Sutton Harbour Holdings Regulatory News (SUH)

05 December 2017

SUTTON HARBOUR HOLDINGS PLC ("the Group")

Interim results for the six-month period to 30 September 2017

Sutton Harbour Holdings plc ("Sutton Harbour", the "Company"), the AIM-listed marine and waterfront regeneration specialist, announces its interim results for the six-month period to 30 September 2017. 

Financial Highlights

· Adjusted* profit before tax £0.136m (2016: £0.232m);

· Loss before tax of £0.702m (2016: loss of £0.038m);

· Net assets of £39.084m (31 March 2017: £40.141m);

· Net debt £22.965m (31 March 2017: £22.458m).

*Excluding fair value adjustments

Highlights

· The Company has concentrated on preparations for the public hearing of the 'Plymouth and South West Devon Joint Local Plan' ("Joint Local Plan") commencing January 2018.

· Pre-planning work has continued in respect of the Sugar House site and the Harbour Arch Quay site at Sutton Harbour

· Slower activity at Plymouth Fisheries during first half year off-set with sustained recovery since September 2017.

· Further infrastructure works underway at Plymouth Fisheries Auction Hall with match grant funding.

Events post six-month period

· On 23rd November 2017, the Company and FB Investors LLP jointly announced a Recommended Partial Cash Offer for the Company for up to 70% of the Company plus a Proposed Share Subscription of £2.75m (the "Offer").

· Further details of the Partial Offer, Share Subscription and General Meeting in relation to the Share Subscription are set out in an Offer Document, Form of Acceptance and Form of Proxy which are being sent to shareholders shortly.

Graham Miller, Chairman, commented:

"The Company is looking forward to taking an active part in the forthcoming public hearing of the 'Joint Local Plan', as well as continuing to promote its proposed regeneration schemes, whilst supporting the trading activities through strategic investment and new initiatives for operational improvements. After the half-year period ended, we were pleased to announce that FB Investors LLP had made a Recommended Partial Cash Offer for the Company. This allows Shareholders the opportunity to realise a significant proportion of their investment in the Company whilst retaining a meaningful stake in future value growth which the Board believes will be enhanced by the proposed share subscription and expertise of the incoming investors."

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Chairman and Chief Executive's Statement

INTERIM RESULTS

Excluding fair value adjustments, the adjusted profit before taxation for the six-month period ending 30 September 2017 was £0.136m (2016: £0.232m).

As at 30 September 2017, net assets were £39.084m compared to £40.141m as last reported as at 31 March 2017. The decrease of £1.057m incorporates the results of the independent property valuation as at 30 September 2017. This valuation gave rise to a surplus of £25,000 on the investment portfolio. The deficit of £1,225,000 on the owner occupied property assets resulted primarily from a slow first quarter's trading at Plymouth Fisheries and a capital expenditure reserve. Since the balance sheet date, trading at Plymouth Fisheries has recovered significantly and the board believes the capital investment programme will underpin future prospects for this business.

Net debt (comprising net bank debt and outstanding finance leases) stood at £22.965m, up from £22.458m at 31 March 2017 reflecting the normal annual cash cycle which peaks at the start of the year as rents and annual berthing fees are received and lowers until new season berthing fees are paid from the end of the calendar year onwards. As at 30 September 2017, gearing stood at 58.8%, up from 55.9% as at 31 March 2017.

The board does not recommend payment of an interim dividend.

REGENERATION

During the first half year the Company has continued to prepare for the forthcoming public hearing of the proposed 'Joint Local Plan' which will determine the planning framework for Plymouth and South West Devon until 2034. This has particular significance for the Former Airport Site, a c.113 acre brownfield site redundant for the last six years, in which the Company has legal interest, and also for further development and improvement of the Sutton Harbour area where the Company holds significant freehold land and property. On 13 November 2017 the appointed planning inspectors issued a timetable with specific topics for the public hearing which is scheduled to start on 30 January 2018 and anticipated to run until March 2018.

Pre-planning work has been actively progressed for both the Sugar House, East Quays site and for a smaller mixed use building known as Harbour Arch Quay, which is another site fronting the Harbour. MMO licensing for the 'Boardwalk' scheme is expected to be received before the end of the financial year.

TRADING

Whilst marina berthing revenue remained level with last year and car parks revenue increased by 6% compared to the first half of last year, activity at Plymouth Fisheries was unusually slow in the first quarter. Fisheries trading has significantly strengthened from July 2017 onwards. During the period the Company expensed £49,000 to remove an abandoned vessel in the harbour which had been the subject of a 13 year-long dispute. The vessel owner is being pursued for costs.

Investment property occupancy has remained stable during the first three months and the Company continues to actively market vacant office space.

INFRASTRUCTURE

Match grant funded works to undertake essential improvements at Plymouth Fisheries are in progress comprising installation of energy efficient boilers and LED lighting and hygienic wall cladding to the auction hall building. The Company has made a further grant application to modernise the fuel and utility servery points and associated fuel storage infrastructure.

At King Point Marina the wave gates, which were never commissioned, have now been removed and the installation of an alternative replacement wave mitigation structure, a 'wave break pontoon' is under construction and due for completion by mid-2018. The cost of these works is being borne by the contractor.

The Company is consulting with lawyers to determine respective responsibilities of the Environment Agency and the Company in agreements in relation to the Sutton Lock and the associated footbridge which date back to the 1990s. In the meantime, the Company is working with stakeholders, including the Environment Agency, to agree a plan to instigate the repair of the out-of-action footbridge as soon as possible.

