risk Level
----------------------------------- ----------------
Inventory risk relates to A thorough review of old Moderate-
losses on realising the carrying and slow-moving stock in Unchanged
value on ultimate sale. Losses Stanley has been undertaken
include obsolescence, shrinkage by senior management and
or changes in market demand a programme to address problem
such that products are only areas, maximise cash realisation
saleable at prices that produce and to prevent reoccurrence
a loss. has been implemented.
FIC is the only Group business
that holds significant inventories
and does face such risk in
the Falklands, where it is
very expensive to return excess
or obsolete stock back to
the UK.
----------------------------------- ----------------
Mitigation
----------------------------------- ----------------
The EPOS and stock system used by FIC allows monitoring of sales,
stock levels and stock turnover by line item. Local management and
senior leadership review of stock levels and slow-moving stock.
PEOPLE
Potential Impact Comment Risk Level
------------------------------------ ----------------
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 retain of any one person. The
experienced and skilled people wide spread of the Group's
at all levels across the business operations further dilutes
could have an adverse impact the risk.
on the business.
------------------------------------ ----------------
In the Falklands business there The development of tourism Low - Reduced
is a reliance on being able on St Helena has been slow
to attract staff from overseas and the Falklands remain
including many from St Helena. an attractive location
Development of those locations for St Helenian people
might reduce the pool of available to work.
staff.
------------------------------------ ----------------
In the Falklands business there Immigration procedures Moderate -
is a reliance on being able in the Falklands are bureaucratic Unchanged
to attract staff from overseas and slow although some
generally. effort is being made by
the Falklands Government
to improve matters.
------------------------------------ ----------------
Mitigation
------------------------------------ ----------------
Consultation with employees, where appropriate, on key issues concerning
them as employees.
Management review of local salary trends
Long term incentive plans for key senior staff. Incentivising staff
through performance related bonuses.
Staff are supported with immigration applications and to acquire
relevant employment related qualifications.
LAWS AND REGULATION
------------------------------------ ----------------
Potential Impact Comment Risk Level
------------------------------------ ----------------
Failure to comply with the frequently The regulatory environment Low - Unchanged
changing regulatory environment continues to become increasingly
could result in reputational complex.
damage or financial penalty.
------------------------------------ ----------------
Mitigation
------------------------------------ ----------------
Use of specialist and local advisers on regulatory and legislation
matters
Evolving policies and practices to take account of changes in legal
obligations.
We monitor regulatory and legislation changes to ensure our policies
and practices reflect them and we comply with relevant legislation.
During the year training has taken place in respect of customs practices.
GENERAL HEALTH AND SAFETY
Health & Safety matters are Low
The Group is required to comply considered a key priority
with laws and regulation governing for the Board of FIH and
occupational health and safety all its operating companies.
matters. Furthermore, accidents Particular attention has
could happen which might result been paid to updating risk
in injury to an individual, assessments and safe working
claims against the Group and practices in the light of
damage to our reputation. COVID-19.
All staff receive relevant
Health and Safety training
when joining the Group and
receive refresher and additional
training as is necessary.
Training courses cover maritime
safety, lifting and manual
handling, asbestos awareness
and fire extinguisher training.
External HSE audits are conducted
on a regular basis
-------------------------------------- ----------------
John Foster
Chief Executive
23 June 2020
Board of Directors and Secretary
Robin Williams, Non-executive Chairman
Robin joined the Board in September 2017. He has a wide breadth
of corporate experience, gained at a range of quoted and private
businesses as well as from an early career in investment banking.
He is currently Chairman at Keystone Law Group plc and a
non-executive director at van Elle Plc. Robin qualified as an
accountant in 1982 after graduating in engineering science from the
University of Oxford. He worked in corporate finance for ten years
at investment banks including Salomon Brothers and UBS before
leaving the City in 1992 to co-found the packaging business,
Britton Group plc. In 1998, he moved to Hepworth plc, the building
materials group, and since 2004 he has focused on non-executive
work in public, private and private equity backed businesses. His
financial background provides the experience required as Chairman
of the Group to review and challenge decisions and opportunities.
Robin is a member of the Audit and Remuneration Committees and is
Chairman of the Nominations Committee.
John Foster, Chief Executive
John joined the Board in 2005. He is a Chartered Accountant and
previously served as Group Finance Director for Macro 4 plc (2000 -
2003) and Hamleys plc (1998 - 2000). Prior to joining Hamleys, he
spent three years as Corporate Finance Director of Ascot plc, an
industrial holding company with a turnover of GBP300 million and
over 1,600 employees. Before becoming a plc director, John spent 11
years working in Private Equity for a leading UK investment bank
following training and CA qualification with Arthur Andersen in
1983. John's finance background, together with his strong
analytical skills developed during his nine years working as a
venture capitalist with a leading investment bank is well fitted to
his commitment to perform the Chief Executive role at FIH group
plc.
Jeremy Brade, Non-executive Director
Jeremy joined the Board in 2009, he is a Director of Harwood
Capital Management where he is the senior private equity partner
and has worked in UK private equity for over 19 years. He has led
several successful acquisitions and public-to-private transactions.
Previously Jeremy was with the Foreign and Commonwealth Office
(FCO) where he served at the British High Commission in New Delhi
and as the representative of Cyrus Vance and Lord Owen at the
International Conference on the Former Yugoslavia, and prior to
joining the diplomatic service, Jeremy was an army officer. Using
his experience of acquisitions and various corporate transactions
through Harwood Capital Management Limited, Jeremy brings a wealth
of knowledge and expertise on restructuring, funding and
transforming companies. Jeremy is a member of the Nominations,
Audit and Remuneration Committees.
Robert Johnston, Non-executive Director
Robert joined the Board on 13 June 2017; he is an experienced
non-executive director and investment professional and has served
on the boards of several quoted companies in both North America and
in UK, including Fyffes PLC and Supremex, Inc. Robert Johnston has
been the Chief Strategy Officer and Executive Vice President at The
InterTech Group, Inc. and has over 20 years of experience in
various financial and strategic roles. He is the principal
representative of the Jerry Zucker Revocable Trust. Robert brings
experience on many transactions at both the corporate and asset
level, including debt and equity, and his experience in the banking
sector will prove invaluable to developing the Group. Robert
represents the Company's largest shareholder, "The Article 6
Marital Trust, created under the First Amended and Restated Jerry
Zucker Revocable Trust dated 4-2-07", which has a beneficial
holding of 3,596,553 ordinary Shares, representing 28.8% of the
Company's issued share capital.
He is currently on the boards of Colabor Group Inc, Corning
Natural Gas Holding Corp, Supremex Inc, and Circa Enterprises Inc.
Robert is a member of the Nominations and Audit Committees and is
Chairman of the Remuneration Committee.
Dominic Lavelle, Non-executive Director
Dominic joined the Board on 1 December 2019; Dominic brings to
FIH a wide breadth of corporate experience. Most recently, Dominic
was Chief Financial Officer of SDL plc from 2013 to 2018. He has
over 15 years' experience as a UK plc Main Board Director and has
been Finance Director/Chief Financial Officer of seven UK publicly
traded companies including Mothercare plc, Alfred McAlpine plc,
Allders plc and Oasis plc. His experience in both permanent roles
and turnaround and restructuring projects across several business
sectors: technology and services, retail, building, construction,
support services, property (agency, management, valuation,
investment, development), leisure, care home and insurance is a
great benefit to the Group, particularly with the various business
streams operated by FIC.
After graduating in Civil and Structural Engineering from the
University of Sheffield in 1984, Dominic trained with Arthur
Andersen and qualified as a chartered accountant in 1989. He is
currently on the board of McColls Retail Group plc, as a
non-executive director and Chair of the Audit & Risk Committee,
and a director of Steenbok Newco 10 SARL, a wholly owned subsidiary
of the Steinhoff Group. Dominic is a member of the Nominations and
Remuneration Committees and is Chairman of the Audit Committee.
Carol Bishop, Company Secretary
Carol Bishop joined the Company in December 2011. She is a
chartered accountant and has previously worked for London Mining
plc, an AIM listed company as Group reporting manager. Prior to
this she spent three years at Hanson plc and prior to that, six
years at the Peninsular and Oriental Steam Navigation Company.
Corporate Governance Statement
Dear Shareholder,
As Chairman of the Company, I am responsible for leading the
Board in applying good corporate governance and the Board is
committed to good governance across the business, both at an
executive level and throughout its operations. The Board strives to
ensure that the objectives of the business, the principles and
risks are underpinned by values of good governance throughout the
organisation.
The FIH group plc Board values include embedding a culture of
ethics and integrity, and the adoption of higher governance
standards, to maintain its reputation by fostering good
relationships with employees, shareholders and other stakeholders
to deliver long term business success.
In 2018 the AIM Rules for Companies were updated to acknowledge
a change in investor expectations toward corporate governance for
companies admitted to trading on AIM, and the Board, took the
decision to adopt the revised Quoted Companies Alliance Corporate
Governance Code 2018 (the "QCA Code") which they believe is the
most appropriate recognised governance code for the Company.
The QCA Code has ten principles of corporate governance that the
Company has committed to apply within the foundations of the
business, which are discussed in detail on the Company's website
www.fihplc.com in the Corporate Governance section.
The Board is aware of the need to protect the interests of
minority shareholders, and balancing those interests with those of
any more substantial shareholders, including those interests of the
Jerry Zucker Revocable Trust, a major shareholder holding nearly
29% of the issued share capital and voting rights, which are
represented on the Board by the non-executive director, Robert
Johnston.
Beyond the Annual General Meeting, the Chief Executive and the
Chairman offer to meet with all significant shareholders after the
release of the half year and full year results. The Chief Executive
and the Chairman are the primary points of contact for the
shareholders and are available to answer queries over the phone or
via email from shareholders throughout the year.
Business model and strategy
The Group's strategy is to continue to develop the potential of
its existing companies: to fill storage capacity and make further
progress at Momart, to maintain the strong cash flow from PHFC and
to invest in FIC to take full advantage of the longer-term growth
opportunities in the Falklands. While doing this management are
also alert to the benefits of a well-judged complimentary
acquisition that would give increased scale to the Group and
enhance the liquidity of FIH shares. As set out in the Chief
Executive's Strategic Report, this established strategy has been
affected by the impact of COVID-19 which has necessitated a
temporary focus on cost saving, husbanding cash resources and
restricting investment whilst the damaging short term effects of
the virus are dealt with in a way which ensures maximisation of the
long term value of the Group's businesses
Risk Management
The Board has overall responsibility for the systems of risk
management and internal control and for reviewing their
effectiveness. The internal controls are designed to manage rather
than eliminate risk and provide reasonable but not absolute
assurance against material misstatement or loss. The key risks of
the Group are presented in the Chief Executive's Strategic
Report.
The Board has determined that an internal audit function is not
required due to the small size of the Group and its administrative
function and the high level of director review and authorisation of
transactions.
A Directors' and Officers' Liability Insurance policy is
maintained for all directors and each director has the benefit of a
Deed of Indemnity.
Director independence
The Board considers itself sufficiently independent. The QCA
Code suggests that a board should have at least two independent
non-executive directors. The Board has considered each
non-executive director's length of service and interests in the
share capital of the Group and consider that Mr Williams, Mr Brade,
Mr Johnston and Mr Lavelle are independent of the executive
management and free from any undue extraneous influences which
might otherwise affect their judgement. All Board members are fully
aware of their fiduciary duty under company law and consequently
seek at all times to act in the best interests of the Company as a
whole.
Whilst the Company is guided by the provisions of the Code in
respect of the independence of directors, it gives regard to the
overall effectiveness and independence of the contribution made by
directors to the Board in considering their independence, and does
not consider a director's period of service in isolation to
determine this independence. The Board acknowledges that Robert
Johnston, who joined the Board on 13 June 2017, represents the
Company's largest shareholder, "The Article 6 Marital Trust,
created under the First Amended and Restated Jerry Zucker Revocable
Trust dated 4-2-07", (the "Zucker Trust"), which has a beneficial
holding of 3,596,553 ordinary Shares, representing 29% of the
Company's issued share capital. The Board has considered Mr
Johnston's independence, given his representation of this
shareholding and all Board members have satisfied themselves that
they consider Mr Johnston to be independent. This is as a
consequence of (i) the fact that Mr Johnston has considerable
international investment expertise, and (ii) that the shareholding
of his employer in FIH represents only a small part of its wider
portfolio, but nonetheless aligns him with the interests of FIH
shareholders generally. It is also relevant that Mr Johnston has
relatively recently joined the Board of FIH and does not have long
established relations with any of the Group's management, external
advisers or businesses.
Jeremy Brade's tenure, at over the suggested nine years for PLC
directors, is not the determining factor in his independence, which
the Board judges in relation to his contribution and depth of
knowledge of the Group's operations and history. The Board has
asked Jeremy to stand for re-election at the AGM and will consider
his position again before the AGM next year with the Company's and
shareholders' interests as the priority consideration. All
directors retire by rotation and are subject to election by
shareholders at least once every three years. Any non-executive
directors who have served on the Board for over least nine years
will be subject to annual re-election.
Time commitment of directors
John Foster, Chief Executive of the company, is the only
full-time executive director. Robin Williams, Jeremy Brade Robert
Johnston and Dominic Lavelle have all been appointed on service
contracts for an initial term of three years. Overall, it is
anticipated that non-executive directors spend 10-15 days a year on
the Group's business after the initial induction, which includes a
trip to the Group's subsidiary in the Falkland Islands. However,
the non-executive directors and the Chairman in particular spend
significantly more time than this on the business of the group.
All directors are expected to attend all Board meetings, the
Annual General Meeting and any extraordinary general meetings.
Non-executive directors are expected to devote additional time in
respect of any ad hoc matters, such as significant investment
opportunities, responding to market changes, such as the COVID-19
pandemic, consideration of any business acquisitions, and any
significant recruitment or corporate governance changes.
Skills and qualities of each director
The Board recognised the importance of having directors with a
diverse range of skills, experience and attributes, which we have
across our current Board. Each Board member contributes a different
skill set based on their own experience, which is discussed in
detail in the "Board of Directors and Secretary".
Board Meetings
The Board meets frequently throughout the year to consider
strategy, corporate governance matters, and performance. Prior to
each meeting, all directors receive appropriate and timely
information. Since the last annual report was published on 11 June
2019 there have been seventeen Board meetings, Robin Williams, John
Foster and Robert Johnston have attended all meetings. Jeremy Brade
attended sixteen of the seventeen, and Dominic Lavelle has attended
all meetings since his appointment to the Board.
There have been two Remuneration Committee meetings in the past
12 months since 11 June 2019 and two Audit Committee meetings,
which were attended by all members of each committee. The
appointment of the additional non-executive director was handled by
the Board and the Nominations Committee meets on an ad hoc basis to
consider Board composition and succession.
Board directors
The Board comprises Robin Williams, the non-executive Chairman,
John Foster, the full time Chief Executive and three other
non-executive directors, Jeremy Brade, Robert Johnston and Dominic
Lavelle.
Details of how each director keeps their skill set up to
date
The Board as a whole is kept abreast by the Company's lawyers
with developments of governance, and by WH Ireland, the Company's
Nominated Adviser, of updates to AIM regulations. The Group's
auditors, KPMG, meet with the Board as a whole twice a year and
keep the Board updated with any regulatory changes in finance and
accounting.
Any external advice sought by the Board
During the year, KPMG provided advice on the new accounting
standards and the control environments at the subsidiaries. RSM
Tenon, the Group's tax advisors ensure compliance with taxation law
and transfer pricing and the Company's lawyers advised on a number
of areas.
Internal advisory responsibilities
The company secretary helps keep the Board up to date on areas
of new governance and liaises with the Nominated Adviser on areas
of AIM requirements, and with the Company's lawyers on areas such
as Modern Slavery, Data Protection and other legal matters. She
also liaises with the Company's tax advisers with regards to tax
matters and with the Group's auditors with respect to the
application of current and new accounting standards, and on the
status on compliance generally around the Group. The company
secretary has frequent communication with the Chief Executive and
access to the Chairman, and is available to other members of the
Board as and when required.
Board performance effectiveness
The directors have considered the effectiveness of the Board,
committees and individual performance, and this was discussed by
the Board in the April 2019 meeting. The Board meets formally five
times a year with update Board meetings held in between these
meetings as required. There is a strong flow of communication
between the directors, in particular the relationship between the
Chief Executive and Chairman, who have regular additional calls or
meetings. The agenda for the formal meetings are set with the
consultation of both the Chief Executive and Chairman, and papers
are circulated a week in advance of the meetings, giving directors
ample time to review the documentation and enabling an effective
meeting. Resulting actions are tracked as matters arising and
followed up at subsequent Board meetings to ensure that they have
been addressed.
Board performance evaluation
In 2019, the Chairman conducted an effectiveness review by means
of a questionnaire, with comment on the Chairman passed to Jeremy
Brade as the Senior Independent Director at that time. The outcome
of the appraisal is that the Board has been effective in
discharging its duties during the year. The review was conducted in
March 2019 and discussed at the April 2019 Board meeting, with
useful conclusions in the areas of major shareholder representation
in the Board, how the non-executive directors interact with only
one executive on the Board, the development of strategy and the
presentation of recommendations to the Board.
In a small but highly diversified and geographically dispersed
group such as FIH, the Board recognise that creating an effective
leadership team is of vital importance. In 2020, the Board widened
its review to include the thoughts of the senior management team of
the FIH group, with focus on the only executive director, the Chief
Executive, to seek their perspectives on the organisation and their
suggestions for improvement.
Robin Williams
Chairman
23 June 2020
Audit Committee Report
The Audit Committee comprises the four non-executive directors:
Jeremy Brade, Robin Williams, Robert Johnston and Dominic Lavelle,
and is chaired by Dominic Lavelle. The Audit Committee reviews the
external audit activities, monitors compliance with statutory
requirements for financial reporting and reviews the half year and
annual financial statements before they are presented to the Board
for approval. The Audit Committee also keeps under review the scope
and results of the audit and its cost effectiveness and the
independence and objectivity of the Auditor and the effectiveness
of the Group's internal control systems.
The Committee meets twice a year to review both the year end and
half year results and KPMG, the Company's auditors, attend both of
these meetings in person. It is the Audit Committee's role to
provide formal and transparent arrangements, to consider how to
apply financial reporting under IFRS, the Companies Act 2006, and
the requirements of the QCA Code and also to maintain an
appropriate relationship with the independent auditor of the
Group.
The current terms of reference of the Audit Committee were
reviewed and updated in January 2018.
Effectiveness of the external audit process
The Audit Committee is committed to ensuring that the external
audit process remains effective on a continuing basis as set out
below:
-- Reviewing the independence of the incumbent auditor;
-- Considering if the audit engagement planning, including the
team quality and numbers is 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 to the external auditor twice a year to
the Audit Committee, after the full year audit and half year
review, with one-to-one discussions held beforehand between the
Chair of the Audit Committee and the audit rm partner.
Non-audit services provided by the external auditor
The Audit Committee keeps the appointment of external auditors
to perform non-audit services for the Group under continual review,
receiving a report at each Audit Committee meeting. In the year
ended 31 March 2020, there were no non-audit fees paid to the
external auditors, in the year ended 31 March 2019, GBP12,000 was
payable for non-audit services, less than 10% of the audit service
fee.
Emerging Risks
The risk management approach is subject to continuous review and
updates in order to reflect new and developing issues which might
impact business strategy. Emerging or topical risks are examined to
understand their 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.
Risks faced in relation to investments in material joint
ventures
The Group has one joint venture, which has been dormant in the
current and prior year. The balance sheet consists mainly of
debtors due from each of the parent companies and the Group is
responsible for maintaining the accounting records of the joint
venture, therefore there are currently no significant risks which
have been identified.
Areas of judgement
In making its recommendation that the financial statements be
approved by the Board, the Audit Committee has taken account of the
following significant issues and judgements:
Going concern
The Group's balance sheet and liquidity position at 31 March
2020 was strong with cash balances of GBP9.1 million (2019: GBP6.2
million).
However, COVID-19 and the lockdown measures introduced in the UK
on 23 March 2020 have significantly affected the Group's
businesses, particularly in the UK, resulting in significant losses
in the short term. The Group is currently incurring losses at both
Momart and PHFC, which are only partially offset by continued
profitable trading at FIC.
At PHFC, where passenger numbers fell initially by 90%, a modest
recovery in passenger volumes is being seen as lock-down is
gradually eased; further improvement is expected as business and
retail activity around Portsmouth Harbour slowly returns to
normal.
At Momart, commercial gallery clients, auction houses and
museums across the globe had closed their doors by the end of March
2020 leading to a cessation in art handling throughout the lock
down period, leaving income from art storage as the company's only
source of revenue. However, commercial galleries have been steadily
re-opening from early June and further openings are expected from
UK and international museums and galleries during the summer.
As a result of the lock-down and curtailment in demand for
services at PHFC and at Momart, the Group has utilised the UK
Government's Job Retention Scheme and a substantial number of the
Group's UK employees have been placed on furlough.
In the Falkland Islands the limited number of infections have
been successfully contained leaving the Islands quarantined and
effectively virus free with domestic business activity at close to
normal levels. However, for the October 2020 - March 2021 tourist
and cruise season, visitor numbers are highly uncertain and the
significant uplift in commercial activity normally seen at FIC is
likely to be markedly reduced in the second half of the current
financial year.
Since the emergence of the pandemic the Board has met regularly
to review the financial implications for the Group. Detailed
monthly financial projections, including a twenty-four month
cash-flow forecast, have been prepared in discussion with the local
management teams of each business. These forecast cash flows have
been carefully reviewed after consideration of the impact of the
pandemic on revenue, cost saving measures, agreed salary cuts, the
curtailment of capital expenditure programmes, cessation of
dividends, bank loan repayment holidays and the various central and
local government support measures. These forecasts have been
updated regularly and reviewed on fortnightly Board calls.
All loan facility terms have been reviewed with particular
attention paid to covenants, none of which will be breached by any
currently foreseeable events.
