Results for the year ended 31 March 2022

RNS Number : 0396T

Sutton Harbour Group PLC

20 July 2022

 

20 July 2022

SUTTON HARBOUR GROUP PLC (the "Group")

Results for the year ended 31 March 2022

Sutton Harbour Group plc ("Sutton Harbour", "the Company"), the AIM listed owner and operator of Sutton Harbour in Plymouth and specialist in waterfront regeneration projects and operation of waterfront real estate, marinas and Plymouth Fisheries, announces audited results for the year ended 31 March 2022.

Highlights

· Net asset value up to £56.211m (43.3p per share), from £47.153m (40.6p per share).

· Record trading year for the marinas with  near capacity occupancy during year ended 31 March 2022 and maintained at 98% occupancy as of July 2022.

· Investment Property occupancy rate of 89% at 31 March 2022 (97% at 31 March 2021). One building under refurbishment for three new tenants.

· Strong recovery of parking revenues since summer 2021 and improving trend in 2022.

· The first new development project at Sutton Harbour in a decade, Harbour Arch Quay, under construction and due for completion in Spring 2023.

· Updated planning consent and s106 agreement for the 170 apartment building at Sugar quay secured.

Financial Highlights

	Note	2022	2021
Adjusted Profit/(loss) before tax	*	£0.366m	(£0.162m)
Net financing costs		£0.789m	£0.753m
Net assets		£56.2m	£47.2m
Net asset per share		43.3p	40.6p
Valuation of property portfolio	**	£54.3m	£47.3m
Year-end net debt		£24.4m	£26.9m

*Before accounting for fair value adjustments to property asset valuation.

**Comprises investment and owner occupied portfolios.

  Excludes land held as development inventory.

  Valuation as at 31 March 2022.

Philip Beinhaker, Executive Chairman, commented:

"The resilience of the Group's property asset portfolio is shown in the valuation uplift. The strong asset base and annuity incomes provide a secure platform from which the Company has been able to restart property construction and develop a new pipeline of consented projects to follow. In time, the profits and investment revenues achieved by new developments will enable the Company the flexibility to reduce its borrowings. The Group celebrates the 175^th anniversary of its core subsidiary this year and the stated strategic objectives provide a long term plan for the Group's future success."

For further information, please contact

Sutton Harbour Group plc Philip Beinhaker - Executive Chairman Corey Beinhaker - Chief Operating Officer Natasha Gadsdon - Finance Director	01752 204186
Strand Hanson Ltd (Nomad and Broker) James Dance Richard Johnson	020 7409 3494

Introduction

I am pleased to report on a successful year's results for the year ended 31 March 2022.

· The year's trading performance reflects the overall resilience of the mix of business activities and restoration of full operations following the Lockdowns imposed by the UK Government throughout the previous trading year.  As a result, the Group has achieved record earnings from its marina and car parking trading businesses and a 22.6% uplift in the valuation of the owner occupied asset portfolio.

· The broad mix of tenants occupying the Group's investment properties and focus on the destination leisure property has protected the Group from void rates associated with other sectors.  The Group maintained its property occupancy rate at 89% and is currently converting the space vacated by Edinburgh Woollen Mill into three units for new national covenant tenants, at materially improved £/sq ft rental rates.

· Contract and financing preparations made during the previous year enabled the Group to press ahead with the construction of the Harbour Arch Quay development, the first new build by the Group in almost a decade, which started in February 2022.

· The Group has secured an updated unanimous planning consent for the 170 apartment Sugar Quay development and agreement to the s106 agreement by the Local Authority.

· To maintain progress with the development programme, the Company raised £3.417m net from the issue of 14 million new ordinary shares in August 2021. This equity issue also allowed the purchase of certain development sites adjacent at Sutton Road, Plymouth.

Results and Financial Position

The adjusted profit before taxation for the year was £0.366m (2021: £0.162m loss before taxation) which excludes non-cash fair value adjustments. In this financial year these adjustments relate to property asset valuation, undertaken by external valuers as at 31 March 2022. The profit before taxation for the year under review as per the consolidated income statement, inclusive of the aforementioned adjustments, was £0.561m (2021: £2.373m loss). The financial impact of the recovery from the Covid-19 pandemic is evident in the Gross Profit which is up by £0.586m to £2.348m in the year to 31 March 2022 (year to 31 March 2021: £1.762m).

