Sutton Harbour Holdings Regulatory News (SUH)

7 July 2020

SUTTON HARBOUR GROUP PLC ("the Group")

Final results for the year ended 31 March 2020

Sutton Harbour Group plc ("Sutton Harbour", "the Company"), the AIM listed owner and operator of Sutton Harbour in Plymouth and specialist in waterfront regeneration projects and operation of waterfront real estate, marinas and Plymouth Fisheries, announces audited results for the year ended 31 March 2020.

Highlights

· 4 year bank facility renewal in December 2019, additional £2m facility agreed in May 2020

· Car Parking revenue up 25.5%

· Tenant occupancy at 95% in March 2020

· Growth in marina occupancy and revenue following a targeted marketing communications programme

· Completion of new fuel and utilities servery infrastructure at Plymouth Fisheries

· Corey Beinhaker appointed Executive Director and Chief Operating Officer

· Progress with Harbour Arch Quay scheme; construction now anticipated to begin in 2020

Financial Highlights

*Before accounting for fair value adjustments to property asset valuation.

**Comprises investment and owner occupied portfolios.

Excludes land held as development inventory.

Valuation as at 31 January 2020, pre Covid-19 lockdown measures

Philip Beinhaker, Executive Chairman, commented:

"Development of the Group's trading strategies had begun to bear fruit with pleasing advancement of the marina, parking and investment property results. The Group has the base of a unique portfolio of property assets in a landmark location and as stability is restored (post Covid-19 lockdown) we are ready to move forward with planned development of new assets in line with our strategy for value growth".

For further information, please contact

Executive Chairman's Statement

For Year Ended 31 March 2020

Introduction

I am pleased to report on the Group's results for the year ended 31 March 2020. During this period the Group has moved forward productively with the pre-construction preparations for the approved schemes for construction over the short to medium term, has worked on the promotion of our business activities and those of our tenants based around Sutton Harbour and has increased revenue-earning from our established operations. These financial results show the progress that has, and is, being made. Just before the end of our financial year the Covid-19 Lockdown measures were introduced by the UK Government, which adversely effected the last two weeks of our trading year.

During the strictest period of the lockdown we maintained full operations at Plymouth Fisheries and Sutton Lock, and we managed the marina facilities in accordance with government guidance which required closure of some facilities. The Group has remained in regular contact with tenants to discuss their operating status and to be ready to move to reawakening the activities surrounding the Sutton Harbour area. The core of professional office tenants has been less affected. Many tenants in the food and beverage sector have adapted to the situation by offering takeaway services. The Head Office of Sutton Harbour Group has remained fully operational with some personnel working remotely.

As the lockdown has been relaxed the Group has worked to restore operations in accordance with government guidance and as quickly as adaptations can be made to provide safe facilities. Activity at the marinas is approaching normality helped by a period of fine weather and the car parks have now re-opened to welcome visitors to the area.

To provide additional headroom on bank facilities to assure the financial resilience of the Group beyond the current projected time of the crisis, an increased facility of £2m above the previous limit of £25m has been successfully negotiated with National Westminster Bank plc. This additional committed financing has been made available until May 2021 with the possibility of an extension for a further year.

Results and Financial Position

The adjusted profit before taxation for the year was £0.221m (2019: £0.072m profit) which excludes non-cash fair value adjustments. In this financial year these adjustments relate to property asset valuation and further explanation is given in the paragraph below. The loss before taxation for the year under review as per the Income Statement, inclusive of the aforementioned adjustments, was £0.756m (2019: £1.516m profit). Compared to the previous year revenue from fuel sales declined by some 24% and this accounts for the overall fall in revenue to £6.558m from £6.893m (2019). The profit margin earned on fuel sales is low which explains why this does not materially impact operating profit. Overall, trading operations (excluding regeneration) contributed £2.329m to group costs and overheads (2020: £2.207m). Further detail about trading activities follows later in the report.

As at 31 March 2020, net assets were £46.082m (2019: £45.732m), a net asset value of 39.7p per share (2019: 39.4p per share). The movement includes the valuation of the Group's property assets which gave rise to an overall valuation surplus of £0.361m, of which £0.494m deficit relates to the investment property portfolio and £0.855m surplus relates to the owner occupied properties . Further detail is given about property valuation below. Gearing (Net debt:net assets) as at 31 March 2020 stood at 51.1% (2019: 46.7%). Finance costs of £0.844m in the year (2019: £0.902m) reflect the level of bank borrowing throughout the year.

Net debt (including lease liabilities) increased to £23.549m at 31 March 2020 from £21.373m at 31 March 2019. Development Inventories increased by £0.902m reflecting the investment required to progress the development projects with planning consented status and other schemes being prepared for planning submission. A further £0.873m was invested in the Group's infrastructure asset base, the principal project being the construction of a new fuel and utilities servery at Plymouth Fisheries.

Taking into account the current level of bank borrowing, the board does not recommend payment of a dividend on the year's results.

Property Valuation

The Group engages external independent valuers to undertake the annual valuation of investment and owner-occupied properties in January each year and received the updated valuation for 31 January 2020. In normal times this would be an acceptable basis for valuation for the year-end balance sheet. The uncertainty and volatility caused by the Covid-19 pandemic and resulting Government restrictions were not foreseen giving rise to difficulties in obtaining an uncaveated valuation as at 31 March 2020. After consultation with the Group's advisors who recognised the difficulty to obtain a reliable updated valuation in the exceptional circumstances it was determined that no valuation would be sought. The lack of an updated valuation has resulted in the auditors reporting that the audit was limited in scope. The Group's bankers have agreed to suspend loan to property valuation covenant testing at least until June 2021 in light of the variable valuation uncertainty over the next year.

Directors and Staff

In October 2019, Corey Beinhaker was appointed Executive Director and Chief Operating Officer following a recruitment process led by the Non-Executive Directors and with advice from an external recruitment specialist. There have been no other board changes during the year. Headcount as at 31 March 2020 was 30 (31 March 2019: 31) and remains stable.

Operations Report

Marine

Overall, the marine segment has performed steadily during the year. The Marinas achieved satisfactory growth in both revenue and occupancy following a targeted marketing communications programme. Results from fishing activities were adversely impacted by a prolonged period of stormy weather at the start of 2020 and greater fish landings by road to the auction facility which attracts lower commission and results in lower fuel and ice sales. During the year new fuel and utilities servery infrastructure was installed to improve resilience of essential supplies to harbour users. This £800,000 investment was matched by grant funding and completes a five- year long programme to upgrade facilities at Plymouth Fisheries. In response to demand for longer and wider marina berths, a reconfiguration of some pontoons at Sutton Harbour Marina was completed during the winter months.

Real Estate and Car Parking

The tenant occupancy rate was enhanced throughout the year, starting at 94% in April 2019 and progressing to 95% by March 2020 after letting of some smaller units to new tenants. Car Parking revenue was up 25.5% in this financial year against the comparative period following a number of strategic changes to the management of the assets and sustained social media to promote the area. The Covid 19 Lockdown undermined results for the second half of March with minimal activity in the harbour.

Regeneration

Sutton Harbour During the year the Group has continued with the pre-construction work for the two major consented schemes around Sutton Harbour. Harbour Arch Quay, the smaller 14 apartment building, is close to starting construction subject to finalising contracts and financing, which is anticipated later this year. The much larger 170 apartment Sugar Quay development is subject to gaining planning consent variations and work is targeted to start on site in 2021.

Former Airport Site As previously reported the site is safeguarded from development until 2024. The Group continues to refine proposals for deliverable alternative use of the 113 acre site which meet the social and economic needs of Plymouth.

Summary and Outlook

Development of the Group's trading strategies had begun to bear fruit with pleasing advancement of the marina, parking and investment property results. The full impact of the Covid 19 lockdown and recovery period is unknown and it will take time to re-establish normal levels of business, but the start of the re-awakening as of this date, is encouraging. Some operations have re-opened and virtually all others are planning to follow in July 2020. The Board has reacted quickly to the situation, putting in place an increased bank facility and taking reasonable measures to mitigate loss and maintain continuity of operations. The Group has the base of a unique portfolio of property assets in a landmark location and as stability is restored we are ready to move forward with planned development of new assets in line with our strategy for value growth.

Consolidated Income Statement

For the year ended 31 March 2020

Segment results

For the year ended 31 March 2020

Profit for the year from continuing operations 1,831

Notes to the Consolidated Financial Statements

1. General Accounting Policies

Basis of preparation

The results for the year to 31 March 2020 have been extracted from the audited consolidated financial statements, which are expected to be published by 7 August 2020.

The financial information set out above does not constitute the Company's statutory accounts for the years to 31 March 2020 or 2019 but is derived from those accounts. Statutory accounts for the year ended 31 March 2019 were delivered to the Registrar of Companies following the Annual General Meeting on 4 September 2019 and the statutory accounts for 2020 are expected to be published on the Group's website (www.suttonharbourholdings.co.uk) shortly, posted to shareholders at least 21 days ahead of the Annual General Meeting ("AGM") on 9 September 2020 and, after approval at the AGM, delivered to the Registrar of Companies. 

The auditor, PKF Francis Clark, has reported on the accounts for the year ended 31 March; their report was (i) qualified in respect of a limitation in scope with the Company and Auditor not having access to updated property valuations at 31 March 2020 in light of Covid-19 as detailed in the Executive Chairman's Statement (ii) includes a reference to the valuation of Plymouth City Airport (former airport site) to which the auditors drew attention by way of emphasis without qualifying their report and (iii) contains a statement under Section 498 (3) of the Companies Act 2006 in respect of the limitation of scope on those accounts.

2. Adoption of IFRS 16 Leases

The Directors have considered the application of IFRS16 on its leasing arrangements. The Group has a small number of short term leases and leases of low value items and therefore continues to recognise payments made under these agreements on a straight line basis over the term of the lease. The Group has one leasing arrangement in relation to a property, which is due to expire in September 2021. The Directors have concluded that the expected right of use asset and corresponding lease liability would be immaterial to the Group's financial statements and have therefore not adopted the requirements of IFRS16 in relation to this arrangement.