After careful consideration of current cash balances, the cash
flow forecasts, existing loan facilities plus an additional
interest free loan of GBP5.0 million under the UK Government's
CBILS loan guarantee scheme, the directors are satisfied that the
Group's existing resources (including committed banking facilities)
are sufficient to meet its medium-term needs, and the Group is well
placed to manage the impact of COVID-19 on its businesses and they
have a reasonable expectation that the Company and Group have
adequate resources to continue in operational existence for the
foreseeable future.
As a result, the directors have continued to adopt the going
concern basis in preparing the financial statements.
Large housing construction contract
In 2019, FIC started construction of 18 houses for the Falklands
Islands Government. This is the largest residential construction
contract for FIC. In accordance with IFRS 15: Revenue from
Contracts with Customers, the revenue is being recognised under the
"input method" permitted under the standard, and therefore at each
reporting period, the "inputs" are assessed, including the
materials consumed, the labour hours expended, and all other costs
incurred. These costs are then compared to the total expected costs
to assess the revenue recognised. In order to use this method, a
reliable system of forecasting the outcome of the contract is
required, and if these forecasts are found to be inaccurate this
would result in an over or understatement of revenue for that
reporting period.
Impairment testing
The Group tests material goodwill annually for impairment, or
more frequently if there are indications that goodwill and/or
indefinite life assets might be impaired. An impairment test is a
comparison of the carrying value of the assets of a CGU, based on a
value-in-use calculation, to their recoverable amounts. Impairment
is necessary when the recoverable amount is less than the carrying
value.
Impairment tests have been undertaken with respect to intangible
assets (see note 11 for further details) using commercial judgement
and a number of assumptions and estimates have been made to support
the carrying values.
In determining the fair value of intangible assets recognised on
the acquisition of Momart International Limited, management acted
after consultation with independent intangible asset valuation
advisers. The intangible assets, which have not been fully
amortised at 31 March 2020, include goodwill and the brand name.
Goodwill is not subject to amortisation but to at least annual
impairment testing, and the Momart brand name was deemed to have an
indefinite life, and amortisation was ceased from 1 October
2013.
At PHFC, the key assumptions made in the estimation of future
cash flows are: passenger numbers and the average fare yield per
passenger. In late March 2020, the impact of the lock-down
initially resulted in falls in passenger numbers of 90% and volumes
have remained low throughout the three-month lock down period. A
slow recovery is expected in the medium-term as children return to
school and non-essential retail shops re-open. But there is a clear
risk that the impact of COVID-19 may continue in the medium-term,
with increased numbers of employees working from home and/or some
choosing to avoid public transport and to travel by car, reducing
the number of commuters using the ferry. In past years, the small
annual decline in passenger numbers, due to changing demographic
and travel patterns, has been offset by increases in ticket prices.
Given the negative factors noted above, PHFC's ability to maintain
its profitability and cash flow by offsetting volume declines by
fare increases has been brought into question and this directly
affects the recoverable value of the Group's investment in this
company resulting in an impairment of historic goodwill of GBP4.0
million.
A more cautious view of Momart's long-term growth prospects has
been taken, driven by the weakness seen in the international
commercial art market in 2019 (pre COVID-19) and by the long-term
implications of the virus on the global economy. A widespread
recession and market dislocation are likely to further dilute
demand from ultra-high-net-worth collectors and commercial buyers
for some time. In the public sector, museum budgets are likely to
be squeezed by anticipated cuts in government spending and in
addition visitor numbers are likely to be restricted by the need
for social distancing, resulting in less frequent, less complex
exhibitions and a reduced demand for Momart's services from museum
clients. These effects are likely to restrict the speed and extent
of Momart's expected recovery and have resulted in an impairment of
historic goodwill of GBP3.5 million.
Parent Company Investment in subsidiaries
The reviews of the recoverable amounts of Momart and PHFC were
compared to the cost of investments held in the Parent Company's
balance sheet, and during the year ended 31 March 2020, the
Company's investment in the Momart was impaired by GBP3,713,000. No
impairment was required to the PHFC cost of investment. Further
detail has been provided in note 11 with regards to the
sensitivities of the assumptions.
New accounting standards
In the year commencing 1 April 2019, the Group adopted IFRS 16:
Leases for the first time. This requires operating leases to be
brought onto the balance as a right-to-use asset with a
corresponding lease liability of all future lease payments. From 1
April 2019 there is no longer a distinction between finance and
operating leases. There was no material impact on current year
profits as a result of this change in policy: profit before
interest increased by GBP0.1 million and the interest charge
increased by GBP0.1 million due to the discounting of these
liabilities. Our significant leases include the 50-year ground rent
at Gosport, which is payable at GBP60,000 a year until June 2061,
two warehouses leased from third parties by Momart for a remaining
eight and nine years, and two head office leases for Momart and the
FIC UK head office.
The impact on the Group's balance sheet at 31 March 2020, was to
increase fixed assets by GBP2.3 million and increase liabilities by
GBP2.5 million. The GBP0.2 million difference was taken to reserves
at 1 April 2019, as the Group has elected to apply the modified
retrospective approach.
Stock provisions
An inventory provision is booked when the realisable value from
sale of the inventory is estimated to be lower than the inventory
carrying value, or where the stock is slow-moving, obsolete or
damaged, and is therefore unlikely to be sold. The quantification
of the inventory provision requires the use of estimates and
judgements and if actual future demand were to be lower or higher
than estimated, the potential amendments to the provisions could
have a material effect on the results of the Group.
Defined benefit pension liabilities
A significant degree of estimation is involved in predicting the
ultimate benefit payments to pensioners in the FIC defined benefit
pension scheme. Actuarial assumptions have been used to value the
defined benefit pension liability (see note 23). Management have
selected these assumptions from a range of possible options
following consultations with independent actuarial advisers. The
actuarial valuation includes estimates about discount rates and
mortality rates, and the long-term nature of these plans, make the
estimates subject to significant uncertainties.
There are eleven pensioners currently receiving a monthly
pension under the scheme and three deferred members.
Independent auditor
The independent auditor (KPMG LLP) was appointed in 1997. The
current audit engagement partner has been in place since the audit
for the year ended 31 March 2016 and will step down after the audit
for the year ended 31 March 2020. The analysis of the auditor's
remuneration is shown in note 6. Total non-audit fees paid to KPMG
were GBP12,000 in the prior year and no non audit fees were payable
in the year ended 31 March 2020. Tax advisory services are provided
by RSM UK Tax and Accounting Limited, and where possible,
accounting services are provided by in-house support to the
subsidiaries of the Group, by the Company Secretary. The Audit
Committee is responsible for ensuring that the Group's risks are
understood, managed and mitigated as far as practicable.
Dominic Lavelle
Independent Non-executive Director
23 June 2020
Directors' Report
The directors present their annual report and the financial
statements for the Company and for the Group for the year ended 31
March 2020.
Results and dividend
The Group's result for the year is set out in the Group Income
Statement. After the GBP7.5 million impairment of goodwill, the
Group loss for the year after taxation amounted to GBP4,728,000
(2019: Profit GBP3,031,000). Basic earnings per share on underlying
profits were 22.0 pence (2019: 24.4 pence).
Prior to the onset of COVID-19, an interim dividend of 1.80
pence per share was paid in January 2020. Given the adverse impact
of COVID-19 on the financial position of the Group the directors
have decided not to recommend the payment of a final dividend.
With the interim dividend of 1.80 pence paid in January 2020 the
total dividend for the year to 31 March 2020 was 1.80 pence per
share (2019: 5.0 pence per share). The total paid out in dividends
during the year was GBP644,000 (2019: GBP579,000. The suspension of
dividends will be kept under close review and dividend payments
will be resumed as soon as the directors consider it prudent to do
so.
Principal activities
The business of the Group during the year ended 31 March 2020
was general trading in the Falkland Islands, the operation of a
passenger ferry across Portsmouth Harbour and the provision of
international arts logistics and storage services. The principal
activities of the Group are discussed in more detail in the Chief
Executive's Strategic Report and should be considered as part of
the Directors' Report for the purposes of the requirements of the
enhanced Directors' Report guidance.
The principal activity of the Company is that of a holding
company.
Directors
On 1 December 2019, an additional non-executive director,
Dominic Lavelle, was appointed to the Board.
Directors' interests
The interests of the directors in the issued shares and share
options over the shares of the Company are set out below under the
heading 'Directors' interests in shares'. During the year no
director had an interest in any significant contract relating to
the business of the Company or its subsidiaries other than their
own service contract.
Health and safety
The Group is committed to the health, safety and welfare of its
employees and third parties who may be affected by the Group's
operations. The focus of the Group's effort is to prevent accidents
and incidents occurring by identifying risks and employing
appropriate control strategies. This is supplemented by a policy of
investigating and recording all incidents.
Employees
The Board is aware of the importance of good relationships and
communication with employees. Where appropriate, employees are
consulted about matters which affect the progress of the Group and
which are of interest and concern to them as employees. Within this
framework, emphasis is placed on developing greater awareness of
the financial and economic factors which affect the performance of
the Group. Employment policy and practices in the Group are based
on non-discrimination and equal opportunity irrespective of age,
race, religion, sex, colour and marital status. In particular, the
Group recognises its responsibilities towards disabled persons and
does not discriminate against them in terms of job offers, training
or career development and prospects. If an existing employee were
to become disabled during the course of employment, every practical
effort would be made to retain the employee's services with
whatever retraining is appropriate. The Group's pension
arrangements for employees are summarised in note 23.
Payments to suppliers
The policy of the Company and each of its trading subsidiaries,
in relation to all its suppliers, is to settle the terms of payment
when agreeing the terms of the transaction and to abide by those
terms, provided that it is satisfied that the supplier has provided
the goods or services in accordance with agreed terms and
conditions. The Group does not follow any code or standard payment
practice. As a holding company, the Company had no trade creditors
at either 31 March 2020 or 31 March 2019.
Share capital and substantial interests in shares
During the year, 2,382 shares were issued following the exercise
of options by the Chief Executive. Further information about the
Company's share capital is given in note 25. Details of the
Company's executive share option scheme can be found in note
24.
The Company was been notified of the following interests in 3%
or more of the issued ordinary shares of the Company as at 23 June
2020:
Number of shares Percentage of shares
in issue
The Article 6 Marital Trust created
under the First Amended and Restated
Jerry Zucker Revocable Trust dated
2 April 2007 3,596,553 28.76
----------------- ---------------------
Quaero Capital Funds (Lux) - Argonaut 1,057,158 8.45
----------------- ---------------------
Martin Janser 897,324 7.18
----------------- ---------------------
J.F.C Watts 797,214 6.38
----------------- ---------------------
Deep Blue Ventures Holdings SPC DBVF
IV Segregated Portfolio 680,001 5.44
----------------- ---------------------
Christian Struck 380,000 3.04
----------------- ---------------------
Charitable and political donations
Charitable donations made by the Group during the year amounted
to GBP19,312 (2019: GBP19,268), these were largely paid to local
community charities in Gosport and the Falkland Islands. There were
no political donations in the year (2019: nil).
Disclosure of information to auditor
The directors who held office at the date of this Directors'
Report confirm that, so far as they are each aware, there is no
relevant audit information of which the Company's auditor is
unaware; and each director has taken all the steps that they ought
to have taken as a director to make themselves aware of any
relevant audit information and to establish that the Company's
auditor is aware of that information.
Auditor
A resolution proposing the re-appointment of KPMG LLP will be
put to shareholders at the Annual General Meeting.
Greenhouse gas emissions
The 2018 Regulations introduced requirements under Part 15 of
the Companies Act 2006 for large unquoted companies to disclose
their annual energy use and greenhouse gas emissions, and related
information. However, the Group has applied the option permitted to
exclude any energy and carbon information relating to its
subsidiary which the subsidiary would not itself be obliged to
include if reporting on its own account, this applies to all
subsidiaries within the group. FIH group plc, itself consumes less
than 40MWh and therefore as a low energy user, it is not required
to make the detailed disclosures of energy and carbon information
but is required to state, in its relevant report, that its energy
and carbon information is not disclosed for that reason. FIH group
plc's annual energy use and greenhouse gas emissions, and related
information has not been disclosed in this annual report as it is a
low energy user.
Statement by the directors in performance of their statutory
duties in accordance with s172(1) Companies Act 2006
As an experienced Board, our intention is to behave responsibly
and we consider that we, both as individuals and as a collective
Board, as representatives of FIH group plc and the Group as a
whole, during the year ended 31 March 2020, have acted in good
faith, to promote the success of the Company for the benefit of its
members as a whole, having regard to the wider stakeholders as set
out in s172 of the Companies Act. In the Falkland Islands and in
Gosport, the subsidiaries of the group work closely with local
government and local communities and Momart, is an active and
founding member of several art communities and its employees give
talks at conferences, sharing their experiences on the import and
export of art work. The details of the Group's interaction with its
wider stakeholders is as follows:
Customers:
PHFC's commitment to provide a service between 5.30 and midnight
364 days a year means at certain times the service is run at a loss
but we recognize the social importance of the service to the local
community. For special events, such as the Great South Run, the
ferry provides a two vessel rush hour service all day, for the convenience
of customers.
PHFC tweets and posts information on Facebook about local pantomimes,
football matches, special events offered by local restaurants and
other events of interest to the local community and visiting tourists.
The crews and customers are encouraged to post their own photos
of the ferries, and sightings of any HMS warships in the harbour.
The Environmental and Sustainability workgroup at Momart is planning
to work with clients to share environmentally conscious ideas.
Colleagues:
We have an experienced, diverse and dedicated workforce which we
recognise as a key asset of our businesses. Therefore, it is important
that we continue to create the right environment to encourage and
create opportunities for individuals and teams to realise their
full potential.
We have an open, collaborative and inclusive management structure
and engage regularly with our employees. We do this through an appraisal
process, structured career conversations, employee surveys, company
presentations, away days and our well-being programme.
Suppliers:
At FIC, through effective collaboration, we aim to build long-term
relationships with our suppliers so that we can develop and operate
great spaces for our occupiers. We are clear about our payment practices.
We expect our suppliers to adopt similar practices throughout their
supply chains to ensure fair and prompt treatment of all creditors.
Communities:
We are committed to supporting the communities in which we operate,
including local businesses, residents and the wider public.
We engage with the local community at Gosport and in the Falkland
Islands through our community donations, and providing employment
and work experience opportunities. Apprentices have been taken on
at both Momart and PHFC, in areas including Customs and Excise and
Engineering.
PHFC donates cruise tickets to charities and makes various donations
and gifts to local charities as well as public organisations such
as the Fire Service. PHFC staff conduct organized collections on
the pontoons, for example for the Poppy Appeal, and permits local
school children to collect charitable donations on board the vessels.
The business is actively lobbying local government for a bike hub
at Gosport.
Environment:
At Momart, an Environmental and Sustainability workgroup has been
set up to investigate current practices which include areas such
as, (i) transport, (ii) buildings and facilities, (iii) materials
purchased for packaging, (iv) office practice. The group is looking
into steps which can be taken to make the current practices more
environmentally favourable.
Steps already taken at Momart include:
* Use of LED lighting across all warehouse units
* Use of light sensors in the head office and Leyton
site, so lights are triggered by movement.
* Use of renewable energy from solar panels installed
on unit 14 of the warehouse.
* Introduction of a rolling vehicle replacement program
ensuring that the lowest emissions are achieved based
not only on current emissions regulations (currently
EU6), but on emissions over the lifecycle of the
vehicle including manufacture and decommissioning.
* Introduction of high-quality fleet maintenance
procedures and selection of most effective parts such
as low-rolling resistance tyres, brake pads, filters,
catalytic converters.
* Purchase of electrical vehicles is being considered.
* Training and monitoring drivers in environmental
conscious driving techniques.
* Route and load planning to reduce driving time and
empty load journeys including collaboration with
overseas partners or customers to assist with this.
* An investigation of the life cycle of the packing
materials is underway. Wood is purchased from
sustainable sources and where possible the crates are
re-used, and the wood is fully recycled at the end of
the life cycle.
* Waste segregation bins available in office areas to
separate recyclable materials, organic waste and
general waste.
At PHFC, tickets are from sustainable resources and coffee cup recycling
is provided on the ferries and the pontoon.
The FIC supermarkets only offer paper bags for sale now, plastic
bags are no longer available. The paper bag proceeds are donated
to charity. Environmentally friendly cups are available as an option
in the FIC cafes, and all straws are paper. Electricity used by
FIC's operations is largely provided by the wind turbines near Stanley,
which provide the bulk of the town's energy supplies.
No disposable cups are used in any of the Group's offices.
Governments and regulatory authorities
Our work brings us into regular contact with the Falkland Islands
Government, and local authorities, as we deliver construction projects,
repairs and other work. We strive to be proactive and transparent,
consulting with them to ensure that our planning reflects local
sensitivities.
PHFC staff attend meetings with the local government members and
Gosport Borough Council.
The Momart Business Process and Compliance Manager attends quarterly
industry forums, such as those Freight Transport Association, discussing
difficulties faced by the industry with the forum and any attending
HMRC officers.
Media
All businesses are active on social media, using Twitter, Instagram,
LinkedIn and Facebook.
Non-governmental organizations:
PHFC is a Heritage committee member
Momart representatives attend the UK Registrars' Group conference
and the European Registrars' Group conference and speak on issues
such as customs procedures, Brexit, or specialized Export licences,
such as the "Convention on International Trade in Endangered Species
of Wild Fauna and Flora", which requires permits for the export
of ivory, rosewood and mahogany.
With over 40 years of experience and expertise in handling, transportation
and storage of art, since 1993, Momart has held a Royal Warrant
from Her Majesty The Queen for our work with the Royal Collection.
Momart is a founding member of ARTIM, "the Art Transporter International
Meeting" and attends the annual conference to discuss the best practices
and the key business issues concerning the packing, transportation
and movement of works of art.
Momart is also a member of the UK Registrars' Group, which is a
non-profit association, which provides a forum for exchanging ideas
and expertise between registrars, collection managers and other
museum professionals in the United Kingdom, Europe and worldwide.
Shareowners and analysts:
Beyond the Annual General Meeting, the Chief Executive and the Chairman
offer to meet with all significant shareholders after the release
of the half year and full year results. The Chief Executive and
the Chairman are the primary points of contact for the shareholders
and are available to answer queries over the phone or via email
from shareholders throughout the year.
The Annual General Meeting provides a chance with investors and
analysts to meet the Board face-to-face each year.
Debt providers :
We have several debt facilities provided by HSBC, with whom we engage
through regular meetings and presentations to ensure that they remain
fully informed on all relevant areas of our business. This high-level
engagement helps to support our significant lines of credit available
to us.
The relationship with HSBC spans back over the two decades since
the Company has been in operation.
Capital allocation and dividend policy:
This year's budget was approved by the Board following a comprehensive
review of our strategic priorities, risks to and potential opportunities
arising in, our three businesses. We considered the input from our
locally based directors about expected changes in the market and
anticipated customer needs.
Due to the impact of the COVIC-19 pandemic, the dividend payment
will be suspended and will be kept under close review, dividend
payments will be resumed as soon as the directors consider it prudent
to do so.
The capital allocation priorities are to support continued investment
in organic business growth, funded by a strong balance sheet, with
the focus on long-term decisions to position the Group for success.
In line with this policy, on 30 June 2019, the Group refinanced
the short-term temporary bank facility of GBP10 million, which was
drawn down in December 2018 to purchase the GBP19.6 million warehouse
in Leyton, with a drawdown of a GBP13.9 million long-term mortgage,
which increased overall bank borrowings by GBP3.9 million and boosted
the Group's cash reserves by GBP3.9 million. Net borrowings were
unaffected. Capital repayments are GBP500,000 per annum for the
first five years and GBP600,000 per annum for the following five
years, to be paid quarterly, with a bullet capital repayment of
GBP8.375 million at the end of ten years, which the Group and HSBC
expect to be refinanced. Immediately following the draw down the
Group entered into an interest rate swap which fixed the cost of
borrowing for the loan at 3.0% p.a. for 10 years. In late March
2020, a six-month repayment holiday was granted by HSBC on the 10-year
property loans.
Annual General Meeting
The Company's Annual General Meeting will be held at 14.00 on 17
September 2020. The Notice of the Annual General Meeting and a
description of the special business to be put to the meeting are
considered in a separate circular to Shareholders.
Details of Directors' remuneration and emoluments
The remuneration of non-executive directors consists only of
annual fees for their services both as members of the Board and of
Committees on which they serve.
An analysis of the remuneration and taxable benefits in kind
(excluding share options) provided for and received by each
director during the year to 31 March 2020 and in the preceding year
is as follows:
Salary / Health insurance 2020 2019
Fees GBP'000 Total Total
GBP'000 GBP'000 GBP'000
John Foster 222 2 224 254
--------- ----------------- --------- ---------
Robin Williams 60 - 60 60
--------- ----------------- --------- ---------
Jeremy Brade 30 - 30 30
--------- ----------------- --------- ---------
Robert Johnston 30 - 30 30
--------- ----------------- --------- ---------
Dominic Lavelle** 10 - 10 -
--------- ----------------- --------- ---------
Total 352 2 354 374
--------- ----------------- --------- ---------
*The Chief Executive's bonus for the year is normally split into
equal parts of deferred shares and cash, with the shares requiring
a service condition to remain in employment for up to three years.
However, for the year ended 31 March 2020, given the impact of
COVID-19 on the Group's finances no bonus will be payable.
Full details of historic awards of deferred shares to John
Foster and other options issued to senior staff, including all
grants and exercises are provided in note 24 Employee Benefits:
Share based payments. During the year ending 31 March 2020, 15,171
nil cost options and 44,550 other share options were exercised by
the Chief Executive (2019: 17,035 nil cost options)
** From date of appointment
None of the directors of the Company receive any pension
contributions or benefit from any Group pension scheme.
The Chief Executive participates in an annual performance
related bonus arrangement, with the potential during the year of
earning up to 100% of his salary. The bonuses are subject to the
achievements of specified corporate and personal objectives.
