Interim Results
Sutton Harbour Holdings PLC
29 November 2007
Sutton Harbour Holdings plc
('Sutton Harbour' or the 'Company')
Interim Results for the six months ended 30 September 2007
Sutton Harbour Holdings plc announces its results for the six months ended 30
September 2007. These results have been prepared under Adopted IFRS for the
first time.
Chairman's Statement
-----------------------------------------------------------------------------
Your Company has progressed well in the first half and has brought a number of
schemes to fruition whilst concluding agreements on a range of new projects.
Results show a very satisfactory performance by all divisions in this six month
period.
Results and dividend
These results are presented for the first time under Adopted International
Financial Reporting Standards (Adopted IFRS) whereas previous results were
reported under UK GAAP. Adopted IFRS reporting is mandatory for companies listed
on the Alternative Investment Market for accounting periods starting on or after
1 January 2007. Comparative results have been translated to Adopted IFRS
reporting and a full reconciliation of the differences in accounting are
presented in the Transition Statement to Adopted International Financial
Reporting Standards (this document is available on our website
www.sutton-harbour.co.uk). The principal change to our accounts is that under UK
GAAP the profit on the sale of the building occupied by Department for Work and
Pensions ('DWP') was recognised in the second half of the last financial year at
the point it was sold. Under Adopted IFRS, this profit is recognised as a fair
value adjustment at the point it was ready for use which occurred in the first
half of the last financial year. Under Adopted IFRS accounting, whilst total
profits from our regeneration activities remain unchanged, we may experience
greater 'lumpiness' in the reporting of such profits and there are a number of
milestones that need to be achieved in the second half year to continue our
current rate of progress in the months ahead.
I am pleased to report a profit before tax of £2.18m compared to £2.00m at this
stage last year (excluding the DWP profit referred to above), an increase of 9%.
Earnings per share are up 5% at 3.36p (2006: 3.19p adjusted for the one for one
capitalisation issue made on 27 August 2007 and the removal of the fair value
adjustment of investment properties). In recognition of profits on recent
projects and the Board's confidence in your Company's future prospects, the
directors propose an interim dividend of 0.9p per share, an increase of 20% on
the interim dividend paid last year (2006: 0.75p per share after adjustment for
the one for one capitalisation issue). The dividend will be paid on 4 January
2008 to shareholders on the register on 7 December 2007. The shares are expected
to go ex-dividend on 5 December 2007.
Regeneration
During the period the pre-let ground floor of the DWP building was sold and the
completion of the Shepherd's Wharf transaction to Rowe Group was achieved. The
two car parks in the harbour environs that we purchased from Plymouth City
Council for £2.4m in May 2007, have traded satisfactorily.
We have also made good progress on the mixed-use scheme on the former Boatyard
site and adjacent Salt Quay site with the agreements to lease commercial
premises to both the BBC and Foot Anstey solicitors now signed. These two
pre-let agreements are for a total of 65,000 sq ft new office accommodation
directly overlooking Sutton Harbour and these tenants will serve to enhance
further the overall quality of the harbour environment.
The Company has agreed heads of terms with the South West Regional Development
Agency to develop an 8 acre site at Portland for mixed-use in readiness for the
2012 Olympic sailing events which will take place nearby. This project is a good
example of the progress we are making towards our goal of broadening the
geographical spread of our regeneration activities. Additionally, the Company
has agreed heads of terms with Plymouth City Council to release 22 acres of
surplus land at Plymouth City Airport for mixed-use development. Work on these
projects has been time-consuming and highly complex and management are now
working towards securing planning permission at Portland and master-planning the
Plymouth Airport site. We are hopeful of reporting positive progress at the year
end.
We continue to bid for other schemes in the region and have invested in
additional professional staff to resource growth of our regeneration activities.
Transport
Air Southwest's results have improved steadily throughout the period and we are
encouraged that our Newquay-Gatwick services have remained popular despite new
competition on the route. Spare capacity has been used profitably to operate
charter services during the current period and we have recently announced that
we will be introducing new services from Plymouth and Newquay to Glasgow and
Newcastle from April 2008. Additionally new services from Plymouth to Cork and
Dublin will operate from April 2008 and new services for winter 2008/09 from
Plymouth and Newquay to Chambery are planned.
