Sutton Harbour Holdings Regulatory News (SUH)

2 December 2014

SUTTON HARBOUR HOLDINGS PLC ("the Group")

Interim results for the six month period to 30 September 2014

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 2014. 

Financial Highlights

· Profit before tax of £0.661m (2013: £0.526m);

· Adjusted* profit before tax £0.155m (2013: £0.123m);

· Net assets of £39.169m (31 March 2014: £38.554m);

· Net assets per share 40.7p (31 March 2014: 40.0p);

· Net debt £21.136m (31 March 2014: £20.225m).

*Excluding fair value adjustments and impairment of assets

Operational Highlights

· Two new high quality tenancies completed;

· Investment in new ice plant to underpin growth and improve capacity at Plymouth Fisheries;

· Well-received launch of "Vision" for Sutton Harbour;

· Consolidation of the Group's representations on emerging planning policy to City of Plymouth to enhance position of real estate inventory.

Graham Miller, Chairman, commented:

"Our core trading operations continue to perform in line with our expectations. New lettings around the harbour and strong interest in the Group's Vision for Sutton Harbour underpin our confidence in the long term development potential of the harbour and its capacity to deliver shareholder value. 

We have made significant grant aided infrastructure investment during the half year to enhance the capacity and growth potential of our trading activities. Good progress is being made with proposals for the Boardwalk scheme at Vauxhall Quay and the East Quays site. The Board remains committed to reducing debt by realising inventory where possible."

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During the first half year the Group has benefitted from improving activity levels across the core trading businesses and reports the following achievements:

· Two new significant lettings completed to high quality tenants on improved terms totalling 7,846 sq ft (729 m2) of space

· Contractors on site to construct and commission a new c.£800,000, match grant funded, ice plant at Plymouth Fisheries as part of an infrastructure renewal programme to create additional capacity for growth

· Launch of 'Vision' for Sutton Harbour, a framework for approximately 350,000 sq ft (32,516 m2) new mixed use space, to underpin the Sutton Harbour area as a more regionally and nationally recognised destination

· Consolidation of the Group's representations on emerging planning policy to City of Plymouth to enhance position of real estate inventory.

Results and Financial Position

The Group reports profit before tax of £0.661m for the six months to 30 September 2014 (2013: £0.526m). Excluding fair value adjustment on investment properties the underlying profit before tax was £0.155m (2013: £0.123m). The steadily improving revenue reflects increasing occupancy rates of the marinas, investment properties and car parks and continued strong performance by the fisheries business.

The balance sheet as at 30 September 2014 incorporates valuation of the property portfolio as at the same date which has resulted in an overall increase in portfolio valuation of £0.563m since 31 March 2014. This increase is split £0.506m in respect of the investment portfolio and £0.057m in respect of the owner occupied portfolio. The positive revaluation reflects the improving quality of tenant covenants but we continue to experience a cautious approach to valuation of assets in provincial locations. The Company's net assets as at 30 September 2014 increased to £39.169m (40.7pence per share) from £38.554m (40.0pence per share) as at 31 March 2014.

The increase in finance expense to £0.524m in the first six months (2013: £0.398m) reflects the re-classification of bank charges formerly charged to overheads and the cost to service increased net debt, compared to last year. As at 30 September 2014 net debt was £21.136m (30 September 2013: £20.154m and 31 March 2014: £20.225m). During the first six months net debt has increased due to the investment into capital infrastructure projects, instalments to pay the previously recognised back rating demand and the effects of the Group's seasonal working capital cycle. With additional payments due for infrastructure plant in the second half year, partly offset by match grant funding, and the final lease payment of £500,000 due in respect of King Point Marina, the Group expects reduced headroom on its maximum £22.5m bank facility during the second half of the year, although the Board remains committed to reducing this level of debt. The Group has met all of its banking covenants during the period and continues to maintain the support of its bankers. Gearing as at 30 September 2014 was 54.0% (31 March 2014: 52.5%).

No interim dividend is proposed by the board (2013:nil).

Marine Businesses

After opening in October 2013, King Point Marina has achieved 59% occupancy of the facility by 30 September 2014. Sutton Harbour Marina occupancy has also advanced to 86% with particularly strong demand for larger berths. We are encouraged that the new King Point Marina has not had an impact on the customer base of the mature Sutton Harbour Marina and that the offer differentiation has been recognised.

The Plymouth Fisheries business at Sutton Harbour has traded strongly throughout the first half year, albeit fuel sales margins achievable are still tight. During October 2014, Plymouth Fisheries recorded its most successful month since the facility opened 20 years ago with over £2.1m fish landed (auctioned value).