Directors' interests in shares
As at 31 March 2020, the nil cost share options issued to the
executive director were as follows:
Date of grant Number of Exercisable Expiry date
options from
J L Foster
16 Jun 2017 3,217 16 Jun 2020 16 Jun 2021
------------ ------------ ------------
15 Jun 2018 5,682 15 Jun 2020 15 Jun 2022
------------ ------------ ------------
15 Jun 2018 5,681 15 Jun 2021 15 Jun 2022
------------ ------------ ------------
17 Jun 2019 3,590 17 Jun 2020 17 Jun 2023
------------ ------------ ------------
17 Jun 2019 3,591 17 Jun 2021 17 Jun 2023
------------ ------------ ------------
17 Jun 2019 3,591 17 Jun 2022 17 Jun 2023
------------ ------------ ------------
Total 25,352
------------ ------------ ------------
The mid-market price of the Company's shares on 31 March 2020
was 194 pence and the range in the year was 194 pence to 328
pence.
The directors' options extant at 31 March 2020 totalled 25,352
nil cost options. In total these options represented 0.2% of the
Company's issued share capital.
The 331,648 options, granted to 33 other employees of the Group
including subsidiary directors and senior management, include
135,535 LTIP options granted in July 2019 and 99,199 LTIP options
granted in March 2018 all at a 10 pence exercise price and 96,914
options granted under the Company's executive share option scheme
between December 2010 and January 2015, with exercise prices of
GBP2.675 to GBP3.535.
The 96,914 options granted under the Company's executive share
option scheme, are options to acquire ordinary shares in the
Company after a period of three years from the date of the grant
and have been granted at an option price of not less than market
value at the date of the grant. The 234,734 LTIP awards have been
granted at an exercise price of 10 pence. The exercise of the LTIP
awards is subject to various performance conditions, which have
been determined by the remuneration committee after discussion with
the Company's advisers. The 25,352 nil cost options granted to the
Chief Executive are exercisable at no cost to him, and will vest
provided he remains in employment for the required service
periods.
In addition to the share options set out above, the interests of
the directors, their immediate families and related trusts in the
shares of the Company according to the register kept pursuant to
the Companies Act 2006 were as shown below:
Ordinary shares as at Ordinary shares
31 March 2020 as at
31 March 2019
Robin Williams 1,935 1,935
---------------------- ----------------
John Foster* *107,009 *96,136
---------------------- ----------------
Jeremy Brade 15,032 15,029
---------------------- ----------------
Robert Johnston **3,647,853 **3,647,853
---------------------- ----------------
*John Foster's shareholding above includes all Shares held in
the Company's share incentive plan in which he has a beneficial
interest.
** Robert Johnston holds 51,300 shares in his own name, and as
he is also the representative of the Company's largest shareholder,
"The Article 6 Marital Trust, created under the First Amended and
Restated Jerry Zucker Revocable Trust dated 4-2-07", which holds
3,596,553 Shares, Robert Johnston is interested in 3,647,853 Shares
in total, representing 29.2 per cent. of the Company's 12,504,519
total voting rights
Share Incentive Plan
In November 2012, the Company implemented an HMRC approved Share
Incentive Plan available to employees of the Group, which enables
UK and Falklands staff to acquire shares in the Company through
monthly purchases of up to GBP150 per month or 10% of salary,
whichever is lower. For every three shares purchased by the
employee, the Company contributes one free matching share. These
shares are placed in trust and if they are left in trust for at
least five years, they can be removed free of UK income tax and
national insurance contributions. During the year ended 31 March
2020 the Company purchased GBP600 of matching shares for John
Foster.
Approved by the Board and signed on its behalf by:
Carol Bishop
Company Secretary
23 June 2020
Kenburgh Court
133-137 South Street
Bishop's Stortford
Hertfordshire
CM23 3HX
Statement of Directors' responsibilities in respect of the
Annual Report and the Financial Statements
The directors are responsible for preparing the Annual Report,
Strategic Report, Directors' Report, and the Group and Company
financial statements in accordance with applicable law and
regulations.
Company law requires the directors to prepare Group and Parent
Company financial statements for each financial year. Under the AIM
Rules of the London Stock Exchange, they are required to prepare
the Group financial statements in accordance with International
Financial Reporting Standards as adopted by the EU (IFRSs as
adopted by the EU) and applicable law and have elected to prepare
the Parent Company financial statements on the same basis.
Under company law the directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and Parent Company and of
their profit or loss for that period. In preparing each of the
Group and Parent Company financial statements, the directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and estimates that are reasonable, relevant and reliable;
-- state whether they have been prepared in accordance with IFRSs as adopted by the EU;
-- assess the Group and Parent Company's ability to continue as
a going concern, disclosing, as applicable, matters related to
going concern; and
-- use the going concern basis of accounting unless they either
intend to liquidate the Group or the Parent Company or to cease
operations, or have no realistic alternative but to do so.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Parent
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the Parent Company and enable them
to ensure that its financial statements comply with the Companies
Act 2006. They are responsible for such internal control as they
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error, and have general responsibility for taking such
steps as are reasonably open to them to safeguard the assets of the
Group and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the directors are also
responsible for preparing a Strategic Report and a Directors'
Report that complies with that law and those regulations.
The directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the UK governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
KPMG Independent Auditor's Report to the members o f FIH group
plc
1. Our opinion is unmodified
We have audited the financial statements of FIH group plc ("the
Company") for the year ended 31 March 2020 which comprise the
Consolidated Income Statement, Consolidated Statement of
Comprehensive Income, Consolidated Balance Sheet, Company Balance
Sheet, Consolidated Cash Flow Statement, Company Cash Flow
Statement, Consolidated Statement of Changes in Shareholders'
Equity, Company Statement of Changes in Shareholders' Equity, and
the related notes, including the accounting policies in note 1:
In our opinion:
-- the financial statements give a true and fair view of the
state of the Group's and of the parent Company's affairs as at 31
March 2020 and of the Group's loss for the year then ended;
-- the Group financial statements have been properly prepared in
accordance with International Financial Reporting Standards as
adopted by the European Union (IFRSs as adopted by the EU);
-- the parent Company financial statements have been properly
prepared in accordance with IFRSs as adopted by the EU and as
applied in accordance with the provisions of the Companies Act
2006; and
-- the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our
responsibilities are described below. We have fulfilled our ethical
responsibilities under, and are independent of the Group in
accordance with, UK ethical requirements including the FRC Ethical
Standard as applied to listed entities. We believe that the audit
evidence we have obtained is a sufficient and appropriate basis for
our opinion.
Overview
Materiality: GBP150,000 (2019: GBP150,000) 4.0% of group
(Group financial statements profit before tax before goodwill impairment
as a whole) (2019: 3.9% of group profit before tax)
----------------------------------------------------
Coverage 100% (2019: 100%) of group profit before tax
----------------------------------------------------
Key audit matters vs 2019
--------------------------------------------------
New risk Going concern
Recurring risks Recoverability of Art Logistics and
Storage Brand Name and Goodwill and
Ferry Services Goodwill and Property,
Plant and Equipment
Recoverability of parent Company's
investment in, and debt due from, subsidiaries
--------------------------------------------------
2. Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional
judgment, were of most significance in the audit of the financial
statements and include the most significant assessed risks of
material misstatement (whether or not due to fraud) identified by
us, including those which had the greatest effect on: the overall
audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters were
addressed in the context of our audit of the financial statements
as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters. In arriving at our
audit opinion above, the key audit matters, in decreasing order of
audit significance, were as follows:
KPMG Independent Auditor's Report to the members o f FIH group plc (continued)
Going concern Refer to page 56 (accounting policy).
The risk Our response
--------------------------------------------------------------
Disclosure quality Our procedures included:
The financial statements explain
how the Board has formed a judgement * Funding assessment: we performed an inspection of
that it is appropriate to adopt bank correspondence to corroborate the committed
the going concern basis of level of financing and related covenant requirements;
preparation
for the group and parent company.
That judgement is based on an
evaluation * Our sector experience : we evaluated and challenged
of the inherent risks to the Group's assumptions used in the forecasts, in particular
and Company's business model and those relating to revenue trends and profit margins,
how those risks might affect the through enquiries with divisional managers and those
Group's and Company's financial responsible for preparing and delivering the
resources or ability to continue forecasts;
operations over a period of at least
a year from the date of approval
of the financial statements.
The risks most likely to adversely * Historical comparison : we evaluated the adequacy of
affect the Group's and Company's the budgets and forecasts used by assessing the
available financial resources over historical accuracy of the Group's previous budgets;
this period were:
-- Continued reduction in passenger
numbers in the Ferry Services CGU
as a result of COVID-19; * Sensitivity analysis: We considered sensitivities
-- Continued closure of museums over the level of available financial resources
and galleries in the Art Logistics indicated by the Group's financial forecasts taking
CGU as a result of COVID-19; account of reasonably possible (but not unrealistic)
-- Restrictions on imports and adverse effects that could arise from these risks
exports individually and collectively, in particularly around
in the Art Logistics CGU as a result the impact of COVID -19 on the operations;
of COVID-19.
There are also less predictable
but realistic second order impacts,
such as future availability of * Assessing transparency: Assessed the completeness and
funding accuracy of the matters covered in the going concern
and the erosion of customer or disclosure including that sufficient details were
supplier provided concerning the impact of COVID -19 on the
confidence as a result of COVID-19, directors' assessment and the additional banking
which could result in a rapid facilities that the Group has put in place.
reduction
of available financial resources.
The risk for our audit was whether
or not those risks were such that
they amounted to a material
uncertainty
that may have cast significant doubt
about the ability to continue as
a going concern. Had they been such,
then that fact would have been
required
to have been disclosed.
--------------------------------------------------------------
KPMG Independent Auditor's Report to the members o f FIH group plc (continued)
Recoverability of Art Logistics (GBP4.1 million; 2019: GBP11.6 million)
and Storage Brand Name and Goodwill
and Recoverability of Ferry Services Refer to page 29 (Audit Committee
Goodwill and Property, Plant and Report), page 59 (accounting policy)
Equipment and page 76 (financial disclosures).
The risk Our response
-------------------------------------------------------------------
Forecast Based Valuation: Our procedures included:
The carrying amount of the Art Logistics * Our sector experience: we evaluated and challenged
and Storage CGU is significant and assumptions used in the forecasts, in particular
the recoverable amount of that CGU those relating to revenue trends and profit margins,
is at risk of fluctuation due primarily through enquiries with the divisional managers and
to fluctuating future demand in those responsible for preparing and delivering the
the art logistics and storage markets forecasts;
along with the inherent uncertainty
involved in forecasting and discounting
future cash flows. The Group has
recognised an impairment loss of * Benchmarking assumptions: we compared the group's
GBP3,500,000 on the goodwill on assumptions in relation to key inputs such as,
the Art Logistics CGU as a result projected economic growth and, with the assistance of
of changes in the market resulting specialist valuation tools, the discount rate to
in significant changes in forecast historical information and externally derived data;
cash flows. The remaining carrying
amount of goodwill and intangible
assets associated with the Art Logistics
CGU is particularly sensitive to * Historical comparison: we evaluated the adequacy of
changes in key assumptions. the budgets and forecasts used in the value in use
calculations by assessing the historical accuracy of
The effect of these matters is that, the Group's previous budgets;
as part of our risk assessment for
audit planning purposes, we determined
that the value in use of the Art
Logistics and Storage CGU had a * Sensitivity analysis: we performed a sensitivity
high degree of estimation uncertainty, analysis on the key assumptions noted above;
with a potential range of reasonable
outcomes greater than our materiality
for the financial statements as
a whole. * Comparing valuations : we compared the net asset
value of the Group with the market capitalisation of
The carrying amount of the Ferry the Group and assessed whether any difference was an
Services CGU is significant and indicator of impairment with reference to why that
the recoverable amount is at risk difference has arisen;
due primarily to reductions in passenger
numbers which has been exacerbated
by the COVID-19 pandemic. The estimated
recoverable amount is subjective * Assessing transparency: we assessed whether the
due to the inherent uncertainty group's disclosures about the sensitivity of the
involved in forecasting and discounting outcome of the impairment assessment to changes in
future cash flows. The Group has key assumptions reflected the risks inherent in the
recognised an impairment loss of recoverable amounts of the Art Logistics and Storage
GBP3,979,000 on the goodwill on CGU and Ferry Services CGU.
the Ferry Services CGU as a result
of changes in the market resulting
in significant changes in forecast
cash flows. As a result, the carrying
amount of goodwill and property,
plant and equipment associated with
the Ferry Services CGU is particularly
sensitive to changes in key assumptions.
The effect of these matters is that,
as part of our re-assessment of
audit risk, we determined that the
value in use of the Ferry Services
CGU, had a high degree of estimation
uncertainty, with a potential range
of reasonable outcomes greater than
our materiality for the financial
statements as a whole.
-------------------------------------------------------------------
KPMG Independent Auditor's Report to the members o f FIH group plc (continued)
Parent: Recoverability of Parent (GBP23.9 million investment in,
Company's investment in, and debt and GBP10.2 million debt due from,
due from, subsidiaries subsidiaries; 2019: GBP27.6 million
investment in and GBP8.7 million
debt due from subsidiaries)
Refer to page 57 (accounting policy)
and page 83 (financial disclosures).
The risk Our response
---------------------------------------------------------------
Forecast-based valuation Our procedures included:
The carrying amount of the parent * Our sector experience: we evaluated assumptions used
company's investment in subsidiaries in the relevant cash flow forecasts, in particular
and intra-group debtor balance those relating to forecast revenue growth and profit
represents 60.1% (2019: 46.7%) margins, through enquiries with the divisional
of the parent company's total assets. managers and those responsible for preparing and
delivering the forecasts;
They are significant and at risk
of irrecoverability due to weak
demand in the Art Logistics and
Ferry Services businesses as a * Benchmarking assumptions: we compared the group's
result of the COVID-19 pandemic. assumptions in relation to key inputs such as,
The Group has recognised an impairment projected economic growth and, with the assistance of
loss of GBP3,130,000 on the investment specialist valuation tools, compared the discount
in the Art Logistics subsidiary rate to historical information and externally derived
as a result of changes in the market data;
resulting in significant changes
in forecast cash flows. The estimated
recoverable amount of the remaining
balances is subjective due to the * Historical comparison: we evaluated the adequacy of
inherent uncertainty involved in the budgets and forecasts used in the value in use
forecasting and discounting future calculation by assessing the historical accuracy of
cash flows. the Group's previous budgets;
The effect of these matters is
that, as part of our risk assessment,
we determined that the recoverable * Sensitivity analysis: we performed a sensitivity
amount of the cost of investment analysis on the key assumptions noted above;
in subsidiaries has a high degree
of estimation uncertainty, with
a potential range of reasonable
outcomes greater than our materiality * Comparing valuations: we compared the carrying value
for the financial statements as of the parent Company's investments in subsidiaries
a whole. and receivables due from group entities to value in
use calculations for the relevant CGUs and to the
market capitalisation of the Group;
* Assessing transparency: we assessed the adequacy of
the parent Company's disclosures in respect of
investments in subsidiaries and group debtor
balances.
---------------------------------------------------------------
KPMG Independent Auditor's Report to the members o f FIH group plc (continued)
3. Our application of materiality and an overview of the scope of our audit
Materiality for the Group financial statements as a whole was
set at GBP150,000 (2019: GBP150,000), determined with reference to
a benchmark of Group profit before tax before goodwill impairment
of which it represents 4.0% (2019: 3.9% of group profit before
tax).
Materiality for the parent company financial statements as a
whole, as communicated by the group audit team, was set at
GBP80,000 (2019: GBP100,000). This is lower than the materiality we
would otherwise have determined with reference to a benchmark of
the Company's net assets, of which it represents 0.36% (2019:
0.24%).
We agreed to report to the Audit Committee any corrected or
uncorrected identified misstatements exceeding GBP7,500 (2019:
GBP7,500), in addition to other identified misstatements that
warranted reporting on qualitative grounds.
Of the group's four (2019: four) components, we subjected all
(2019: all) to full scope audits for group purposes. The group team
performed the audits of each of the components. The audit was
performed using the materiality levels set out opposite, having
regard to the mix of size and risk profile of the Group across the
components.
The components within the scope of our work accounted for the
percentages illustrated as follows:
Component 2020 2019
Group revenue 100% 100%
----------------------- ---------------
Group profit before tax 100% 100%
----------------------- ---------------
Group total assets 100% 100%
----------------------- ---------------
Group profit before tax before GBP3.7 million GBP3.9 million
goodwill impairment 2019 "Group
profit before tax"
----------------------- ---------------
Group materiality GBP150,000 GBP150,000
----------------------- ---------------
Whole financial statements GBP150,000 GBP150,000
materiality
----------------------- ---------------
Range of materiality at 4 GBP80,000 - GBP100,000 GBP100,000
components
----------------------- ---------------
Threshold for misstatements GBP7,500 GBP7,500
reported to the audit committee
----------------------- ---------------
4. We have nothing to report on going concern
The directors have prepared the financial statements on the
going concern basis as they do not intend to liquidate the Company
or the Group or to cease their operations, and as they have
concluded that the Company's and the Group's financial position
means that this is realistic. They have also concluded that there
are no material uncertainties that could have cast significant
doubt over their ability to continue as a going concern for at
least a year from the date of approval of the financial statements
("the going concern period").
Our responsibility is to conclude on the appropriateness of the
directors' conclusions and, had there been a material uncertainty
related to going concern, to make reference to that in this audit
report. However, as we cannot predict all future events or
conditions and as subsequent events may result in outcomes that are
inconsistent with judgements that were reasonable at the time they
were made, the absence of reference to a material uncertainty in
this auditor's report is not a guarantee that the group or the
company will continue in operation.
We identified going concern as a key audit matter (see section 2
of this report). Based on the work described in our response to
that key audit matter we are required to report to you if we have
concluded that the use of the going concern basis of accounting is
inappropriate or there is an undisclosed material uncertainty that
may cast significant doubt over the use of that basis for a period
of at least a year from the date of approval of the financial
statements.
We have nothing to report in these respects.
KPMG Independent Auditor's Report to the members o f FIH group plc (continued)
5. We have nothing to report on the other information in the Annual Report
The directors are responsible for the other information
presented in the Annual Report together with the financial
statements. Our opinion on the financial statements does not cover
the other information and, accordingly, we do not express an audit
opinion or, except as explicitly stated below, any form of
assurance conclusion thereon.
Our responsibility is to read the other information and, in
doing so, consider whether, based on our financial statements audit
work, the information therein is materially misstated or
inconsistent with the financial statements or our audit knowledge.
Based solely on that work we have not identified material
misstatements in the other information.
Strategic report and directors' report
Based solely on our work on the other information:
-- we have not identified material misstatements in the
strategic report and the directors' report;
-- in our opinion the information given in those reports for the
financial year is consistent with the financial statements; and
-- in our opinion those reports have been prepared in accordance with the Companies Act 2006.
6. We have nothing to report on the other matters on which we are required to report by exception
Under the Companies Act 2006, we are required to report to you
if, in our opinion:
-- adequate accounting records have not been kept by the Parent
Company, or returns adequate for our audit have not been received
from branches not visited by us; or
-- the Parent Company financial statements are not in agreement
with the accounting records and
returns; or
-- certain disclosures of directors' remuneration specified by law are not made; or
-- we have not received all the information and explanations we require for our audit.
We have nothing to report in these respects.
7. Respective responsibilities
Directors' responsibilities
As explained more fully in their statement set out on page 40,
the directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and fair
view; such internal control as they determine is necessary to
enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error; assessing the
Group and parent Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern; and
using the going concern basis of accounting unless they either
intend to liquidate the Group or the parent Company or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue our
opinion in an auditor's report. Reasonable assurance is a high
level of assurance, but does not guarantee that an audit conducted
in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in aggregate,
they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial
statements.
A fuller description of our responsibilities is provided on the
FRC's website at www.frc.org.uk/auditorsresponsibilities .
KPMG Independent Auditor's Report to the members o f FIH group plc (continued)
8. The purpose of our audit work and to whom we owe our responsibilities
This report is made solely to the Company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
Company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company's members, as a body,
for our audit work, for this report, or for the opinions we have
formed
Craig Parkin
(Senior Statutory Auditor)
For and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
St Nicholas House
Park Row
Nottingham
NG1 6FQ
23 June 2020
Consolidated Income Statement
FOR THE YEARED 31 MARCH 2020
Notes Before Before
non-trading Non-trading non-trading Non-trading
items items Total items items Total
2020 2020 2020 2019 2019 2019
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- ------------- ------------ ------------- ------------
4 Revenue 44,600 - 44,600 42,528 - 42,528
Cost of sales (26,521) - (26,521) (24,777) - (24,777)
Gross profit 18,079 - 18,079 17,751 - 17,751
Other administrative
expenses (13,745) - (13,745) (13,546) - (13,546)
Consumer Finance interest
income 231 - 231 172 - 172
5 Goodwill impairment - (7,479) (7,479) - - -
-------------------------- ------------- ------------ --------- ------------- ------------ ---------
6 Operating expenses (13,514) (7,479) (20,993) (13,374) - (13,374)
Operating profit /
(loss) 4,565 (7,479) (2,914) 4,377 - 4,377
Finance income 13 - 13 36 - 36
Finance expense (869) - (869) (555) - (555)
-------------------------- ------------- ------------ --------- ------------- ------------ ---------
8 Net financing costs (856) - (856) (519) - (519)
Profit before tax 3,709 (7,479) (3,770) 3,858 - 3,858
9 Taxation (958) - (958) (827) - (827)
Profit / (loss) for
the year
attributable to equity
holders of the company 2,751 (7,479) (4,728) 3,031 - 3,031
-------------------------- ------------- ------------ --------- ------------- ------------ ---------
10 Earnings per share
Basic 22.0p -37.8p 24.4p 24.4p
Diluted 21.7p -37.8p 24.1p 24.1p
--------- ---------
* The Group's results are being reported under IFRS 16 for the
first time in the year to 31 March 2020 following the mandatory
adoption of the standard from 1 April 2019. In accordance with the
transitional provisions, the group has elected not to restate the
comparatives. See Note 1.
The accompanying notes form part of these Financial
Statements.