Our commitment to the development of air-links from the Southwest to a
comprehensive range of UK destinations follows confirmation of the transition of
Newquay Cornwall Airport from a military to civilian airport and our decision to
increase services out of Plymouth.
We continue to be mindful of the future impact of fuel prices as they currently
stand although the Company has hedged much of its commodity price risk for the
current financial year.
Marine
Our marine activities have performed well during the first half year. The Sutton
Harbour Marinas continue to be popular after further improvements to facilities
were completed and additional berthing space was created for larger vessels.
Fishing related revenues also showed satisfactory growth in the period. However,
we expect results from these activities to be depressed during the second half
year as a four month long refit of the lock gates is underway. These works
necessitate closure of the lock gates at times and we have worked hard to
provide alternative berthing and discharge facilities outside the harbour in
order to minimise the disruption to our commercial and leisure customers.
Nonetheless, some harbour users have chosen to relocate for the duration of
works which we expect to be complete by end of January 2008.
Staff matters and outlook
This has been a particularly challenging period of intense activity for your
Company and I am grateful to our staff for their continued commitment and
enthusiasm. In particular, I thank our staff based at Sutton Harbour who have
managed the impact of disruption caused by the lock gates' refit; the
regeneration team for delivering the successes referred to above; and, to the
Air South West team for their support during a challenging time. Due to the
enthusiasm for previous employee SAYE share-save schemes we plan to launch a new
scheme in January 2008.
Jason Schofield joined the Company as Head of Development in June 2007, having
previously held senior positions at Hammerson plc and Crest Nicholson. He has
already made a significant contribution and I am delighted that he will be
appointed Executive Director with effect from 1 December 2007. As indicated
previously, Tim Bacon stepped down as Executive Director on 31 October 2007 but
remains a Non-Executive Director on the Board.
Your Company is well placed to continue its progress in the current financial
year with a pipeline of projects due to complete in the second half year and in
future periods.
Michael Knight
Chairman
Consolidated Income Statement
-----------------------------------------------------------------------------
6 months to 6 months to Year Ended
30 September 30 September 31 March
2007 2006 2007
(unaudited) (unaudited) (unaudited)
Note £000 £000 £000
Revenue 2 17,576 16,628 30,189
Cost of sales (14,436) (13,714) (26,319)
Gross profit 3,140 2,914 3,870
Other operating income 9 11 22
Administration expenses (603) (503) (954)
Other operating expenses (24) (4) (59)
Operating profit before gains on investment properties 2,522 2,418 2,879
Fair value adjustments of investment property - 2,200 2,200
Operating profit 2 2,522 4,618 5,079
Financial income 6 146 60 119
Financial expense 6 (448) (472) (965)
Net financing costs (302) (412) (846)
Share of loss of associate using the equity accounting
method (44) (4) (14)
Profit before tax 2,176 4,202 4,219
Taxation 3 (492) (1,133) (1,066)
Profit for the period attributable to the equity
shareholders 1,684 3,069 3,153
Earnings per Share 5 3.36p 6.30*p 6.47*p
Diluted Earnings per Share 5 3.31p 6.16*p 6.33*p
*Adjusted for the one for one capitalisation issue
Consolidated Statement of Recognised Income and Expense
-----------------------------------------------------------------------------
6 months to 6 months to Year Ended
30 September 30 September 31 March
2007 2006 2007
(unaudited) (unaudited) (unaudited)
£000 £000 £000
Tax recognised on income and expenses recognised
directly in equity 180 41 115
Profit for the period 1,684 3,069 3,153
Total recognised income and expense for the period 1,864 3,110 3,268
