Isles of Scilly Steamship Company Limited Contents Page Directors’ report 1 - 3 Independent auditors’ report 4 - 5 Group profit and loss account 6 Note of group historical cost profits and losses 7 Balance sheet 8 Group cash flow statement 9 Notes 10 - 24 Isles of Scilly Steamship Company Limited Directors’ report For the year ended 31 March 2010 The directors present their annual report and financial statements of the group for the year ended 31 March 2010. Principal activities The principal activities of the company and its subsidiaries are the provision of regular sea and air services for passengers and cargo between the mainland and the Isles of Scilly. During the year under review the companies continued the operation of ancillary activities as follows: marine engineers, ship repairers and operation of a dry dock, operation of the inter-island launch service, operation of Land’s End Aerodrome, operation of scenic flights and aeronautical engineering. On 20 August 2009 the group acquired the trade and assets of Penzance Dry Dock Ltd (in administration). Review of business The results for the year are shown in the profit and loss account on page 6. The group’s turnover increased by 2.4% (2009: decrease of 0.4%) to £9,775,224 (2009: £9,545,658). Cost of sales increased by 1.5% (2009: 2.4%). Operating profit before exceptional items was £608,368 (2009: £537,035). The exceptional item of £309,335 (2009: £Nil) is the group’s share of the 2009 actuarial deficit in the Merchant Navy Officers’ Pension Fund which will be paid in full in September 2010. Interest receivable reduced by £53,208 (2009: £30,011) as interest rates fell in the second half of the previous year. Profit before tax was £389,091 (2009: £656,553) reflecting the impact of the pension deficit. The increase in cash in the year was £812,248 (2009: £257,181). Capital expenditure in the year was £531,266 (2009: £1,005,544) and included the purchase of the Guedel (now the IVOR B) a small freight ship. Shareholders’ funds increased by £349,466 to £6,361,505 (2009: £6,012,039). The group has been involved in a competitive dialogue process with Cornwall Council which may lead to the award of a public contract to operate a vessel for the Isles of Scilly Link project. Cornwall Council announced in May 2010 that they had appointed the Isles of Scilly Shipping Company Limited (a group subsidiary) as the Preferred Bidder for the operation of the Link. The completion of the project is still dependant on a number of factors including Cornwall Council securing final approval from the Department for Transport for funding. 1 Isles of Scilly Steamship Company Limited Directors’ report For the year ended 31 March 2010 Directors The directors who held office during the year were: Committees RW Banfield HR Duncan A JHM East (Vice Chairman) A, R PD Hardaker A, R J Marston (Chief executive) AJ May (Chairman) Mrs JM Walder R TB Ward ‘A’ signifies that the director is a member of the audit committee. ‘R’ signifies that the director is a member of the remuneration committee. The chairman and chief executive are ex officio members of both committees. Dividend The directors recommend the payment of a final dividend of £84,694 (2009: £59,218), 7p (2009: 5p) per share. This is based on shareholdings at 13 May 2010 and will be paid on 1 November 2010. The directors are proposing to offer shareholders a choice of taking shares in place of the dividend and proposals will be put before shareholders at the Annual General Meeting to ask for their approval. Auditors In accordance with section 485 of the Companies Act 2006, a resolution proposing that Robinson Reed Layton be re-appointed auditors of the company will be put to the Annual General Meeting. 2 Isles of Scilly Steamship Company Limited Directors’ report For the year ended 31 March 2010 Directors’ responsibilities The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). 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 company and the group and of the profit and loss of the group for that period. In preparing these financial statements, the directors are required to: - select suitable accounting policies and then apply them consistently; - make judgements and estimates that are reasonable and prudent; - prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the group’s transactions and disclose with reasonable accuracy at any time the financial position of the company and the group and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Statement of disclosure to auditor (a) so far as the directors are aware, there is no relevant audit information of which the company’s auditors are unaware, and (b) they have taken all the steps that they ought to have taken as directors in order to make themselves aware of any relevant audit information and to establish that the company’s auditors are aware of that information. By order of the Board Hugh Town St Mary’s Isles of Scilly Jeffrey Marston Secretary 8 July 2010 3 Isles of Scilly Steamship Company Limited Independent auditors’ report to the shareholders of Isles of Scilly Steamship Company Limited We have audited the group and parent company statements of Isles of Scilly Steamship Company Limited for the year ended 31 March 2010 set out on pages 6 to 24. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). 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. Respective responsibilities of directors and auditors As explained more fully in the Directors’ Responsibilities Statement set out on page 3, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the group’s and the parent company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. Opinion on financial statements In our opinion the financial statements: - give a true and fair view of the state of the group’s and the parent company’s affairs as at 31 March 2010 and of the group’s profit for the year then ended; - have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and - have been prepared in accordance with the requirements of the Companies Act 2006. Opinion on other matter prescribed by the Companies Act 2006 In our opinion the information given in the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements. 4 Isles of Scilly Steamship Company Limited Independent auditors’ report to the shareholders of Isles of Scilly Steamship Company Limited Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: - adequate accounting records have not been kept or returns adequate for our audit have not been received from branches not visited by us; or - the 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. Graham Boulton (Senior Statutory Auditor) for and on behalf of Robinson Reed Layton, Statutory Auditors Peat House Newham Road TRURO