Consolidated Statement of Comprehensive Income
FOR THE YEARED 31 MARCH 2020
2020 2019
GBP'000 GBP'000
---------------------------------------------------- -------- --------
Cash flow hedges: effective portion of changes
in fair value (521) 4
Deferred tax on effective portion of changes in
17 fair value 102 -
Items that are or may be reclassified subsequently
to profit or loss (419) 4
Re-measurement of the FIC defined benefit pension
23 scheme 136 36
Movement on deferred tax asset relating to the
17 pension scheme (35) (9)
Items which will not ultimately be recycled to
the income statement 101 27
Other comprehensive (loss) / income (318) 31
(Loss) / profit for the year (4,728) 3,031
--------------------------------------------------------- -------- --------
Total comprehensive (loss) / income (5,046) 3,062
--------------------------------------------------------- -------- --------
The accompanying notes form part of these Financial
Statements.
Consolidated Balance Sheet
AT 31 MARCH 2020
2020 2019
Notes GBP'000 GBP'000
-------------------------------------- --------- ---------
Non-current assets
11 Intangible assets 4,246 11,766
12 Property, plant and equipment 41,712 38,664
13 Investment properties 6,458 5,239
15 Investment in Joint venture 259 259
Debtors due in more than one year 88 88
16 Hire purchase lease receivables 519 584
17 Deferred tax assets 677 721
Total non-current assets 53,959 57,321
Current assets
18 Inventories 5,374 5,756
19 Trade and other receivables 8,696 7,761
16 Hire purchase lease receivables 596 659
20 Cash and cash equivalents 9,108 6,184
Total current assets 23,774 20,360
TOTAL ASSETS 77,733 77,681
Current liabilities
22 Trade and other payables (8,611) (9,605)
21 Interest-bearing loans and borrowings (1,165) (10,645)
Derivative financial instruments (537) (16)
Corporation tax payable (233) (399)
Total current liabilities (10,546) (20,665)
Non-current liabilities
21 Interest-bearing loans and borrowings (22,942) (7,148)
Derivative financial instruments - -
23 Employee benefits (2,604) (2,772)
17 Deferred tax liabilities (2,849) (2,529)
Total non-current liabilities (28,395) (12,449)
TOTAL LIABILITIES (38,941) (33,114)
Net assets 38,792 44,567
-------------------------------------- --------- ---------
25 Capital and reserves
Equity share capital 1,250 1,250
Share premium account 17,590 17,590
Other reserves 703 1,162
Retained earnings 19,784 24,579
Hedging reserve (535) (14)
Total equity 38,792 44,567
-------------------------------------- --------- ---------
These financial statements, of which the accompanying notes form
part, were a pproved by the Board of directors on 23 June 2020 and
were signed on its behalf by:
J L Foster
Director
Company Balance Sheet
AT 31 MARCH 2020
2020 2019
Notes GBP'000 GBP'000
-------------------------------------- --------- -----------
Non-current assets
13 Investment properties 19,373 19,582
14 Investment in subsidiaries 23,989 27,653
19 Loans to subsidiaries 10,207 8,717
17 Deferred tax 121 4
-------------------------------------- --------- -----------
Total non-current assets 53,690 55,956
Current assets
19 Trade and other receivables 30 30
Corporation tax receivable - 24
20 Cash and cash equivalents 5,766 1,768
Total current assets 5,796 1,822
TOTAL ASSETS 59,486 57,778
Current liabilities
22 Trade and other payables (7,019) (5,716)
21 Interest-bearing loans and borrowings (243) (10,000)
Derivative financial instruments (537) (16)
Corporation tax payable (21) -
Total current liabilities (7,820) (15,732)
Non-current liabilities
21 Interest-bearing loans and borrowings (13,207) -
-------------------------------------- --------- -----------
TOTAL LIABILITIES (21,027) (15,732)
-------------------------------------- --------- -----------
Net assets 38,459 42,046
-------------------------------------- --------- -----------
25 Capital and reserves
Equity share capital 1,250 1,250
Share premium account 17,590 17,590
Other reserves 5,389 6,910
Retained earnings 14,765 16,310
Hedging reserve (535) (14)
Total equity 38,459 42,046
-------------------------------------- --------- -----------
As permitted by Section 408 of the Companies Act 2006, a
separate profit and loss account of the Parent Company has not been
presented. The Parent Company's loss for the financial year is
GBP2,592,000 (2019: Profit of GBP1,716,000).
These financial statements, of which the accompanying notes form
part, were a pproved by the Board of directors on 23 June 2020 and
were signed on its behalf by:
J L Foster
Director
Registered company number: 03416346
Consolidated Cash Flow Statement
FOR THE YEARED 31 MARCH 2020
2020 2019
GBP'000 GBP'000
---------------------------------------------- --------- ---------
Note Cash flows from operating activities
(Loss)/profit for the year after taxation (4,728) 3,031
Adjusted for:
(i) Non-cash items:
11 Amortisation 68 66
12 Depreciation: Property, plant and equipment 1,863 1,272
13 Depreciation: Investment properties 132 99
11 Goodwill impairment 7,479 -
Loss on disposal of fixed assets 78 20
23 Interest cost on pension scheme liabilities 65 72
24 Equity-settled share-based payment expenses 97 69
---------------------------------------------- --------- ---------
Non-cash items adjustment 9,782 1,598
(ii) Other items:
Exchange gains (54) -
Bank interest receivable (13) (36)
Bank interest payable 464 248
Lease liability finance expense 340 235
Decrease in hire purchase leases receivable 128 191
Corporation and deferred tax expense 958 827
---------------------------------------------- --------- ---------
Other adjustments 1,823 1,465
Operating cash flow before changes in working
capital 6,877 6,094
Increase in trade and other receivables (935) (418)
Decrease/(increase) in inventories 471 (1,128)
Decrease in trade and other payables (980) (924)
---------------------------------------------- --------- ---------
Changes in working capital (1,444) (2,470)
Cash generated from operations 5,433 3,624
Payments to pensioners (97) (103)
Corporation taxes paid (659) (560)
---------------------------------------------- --------- ---------
Net cash flow from operating activities 4,677 2,961
Cash flows from investing activities
Purchase of property, plant and equipment (3,361) (22,432)
Purchase of software (27) -
Interest received 13 36
---------------------------------------------- --------- ---------
Net cash flow from investing activities (3,375) (22,396)
Cash flow from financing activities
Bank loan drawn down 13,875 10,000
Repayment of bank loans (10,955) (514)
Bank interest paid (478) (234)
Hire purchase loan drawn down 534 172
Repayment of lease liabilities principal (395) (131)
Lease liabilities interest paid (340) (235)
Cash inflow on option exercises - 150
Cash outflow on nil cost option exercise (29) (28)
Dividends paid (644) (579)
---------------------------------------------- --------- ---------
Net cash flow from financing activities 1,568 8,601
---------------------------------------------- --------- ---------
Net increase / (decrease) in cash and cash
equivalents 2,870 (10,834)
Cash and cash equivalents at start of year 6,184 17,018
Exchange gains on cash balances 54 -
---------------------------------------------- --------- ---------
Cash and cash equivalents at end of year 9,108 6,184
---------------------------------------------- --------- ---------
The accompanying notes form part of these Financial
Statements.
Company Cash Flow Statement
FOR THE YEARED 31 MARCH 2020
2020 2019
GBP'000 GBP'000
------------------------------------------------ --------- ---------
Notes Cash flows from operating activities
Holding Company (loss) / profit for the
year (2,592) 1,716
Adjusted for:
Bank interest receivable (13) (36)
Bank interest payable 372 139
Equity-settled share-based payment expenses 48 46
14 Impairment of subsidiary 3,713 -
13 Depreciation 209 60
Corporation and deferred tax expense 72 25
------------------------------------------------ --------- ---------
Non-cash and other items adjustment 4,401 234
Operating cash flow before changes in working
capital 1,809 1,950
Decrease in trade and other receivables - (18)
Increase in trade and other payables 9 128
------------------------------------------------ --------- ---------
Changes in working capital and provisions 9 110
Cash generated from operations 1,818 2,060
Corporation taxes paid (17) (17)
------------------------------------------------ --------- ---------
Net cash flow from operating activities 1,801 2,043
Cash generated from investing activities
Interest received 13 36
Purchase of property, plant and equipment - (19,642)
------------------------------------------------ --------- ---------
Net cash flow from investing activities 13 (19,606)
Cash flow from financing activities
Bank loan drawn down 13,875 10,000
Bank loan repaid (10,425) -
Interest paid (358) (125)
Cash outflows in inter-company borrowing (1,515) (2,693)
Cash inflows in inter-company borrowing 1,280 -
Cash inflow on option exercise - 150
Cash inflow outflow on nil cost option exercise (29) (28)
Dividends paid (644) (579)
Net cash flow from financing activities 2,184 6,725
Net increase / (decrease) in cash and cash
equivalents 3,998 (10,838)
Cash and cash equivalents at start of year 1,768 12,606
Cash and cash equivalents at end of year 5,766 1,768
------------------------------------------------ --------- ---------
The accompanying notes form part of these Financial
Statements.
Consolidated Statement of Changes in Shareholders' Equity
FOR THE YEARED 31 MARCH 2020
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 2018 1,243 17,447 1,162 22,059 (18) 41,893
Profit for the year - - - 3,031 - 3,031
Cash flow hedges: effective
portion of changes in
fair value - - - - 4 4
Re-measurement of the
defined benefit pension
liability, net of tax - - - 27 - 27
----------------------------- --------- --------- ---------- ---------- --------- ---------
Total comprehensive income - - - 3,058 4 3,062
----------------------------- --------- --------- ---------- ---------- --------- ---------
Transactions with owners in their
capacity as owners:
Share option exercise 7 143 - (28) - 122
Share based payments - - - 69 - 69
Dividends paid - - - (579) - (579)
Total transactions with
owners 7 143 - (538) - (388)
----------------------------- --------- --------- ---------- ---------- --------- ---------
Balance at 31 March 2019 1,250 17,590 1,162 24,579 (14) 44,567
Restatement related to
the application of IFRS
16 - - - (153) - (153)
----------------------------- --------- --------- ---------- ---------- --------- ---------
Restated balance 31 March
2019 1,250 17,590 1,162 24,426 (14) 44,414
Loss for the year - - - (4,728) - (4,728)
Reserves transfer - - (459) 459 - -
Cash flow hedges: effective
portion of changes in
fair value - - - 102 (521) (419)
Re-measurement of the
defined benefit pension
liability, net of tax - - - 101 - 101
Total comprehensive loss - - (459) (4,066) (521) (5,046)
----------------------------- --------- --------- ---------- ---------- --------- ---------
Transactions with owners
in their capacity as
owners:
Share option exercise: - - - (29) - (29)
Share based payments - - - 97 - 97
Dividends paid - - - (644) - (644)
Total transactions with
owners - - - (576) - (576)
----------------------------- --------- --------- ---------- ---------- --------- ---------
Balance at 31 March 2020 1,250 17,590 703 19,784 (535) 38,792
----------------------------- --------- --------- ---------- ---------- --------- ---------
The accompanying notes form part of these Financial
Statements.
Company Statement of Changes in Shareholders'
Equity
FOR THE YEARED 31 MARCH 2020
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 2018 1,243 17,447 6,910 15,132 (18) 40,714
Profit for the year - - - 1,716 - 1,716
Cash flow hedges: effective
portion of changes in
fair value - - - - 4 4
Total comprehensive income - - - 1,716 4 1,720
------------------------------ --------- --------- ---------- ---------- --------- ---------
Transactions with owners
in their capacity as
owners:
Share option exercise 7 143 - (28) - 122
Share based payments - - - 69 - 69
Dividends paid - - - (579) - (579)
------------------------------ --------- --------- ---------- ---------- --------- ---------
Total transactions with
owners 7 143 - (538) - (388)
------------------------------ --------- --------- ---------- ---------- --------- ---------
Balance at 31 March 2019 1,250 17,590 6,910 16,310 (14) 42,046
Loss for the year - - - (2,592) - (2,592)
Reserves transfer - - (1,521) 1,521 - -
Cash flow hedges: effective
portion of changes in
fair value - - - 102 (521) (419)
Total comprehensive loss - - (1,521) (969) (521) (3,011)
------------------------------ --------- --------- ---------- ---------- --------- ---------
Transactions with owners
in their capacity as
owners:
Share option exercise - (29) - (29)
Share based payments - - - 97 - 97
Dividends paid - - - (644) - (644)
Total transactions with
owners - - - (576) - (576)
------------------------------ --------- --------- ---------- ---------- --------- ---------
Balance at 31 March 2020 1,250 17,590 5,389 14,765 (535) 38,459
------------------------------ --------- --------- ---------- ---------- --------- ---------
The GBP2,592,000 loss for the year includes a GBP3,713,000
impairment of the Company's investment in Momart Limited.
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.
Basis of preparation
Both the Parent Company financial statements and the Group
financial statements have been prepared and approved by the
directors in accordance with International Financial Reporting
Standards as adopted by the EU ("Adopted IFRS"). On publishing the
Parent Company financial statements here together with the Group
financial statements, the Company is taking advantage of the
exemption in s408 of the Companies Act 2006 not to present its
individual income statement and related notes that form a part of
these approved financial statements.
The accounting policies set out below have, unless otherwise
stated, been applied consistently to all periods presented in these
consolidated financial statements.
Judgements made by the directors in the application of these
accounting policies that have a significant effect on the financial
statements and estimates with a significant risk of material
adjustment next year are discussed in note 30.
The financial statements are presented in pounds sterling,
rounded to the nearest thousand and are prepared on the historical
cost basis.
The directors are responsible for ensuring that the Group has
adequate financial resources to meet its projected liquidity
requirements and also for ensuring forecast earnings are sufficient
to meet the covenants associated with the Group's banking
facilities.
As a result of COVID-19 and the resulting lockdown in the UK,
together with the closure of UK and international museums and art
galleries, the Group is currently incurring substantial monthly
losses at PHFC and Momart, which are only partially offset by
continued trading in FIC. A substantial number of UK employees have
been placed on furlough, as the Group has taken advantage of the UK
Government's Job Retention Scheme. Since the severity of the
situation has been known, the Group has prepared detailed
twenty-four month cash flows forecasts in discussion with the local
management teams of each business, which factor in the likely cash
flows after consideration of the impact of the pandemic on revenue,
salary cuts, bank loan repayment holidays and government
assistance. These have been updated regularly and reviewed at
fortnightly Board calls where key assumptions have been monitored
against actual performance to ensure that there was no increased
risk of more adverse outcomes developing including a deterioration
in FIC trading or a more protracted lock-down, beyond those
contemplated in the "realistic worst case" scenario.
Loan facility terms have been reviewed with particular attention
paid to covenants, none of which are forecast to be breached by any
currently foreseeable events. After careful consideration of the
cash flow forecasts, including the "realistic worst case" scenario,
by the Board, together with the additional GBP5.0 million facility
arranged under the UK Government's CBILS loan guarantee scheme, the
directors are satisfied the Group's existing resources (including
committed banking facilities) are sufficient to meet its needs. As
a consequence, the directors believe that the Group is well placed
to manage the impact of COVID-19 on its businesses and have a
reasonable expectation that the Company and Group have adequate
resources to continue in operational existence for the foreseeable
future, and have continued to adopt the going concern basis in
preparing the financial statements.
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in more detail in the Chief Executive's Strategic
Report. The financial position of the Group, its cash flows,
liquidity position and facilities are also described in the Chief
Executive's Strategic Report. In addition, note 26 to the financial
statements includes the Group's objectives, policies and processes
for managing its capital; its financial risk management objectives;
details of its financial instruments and hedging activities; and
its exposures to credit risk and liquidity risk.
1. Accounting policies (continued)
The areas considered by the Board in relation to its review of
the Group's status as a "going concern" are highlighted in the
report of the Audit Committee on page 29.
After a detailed review, the directors consider that it remains
appropriate to continue to adopt the going concern basis in
preparing the financial statements.
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in more detail in the Chief Executive's Strategic
Report. The financial position of the Group, its cash flows,
liquidity position and facilities are also described in the Chief
Executive's Strategic Report. In addition, note 26 to the financial
statements includes the Group's objectives, policies and processes
for managing its capital; its financial risk management objectives;
details of its financial instruments and hedging activities; and
its exposures to credit risk and liquidity risk.
Basis of consolidation
The consolidated financial statements comprise the financial
statements of FIH group plc and its subsidiaries (the "Group"). A
subsidiary is any entity FIH group plc has the power to control.
Control is determined by FIH group plc's exposure or rights, to
variable returns from its involvement with the subsidiary and the
ability to affect those returns. The financial statements of
subsidiaries are prepared for the same reporting period as the
Parent Company. The accounting policies of subsidiaries have been
changed when necessary to align them with the policies adopted by
the Group.
Subsidiaries are consolidated from the date on which control is
transferred to the Group and cease to be consolidated from the date
on which control is transferred out of the Group.
All intra-company balances and transactions, including
unrealised profits arising from intra-group transactions, are
eliminated in full in preparing the consolidated financial
statements. Investments in subsidiaries within the Company balance
sheet are stated at impaired cost.
Presentation of income statement
Due to the non-prescriptive nature under IFRS as to the format
of the income statement, the format used by the Group is explained
below.
Operating profit is the pre-finance profit of continuing
activities and acquisitions of the Group, and in order to achieve
consistency and comparability, is analysed to show separately the
results of normal trading performance ("underlying profit"),
individually significant charges and credits, changes in the fair
value of financial instruments and non-trading items. Such items
arise because of their size or nature. In the year ended 31 March
2020, there were two non-trading items, the impairment of the
GBP3,979,000 goodwill which arose on the 2005 PHFC acquisition and
the GBP3,500,000 impairment of the goodwill, which arose on the
2008 acquisition of Momart. There were no non-trading items in the
year ended 31 March 2019.
Foreign currencies
Transactions in foreign currencies are translated to the
functional currencies of Group entities at exchange rates ruling at
the dates of the transactions. Monetary assets and liabilities
denominated in foreign currencies are retranslated to the
functional currency using the relevant rates of exchange ruling at
the balance sheet date and the gains or losses thereon are included
in the income statement.
Non-monetary assets and liabilities are translated using the
exchange rate at the date of the initial transaction.
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 to 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 few properties purchased are depreciated over an estimated
useful life of 50 years.
Investment properties - Company
The investment property in the Company consists of the Leyton
site purchased in December 2018, with five warehouses which are
rented to Momart. The purchase price allocated to land has not been
depreciated, and the purchase price allocated to each property has
been depreciated on a straight-line basis over the expected useful
life, after consideration of the age and condition of each
property, down to an estimated residual value of nil.
The carrying value of assets and their useful lives are
reviewed, and adjusted if appropriate, at each balance sheet date.
If an indication of impairment exists, the assets are written down
to their recoverable amount and the impairment is charged to the
income statement in the period in which it arises. Freehold land is
not depreciated.
Joint Ventures
Jointly controlled entities are those entities over whose
activities the Group has joint control, established by contractual
agreement and requiring the joint venture partners' unanimous
consent for strategic financial and operating decisions. FIH group
plc has joint control over an investee when it has exposure or
rights to variable returns from its involvement with the joint
venture and has the ability to affect those returns through its
joint power over the entity.
Jointly controlled entities are accounted for using the equity
method (equity accounted investees) and are initially recognised at
cost. The consolidated financial statements include the Group's
share of the total comprehensive income and equity movements of
equity accounted investees, from the date that significant
influence or joint control commences until the date that
significant influence or joint control ceases. When the Group's
share of losses exceeds its interest in an equity accounted
investee, the Group's carrying amount is reduced to nil and
recognition of further losses is discontinued except to the extent
that the Group has incurred legal or constructive obligations or
made payments on behalf of an investee.
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. The
classification and accounting treatment of business combinations
which occurred prior to transition has not been reconsidered in
preparing the Group's opening IFRS balance sheet at 1 April 2006.
Goodwill is not amortised but reviewed for impairment annually, or
more frequently, if events or changes in circumstances indicate
that the carrying value may be impaired. At 31 March 2020, all
goodwill arising on acquisitions prior to 1 April 2006 has either
been offset against other reserves on acquisition, or written off
through the income statement as an impairment.
Acquisitions on or after 1 April 2006
Goodwill on acquisition is initially measured at cost, being the
excess of the cost of the business combination over the acquirer's
interest in the fair value of the identifiable assets, liabilities
and contingent liabilities of the acquired business. Following
initial recognition, goodwill is measured at cost less any
accumulated impairment losses. Goodwill is not amortised but
reviewed for impairment annually or more frequently if events or
changes in circumstances indicate that the carrying value may be
impaired. Amortisation is charged to the income statement on a
straight-line basis over the estimated useful lives of intangible
assets unless such lives are indefinite. Other intangible assets
are amortised from the date they are available for use. In the year
ended 31 March 2014, the directors reviewed the life of the brand
name at Momart and after considerations of its strong reputation in
a niche market and its history of stable earnings and cash flow,
which is expected to continue into the foreseeable future,
determined that its useful life is indefinite, and amortisation
ceased from 1 October 2013.
Computer software
Acquired computer software is capitalised as an intangible asset
on the basis of the cost incurred to acquire and bring the specific
software into use. Amortisation is charged to the income statement
on a straight-line basis over the estimated useful lives of
intangible assets from the date that they are available for use.
The estimated useful life of computer software is seven years.
Impairment of non-financial assets
At each reporting date the Group assesses whether there is any
indication that an asset may be impaired. Goodwill and intangible
assets with indefinite lives are tested for impairment, at least
annually. Where an indicator of impairment exists or the asset
requires annual impairment testing, the Group makes a formal
estimate of the recoverable amount. Where the carrying amount of an
asset exceeds its recoverable amount, the asset is considered
impaired and is written down to its recoverable amount. Impairment
losses are recognised in the income statement.
Recoverable amount is the greater of an asset's or
cash-generating unit's fair value less cost to sell or value in
use. It is determined for an individual asset, unless the asset's
value in use cannot be estimated and it does not generate cash
inflows that are largely independent of those from other assets or
groups of assets, in which case the recoverable amount is
determined for the cash-generating unit to which the asset belongs.
In assessing value in use, the estimated future cash flows are
discounted to their present value using a discount rate that
reflects current market assessments of the time value of money and
risks specific to the asset.
An impairment loss in respect of goodwill is not reversed. In
respect of other assets, impairment losses are reversed if there
has been a change in the estimates used to determine the
recoverable amount. An impairment loss is reversed only to the
extent that the asset's carrying amount does not exceed the
carrying amount that would have been determined, net of
depreciation or amortisation, if no impairment loss had been
recognised.
Finance income and expense
Net financing costs comprise interest payable and interest
receivable which are recognised in the income statement. Interest
income and interest payable are recognised as a profit or loss as
they accrue, using the effective interest method.
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.
Consumer Finance interest income
Consumer Finance interest income consists of interest receivable
on the hire purchase debtors, which is calculated on a sum of
digits basis, which allocates more interest on the earlier periods,
when the debt is higher, and interest receivable from charge cards,
which are FIC credit cards issued to customers including staff.
Pensions
Defined contribution pension schemes
The Group operates defined contribution schemes at PHFC and
Momart, and FIC employees are enrolled in the FIPS, "Falkland
Islands Pension Scheme". The assets of all these schemes are held
separately from those of the Group in independently administered
funds. The amount charged to the income statement represents the
contributions payable to the schemes in respect to the accounting
period.
Defined benefit pension schemes
The Group has one pension scheme providing benefits based on
final pensionable pay, which is unfunded and closed to further
accrual. The Group's net obligation in respect of the defined
benefit pension plan is calculated by estimating the amount of
future benefit that employees have earned in return for their
service in the current and prior periods; that benefit is
discounted to its present value. The liability discount rate is the
yield at the balance sheet date on AA credit-rated bonds that have
maturity dates approximating the terms of the Group's obligations.
The calculation is performed by a qualified actuary using the
projected unit credit method.
The current service cost and costs from settlements and
curtailments are charged against operating profit. Past service
costs are recognised immediately within profit and loss. The net
interest cost on the defined benefit liability for the period is
determined by applying the discount rate used to measure the
defined benefit obligation at the end of the period to the net
defined benefit liability at the beginning of the period. It takes
into account any changes in the net defined benefit liability
during the period. Re-measurements of the defined benefit pension
liability are recognised in full in the period in which they arise
in the statement of comprehensive income.
1. Accounting policies (continued)
Trade and other receivables
Trade receivables are carried at amortised cost, less provision
for impairment. Any change in their value through impairment or
reversal of impairment is recognised in the income statement.
Trade and other payables
Trade and other payables are stated at their cost less payments
made.
Dividends
Dividends unpaid at the balance sheet date are only recognised
as liabilities at that date to the extent that they are
appropriately authorised and are no longer at the discretion of the
Company.
Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash
balances and call deposits with an original maturity of three
months or less. Bank overdrafts that are repayable on demand and
form an integral part of the Group's cash management are included
as a component of cash and cash equivalents for the purpose of the
statement of cash flows.
Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair
value less directly attributable transaction costs. Subsequent to
initial recognition, interest-bearing borrowings are stated at
amortised cost with any difference between cost and redemption
value being recognised in the income statement over the period of
the borrowings on an effective interest basis.
Income tax
Income tax on the profit or loss for the year comprises current
and deferred tax. Income tax is recognised in the income statement,
except to the extent that it relates to items recognised directly
in equity, in which case it is recognised directly in equity or in
other comprehensive income. Current tax is the expected tax payable
on the taxable income for the year, using tax rates enacted, or
substantively enacted at the balance sheet date, and any adjustment
to tax payable in respect of previous years.
Deferred tax is provided using the balance sheet method,
providing for temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the
amounts used for taxation purposes. The following temporary timing
differences are not recognised:
-- Goodwill not deductible for tax purposes; and
-- Initial recognition of assets or liabilities in a transaction
that is not a business combination and that affects neither
accounting nor taxable profits.
-- Temporary differences related to investments in subsidiaries,
to the extent that it is probable that they will not reverse in the
foreseeable future.
A deferred tax asset is recognised to the extent that it is
probable that future taxable profits will be available against
which the temporary differences can be utilised. Deferred tax
assets are reviewed at each reporting date and are reduced to the
extent that it is no longer probable that the related tax benefit
will be realised.
Deferred tax is recognised at the tax rates that are expected to
be applied to the temporary differences when they reverse, based on
rates that have been enacted or substantially enacted by the
reporting date.
Cash-flow hedges
The effective portions of changes in the fair values of
derivatives that are designated and qualify as cash-flow hedges are
recognised in equity. The gain or loss to any ineffective portion
is recognised immediately in the income statement. Amounts
accumulated in the hedging reserve are recycled to the income
statement in the periods when the hedged items will affect profit
or loss.
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 estimated,
being the amount to which the Group expects to be entitled and to
which it has present enforceable rights under the contract. Once
the total transaction price is determined, the Group allocates this
to the identified performance obligations in proportion to their
relative standalone selling prices and revenue is then recognised
when (or as) those performance obligations are satisfied.
Discounts are allocated proportionally across all performance
obligations in the contract unless directly observable evidence
exists that the discount relates to one or more, but not all,
performance obligations.
For each performance obligation, the Group determines if revenue
will be recognised over time or at a point in time. For each
performance obligation to be recognised over time, the Group
applies a revenue recognition method that faithfully depicts the
Group's performance in transferring control of the goods or
services to the customer. This decision requires assessment of the
nature of the goods or services that the Group has promised to
transfer to the customer. The Group applies an appropriate
methodology, typically based on the expected profile of the
deferral event (for example claims cost through the policy term or
time elapsed).
Revenue streams of the Group
The revenues streams of the Group have been analysed and
considered in turn.
Retail revenues arising from the sale of goods and recognised at
the point of sale
The retail revenues in the Falkland Islands arise from the sale
of goods in the retail outlets and the sale of vehicles and parts
at Falklands 4x4, are recognised at the point of sale, which is
usually at the till, when the goods are paid for by cash or credit
or debit card.
Housing revenue is generally recognised on completion of the
single performance obligation of supplying a house, once the keys
are handed over on legal completion. However, the contract for the
18 houses for the Falklands Islands Government has been deemed to
be a contract on which revenue should be recognised over time, as
an activity schedule with milestone payments was agreed before the
work commenced.
1. Accounting policies (continued)
Revenue from cars sold is recognised in full when the asset is
physically transferred and the benefits and risks of ownership pass
to the customer.
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 Exhibitions
revenue, which includes the income from UK and International
museums, or Gallery Services revenue, which includes revenue earned
from Gallery services, such as Sothebys, where the inbound and
outbound exhibitions installations and dispersal are provided as
one quote to customers, but are fulfilled up to several months
apart. The allocation of revenue in the inbound installations and
outbound dispersals has been reviewed. Momart operates a very
transparent method of setting out prices in both quotes and
invoices, allocating revenues per trips, as these are considered
separate obligations.
Storage income in Momart is charged based on the actual volume
occupied, at an agreed weekly rate per cubic metre. Clients can be
invoiced weekly, monthly or quarterly, and income is recognised as
it is accrued, on a monthly or weekly basis.
Long term construction contracts
The housing contract for the Falkland Islands Government is a
long-term contract, with an outcome that can be reliably estimated
and as it is considered probable that the contract will be
profitable. Revenue and costs are recognised by reference to the
stage of completion of the contract activity at the reporting date,
with revenue recognised over time by reference to the stage of
completion, using the input method, based on regular assessments of
the costs incurred to date, which includes using the resources
consumed, labour hours expended, and any other costs incurred.
The Group receives payments from the Falkland Islands Government
based on an activity schedule, which is a contractual schedule of
value that reflects the timing and performance of service delivery.
Revenue is therefore recognised over time. Un-invoiced amounts are
presented as contract assets. Revenue is recognised under IFRS 15
by the application of the input method using the direct measurement
of the goods or services provided to date, including materials and
labour.
Where a modification is required, the Group assesses the nature
of the modification and whether it represents a separate
performance obligation required to be satisfied by the Group or
whether it is a modification to the existing performance
obligation. No margin is recognised until the outcome of the
contract can be estimated with reasonable certainty. Revenue in
respect of variations to contracts and incentive payments is
recognised when there is an enforceable right to payment and it is
highly probable it will be agreed by the customer. Variation
orders, claims and liquidated damages, are re-assessed at each
reporting period using the expected outcome approach. If it were
considered probable that total contract costs would exceed total
contract revenue, the expected loss would be recognised as an
expense immediately.
Other revenues
Other revenues recognised over time, include rental income from
the rental property portfolio, which is recognised monthly as the
properties are occupied, and car hire income, which is recognised
over the hire period.
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 two open hedging relationships at 31 March 2020,
one 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. 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 2020 is
GBP13,500,000. The accrual held in respect of this swap at the
year-end was GBP526,000. The second swap was taken out in October
2015 to hedge the bank loans drawn down to fund the Harbour Spirit
ferry purchase. The swap had an initial notional value of GBP3.6
million, with interest payable at the difference between 1.325% and
the Bank of England Base rate. This interest rate swap notional
value decreases at GBP36,250 per month over five years until
September 2020 when it will expire. The notional value of the swap
at 31 March 2020 is GBP1,703,750 (2019: GBP2,138,750). The accrual
held in respect of this swap at the year-end was GBP11,000 (2019:
GBP16,000).
1. Accounting policies (continued)
IFRS 9 introduces three hedge effectiveness requirements:
IFRS 9 requires the existence of an economic relationship
between the hedged item and the hedging instrument. There must be
an expectation that the value of the hedging instrument and the
value of the hedged item would move in the opposite direction as a
result of the common underlying or hedged risk. As the LIBOR and
base rates increase, the interest payable on the loans will
increase, and the interest payable on the swaps will fall.
The hedge accounting model is based on a general notion of there
being an offset between the changes of the swap as the hedging
instrument and those of the hedged bank loans, both of these
balances will be affected by the base rate movements, so it has
been concluded the offset is justifiable. The size of the hedging
instrument and the hedged items must be similar for the hedge to be
effective.
Standards and revisions adopted in the year to 31 March 2020
Impact of initial application of IFRS 16: Leases
The date of initial application of IFRS 16 for the Group is 1
April 2019. The Group has applied IFRS 16 using the modified
retrospective approach and therefore comparative information has
not been restated and is presented under IAS 17.
The adoption of IFRS 16, and the resulting change in the
accounting treatment of operating leases, has had a significant
impact on the Group's financial statements resulting from the
revised treatment of the ground rent payable on the 50-year lease
for the Gosport pontoon, and the lease payments incurred on the two
external storage facilities and the head office facilities at
Momart. The Group recognised GBP2,307,000 of right-of-use assets
and GBP2,494,000 of lease liabilities upon transition to IFRS 16.
The difference of GBP187,000 has been recognised in retained
earnings, net of GBP34,000 of associated deferred tax.
The acquisition of the Momart warehouse facilities by the Group
in December 2018, combined with the age of some of those leases,
which extend back nearly 20 years, was the key driver in the
decision to adopt the modified retrospective approach.
Leased assets treatment for the year ended 31 March 2019
only
IAS 17 has been applied to the results for the year ended 31
March 2019, though IFRS 16 has been applied from 1 April 2019.
Prior to 31 March 2019, leases in which the Group assumes
substantially all the risks and rewards of ownership were
classified as finance leases. All other leases were classified as
operating leases, and rental operating leases were charged to the
income statement on a straight-line basis over the lease term, with
lease incentives, such as rent -free periods, recognised as an
integral part of the total rental income.
Following the transition to IFRS 16, equity as at 31 March 2019
has been restated as follows:
Group
GBP'000
Equity at 1 April 2019 44,567
Right-of-use assets recognised 2,307
Lease liabilities recognised (2,494)
Associated deferred tax asset recognised 34
Equity at 1 April 2019, after IFRS 16 transitional
adjustments 44,414
-------------------------------------------------------- --------
1. Accounting policies (continued)
The Group has applied IFRS 16 using the modified retrospective approach
which:
* Requires the Group to recognise the cumulative effect
of initially applying IFRS 16 as an adjustment to the
opening balance of retained earnings at the date of
initial application;
* Does not permit restatement of comparatives, which
continue to be presented under IAS 17;
(a) Impact of the new definition of a lease
The Group has made use of the practical expedient available on transition
to IFRS 16 not to reassess whether a contract is, or contains, a lease.
Accordingly, the definition of a lease in accordance with IAS 17 and
IFRIC 4 will continue to be applied to those leases before 1 April
2019.
IFRS 16 determines whether a contract contains a lease on the basis
of whether the customer has the right to control the use of an identified
asset for a period of time in exchange for consideration. This is
in contrast to the focus on 'risks and rewards' in IAS 17. The Group
applies the definition of a lease and related guidance set out in
IFRS 16 to all lease contracts entered into or changed on or after
1 January 2019 (whether it is a lessor or a lessee in the lease contract).
In preparation for this first-time application of IFRS 16, the Group
has carried out an implementation project, which has shown that the
new definition in IFRS 16 will not significantly change the scope
of contracts that meet the definition of a lease for the Group.
(b) Impact on Lessee Accounting
(i) Former operating leases
IFRS 16 changes how the Group accounts for leases previously classified
as operating leases under IAS 17, which were off balance sheet. Applying
IFRS 16, for all leases (except as noted below), the Group:
a) Recognises right-of-use assets and lease liabilities in the consolidated
statement of financial position, initially measured at the present
value of the future lease payments;
b) Recognises depreciation of right-of-use assets and interest on
lease liabilities in the consolidated statement of profit or loss;
c) Separates the total amount of cash paid into a principal portion
(presented within financing activities) and interest (presented within
financing activities) in the consolidated statement of cash flows.
Lease incentives (e.g. rent-free periods) are recognised as part of
the measurement of the right-of-use assets and lease liabilities whereas
under IAS 17 they resulted in the recognition of a lease incentive,
amortised as a reduction of rental expenses on a straight-line basis.
For short-term leases (lease term of 12 months or less) and leases
of low-value assets (which includes tablets and personal computers,
small items of office furniture and telephones), the Group has opted
to recognise a lease expense on a straight-line basis as permitted
by IFRS 16. This expense is presented within 'other expenses' in profit
or loss.
Under IFRS 16, right-of-use assets are tested for impairment in accordance
with IAS 36.
The Group has used the following practical expedients when applying
the modified retrospective approach to leases previously classified
as operating leases applying IAS 17:
* applied a single discount rate to a portfolio of
leases with reasonably similar characteristics, this
portfolio of assets are the two warehouses and head
office rental agreements within Momart;
* elected not to recognise right-of-use assets and
lease liabilities to leases for which the lease term
ends within 12 months of the date of initial
application;
* excluded initial direct costs from the measurement of
the right-of-use asset at the date of initial
application;
* used hindsight when determining the lease term when
the contract contains options to extend or terminate
the lease;
* concluded that there is no residual value included in
any of the rental leases.
1. Accounting policies (continued)
(ii) Former finance leases
For leases that were previously classified as finance leases, the
carrying amount of the leased assets and obligations under finance
leases measured applying IAS 17 immediately before the date of initial
application is reclassified to right-of-use assets and lease liabilities
respectively without any adjustments from 1 April 2019.
(c) The Group as a lessor
IFRS 16 does not change substantially how a lessor accounts for leases.
Under IFRS 16, a lessor continues to classify leases as either finance
leases or operating leases and account for those two types of leases
differently.
The hire purchase receivables in FIC continue to be reported as receivables,
the goods are removed from the balance sheet when the finance lease
agreements are signed and instead a receivable due from the customer
is recorded, as the title of the vehicles, or other goods, such as
furniture, white goods or other electrical items, are deemed to have
passed to the customer at that point.
Hire purchase debtors are shown in the balance sheet under current
assets to the extent they are due within one year, and under non-current
assets to the extent that they are due after more than one year, and
are stated at the value of the net investment in the agreements. Finance
lease income is allocated to accounting periods so as to reflect a
constant periodic rate of return on the Group's net investment outstanding
in respect of the leases.
The FIC rental property agreements which are only ever for a maximum
of 12 months, and with titles that will never pass to the customer,
continue to be classified as operating leases. Rental income from
operating leases is recognised on a straight-line basis over the term
of the relevant lease. Initial direct costs incurred in negotiating
and arranging an operating lease are added to the carrying amount
of the leased asset and recognised on a straight-line basis over the
lease term. The rental property portfolio, which is held for leasing
out under operating leases are included in investment property (where
they constitute land and buildings) or in property, plant and equipment
(where they do not constitute land and buildings) at cost less accumulated
depreciation and impairment losses.
Other than IFRS 16, the Group has consistently applied the accounting
policies set out in this note to all periods presented in these consolidated
financial statements.
Standards and revisions not yet adopted in the year to 31 March 2020
No standards not yet adopted are expected to have any significant
impact on the financial statements of the Group or Company.
2. Segmental Information Analysis
The Group is organised into three operating segments, and information
on these segments is reported to the chief operating decision maker
('CODM') for the purposes of resource allocation and assessment of
performance. The CODM has been identified as the Board.
The operating segments offer different products and services and are
determined by business type: goods and essential services in the Falkland
Islands, the provision of ferry services and art logistics and storage.
Segment results, assets and liabilities include items directly attributable
to a segment as well as those that can be allocated on a reasonable
basis. Segment capital expenditure is the total cost incurred during
the period to acquire property, plant and equipment and intangible
assets other than goodwill and any other assets purchased through
the acquisition of a business.
2. Segmental Information Analysis (continued)
2020
General Ferry Art Logistics Unallocated Total
Trading Services and Storage
(Falklands) (Portsmouth) (UK)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 21,671 4,125 18,804 - 44,600
---------------------------------- ------------ ------------- -------------- ------------ ---------
Segment operating profit
before tax & non-trading
items 2,121 975 1,469 - 4,565
Impairment of goodwill - (3,979) (3,500) - (7,479)
Profit / (loss) before
net financing costs 2,121 (3,004) (2,031) - (2,914)
Finance income 5 4 4 - 13
Finance expense (69) (344) (456) - (869)
---------------------------------- ------------ ------------- -------------- ------------ ---------
Net finance expense (64) (340) (452) - (856)
---------------------------------- ------------ ------------- -------------- ------------ ---------
Segment profit / (loss)
before tax 2,057 (3,344) (2,483) - (3,770)
---------------------------------- ------------ ------------- -------------- ------------ ---------
Assets and liabilities
Segment assets 28,492 10,983 32,462 5,796 77,733
Segment liabilities (9,208) (8,834) (20,331) (568) (38,941)
Segment net assets 19,284 2,149 12,131 5,228 38,792
---------------------------------- ------------ ------------- -------------- ------------ ---------
Other segment information
Capital expenditure:
Property, plant and
equipment 1,343 65 1,363 - 2,771
Investment properties 1,351 - - - 1,351
Computer software - - 27 - 27
---------------------------------- ------------ ------------- -------------- ------------ ---------
Total Capital expenditure 2,694 65 1,390 - 4,149
---------------------------------- ------------ ------------- -------------- ------------ ---------
Capital expenditure:
cash 2,685 65 638 - 3,388
Capital expenditure:
non-cash 9 - 752 - 761
Total Capital expenditure 2,694 65 1,390 - 4,149
---------------------------------- ------------ ------------- -------------- ------------ ---------
Depreciation and amortisation:
Property, plant and
equipment 564 459 840 - 1,863
Investment properties 132 - - - 132
Computer software - - 68 - 68
Total Depreciation and
Amortisation 696 459 908 - 2,063
Impairment of goodwill - 3,979 3,500 - 7,479
---------------------------------- ------------ ------------- -------------- ------------ ---------
Total Depreciation &
impairment 696 4,438 4,408 - 9,542
---------------------------------- ------------ ------------- -------------- ------------ ---------
Underlying profit before
net financing costs 2,121 975 1,469 - 4,565
Interest income 5 4 4 - 13
Interest expense (69) (344) (456) - (869)
Underlying profit before
tax 2,057 635 1,017 - 3,709
------------ ------------- -------------- ------------
2. Segmental Information Analysis (continued)
2019
General Ferry Art Logistics Unallocated Total
Trading Services and Storage
(Falklands) (Portsmouth) (UK)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 17,554 4,367 20,607 - 42,528
--------------------------------- ------------ ------------- -------------- ------------ ---------
Segment operating profit
before tax & non-trading
items 1,565 1,082 1,730 - 4,377
Profit before net financing
costs 1,565 1,082 1,730 - 4,377
Finance income 12 12 12 - 36
Finance expense (72) (310) (173) - (555)
--------------------------------- ------------ ------------- -------------- ------------ ---------
Net finance expense (60) (298) (161) - (519)
--------------------------------- ------------ ------------- -------------- ------------ ---------
Segment profit before
tax 1,505 784 1,569 - 3,858
--------------------------------- ------------ ------------- -------------- ------------ ---------
Assets and liabilities
Segment assets 25,913 14,756 35,214 1,798 77,681
Segment liabilities (8,772) (8,237) (15,457) (648) (33,114)
Segment net assets 17,141 6,519 19,757 1,150 44,567
--------------------------------- ------------ ------------- -------------- ------------ ---------
Other segment information
Capital expenditure:
Property, plant and
equipment 1,055 50 20,034 - 21,139
Investment properties 1,293 - - - 1,293
Total Capital expenditure 2,348 50 20,034 - 22,432
--------------------------------- ------------ ------------- -------------- ------------ ---------
Depreciation and amortisation
Property, plant and
equipment 395 437 440 - 1,272
Investment properties 99 - - - 99
Computer software - - 66 - 66
Total Depreciation and
Amortisation 494 437 506 - 1,437
--------------------------------- ------------ ------------- -------------- ------------ ---------
Underlying profit before
net financing costs 1,565 1,082 1,730 - 4,377
Interest income 12 12 12 - 36
Interest expense (72) (310) (173) - (555)
Underlying profit before
tax 1,505 784 1,569 - 3,858
------------ ------------- -------------- ------------
2. Segmental Information Analysis (continued)
The GBP5,796,000 (2019: GBP1,798,000) unallocated assets above
include GBP5,766,000 (2019: GBP1,768,000) of cash and GBP30,000
(2019: GBP30,000) of prepayments held in FIH group plc.
The GBP568,000 (2019: GBP648,000) unallocated liabilities above
consist of accruals and tax balances held in FIH group plc.
3. Geographical analysis
The tables below analyse revenue and other information by
geography:
2020
United Falkland
Kingdom Islands Total
GBP'000 GBP'000 GBP'000
Revenue (by source) 22,929 21,671 44,600
------------------------------------------------ --------- --------- --------
Assets and Liabilities:
Non-current segment assets, excluding deferred
tax 37,826 15,456 53,282
------------------------------------------------ --------- --------- --------
Capital expenditure: cash 703 2,685 3,388
------------------------------------------------ --------- --------- --------
2019
United Falkland
Kingdom Islands Total
GBP'000 GBP'000 GBP'000
Revenue (by source) 24,974 17,554 42,528
------------------------------------------------ --------- --------- --------
Assets and Liabilities:
Non-current segment assets, excluding deferred
tax 43,110 13,490 56,600
------------------------------------------------ --------- --------- --------
Capital expenditure: cash 20,084 2,348 22,432
------------------------------------------------ --------- --------- --------
4. Revenue
2020
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 10,014 - - 10,014
Automotive sales 2,187 631 369 3,187
Construction 3,141 - 1,874 5,015
Freight & Port Services - 745 - 745
Support Services - 2,010 31 2,041
Rental property income - - 669 669
-------------------------- --------------- ---------------------- -------------------- ---------
FIC (Falklands) 15,342 3,386 2,943 21,671
PHFC (Portsmouth) - 4,125 - 4,125
Art logistics and
storage - - 18,804 18,804
-------------------------- --------------- ---------------------- -------------------- ---------
Total Revenue 15,342 7,511 21,747 44,600
-------------------------- --------------- ---------------------- -------------------- ---------
At 31 March 2020, a contract asset of GBP73,000 has been
included in Trade and other receivables (note 19) in respect of the
long-term housing contract with the Falkland Islands Government.
There were no associated contract liabilities at this date.
2019
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 9,716 - - 9,716
Automotive sales 2,078 628 343 3,049
Construction 1,544 - - 1,544
Freight & Port Services - 778 - 778
Support Services - 1,908 92 2,000
Rental property income - - 467 467
-------------------------- --------------- ---------------------- -------------------- ---------
FIC (Falklands) 13,338 3,314 902 17,554
PHFC (Portsmouth) - 4,367 - 4,367
Art logistics and
storage - - 20,607 20,607
-------------------------- --------------- ---------------------- -------------------- ---------
Total Revenue 13,338 7,681 21,509 42,528
-------------------------- --------------- ---------------------- -------------------- ---------
5. Non-trading items
2020 2019
GBP'000 GBP'000
(Loss) / profit before tax as reported (3,770) 3,858
Non-trading items:
Impairment of goodwill 7,479 -
---------------------------------------- -------- --------
Underlying profit before tax 3,709 3,858
----------------------------------------- -------- --------
Tax on non-trading items
There has not been any tax impact from the impairment of
goodwill. There were no non-trading items in the prior year.
6. Expenses and auditor's remuneration
The following expenses have been
included in the profit and loss Group Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Direct operating expenses of rental
properties 380 316 - -
Depreciation 1,995 1,371 204 60
Amortisation of computer software 68 66 - -
Foreign currency (gain) / loss (5) 69 - -
Impairment of goodwill 7,479 - - -
Impairment loss on trade and other
receivables 31 17 - -
Cost of inventories recognised
as an expense 12,608 8,735 - -
Operating lease payments - 895 - -
------------------------------------- -------- -------- -------- --------
Auditor's remuneration 2020 2019
GBP'000 GBP'000
Audit of these financial statements 40 39
Audit of subsidiaries' financial statements pursuant
to legislation 110 86
Tax advisory services - 2
Other assurance services - 10
------------------------------------------------------ -------- --------
Total auditor's remuneration 150 137
------------------------------------------------------ -------- --------
Amounts paid to the Company's auditors and their associates in
respect of services to the Company, other than the audit of the
Company's financial statements, have not been disclosed as the
information is required instead to be disclosed on a consolidated
basis.
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
2020 2019 2020 2019
PHFC 35 37 - -
Falkland Islands: in Stanley 180 158 - -
in UK 7 5 - -
Art logistics & storage 140 140 - -
Head office 6 6 6 6
-------------------------------------------- ---------- ---------- ---------- ----------
Total average staff numbers 368 346 6 6
-------------------------------------------- ---------- ---------- ---------- ----------
The aggregate payroll cost of these persons was as follows:
Group Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Wages and salaries 12,771 12,002 571 582
Share-based payments (see note 24) 97 69 48 46
Social security costs 939 966 76 85
Contributions to defined contribution
plans (see note 23) 527 436 19 19
--------------------------------------- -------- -------- -------- --------
Total employment costs 14,334 13,473 714 732
--------------------------------------- -------- -------- -------- --------
Details of audited directors' remuneration are provided in the
Directors' Report, which forms part of these audited financial
statements, under the heading 'Details of Directors' Remuneration
and Emoluments'.
8. Finance income and expense
2020 2019
GBP'000 GBP'000
Bank interest receivable 13 36
Total financial income 13 36
---------------------------- -------- --------
2020 2019
GBP'000 GBP'000
Interest payable on bank loans (464) (248)
Net interest cost on the FIC defined benefit pension
scheme liability (65) (72)
Lease liabilities finance charge (340) (235)
Total finance expense (869) (555)
-------------------------------------------------------- -------- --------
9. Taxation
Recognised in the income statement
2020 2019
GBP'000 GBP'000
Current tax expense
Current year 480 635
Adjustments for prior years 13 (22)
----------------------------------------- -------- --------
Current tax expense 493 613
Deferred tax expense
Origination and reversal of temporary
differences 376 183
Change in UK tax rate to 19% 144 -
Adjustments for prior years (55) 31
Deferred tax expense (see note
17) 465 214
----------------------------------------- -------- --------
Total tax expense 958 827
----------------------------------------- -------- --------
Reconciliation of the effective tax rate
2020 2019
GBP'000 GBP'000
(Loss) / Profit on ordinary activities
before tax (3,770) 3,858
--------------------------------------------- -------- --------
Tax using the UK corporation tax rate of
19% (2019: 19%) (716) 733
Expenses not deductible for tax purposes 85 14
Impairment of goodwill not deductible for
tax purposes 1,421 -
Effect of increase in rate of deferred
tax 199 6
Effect of higher tax rate overseas 11 65
Adjustments to tax charge in respect of
previous periods (42) 9
Total tax expense 958 827
--------------------------------------------- -------- --------
Tax recognised directly in equity and other comprehensive
income
2020 2019
GBP'000 GBP'000
Deferred tax on effective portion of changes
in fair value 102 -
Movement on deferred tax asset relating
to the pension scheme (35) (9)
----------------------------------------------------- -------- --------
Deferred tax expense recognised directly in other
comprehensive income 67 (9)
Deferred tax on IFRS 16 transitional adjustment 34 -
----------------------------------------------------- -------- --------
Deferred tax expense recognised directly in equity 101 (9)
------------------------------------------------------- -------- --------
A UK corporation rate of 19% (effective 1 April 2020) was
substantively enacted on 17 March 2020, reversing the previously
enacted reduction in the rate from 19% to 17%. This will increase
the company's future current tax charge accordingly. The deferred
tax asset at 31 March 2020 has been calculated at 19% (2019:
17%).
The deferred tax assets and liabilities in FIC have been
calculated at the Falklands Islands' tax rate of 26%.
10. Earnings per share
The calculation of basic earnings per share is based on profits
on ordinary activities after taxation, and the weighted average
number of shares in issue in the period, excluding shares held
under the Employee Share Ownership Plan ('ESOP') (see note 25).
The calculation of diluted earnings per share is based on
profits on ordinary activities after taxation and the weighted
average number of shares in issue in the period, excluding shares
held under the ESOP, adjusted to assume the full issue of share
options outstanding, to the extent that they are dilutive.
2020 2019
GBP'000 GBP'000
(Loss) / Profit on ordinary activities after taxation (4,728) 3,031
------------------------------------------------------- -------- --------
2020 2019
Number Number
Weighted average number of shares in issue 12,504,000 12,451,125
Less: shares held under the ESOP (1,633) (9,964)
------------------------------------------------------ ----------- -----------
Average number of shares in issue excluding the ESOP 12,502,367 12,441,161
Maximum dilution with regards to share options 181,663 119,277
------------------------------------------------------ ----------- -----------
Diluted weighted average number of shares 12,684,030 12,560,438
------------------------------------------------------ ----------- -----------
2020 2019
Basic earnings per share -37.8p 24.4p
Diluted earnings per share -37.8p 24.1p
------------------------------------------------------ ----------- -----------
The diluted earnings per share for the year ended 31 March 2020
are the same as the basic earnings, as IAS 33 states that potential
shares shall only be treated as dilutive when, and only when, their
conversion to ordinary shares would decrease earnings per share or
increase loss per share from continuing operations.
To provide a comparison of earnings per share on underlying
performance, the calculation below sets out basic and diluted
earnings per share based on underlying profits.
Earnings per share on underlying profit 2020 2019
GBP'000 GBP'000
Underlying profit before tax (see note 5) 3,709 3,858
Underlying taxation (958) (827)
-------------------------------------------------------- ----------- -----------
Underlying profit after tax 2,751 3,031
Effective tax rate 25.8% 21.4%
Weighted average number of shares in issue excluding
the ESOP (from above) 12,502,367 12,441,161
Diluted weighted average number of shares (from above) 12,684,030 12,560,438
Basic earnings per share on underlying profit 22.0p 24.4p
Diluted earnings per share on underlying profit 21.7p 24.1p
-------------------------------------------------------- ----------- -----------
11. Intangible assets
Computer Brand
Software name Goodwill Total
GBP'000 GBP'000 GBP'000 GBP'000
Cost :
At 1 Apr 2018 and 31 March
2019 537 2,823 11,576 14,936
Additions 27 - - 27
------------------------------ ---------- -------- --------- --------
At 31 March 2020 564 2,823 11,576 14,963
------------------------------ ---------- -------- --------- --------
Accumulated amortisation:
At 1 Apr 2018 336 785 1,983 3,104
Amortisation 66 - - 66
At 31 March 2019 402 785 1,983 3,170
Amortisation 68 - - 68
Impairment - - 7,479 7,479
At 31 March 2020 470 785 9,462 10,717
------------------------------ ---------- -------- --------- --------
Net book value:
At 1 April 2018 201 2,038 9,593 11,832
------------------------------ ---------- -------- --------- --------
At 31 March 2019 135 2,038 9,593 11,766
------------------------------ ---------- -------- --------- --------
At 31 March 2020 94 2,038 2,114 4,246
------------------------------ ---------- -------- --------- --------
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.
During the year ended 31 March 2020, following the review for
impairment, the goodwill of PHFC has been deemed to be fully
impaired as passenger numbers have fallen significantly due to
COVID-19 and working practices, and therefore commuter transport
services, are likely to be affected beyond the short term. The Art
logistics and storage business has also impaired its goodwill by
GBP3.5 million as revenue has fallen significantly due to COVID-19
and art logistics services are likely to be affected beyond the
short term.
Goodwill
Goodwill is allocated to the Group's Cash Generating Units
(CGUs) which principally comprise its business segments. A segment
level summary of goodwill for each cash-generating-unit is shown
below:
Art Logistics Ferry Falkland
and Storage Services Islands Total
GBP'000 GBP'000 GBP'000 GBP'000
Goodwill at 1 April 2018 and 1
April 2019 5,577 3,979 37 9,593
------------------------------------ -------------- ---------- --------- --------
Goodwill at 31 March 2020 2,077 - 37 2,114
------------------------------------ -------------- ---------- --------- --------
11. Intangible assets (continued)
Recoverable amounts
A segment level summary of the recoverable amounts for the Art
Logistics and Storage, and Ferry Services cash-generating unit is
shown below:
Art Logistics Ferry
and Storage Services
GBP'000 GBP'000
Recoverable amounts at 31 March
2019 34,414 24,206
--------------------------------------- -------------- ----------
Recoverable amounts at 31 March
2020 25,361 9,764
--------------------------------------- -------------- ----------
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 a
value-in-use calculation, to their recoverable amounts. Goodwill is
impaired when the recoverable amount is less than the carrying
value. During the year the goodwill and indefinite life intangibles
for each CGU was separately assessed and tested for impairment, and
the goodwill allocated to the Ferry Services CGU was deemed to be
fully impaired, and that related to the Art Logistics and Storage
CGU was deemed to be impaired by GBP3.5 million. There were no
impairment charges in the year ended 31 March 2019. As part of
testing goodwill and indefinite life intangibles for impairment,
forecast operating cash flows for the next five years ended 31
March 2021-2025 and then to perpetuity have been used to assess the
value-in-use of Momart and a forty year model has been used to
assess the value-in-use of PHFC. These forecasts represent the best
estimate of future performance of the CGUs based on past
performance and expectations for the market development of the CGU.
A forty-year model has been considered to be appropriate for PHFC,
as this is the expected remaining useful economic life of the boats
currently in operation. Detailed forecasts have been prepared for
five years, with high level assumptions applied after the fifth
year.
These forecasts show heavy initial impacts of COVID-19 in year 1
followed by a gradual recovery over the following years and are
discussed in more detail in the assumption sections for each
CGU.
A number of key assumptions are used for impairment testing.
These key assumptions are made by management reflecting past
experience combined with their knowledge as to future performance
and relevant external sources of information.
Discount rates
Within impairment testing models, the cash flows of the Art
Logistics and Storage CGU have been discounted using a pre-tax
discount rate of 12.9% (2019: 9.8%), and the cash flows of the
Ferry Services CGU have been discounted using a pre-tax discount
rate of 8.5% (2019: 8.5%). Management have determined that each
rate is appropriate as the risk adjustment applied within the
discount rate reflects the risks inherent to each CGU, based on the
industry and geographical location it is based within.
Long term growth rates
Long term growth rates of 2% (2019: 2%) have been used for the
Art Logistics and Storage CGU as part of the impairment testing
model. For the Ferry Services CGU, long term growth rates assume no
growth.
Sensitivity to changes in assumptions
Using a discounted cash flow methodology necessarily involves
making numerous estimates and assumptions regarding growth,
operating margins, tax rates, appropriate discount rates, capital
expenditure levels and working capital requirements. These
estimates will likely differ from future actual results of
operations and cash flows, and it is possible that these
differences could be material. In addition, judgements are applied
by the directors in determining the level of cash generating units
and the criteria used to determine which assets should be
aggregated. A difference in testing levels could further affect
whether an impairment is recorded and the extent of impairment
loss.
11. Intangible assets (continued)
Assumptions specific to Ferry Services CGU
As a result of the expected impact on commuter services arising
from the current COVID-19 pandemic, in the medium to long term,
management have forecast a slight decrease in cash flows year on
year, in line with expected declines in passenger numbers. The
carrying value was determined to exceed the value-in-use and an
impairment of GBP3,979,000 to fully write down the goodwill held on
this CGU has been recognised (2019: GBPnil). The key assumptions
made in the estimation of future cash flows are the passenger
numbers and the average revenue per passenger. The pandemic
initially resulted in falls in passenger traffic of 90% in late
March 2020, which has remained low throughout the three-month lock
down period. A slow recovery is expected in the medium term as
children return to school and non-essential retail shops re-open,
but the impact of COVID-19 is likely to continue in the long-term,
with increased numbers of employees working from home, reducing the
number of commuters using the ferry which is the most significant
factor affecting future cash flows.
While the directors believe in the assumptions used in this
impairment test, there remains some uncertainty around the
timescale of recovery from the current COVID-19 pandemic, and
accordingly a scenario was performed which assessed a 10% reduction
in business cashflows in years 3 to 5 and there is a clear risk
that the impact of COVID-19 may continue in the medium to
long-term, with higher than expected numbers of employees working
from home, reducing the number of commuters using the ferry, and
should this materialise, a further impairment of GBP1.0 million
would be required. An additional scenario was performed which
increased the pre-tax discount rate by 1.0% and should this
materialise, a further impairment of GBP0.9 million would be
required.
At PHFC, the key assumptions made in the estimation of future
cash flows are: passenger numbers and the average fare yield per
passenger.
Assumptions specific to Arts Logistics and Storage CGU
Cash flows were projected based on approved budgets and plans
over the forecast period, with a long-term growth rate of 2%. The
carrying value was determined exceed its value-in-use and an
impairment of GBP3,500,000 to write down the goodwill held on this
CGU has been recognised (2019: GBPnil). The key assumptions made in
the estimation of future cashflows are in relation to Momart's
future revenue, and the extent to which the company's income will
recover from the effects of the pandemic.
While the directors believe in the assumptions used in this
impairment test, there remains some uncertainty around the
timescale of recovery from the current COVID-19 pandemic, and
accordingly a scenario was performed which assessed a 10% reduction
in profits in years 3 to 5 as it is possible that an even more
cautious view of Momart's long-term prospects could be impacted
into the medium-term by higher than anticipated cuts in government
spending, resulting in significantly less frequent, less complex
exhibitions. Should this materialise, a further impairment of
GBP1.8 million would be required, An additional scenario was
performed which increased the pre-tax discount rate by 0.5% and
should this materialise, a further impairment of GBP1.9 million
would be required.
12. Property, plant and equipment
Group
Right Freehold Long leasehold Vehicles,
to 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
2018 - 7,858 7,768 6,826 8,507 30,959
Additions in
year - 19,716 80 33 1,310 21,139
Transfer to
stock - - - - (86) (86)
Disposals - - (17) - (77) (94)
At 31 March
2019 - 27,574 7,831 6,859 9,654 51,918
IFRS 16 transition 3,537 - - - - 3,537
Additions in
year 1,217 124 81 18 1,331 2,771
Transfer to
stock - - - - (196) (196)
Reclassification
of leased assets 5,661 - (5,089) - (572) -
Disposals - - (112) - (106) (218)
At 31 March
2020 10,415 27,698 2,711 6,877 10,111 57,812
---------------------------- ------- ----------- --------------- -------- ----------- --------
Accumulated depreciation:
At 1 April
2018 - 2,482 1,548 2,061 6,023 12,114
Charge for
the year - 344 167 243 518 1,272
Transfer to
stock - - - - (58) (58)
Disposals - - (12) - (62) (74)
---------------------------- ------- ----------- --------------- -------- ----------- --------
At 31 March
2019 - 2,826 1,703 2,304 6,421 13,254
IFRS 16 transition 1,230 - - - - 1,230
Charge for
the year 527 506 71 244 515 1,863
Transfer to
stock - - - - (107) (107)
Reclassification
of leased assets 1,075 - (906) - (169) -
Disposals - - (51) - (89) (140)
---------------------------- ------- ----------- --------------- -------- ----------- --------
At 31 March
2020 2,832 3,332 817 2,548 6,571 16,100
---------------------------- ------- ----------- --------------- -------- ----------- --------
Net book value:
At 1 April
2018 - 5,376 6,220 4,765 2,484 18,845
---------------------------- ------- ----------- --------------- -------- ----------- --------
At 31 March
2019 - 24,748 6,128 4,555 3,233 38,664
---------------------------- ------- ----------- --------------- -------- ----------- --------
At 31 March
2020 7,583 24,366 1,894 4,329 3,540 41,712
---------------------------- ------- ----------- --------------- -------- ----------- --------
12. Property, plant and equipment (continued)
Right to use assets
Group
Long leasehold
Short leasehold Pontoon Momart Office
lease lease Trucks Equipment Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost:
At 31 March 2019 - - - - -
IFRS 16 transition 2,384 1,144 - 9 3,537
Additions in year 752 - 456 9 1,217
Reclassification from
property, plant and
equipment - 5,089 572 - 5,661
At 31 March 2020 3,136 6,233 1,028 18 10,415
------------------------- ---------------- --------------- -------- ----------- --------
At 31 March 2019 - - - - -
IFRS 16 transition 1,067 161 - 2 1,230
Charge for the year 299 124 100 4 527
Reclassification from
property, plant and
equipment - 906 169 - 1,075
At 31 March 2020 1,366 1,191 269 6 2,832
------------------------- ---------------- --------------- -------- ----------- --------
Net book value:
At 31 March 2019 - - - - -
At 31 March 2020 1,770 5,042 759 12 7,583
------------------------- ---------------- --------------- -------- ----------- --------
During the year to 31 March 2020, Momart acquired three trucks
financed by a three hire purchase loans totalling GBP534,000, and
renewed a Momart warehouse lease for GBP752,000.
At 31 March 2019 the net carrying amount of leased long
leasehold land and buildings and vehicles, plant and equipment was
GBP4,183,000 and GBP379,000 for the Gosport Pontoon and trucks at
Momart respectively.
The Company has no tangible fixed assets, other than the
investment property purchased in December 2018, which is included
within Investment Property (note 13).
13. Investment properties
Group
Residential
and commercial Freehold
property land Total
GBP'000 GBP'000 GBP'000
Cost:
At 1 April 2018 4,052 761 4,813
Additions in year 1,293 - 1,293
At 31 March 2019 5,345 761 6,106
Additions in year 1,330 21 1,351
----------------------------- ---------------- --------- --------
At 31 March 2020 6,675 782 7,457
----------------------------- ---------------- --------- --------
Accumulated depreciation:
At 1 April 2018 768 - 768
Charge for the year 99 - 99
At 31 March 2019 867 - 867
Charge for the year 132 - 132
At 31 March 2020 999 - 999
----------------------------- ---------------- --------- --------
Net book value:
At 1 April 2018 3,284 761 4,045
----------------------------- ---------------- --------- --------
At 31 March 2019 4,478 761 5,239
At 31 March 2020 5,676 782 6,458
----------------------------- ---------------- --------- --------
The investment properties comprise residential and commercial
property held for rental in the Falkland Islands. Investment
properties include 65 properties held for rental and 400 acres of
land, including 70 acres in Stanley, 58 acres of which have
planning permission. In addition, the Group has 300 acres of land
on the North shore of Stanley Harbour at Fairy Cove. The net book
value of the 700 acres of land held in investment properties is
GBP0.78 million (2019: GBP0.76 million).
Estimated Fair Value
At 31 March 2020 the fair value of this property portfolio,
including GBP2.1 million of land, GBP7.3 million of properties
available for rent and GBP0.6 million of properties under
construction, was estimated at GBP10.0 million, which has increased
by GBP1.3 million from the GBP8.7 million at 31 March 2019, due to
the GBP1.3 million capital investment in the year ended 31 March
2020.
The 65 rental properties are estimated to have a current market
value of GBP7.3 million (2019: GBP5.8 million); the increase from
the prior year is due to the addition of 11 further properties into
the investment property portfolio, a block of 9 houses at Camber
View, which together with one at Fitzroy Road has been built by the
FIC building team, and one complete house purchased in March
2020.
The land portfolio in the Falkland Islands has been owned for
many years and the estimated value of the land at GBP2.1 million
now exceeds the net book value by GBP1.4 million. The rental
property portfolio is valued at GBP7.9 million, GBP2.1 million more
than the net book value at 31 March 2020.
A level 3 valuation technique has been applied, using a market
approach to value these properties; the properties have been valued
based on their expected market value after review by the directors
of FIC who are resident in the Falkland Islands and who are
considered to have the relevant knowledge and experience to
undertake the valuation after consideration of current market
prices in the Falkland Islands.
Rental income.
During the year to 31 March 2020, the Group received rental
income of GBP669,000 (2019: GBP467,000) from its investment
properties.
13. Investment properties (continued)
Group
2020 2019
GBP'000 GBP'000
Estimated fair value:
Freehold land 2,128 2,229
Properties available for rent 7,251 5,788
Properties under construction 624 718
At 31 March 10,003 8,735
-------------------------------------- -------- --------
Uplift on net book value:
Freehold land 1,346 1,447
Properties available for rent 2,199 2,028
Properties under construction - -
----------------------------------- -------- --------
At 31 March 3,545 3,475
-------------------------------------- -------- --------
Number of rental properties
Available for rent 65 54
Under construction 10 10
Undeveloped freehold land (acres) 700 700
-------------------------------------- -------- --------
Assets under construction
At 31 March 2020, ten investment properties were under
construction, including a block of 8 flats and two houses at Davis
Street with a total cost to date of GBP624,000. At 31 March 2019,
ten investment properties were under construction, with a total
cost of GBP718,000, these ten houses were all completed during the
year to 31 March 2020 and are now all available for rent.
Company Commercial
property
GBP'000
Cost:
At 1 April 2018 -
Additions in year 19,642
-------------------------------- --- -----------
At 31 March 2019 and 31 March
2020 19,642
-------------------------------- --- -----------
Accumulated depreciation:
At 1 April 2018 -
Charge for the year 60
At 31 March 2019 60
Charge for the year 209
At 31 March 2020 269
-------------------------------- --- -----------
Net book value:
At 1 April 2018 -
-------------------------------- --- -----------
At 31 March 2019 19,582
-------------------------------- --- -----------
At 31 March 2020 19,373
-------------------------------- --- -----------
The investment property in the Company consists of the five
warehouses leased by Momart, the Group's art handling subsidiary
which were purchased in December 2018. In the year ending 31 March
2019, the buildings were depreciated from the 20 December 2018 date
of purchase.
The directors have reviewed the market value of the Leyton
warehouses and are satisfied that there is no indication of
impairment.
14. Investment in subsidiaries
Country of Class of shares Ownership Ownership
incorporation held at at
31 March 31 March
2020 2019
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%
Ordinary shares
Momart International Limited(5) 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
2020 2019
GBP'000 GBP'000
At 1 April 2019 27,653 27,630
Impairment (3,713) -
Share based payments charge capitalised
into subsidiaries 49 23
At 31 March 2020 23,989 27,653
-------------------------------------------- -------- --------
During the year ended 31 March 2020, the Company's investment in
the Art Logistics business, Momart, was impaired by GBP3,713,000
due to lower future expected levels of profitability following the
COVID-19 pandemic, as the expected widespread recession and market
dislocation are likely to further dilute demand from
ultra-high-net-worth collectors and commercial buyers for some
time. In the public sector, museum budgets are likely to be
squeezed by anticipated cuts in government spending and visitor
numbers are likely to be restricted by the need for social
distancing. Further detail has been provided in note 11 with
regards to the sensitivities of the assumptions.
15. Investment in Joint Ventures
The Group has one joint venture (South Atlantic Construction
Company Limited, "SAtCO"), which was set up in June 2012, with
Trant Construction to bid for the larger infrastructure contracts
which were expected to be generated by oil activity. Both Trant
Construction and the FIC contributed 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 2020 2019
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 2020 (2019: none).
The current assets balances above include GBP17,000 of cash
(2019: GBP66,000), GBP4,000 of other debtors (2019: GBP4,000) and
GBP498,000 (2019: GBP449,000) of loans due from SAtCO's parent
companies.
SAtCO had no contingent liabilities or capital commitments as at
31 March 2020 or 31 March 2019 and the Group had no contingent
liabilities or commitments in respect of its joint venture at 31
March 2020 or 31 March 2019.
SATCO's registered office is 56 John Street, Stanley, Falkland
Islands FIQQ 1ZZ
16. Leases receivable
As lessor, FIC has sold assets to customers as hire purchase
leases, the present value of the lease payments, together with any
unguaranteed residual value, is recognised as a receivable, net of
allowances for expected bad debt losses.
The difference between the gross receivable and the present
value of future lease payments, is recognised as unearned lease
income. Lease income is recognised in interest income over the term
of the lease using the sum of digits method so as to give a
constant rate of return on the net investment in the leases. Lease
receivables are reviewed regularly to identify any impairment.
Lease receivables arise on the sale of vehicles and customer
goods, such as furniture and electrical items, by FIC. No
contingent rents have been recognised as income in the period. No
residual values accrue to the benefit of the lessor.
Group
2020 2019
GBP'000 GBP'000
Lease debtors due after more
Non-Current: than one year 519 584
Lease debtors due within one
Current: year 596 659
-------------- -------------------------------- -------- --------
Total lease
debtors 1,115 1,243
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 GBP176,000 (2019: GBP211,000).
The cost of assets acquired for the purpose of renting out under
hire purchase agreements by the Group during the year amounted to
GBP 786 ,000 (2019: GBP883,000).
The total cash received during the year in respect of hire
purchase agreements was GBP 1,115 ,000 (2019: GBP1,116,000).
Group
2020 2019
GBP'000 GBP'000
Gross investment in hire purchase leases 1,318 1,484
Unearned lease income (176) (211)
Bad debt provision against hire purchase
leases (27) (30)
-------- --------
Present value of future lease receipts 1,115 1,243
Present value of future lease payments due:
Within one year 596 659
Within two to five years 519 584
Present value of future lease receipts 1,115 1,243
17. Deferred tax assets and liabilities
Recognised deferred tax assets and (liabilities) Group
2020 2019
GBP'000 GBP'000
Property, plant & equipment (2,713) (2,396)
Intangible assets (387) (346)
Inventories (unrealised intragroup profits) 32 43
Other financial liabilities 48 26
Derivative financial liabilities 102 -
Share-based payments 41 26
Tax losses 28 118
Total net deferred tax liabilities (2,849) (2,529)
Deferred tax asset arising on the defined
benefit pension liabilities 677 721
Net tax liabilities (2,172) (1,808)
17. Deferred tax assets and liabilities (continued)
The deferred tax asset on the defined benefit pension scheme
(see note 23) arises under the Falkland Islands tax regime and has
been presented on the face of the consolidated balance sheet as a
non-current asset as it is expected to be realised over a
relatively long period of time. All other deferred tax assets are
shown net against the non-current deferred tax liability shown in
the balance sheet.
Company
2020 2019
GBP'000 GBP'000
Other temporary differences 121 4
Net tax asset 121 4
Movement in deferred tax assets / (liabilities)
in the year:
Group
1 April Recognised Recognised 31 March
2019 in income in equity 2020
GBP'000 GBP'000 GBP'000 GBP'000
Property, plant & equipment (2,396) (351) 34 (2,713)
Intangible assets (346) (41) - (387)
Inventories (unrealised intragroup
profits) 43 (11) - 32
Other financial liabilities 26 22 - 48
Derivative financial liabilities - - 102 102
Share-based payments 26 15 - 41
Tax losses 118 (90) 28
Pension 721 (9) (35) 677
Deferred tax movements (1,808) (465) 101 (2,172)
The GBP34,000 recognised in equity for Property, plant &
equipment relates to the transition to IFRS 16 and therefore is
shown net of the GBP187,000 gross movement in the Statement of
Changes to Shareholders' equity.
Unrecognised deferred tax assets
Deferred tax assets of GBP113,000 (2019: GBP113,000) in respect
of capital losses have not been recognised as it is not considered
probable that there will be suitable chargeable gains in the
foreseeable future from which the underlying capital losses will
reverse.
Movement in deferred tax asset
in the year: Company
1 April Recognised Recognised 31 March
2019 in income in equity 2020
GBP'000 GBP'000 GBP'000 GBP'000
Other temporary difference 4 15 102 121
Deferred tax asset movements 4 15 102 121
Movement in deferred tax assets / (liabilities)
in the prior year:
Group
Recognised Recognised 31 March
1 April 2018 in income in equity 2019
GBP'000 GBP'000 GBP'000 GBP'000
Property, plant & equipment (2,133) (263) - (2,396)
Intangible assets (346) - - (346)
Inventories 9 34 - 43
Other financial liabilities 35 (9) - 26
Share-based payments 27 (1) - 26
Tax losses 85 33 118
Pension 738 (8) (9) 721
Deferred tax movements (1,585) (214) (9) (1,808)
17. Deferred tax assets and liabilities (continued)
Movement in deferred tax asset in
the prior year: Company
1 April Recognised Recognised 31 March
2018 in income in equity 2019
GBP'000 GBP'000 GBP'000 GBP'000
Other temporary difference 16 (12) - 4
Deferred tax asset movements 16 (12) - 4
18. Inventories
Group
2020 2019
GBP'000 GBP'000
Work in progress 697 1,253
Goods in transit 1,228 692
Goods for resale 3,449 3,811
Total Inventories 5,374 5,756
Goods in transit are retail goods in transit to the Falkland
Islands. During the year GBP307,000 (2019: GBP249,000) of stock
write downs was included in the cost of inventories as disclosed in
note 6.
The Company has no inventories.
19. Trade and other receivables
Group Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Non-Current
Rental deposits 88 88 - -
Amount owed by subsidiary undertakings - - 10,207 8,717
Total trade and other receivables 88 88 10,207 8,717
Group Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Current
Trade and other receivables 6,284 6,310 3 -
Contract asset, long term housing
project 73 - - -
Prepayments 1,123 918 27 30
Accrued income 1,216 533 - -
Total trade and other receivables 8,696 7,761 30 30
20. Cash and cash equivalents
Group Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Cash and other cash equivalents
in the balance sheet 9,108 6,184 5,766 1,768
Group Company
Year ended 31 March 2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Net increase / (decrease) in cash
and cash equivalents 2,870 (10,834) 3,998 (10,838)
Exchange gains 54 - - -
Net increase / (decrease) in cash
and cash equivalents after exchange
gains 2,924 (10,834) 3,998 (10,838)
Bank loan draw downs (13,875) (10,000) (13,875) (10,000)
Bank loan repayments 10,955 514 10,425 -
1 April 2019: lease liabilities on
IFRS16 application (2,494) - - -
Lease liabilities drawdown: non-cash (761) - - -
Lease liabilities drawdown: cash (534) (172) - -
Lease liabilities repayments 395 131 - -
Increase in interesting bearing loans
and borrowings (6,314) (9,527) (3,450) (10,000)
Net (decrease) / increase in debt (3,390) (20,361) 548 (20,838)
Net debt brought forward (11,609) 8,752 (8,232) 12,606
Net debt at 31 March (14,999) (11,609) (7,684) (8,232)
Net debt
Group Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Cash balances 9,108 6,184 5,766 1,768
less: Total interest-bearing loans
and borrowings (24,107) (17,793) (13,450) (10,000)
Net debt (14,999) (11,609) (7,684) (8,232)
The bank loan and lease liability repayments noted above exclude
any interest payments as any interest paid or received has been
included within the movement in cash and cash equivalents balance.
The bank interest paid in the year of GBP478,000 is GBP14,000 more
than the bank interest expense of GBP464,000 due to an accrual of
GBP14,000 at 31 March 2019, which was paid in the year ended 31
March 2020.
21. Interest-bearing loans and borrowings
This note provides information about the contractual terms of
the interest-bearing loans and borrowings owed by the Group, which
are stated at amortised cost. For more information regarding the
maturity of the interest-bearing loans and lease liabilities and
about the Group's and the Company's exposure to interest rate and
foreign currency risk, see note 26.
Group Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Non-current liabilities
Secured bank loans 15,127 2,284 13,207 -
Lease liabilities 7,815 4,864 - -
Total non-current interest-bearing loans
and lease liabilities 22,942 7,148 13,207 -
Current liabilities
Secured bank loans 607 10,530 243 10,000
Lease liabilities 558 115 - -
Total current interest-bearing loans
and lease liabilities 1,165 10,645 243 10,000
Total liabilities
Secured bank loans 15,734 12,814 13,450 10,000
Lease liabilities 8,373 4,979 - -
Total interest-bearing loans and lease
liabilities 24,107 17,793 13,450 10,000
Lease liabilities
Future minimum Interest Present value
lease payments of minimum lease
payments
2020 2019 2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Less than one year 902 347 344 232 558 115
Between one and two
years 871 336 329 226 542 110
Between two and five
years 2,057 882 854 660 1,203 222
More than five years 12,246 9,685 6,176 5,153 6,070 4,532
Total 16,076 11,250 7,703 6,271 8,373 4,979
The Group adopted IFRS 16: Leases from 1 April 2019. IFRS 16
replaces IAS 17 Leases and there is no longer a distinction between
the accounting for finance and operating leases. The liabilities
shown above at 31 March 2020 now include the liabilities for rental
lease payments committed for the head offices of Momart and Bishops
Stortford, two third party warehouse leases at Momart and for the
ground rent of the Gosport pontoon, with a rental agreement running
for a remaining 41 years until June 2061.
The Group elected to apply the standard retrospectively with the
cumulative effect of initial application being recognised at 1
April 2019, and comparatives have therefore not been restated. In
the year ended 31 March 2019, these lease commitments were shown as
operating leases, and no liability was recognised at the year
end.
22. Trade and other payables
Group Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Current
Trade payables 4,304 4,646 - -
Amounts owed to subsidiary undertakings - - 6,310 5,030
Loan from joint venture 249 200 - -
Other creditors, including taxation
and social security 1,364 2,162 184 168
Accruals 2,544 2,567 525 518
Deferred income 150 30 - -
Total trade and other payables 8,611 9,605 7,019 5,716
23. Employee benefits: pension plans
The Group operates defined contribution schemes at PHFC and
Momart and current FIC employees are enrolled in the FIPS,
"Falkland Islands Pension Scheme". The assets of all these schemes
are held separately from those of the Group in independently
administered funds. The Group also has one unfunded defined benefit
pension scheme in the Falkland Islands.
Defined contribution schemes
The pension cost charge for the year represents contributions
payable by the Group to the schemes and amounted to GBP527,000
(2019: GBP436,000). The Group anticipates paying contributions
amounting to GBP513,000 during the year ending 31 March 2021. There
were outstanding contributions of GBP34,000 (2019: GBP31,000) due
to pension schemes at 31 March 2020.
The Falkland Islands Company Limited Scheme
FIC operates a defined benefit pension scheme for certain former
employees. This scheme was closed to new members in 1988 and to
further accrual on 31 March 2007. The scheme has no assets and
payments to pensioners are made out of operating cash flows. The
expected contributions for the year ended 31 March 2021 are
GBP102,000. During the year ended 31 March 2020, 11 pensioners
(2019: 13) received benefits from this scheme, and there are three
deferred members at 31 March 2020 (2019: three). Benefits are
payable on retirement at the normal retirement age. The weighted
average duration of the expected benefit payments from the Scheme
is around 15 years (2019: 16 years).
Actuarial reports for IAS 19 purposes as at 31 March 2020, 2019,
2018, 2017 and 2016 were prepared by a qualified independent
actuary, Lane Clark and Peacock LLP. The major assumptions used in
the valuation were:
2020 2019
Rate of increase in pensions in payment and
deferred pensions 2.2% 2.5%
Discount rate applied to scheme liabilities 2.5% 2.4%
Inflation assumption 2.8% 3.5%
Average longevity at age 65 for male current
and deferred pensioners (years) at accounting
date 21.7 22.2
Average longevity at age 65 for male current
and deferred pensioners (years) 20 years
after accounting date 23.6 23.9
23. Employee benefits: pension plans (continued)
The assumptions used by the actuary are chosen from a range of
possible actuarial assumptions which, due to the timescale covered,
may not necessarily be borne out in practice.
Sensitivity Analysis
The calculation of the defined benefit liability is sensitive to
the assumptions set out above. The following table summarises how
the impact of the defined benefit liability at 31 March 2020 would
have increased / (decreased) as a result of a change in the
respective assumptions by 0.1%
Effect on obligation
2020 2019
GBP'000 GBP'000
Discount rate +/- 0.1% 40 43
Inflation assumption +/- 0.1% (10) (13)
Life expectancy +/- one year (120) (130)
These sensitivities have been calculated to show the movement in
the defined benefit obligation in isolation, and assume no other
changes in market conditions at the accounting date.
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
2016 2017 2018 2019 2020
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Present value of scheme
liabilities (2,644) (2,985) (2,839) (2,772) (2,604)
Related deferred tax
assets 687 776 738 721 677
Net pension liability (1,957) (2,209) (2,101) (2,051) (1,927)
Movement in deficit during the year: 2020 2019
GBP'000 GBP'000
Deficit in scheme at beginning of the year (2,772) (2,839)
Pensions paid 97 103
Other finance cost (65) (72)
Re-measurement of the defined benefit pension
liability 136 36
Deficit in scheme at the end of the year (2,604) (2,772)
Analysis of amounts included in other finance
costs: 2020 2019
GBP'000 GBP'000
Interest on pension scheme liabilities 65 72
23. Employee benefits: pension plans (continued)
Analysis of amounts recognised in statement of comprehensive
income: 2020 2019
GBP'000 GBP'000
Experience gains arising on scheme liabilities (23) 100
Changes in assumptions underlying the present value
of scheme liabilities 159 (64)
Re-measurement of the defined benefit pension liability 136 36
24. Employee benefits: share based payments
The total number of options outstanding at 31 March 2020 is
357,000 including (i) 25,352 nil cost options (2019: 29,751), (ii)
234,734 options (2019: 104,689) granted under the Long Term
Incentive Plan and (iii) 96,914 (2019: 163,254) Share options
granted with an exercise price equal to the market price on the
date of grant.
(i) Nil cost options granted to the Chief Executive:
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
16 Jun 16 Jun 16 Jun
17 3,217 285.0 268.5 8,638 20 21
15 Jun 15 Jun 15 Jun
18 5,681 352.0 343.0 19,486 20 22
15 Jun 15 Jun 15 Jun
18 5,682 352.0 338.5 19,234 21 22
17 Jun 17 Jun 17 Jun
19 3,590 316.0 311.0 11,165 20 23
17 Jun 17 Jun 17 Jun
19 3,591 316.0 306.0 10,988 21 23
17 Jun 17 Jun 17 Jun
19 3,591 316.0 301.0 10,809 22 23
Total 25,352 80,320
Reconciliation of nil cost options: Number Number of
of options options
2020 2019
Outstanding at the beginning of the year 29,751 29,741
Options exercised during the year (15,171) (17,035)
Options granted during the year 10,772 17,045
Outstanding at the year end 25,352 29,751
Vested options exercisable at the year end - -
Weighted average life of outstanding options
(years) 2.5 2.6
24. Employee benefits: share based payments (continued)
(ii) Long term Incentive Plan grants at an exercise price of ten
pence to local directors and executives:
135,535 Long term Incentive Plan grants were issued on 4 July
2019 at an exercise price of ten pence to local directors and
executives, and expire in five years on 4 July 2024. There are
various performance conditions attached to these grants. None of
these grants are exercisable at 31 March 2020.
104,689 Long term Incentive Plan grants were issued on 18 March
2018 at an exercise price of ten pence to local directors and
executives, which expire in five years on 19 March 2023. There are
various performance conditions attached to these grants. During the
year 5,490 of these options were forfeited and 99,199 options
remain outstanding at 31 March 2020. None of these options are
exercisable at 31 March 2020.
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
18 Mar 18 Mar 17 Mar
18 99,199 10.0 305.0 70.7 70,134 21 22
4 Jul 4 Jul 3 Jul
19 135,535 10.0 314.0 96.8 131,198 22 23
Total 234,734 201,332
Reconciliation of LTIPs: Number Number of
of options options
2020 2019
Outstanding at the beginning of the year 104,689 104,689
Options granted during the year 135,535 -
Options forfeited during the year (5,490) -
Outstanding at the year end 234,734 104,689
Vested options exercisable at the year end - -
Weighted average life of outstanding options
(years) 3.7 3.0
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
21 Dec 21 Dec 20 Dec
10 7,742 342.5 337.5 124.0 9,600 13 20
16 Dec 16 Dec 15 Dec
11 71,018 267.5 261.5 68.0 48,292 14 21
03 Sep 03 Sep 02 Sep
14 13,154 353.5 353.5 100.0 13,154 17 24
19 Jan 19 Jan 18 Jan
15 5,000 272.5 272.5 63.0 3,150 18 25
Total 96,914 74,196
The range of exercise prices of outstanding options at 31 March
2020 is from GBP2.675 (2019: GBP2.675) to GBP3.535 (2019:
GBP3.90).
Reconciliation of options with an exercise price equal to the
market price on the date of grant, including the number and
weighted average exercise price:
Weighted Weighted
average average
exercise exercise
price Number of price Number
(GBP) options (GBP) of options
2020 2020 2019 2019
Outstanding at the beginning of
the year 2.94 163,254 2.74 236,490
Options exercised during the year 2.90 (44,550) 2.22 (67,719)
Forfeited during the year 2.84 (10,790) 2.68 (2,000)
Lapsed during the year 3.90 (11,000) 3.65 (3,517)
----------
Outstanding at the year end 2.85 96,914 2.94 163,254
----------
Vested options exercisable at the
year end 2.85 96,914 2.94 163,254
----------
Weighted average life of outstanding
options (years) 2.2 2.2
The fair values of the options are estimated at the date of
grant using appropriate option pricing models and are charged to
the profit and loss account over the expected life of the options.