Net debt (including lease liabilities) decreased to £24.408m as at 31 March 2022 from £26.874m at 31 March 2021, a fall of £2.466m. The net proceeds of £3.417m  from the new equity raise by way of Open Offer in August 2021 were partly used for the pre-construction costs of development projects and the purchase of land at Sutton Road, Plymouth. The increase in development property inventory, including the aforementioned site acquisition, was £2.586m during the year.

Gearing (net debt: net assets) as at 31 March 2022 stood at 43.4% (2021: 57.0%). Net finance costs of £0.789m in the year (2021: £0.753m) are stated after capitalisation of interest of £0.343m (2021: £0.138m).

As at 31 March 2022, net assets were £56.211m (2021: £47.153m), a net asset value of 43.3p per ordinary share (2021: 40.6p per ordinary share). The movement includes the valuation of the Group's property assets which gave rise to an overall valuation surplus of £7.208m, as reconciled in the table below, of which a £0.380m surplus relates to the investment property portfolio and a net £6.828m surplus relates to the owner-occupied properties. The valuation surplus' follow further improvement in trading performance and the restoration of car parks activity after the end of the Lockdowns. The ongoing weaker level of trading at Plymouth Fisheries has informed the valuer's lower overall Fisheries asset value.

	Valuation Surplus/(Deficit)	Accounting*
Owner Occupied Portfolio
-  Fisheries	(£0.185m)	Fair valuation adjustment recorded in the Income Statement as no revaluation reserve available to absorb the deficit
-  Marinas	£5.526m	Credited to the Revaluation Reserve in the Balance Sheet
-  Car Parks	£1.487m	Credited to the Revaluation Reserve in the Balance Sheet
Investment Property Portfolio	£0.380m	Fair valuation adjustment recorded in the Income Statement
TOTAL	£7.208m

Financing

During the year the Company issued 14 million new ordinary shares each at 25p and raised £3.417m after costs pursuant to an Open Offer. A loan from a private finance lender, which was used to purchase land in December 2020, was repaid after the year end and secured assets were unencumbered. Funds to repay this loan were made available by way of two unsecured loans from major shareholders at a lower rate of interest and on more flexible terms.

The full general banking facility with Nat West reduced from £27m to £26.9m during the year after a repayment was made from the proceeds of a minor investment property, Unit 1 Penrose House. After the year end the temporary £2m Covid support facility expired reducing the full committed facility to £24.9m. This facility expires in December 2023 and the board is actively considering whether to elect for a twelve month extension, which is allowed for in the facility agreement, or to enter into a new facility.

In accordance with the Dividend Policy, the board does not recommend payment of a dividend on the year's results in order to preserve headroom in the bank facility. The Group regards itself as an asset-based investment with its opportunities to reduce bank debt and realise value vested in the success of future development projects.

Directors and Staff

There have been no Board changes during the year. Headcount as at 31 March 2022 was 32 (31 March 2021: 31).

Operations Report

Marine

Sutton Harbour Marina and King Point Marina have enjoyed the busiest ever season with overall annual berth sales up by 20.3% and overall occupancy up to 98% by 31 March 2022 (92% by 31 March 2021). Overall berthing revenue, including visitor berthing across both marinas was up by £0.334m compared to the previous year, with no berthing rate increases. The new season has started strongly with more early bookings than usual, as available berthing along the South Coast of England has become scarcer. The outlook for strong revenue growth is encouraging after berthing rates were increased from 1 April 2022. Some changes were made to berthing configuration over the Winter and opportunities to maximise use of the water space are under review for creation of additional berths in the future. Three new positions have been created in the marina team to allow the Company to maintain a high level of customer service to a growing clientele.

Trading at Plymouth Fisheries has returned to a level close to the pre-pandemic period, although competition from other local ports and a declining local fleet continue to lower the performance of the port. Against a backdrop of rising fuel prices, which makes it increasingly difficult for fishers to make profitable trips to sea, the Company is working with suppliers to try to improve fuel buying prices and to pass savings on to customers. The Company's long-standing Harbour Master, Pete Bromley, retired in December 2021 and he has been successfully replaced by Mark Veale.

