Sutton Harbour Holdings Regulatory News (SUH)

For Immediate release 17 December 2010

Sutton Harbour Holdings plc

Interim Results for the six months ended 30 September 2010

Sutton Harbour Holdings plc ("Sutton Harbour" or "the Group") announces Interim results for the six months ended 30 September 2010.

Enquiries:

Nigel Godefroy, Group Chief Executive

Sutton Harbour Holdings plc Tel: 01752 204186

Bobbie Hilliam, Evolution Securities Tel: 020 7071 4300

Richard Day, Arden Partners Tel: 020 7614 5900

Paul Vann/ Tom Cooper, Winningtons Financial Tel: 0117 985 8989 or 07768 807631

Chairman's Statement

The last half year period has been an exceptionally challenging time for the Company with the period being dominated by the protracted sale process of Air South West Limited. In addition, difficult economic conditions remain in the regeneration sector although our marine activities have continued to perform well.

Since its formation in 2003, Air Southwest contributed well to Group profits, until 2009, when a combination of circumstances resulted in a trading loss for that year. In May 2010, we announced the decision to dispose of the airline and, following a competitive process, the Company entered into a conditional agreement for the sale of the entire issued share capital of Air South West Limited to Eastern Airways International Limited in September 2010 (the "Disposal"). The Disposal was completed on 30 November 2010. This has resulted in a significant loss for the Company in the half year period but it was considered necessary by the Board in order to remove a significant risk to the Group and avoid a further drain on the Group's resources. Following the Disposal, Air Southwest has continued to provide air services to the region.

The Group will now be able to re-focus on its core strengths and use its comprehensive regional knowledge and partnering skills to build long-term value through waterfront regeneration activities. Our immediate priorities following the Disposal are to: rebuild the balance sheet; sell the stock of prime property projects many of which are ready to develop with planning consents in place; and reduce debt and gearing. In the last six months the Group has continued to use its strength to build an exciting pipeline of projects which will grow annuity revenues as well as standalone project receipts

Results and dividend

The Group sustained a loss after taxation of £9.18m for the period, of which £8.60m was the loss on the Disposal and the trading losses incurred by Air South West Limited during the period. These losses are accounted for in the interim results as a discontinued operation. The loss before taxation from continuing operations was £0.81m (2009: profit £2.53m). In the corresponding period last year, results benefited from the sale of the first tranche of surplus airport land. In the last six months, marine profits have been stable with increased revenues from fish landings being offset by marginally lower fuel sales. The marina enjoyed higher berthing fees from visitors which offset the slight decline in annual revenues. The Group loss is stated after recording a fair value deficit on investment property of £0.05m (2009: deficit £0.50m)

Because of the loss incurred in the period, the Board is not recommending the payment of an interim dividend in January 2011. Although many shareholders will find this disappointing, the Board must be prudent and expects to resume dividend payments once the cash position of the Group has improved.

Net assets at 30 September 2010 were £33.2m (30 September 2009: £41.9m) compared to £43.1m at 31 March 2010 and includes the deficit on revaluation of owner-occupied property of £0.12m (2009: deficit £0.37m). Gearing, expressed as total debt over net assets, is 65 per cent. as at 30 September 2010 (2009: 41 per cent.).

The Group's banking facilities have been recently renewed with the Royal Bank of Scotland plc comprising a new three year facility for £25m and have been structured to take account of the Group's strategy for the next three years.

Future strategy

The Board has recently undertaken a review of the Group's strategy, operational activities and prospects. Whilst involvement in transport activities has yielded past success, in future we will focus on our strengths and on our core activities of waterfront regeneration and marine activities. Accordingly, we are currently reviewing our options for our investment in Plymouth City Airport which is currently loss-making. Also, we are in the process of marketing a number of development sites which will enable the Group to reduce stock, reduce debt and raise proceeds that can be used for new projects which have the potential to generate annuity revenues such as rents and fees. This would reduce our reliance on development profits which are more irregular in timing and quantum.

The Group has been steadily growing revenues from its marinas located in Sutton Harbour over recent years. Building upon our marina operation credentials, the Group has been bidding for two new marina projects, including East Cowes which was announced on 25 October 2010 and which will include substantial regeneration activity as well as marina management.

The Group has continued to take a proactive approach to managing its investment portfolio, which constitutes a significant element of the Group's asset base. Additionally we have worked to improve and protect rental incomes which is demonstrated by the resilient performance of the investment portfolio. We continue to try to further develop the long-term value of our Sutton Harbour estate and discussions with the BBC are ongoing. In addition, we have an exciting pipeline of projects in Portland, Exeter and Swansea, each of which involves regeneration of urban waterfront areas and in partnership with the public sector, which are traditionally our areas of competitive advantage. In building recurring revenues, we expect to increase our flexibility to bring forward development schemes as market conditions permit.