RECOMMENDED PARTIAL OFFER BY FB INVESTORS LLP ("FB INVESTORS")

On 23 November 2017, FB Investors and Sutton Harbour jointly announced that they had reached agreement on the terms of a recommended partial cash offer (the "Partial Offer") to be made by FB Investors to acquire up to 70 per cent. of the issued ordinary share capital of Sutton Harbour. In connection with the Partial Offer, FB Investors and Sutton Harbour also have entered into a conditional share subscription agreement (the "Share Subscription") pursuant to which £2.75m of proceeds will be raised by Sutton Harbour, which will be used to assist Sutton Harbour in its regeneration activities as well as provide additional working capital and the payment of costs incurred in relation to the Formal Sales Process.

Further details of the Partial Offer and Share Subscription are set out in an Offer Document, Form of Acceptance and Form of Proxy which are being sent to shareholders shortly.

This announcement follows the strategic review and formal sales process the Company announced on 21 April 2016 to assess all options to generate value for Sutton Harbour shareholders.

OUTLOOK

As was noted at the time of the announcement on 23 November 2017, with the assistance and investment of FB Investors, Sutton Harbour will seek to continue to deliver the Group's vision for the area in and around Sutton Harbour, with the aim of establishing the Company as a leading waterfront destination in the UK.

FB Investors supports the management team's vision for the former airport site at Plym Vale and will support their long-term aspiration to develop it - the Company is looking forward to taking an active part in the forthcoming public hearing of the 'Joint Local Plan'. We continue to promote our proposed regeneration schemes and we are supporting our trading activities through strategic investment and new initiatives for operational improvements.

GRAHAM MILLER JASON SCHOFIELD

Chairman Chief Executive

1. General information

This consolidated interim financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 March 2017 were approved by the Board of Directors on 27 June 2017 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified and included an 'Emphasis of matter' which referred to the valuation of inventory relating to the former Plymouth Airport site.

Copies of the Group's financial statements are available from the Company's registered office, Tin Quay House, Sutton Harbour, Plymouth, PL4 0RA and on the Company's website www.sutton-harbour.co.uk.

This consolidated interim financial information has not been audited.

2. Basis of preparation

The consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 March 2016, which have been prepared in accordance with International Financial Reporting Standards (IFRS) and International Financial Reporting Interpretation Committee (IFRIC) interpretations as endorsed by the European Union, and those parts of the Companies Acts 2006 as applicable to companies reporting under IFRS.

Accounting policies

Except as described below, the accounting policies applied are consistent with those of the annual financial statements for the year ended 31 March 2017, as described in those annual financial statements.

Adoption of new International Financial Reporting Standards

The following new standards, amendments to standards or interpretations have been issued, but are not effective for the financial year beginning 1 April 2017 and have not been adopted early:

IFRS 15 Revenue from Contracts with Customers: *1 January 2018

IFRS 9 Financial Instruments: * 1 January 2018

* mandatory effective date is periods commencing on or after

Accounting estimates and judgements

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements that are not readily apparent from other sources. Actual results may differ from these estimates.

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, if the revision affects only that period, or in the period of the revision and future periods, if the revision affects both current and future periods.

3. Segment information

Management has determined the operating segments based on the reports reviewed by the Board of Directors that are used to make strategic decisions.

The Board of Directors considers the business from an operational perspective as having only one geographical segment, with all operations being carried out in the United Kingdom.

The Board of Directors considers the performance of the operating segments using operating profit. The segment information provided to the Board of Directors for the reportable segments for the period ended 30 September 2016 is as follows:

3. Segment Information (continued)

3. Segment Information (continued)

3. Segment Information (continued)

Unallocated assets included in total assets and unallocated liabilities included in total liabilities are not split between segments as these items are centrally managed.

4. Taxation

The Company has applied an effective tax rate of 20% (2016: 20%) based on management's best estimate of the tax rate expected for the full financial year and is reflected in a movement in deferred tax.

5. Dividends

The Board of Directors do not propose an interim dividend (2016: nil).

6. Earnings per share

Basic Earnings per Share:

Basic earnings per share have been calculated using the loss for the period of £729,000 (2016: loss £31,000, year ended 31 March 2017 profit £40,000). The average number of ordinary shares in issue, excluding those options granted under the SAYE scheme, of 96,277,086 (2016: 96,277,086; year ended 31 March 2017: 96,277,086) has been used in our calculation.

Diluted Earnings per Share:

Diluted earnings per share uses an average number of 96,277,086 (2016: 96,277,086; year ended 31 March 2017 96,277,086) ordinary shares in issue, and takes account of the outstanding options under the SAYE scheme in accordance with IAS 33 'Earnings per share'. There are no outstanding options under expire SAYE schemes.

7. Property valuation

Freehold land and buildings and investment property have been independently valued by Jones Lang LaSalle as at 30 September 2017, in accordance with the Practice Statements in the Valuations Standards (The Red Book) published by the Royal Institution of Chartered Surveyors.

A further valuation will be commissioned for the year ending 31 March 2018, as in previous years.

8. Cash and cash equivalents

9. Provisions

10. Cash flow statements

11. Capital Commitments

At 30 September 2017 the Group has engaged contractors to perform £0.2m of work in the Fisheries complex. Some of this cost will be set off by grant contribution.

12. Post Balance Sheet Events

On 23 November 2017, the Company and FB Investors LLP jointly announced a Recommended Partial Cash Offer for the Company for up to 70% of the Company plus a Proposed Share Subscription of £2.75m (the "Offer").