Consolidated Balance Sheet
-----------------------------------------------------------------------------
As at As at As at
30 September 30 September 31 March
2007 2006 2007
(unaudited) (unaudited) (unaudited)
Note £000 £000 £000
Non-current assets
Property, plant and equipment 33,383 32,684 33,342
Intangible assets 559 594 576
Investment property 20,102 14,736 15,923
Investment in associate 847 799 828
Other financial assets 130 130 130
55,021 48,943 50,799
Current assets
Inventories 3,922 4,404 3,898
Trade and other receivables 5,579 3,719 5,482
Cash and cash equivalents 7 5 3 6
Non-current assets held for sale - 13,600 -
Derivatives 83 - 14
9,589 21,726 9,400
Total assets 64,610 70,669 60,199
Current liabilities
Bank overdraft 7 8,621 7,559 6,061
Other interest-bearing loans and borrowings 1,047 1,865 1,069
Trade and other payables 3,223 2,587 3,738
Deferred income 2,338 2,739 3,336
Deferred government grants 21 22 21
Tax payable 565 618 306
Derivatives 97 - 7
15,912 15,390 14,538
Non-current liabilities
Other interest-bearing loans and borrowings 1,813 11,120 2,293
Deferred government grants 331 373 333
Provisions 58 19 40
Deferred tax liabilities 6,128 6,881 6,211
8,330 18,393 8,877
Total liabilities 24,242 33,783 23,415
Net assets 40,368 36,886 36,784
Equity and reserves
Share capital 8,9 12,621 6,086 6,112
Share premium 9 - 2,797 2,843
Other reserves 9 11,468 11,214 11,288
Retained earnings 9 16,279 16,789 16,541
Total equity 40,368 36,886 36,784
Consolidated Cash Flow Statement
-----------------------------------------------------------------------------
6 months to 6 months to Year Ended
30 September 30 September 31 March
2007 2006 2007
(unaudited) (unaudited) (unaudited)
Note £000 £000 £000
Cash flows from operating activities:
Profit for the period 1,684 3,069 3,153
Adjustments for:
Taxation 492 1,133 1,066
Share of loss of associate 44 4 14
Financial income (146) (60) (119)
Financial expense 448 472 965
Change in value of investment property - (2,200) (2,200)
Depreciation and amortisation 433 321 648
Amortisation of grants (9) (11) (22)
Loss on sale of property, plant and
equipment 24 4 59
Equity settled share-based payment
expenses 35 40 74
Operating profit before changes in
working capital and provisions 3,005 2,772 3,638
(Increase) in loan to associate (63) (85) (124)
(Increase) in inventories (692) (1,259) (753)
(Increase)/decrease in trade and other
receivables (97) 449 (1,314)
(Decrease) in trade and other payables (520) (1,500) (188)
(Decrease)/increase in deferred income (998) (511) 86
Increase in provisions 18 19 40
Cash generated from/(used in)
operations 653 (115) 1,385
Tax paid (138) (33) (875)
Net cash from/(used in) operating
activities 515 (148) 510
Cash flows from investing activities:
Proceeds from sale of non-current
assets held for sale - - 13,600
Proceeds from sale of property, plant
and equipment 5 - 174
Acquisition of investment property (2,948) (85) (1,272)
Acquisition of property, plant and
equipment (1,048) (2,281) (3,546)
Proceeds from receipt of government
grants - 48 48
Interest received 73 11 30
Net cash (used in)/from investing
activities (3,918) (2,307) 9,034
Cash flows from financing activities:
Proceeds from the issue of share
capital 2,424 - 72
Issue costs relating to the issue of
share capital (94) - -
Proceeds from new loan - 1,877 1,669
Interest paid (344) (445) (1,025)
Repayment of borrowings (500) (450) (9,866)
Dividends paid (644) (584) (950)
Net cash from/(used in) financing
activities 842 398 (10,100)
Net (decrease) in cash and cash
equivalents (2,561) (2,057) (556)
Cash and cash equivalents at beginning
of period (6,055) (5,499) (5,499)
Cash and cash equivalents at end of
period 7 (8,616) (7,556) (6,055)
Notes to Interim Report
-----------------------------------------------------------------------------
1. Basis of preparation
The AIM rules require that the next annual consolidated financial statements of
the Group, for the year ending 31 March 2008, be prepared in accordance with
International Financial Reporting Standards (IFRSs) as adopted by the EU
('Adopted IFRSs').
This interim financial information has been prepared on the basis of the
recognition and measurement requirements of IFRSs in issue that are endorsed by
the EU and effective (or available for early adoption) at 31 March 2008, the
Group's first annual reporting date at which it is required to use Adopted
IFRSs. Based on these Adopted IFRSs, the directors have made assumptions about
the accounting policies expected to be applied when the first annual Adopted
IFRS financial statements are prepared for the year ending 31 March 2008. These
accounting policies are set out in the transition statement available on the
Group's website www.sutton-harbour.co.uk.
In particular, the directors have assumed that the following IFRSs issued by the
International Accounting Standards Board, and IFRIC Interpretations issued by
the International Financial Reporting Interpretations Committee, will be adopted
by the EU in sufficient time that they will be available for use in the annual
Adopted IFRS financial statements for the year ending 31 March 2008:
IFRIC 12 'Service Concession Arrangements' effective for year ends beginning on
or after 1 January 2008 - not going to adopt early.
IFRS 8 'Operating Segments' effective for year ends beginning on or after 1
January 2009 - not going to adopt early.
IAS 23 'Borrowing Costs' (Amended) - not expected to have any major impact.
In addition, the Adopted IFRSs that will be effective (or available for early
adoption) in the annual financial statements for the year ending 31 March 2008
are still subject to change and to additional interpretations and therefore
cannot be determined with certainty. Accordingly, the accounting policies for
that annual period will be determined finally only when the annual financial
statements are prepared for the year ending 31 March 2008.
The accounting policies set out in the transition statement have been applied
consistently in all periods presented and in preparing the opening balance sheet
at the transition date.
Accounting estimates and judgements
The preparation of financial statements in conformity with Adopted IFRSs
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.
The following are the areas that require the use of estimates and judgement that
may impact the Group's balance sheet and income statement:
a) The stage of completion of construction contracts and project management
contracts:
Judgement has been made in determining the stage of completion of construction
contracts and project management contracts and therefore the amount of revenue
and costs that have been recognised in the income statement. In determining the
stage of completion, management make use of the experience of RICS qualified
employees and surveys of the work performed.
b) The valuation of investment property and property held for use in the
business:
In determining the fair value of properties, the Board relies on internal and
external valuations carried out by professionally qualified valuers in
accordance with the Appraisal and Valuation Standards of the Royal Institution
of Chartered Surveyors. The valuation of investment properties uses estimated
rental yields for each property based on market evidence at the date the
valuation is carried out.
c) The calculation of deferred tax assets and liabilities:
The Group has not recognised deferred tax assets due to a high degree of
uncertainty of the timing of when the asset may be realised.
d) The level of provision required for aircraft maintenance overhauls:
The Group bases it's estimates on the number of hours flown, the expected
interval between services, the cost of prior overhauls and industry experience.
e) Determining whether a lease is a finance lease or an operating lease:
The Board has exercised judgement in considering the potential transfer of risks
and rewards in accordance with IAS 17 'Leases' for all property leased to
tenants and for all property leased by the Group.
f) In preparing the interim report, the Group has not applied hedge
accounting to date. The fair value movement on all hedges has therefore been
recorded in the income statement as at 30 September 2007. The Group will assess
whether it meets the cash flow hedge accounting criteria at the year end. The
Group uses derivatives to hedge uncertain future cash flows and intend to take
steps to implement hedge accounting.
Publication of Non-Statutory Accounts
The comparative figures for the financial year ended 31 March 2007 are not the
Group's statutory accounts for that financial year. Those accounts, which were
prepared under UK GAAP, have been reported on by the Group's auditors and
delivered to the registrar of companies. The report of the auditors was (i)
unqualified, (ii) did not include a reference to any matters to which the
auditors drew attention by way of emphasis without qualifying their report, and
(iii) did not contain a statement under section 237(2) or (3) of the Companies
Act 1985.
Copies of the Group's financial statements are available from the Group's
registered office, North Quay House, Sutton Harbour, Plymouth, PL4 0RA and on
the Group's website www.sutton-harbour.co.uk.
2. Segment results
The Group's primary format for segment reporting is based on business segments.
All of the Group's operations are carried out in the United Kingdom. The Group
therefore has only one geographical segment.
Business segments:
6 months to 6 months to Year Ended
30 September 30 September 31 March
2007 2006 2007
(unaudited) (unaudited) (unaudited)
£000 £000 £000
External revenue:
Marine activities 2,632 2,836 4,934
Regeneration 2,583 2,023 3,283
Transport 12,361 11,769 21,972
Total external revenue 17,576 16,628 30,189
Total intersegment revenue - - -
Total revenue 17,576 16,628 30,189
Segment result:
Marine activities 707 573 947
Regeneration 1,486 3,946 4,958
Transport 932 602 128
3,125 5,121 6,033
Unallocated expenses:
Administrative expenses (603) (503) (954)
Group operating profit 2,522 4,618 5,079
Financial income 146 60 119
Financial expense (448) (472) (965)
Share of loss of associate (44) (4) (14)
Taxation (492) (1,133) (1,066)
Profit for the period 1,684 3,069 3,153
Assets and liabilities
Segment assets:
Marine activities 22,544 21,935 22,422
Regeneration 26,635 33,739 22,556
Transport 14,401 13,889 14,112
Unallocated assets 1,030 1,106 1,109
Total assets 64,610 70,669 60,199
Segment liabilities:
Marine activities 755 781 1,475
Regeneration 953 1,505 549
Transport 4,350 3,450 5,451
Unallocated liabilities 11,491 20,548 9,423
Tax liabilities 6,693 7,499 6,517
Total liabilities 24,242 33,783 23,415
3. Taxation
The Current Tax charge represents the provision for taxation on the taxable
profits for the period.
6 months to 6 months to Year Ended
30 September 30 September 31 March
2007 2006 2007
(unaudited) (unaudited) (unaudited)
£000 £000 £000
Current Tax (329) (300) (834)
Deferred Tax (163) (833) (232)
(492) (1,133) (1,066)
In the recent Chancellor's Budget, the rate of Corporation Tax has been reduced
from 30% to 28% with effect from 1 April 2008. Current Tax continues to be
calculated at 30% for the current financial year. Deferred Tax as at 30
September 2007, however, has been recalculated at the reduced 28% rate to
reflect the reduced future rate.
4. Dividends
6 months to 6 months to Year Ended
30 September 30 September 31 March
2007 2006 2007
(unaudited) (unaudited) (unaudited)
£000 £000 £000
Final Dividend in respect of the year ended 31 March 2007 644 584 584
Interim Dividend in respect of the year ended 31 March 2007
- - 366
644 584 950
The interim ordinary dividend of 0.9p (net) per share (2006: 0.75p adjusted for
the one for one capitalisation issue) totalling £454,361 (2006: £366,651) was
approved by the Board of Directors on 28 November 2007. This interim dividend
will not be provided against profits until paid and will be paid on 4 January
2008 to Shareholders on the register on 7 December 2007.
5. Earnings per Share
As at As at As at
30 September 30 September 31 March
2007 2006 2007
(unaudited) (unaudited) (unaudited)
pence pence pence
Earnings per Share 3.36p 6.30*p 6.47*p
Adjusted Earnings per Share 3.36p 3.19*p 6.47*p
Diluted Earnings per Share 3.31p 6.16*p 6.33*p
Diluted Adjusted Earnings per Share 3.31p 3.11*p 6.33*p
*Adjusted for the one for one capitalisation issue
Earnings per share have been calculated using the profit for the period of
£1,684,000 (2006: £3,069,000) and the 50,066,411 (2006: 48,684,044 adjusted for
the one for one capitalisation issue) average number of ordinary shares in
issue, excluding those options granted under the SAYE scheme. Adjusted
Earnings per share have been calculated using the same information as for the
Basic Earnings per share but the profit for the six months to 30 September 2006
has been adjusted to £1,551,000. This adjusted profit reflects the removal of
the fair value adjustments to investment properties and the associated deferred
taxation. Diluted Earnings per share uses an average number of 50,933,025
(2006: 49,832,480 adjusted for the one for one capitalisation issue) ordinary
shares in issue, and takes account of the outstanding options under the SAYE
scheme in accordance with IFRS2 'Share-based Payment'. Diluted Adjusted
Earnings per share have been calculated using the same information as for the
Diluted Earnings per share but the profit for the six months to 30 September
2006 has been adjusted to £1,551,000 as described above.
6. Financial income and financial expense
6 months to 6 months to Year Ended
30 September 30 September 31 March
2007 2006 2007
(unaudited) (unaudited) (unaudited)
£000 £000 £000
Interest receivable on loan to associate 58 51 84
Other interest receivable 19 9 21
Gain on remeasurement of derivative financial instrument
to fair value 69 - 14
Financial income 146 60 119
Bank overdraft interest payable 358 472 958
Loss on remeasurement of derivative financial instrument
to fair value 90 - 7
Financial expense 448 472 965
7. Cash and cash equivalents
As at As at As at
30 September 30 September 31 March
2007 2006 2007
(unaudited) (unaudited) (unaudited)
£000 £000 £000
Cash and cash equivalents per balance sheet 5 3 6
Bank overdraft (8,621) (7,559) (6,061)
Cash and cash equivalents per cash flow statement (8,616) (7,556) (6,055)
8. Share capital
As at As at As at
30 September 30 September 31 March
2007 2006 2007
(unaudited) (unaudited) (unaudited)
£000 £000 £000
Authorised:
100,000,000 Ordinary shares of 25p each (2006: 40,000,000
Ordinary shares of 25p each) 25,000 10,000 10,000
Allotted, Called Up and Fully Paid:
50,484,580 Ordinary shares of 25p each (2006: 24,342,022
Ordinary shares of 25p each) 12,621 6,086 6,112
On 18 May 2007, the Company issued 794,600 ordinary 25p shares at £3.05 each to
finance the acquisition of two car parks in the environs of Sutton Harbour. The
issue price included a discount of 15p per share. Following the issue, the
share capital of the Company was 25,136,622 ordinary shares of 25p each.
655 Ordinary shares of 25p each were issued on 2 August 2007 as employees
exercised share options under the Company's Save As You Earn Share Option
Scheme. The Company received £1,212 in consideration for the 655 share options
exercised.
At the Annual General Meeting on 11 July 2007, it was agreed to increase the
authorised share capital to £25,000,000 by the creation of 60,000,000 ordinary
shares of 25p each.
At the Annual General Meeting on 11 July 2007, the Company resolved to make a
one for one capitalisation issue to be met out of a combination of the share
premium account and retained earnings. On 27 August 2007, the Company issued
25,242,290 ordinary shares of 25p each to shareholders at that date on a one for
one basis. This resulted in an increase of share capital of £6,311,000, a
reduction in share premium of £4,974,000 and the capitalisation of £1,337,000 of
retained earnings. Following the one for one capitalisation issue, the share
capital of the Company was 50,484,580 ordinary shares of 25p each.
9. Reconciliation of movements in equity
Share capital Share premium Revaluation Merger reserve Retained
reserve earnings
----Other reserves----
£000 £000 £000 £000 £000
At 1 April 2006 6,086 2,797 10,922 251 14,264
Deferred taxation on revaluation of
property, plant and equipment - - 41 - -
Cost relating to share-based payment
schemes - - - - 40
Dividends - - - - (584)
Profit for the period - - - - 3,069
As at 30 September 2006 6,086 2,797 10,963 251 16,789
Issue of shares 26 46 - - -
Deferred taxation on revaluation of
property, plant and equipment - - 74 - -
Cost relating to share-based payment
schemes - - - - 34
Dividends - - - - (366)
Profit for the period - - - - 84
As at 31 March 2007 6,112 2,843 11,037 251 16,541
Issue of shares less costs 198 2,131 - - -
One for one capitalisation issue 6,311 (4,974) - - (1,337)
Deferred taxation on revaluation of
property, plant and equipment - - 180 - -
Cost relating to share-based payment
schemes - - - - 35
Dividends - - - - (644)
Profit for the period - - - - 1,684
As at 30 September 2007 12,621 - 11,217 251 16,279
This information is provided by RNS
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