Sutton Harbour Holdings Regulatory News (SUH)

12 December 2012

Sutton Harbour Holdings plc

Interim Results for the six month period to 30 September 2012

Sutton Harbour Holdings plc ("Sutton Harbour", "the Company"), the AIM listed marine and waterfront regeneration specialist, announces interim results for the six month period to 30 September 2012.

Financial highlights

·; Trading activities have continued in line with expectations

·; Revenues of £3.93m (2011: £6.06m)

·; Gross operating profit* £1.49m (2011: £2.74m)

·; Revaluation generates a deficit of £2.59m (2011: £0.38m) through the income statement

·; After that charge there is a loss before tax £2.75m (2011 loss £0.65m)

·; Net assets of £36.9m (2011: £41.5m)

·; Net debt of £16.8m (2011: £15.8m)

* Before administration costs and asset impairments

Operational highlights

·; Launch of Sutton Harbour Destination Initiative to transform Sutton Harbour into one of the UK's most attractive waterfront locations

·; Indicative master-plan prepared for 113 acre airport site

·; Relocation of head office operations

·; Achieved completion of the lease and construction agreements for the new King Point Marina development in the Millbay area of Plymouth.

Michael Knight, Chairman, commented:

"During the first half year trading has continued in line with our expectations of challenging trading conditions and we have been implementing specific strategies to build profile and to target new markets. The Company has established its position as a niche real estate operator specialising in waterfront destinations and associated marine activities. We are actively pursuing our plans for the delivery of King Point Marina and marketing of berths; making progress with future ideas for "Destination Sutton Harbour" as well as the former airport site; and, managing the Sutton Harbour estate for long-term income and asset growth."

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Chairman's Statement

Overview

During the first half year the Company has made significant progress in advancing its plans for the Sutton Harbour area and also for alternative uses on the former airport site in line with its strategy to be a leading marine, waterfront regeneration and destination specialist in Southern England.

As recently announced, the Company has formally launched its master-plan as a blueprint for the evolution of Sutton Harbour into a visitor destination of regional and national significance. This sets out the vision of bringing together existing attractions of the historic Barbican quarter and Mayflower Steps, the National Marine Aquarium, numerous restaurants and bars and establishing firmer links with the waterfront and Hoe and the City Centre. The master-plan features opportunities for food and beverage outlets, retail, office, hotel and high quality residential development, brought together with improved access all around the harbour perimeter.

It is now almost a year since Plymouth City Airport was closed and no financially substantiated offers have been made by any third parties to acquire the Company's interest and to re-open an airport facility on a commercially sustainable basis. Accordingly, the Company has prepared an indicative master-plan to show what the 113 acre site could deliver as part of the evolving planning policy for the City of Plymouth. The Company is entitled to a 25% share of net proceeds from disposal of the site for alternative use.

Trading activities have continued in line with expectations during the first half year. After a period of sustained growth we are now experiencing a levelling of results in the marine operations segment and the marina team are working hard to maintain berthing occupancy levels. Given the continuing economic malaise, we are now more cautious about improving property occupancy rates in the second half year although going forward these should improve with the increased marketing of Sutton Harbour as a destination. Demand for quality space remains good, although end users are taking more time to make longer term commitments.

The Company continues to take advantage of good estate management opportunities and has recently relocated its head office operations to the smaller Tin Quay House. Its previous head office space, at North Quay House, has now been let to a high quality tenant.

I am pleased to report that we have achieved completion of the lease and construction agreements for the new King Point Marina development in the Millbay area of Plymouth. Construction of the marine and shoreside facilities will commence in January 2013 and is expected to be complete during Summer 2013.

Results and Financial Position

In line with the rest of the UK, the South West area of the country is experiencing difficult market conditions in the property sector. The continuing overall economic situation has clearly had an effect on property prices and it is clear that advisers in the sector are also taking a conservative position on values. We appointed a new firm of independent valuers, DTZ, during the period and they have conducted a valuation of the majority of our estate. The result of this valuation shows a reduction in asset value, reflecting reticent sentiment about provincial commercial space and a general lack of current and relevant evidence of trading specialist assets such as our marina. The valuation does not reflect any marked change in marina occupancy rates and resulted in net initial yield movement on the investment portfolio from 8.0% to 8.6%. In addition, another firm of valuers was commissioned to value the fishmarket, but the recently received results showed that the valuation was inconsistent with the principles adopted for the rest of the estate and the board has decided to retain the independent valuation as at 31 March 2012 of the fishmarket. Overall, the revised values give rise to a deficit of £4.905m (2011: £0.282m). Of this, a £2.593m deficit (2011: £0.380m) is recognised through the income statement in relation to the investment portfolio and a £2.312m deficit (2011: £0.098m surplus) is accounted to the revaluation reserve in relation to the owner-occupied portfolio. Notwithstanding the disappointing downward valuation movement of certain properties, the Directors consider there is considerable potential for value recovery and growth in the portfolio as the development vision is realised. A valuation will be commissioned for our entire portfolio for the year ending 31 March 2013, as in previous years.

The Company's net assets at 30 September 2012 were £36.9m (31 March 2012: £41.5m), expressed as 38.3p per share (31 March 2012: 43.1p per share).

Gearing, expressed as total debt over net assets is 45.5 per cent as at 30 September 2012 (31 March 2012: 38.2 per cent), with net bank debt standing at £16.8m (31 March 2012: £15.8m). As anticipated, the Company expects to see an increase in bank debt over the second half year, once construction starts on King Point Marina in the Millbay area of Plymouth. The Company continues to operate comfortably within its banking covenants.