All options, other than certain nil cost options granted to the
Chief Executive, are granted with the condition that the employee
remains in employment for three years.
All share options are equity settled. Share options issued
without share price conditions attached have been valued using the
Black-Scholes model. Share price options issued with share price
conditions attached have been valued using a Monte Carlo simulation
model making explicit allowance for share price targets. During the
year ending 31 March 2020, 15,171 nil cost options were exercised
over ordinary shares and 44,550 other share options were exercised
by the Chief Executive (2019: 17,035 nil cost options were
exercised by the Chief Executive and 67,719 other share options
were exercised by employees around the Group).
2020 2019
GBP'000 GBP'000
Total share-based payment expense recognised
in the year 97 69
25. Capital and reserves
Share capital Ordinary Shares
2020 2019
In issue at the start of the year 12,502,137 12,434,418
Share capital issued during the year 2,382 67,719
In issue at the end of the year 12,504,519 12,502,137
2020 2019
GBP'000 GBP'000
Allotted, called up and fully paid Ordinary
shares of 10p each 1,250 1,250
By special resolution at an Annual General Meeting on 9
September 2010 the Company adopted new articles of association,
principally to take account of the various changes in company law
brought in by the Companies Act 2006. As a consequence, the Company
no longer has an authorised share capital. The holders of ordinary
shares are entitled to receive dividends as declared from time to
time and are entitled to one vote per share at meetings of the
Company.
On 9 August 2019, the Employee Share Ownership Plan was
terminated. At 31 March 2019 the plan held 7,664 ordinary shares at
a cost of GBP15,047. In June 2019, the ESOP issued these 7,664
shares in respect of the exercise of the nil cost options which
vested in June 2019. The market value of the shares at 31 March
2019 was GBP21,076.
During the year 2,382 shares were issued following the exercise
of share options. On 17 June 2019, the Chief Executive exercised
15,171 nil cost options, 7,131 options were cancelled to settle the
employee tax liabilities and 7,664 shares were transferred from the
Employee Share Ownership Plan, the remaining 376 options were
issued as new share capital. On 19 June 2019, the Chief Executive
exercised 44,550 ordinary shares of GBP0.10 each in the Company
under the terms of the Company's 2009 Executive Share Option
Scheme, after sufficient options had been cancelled to meet the
exercise price and employee tax obligations, 2,006 options were
issued as new share capital. A total cash outflow of GBP29,000 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 2020
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 Falklands' businesses for GBP8.0 million and the
GBP4,686,000 of goodwill on this acquisition was written off
against this merger relief in other reserves.
Dividends
The following dividends were recognised and paid in the
period:
2020 2019
GBP'000 GBP'000
Final: 3.35 pence (2019: 3.0 pence) per qualifying
ordinary share 419 373
Interim: 1.80 pence (2019: 1.65 pence) per
qualifying ordinary share 225 206
Total dividends recognised in the period 644 579
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 is equal to
fair value for each category of financial instrument:
Group Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Cash and cash equivalents 9,108 6,184 5,766 1,768
Hire purchase debtors 1,115 1,243 - -
Trade and other receivables 6,284 6,310 3 -
Total assets exposed to credit risk 16,507 13,737 5,769 1,768
Interest rate swap liability (537) (16) (537) (16)
Total trade and other payables (8,611) (9,605) (7,019) (5,716)
Interest-bearing borrowings at amortised
cost (24,107) (17,793) (13,450) (10,000)
The interest rate swaps have been valued using a level 2
methodology. All other financial instruments are based on level 3
methodology.
26. Financial instruments (continued)
(ii) Credit Risk
Financial risk management
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations, and arises principally from the
Group's receivables from customers.
Group
The Group's credit risk is primarily attributable to its trade
receivables. The maximum credit exposure of the Group comprises the
amounts presented in the balance sheet, which are stated net of
provisions for doubtful debt. A provision is made where there is an
identified loss event which, based on previous experience, is
evidence of a reduction in the recoverability of future cash flows.
Management has credit policies in place to manage risk on an
on-going basis. These include the use of customer specific credit
limits.
Company
The majority of the Company's receivables are with subsidiaries.
The Company does not consider these counter-parties to be a
significant credit risk.
Exposure to credit risk
The carrying amount of financial assets, other than available
for sale financial assets represents the maximum credit exposure.
Therefore, the maximum exposure to credit risk at the balance sheet
date was GBP16,507,000 (2019: GBP13,737,000) being the total trade
receivables, hire purchase debtors and cash and cash equivalents in
the balance sheet. The credit risk on cash balances and the
interest rate swap is limited because the counterparties are banks
with high credit ratings assigned by international credit-rating
agencies.
The maximum exposure to credit risk for trade receivables at the
balance sheet date by geographic region was:
Group
2020 2019
GBP'000 GBP'000
Falkland Islands 1,824 1,021
Europe 786 622
North America 952 706
United Kingdom 2,472 3,302
Other 250 659
Total trade receivables 6,284 6,310
The Company has no trade debtors
Credit quality of financial assets and impairment losses
Group Gross Impairment Net Gross Impairment Net
2020 2020 2020 2019 2019 2019
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Not past due 4,946 - 4,946 4,710 - 4,710
Past due 0-30 days 922 - 922 1,210 (48) 1,162
Past due 31-120 days 406 (58) 348 366 (57) 309
More than 120 days 166 (98) 68 190 (61) 129
6,440 (156) 6,284 6,476 (166) 6,310
26. Financial instruments (continued)
The movement in the allowances for impairment in respect of
trade receivables during the year was:
Group
2020 2019
GBP'000 GBP'000
Balance at 1 April 2019 196 285
Impairment loss recognised 31 17
Cash received - 5
Utilisation of provision (debts written
off) (44) (111)
Balance at 31 March 183 196
Provided against hire purchase debtors 27 30
Provided against trade and other receivables 156 166
Balance at 31 March 183 196
The allowance account for trade receivables is used to record
impairment losses unless the Group is satisfied that no recovery of
the amount owing is possible: at that point the amounts considered
irrecoverable are written off against the trade receivables
directly.
No further analysis has been provided for cash and cash
equivalents, trade receivables from Group companies, other
receivables and other financial assets, as there is limited
exposure to credit risk and no provisions for impairment have been
recognised.
(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 GBP12.8
million. All payments due during the year with respect to these
agreements were met as they fell due.
At the start of the year, the Company had one bank loan of
GBP10.0 million repayable within less than twelve months at 31
March 2019, which was drawn down by FIH group plc to fund the
Leyton warehouse acquisition, and repaid in June 2019, when the
GBP13,875,000 ten-year mortgage was drawn down, net of GBP56,000 of
arrangement and legal fees.
The Group manages its cash balances centrally and prepares
rolling cash flow forecasts to ensure funds are available to meet
its secured and unsecured commitments as and when they fall
due.
Liquidity risk - Group
The following are the contractual maturities of financial
liabilities, including estimated interest payments and excluding
the effects of netting agreements:
Contractual cash flows
2020 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 15,734 18,363 1,021 1,322 3,913 12,107
Leases liabilities 8,373 16,076 902 871 2,057 12,246
Trade payables 4,304 4,304 4,304 - - -
Interest rate swap liability 537 612 89 76 207 240
Other creditors, including
taxation 1,364 1,364 1,364 - - -
Accruals 2,544 2,544 2,544 - - -
Total financial liabilities 32,856 43,263 10,224 2,269 6,177 24,593
26. Financial instruments (continued)
Contractual cash flows
2019 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 12,814 13,057 10,594 449 1,347 667
Lease liabilities 4,979 11,250 347 336 882 9,685
Trade payables 4,646 4,646 4,646 - - -
Interest rate swap liability 16 16 11 5 - -
Other creditors, including
taxation 2,162 2,162 2,162 - - -
Accruals 2,567 2,567 2,567 - - -
Total financial liabilities 27,184 33,698 20,327 790 2,229 10,352
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
2020 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 13,450 15,901 595 869 2,552 11,885
Interest rate swap liability 537 612 89 76 207 240
Other creditors, including
taxation 184 184 184 - - -
Accruals and deferred income 525 525 525 - - -
Total financial liabilities 14,696 17,222 1,393 945 2,759 12,125
Contractual cash flows
2019 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 10,000 10,000 10,000 - - -
Interest rate swap liability 16 16 11 5 - -
Other creditors, including
taxation 168 168 168 - - -
Accruals and deferred income 518 518 518 - - -
Total financial liabilities 10,702 10,702 10,697 5 - -
(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.
26. Financial instruments (continued)
Group
2020 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 142 197 38 377 8,731 9,108
Trade payables and other
payables (316) (205) (78) (599) (8,012) (8,611)
-------
Balance sheet exposure (174) (8) (40) (222) 719 497
-------
2019 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 142 210 23 375 5,809 6,184
Trade payables and other
payables (148) (126) (154) (428) (9,177) (9,605)
-------
Balance sheet exposure (6) 84 (131) (53) (3,368) (3,421)
-------
The Company has no exposure to foreign currency risk.
Sensitivity analysis
Group
A 10% weakening of the following currencies against pound
sterling at 31 March would have increased/(decreased) equity and
profit or loss by the amounts shown below. This calculation assumes
that the change occurred at the balance sheet date and had been
applied to risk exposures existing at that date. This analysis
assumes that all other variables, in particular other exchange
rates and interest rates remain constant and is performed on the
same basis for year ended 31 March 2019.
Equity Profit or Loss
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
EUR 17 1 17 1
USD 1 (8) 1 (8)
A 10% strengthening of the above currencies against pound
sterling at 31 March would have the equal but opposite effect on
the above currencies to the amounts shown above, on the basis that
all other variables remain constant.
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
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Fixed rate financial instruments
Leases receivable 1,115 1,243 - -
Bank loans (702) (794) - -
Lease liabilities (8,373) (4,979) - -
Total Fixed rate financial instruments (7,960) (4,530) - -
Variable rate financial instruments
Effect of Interest rate swap liability (537) (16) (537) (16)
Bank loans (15,032) (12,020) (13,450) (10,000)
Total Variable rate financial instruments (15,569) (12,036) (13,987) (10,016)
26. Financial instruments (continued)
At 31 March 2020, the Group had four bank loans:
(i) GBP13.4 million ten-year loan, which was drawn down on 28
June 2019, with interest charged at LIBOR plus 1.75%;
(ii) GBP1.3 million (2019: GBP1.5 million) repayable over ten
years until May 2025, secured against the newest vessel in PHFC,
with interest charged at 2.6% above the bank of England base
rate;
(iii) GBP0.3 million (2019: GBP0.3 million) repayable over ten
years until May 2025, secured against freehold property held in
PHFC, with interest charged at 1.75% above the Bank of England base
rate;
(iv) GBP0.7 million (2019: GBP0.8 million) drawn down by Momart,
interest has been fixed on this loan at 2.73% for the full ten
years until December 2026.
The interest payable on the GBP13.4 million ten-year loan has
been hedged by one interest swap, taken out on 4 July 2019 with an
initial notional value of GBP13.875 million, with interest payable
at the difference between 1.1766% and the three-month LIBOR rate.
This interest rate swap notional value decreases at 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 2020 is
GBP13,500,000.
The interest payable on the loans regarding the vessel and the
freehold property in PHFC noted above has been hedged by one
interest swap, taken out in October 2015 with an initial notional
value of GBP3.6 million, with interest payable at the difference
between 1.325% and the Bank of England Base rate. This interest
rate swap notional value decreases at GBP36,250 per month over five
years until September 2020 when it will expire. The notional value
of the swap at 31 March 2020 is GBP1,703,750 (2019: GBP2,138,750).
Including the two swaps, the blended average interest rates on the
Group's bank borrowings is 3.0% (2019: 2.7%) per annum.
Lease liabilities
At 31 March 2020, the Group had the following lease
liabilities:
(i) GBP5.8 million lease liabilities payable to Gosport Borough
Council; GBP4.7 million for the Gosport pontoon and GBP1.1 million
for the ground rent on the pontoon. Both of these leases run until
June 2061 and finance charges accrue on these liabilities at a
fixed 4.75%.
(ii) GBP1.9 million of property rental leases, including two
warehouses rented by Momart, and the Momart and Bishops Stortford
head offices, which run for between six to nine years from 1 March
2020. The weighted average interest rate of these rental
liabilities is 3.25%.
(iii) GBP0.7 million of lease liabilities taken out to finance
trucks by hire purchase leases at Momart, GBP0.5 million of this
balance arises on three leases drawn down towards the end of the
year ended 31 March 2020. The weighted average interest rate of
these truck liabilities is 3.0%.
The total blended average interest rate on the Group's lease
liabilities is 4.3% per annum.
Sensitivity analysis
An increase of 100 basis points in interest rates at the balance
sheet date would have increased / (decreased) equity and profit or
loss by the amounts shown below. This calculation assumes that the
change occurred at the balance sheet date and has been applied to
risk exposures existing at that date.
This analysis assumes that all other variables, in particular
foreign currency rates, remain constant and considers the effect of
financial instruments with variable interest rates and financial
instruments at fair value through profit or loss or
available-for-sale with fixed interest rates. The analysis is
performed on the same basis for 31 March 2019.
26. Financial instruments (continued)
Interest rate sensitivity analysis Group Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Equity
Interest rate swap liability 152 21 152 21
Variable rate financial liabilities (150) (120) (135) (100)
Profit or Loss
Interest rate swap liability 152 21 152 21
Variable rate financial liabilities (150) (120) (135) (100)
Market risk - equity price risk
(v) Capital Management
The Group's objectives when managing capital, which comprises
equity and reserves at 31 March 2020 of GBP38,792,000 (2019:
GBP44,567,000) are to safeguard its ability to continue as a going
concern, so that it can continue to provide returns to shareholders
and benefits to our other stakeholders.
27. Operating leases
The Group leases three office premises and two storage
warehouses at Momart. Office leases typically run for a period of
3-10 years, with an option to renew the lease after that date.
Warehouse leases typically run for a period of 25 years, with an
option to renew the lease after that date. From 1 April 2019, the
group has recognised right-of-use assets for these leases, except
for short-term and low-value leases.
Non-cancellable operating lease rental commitments are payable
as follows:
Group
2020 2019
GBP'000 GBP'000
Less than one year 3 365
Between one and five years - 1,075
More than five years - 2,549
3 3,989
---------------------------
During the year ended 31 March 2020, IFRS 16 has been adopted
and therefore from 1 April 2019 all significant rental leases have
been recognised as a right-of-use asset within fixed assets, with a
corresponding liability also recognised within lease liabilities.
The Gosport office rental of GBP7,000 per year is being extended on
a rolling six-month basis and the group has applied the short life
exemption permitted by IFRS 16.
During the year ended 31 March 2019, GBP895,000 was recognised
as an expense in the income statement in respect of operating
leases.
Group
GBP'000
Operating lease commitments 31 March 2019 3,989
Effect of discounting at 31 March 2019 (1,495)
Lease liabilities recognised on transition
to IFRS 16 2,494
GBP1,466,000 of the unaccrued interest above at 31 March 2019
arises on the Gosport pontoon ground rent, which runs for a further
41 years until June 2061. The remaining unaccrued interest arises
on the property leases at Momart for the head office lease at
Canary Wharf with three years left to run, and two warehouses
rented from third parties, with eight or nine years remaining.
Leases as lessor
The Group leases out its investment properties, which consist of
55 houses and flats and ten mobile homes in the Falkland Islands,
these are leased to staff, fishing agency representatives and other
short-term visitors to the Islands. These lease agreements
generally have an initial notice period of six months, and beyond
the six months initial tenancy, one month's notice can be given by
either party, therefore future minimum lease payments under
non-cancellable leases receivable are not material.
The Company had no operating lease commitments; however, as a
result of the purchase of the five warehouses at Leyton, the
Company had the following non-cancellable operating lease rentals
receivable:
Company
2020 2019
GBP'000 GBP'000
Less than one year 918 763
Between one and five years 3,672 3,157
More than five years 17,672 4,748
22,262 8,668
28. Capital commitments
At 31 March 2020, the Group had entered into contractual
commitments of GBP389,000 for one 18 tonne truck and one 26 tonne
truck at Momart.
At 31 March 2019, the Group had entered into contractual
commitments of GBP421,000 for two heavy goods trucks and two
sprinter vans at Momart.
29. Related parties
The Group has a related party relationship with its subsidiaries
(see note 14) and with its directors and executive officers.
Directors of the Company and their immediate relatives
controlled 30.2% (2019: 30.0%) of the voting shares of the Company
at 31 March 2020.
The compensation of key management personnel, which includes the
FIH group plc directors and the directors of the subsidiaries, is
as follows:
Group Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Key management emoluments including social
security costs 1,325 1,597 401 431
Company contributions to defined contribution
pension plans 74 69 - -
Share-related awards 85 65 41 44
Total key management personnel compensation 1,484 1,731 442 475
At 31 March 2020, the Group's joint venture, SAtCO, has debtors
of GBP224,500 due from each of its parent companies.
30. Accounting estimates
The preparation of financial statements in conformity with
adopted IFRS requires management to make judgements, estimates and
assumptions that effect the application of policies and reported
amounts of assets and liabilities, income and expenses. The
estimates and associated assumptions are based upon historical
experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form the
basis of the judgements as to asset and liability carrying values
which are not readily apparent from other sources. Actual results
may vary from these estimates, and are taken into account in
periodic reviews of the application of such estimates and
assumptions. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period or in the period of revision and future periods if
the revision affects both current and future periods.
Defined benefit pension liabilities
At 31 March 2020, 11 pensioners were receiving payments from the
FIC defined benefit pension scheme, and there are three deferred
members. A significant degree of estimation is involved in
predicting the ultimate benefits payment to these pensioners using
actuarial assumptions to value the defined benefit pension
liability (see note 23). Management have selected these assumptions
from a range of possible options following consultations with
independent actuarial advisers. There is a range of assumptions
that may be appropriate, particularly when considering the
projection of life expectancy post-retirement, which is a key
demographic assumption, and has been based on UK mortality data, if
the life expectancy assumption was one more year than the
assumptions used, this would result in an increase of GBP120,000 in
the liability. Selecting a different assumption could significantly
increase or decrease the IAS19 value of the Scheme's liabilities.
The projections of life expectancy make no explicit allowance for
specific individual risks, such as the possible impact of climate
change or a major medical breakthrough, the projections used
reflect the aggregate impact of the many possible factors driving
changes in future mortality rates.
The figures are prepared on the basis that both the FIC pension
scheme and the FIC are ongoing. If the scheme were to be wound up,
the position would differ, and would almost certainly indicate a
much larger deficit.
Impairment testing
Impairment tests have been undertaken with respect to intangible
assets (see note 11 for further details), with detailed reviews of
probable medium to long-term detailed forecasts of each of the
businesses in the Group, and following these, the goodwill held in
respect of both Momart and PHFC has been reduced during the year.
Goodwill at Momart has been written down by GBP3.5 million to
GBP2.1 million and the goodwill held in respect of PHFC, has been
reduced by GBP4.0 million, eliminating all the previously recorded
balance in relation to the ferry company.
Investment in subsidiaries
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised. The following
estimates are dependent upon assumptions which could change in the
next financial year and have a material effect on the carrying
amounts of assets and liabilities recognised at the balance sheet
date. The estimates of the costs of investment in subsidiaries have
been assessed for impairment, with detailed reviews of probable
medium to long-term detailed forecasts of each of the businesses.
During the year ended 31 March 2020, the Company's investment in
the Art Logistics business, Momart was impaired by GBP3,713,000 due
to lower future expected levels of profitability following
COVID-19, as the expected widespread recession and market
dislocation are likely to further dilute demand from
ultra-high-net-worth collectors and commercial buyers for some
time. In the public sector, museum budgets are likely to be
squeezed by anticipated cuts in government spending and visitor
numbers are likely to be restricted by the need for social
distancing. Further detail has been provided in note 11 with
regards to the sensitivities of the assumptions.
Revenue recognition on Falkland Islands Government Housing
contract
The revenue from the housing contract for the Falkland Islands
Government requires the future costs to be estimated, and the
current estimates consider it probable that the contract will be
profitable. The key judgements in this assessment are (i) the stage
of completion of the contract activity at the reporting date, which
is assessed and signed off by a Falkland Islands Government
representative, and (ii) the future costs to complete the project.
A reasonable increase in costs to complete would not result in a
material change in the revenue or profit recognised to date.
Warranties on private builds
On the completion of each construction project, FIC set up a
provision of 2.5% of the sales proceeds as a warranty against any
potential future work required.
Company Information
Directors Registered Office
John Foster Chief Executive Kenburgh Court
Robin Williams Non-executive Chairman 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
Company Secretary W: www.fihplc.com
Carol Bishop Registered number 03416346
Corporate Information
Stockbroker and Nominated Adviser
W.H. Ireland Limited
24 Martin Lane,
London EC4R 0DR
Solicitors
BDB Pitmans LLP
50 Broadway,
Westminster,
London SW1H 0BL
Auditor
KPMG LLP
St. Nicholas House,
Park Row,
Nottingham NG1 6FQ
Registrar
Link Asset Services
The Registry, 34 Beckenham Road,
Beckenham,
Kent BR3 4TU
Financial PR
Novella Communications,
South Wing, Somerset House,
London WC2R 1LA
The Falkland Islands Company The Portsmouth Harbour Momart Limited
Ferry Company Alan Sloan, Director
Kevin Ironside, Director Clive Lane, Director Kenneth Burgon, 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
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR BIGDLBXDDGGD
(END) Dow Jones Newswires
June 23, 2020 02:00 ET (06:00 GMT)
Fih (LSE:FIH)
Gráfica de Acción Histórica
De Feb 2024 a Mar 2024
Fih (LSE:FIH)
Gráfica de Acción Histórica
De Mar 2023 a Mar 2024