TIDMFIH
RNS Number : 8514C
FIH Group PLC
20 April 2017
20 April 2017
FIH group plc
("FIH", "the Group" or the "Company")
Pre-Close Trading Update
FIH group plc ("FIH"), the AIM quoted international specialist
services group with businesses in the Falkland Islands and UK, is
pleased to provide the following update on trading for the year
ended 31 March 2017. The results remain subject to audit and final
approval by the Board of FIH.
-- As outlined in the Group's Trading Update of 14 March 2017,
trading in the second half was stronger than originally
anticipated, although, as expected, profitability was still
significantly lower than in H2 last year due to the quieter trading
in the Falklands.
-- Full Year Underlying Profit before Tax is therefore likely to
be approximately 20-25% lower than the prior year, in the range of
GBP2.3- GBP2.5million, principally due to the reduced contribution
from the Group's Falklands operations.
-- The Group's cash flow during the year was strong. After
capital investment of over GBP1.6 million, principally to support
long term expansion at Momart, FIH ended the year with record cash
balances of GBP15.1 million, an increase of over GBP1 million
compared to 31 March 2016 (GBP14.0 million).
Operational Highlights:
-- Falkland Islands Company ("FIC") - In the Falklands, trading
was as expected, much quieter compared to the record levels seen in
the prior year as the business returned to more normalised levels
of activity following the cessation of oil exploration drilling
early in the year. FIC's principal business activity, Retailing,
also faced increased competitive pressure following the expansion
of its largest supermarket competitor, "The Chandlery", in November
2016.
-- Momart - At the Group's art handling and logistics business,
after a strong start in H1, activity in the second half slowed
compared to the prior year, however, profits for the full year are
still expected to be marginally ahead of the prior year after
absorbing start-up losses of GBP0.2 million from the company's
recently opened extension to its art storage facilities at Leyton.
At an underlying level Momart's profitability improved over the
full year despite continuing to face pricing pressure in the Museum
sector and a highly competitive global art market.
-- Portsmouth Harbour Ferry Company ("PHFC") - Passenger numbers
at Gosport Ferry were 4.1% lower than in the prior year, but these
volume decreases were offset by fare rises in June 2016 and with
tight cost control, trading at the Group's passenger ferry business
was satisfactory, at levels slightly ahead of 2015-16.
-- Group Trading performance - The Group's overall trading
performance for the year to 31 March 2017 (i.e. underlying pre-tax
profits, before amortisation and non-trading items), is expected to
show a 20-25% decrease in comparison to the prior year, principally
due to the reduced contribution from FIC. Full Year Underlying
Profit before Tax and non-trading items and the amortisation of
intangibles is expected to be in the range GBP2.3-GBP2.5 million
(2016: GBP3.1 million).
-- At a non-trading level, in 2016-17, the Group saw profits of
GBP0.16 million from the disposal of fully written down fixed
assets in SAtCO and in PHFC. However non-recurring costs of
approximately GBP0.5 million were incurred with professional
advisers who provided guidance to the Board on its duties to the
Company and its shareholders in relation to the offer from Staunton
Holdings and on the Board's subsequent response to expression of
interest from Dolphin Fund Limited. Unlike in the prior year, there
were no restructuring costs (2016: GBP0.26 million).
-- Cash and Bank Borrowings - At 31 March 2017, the Group had
cash balances of GBP15.1 million and with bank borrowings of GBP3.8
million the Group had net cash of GBP11.3 million (GBP10.8 million
at 31 March 2016).
Strategic Priorities:
-- Although global oil prices have improved over the last 12
months, the timing of oil development in the Falklands remains
uncertain. In the near term FIC faces increasingly strong local
competition and although all opportunities for expansion of FIC's
business will be pursued, until such time as oil development or the
growth of tourism provides a long term stimulus to business
activity in the Islands, the outlook for the Group's Falklands
business will be challenging.
-- The Board therefore continues to believe that given the
hiatus and delays in the Falklands that the Group should continue
to focus in the near term on developing its UK operations through
further investment in existing businesses and through the pursuit
of high quality strategic acquisitions.
-- This strategy aims to create an enlarged quoted entity with a
wider appeal to investors that will in turn enhance shareholder
liquidity, improve the Group's rating and drive a sustainable
increase in shareholder value.