The Company achieved a gross operating profit of £1.492m (2011: profit £2.741m) before accounting for administration costs and asset impairments and a loss before taxation of £2.751m (2011: £0.652m loss) for the period. The results for the comparative period include £0.517m loss in relation to costs of closure of the airport business.

As previously reported, the half year results include final consideration in connection with the disposal of surplus airport land to a developer and the profit on disposal of the investment in Express LIFT Investments Limited, a public private partnership engaged in the provision of healthcare premises. A further write down of project inventory amounting to £0.639m has been made in the period (2011: £0.970m).

The Board is not recommending payment of an interim dividend (2011: nil), as it continues to work through and more firmly establish its strategies for future growth.

Summary and Outlook

We have made considerable progress to reduce costs together with changes to our professional advisers including auditors, lawyers and valuers. Ongoing administrative expenses have continued to contract.

During the first half year trading has continued in line with our expectations of challenging trading conditions and we have been implementing specific strategies to build profile and to target new markets. The Company has established its position as a niche real estate operator specialising in waterfront destinations and associated marine activities. We are actively pursuing our plans for the delivery of King Point Marina and marketing of berths; making progress with future ideas for "Destination Sutton Harbour" as well as the former airport site; and, managing the Sutton Harbour estate for long-term income and asset growth.

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 2012 were approved by the Board of Directors on 26 June 2012 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 2012, 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 2012, 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 2012, but are not currently relevant for the Group:

- Amendments to IAS 1, 'Presentation of items of Other Comprehensive Income' - not applicable to current activity.

- Amendment to IAS 19, 'Employee benefits' - not applicable to current activity.

- IFRS 10, 'Consolidated Financial Statements' - not applicable to current activity.

- IFRS 11, 'Joint Arrangements' - not applicable to current activity.

- IFRS 12 'Disclosure of Interests in Other Entities' - no impact on current activities.

- IFRS 13 'Fair Value Measurement' - not applicable to current activity.

- IAS 27 'Separate Financial Statements' - no impact on current activities.

- IAS 28 'Investments in Associates and Joint Ventures - no impact on current activities.

- Amendments to IFRS 7 'Disclosures - Offsetting Financial Assets and Financial Liabilities' - no impact on current activities.

- Amendments to IFRS1 'Government Loans' - no impact on current activities.

- Improvements to IFRSs (2012) - no impact on current activities

The following new standards, amendments to standards or interpretations have been issued, but are not effective for the financial year beginning 1 April 2012 and have not been adopted early:

- Amendment to IAS 32 'Offsetting Financial Assets and Financial Liabilities' - not yet endorsed - effective 1 January 2014.

- IFRS 9 'Financial instruments' - not yet endorsed - effective 1 January 2015.

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 2012.

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

Continuing Operations

The Company has applied an effective tax rate of 16% (2011: 26%) based on management's best estimate of the tax rate expected for the full financial year.

Discontinued Operations

In the prior year the Company applied an effective tax rate of 26% to the trading losses of the discontinued operations.

6. Dividends

The Board of Directors do not propose an interim dividend (2011: nil).

7. Earnings per share

Basic Earnings per Share:

Basic earnings per share have been calculated using the loss for the period of £2,302,000 (2011: £483,000) for the continuing operations, and the loss for the period of £nil (2011: £500,000) for the discontinued operations. The average number of ordinary shares in issue, excluding those options granted under the SAYE scheme, of 96,277,086 (2011: 62,943,752; year ended 31 March 2012: 69,701,743) has been used in our calculation.

Diluted Earnings per Share:

Diluted earnings per share uses an average number of 96,380,937 (2011: 63,193,851; year ended 31 March 2012: 69,701,743) ordinary shares in issue, and takes account of the outstanding options under the SAYE scheme in accordance with IAS 33 'Earnings per share'.

7. Earnings per share (continued)

* For the 6 months ended 30 September 2012, the year ended 31 March 2012, and the 6 months ended 30 September 2011, 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, with the exception of the Fishmarket, and investment property have been independently valued by DTZ as at 30 September 2012, in accordance with the Practice Statements in the Valuations Standards (The Red Book) published by the Royal Institution of Chartered Surveyors.

The Fishmarket was valued by another firm but was inconsistent with the principles adopted for the rest of the estate and these accounts incorporate the independent valuation on that asset as at 31 March 2012. A further valuation will be commissioned for our entire portfolio for the year ending 31 March 2013, as in previous years.

9. Cash and cash equivalents

10. Provisions

The total provision of £119,000 relates to the provision for airport works required to be carried out which were a condition of the planning consent for development on surplus airport land. 

11. Issue of Shares

On 18 January 2012 Sutton Harbour Holdings plc undertook a share placing and open offer.

In order to issue the new shares, a share reorganisation was required. Each Ordinary share of 25p nominal value was sub-divided into 1 Ordinary share of 1p nominal value and 1 deferred share of 24p nominal value.

The share placing and open offer resulted in the issue of 33,333,334 new Ordinary shares each with a nominal value of 1p, issued at a price of 18p each. The net proceeds after issue costs were £5.7m. The £5.4m excess of the value of the shares issued over the nominal value of Ordinary shares was credited to the Company's Share Premium Reserve.

12. Discontinued operations

In December 2011 the Group ceased all operations at Plymouth City Airport. All trading activities relating to the airport have therefore been classified as discontinued activities at 31 March 2012. There were no transactions relating to discontinued activities in the 6 months to 30 September 2012. The results for the 6 months to 30 September 2011 have been restated.

A charge of £508,000 relating to the impairment of related property, plant and equipment and inventory is included in the discontinued operations' cost of sales for the year ended 31 March 2012.

Cash flows

13. Cash flow statements

14. 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.

15. 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 costs of £3.6m.