Sutton Harbour Holdings Regulatory News (SUH)

4 December 2013

Sutton Harbour Holdings plc

Interim results for the six month period to 30 September 2013

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 2013. 

Financial Highlights

· Profit before tax of £0.526m (2012: loss before tax £2.751m);

· Adjusted* profit before tax £0.123m (2012: £0.481m);

· Net assets of £38.846m (31 March 2013: £36.562m);

· Net assets per share 40.3p (31 March 2013: 38.0p);

· Net debt £20.154m (31 March 2013: £17.355m).

*Excluding fair value adjustments and impairment of assets

Operational Highlights

· Appointed Graham Miller as Chairman;

· Marine and car park businesses have performed well;

· Opened the new King Point Marina to berth holders;

· Planning process for new uses on the former airport site is proceeding as part of an ultimate realisation strategy;

· Submitted plans for 'The Boardwalk' scheme at Sutton Harbour;

· Negotiated a new facility with existing bankers with funding committed until June 2016.

Graham Miller, Chairman, commented:

"The Company is committed to its focus on marine operations, waterfront regeneration and destination activities, and during the first half year has made advances in each of these areas. Achievement of full year results expectations will be dependent on the conclusion of certain transactions which are currently under negotiation. The Company is concentrating its resources on its existing operations and the new King Point Marina to increase asset value and to achieve income growth. Active consideration is being given to funding options required for any new development opportunities.

The Company's restructuring of its business activities over recent years has reduced complexity, increased visibility for investors and improved the overall risk profile. This transformation has enabled the Company to manage the impact of a long economic downturn in the market whilst continuing to invest in the region and contributing significantly to the local and regional economy. The board has greatly valued the support of shareholders, bankers and all its stakeholders during this transitional period."

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Chairman and Chief Executive's statement

During the first half year, the Company has continued to make steady progress:

· the marine and car park businesses have performed well;

· the Company has opened the new King Point Marina to berth holders;

· the planning process for new uses on the former airport site is proceeding as part of an ultimate realisation strategy;

· the Company has submitted plans for 'The Boardwalk' scheme at Sutton Harbour; and,

· the Company negotiated a new facility with existing bankers with funding committed until June 2016, as previously reported.

The interim accounts as at 30 September 2013 incorporate the results of an independent external valuation of the investment and owner occupied property portfolio as at that date undertaken by Jones Lang LaSalle. The change in valuer has enabled valuation of the portfolio to be undertaken by a single firm to ensure uniformity of approach. The valuation result has given rise to an increase in the net asset value per share from 38.0p to 40.3p, and reflects a general improvement in market sentiment and quality of the asset base. The King Point Marina asset has been valued at cost as it was not complete at the half year reporting date although it is now open for business.

Following the launch of the King Point Marina at the Southampton Boat Show and subsequent targeted marketing and open day events, we are pleased to report a good level of activity with 35 berths already sold and an encouraging level of enquiries for the new season which starts on 1 April 2014.

The marine activities based at Sutton Harbour maintained good progress, with the marinas enjoying a strong summer visitor season and the fish market trading well, albeit that the second half year is typically the stronger fisheries season.

The Company is working in accordance with its lease obligations and entitlements at the former airport site to achieve best value through alternative use. This would facilitate reduction of debt and allow resources to be focused on new opportunities in and around Sutton Harbour as part of the destination initiative. The 113 acre (45.7ha) former airport site is capable of accommodating retail, residential, employment and other facilities which would result in significant economic and social benefits for Plymouth.

As part of the destination framework for Sutton Harbour to develop underutilised sites within the area, the Company has re-submitted an application for 'The Boardwalk', a scheme at Sutton Harbour which will provide approximately 16,000 sq ft (1,487m2) in four principal units, and awaits a committee decision which is anticipated during the early part of the New Year. As the Harbour further evolves as a regional and national destination, the Company recognises the need to balance uses which appeal to different target audiences. The Boardwalk development specifically encourages and addresses demand for quality family orientated dining, and will significantly improve pedestrian access from the west to the north of the Harbour. Strong interest has already been received from national operators.

During the period, two restaurant tenants on the north side of the Harbour have ceased trading, equating to 5,290 sq ft (492m2), and a further 3,500 sq ft (325m2) of quality office space has become available for marketing. Although conversion from initial occupier interest to committed tenancy remains slow, overall, the vacancy rate for the first half year in respect of investment properties has moved slightly from 14.8% to 14.6%, with two new office lettings, one restaurant assignment and a new open air organic fast food outlet having been achieved in the period. Reducing voids continues to be a priority and the Company is actively marketing for new tenants targeting professional services, dining and other quality occupiers to build on the success of recent lettings. As at 30 September 2013 the net initial yield on the investment property portfolio was 9.07% compared to 9.12% at 31 March 2013. Regeneration profits remain variable from period to period and no sales of development inventory were recorded in the first half year.

The Company continues to maintain tight control on overhead costs and the slight increase compared to the comparative period in the first six months reflects the bank fees following the facility renewal and costs of engaging a new valuer at the interim stage.