Maintenance and renewal of the infrastructure that serves the Harbour and its marine businesses is essential to ensure we can continue to provide reliable service and meet capacity requirements. The capital expenditure programme to renew the ice plant, chilling equipment, power metering and lighting infrastructure is now underway, with the new ice plant expected to be operational early in the New Year. The new walkways, on the inside of the lock structure, that rise and fall with the tide for vessels to tie up alongside, will be completed this month. These are high profile projects within the fishing and marine industry and have attracted positive media interest.

Real Estate

Letting of 4,028 sq ft (374m2) vacant office space at North Quay House on a 15 year lease was completed in August 2014 to Rame Energy plc, and a new 15 year lease was completed on 3,818 sq ft (355m2) waterfront premises to 'The Stable' (which is part owned by Fuller, Smith & Turner PLC), a craft cider and artisan pizza concept bar/restaurant, last month. These new lettings bring the occupancy rate to 89%, with the ready-to-let office accommodation now full reinforcing the success of promoting Sutton Harbour as the central business district for professional services in Plymouth.

Car Parking

The car parking business benefitted from a good summer season and first half year revenues were boosted to £0.251m, a 15% increase from the comparative period (2013: £0.219m). We continue to work to improve yields using variable seasonal pricing and deploying additional credit card payment machines.

Regeneration

In July 2014 the Group launched the 'Vision' for Sutton Harbour, the framework for creation of approximately 350,000 sq ft (32,516m2) of accommodation with gross development value of c.£75m. Following the launch, the management team has embarked on an ambitious programme to present the 'Vision' to a wide range of potential end users, local stakeholders and possible joint venture partners to position the opportunities offered by the waterfront location. Open forum public consultation sessions have been held with particular focus on proposals for 'The Boardwalk' scheme at Vauxhall Quay and for Sugar House, East Quay, which is the largest development site in the Group's ownership located at Sutton Harbour. Following further consultation of local stakeholders' views, which has led to additional changes in the overall design, 'The Boardwalk' is due for resubmission to the local planning authority in the near future.

The Group has continued to promote the 113 acre former airport site as a regeneration project with rich potential within the framework of emerging planning policy for the area. The Group's clear objective is to realise value from its interest in this site in order to reduce debt and move forward with the 'Vision' led development projects around Sutton Harbour.

Outlook

Reduction in the level of the Group's debt remains a high priority. In addition, the Group continues to focus on its strategy to release value from its regeneration stock, and with a further revaluation of the Company's net assets, the outlook for the Group is encouraging with better prospects to grow revenues as business conditions improve and new infrastructure adds capacity.

Graham S Miller Jason W H Schofield

Chairman Chief Executive

2 December 2014

Consolidated Income Statement

Consolidated Statement of Comprehensive Income

Consolidated Balance Sheet

Consolidated Statement of Changes in Equity

Consolidated Cash Flow Statement

Notes to Interim Report

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 2014 were approved by the Board of Directors on 17 June 2014 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified and did not contain any statement under section 498 of the Companies Act 2006.

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 2014, 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 2014, 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 11 April 2014 and have not been adopted early:

Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to IAS 16 and IAS 38): *1 January 2016

Amendment to IFRS 11 Joint Arrangements: *1 January 2016

IFRS 15 Revenue from Contracts with Customers: *1 January 2017

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.

There have been no significant changes to estimates and judgements since the signing of the financial statements for the year ended 31 March 2014.

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 2014 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% (2013: 23%) based on management's best estimate of the tax rate expected for the full financial year.

5. Dividends

The Board of Directors do not propose an interim dividend (2013: nil).

6. Earnings per share

Basic Earnings per Share:

Basic earnings per share have been calculated using the profit for the period of £529,000 (2013: profit £18,000, year ended 31 March 2014 profit £1,323,000). The average number of ordinary shares in issue, excluding those options granted under the SAYE scheme, of 96,277,086 (2013: 96,277,086; year ended 31 March 2014: 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 (2013: 96,277,086; year ended 31 March 2014: 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'.

* For the 6 months ended 30 September 2014, the year ended 31 March 2014, and the 6 months ended 30 September 2013, there is no adjustment for the effect of all dilutive potential ordinary shares because the exercise prices of the options are greater than the average market price of the shares during the year.

7. Property valuation

Freehold land and buildings and investment property have been independently valued by Jones Lang LaSalle as at 30 September 2014, 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 2015, as in previous years.

8. Cash and cash equivalents

9. Provisions

10. Cash flow statements

11. Capital Commitments

In December 2012, the Group contracted with three companies to construct a new 171 berth marina facility together with shoreside facilities, car parking and a wave protection gate structure. At 30 September 2014 the Group is contractually committed to a further £503,000 to complete the project.

In June 2014, the Group contracted to construct a replacement ice plant for the Fishmarket and replacement floating walkways for Sutton Harbour Lock. The Group is currently contractually committed to £464,000 to complete these projects and grant match funding of up to 50% and 37.5% respectively will be available to offset these costs.