Starting in Autumn 2022, the Environment Agency will embark on a six-month programme to replace the cills of the Sutton Harbour lock. These works are necessary to ensure the proper working of the lock, a flood defence for Plymouth, and flood protection for a least a decade to come. This will result in restrictions to harbour users at certain times when passage through the lock will be constrained. A comprehensive communications programme has been organised to provide real time information to harbour users such that activities of the fishing industry, marina and public continue with minimal disruption. The Group is arranging for interim alternatives to facilitate some of the landing of fish at a nearby location which can then be transported to the Plymouth Fisheries complex for auction, processing and distribution, as is currently the case with c. 50% fish which arrives at the Plymouth Fisheries auction by road. This approach integrates the lessons learned from the similar major works that were completed some 13 years ago on the lock gates.

Real Estate and Car Parking

As at 31 March 2022 tenant occupancy across the Company's portfolio of real estate assets stood at 89% (31 March 2021: 97%). The Company supported some tenants through the Covid crisis with extended time to pay. These deferred rents were almost all cleared by 31 March 2022 and with the exception of two tenant failures, Edinburgh Woollen Mill and a gym operator, tenants restored normal operations during the year under review, many benefiting from improved footfall around Sutton Harbour. At the heart of the Sutton Harbour and Barbican area, the Old Barbican (fish) Market, is undergoing refurbishment and is due to open during summer 2022 with three new national covenant tenants.

After a slow start in April and May 2021, as visitors to the area increased, the revenue from car parking returned to the previous peak trading level recorded before the pandemic. The resumption of local events in Summer 2022, high marina occupancy and continued popularity of UK based tourism are conditions which are expected to underpin trading performance in the current financial year.

Regeneration

Sutton Harbour

The 14 apartment building known as Harbour Arch Quay located on the north eastern quay of Sutton Harbour is currently under construction with completion currently due in Spring 2023. The agency and digital marketing campaigns are in place and to date reservations for five apartments, including one of the penthouses, all at full asking price, have been received. Contracts are currently with lawyers pending exchange. The development is being financed by a £5m development loan from Atelier Finance and partly by the Group.

The Group has secured planning consent and s106 agreement for the updated plans for the 170 apartment Sugar Quay building. This will be a landmark 20 storey building on the eastern quay of Sutton Harbour. During the forthcoming year, the Company will prepare pre-construction work and source financing for this major new development. The intention is to start the building by mid-2023 with completion to follow some 30 months later.

The Group has continued with planning work for the future development of the Sutton Road site, opening and extending the eastern side of the Harbour and linking with Plymouth city centre and residential communities to the east of Gdynia Way. The original plans are now being refined following the purchase during the year of a small adjacent site which will enable improved road access and site layout. The Group is working on a wider masterplan for a comprehensive housing led regeneration of the east of Sutton Harbour area and has engaged regularly with the Local Planning Authority and potential partners.

The Plymouth Fisheries complex is now 27 years old and the Group recognises, as does the industry and Plymouth City Council, that modernisation of the facility would support the future of fishing in Plymouth and improve the port's competitive position. Redevelopment of the facility would require state support in the form of fishery industry and other grants and the Company is working, together with the local authority, on planning applications and grant submissions.

Former Airport Site

In 2019, when the new Local plan was agreed, a safeguard of a maximum five years was supported by Government Planning inspectors. More than three of the five years have now passed and the Company has continued to refine a masterplan for the alternative use of the 113 acre brownfield site. The Company's masterplan illustrates a mixed use development to accommodate various types of housing, institutional uses, business uses and areas of green space providing links to integrate with established surrounding neighbourhoods and institutions.

Financial Outlook

The Company has emerged from the pandemic period with trading results and asset valuation showing resilience and growth recovery. Like most businesses, emerging inflationary conditions are beginning to bite. In order to retain and attract good quality personnel the Company has needed to increase pay and in some roles by more than 10%. The Company is a major consumer of electricity to power the Sutton Lock gates, ice making and chilling plant at Plymouth Fisheries and lighting required for a large estate. Boilers across company premises are gas powered although consumption is less significant. The current power contracts expire in September 2022, whereafter the Company will experience a sharp increase. Much of this consumption is recharged to tenants and berth-holders, however the Company will need to raise the prices it charges for some of its services. The Company has already installed power efficient lighting at some locations, upgraded fisheries boilers and modernised fisheries plant to assist with consumption efficiency. Other costs are expected to increase in line with general inflation.

With interest rises to date and the pressure to control inflation with further interest rate rises, the Company will incur higher interest rate costs in the coming year. Each additional 1% in bank base rate will cost an additional c. £263,000 per annum based on average draw on the general banking facility. At the present time, the Group has not entered into any interest rate swap agreements to manage exposure to rising rates due to their high cost, however this a matter for close and monthly review by the board. The development loan for Harbour Arch Quay and the major shareholders' loan incur interest at fixed rates.

Summary

The Company has a unique mix of trading businesses concentrated around Sutton Harbour, a strongly supported visitor destination. Post Covid, the trading businesses have recovered and continues to improve, providing a growing cash inflow to the Company. The resilience of the property asset portfolio is shown in the valuation uplift. The strong asset base and annuity incomes provide a secure platform from which the Company has been able to restart property construction and develop a new pipeline of consented projects to follow. In time, the profits and investment revenues achieved by new developments will enable the Company the flexibility to reduce its borrowings. The Group celebrates the 175^th anniversary of its core subsidiary this year and the stated strategic objectives provide a long term plan for the Group's future success.

Philip Beinhaker 

EXECUTIVE CHAIRMAN 

19 July 2022

Consolidated Income Statement for

the year ended 31 March 2022

		2022	2021
		£000	£000
Revenue		7,194	5,400
Cost of sales		(4,846)	(3,638)
Gross profit		2,348	1,762
Fair value adjustments on investment properties and fixed assets		195	(2,211)
Administrative expenses		(1,193)	(1,171)
Operating profit/ (loss)		1,350	(1,620)
Finance income		-	-
Finance costs		(789)	(753)
Net finance costs		(789)	(753)
Profit/(loss) before tax from continuing operations		561	(2,373)
Taxation ( charge)/ credit on (l oss) /profit from continuing operations		(820)	198
(Loss) for the year from continuing operations		(259)	(2,175)
(Loss) for the year attributable to owners of the parent		(259)	(2,175)
Basic and diluted earnings/(loss) per share
from continuing operations Diluted earnings/(loss) per share		(0.20p)	(1.88p)
From continuing operations		(0.20p)	(1.88p)
Consolidated Statement of Other Comprehensive Income for the year ended 31 March 2022
		2022	2021
		£000	£000
(L oss) for the year		(259)	(2,175)
Items that will not be reclassified subsequently to profit or loss:
Revaluation of property, plant and equipment		7,016	3,245
Deferred tax in respect of property revaluation		(1,116)	-
Items that may be reclassified subsequently to profit or loss:
Effective portion of changes in fair value of cash flow hedges		-	-
Other comprehensive income for the year, net of tax		5,900	3,245
Total comprehensive income for the year attributable to owners of the parent		5,641	1,070

Consolidated Balance Sheets As at 31 March 2022

		2022	2021
		£000	£000
Non-current assets
Property, plant and equipment		36,398	29,766
Investment property Inventories		18,195 13,216	17,845 12,962
		67,809	60,573
Current assets
Inventories		18,734	16,359
Trade and other receivables		1,810	2,396
Tax recoverable		9	6
Cash and cash equivalents		970	928
		21,523	19,689
Total assets		89,332	80,262
Current liabilities
Other Loans		2,275	-
Trade and other payables		1,880	1,730
Lease liabilities		165	141
Deferred income		2,225	1,819
Provisions		-	56
		6,545	3,746
Non-current liabilities
Bank loans		22,863	27,475
Lease liabilities		75	186
Deferred government grants		646	646
Deferred tax liabilities		2,992	1,056
Provisions		-	-
		26,576	29,363
Total liabilities		33,121	33,109
Net assets		56,211	47,153
Issued capital and reserves attributable to owners of the parent
Share capital		16,406	16,266
Share premium		13,972	10,695
Other reserves		22,180	16,280
Retained earnings		3,653	3,912
Total equity		56,211	47,153