Results and Financial Position

The Company achieved a profit before tax of £0.526m (2012: loss before tax £2.751m). Excluding fair value adjustments and impairment of assets, adjusted profit before tax for the period was £0.123m (2012: adjusted profit before tax £0.481m).

The property asset valuation as at 30 September 2013 resulted in a net valuation surplus of £2.699m, split as a £0.403m surplus on the investment property portfolio and £2.296m surplus on the owner occupied portfolio, compared against the valuation as at 31 March 2013.

As expected, the net debt position increased during the first half year end to £20.154m, up from £17.355m at 31 March 2013, with £1.822m of the increase arising from the programmed expenditure on the King Point Marina development. Gearing at 30 September 2013 was 51.9% (31 March 2013: 47.5%). The Company has sufficient headroom within its facilities to support its existing operations.

The provision for deferred tax has increased during the period reflecting adjustment for the provision in connection with the former airport site asset.

The Company's net assets at 30 September 2013 were £38.846m (31 March 2013: £36.562m) expressed as 40.3p per share (31 March 2013: 38.0p per share).

The board is not recommending an interim dividend (2012: nil) and retains the view that realisation of development inventory and consequent reduction in debt levels is a major factor in determining resumption of dividend payments.

Board Changes

After six years as Chairman, and eight years on the Board, Michael Knight stepped down on 20 September 2013 and was succeeded by Graham Miller. On behalf of the board and Company colleagues we wish to thank Michael for his unstinting commitment and support through a difficult transitionary period for the Company.

Summary and Outlook

The Company is committed to its focus on marine operations, waterfront regeneration and destination activities, and during the first half year has made advances in each of these areas. Achievement of full year results expectations will be dependent on the conclusion of certain transactions which are currently under negotiation. The Company is concentrating its resources on its existing operations and the new King Point Marina to increase asset value and to achieve income growth. Active consideration is being given to funding options required for any new development opportunities.

The Company's restructuring of its business activities over recent years has reduced complexity, increased visibility for investors and improved the overall risk profile. This transformation has enabled the Company to manage the impact of a long economic downturn in the market whilst continuing to invest in the region and contributing significantly to the local and regional economy. The board has greatly valued the support of shareholders, bankers and all its stakeholders during this transitional period.

Graham S Miller Jason W H Schofield

Chairman Chief Executive

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 2013 were approved by the Board of Directors on 19 June 2013 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 2013, 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 2013, 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 2013, but are not currently relevant for the Group:

IFRS 10 Consolidated Financial Statements: * 1 January 2014

IFRS 12 Disclosure of Interests in Other Entities: * 1 January 2014

IFRS 13 Fair Value Measurement: * 1 January 2013

IAS 27 Separate Financial Statements: * 1 January 2014

IAS 28 Investments in Associates and Joint Ventures: * 1 January 2014

Disclosures-Offsetting Financial Assets and Financial Liabilities (Amendments to IFRS 7): * 1 January 2013

Annual Improvements to IFRSs (2009-2011 Cycle): * 1 January 2013

Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance (Amendments to IFRS 10, IFRS 11 and IFRS 12): * 1 January 2013

Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32): * 1 January 2014

IFRS 9 Financial Instruments: * 1 January 2015

* 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 2013.

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 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 2012 is as follows:

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. Disposal of shares in associate

In April 2012 Sutton Harbour Holdings plc completed the sale transaction of its interest in Express Lift Investments Limited for £503,000. This included repayment of loan notes of £320,000, interest on the loan notes of £63,000 and payment for the shares of £120,000. This resulted in a profit before tax on disposal of £77,000.

5. Taxation

The Company has applied an effective tax rate of 23% (2012: 24%) based on management's best estimate of the tax rate expected for the full financial year. Additionally, a release of a deferred tax provision in the 31 March 2013 accounts has been reversed in the period.

6. Dividends

The Board of Directors do not propose an interim dividend (2012: nil).

7. Earnings per share

Basic Earnings per Share:

Basic earnings per share have been calculated using the profit for the period of £18,000 (2012: loss £2,302,000, year ended 31 March 2013 loss £2,849,000). The average number of ordinary shares in issue, excluding those options granted under the SAYE scheme, of 96,277,086 (2012: 96,277,086; year ended 31 March 2013: 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 (2012: 96,380,937; year ended 31 March 2013: 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 2013, the year ended 31 March 2013, and the 6 months ended 30 September 2012, 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.

8. Property valuation

Freehold land and buildings and investment property have been independently valued by Jones Lang LaSalle as at 30 September 2013, 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 our entire portfolio for the year ending 31 March 2014, as in previous years.

9. Cash and cash equivalents

10. Provisions

The provision related to airport works required to be carried out which were a condition of the planning consent for development on surplus airport land.

11. Cash flow statements

12. Capital Commitments

The Company has entered into agreements to construct a new marina together with shoreside facilities in the Millbay area of Plymouth and is committed to further costs of £1.440m.