Sutton Harbour Holdings Regulatory News (SUH)

For immediate release 8 December 2011

Sutton Harbour Holdings plc

Interim results for the half year period to 30 September 2011

Sutton Harbour Holdings plc ("Sutton Harbour", "the Company"), the AIM listed regeneration and infrastructure specialist, announces interim results for the six month period to 30 September 2011.

HIGHLIGHTS

Financial

·; Revenues increased to £6.89m (2010: £4.07m)

·; Operating profit from core activities was £2.47m (2010: £0.90m)*

·; Reported loss before tax of £1.33m (2010: £0.81m) including provision for expected losses in connection with closure of the airport

·; Trading losses of the airport were £674,000 (2010: £342,000)

·; Net assets at end of period of £34.9m (2010: £33.2m)

*Before administration costs, losses associated with transport operations, revaluation adjustments and one off staff costs

Operations

·; Continued focus on growing core businesses whilst managing the exit from loss making or more marginal activities

·; Continuing businesses have performed solidly

o Further lettings reduced voids within asset management activity

o Good occupancy levels within marinas; Sutton Harbour Fisheries surpasses fish landing records

·; Plymouth City Airport to cease operations by end of 2011

·; Fourth tranche of airport land disposed - £1m on completion and £1.3m early in the New Year

·; Sale of commercial space in Exeter for £400,000

·; Plans to re-configure Sutton Harbour Marinas to accommodate larger vessels

·; Planning application submitted for new 179 berth marina in Millbay area of Plymouth

Michael Knight, Chairman, commented: "We have continued with our strategy to reshape the Company and we are now clearly positioned as a marine and waterfront regeneration specialist. We have a high quality asset base and a demonstrated track record of developing properties in our region and we are committed to delivering further value for shareholders."

For further information, please contact: 

Sutton Harbour Holdings plc 01752 204186

Jason Schofield - Acting Chief Executive

Natasha Gadsdon - Finance Director

Arden Partners plc 0207 614 5917

Richard Day

Jamie Cameron

Threadneedle Communications 020 7653 9850

Graham Herring

Terry Garrett

Chairman's Statement

During the first six months of the year, the Group has continued to implement its strategy to grow the core businesses of the Group, whilst managing the exit from loss making or more marginal activities. The continuing businesses have performed solidly throughout the period: asset management activity has been successfully focused to reduce voids; the marinas have maintained good occupancy levels and have benefited from the hosting of the Fastnet Race Finish in August 2011; and Sutton Harbour Fisheries has, again, surpassed its fish landing records. The property markets, however, continue to be weak with provincial areas continuing to experience low activity levels.

Against this backdrop of difficult economic conditions, and as previously announced, the Group has achieved completion for disposal of the fourth tranche of airport land, with £1m received upon completion and a further £1.3m receivable early in the New Year. Construction of the associated new link road has continued to make good progress and is expected to be completed by the Summer. In addition, we also reported that completion has occurred on the sale of commercial space in Exeter for £400,000. We anticipate achieving further realisations of non-core trading assets in the second half of the year.

Having served notice of its intention to cease operations at Plymouth City Airport by the end of 2011, the Group is well advanced in its closure programme. Scheduled commercial services have not operated since the end of July 2011 when the owners of Air Southwest withdrew from the airport.

Results and Dividend

The Group achieved an operating profit from core activities of £2.471m (2010: profit £0.902m) before accounting for administration costs, losses associated with transport operations, revaluation adjustments and one off staff costs, demonstrating the strength of the underlying core businesses. The Group sustained a loss before taxation of £1,328,000 (2010: £813,000) for the period, including provision for the expected losses in connection with closure of the airport. The trading losses of the airport for the period of £674,000 (2010: £342,000) are recorded as continuing activities and will be re-classified in the year end results as discontinued activities, once the airport is closed. In addition, the Board has re-assessed the likely recoverability of amounts included in trading stocks in the light of prevailing property market conditions and prospects for economic recovery in the short term. Taking a prudent view, a provision of £970,000, before tax relief of £252,000, has been charged. The loss is also stated after accounting for the fair value deficit on investment property of £380,000 (2010: £45,000).

Net assets at 30 September 2011 were £34.9m (30 September 2010: £33.2m) compared to £36.1m as at 31 March 2011 and include the surplus on revaluation of owner-occupied property of £98,000 and also the deficit on mark to market re-measurement of hedging instruments of £312,000 resulting during the six month period. Gearing, expressed as total debt over net assets is 63.0 per cent as at 30 September 2011 (31 March 2011: 58.2 per cent).

The Board is not recommending payment of an interim dividend (2010: nil), so as to conserve cash resources whilst the business is being reshaped.

Operational Progress

The Group has made steady and encouraging progress in implementing its strategy to improve and extend the core income earning base of the Group and move forward the development of its assets, whilst working to dispose of trading property stock.

Further lettings of void space have been achieved, reducing the void rate to 10.9% (31 March 2011: 14.3%), thereby helping to contain costs of maintaining empty properties. The marinas and car parks have traded on par with last year. As we look forward to the 2012/13 marina season we have re-launched the website and have increased marketing activity, to include attendance at the forthcoming London Boat Show, in order to increase our potential customer base of berth-holders and visitors.

We have a number of exciting opportunities in our pipeline to develop our future income and value growth. We aim to re-configure part of the Sutton Harbour Marinas to accommodate larger vessels and we have now submitted a planning application for the new 179 berth marina in the Millbay area of Plymouth. This new facility will enable the Group to build on its existing marina operations business and to attract more sailing enthusiasts to some of the best cruising waters that the UK has to offer.

The Group has secured the letting of the 705m² (7,585 sq ft) premises on Exeter Street to a gym operator and 577m² (6,212 sq ft) Jamaica House premises to a restaurateur. The Group continues to actively manage the lease renewal process as each falls due.

Directors and Staff

Following recent departures from the Group of Non-Executive Directors, Malcolm Pearce and John Heawood, and also of Group Chief Executive, Nigel Godefroy, who stepped down from the Board for personal reasons on 30 September, the Board is currently undertaking the selection process for his successor. Anthony Everett succeeds John Heawood as Remuneration Committee Chairman.  

All our staff have shown tremendous loyalty to the Group and, in many cases, shouldered additional responsibilities. In addition, the closure of the airport will result in the loss of a further 39 direct jobs, leaving a Group-wide headcount of 42 staff in the property, marine, estate and central functions. This results in a significant reduction in headcount and Group costs, but we are very mindful that the last year has been a difficult period for airport staff, who faced uncertainty over a long period towards ultimate redundancy. On behalf of the Board, I want to thank the airport team for the many years of professional service that they have given.

Outlook

The Group is now clearly positioned as a marine and waterfront property specialist, by withdrawing from loss making transport activities. The investment proposition to investors is now much simpler, with the Group now focused on growing its annual revenues whilst achieving profits from specific development projects, as economic conditions permit. The Business has a high quality asset base and a demonstrated track record of developing properties in the region and is committed to delivering further value for shareholders.

Michael Knight

Chairman

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 2011 were approved by the Board of Directors on 14 June 2011 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, North 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 2011, 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 2011, as described in those annual financial statements.

Adoption of new International Financial Reporting Standards

The following new standards, amendments to standards or interpretations are mandatory for the first time for the financial year beginning 1 April 2011, but are not currently relevant for the Group:

- Amendments to IAS 24, 'Related party disclosures' - not applicable to current activity.

- Amendment to IFRS 1, 'First time adoption' - no impact as the Group has already adopted IFRS for the first time

- IFRIC 14, 'Prepayments of a minimum funding requirement' - not applicable to current activity.

- IFRIC 19, 'Extinguishing financial liabilities with equity instruments' - not applicable to current activity.

- Annual improvements to IFRS 2 'Share based payments' - no impact on current activities.

- Annual improvements to IAS 32 'Financial instruments: Presentation on classification of rights issues' - not applicable to current activity

- IFRIC 15 'Arrangements for construction of real estates' - no impact on current activity

The following new standards, amendments to standards or interpretations have been issued, but are not effective for the financial year beginning 1 April 2011 and have not been adopted early:

- Amendment to IAS 12 'Income taxes' - not yet endorsed.

- IFRS 9 'Financial instruments' - no impact on current activities.

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 2011.

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. These have changed since 31 March 2011, following the decision to close Plymouth City Airport.

The Board of Directors considers the business from an operational perspective as the Group has 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 2011 is as follows:

Business segments:

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

Continuing Operations

The company has applied an effective tax rate of 26% (2010: 28%) based on management's best estimate of the tax rate expected for the full financial year.

Discontinued Operations

In the prior period, the Company applied an effective tax rate of 28% to the trading losses of the discontinued operations.

5. Dividends

The Board of Directors do not propose an interim dividend (2010: nil).

6. Earnings per share

Basic Earnings per Share:

Basic earnings per share have been calculated using the loss for the period of £983,000 (2010: £585,000) for the continuing operations, and the loss for the period of £nil (2010: £8,598,000) for the discontinued operations. The average number of ordinary shares in issue, excluding those options granted under the SAYE scheme, of 62,943,752 (2010: 62,943,752) has been used in our calculation.

Diluted Earnings per Share:

Diluted earnings per share uses an average number of 63,193,851 (2010: 63,514,771) 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 2011, the year ended 31 March 2011, and the 6 months ended 30 September 2010, 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 Lambert Smith Hampton as at 30 September 2011 in accordance with the Practice Statements in the Valuations Standards (The Red Book) published by the Royal Institution of Chartered Surveyors.

The basis for determining the property values is as described in the financial statements for the year ended 31 March 2011.

8. Cash and cash equivalents

9. Provisions

The total provision of £2,493,000 is made up primarily of provisions for airport works, onerous leases, one off staff costs and airport closure costs. 

10. Discontinued operations and assets held for sale

Sutton Harbour Holdings plc announced on 25 May 2010 its intention to sell the airline subsidiary, Air South West Limited. Contracts for sale and purchase of the airline were exchanged on 17 September 2010 with Eastern Airways International Limited, with the effective date of control passing being 30 September 2010. The sale was completed on 30 November 2010.

The net profit or loss that accrued from 1 October 2010 to 30 November 2010 accrued to Eastern Airways International Limited, in accordance with the terms of the sale and purchase agreement.

The results of the airline to 30 September 2010 and loss on disposal (estimated at 30 September 2010, actual at 31 March 2011) are shown below:

11. Cash flow statements

12. Contingencies

On 26 October 2007, the Group entered into an agreement with the BBC to construct a 22,000 sq. ft. office building by a longstop date of December 2012. To date, the Group has not contracted for the construction of this development although it has agreed heads of terms with a developer to deliver a workable scheme, but terms have not been agreed with the BBC. It is not considered appropriate to make any provision in this regard.

Since Plymouth City Council agreed, in August 2011, the closure of the airport on 23 December 2011, the Group is obliged to work with the freeholder to obtain best value for the land through alternative use. In addition, the government grants of £804,000 may be subject to claw-back, settled out of the proceeds on the disposal.