-- Execution of this strategy will be aided by making use of the
Group's strong operating cash flow and the Group's record net cash
reserves which at 31 March 2017 amounted to GBP11.3 million (90
pence per share).
-- However the Board is mindful of the importance of retaining
support from loyal shareholders and will be consulting with
stakeholders to develop consensus support for its acquisition
strategy and to consider the benefits of a potential return of
excess capital. A further announcement confirming the Board's
approach will be issued soon.
-- To strengthen the Board and to support its ambitions for long
term sustainable growth in shareholder value, the Board has started
a process to recruit a further qualified and experienced,
independent Non-Executive Director and this appointment will be
announced prior to the Company's AGM on 31 August 2017.
Operational detail:
Falkland Islands Company ("FIC")
At FIC, profitability was lower than in 2015-16 due principally
to the slow-down in the Falklands economy resulting from the
absence of oil exploration activity that last year produced record
profits at FIC. The contribution from FIC was also adversely
affected by the expansion and further modernisation of FIC's
principal retail competitor, the Chandlery, which contributed to a
6.2% decline sales at the Group's West Store supermarket for the
full year compared to only a 1.6% reduction in the first half. At
FIC's Capstan gift shop and General Store at the MPA air terminal,
the absence of discretionary oil related spend saw sales fall by
15.3%. At Home Living/ Homebuilder there was a welcome 9% increase
in sales, linked to the continued buoyancy of the government's
subsidised housing scheme on government land. Despite this bright
spot, total retail sales were 5.4% lower than in 2015-16 and with
margins under pressure too, the contribution from FIC's largest
business unit fell sharply over the year.
The lack of oil related demand also saw the contribution from
FIC's property portfolio fall as premium corporate rental income
was exchanged for "local" rentals at a 30% discount. Increased
local competition and the absence of the oil stimulus together with
the exceptionally poor squid catch at the start of the financial
year were the main factors behind the decline in FIC's
profitability although the overall reduction was mitigated by cost
savings in central administration, encouraging performances from
FIC's housebuilder, FBS, and Penguin Travel combined with continued
growth from insurance and consumer finance services.
Income from the Group's construction Joint Venture, SAtCO, also
ceased with the departure of the oil rigs in early summer 2016 and
SAtCO's contribution was minimal compared to FIC's share of JV
profits of GBP0.2m in the prior year. On a more positive note, the
successful disposal of SAtCO's fully written down crawler crane,
was achieved by shipping the asset back to the UK and selling it to
a middle-eastern buyer at a small profit. The contribution from
this sale is included in non-trading income.
In overall terms profitability in the Group's Falkland
operations fell back from the record levels of GBP1.9 million seen
in 2015-16 to a similar level to that seen in the year to 31 March
2014, (GBP1.0m PBTa ) when there was little oil exploration
activity in the Islands.
Momart
At the Group's London based art handling specialist Momart, the
recent investment in strengthening marketing and sales saw revenues
for the full year increase by GBP2m (+13%) to over GBP18.3 million
(2016: GBP16.3 million) despite a highly competitive art market and
the absence of revenue in the current year from the company's newly
opened art storage facility in Leyton where snagging issues delayed
effective completion and opening to clients until March 2017.
Exhibition revenues from museums increased by 20% to over GBP10
million although gross margins for this highly competitive work
were squeezed and the mix of work was less lucrative than in the
prior year with more contracts requiring work outsourced to
overseas partners at lower margins.
In Gallery Services despite a quieter art market and a slow-down
in activity with auction houses earlier in the year, progress
continued with total annual revenues increasing by 8% to over
GBP6.2 million (2016 GBP5.8 million). Margins held up well as the
company became more effective in differentiating its high end
specialist services for discerning private collectors and gallery
owners.
With existing storage facilities at full capacity, storage
revenues were essentially unchanged at GBP2.0million. With the
completion of the company's new warehouse at Leyton, which adds 30%
to existing capacity, quickly filling the new space and driving
renewed growth in storage income is a key priority for the coming
year.
Despite the increased rental costs of GBP0.2 million from the
new warehouse, Momart delivered an improved contribution compared
to the prior year and further growth is anticipated in the new
financial year as increased storage activity helps drive an
improved bottom line performance.
Portsmouth Harbour Ferry Company ("PHFC")
At the Group's passenger ferry business, PHFC, revenues were
maintained despite a 4.1% fall in passenger numbers as volume
decreases were offset by fare rises implemented in June 2016. At
GBP3.40 for an Adult Return ticket and a variety of discounts and
incentives available for regular users, the ferry remains good
value for money albeit the attractions of car travel, cheap petrol
and a subsidised Park & Ride scheme in Portsmouth create a
challenging back drop. However with tight cost control, trading for
the year was satisfactory, with PHFC's contribution at levels
slightly ahead of 2015-16.
Outlook:
FIC
For the year ahead, we anticipate another quiet trading period
in the Falklands. Local competition remains fierce particularly in
Retail and the full effects of the Chandlery's expansion will wash
through in the first half.
However property rental income has now stabilised and
housebuilding remains buoyant on the back of continued government
subsidies for first time local buyers. Further growth in FIC's
consumer finance business is anticipated and a steady performance
is also expected from insurance broking, 4x4 sales and vehicle
maintenance.
In the near term, an improved squid catch should help improve
general confidence and a further stimulus from government
infrastructure projects may emerge following the quadrennial
Legislative Assembly elections in November 2017. Further oil
development awaits an improved outlook for the global oil and the
emergence of a deep pocketed operator to farm-in and help develop
Premier Oil's "Sea Lion" acreage. With respect to tourism,
continued growth is expected from cruise ship activity but
negotiations with Argentina concerning flight permissions for new
scheduled flights from South America which have the potential to
unlock land-based tourism, remain unresolved and no significant
stimulus from new flights is expected in the coming year.
PHFC
At PHFC, the emphasis in the coming year will continue to be on
tight cost control and on maintaining the ferry's excellent
reliability record. The final completion of the disruptive
construction works at the passenger interchange in Portsmouth is
expected by June 2017; this and the arrival of the new carrier HMS
Queen Elizabeth late in 2017, should provide some modest stimulus
to passenger volumes over the year. With its core fleet of 3 modern
passenger vessels, ongoing capital expenditure at the ferry will be
modest and underlying cash flow from ferry operations will continue
to be strong.
Momart
At Momart, increased confidence in the global art market was
reflected in the Spring auction house sales, which should help
drive further growth in sales to private collectors, galleries and
auction houses although competition remains intense. Museum
exhibitions work remains very price competitive and only limited
growth is anticipated in this sector. In the coming year, the key
focus will be to fill the company's newly opened storage facilities
as quickly as possible to expand business with private collectors
and galleries and create a platform for further growth.
Full Year Preliminary Results
The Group's Preliminary Results for the year ended 31 March 2017
are expected to be released on Tuesday 13(th) June 2017.
Chairman of FIH, Edmund Rowland, commented:
"The Group has delivered a satisfactory trading performance,
reflecting the much quieter trading conditions which were expected
in the Falklands and the solid performance of the Group's UK
businesses, which both saw improved profits compared to the prior
year. With record cash balances of GBP15.1 million and net cash of
GBP11.3 million, giving net cash per FIH share of 90 pence per
share, the Group's financial position and prospects remain
strong.
"As Chairman, I remain committed to delivering sustainable long
term growth in shareholder value by investing in the strong niche
businesses the Group already has and by delivering on our promise
of securing high quality selective acquisitions. In line with this
commitment, the Board will be consulting over the coming period
with shareholders as to the benefits of a potential return of
excess capital and details of our proposals will be made public in
the coming weeks, prior to the announcement of the Group's full
year results on Tuesday 13(th) June.
"In the meantime we will immediately commence a process to
appoint an experienced independent Non-Executive Director to
further strengthen the Board. I look forward to updating the market
on our growth strategy as the year progresses, as we seek out
opportunities that will create an enhanced platform for sustainable
long term growth."
- Ends -
Enquiries:
FIH group plc
Edmund Rowland, Chairman Tel: 020 7087 7970
John Foster, Chief Executive Tel: 01279 461 630
WH Ireland Ltd. - NOMAD and Broker
to FIH
Adrian Hadden / Nick Prowting Tel: 020 7220 1666
FTI Consulting
Edward Westropp / Eleanor Purdon Tel: 020 3727 1000
This information is provided by RNS
The company news service from the London Stock Exchange
END
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