Consolidated Statement of Changes in Equity For the year ended 31 March 2022

		Share capital	Share premium	Revaluation reserve	Merger reserve	Hedging reserve	Retained earnings	Total equity
				------------Other reserves------------
		£000	£000	£000	£000	£000	£000	£000
Balance at 1 April 2020		16,266	10,695	9,164	3,871	-	6,087	46,083
Comprehensive income
Loss for the year		-	-	-	-	-	(2,175)	(2,175)
Other comprehensive income
Revaluation of property, plant and equipment		-	-	3,245	-	-	-	3,245
Total comprehensive income		-	-	3,245	-	-	(2,175)	1,070
Balance at 1 April 2021		16,266	10,695	12,409	3,871	-	3,912	47,153
Comprehensive income
Loss for the year		-	-	-	-	-	(259)	(259)
Other comprehensive income
Share issue		140	3,277					3,417
Revaluation of property, plant and equipment		-	-	7,016	-	-	-	7,016
Deferred tax on revaluation				(1,116)				(1,116)
Total other comprehensive income		140	3,277	5,900	-	-	(259)	9,058
Total balance at 31 March 2022		16,406	13,972	18,309	3,871	-	3,653	56,211

Consolidated Cash Flow Statement For the year ended 31 March 2022
			2022	2021
			£000	£000
Cash generated/(used) from total operating activities			59	(2,536)
Cash flows from investing activities
Net expenditure on investment property			(52)	(10)
Expenditure on property, plant and equipment			(196)	(161)
Proceeds from disposal			262	-
Cash generated/ (used) in investing activities			14	(171)
Cash flows from financing activities
Proceeds from issue of share capital			3,417	-
Interest paid			(1,033)	(754)
Loan (repaid)/drawdown			(2,337)	3,225
Lease finance (paid)/received			62	378
Cash payments of lease liabilities			(148)	(142)
Grants received			8	136
Net cash (used)/ generated from financing activities			(31)	2,843
Net increase in cash and cash equivalents			42	136
Cash and cash equivalents at beginning of the year			928	792
Cash and cash equivalents at end of the year			970	928

Reconciliation of financing activities for the year ended 31 March 2022

	2022	Cash flow	2021	Cash flow	202 0
	£000	£000	£000	£000	£000
Bank loans	22,800	( 2,400)	25,200	950	24,250
Other loans	2,338	63	2,275	2,275	-
Lease liabilities	2 40	( 87)	327	236	91
Long term debt	25,378	( 2,424)	27,802	3,461	24,341

Segment results

For the year ended 31 March 2022

	Marine	Real Estate	Car Parking	Regeneration	Total
	£000	£000	£000	£000	£000
Revenue	4,771	1,427	736	260	7,194
Segmental Operating Profit before Fair value adjustment and unallocated expenses	1,199	922	389	(162)	2,348
Fair value adjustment on investment properties and fixed assets	(185)	380	-	-	195
					2,543
Unallocated:
Administrative expenses					(1,193)
Operating profit					1,350
Financial income
Financial expense					(789)
Profit before tax from continuing activities					561
Taxation					(820)
Loss for the year from  continuing operations					(259)

Depreciation charge
Marine					335
Car Parking					40
Administration					17
					392

Year ended 31 March 2021	Marine	Real Estate	Car Parking	Regeneration	Total
	£000	£000	£000	£000	£000
Revenue	3,509	1,542	349	-	5,400
Gross profit prior to non-recurring items	770	1,020	110	(138)	1,762
Fair value adjustment on investment properties and fixed assets	(1,061)	(1,150)	-	-	(2,211)
					(449)
Unallocated: Administrative expenses					(1,171)
Operating loss					(1,620)
Finance income					-
Finance expenses					(753)
Loss before tax from continuing activities					(2,373)
Taxation					198

  Loss for the year from continuing operations    (2,175)

Depreciation charge
Marine					336
Car Parking					31
Administration					32
					399

Notes to the Consolidated Financial Statements

1. General Accounting Policies

Basis of preparation

The results for the year to 31 March 2022 have been extracted from the audited consolidated financial statements, which are expected to be published by mid-August 2022.

The financial information set out above does not constitute the Company's statutory accounts for the years to 31 March 2022 or 2021 but is derived from those accounts.  Statutory accounts for the year ended 31 March 2021 were delivered to the Registrar of Companies following the Annual General Meeting on 1 October 2021 and the statutory accounts for 2022 are expected to be published on the Group's website (www.suttonharbourholdings.co.uk) shortly, posted to shareholders at least 21 days ahead of the Annual General Meeting ("AGM") to be held on 14 September 2022 and, after approval at the AGM, delivered to the Registrar of Companies. 

The auditor, PKF Francis Clark, has reported on the accounts for the year ended 31 March 2022; their report  includes a reference to the valuation of Plymouth City Airport (former airport site) to which the auditors drew attention by way of emphasis of matter without qualifying their report.

 

END

 

 

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