Staff

This has been a very difficult period for management and staff, particularly those directly affected by the uncertainty surrounding the disposal of Air Southwest and the need to cut costs. I thank all the staff for their continued commitment and hard work throughout this period.

Outlook

The Group is now much better placed to focus its resources on the core marine activities and waterfront regeneration and has the stability of longer term bank financing in place. The Disposal of Air Southwest has been achieved, which removes a substantial cost to the business. The Group has a number of regeneration projects that it is actively working on. Our ability to complete these projects on favourable terms and before the end of the financial year is expected to be impacted by the current market environment. The Group has a strong portfolio of assets and the Group's management looks forward to developing new opportunities, as well as those already in the pipeline, with a greater emphasis on developing recurring revenues and to re-shape the Group for future 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 the 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 2010 were approved by the Board of Directors on 25 May 2010 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. It did, however, contain an emphasis of matter paragraph in relation to the carrying value of Air Southwest.

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 2010, 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 2010, as described in those annual financial statements.

Adoption of new International Financial Reporting Standards

IFRS 5 (amendment) 'Non-current assets held for sale and discontinued operations' clarifies that IFRS 5 specifies the disclosures required in respect of non-current assets (or disposal groups) classified as held for sale or discontinued operations. It also clarifies that the general requirements of IAS 1 still apply.

The consolidated interim financial information has been prepared under the revised disclosure requirements of IFR 5 (amendment) as stated above. There was no impact on the results or net assets of the Group.

The following new standards, amendments to standards and interpretations are not applicable to current activity in the Group: IAS 36 (amendment) ' Impairment of Assets'; IFRS 2 (amendments) 'Group cash-settled share-based payment transactions'; IFRIC 9 'Reassessment of embedded derivatives and IAS 39, Financial instruments: Recognition and measurement'; IFRIC 16 'Hedges of a Net Investment in a Foreign Operation'; IFRIC 17 'Distribution of Non-Cash Assets to Owners'; IFRIC 18 'Transfers of Assets from Customers'.

The following new standards, amendments and interpretations issued but not effective for the current period have not been adopted early:

IFRS 9 'Financial instruments'; Revised IAS 24 (revised) 'Related party disclosures'; 'Classification of rights issues' (amendment to IAS 32); IFRIC 19 'Extinguishing financial liabilities with equity instruments'; 'Prepayments of a minimum funding requirement' (amendments to IFRIC 14).

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 2010.

 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 on 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 2010 is as follows:

Business segments:

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 28% (2009: 28%) based on management's best estimate of the tax rate expected for the full financial year.

Discontinued Operations

The company has applied an effective tax rate of 28% to the trading losses of the discontinued operations.

The loss recognised on the re-measurement of the assets of the disposal group is not tax deductible.

£892,000 of the consideration payable to Eastern Airways International Limited is not expected to be tax deductible.

5. Dividends

The board of directors do not propose an interim dividend (2009: 0.9p totalling £566,494).

6. Earnings per share

Basic Earnings per Share:

Basic earnings per share have been calculated using the loss for the period of £585,000 (2009: profit £1,819,000) for the continuing operations, and the loss for the period of £8,598,000 (2009: £954,000) for the discontinued operations. The average number of ordinary shares in issue, excluding those options granted under the SAYE scheme, of 62,943,752 (2009: 52,330,463) has been used in our calculation.

Diluted Earnings per Share:

Diluted earnings per share uses an average number of 63,514,771 (2009: 52,790,358) 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 year ended 31 March 2010 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 2010 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 2010.

8. Cash and cash equivalents

9. Provisions

Of this total provision amount, £1,392,000 relates to the disposal of the airline. This balance is expected to cover amounts due to Eastern Airways International Limited, in accordance with the sale and purchase agreement, as well as other anticipated costs.

10. Discontinued operations

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

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

The Air Southwest operations represented a separate major line of business for the Sutton Harbour Group. As a result of the agreed disposal, these operations have been treated as discontinued operations for the 6 months ended 30 September 2010. An amount is shown on the face of the income statement comprising the post tax result of discontinued operations and the related provisions made as a result of reclassification as held for sale. That is, the income and expenses of Air South West Limited are shown separately from the continuing operations of the Sutton Harbour Group.

The re-measurement of the assets of the disposal group and the provision for consideration payable are subject to final closing adjustments to be agreed with the purchaser, hence these figures are managements best estimate of the expected outcome.

A. Income statement

B. Balance Sheet of Air South West Limited

C. Cash flows

11. Cash flow statements

Continuing operations:

Discontinued operations:

Total cash used in operations: