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2023 Report2017 ANNUAL REPORT & FINANCIAL STATEMENTS A N N U A L R E P O R T & I F N A N C A L I S T A T E M E N T S 2 0 1 7 C O N T E N T S Strategic Report 2 4 6 7 8 The Group at a Glance The Chairman’s Statement and Chief Executive’s Report Key Performance Indicators Financial Review Managing Business Risks Governance 10 11 13 15 17 20 21 Directors and Advisors Directors’ Report Corporate Governance Report Corporate, Environmental and Social Responsibility Report Report on Remuneration Statement of Directors’ Responsibilities Independent Auditor’s Report Consolidated Group Financial Statements under IFRS 22 23 24 25 26 54 Consolidated Statement of Comprehensive Income Consolidated Balance Sheet Consolidated Statement of Changes in Equity Consolidated Cash Flow Statement Notes to the Consolidated Financial Statements Historical Financial Information Company Financial Statements under UK GAAP 55 56 57 Company Balance Sheet Company Statement of Changes in Equity Notes to the Company Financial Statements Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 1 F O R T H E Y E A R E N D E D 3 1 M A R C H 2 0 17 STRATEGIC REPORT T H E G R O U P AT A G L A N C E Sutton Harbour Holdings plc, listed on the Alternative C U R R E N T B U S I N E S S P L A N S Investment Market (AIM) of the London Stock Exchange since 1996, is the parent of a number of • Growth of earnings from core divisions. wholly owned subsidiary companies which include: • Retention of assets and development of new assets • Sutton Harbour Company, the statutory harbour for investment and revenue earning potential. authority company, which operates the Plymouth • Realisation of inventory assets through sale and fishmarket (known as Plymouth Fisheries), The development. Marina at Sutton Harbour, together with a number of operations related properties; • a number of other ‘Sutton Harbour’ group companies engaged in waterfront property • Investment in infrastructure to increase capacity, improve service and enhance quality. • Adherence to a rigorous cash management plan. regeneration and investment including King Point • Improve visibility of the Group’s activities to target Marina and car park operating activities; and audiences through the increased use of electronic • Plymouth City Airport Limited, the company holding marketing channels. legal interests in the former airport site. • Maintain strong reputation for quality and customer G R O U P V I S I O N service. The Group aims to be the leading marine, waterfront regeneration and destination specialist in Southern England. O U R O B J E C T I V E S • To develop a mix of activities for long-term sustainable growth and to provide a balanced risk profile. • To provide a secure investment proposition in a profitable company which has a strong asset base. • To build on the Group’s strength as a specialist in waterfront destination and regeneration in the South West region. • To increase and improve the income earning asset portfolio of the Group. • To provide a progressive dividend return to shareholders in the medium term. 2 Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 Details of the Group’s operating segments, together The Group has been active in establishing a business with a description of current activities and latest community around the northern side of Sutton developments are summarised below: Harbour and has been successful in attracting a number M A R I N E Sutton Harbour currently provides berthing for 523 of chartered accountants’ practices, legal firms and other professional services companies. vessels and receives a stable, core annual revenue C A R P A R K I N G stream in the form of dues, fees and rents from the The Group has two major car parks at Sutton Harbour, established fisheries, marinas and property operations. a 340 space multi storey close to the National Marine Plymouth Fisheries, the trading name of the fishmarket in Plymouth, is recognised as the second placed fishing port in England. The location of Sutton Harbour, in central Plymouth and adjoining the historic Barbican quarter, has undergone two main phases of regeneration over the past 25 years. The first phase to unlock the potential of the area was realised when Sutton Lock was installed Aquarium and a 51 space surface car park in the Barbican area. Additionally, the Group controls parking on the fishmarket complex, at the marina and adjoining various tenanted properties. R E G E N E R AT I O N This division focuses on development for revenue and capital growth and for value realisation through specific land asset sale. in 1992 creating a usable depth of water, followed by SUTTON HARBOUR the relocation of the fishmarket to the eastern side The Group has established a track record for the in 1995. In the second phase the development of high delivery of six major regeneration schemes around quality residential and commercial buildings overlooking Sutton Harbour and a further two schemes in other the harbour, and improvements to berthing facilities, locations elsewhere in the South West. A key feature added to the attractiveness of the area to create a long of all these schemes was working in partnership with term sustainable location for business, leisure and living. other public and private sector bodies. In July 2014, a The Group is now focused on bringing forward the new ‘Vision’ framework for future development around third phase with further regeneration to join together Sutton Harbour was launched. The ‘Vision’ included existing key attractions and to position Sutton Harbour indicative development visuals for twelve waterfront as a destination of regional importance within the South schemes including the East Quay site. Planning consent West which is presented in the ‘Vision’ framework, see for one cornerstone development, ‘The Boardwalk’ at ‘Regeneration’ below. KING POINT MARINA Vauxhall Quay, was gained in February 2015. FORMER AIRPORT SITE In June 2011, the Group was selected by the English In 2000, the Group purchased Plymouth City Airport Cities Fund (ECf ) to build and operate the new marina Limited and a long lease of the regional airport site. in the major urban regeneration area of Millbay in In 2003 the Group set up and operated the regional Plymouth. The new King Point Marina received its airline, Air Southwest which was subsequently sold first berth-holders in September 2013 and has now in November 2010 to Eastern Airways International operated for three complete seasons ending 31 March Limited (Eastern Airways). On 28 July 2011 Air 2017. The facility currently has 81 berths, with space to Southwest (under the ownership of Eastern Airways) install a further 86 berths subject to configuration. ceased flights in and out of Plymouth City Airport. R E A L E S TAT E This division comprises the rentals from investment properties and is particularly focused on growing its annual income through asset enhancement. Whilst property development continues to be challenging, the Group has continued to invest in and drive value from its investment portfolio, securing lettings in vacant premises in the Sutton Harbour estate. The Group has a diverse mix of national and regional businesses as tenants as well as various independent operators. The National Marine Aquarium, a major visitor attraction in the region, is also a tenant. Facing unsustainable losses, in August 2011 Plymouth City Council agreed to the closure of the airport as of 23 December 2011. The Group is now working towards options to maximise value from the 113 acre former airport site through development of a masterplan for the area to show alternative uses. The Group has positioned its representations in the area planning policy debate and has engaged with the Local Planning Authority as part of the pre-application planning process. The Group previously achieved planning consent on 22 acres of surplus airport land which was sold in tranches to a residential developer between 2009 and 2011. Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 3 F O R T H E Y E A R E N D E D 3 1 M A R C H 2 0 17 STRATEGIC REPORT T H E C H A I R M A N ’ S S TAT E M E N T A N D C H I E F E X E C U T I V E ’ S R E P O R T S H A R E H O L D E R S O V E R V I E W H I G H L I G H T S • Marketing of the Sugar House, East Quay site for a mixed use scheme. The Group has signed Heads of Terms with a preferred development partner and discussions are underway to formulate the application to be submitted for planning consent. • Completion of further capital investments to upgrade the Group’s operations and asset base. • Submission of representations supported by a detailed evidence base to the public consultation on the proposed new planning framework, the Plymouth and South West Devon Joint Local Plan, which will determine the land use allocation for the Former Airport Site and the area around Sutton Harbour which includes Plymouth Fisheries. S T R AT E G I C R E V I E W The strategic review has continued throughout the recorded to the Revaluation Reserve. Overall, these financial year with the help of Rothschild to explore valuation movements which were determined by way all options with the objective of maximising value for of an independent valuation, decreased net assets by shareholders. In order to maximise the effectiveness £0.870m (2016: £0.285m increase in net assets). of this strategic review, the Board is conducting this within the context of a formal sale process as set out in Note 2 of Rule 2.6 of the City Code on Takeovers and Mergers. R E S U LT S A N D F I N A N C I A L P O S I T I O N The non-cash onerous lease provision was increased by £0.173m to account for the potential future performance of the sub-letting of Salt Quay House until the lease expires in 2021. During the year net debt (including finance leases) increased in line with expectations to £22.458m, up The adjusted profit before taxation for the year was £0.245m from £22.213m at 31 March 2016, following £0.331m (2016: £0.410m), which excludes non-cash fair expenditure on further asset additions and costs in value adjustments, the increase in the onerous lease connection with the promotion of the development provision and other impairments. Profit before taxation land inventory. Gearing as at 31 March 2017 was 55.9% for the year under review as per the Income Statement, (31 March 2016: 54.4%). Finance costs fell from £1.057m inclusive of the aforementioned adjustments, was (2016) to £0.957m following refinancing in March 2016 £0.053m (2016: £1.590m). on better terms. As at 31 March 2017 net assets were £40.141m (2016: The board does not recommend payment of a dividend £40.869m), representing 41.7p per share (2016: on the year’s results. 42.4p per share). The decrease reflects the fair value adjustment to the investment property portfolios of £0.110m surplus offset by valuation deficit of owner D I R E C T O R S A N D S TA F F During the year there have been no changes in the occupied property of £0.215m, a net £0.105m charge Company’s directorships and staff numbers have fallen to the Income Statement (2016: £1.452m credit) and also the deficit on revaluation of other owner slightly due to consolidation of some roles. Headcount, excluding Non-Executive Directors, as at 31 March occupied assets of £0.765m (2016: £1.167m deficit) 2017 stood at 35 (31 March 2016: 38). 4 Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 OPERATIONS REPORT REGENERATION MARINE Trading at Plymouth Fisheries Hub was strong throughout the year, with fish throughput valued at £19.7m, resulting in its most successful year. Fuel sales margins performed satisfactorily as a vital revenue source to the Fisheries Hub’s business, although ice revenues were lower following the departure of a fish processing tenant from the Fisheries Hub complex. Former Airport Site Throughout the year the Company has been co-ordinating the preparation of a detailed evidence base to support representations to three stages of public consultation towards the formulation of the new local planning framework ‘The Plymouth and South West Devon Joint Local (formerly ‘Plymouth’) Plan’. The local planning authority has remained of the view that the site should be safeguarded for general aviation use (such as private During the year, the Company has reviewed the aircraft). This is despite a Department for Transport report efficiency of the Plymouth Fisheries Hub, which is now on Plymouth Airport released in December 2016 that 23 years old. Fish throughput has increased significantly concluded that there is no realistic prospect that commercial during the life of the facility, resulting in increased passenger services would be economically viable from the articulated vehicle movements, whilst fish processing site without significant public subsidy which it has been on-site has largely diminished resulting in underused confirmed is not available. processing unit space. To address the changing needs of fishing and to improve public accessibility to the area, the Company has submitted proposals for a reconfigured Fisheries ‘Hub’ complex to the public consultation on the Plymouth and South West Devon Joint Local Plan. Our evidence based submission includes independent reports on aviation which conclude that there is no financially sustainable case for commercial or general aviation uses, due to technical, environmental and commercial constraints, and presents the case for the best alternative The Marina at Sutton Harbour saw annual berthing use. This includes a concept masterplan for a ‘Garden occupancy fall slightly compared to the previous season. Suburb’ known as Plym Vale anchored by education, sports, During the last year wi-fi connectivity at the marina has healthcare and employment uses with c.1,500 new homes been significantly improved and a refurbished reception on the currently redundant brownfield site. has been relocated to a more prominent position at the front of the existing marina jetty. King Point Marina continued to gain customers during the period. The public hearing of the proposed Joint Local Plan is expected to take place in late 2017 with the independent Government Planning Inspector’s Report planned to follow REAL ESTATE in 2018. Early on in the financial year under review, three tenants departed, two being long standing occupiers of premises Sugar House, East Quay Following reconfiguration of the proposed scheme at the Plymouth Fisheries Hub and one having occupied to provide a mix of private residential units, student a floor of North Quay House. This space, while being accommodation, car parking and commercial space, the actively marketed, currently remains vacant, although site was re-marketed to targeted investors/developers. good occupier interest in the premises has improved in The Company has signed Heads of Terms with a preferred recent months. CAR PARKING The car parks performed strongly in the first half year although revenues flattened in the second half with overall income finishing marginally ahead of last year. The installation of energy efficient lighting has resulted in an energy consumption saving of over 60%. In early 2017, further enhancement works, including clearer signage, have been carried out and automatic number plate recognition equipment has been installed to improve management efficiency. bidder and discussions are underway to formulate the application to be submitted for planning consent. The ‘Boardwalk’, Vauxhall Quay During the year the Company commissioned further ecology and geology surveys required by the Marina Management Organisation in order to obtain the requisite licensing to develop in a marine environment, a requirement in addition to planning consent. The licensing consent is currently awaited. This 7,800 sq ft scheme, to be built on a pier like structure and deliver two large restaurants and a small pavilion unit, gained planned consent in 2015. OUTLOOK The Company has made the strongest possible representations to the consultation on the Joint Local Plan in order to progress the stated regeneration strategy ‘to realise land inventory assets through sale and development’ for both the Former Airport Site and the area immediately around Sutton Harbour. A positive planning allocation outcome will be a key milestone event towards ultimate asset realisation and consequent debt reduction. G R A H A M M I L L E R C H A I R M A N 27 June 2017 J A S O N S C H O F I E L D C H I E F E X E C U T I V E Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 5 F O R T H E Y E A R E N D E D 3 1 M A R C H 2 0 17 STRATEGIC REPORT K E Y P E R F O R M A N C E I N D I C ATO R S K E Y P E R F O R M A N C E I N D I C AT O R S The material Key Performance Indicators relevant to the Group’s business are: F I N A N C I A L H I G H L I G H T S Net Assets Net Asset value per share Profit before tax from continuing operations Adjusted Profit before tax excluding fair value adjustments and impairments to inventory Profit after tax Basic Earnings per share Dividend per share Net Debt Gearing (Net Debt/Net Assets) P R O P E R T Y M E T R I C S Total estate portfolio valuation Owner occupied portfolio valuation Investment portfolio valuation Number of investment properties Contracted rent (per annum) Net initial yield Reversionary yield Occupancy rate Estimated rental value (ERV) of vacant units Average unexpired lease Gross car parks revenue Development Inventory Sites around Sutton Harbour Portland Former airport site Total N O T E 2 0 17 £40.141m 41.7p £0.053m £0.331m £0.040m 0.04p 0.0p £22.458m 55.9% 2 0 16 N O T E 1 £40.869m 42.4p £1.590m £0.410m £1.497m 1.55p 0.0p £22.213m 54.4% A S AT 3 1 M A R C H 2 0 17 A S AT 3 1 M A R C H 2 0 16 £45.135m £25.675m £19.460m 71 £1.518m 7.90% 8.95% 90.0% £0.120m 9.8 years £0.483m £8.303m £0.200m £12.009m £20.512m £46.102m £26.752m £19.350m 71 £1.605m 8.30% 9.20% 96.2% £0.039m 10.0 years £0.478m £8.104m £0.200m £11.721m £20.025m 1 Includes a charge for fair value adjustments on investment property and property, plant equipment of £0.105m (2016: credit £1.452m), a charge to increase the onerous lease provision of £0.173m (2016: £ nil) and a charge for asset impairments of £nil (2016: £0.272m). 6 Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 F O R T H E Y E A R E N D E D 3 1 M A R C H 2 0 17 STRATEGIC REPORT F I N A N C I A L R E V I E W A C C O U N T I N G (£11.479m) to 31 March 2017 (£12.009m) of O N E R O U S L E A S E S The Group’s year end results are presented under International Financial Reporting Standards (IFRS) as adopted by the European Union. £530,000 represents the capitalised costs of developing the planning intellectual property less the cost attributed to sales of small plots. • Net Realisable Value is estimated with The onerous lease provision was increased by £0.173m (2016: £ nil) to account for the expected future performance of the sub- letting of Salt Quay House until the lease A S S E T V A L U AT I O N reference to expected net proceeds for the expires in 2021. 25% share of the leasehold interest. The C A S H F L O W A N D F I N A N C I N G The Company had total borrowing net of cash and cash equivalents of £22.458m at 31 March 2017 (2016: £22.213m) with a gearing level of 55.9% (2016: 54.4%). The Company has operated within its authorised facilities and has met all bank covenants during the year. The bank facilities were renewed in March 2016, when the Company entered into a three year agreement. This banking agreement provides a maximum £25.0m committed facility with a revised confirmed expiry date of March 2019. Debt servicing costs continue to be a major expense to the Group. To manage exposure to LIBOR movements, the Group has hedged LIBOR rate at 0.8737% on £10m core debt until March 2019. TA X AT I O N The standard rate of tax applicable to the Group is 19% (2016: 20%). The overall tax charge for the year is £0.013m (2016: £0.093m). No current tax is due on the year’s results with the tax charge resulting from restatement of prior year losses and a revision in the rate used for deferred tax. N ATA S H A G A D S D O N F I N A N C E D I R E C T O R 27 June 2017 During the year, independent valuation of mechanism for sharing of net proceeds with the Group’s investment and owner-occupied the freeholder, Plymouth City Council, is set portfolio was undertaken at 30 September out in the lease. 2016 and at 31 March 2017. The valuation at 30 September 2016 gave rise to a net deficit of £1.012m in the first half year, with further adjustment in the second half year to give an overall net deficit for the year of £0.870m. This deficit is reconciled as £0.110m surplus on the investment portfolio and £0.980m deficit on the owner-occupied portfolio. C A R R Y I N G V A L U E O F F O R M E R A I R P O R T S I T E The former airport site, a 113 acre site in which the Group holds an unexpired 138 year leasehold interest, is held as development inventory at a carrying value of £12.009m. At each balance sheet date, this carrying value is tested for impairment with the board needing to satisfy itself that the asset is included in inventory at the lower of cost and net realisable value, with net realisable value including developer’s return where applicable. The carrying value of £12.009m is derived as follows: • The land and building asset was independently valued twice yearly until 31 March 2013, when the asset was transferred to development inventory. • As at 31 March 2013 the land and building asset was transferred to development inventory and combined with the pre-existing inventory total, which included the cost of building the Link Road and planning intellectual property costs. • The auditors, Nexia Smith and Williamson, included an Emphasis of Matter paragraph within the 2015, 2016 and 2017 Audit Reports due to uncertainty about the impact on Net Realisable Value of the planning process (Plymouth Plan/Joint Local Plan 2017-2034 currently being formulated) and the outcome of a Government Report about the future of Plymouth City Airport. • In December 2016 the Department for Transport published the ‘Plymouth Airport Study Report’, which concluded that a lack of demand and a short runway mean commercially viable passenger services could not be run out of the former Plymouth Airport site as it would remain “financially vulnerable” in a “high risk environment”. • In April 2017, the Company submitted its representations and detailed evidence base in support of allocation of the former Airport Site for alternative use in advance of the Government Inspector’s public hearing of proposed new local planning framework. The Company expects the hearing to take place during the 2017/18 financial year with the Inspector’s decision to follow thereafter. I M P A I R M E N T O F A S S E T S The Directors have reviewed the carrying values of inventory in relation to regeneration projects, taking professional independent advice where applicable and taking into account the current • It was agreed at 31 March 2013 that the market conditions, estimated delivery timescales transfer was made at valuation, inclusive of and financial outcomes. In addition, the carrying historic revaluations. As at 31 March 2013 cost of other fixed assets has been reviewed for the carrying value of the former airport asset any potential impairment. In this year the charges was £11.479m, inclusive of past revaluations relate to a write down of development inventory totalling £3.969m. The net increase in former of £nil (2016: £0.206m) and an impairment of airport asset valuation from 31 March 2013 airport assets of £nil (2016: £0.066m). Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 7 F O R T H E Y E A R E N D E D 3 1 M A R C H 2 0 17 STRATEGIC REPORT M A N A G I N G B U S I N E S S R I S K S The Group maintains a register of risks which is updated as business risks change. The risk register is reviewed regularly by the Board to ensure that appropriate management processes are in place to manage business risks. Certain business risks are general to all Group activities whereas others are pertinent to particular business activities. Key business risks identified at present are: G E N E R A L R I S K S R I S K I D E N T I F I E D R E S P O N S E T O R I S K Uncertainty of outcome of Strategic Review Process Retention of commitment to Company from key stakeholders and employees. Financing The availability of adequate borrowing and other funding facilities. Financing Compliance with bank terms and covenants Financing Interest rate rises The Board is obliged to manage the process in the best interests of shareholders and with full regard to the impact on employees and other stakeholders. The Group’s current banking facilities to a maximum of £25m expire in March 2019. The Board recognises that the Group is capital constrained thereby delaying progress with specific property development. The Group maintains a regular dialogue with bankers over progress of the Group and operates to a business plan to remain within bank facility terms. The Group has hedged LIBOR by way of an interest rate swap over £10m debt until March 2019. Negative publicity Increased use of social media can heighten the impact of negative publicity. Media publicity about the Group is actively followed and reported where it is misleading or untrue. R E A L E S TAT E , R E G E N E R AT I O N A N D C A R P A R K I N G D I V I S I O N S Economic Cycles Planning R I S K I D E N T I F I E D R E S P O N S E T O R I S K Property markets in provincial areas such as Plymouth will lag the improvements achieved in other major centres. The Group is developing its plans for various sites to prepare for new development as mar- ket conditions allow. Obtaining viable planning permissions has become increasingly demanding resulting in increased cost and delay to submission of applications. The new local planning framework is due for final publication in 2018. The Group prepares comprehensive repre- sentations and applications with supporting reports where required. Public consultation is frequently undertaken to solicit views about proposed schemes. Tenant failure The Group is exposed to the risk of loss of revenue and vacant properties should tenants’ businesses fail. The Group has a diverse tenant base encom- passing national and independent occupiers to avoid high exposure to any single party. 8 Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 R E A L E S TAT E , R E G E N E R AT I O N A N D C A R P A R K I N G D I V I S I O N S Key Personnel R I S K I D E N T I F I E D R E S P O N S E T O R I S K The Group is dependent on a limited number of skilled personnel in key positions. The Group ensures that it has adequate staff with the necessary skills and experience. Com- petitive and realistic remuneration packages are paid. External consultants are used to support the team as necessary. Financial Resource Progress with projects is constrained by availability of financial resources. Projects may be phased to spread cash flows. The Group’s assets may suffer value impairment, thereby reducing the Group net asset value, if carrying value not judged recoverable through use or realisation. Regular external valuations of assets and value appraisals on inventory are undertaken The Group takes action to maintain and add value by developing property/land use proposals and seeking viable planning consents. Property as- sets are maintained to a good state of repair. The closure of Plymouth City Airport has been opposed by some local interest groups. Schemes for other sites proposed by the Group have met with some opposition. The Group takes independent professional advice to ensure decision and actions are justifiable on relevant facts. The Group meets with stakeholder groups and undertakes public consultation when appropriate. The regulatory and legislative environment has continued to result in additional management and financial pressures. The Group takes external advice as necessary to remain compliant and to assist with planning for future change. Continuation of marine activities is dependent on reliability of lock operations and the integrity of the lock structure itself. Maintenance of the Sutton Harbour lock, a key flood defence, is the responsibility of the Environment Agency and it is subject to daily checks. Lock controls have failsafe systems to prevent human errors. The pedestrian swing bridge over the lock structure is currently out of service and undergoing engineering survey to identify the extent of works required. A major pollution incident could result from leakage from a fishing vessel or fuel supply tanks, or unlawful discharge into the harbour. Failure of plant and equipment at the fishmarket has the potential to disrupt operations with the resultant loss of reputation. All properties remain accessibility by foot, however in some instances by a less direct route. Regular public announcements are made to update the public about access. Emergency procedures are in place to con- tain and clear a spillage which includes closure of the lock gates. The Group regularly reviews the condition of infrastructure to plan maintenance and replacement. Valuation Risk Public opinion External M A R I N E A C T I V I T I E S Lock Operations Pollution Incident Continuity of Operations A P P R O V A L The Strategic Report from pages 2 to 9 was approved by the Board of Directors on 27 June 2017 and signed on its behalf by J A S O N S C H O F I E L D C H I E F E X E C U T I V E Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 9 F O R T H E Y E A R E N D E D 3 1 M A R C H 2 0 17 GOVERNANCE D I R E C TO R S A N D A D V I S O R S Company Number Directors Secretary Registered Office Independent Auditors Nominated Broker and Nominated Adviser Financial Advisor Registrar Bankers 2425189 Graham S. Miller (Non-Executive Chairman) Jason W.H. Schofield (Group Chief Executive) Natasha C. Gadsdon (Finance Director) Sean J. Swales (Non-Executive Director) Robert H. De Barr (Non-Executive Director) Natasha C. Gadsdon Tin Quay House Sutton Harbour Plymouth PL4 0RA Tel: 01752 204186 www.suttonharbourholdings.co.uk Nexia Smith & Williamson Portwall Place Portwall Lane Bristol BS1 6NA Arden Partners plc 125 Old Broad Street London EC2N 1AR N M Rothschild & Sons Limited 67 Temple Row Birmingham B2 5LS Computershare Services plc PO Box 82 The Pavilions Bridgwater Road Bristol BS99 7NH The Royal Bank of Scotland plc London EC2N 3UR 10 Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 F O R T H E Y E A R E N D E D 3 1 M A R C H 2 0 17 GOVERNANCE D I R E C TO R S ’ R E P O R T The Directors present their Directors’ Report and audited Consolidated Financial Statements for the year ended 31 March 2017. The review of activities during the year and future developments is contained in the Strategic Report. M A J O R S H A R E H O L D I N G S As at 27 June 2017 the Company’s register of shareholdings showed the following interests in 3% or more of the Company’s share capital: % O R D I N A R Y S H A R E S Crystal Amber Fund Limited Mr D.McCauley/Rotolok (Holdings) Limited Mr T.R and Mrs M.E Winser BS Pension Fund Trustee Limited 29.27 28.79 4.15 4.24 The Directors are not aware of any other interest in its share capital in excess of 3%. 28,084,178 27,721,970 4,000,000 4,083,052 D I R E C T O R S ’ I N T E R E S T S The interests of the Directors in the ordinary shares of the Company as at 31 March 2017 are set out below. There have been no changes in these interests between 1 April 2017 and 27 June 2017. Graham S. Miller Jason W.H. Schofield Natasha C. Gadsdon Sean J. Swales Robert H. De Barr 2 0 17 147,000 14,194 104,026 13,400 10,000 2 0 1 6 147,000 14,194 104,026 13,400 10,000 Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 11 D I R E C T O R S A N D T H E I R I N T E R E S T S G R A H A M S . M I L L E R S E A N J . S W A L E S Aged 49. Appointed Non-Executive Director in December 2009, he is a Chartered Accountant and Group Managing Director of Rotolok (Holdings) Limited, the Group’s second largest shareholder. He is also a member of the Audit and Remuneration Committees. R O B E R T H . D E B A R R Aged 66. Appointed Non-Executive Director in May 2012 and Chairman of the Remuneration Committee in October 2012. He is also a member of the Audit Committee. He is a Chartered Surveyor and principal of De Barr Associates which specialises in development consultancy and business opportunities. He was a senior Executive with Land Securities for 32 years. Aged 54. Appointed Non-Executive Director and Chairman on 23 September 2013. He was appointed Chairman of the Audit Committee in November 2013 because the Board of Directors considered him best placed to chair the Audit Committee. He is also a member of the Remuneration Committee. He has a strong background in private equity, having held senior and director positions at Murray Johnstone Private Equity and 3i plc. Graham currently holds a number of other directorships. J A S O N W . H . S C H O F I E L D Aged 51. Appointed Executive Director in December 2007 and Chief Executive in January 2012. He has been with the Group since June 2007. He is a Chartered Surveyor and previously held senior positions at Hammerson Plc and Crest Nicholson Plc. N ATA S H A C . G A D S D O N Aged 47. Appointed Executive Director in July 2004 and Finance Director in October 2004. She is a Chartered Accountant and has been with the Group since 1996. She has also been the Company Secretary since 2001. In accordance with the Company’s Articles of Association Sean J. Swales and Natasha C. Gadsdon retire by rotation at this year’s Annual General Meeting, and being eligible, offer themselves for re-election. D I R E C T O R S A N D O F F I C E R S I N S U R A N C E The Group maintained a Directors’ and Officers’ liability insurance policy throughout the financial year. F I N A N C I A L I N S T R U M E N T S The Group’s financial risk management objectives and policies are given in note 3, with additional information provided in the financial review on page 7. D I S C L O S U R E O F I N F O R M AT I O N T O A U D I T O R S The Directors who held office at the date of approval of this Directors’ Report confirm that, so far as they are each aware, there is no relevant audit information of which the Company’s auditors are unaware, and each Director has taken all the steps that he/she ought to have taken as a Director to make himself/herself aware of any relevant audit information and to establish that the Company’s auditors are aware of that information. By Order of the Board N ATA S H A G A D S D O N F I N A N C E D I R E C T O R 27 June 2017 12 Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 F O R T H E Y E A R E N D E D 3 1 M A R C H 2 0 17 GOVERNANCE C O R P O R AT E G O V E R N A N C E R E P O R T The rules of the Financial Reporting Council do not require companies that have securities traded on the Alternative Investment Market to comply with the UK Corporate Governance Code (the Code). In managing the Group, the Board has regard to the UK Corporate Governance Code. The Chairmen of the Audit, Remuneration and Nomination Committees will be available to answer questions at this year’s Annual General Meeting. The Board continually monitors its procedures for reviewing the effectiveness of its systems of internal controls. T H E B O A R D The Board currently comprises three Non-Executive Directors, including the Chairman and two Executive Directors and is responsible for the proper management of the Company and for reporting the Company’s progress to Shareholders. The Board has ten scheduled meetings annually for reviewing trading performance, ensuring adequate funding, monitoring strategy and examining acquisition possibilities. Additional meetings are held as required. The Board has a formal schedule of matters specifically reserved to it for decision. The roles of Chairman and Chief Executive are separate. Graham Miller was appointed Chairman on 23 September 2013, and Robert De Barr is the Senior Independent Non-Executive Director. C O M M I T T E E S REMUNERATION COMMITTEE The Remuneration Committee is chaired by Robert De Barr and its other members are Sean Swales and Graham Miller. The Committee, within its written terms of reference, determines and agrees with the Board the employment terms and remuneration packages of the Executive Directors. The Report on Remuneration is set out on pages 17 to 19. The Executive Directors make recommendations to the Board regarding the remuneration of Non-Executive Directors. Independent advice on remuneration is taken where considered appropriate. AUDIT COMMITTEE The Audit Committee is chaired by Graham Miller and its other members are Sean Swales and Robert De Barr. The Committee has written terms of reference and provides a forum for reporting by the Group’s external auditors. All members of the Committee are Non-Executive Directors, although other individuals may be requested to attend all or part of any meeting as the Committee considers appropriate. The Audit Committee is responsible for a wide range of financial matters including the half year and annual financial statements before submission to the Board and monitoring the internal controls and risk management systems which are in place to ensure the integrity of the financial information reported to the shareholders. The Committee is also responsible for making recommendations to the Board to be put to shareholders for approval at the AGM, in relation to the appointment and removal of the Group’s external auditors, determining their remuneration and monitoring the auditors’ performance and independence. In relation to non-audit work, the Committee carefully reviews whether it is necessary for the auditors’ firm to carry out such work and it will only grant approval for them to do so if we are satisfied that the auditors’ independence is maintained. The Group’s auditors assist in this by ensuring that the partner responsible for the external audit remains responsible for the audit for no more than five years and that there is a quality review partner who is involved in planning the audit and in the reviewing of the final accounts including assessing any critical matters identified in the audit. The auditors have also confirmed to the Audit Committee that they have complied with all relevant guidance issued by the Financial Reporting Council and have implemented appropriate safeguards including that non-audit related services are performed by personnel independent of the audit engagement team. The fees paid to the auditor for audit and non-audit services are disclosed in note 7. Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 13 NOMINATION COMMITTEE Members of the Nomination Committee are Graham Miller and Jason Schofield. The Nomination Committee is responsible for proposing candidates to the Board having regard to its balance, expertise and structure. The Nomination Committee is also responsible for making recommendations to the Board regarding appointments to the Audit and Remuneration Committees. R E L AT I O N S W I T H S H A R E H O L D E R S The combined Chairman’s Statement and Chief Executive’s Report on pages 4 to 5 and the Financial Review on page 7 include a detailed review of the business and future developments. Shareholders are encouraged to pose questions to the Board at any time of the year and the Board uses the Annual General Meeting to communicate with all shareholders and welcomes their participation. I N T E R N A L C O N T R O L The Directors are responsible for establishing and maintaining the Group’s internal control systems. Internal control systems are designed to meet the particular needs of the Group and the risk to which it is exposed, and by their nature can provide reasonable, but not absolute, assurance against material misstatement or loss. The key procedures which the Directors have established with a view to providing effective internal controls are as follows: • Corporate Accounting and Procedures: There are defined authority limits and controls over acquisitions and disposals. There are also clear reporting lines within the business and risk assessments are undertaken and regularly reviewed in all divisions and at all levels within the Group. Appropriate internal controls are set for all divisions of the business. Given the size and nature of the Group, no separate internal audit department is considered necessary. • Quality of Personnel: The competence of personnel is ensured through high recruitment standards and subsequent training courses. High quality personnel are seen as an essential part of the control environment. • Financial Reporting: The Group has a comprehensive system for reporting financial results to the Board and monitoring of budgets. • Investment Appraisal: Capital expenditure is regulated by authorisation levels. For expenditure beyond specified levels, detailed written proposals are submitted to the Board. Reviews are carried out after the acquisition is complete and any overruns are investigated. Due diligence work is carried out if a business is to be acquired. G O I N G C O N C E R N The review of the Group’s business activities is set out in the combined Chairman’s Statement and Chief Executive’s Report on pages 4 to 5 The financial position of the Group, its cash flows and financing position are described in the Financial Review on page 7. In addition, note 3 to the financial statements gives details of the Group’s financial risk management. The Group entered into a new three year banking facility effective from 31 March 2016. The Group’s forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of the facilities and covenants over a period of at least twelve months from the date of approval of these financial statements. After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Group, therefore, continues to adopt the going concern basis in preparing its financial statements. By Order of the Board N ATA S H A G A D S D O N C O M P A N Y S E C R E TA R Y 27 June 2017 14 Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 F O R T H E Y E A R E N D E D 3 1 M A R C H 2 0 17 GOVERNANCE C O R P O R AT E , E N V I R O N M E N TA L A N D S O C I A L R E S P O N S I B I L I T Y R E P O R T H E A LT H A N D S A F E T Y The Board of Directors understands its responsibility to the health and safety of employees, customers and others who are directly or indirectly affected by the Group’s operations. The Group’s Health and Safety Committee is chaired by Natasha Gadsdon and has representation from all Group activities. The Health and Safety Committee is an open forum and minutes of the meetings are made The environment plays a key role in the continuing success of the Group and the Group recognises that it needs to set itself high environmental standards. We have looked at the areas of our business which could have both positive and negative impacts on the environment and have identified the following policy aims to enhance our overall environmental performance: • Reduction of our Carbon Footprint by minimising available to all staff upon request. energy use. Committee meetings are also attended by the Group’s Health and Safety Officer and an Independent Health and Safety Consultant. The Committee has a comprehensive agenda and is briefed on new legislation or regulation by the Independent Health and Safety Consultant. The Group does not undertake direct construction on site. An excellent Health and Safety management • Reduction of the amount of waste we create and to ensure that we maximise the recycling of the waste that we generate. • To ensure that we meet, and where possible, exceed environmental legislative requirements. • To set a high standard for the prevention of water pollution in Sutton Harbour. record is a key criterion in the selection of contractors. • To review our purchasing requirements so as to make The Group has a good health and safety record with no enforcement notices and no prosecutions for breaches of Health and Safety legislation to report. P O R T M A R I N E S A F E T Y C O D E Sutton Harbour Company, a Statutory Harbour Authority, and a wholly owned subsidiary of the Company, is committed to undertaking statutory duties environmentally sound purchasing decisions and to increase local purchasing. Independent audits of waste at The Marina at Sutton Harbour have been carried out and improvements put in place regarding the recycling of waste. The Marina at Sutton Harbour has adopted waste recycling protocols of the National Maritime Recycling Scheme using standardised waste sorter recycling bags. in accordance with the standards defined within the The Group monitors energy consumption at its Port Marine Safety Code. To ensure full compliance trading facilities. This information is used to manage with the code an internal audit of the Sutton Harbour consumption through practical energy saving measures Safety Management System is carried out annually. The and targeted capital investment. The Group has last external audit carried out by the Maritime and installed LED energy efficient lighting at the car parks Coastguard Agency took place in March 2016. E N V I R O N M E N TA L I S S U E S The Group’s Green Team Committee is chaired by Natasha Gadsdon and has representation from all Group activities. The Board has agreed the following Environmental Statement: and plans plans to introduce metered power and water at the fisheries complex together with further installations of LED lighting during 2017/18. Sutton Harbour is equipped to manage accidental fuel spills to minimise pollution of land and sea. The Marina at Sutton Harbour is equipped with black water tanks to facilitate the discharge of foul water. Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 15 C O M M U N I T Y E N G A G E M E N T A N D C H A R I TA B L E I N V O LV E M E N T The Group has a long established commitment to the community and its neighbourhood. Throughout its regeneration work, the Group has undertaken extensive public consultation exercises which have led to the reshaping and design of many successful quality regeneration projects surrounding the historic waterfront. The Group sees itself as the custodian of the harbour for future generations and as such believes that working with the local community is essential to achieve this aspiration. N ATA S H A G A D S D O N F I N A N C E D I R E C T O R 27 June 2017 The area of Sutton Harbour is located in the heart of Plymouth, adjacent to the historic Barbican quarter and the City Centre. The Group supports city based arts, sports, community and tourist initiatives and liaises with Destination Plymouth, Plymouth City Centre Company, Plymouth City Council and other relevant public agencies and associations. Sutton Harbour has hosted a number of yacht races in the recent past including the Fastnet finish, the start of the Transat race on two occasions, La Solitaire Du Figaro single handed yachting event as well as other local events. The Group has the twin objectives of stimulating tourism for the city’s benefit, and also showcasing the developments around Sutton Harbour which have created a vibrant centre for leisure, commercial and residential use. The Group supports local charities and this year has supported Young Enterprise. 16 Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 F O R T H E Y E A R E N D E D 3 1 M A R C H 2 0 17 GOVERNANCE R E P O R T O N R E M U N E R AT I O N R E M U N E R AT I O N C O M M I T T E E A N D R E M U N E R AT I O N P O L I C Y The members of the Committee during the year were as follows: Robert H. De Barr - Chairman Graham S. Miller Sean J. Swales The Committee met several times during the year, within its terms of reference, to consider the remuneration packages of the Executive Directors and to make recommendations to the Board. The overriding objective is to ensure that salary, benefits and other remuneration is sufficient to attract, retain and motivate executives of high quality, capable of achieving the Group’s objectives and creating value for our Shareholders. The Committee also takes into account the scale and complexity of the Group’s operations and seeks independent advice, from specialist advisers, where appropriate. C O M P O S I T I O N O F R E M U N E R AT I O N Executive Directors’ pay comprises basic salary reviewed annually, pension scheme contributions to the Group’s defined contribution pension scheme, annual bonus based on audited results of the Group, and other benefits in kind including provision of a company car and private medical healthcare. Salary is paid monthly and the annual bonus is accrued in the financial year to which it relates. Non-Executive Directors receive fees, do not have service contracts, are not eligible to join the pension scheme and have no entitlement to annual bonuses. It is a requirement that Directors purchase shares in the Company, although there is no specified minimum holding. R E M U N E R AT I O N F O R E X E C U T I V E D I R E C T O R S Profit share bonuses earned on the achievement of targets agreed by the Remuneration Committee for the year ended 31 March 2017 were £9,700 in respect of Jason W.H. Schofield (2016: £11,500) and £7,800 in respect of Natasha C. Gadsdon (2016: £9,250). N O N - E X E C U T I V E D I R E C T O R S F E E S The fees for Non-Executive Directors are determined by the Board after taking independent advice. TA B L E S O F D I R E C T O R S R E M U N E R AT I O N The total remuneration of the Directors of the Company is as follows: Fees Other Emoluments Pension Contributions 2 0 17 £ 0 0 0 83 276 57 416 2 0 16 £ 0 0 0 83 269 55 407 Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 17 F O R T H E Y E A R E N D E D 3 1 M A R C H 2 0 17 The remuneration, excluding pension contributions, of the individual Directors is as follows: F O R T H E Y E A R T O 3 1 M A R C H 2 0 17 Graham S. Miller Jason W.H Schofield Natasha C. Gadsdon Sean J. Swales Robert H. De Barr F O R T H E Y E A R T O 3 1 M A R C H 2 0 1 6 Graham S. Miller Jason W.H. Schofield Natasha C. Gadsdon Sean J. Swales Robert H. De Barr Directors’ salaries £000 Taxable benefits £000 Bonus Payments £000 Directors’ fees £000 Total £000 - 130 95 - - 225 1 22 9 - - 32 - 10 8 - - 18 40 - - 20 23 83 41 162 112 20 23 358 Directors’ salaries £000 Taxable benefits £000 Bonus Payments £000 Directors’ fees £000 Total £000 - 127 93 - - 220 1 19 8 - - 28 - 12 9 - - 21 40 - - 20 23 83 41 158 110 20 23 352 18 Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 F O R T H E Y E A R E N D E D 3 1 M A R C H 2 0 17 The pension contributions made in respect of the Executive Directors to the Group’s defined contribution scheme were: Jason W.H. Schofield Natasha C. Gadsdon C O N T R A C T S 2 0 17 £ 0 0 0 27 30 57 2 0 1 6 £ 0 0 0 26 29 55 On 30 August 2011, the Group entered into a service contract with Jason W.H. Schofield. Under this agreement he is employed as a full time Executive Director with a one year rolling contract. He was appointed Chief Executive of the Group on 30 January 2012. On 30 August 2011, the Group entered into a service contract with Natasha C. Gadsdon. Under this agreement she is employed as a full time Executive Director with a one year rolling contract. She was appointed Finance Director in October 2004. The Non-Executive Directors are appointed with one month’s notice and the Chairman has a six month notice period. On Behalf of the Board R O B E R T H D E B A R R D I R E C T O R A N D C H A I R O F T H E R E M U N E R AT I O N C O M M I T T E E 27 June 2017 Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 19 Statement of Directors’ Responsibilities For the year ended 31 March 2017 Statement of Directors’ responsibilities in respect of the Annual Report and the financial statements The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union, and the Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), including Financial Reporting Standard 101 ‘Reduced Disclosure Framework’. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period. The Directors are also required to prepare financial statements in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market. In preparing these financial statements, the Directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and accounting estimates that are reasonable and prudent; • state whether they have been prepared in accordance with IFRSs, as adopted by the European Union and applicable UK Accounting Standards, subject to any material departures disclosed and explained in the Group and Parent Company financial statements respectively; • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the requirements of the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities Website publication The Directors are responsible for ensuring the annual report and the financial statements are made available on a website. Financial statements are published on the Company’s website, in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company’s website is the responsibility of the Directors. The Directors’ responsibility also extends to the ongoing integrity of the financial statements contained therein. By Order of the Board N ATA S H A G A D S D O N C O M P A N Y S E C R E TA R Y 27 June 2017 20 Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 Independent Auditor’s Report For the year ended 31 March 2017 Independent Auditor’s Report to the members of Sutton Harbour Holdings plc We have audited the financial statements of Sutton Harbour Holdings plc for the year ended 31 March 2017 which comprise the Consolidated Income Statement, the Consolidated Statement of Other Comprehensive Income, the Consolidated and Parent Company Balance Sheets, the Consolidated Cash Flow Statement, the Consolidated and Parent Company Statements of Changes in Equity and the related consolidated and parent company notes. The financial reporting framework that has been applied in the preparation of the consolidated financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial reporting framework that has been applied in the preparation of the parent company financial statements is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice) including FRS 101 “Reduced Disclosure Framework”, as applied in accordance with the provisions of the Companies Act 2006. This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of Directors and auditors As explained more fully in the Directors’ Responsibilities Statement set out on page 20, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Financial Reporting Council’s (FRC’s) Ethical Standards for Auditors. Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the FRC’s website at www.frc.org.uk/auditscopeukprivate. Opinion on financial statements In our opinion: • the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 March 2017 and of the group’s profit for the year then ended; • the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; • the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Emphasis of matter – valuation of inventory In forming our opinion, which is not modified, we have considered the adequacy of the disclosures made in the financial statements concerning the potential impact of government reports and Plymouth’s planning strategy upon the valuation of the former airport site, which is held as inventory. The conclusion of these reports and permissions could potentially lead to a material impairment of the airport asset, which currently has a value of £12m in the consolidated balance sheet. Details of the circumstances relating to this are described in note 4 to the financial statements. Opinion on other matters prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of the audit: • the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with those financial statements; and • the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements. In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Directors’ Report. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: • adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or • the parent company financial statements are not in agreement with the accounting records and returns; or • certain disclosures of directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. Carl Deane Senior Statutory Auditor, for and on behalf of Nexia Smith & Williamson Statutory Auditor Chartered Accountants 27 June 2017 Portwall Place Portwall Lane Bristol BS1 6NA Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 21 Consolidated Statement of Comprehensive Income For the year ended 31 March 2017 Consolidated Income Statement for the year ended 31 March 2017 Revenue Cost of sales before impairment of assets and onerous leases Onerous leases Impairment of assets Cost of sales Gross profit Administrative expenses Fair value adjustments on investment properties and fixed assets Operating profit Finance income Finance costs Net finance costs Profit before tax from continuing operations Taxation charge on profit from continuing operations Profit for the year from continuing operations Profit for the year attributable to owners of the parent Basic and diluted earnings per share from continuing operations Consolidated Income Statement for the year ended 31 March 2017 Profit for the year Items that will not be reclassified subsequently to profit or loss: Revaluation of property, plant and equipment 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 Total comprehensive income for the year attributable to owners of the parent The notes on pages 26 to 53 are an integral part of these consolidated financial statements. 22 Note 5 13,18 13,14 5,6 9 9 10 2017 £000 6,718 (4,130) (173) - (4,303) 2,415 (1,300) (105) 1,010 - 2 (957) (957) 53 (13) 40 40 2016 £000 6,509 (3,960) - (272) (4,232) 2,277 (1,082) (1,452) 2,647 (1,059) (1,057) 1,590 (93) 1,497 1,497 12 0.04p 1.55p Note 13 ( ( 2017 £000 40 (765) (3) 768) 728) 2016 £000 1,497 (1,167) 80 (1,087) (410) Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 Consolidated Balance Sheet As at 31 March 2017 Note 13 14 18 19 20 23 24 22 26 16 21 24 22 17 26 16 27 2017 £000 26,289 19,460 45,749 20,569 2,060 703 13 23,345 69,094 1,173 123 1,479 71 - 2,846 22,800 238 1,169 1,642 182 76 26,107 28,953 40,141 16,069 5,368 12,683 6,021 40,141 2016 £000 27,295 19,350 46,645 20,097 2,038 686 19 22,840 69,485 1,118 105 1,542 53 33 2,851 22,500 294 1,214 1,629 88 40 25,765 28,616 40,869 16,069 5,368 13,451 5,981 40,869 Non-current assets Property, plant and equipment Investment property Current assets Inventories Trade and other receivables Cash and cash equivalents Tax recoverable Total assets Current liabilities Trade and other payables Finance lease liabilities Deferred income Provisions Derivative financial instruments Non-current liabilities Bank loans Finance lease liabilities Deferred government grants Deferred tax liabilities Provisions Derivative financial instruments Total liabilities Net assets Issued capital and reserves attributable to owners of the parent Share capital Share premium Other reserves Retained earnings Total equity The notes on pages 26 to 53 are an integral part of these consolidated financial statements. The Financial Statements on pages 22 to 53 were approved and authorised by the Board of Directors on 27 June 2017 and were signed on its behalf by: Jason W.H. Schofield Director Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 23 Consolidated Statement of Changes in Equity For the year ended 31 March 2017 Notes Share capital Share premium £000 £000 Revaluation reserve Hedging reserve -------------- --- Other reserves ------------------ £000 Merger reserve £000 £000 Retained earnings Total equity £000 £000 Balance at 1 April 2015 16,069 5,368 10,820 3,871 (153) 4,484 40,459 Comprehensive income/(expense) Profit for the year Other comprehensive income/(expense) Revaluation of property, plant and equipment 13 Effective portion of changes in fair value of cash flow hedges Total other comprehensive income/(expense) Total comprehensive income/(expense) - - - - - - - - - - Total balance at 31 March 2016 Balance at 1 April 2016 16,069 16,069 5,368 5,368 Comprehensive income/(expense) Profit for the year Other comprehensive income/(expense) Revaluation of property, plant and equipment 13 Effective portion of changes in fair value of cash flow hedges 3 Total other comprehensive income/(expense) Total comprehensive income/(expense) - - - - - - - - - - Total balance at 31 March 2017 16,069 5,368 - (1,167) - (1,167) (1,167) 9,653 9,653 - (765) - (765) (765) 8,888 - - - - - 3,871 3,871 - - - - - - - 80 80 80 (73) (73) - - (3) (3) (3) 1,497 1,497 - - - (1,167) 80 (1,087) 1,497 410 5,981 40,869 5,981 40,869 40 40 - - - (765) (3) (768) 40 (728) 3,871 (76) 6,021 40,141 The cumulative deferred tax relating to items that are charged to equity is £nil (2016: £nil). The notes on pages 26 to 53 are an integral part of these consolidated financial statements. Further information in relation to the other reserves set out within the statement of changes in equity can be found in note 27. 24 Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 Consolidated Cash Flow Statement For the year ended 31 March 2017 Cash generated from total operating activities Cash flows from investing activities Net expenditure on investment property Expenditure on property, plant and equipment Interest received Net cash used in investing activities Cash flows from financing activities Interest paid Loan drawdown/(repayment of borrowings) Net (repayment)/drawdown of capital element of finance leases Proceeds of government grants Net cash generated (used in)/generated from financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year The notes on pages 26 to 53 are an integral part of these consolidated financial statements. Note 29 20 20 2017 £000 1,008 - (296) - 2 (296) (957) 300 (38) - (695) 17 686 703 2016 £000 621 (8) (561) (567) (1,059) 850 353 249 393 447 239 686 Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 25 Notes to the Consolidated Financial Statements For the year ended 31 March 2017 1. General information Sutton Harbour Holdings plc (‘the Company’) and its subsidiaries are together referred to as ‘the Group’. The Group is headquartered at Sutton Harbour, Plymouth and owns and operates the harbour and its ancillary facilities. The other principal activities of the Group are marine operations, waterfront real estate regeneration, investment and development and also provision of public car parking. The Company is a public limited company which is listed on the Alternative Investment Market of the London Stock Exchange, is incorporated and domiciled in the UK and registered in England and Wales with number 02425189. The address of its registered office is Tin Quay House, Sutton Harbour, Plymouth, Devon, PL4 0RA. 2. Group accounting policies Basis of preparation The Group financial statements consolidate those of the Company and its subsidiaries. The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) and International Financial Reporting Interpretation Committee (IFRIC) interpretations as adopted by the European Union, and the Companies Act 2006 applicable to companies reporting under IFRS. The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these Group financial statements. Judgements made by the Directors in the application of these accounting policies that have significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed in note 4 to these financial statements. Going concern The review of the Group’s business activities is set out in the combined Chairman’s Statement and Chief Executive’s Report on pages 4 to 5. The financial position of the Group, its cash flows and financing position are described in the Financial Review on page 7. In addition, note 3 to the financial statements gives details of the Group’s financial risk management. The Group’s forecasts and projections, taking account of reasonably foreseeable possible changes in trading performance, show that the Group should be able to operate within the level of the facilities and covenants over a period of at least twelve months. The covenants measure interest cover, debt to fair value and capital expenditure. After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Group, therefore, continues to adopt the going concern basis in preparing its financial statements. Measurement convention The financial statements are prepared on the historical cost basis as modified by the fair value of share based payments, financial assets and financial liabilities (including derivative instruments) at fair value through the profit or loss. Investment property and other property are carried at fair value. Non- current assets held for sale are stated at the lower of previous carrying amount and fair value less costs to sell. The functional currency of the Group and its subsidiaries is pounds sterling and therefore balances are shown in the financial statements in thousands of pounds sterling, unless otherwise stated. Basis of consolidation The consolidated financial statements include the financial statements of Sutton Harbour Holdings plc and its subsidiaries at each reporting date. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that are currently exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised profits and losses are also eliminated. Property, plant and equipment Property, plant and equipment can be divided into the following classes: Land and buildings Assets in the course of construction Plant, machinery and equipment Fixtures and fittings 26 Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 Notes to the Consolidated Financial Statements For the year ended 31 March 2017 Land and buildings Land and buildings include: - Freehold and leasehold land. Where a lease has an unexpired term of more than 50 years it is considered to share the same characteristics as freehold land and is shown as such. - Properties that are mainly owner-occupied, or that are an integral part of the Group’s trading operations (marina including the lock, quays, marina buildings, the fishmarket building and car parks). Owner occupied assets are initially recorded at cost and are subsequently revalued and stated at their fair values. Fair value is based on regular valuations by an external independent valuer and is determined from market-based evidence by appraisal. Valuations are performed with sufficient regularity (at least annually) to ensure that the fair value of a revalued asset does not differ materially from its carrying amount. Where owner occupied assets (such as marinas, the fishmarket and car parks) comprise land, buildings, plant and machinery the valuation is of the asset as a whole. Any valuation movement is allocated to land and buildings only in proportion to their carrying values: plant and machinery continue to be carried at cost less accumulated depreciation (see below). Any revaluation surplus is credited to the revaluation reserve except to the extent that it reverses a decrease in the carrying value of the same asset previously recognised in the income statement, in which case the increase is recognised in the income statement. Any revaluation deficits are recognised in the income statement, except to the extent of any existing surplus in respect of that asset in the revaluation reserve. Assets in the course of construction Assets in the course of construction are held at cost. Depreciation commences when the asset is fully operational as intended. Plant, machinery and equipment, fixtures and fittings Plant, machinery and equipment includes items used in the operation of marina, fishmarket and car park trading operations (such as pontoons, piles, ice making equipment and chillers, car parking meters). Fixtures and fittings includes building fit outs. Plant, machinery and equipment, fixtures and fittings are all stated at cost less accumulated depreciation and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Leased assets Leases in which the Group assumes substantially all the risks and rewards of ownership of the leased asset are classified as finance leases. Where buildings are held under finance leases the accounting treatment of leases of any associated land is considered separately from that of the buildings. Leased assets acquired by way of finance lease are stated initially at an amount equal to the lower of their fair value and the present value of the minimum lease payments at inception of the lease, less accumulated depreciation and impairment losses. Leased assets are depreciated over the shorter of the lease term and useful economic life. The lease liability is included in the balance sheet as a finance lease liability. Lease payments are apportioned between finance charges and the reduction of lease liabilities so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to the income statement. Leased properties are subsequently revalued to their fair value. The treatment of assets held under operating leases where the lessor maintains the risks and rewards of ownership is described in the operating lease payments accounting policy below. Depreciation Depreciation is charged to the income statement over the estimated useful lives of each part of an item of property, plant, machinery and equipment, fixtures and fittings. Estimated useful lives and residual values are reassessed annually. Where parts of an item of property, plant, machinery and equipment, fixtures and fittings have different useful lives, they are accounted for as separate items. Freehold land is not depreciated. The estimated useful lives and depreciation basis of assets are as follows: Freehold buildings Leasehold buildings Plant, machinery and equipment Fixtures and fittings (straight line) (straight line) (straight line) (straight line) 10 to 50 years 50 years or remaining period of lease 4 to 30 years 4 to 10 years Investment property Investment properties are properties which are held to earn rental income and/or for capital appreciation. Investment properties are initially measured at cost and subsequently revalued to fair value which reflects market conditions at the balance sheet date. Any gains or losses arising from changes in fair value are recognised in the income statement in the period in which they arise. Fair value is the estimated amount for which a property could be exchanged, on the date of valuation, between a willing buyer and a willing seller, in an arm’s length transaction, after proper marketing, in which both parties had acted knowledgeably, prudently and without compulsion. Some properties are held both to earn rental income and for the supply of goods and services and administration purposes. Where the different portions of the property cannot be sold separately, the property is accounted for as an investment property only if an insignificant portion is held for the production and supply of goods and services and administration purposes. Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 27 Notes to the Consolidated Financial Statements For the year ended 31 March 2017 The portfolio is valued on a six-monthly basis by an external independent valuer, who is RICS qualified. The valuer will also have recent experience in the location and category of property being valued. The valuations, which are supported by market evidence, are prepared by considering the aggregate of the net annual rents receivable from the properties and where relevant, associated costs. A yield which reflects the specific risks inherent in the net cash flows is then applied to the net annual rentals to arrive at the property valuation. Rental income from investment property is accounted for as described in the revenue accounting policy. Investment property that is redeveloped for continued future use as an investment property remains classified as an investment property while the redevelopment is being carried out. While redevelopment is taking place, the property will continue to be valued on the same basis as an investment property. All tenant leases have been examined to determine if there has been any transfer of the risks and rewards of ownership from the Group to the tenant in accordance with IAS 17 ‘Leases’. All tenant leases were determined to be operating leases. Accordingly, all the Group’s leased properties are classified as investment properties and included in the balance sheet at fair value. In accordance with IAS 40 ‘Investment Property’, no depreciation is provided in respect of investment properties. Inventories Inventories are stated at the lower of cost and net realisable value. Cost is based on the first-in first-out principle and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. Where inventory has been transferred from fixed assets, deemed cost includes revaluation. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale. Inventories – development property Land identified for development and sale, and properties under construction or development and held for resale, are included in current assets at the lower of cost and net realisable value. Cost includes all expenditure related directly to specific projects, including capitalised interest, and an allocation of fixed and variable overheads incurred in the Group’s contract activities based on normal operating capacity. Net realisable value is estimated selling value less estimated costs of completion and estimated costs necessary to make the sale and includes developer’s return where applicable. Cash and cash equivalents Cash in the balance sheet comprises cash at bank and in hand. Bank overdrafts and similar borrowings that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. Offset arrangements across Group businesses are applied to arrive at the net cash figure. Impairment The carrying amounts of the Group’s assets other than investment property and inventories are considered at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where the carrying amount of an asset exceeds its recoverable amount it is impaired and is written down to its recoverable amount. Impairment losses are recognised in the income statement. The recoverable amount of the Group’s financial assets is calculated as the present value of estimated future cash flows, discounted at an appropriate effective interest rate taking into account the time value of money and the risks associated with future cash flows. The recoverable amount of non-financial assets is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of the recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined if no impairment loss had been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately. Derivative financial instruments and hedging activities Derivative financial instruments, comprising interest rate swaps, are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group documents, at the inception of the transaction, the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows or fair values of hedged items. 28 Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 Notes to the Consolidated Financial Statements For the year ended 31 March 2017 The fair values of various derivative instruments used for hedging purposes are disclosed in note 16. Movements on the hedging reserve in shareholders’ equity are shown in the Statement of Changes in Equity and the Statement of Comprehensive Income. The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months, and as a current asset or liability when the remaining maturity of the hedged item is less than 12 months. The fair values are calculated by reference to active market prices, forward exchange rates and LIBOR rates. Cash flow hedges The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in equity. The gain or loss relating to the ineffective portion is recognised immediately in the income statement within cost of sales for any foreign exchange derivatives and fuel hedging derivatives and within financing costs for any interest rate swaps. Amounts accumulated in equity are recycled to the income statement in the periods when the hedged item affects profit or loss. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement. Derivatives at fair value through profit and loss and accounted for at fair value through profit or loss Where derivative instruments do not qualify for hedge accounting, changes in fair value are recognised immediately in the income statement. The Group has applied hedge accounting for all hedge contracts entered into in both the current and prior year. The effective part of any gain or loss on the cash flow hedges is recognised directly in the hedging reserve. Any ineffective portion of the hedge is recognised immediately in the income statement. Interest-bearing borrowings Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the income statement over the period of the borrowings on an effective interest basis. Own shares Ordinary and Deferred shares are classified as equity. Incremental costs directly attributable to the issue of Ordinary and Deferred shares and share options are recognised as a deduction from equity. Revenue Revenue comprises the fair value of the consideration received or receivable, net of value-added-tax, rebates and discounts. Revenue is recognised once the value of the transaction can be reliably measured and the significant risks and rewards of ownership have been transferred. The following criteria must also be met before revenue is recognised: Rent and marina and berthing fees Rent from investment property and marina and berthing fees are typically invoiced in advance and are accounted for as deferred income and recorded to revenue during the period to which they are earned. Lease incentives and costs associated with entering into tenant leases are amortised over the lease term. These are held in the balance sheet within accrued income. Other marine related revenue Fuel sales, landing dues and other ancillary incomes, are recorded to revenue at the point of sale. Car park revenue Car park revenue is recognised at the point that a car parking ticket is paid for. Property sales Revenue from property sales is recognised when the significant risks and rewards of ownership and effective control of the asset have passed to the buyer. This will be at the point of legal completion. Interest Income Interest income is recognised as it becomes receivable. Government grants Government grants are recognised when there is reasonable assurance that the grant will be received and that the Group will comply with all conditions associated with the grant. Government grants in respect of capital expenditure are credited to reduce the initial carrying value of the related asset. Grants of a revenue nature are credited to a deferred income account and released to the income statement so as to match them with the expenditure to which they relate. Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 29 Notes to the Consolidated Financial Statements For the year ended 31 March 2017 Operating lease payments Payments made under operating leases are recognised in the income statement on a straight-line basis over the term of the lease. Lease incentives received are recognised in the income statement as an integral part of the total lease expense over the term of the lease. Net financing costs Net financing costs comprise interest payable, commitment fees on unused portion of bank facilities, amortisation of prepaid bank facility arrangement fees, unwinding of discount on provisions, finance charge component of minimum lease payments made under finance leases and interest receivable on funds invested. Interest payable and interest receivable are recognised in profit or loss as they accrue, unless capitalised as described under “borrowing costs” below, using the effective interest method. The fair value movement of derivative financial instruments and any ineffective portion of cash flow hedges are also included within net financing costs. Borrowing costs Borrowing costs are capitalised on qualifying assets. A qualifying asset is one that takes more than twelve months to complete. The borrowing rate applied is that specifically applied to fund the development. In the case of bank borrowings this is the weighted average cost of debt capital. Capitalisation ceases when substantially all the activities that are necessary to get the property ready for use are complete. Employee benefits: defined contribution plans Obligations for contributions to defined contribution pension plans are recognised as an expense in the income statement as incurred. Employee benefits: share-based payment transactions The share option programme allows Group employees to acquire shares of the Company; these awards are granted by the Company. The share-based payments are all equity-settled and are measured at fair value. The fair value of options granted is recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the options. The fair value of the options granted is measured using the Black-Scholes option pricing model, taking into account the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the actual number of share options that vest except where forfeiture is due only to share prices not achieving the threshold for vesting. Provisions A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Taxation Tax on the profit for the year comprises current and deferred tax. Tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable profit for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax is recognised on all temporary differences except on the initial recognition of goodwill or on the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit. Dividends Interim dividends are recognised when paid, final dividends are recognised when approved by the shareholders. Dividends unpaid at the balance sheet date are only recognised as a liability at that date if they have been approved. Unpaid dividends that have not yet been approved are disclosed in the notes to the financial statements. 30 Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 Notes to the Consolidated Financial Statements For the year ended 31 March 2017 Segment reporting An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses and whose results are regularly reviewed by the Board. The following business segments have been identified: Marine Real Estate Car Parking Regeneration Revenue included within each segment is as follows: Marine: Marina and commercial berthing fees Fishmarket landing dues Other marine related revenue including fuel sales and other ancillary income Car Parking: Car park revenue Real Estate: Rent Regeneration: Property sales Costs, assets and liabilities are allocated to each business segment based on the revenue that they are used to generate. Trade Receivables Trade receivables are amounts due from customers for items sold or services performed in the ordinary course of business. If settlement is expected in one year or less, they are classified as current assets. If not, they are presented as non-current assets. They are initially recognised at fair value and subsequently carried at amortised cost. Trade Payables Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. They are initially recognised at fair value and subsequently carried at amortised cost. IFRS not yet applied The following new standards, amendments to standards or interpretations have been issued, but are not effective for the financial year beginning 1 April 2017 and have not been adopted early. The directors are currently considering the impact of these new standards and amendments which are not expected to be adopted early: IFRS 16 Leases: * 1 January 2019 IFRS 15 Revenue from Contracts with Customers – Amendments * 1 January 2018 Amendments to existing standards and new standards which may apply to the Group in future accounting periods include: IAS 40 Transfers of Investment Property – Amendments effective 1 January 2018 (not yet EU endorsed) IFRS 9 Financial Instruments: Classification and Measurement effective 1 January 2018 IFRS 12 Disclosure of Interests in Other Entities – Amendments effective 1 January 2016 IAS 7 Statement of Cash Flows Disclosure Initiative – Amendments effective from 1 January 2017 (not yet EU endorsed) * mandatory effective date is periods commencing on or after Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 31 Notes to the Consolidated Financial Statements For the year ended 31 March 2017 3. Financial risk management Fair values IFRS 13 requires disclosure of fair value measurements for balance sheet financial instruments by level according to the following measurement hierarchy: Level 1: Quoted prices unadjusted in active markets for identical assets or liabilities; Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly as prices or indirectly derived from prices; and Level 3: Inputs for the asset or liability that are not based on observable market data. The Group does not hold any Level 1 balance sheet financial instruments. The fair values together with the carrying amounts of the Group’s financial instruments shown in the balance sheet are as follows: Fair value 1 April 2016 £000 Income Statement £000 Other Comprehensive Income £000 Cash-flow Total (Level 2) Movements 31 March 2017 £000 £000 Financial assets Derivative financial instruments Financial liabilities Derivative financial instruments - 73 - - - 58 - (55) - 76 Capital risk management The capital structure of the Group consists of net debt which includes the borrowings disclosed in notes 20 and 21 and shareholders’ equity comprising issued share capital, reserves and retained earnings. The capital structure of the Group is reviewed annually with reference to the costs applicable to each element of capital, future requirements of the Group, flexibility of capital drawdown and availability of further capital should it be required. The Group has a target gearing ratio of approximately 50% but gearing may exceed these levels where a project is in final stages before ultimate disposal or becoming fully operational. The Group structures borrowings into general facilities and secures specific financing for individual property projects as deemed appropriate. The Board is not recommending the payment of a dividend for the year ended 31 March 2017. The gearing ratio at the year end was as follows: Borrowings and loans Finance lease liabilities Cash and cash equivalents Net debt Equity Net debt to equity ratio 2017 £000 (22,800) (361) 703 (22,458) 40,141 55.9% 2016 £000 (22,500) (399) 686 (22,213) 40,869 54.4% Bank borrowing facilities and financial covenants In March 2016 the Group renewed its banking facilities for three years to 10 March 2019, with two term loans totalling £22.5m and a £2.5m revolving credit facility. No amounts of any loan are due before 10 March 2019. The banking facilities include financial covenants, including (i) a measure of EBITDA to interest covenant (ii) a debt to fair value of property valuation covenant and (iii) a capital expenditure covenant. The Group’s forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group will be able to operate within the level of the facilities and covenants over a period of at least twelve months. 32 Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 Notes to the Consolidated Financial Statements For the year ended 31 March 2017 Liquidity risk The Group uses financial instruments, comprising bank borrowing and various items including trade receivables and trade payables that arise directly from its operations. The main purpose of these financial instruments is to raise finance for the Group’s operations. The main risk arising from the Group financial instruments is liquidity risk. The Group seeks to manage liquidity risk by ensuring sufficient liquidity is available to meet foreseeable needs and to invest cash assets safely and profitably. Short-term flexibility is achieved by overdraft facilities. The Group has the ability to manage its liquidity through the timing of development projects and also the timing of the sale of assets. Contractual maturity The following tables analyse the Group’s financial liabilities and net settled derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity date. The amounts disclosed in the tables are the contractual undiscounted cash flows including principal. As at 31 March 2017: Bank loans* Trade and other payables Finance lease liabilities* Derivative financial instruments** As at 31 March 2016: Bank loans* Trade and other payables Finance lease liabilities* Derivative financial instruments** Total £000 0 to <1 year £000 1 to <2 years £000 2 to <5 years £000 (25,235) (1,173) (392) (76) (26,876) (714) (1,173) (137) - (2,024) (24,521) - (114) (76) (24,711) - - (141) - (141) Total £000 0 to <1 years £000 1 to < 2 years £000 2 to <5 years £000 (24,698) (1,118) (437) (125) (26,378) (754) (1,118) (121) (54) (2,047) (754) - (109) (37) (900) (23,190) - (207) (34) (23,431) * financial liabilities at amortised cost ** financial liabilities at fair value Interest rate risk Since June 2016, LIBOR rates have been hedged on £10m of borrowings until March 2019. Credit risk Many of the Group’s customers are required to pay for services in advance of supply which reduces the Group’s exposure to credit risk. Property rentals and marina berthing are examples of this. The Group pursues debtors vigorously where credit terms have been exceeded. The credit quality of the Group’s financial assets can be summarised as follows: Trade receivables: New customers (less than 12 months) Existing customers (more than 12 months) with no defaults in the past Existing customers (more than 12 months) with some defaults in the past Total trade receivables net of provision for impairment 2017 £000 33 408 46 487 2016 £000 19 513 34 566 Commodity price risk The Group experiences volatile fuel prices throughout the year. The Group only acts as a reseller of fuel at the fishmarket and marina. The sales prices are derived from the price paid for fuel and therefore fuel price exposure is no longer considered a risk. Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 33 Notes to the Consolidated Financial Statements For the year ended 31 March 2017 Sensitivity analysis Interest rates In managing interest rate risks the Group aims to reduce the impact of short-term fluctuations on the Group’s earnings. Over the longer-term, however, permanent changes in interest rates would have an impact on consolidated earnings. At 31 March 2017, it is estimated that a general increase of half a percentage point in interest rates (being the best estimate of future anticipated changes in interest rates), ignoring hedging, would have decreased the Group’s profit before tax from continuing operations by approximately £110,000 (2016: £110,000). Net assets would have decreased by the same amount. Valuation of investment property and property held for use in the business Land & buildings valuations are complex, require a degree of judgement and are based on data some of which is publicly available and some that is not. We have classified the valuations of our property portfolio as level 3 as defined by IFRS 13 Fair Value Measurement. Level 3 means that the valuation model cannot rely on inputs that are directly available from an active market. All other factors remaining constant, an increase in trading income would increase valuation, whilst an increase in equivalent nominal yield would result in a fall in value and vice versa. In establishing fair value the most significant unobservable input is considered to be the appropriate yield to apply to the trading income. This is based on a number of factors including the maturity of the business and trading and economic outlook. Yields applied across the trading and investment assets are in the range of 4.35% – 10.45% with the average yield being 7.25%. Assuming all else stayed the same; a decrease of 1.0% in the average yield would result in an increase in fair value of £6.750m. An increase of 1.0% in the average yield would result in a corresponding decrease in fair value of £5.113m. These assets were independently valued by Jones Lang LaSalle (“JLL”) at 31 March 2017. The valuation by JLL was in accordance with the Practice Statements in the Valuations Standards (The Red Book) published by the Royal Institution of Chartered Surveyors, on a market-based evidence approach, which is consistent with the required IFRS 13 methodology. 4. 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. The following are the areas that require the use of estimates and judgement that may impact the Group’s balance sheet and income statement: The valuation of investment property and property held for use in the business as at 31 March 2017 was £19,460,000 and £25,675,000 respectively; (2016: £19,350,000 and £26,752,000 respectively). In determining the fair value of properties, the Board relies on external valuations carried out by professionally qualified independent 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. Judgement is exercised in determining future rental income or profitability of the relevant properties. Within the valuation of property held for use in the business, judgment is required to allocate the valuation between land and buildings. The Board exercises judgement in determining the useful life of fixed assets. The useful lives of fixed assets range from 4 to 50 years and are reviewed regularly to ensure they continue to be appropriate. The Board exercises judgement in determining whether properties should be classified as investment property or development inventory and this is done by reference to criteria including whether the property is being marketed for sale in the ordinary course of business and the nature of the development activity ongoing (including planning applications and development of proposals for submission to the relevant authorities). Determining the net realisable value of development property (2017: £20,512,000; 2016: £20,025,000) The Board has exercised judgement in determining the net realisable value of development property, taking into account expected costs to complete and future sale proceeds, and hence whether any write-down of development property is required. Incorporated in the appraisal of net realisable value are judgements about: disposal revenue and/or investment value at completion; project formulation (including mix of development uses and development density); full development cost; amounts payable to third parties (for example, sharing of proceeds with local authority and repayment of grants in the case of development of the former airport site); financing costs; time value of money; and, allowance for contingency. Included in development inventory is the Former Airport Site and the Secretary of State for Transport has commissioned another report into the viability of re-opening the airport, which is expected to be published within the year. The Local Planning Authority is currently in the process of formulating a new planning policy framework to guide Plymouth’s planning strategy for the 2017 to 2031 period. The Group has positioned its representations that the former airport site is ideally suited to the delivery of a range of new uses to Plymouth with significant economic, social and employment benefits. There is uncertainty about the outcome of the government report and planning strategy which, subject to the result, could affect the value and timing of any development of the site. The current carrying value of the asset is based on this strategy. Should the board change its strategy with a view to a shorter term alternative, this may have an effect on the carrying value of the asset. No write down has been included in the current year. a) b) c) d) 34 Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 Notes to the Consolidated Financial Statements For the year ended 31 March 2017 The second largest development inventory item relates to the Sugar House/East Quay site at Sutton Harbour. At the present time, uncertainty about the final project formulation, planning status, implications of proceeds sharing with any potential third parties and timing of development delivery in relation to this site persist. Impairments The Board exercises judgement in identifying cash-generating units and utilises assumptions, which are often subject to uncertainty, in determining the recoverable amount of assets (or cash-generating units) to assess whether an asset (or cash-generating unit) is impaired. In the year fixed assets totalling £nil (2016: £66,000) and development inventory totalling £nil (2016: £206,000) have been impaired. The calculation of deferred tax assets and liabilities (2017: Liability of £1,642,000; 2016: Liability of £1,629,000) The Group has not recognised deferred tax assets in respect of certain properties due to a high degree of uncertainty of the timing of when the asset may be realised. The calculation of provisions for onerous leases (2017: £253,000; 2016: Liability of £141,000) In calculating provisions for onerous leases, the Board has exercised judgment in assessing future rental shortfalls, timing, and the discount rate to be used. The calculation of provisions for bad and doubtful debts. In exercising its judgment in whether to provide for bad or doubtful debts the Board considers the nature and amount of the debt as well as the ability of the debtor to pay. e) f) g) h) 5. Segment results 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. Details of the types of revenue generated by each segment are given in note 2. The Board of Directors assesses performance using segmental operating profit. The segment information provided to the Board of Directors for the reportable segments for the year ended 31 March 2017 is as follows: Year ended 31 March 2017 Revenue Gross profit prior to non-recurring items Non-recurring items: Onerous leases Impairment of plant, property and equipment Segmental Operating Profit before Fair value adjustment and unallocated expenses Fair value adjustment on investment properties and fixed assets Marine £000 4,626 1,207 - - 1,207 (428) Real Estate £000 Car Parking £000 Regeneration £000 1,609 1,211 (173) - 1,038 110 483 291 - - 291 213 - (121) - - (121) Unallocated: Administrative expenses Operating profit Financial income Financial expense Taxation Profit for the year from continuing operations Depreciation charge Marine Car Parking Administration Total £000 6,718 2,588 (173) - 2,415 (105) 2,310 (1,300) 1,010 - (957) (13) 40 308 12 16 336 Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 35 Notes to the Consolidated Financial Statements For the year ended 31 March 2017 Year ended 31 March 2016 Marine £000 Real Estate £000 Car Parking £000 Regeneration £000 Revenue Gross profit prior to non-recurring items Non-recurring items: Impairment of plant, property and equipment Segmental Operating Profit before Fair value adjustment and unallocated expenses Fair value adjustment on investment properties and fixed assets 4,449 1,255 - 1,255 (229) 1,580 1,196 - 1,196 1,829 480 276 - 276 (148) - (178) (272) (450) - Unallocated: Administrative expenses Operating profit Financial income Financial expense Taxation Profit for the year from continuing operations Depreciation charge Marine Car Parking Administration Assets and liabilities Segment assets: Marine Real Estate Car Parking Regeneration Total segment assets Unallocated assets: Property, plant & equipment Trade & other receivables Cash and cash equivalents Total assets 36 2017 £000 22,865 20,165 4,178 20,668 67,876 100 432 686 69,094 Total £000 6,509 2,549 (272) 2,277 1,452 3,729 (1,082) 2,647 2 (1,059) (93) 1,497 231 6 36 273 2016 £000 24,312 20,014 3,620 20,207 68,153 121 525 686 69,485 Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 Notes to the Consolidated Financial Statements For the year ended 31 March 2017 Segment liabilities: Marine Real Estate Car Parking Regeneration Total segment liabilities Unallocated liabilities: Bank overdraft & borrowings Trade & other payables Financial derivatives Deferred tax liabilities Tax payable Total liabilities Additions to property, plant and equipment Marine Car Parking Unallocated Total 2017 £000 2,361 531 121 932 3,945 23,161 129 76 1,642 - 28,953 175 120 26 321 2016 £000 2,329 622 78 825 3,854 22,500 560 73 1,629 - 28,616 584 - 27 611 Unallocated assets included in total assets and unallocated liabilities included in total liabilities are not split between segments as these items are centrally managed. Unallocated expenses include central administrative costs that cannot be split between the various business segments because they are incurred in assisting the Group generate revenues across all business segments. Revenue can be divided into the following categories: Sale of goods Sale of land and property Rental income Provision of services No revenues from any one customer represented more than 10% of the Group’s revenue for the year. 2017 £000 2,265 - - 1,733 2,720 6,718 2016 £000 2,063 1,740 2,706 6,509 Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 37 Notes to the Consolidated Financial Statements For the year ended 31 March 2017 6. Operating result The following items are included within operating profit/(loss): Staff costs Increase/(decrease) in provisions Rental income from investment property Loss on sale of property, plant and equipment Direct operating expenses of investment properties (including repairs and maintenance) Gain on remeasurement of investment property to fair value Loss on remeasurement of fixed assets Depreciation of property, plant and equipment Operating lease payments Release of deferred grant Impairment of property, plant, and equipment Write down of inventory Note 8 26 28 14 13 13 28 22 13 18 2017 £000 1,455 112 (1,588) 9 129 (110) 215 336 224 (45 ) - - The impairments reflect the difference between the recoverable amount (based upon fair value less costs to sell and further costs to completion) and book value. 7. Services provided by the Company’s auditors During the year the Group obtained the following services from the Company’s auditors: Fees payable to Company’s auditors for the audit of Parent Company and consolidated financial statements Fees payable to the Company’s auditors for other services: The audit of Company’s subsidiaries pursuant to legislation Tax compliance services 2017 £000 15 15 10 2016 £000 1,372 (36) (1,582) 6 206 (1,829) 377 273 221 (29) 66 206 2016 £000 7 32 9 38 Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 Notes to the Consolidated Financial Statements For the year ended 31 March 2017 8. Staff numbers and costs and Directors’ remuneration The average number of persons employed by the Group (including Executive Directors, excluding Non-Executive Directors) during the year, analysed by category, was as follows: Number of employees 2016 2017 Marine Activities Property and Regeneration Administration The aggregate payroll costs of these persons were as follows: Wages and salaries Social security costs Other pension costs Note 25 The total remuneration of the Directors of the Company was as follows: Fees Other Emoluments Pension Contributions 23 3 7 8 33 2017 £000 1,185 117 153 1,455 2017 £000 83 276 57 416 Further details of Directors’ remuneration are given in the Remuneration Report on pages 17 to 19, which forms part of these financial statements. 9. Finance income and finance costs Other finance income Finance income Interest payable on bank loans and overdrafts Interest payable on finance leases Unwinding of provisions Other finance costs Finance costs 2017 £000 - 2 - 820 17 12 108 957 24 3 35 2016 £000 1,103 116 153 1,372 2016 £000 83 260 55 398 2016 £000 2 897 13 17 132 1,059 Borrowing costs capitalised in the year amounted to £23,000 (2016: £50,000). The capitalisation rate used to determine the amount of borrowing costs eligible for capitalisation was 4.4% (2016: 4.4%). Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 39 Notes to the Consolidated Financial Statements For the year ended 31 March 2017 10. Taxation Deferred tax Adjustments in respect of previous years Origination and reversal of temporary differences Change in tax rate to 17% (2016: 18%) Total deferred tax Total tax in income statement Note 17 2017 £000 (165) 268 (90) 13 13 2016 £000 (656) 902 (153) 93 93 The reduction in the corporation tax rate to 19% from 1 April 2017 and 17% from 1 April 2020 was enacted on 15 September 2016. As this rate was enacted at the balance sheet date, and reduces the tax rate expected to apply when temporary differences reverse, it has the effect of reducing the UK deferred tax balance. The tax assessed for the year is lower (2016: lower) than the standard rate of corporation tax in the UK of 20% (2016: 20%). Reconciliation of effective tax rate Profit before tax Tax on profit at standard corporation tax rate of 20% (2016:20%) Expenses not deductible and income not chargeable for tax purposes Adjustments to tax charge in respect of previous periods – deferred tax Adjust closing deferred tax to average rate of 17% (2016: 18%) Total tax credit on continuing operations 2017 £000 53 11 22 71 (91) 13 13 13 2016 £000 1,590 318 (284) 212 (153) 93 93 93 11. Dividends paid on equity shares During the year ended 31 March 2017 no dividends have been paid in respect of previous periods (2016: £nil) or proposed (2016: £nil). The Board of Directors does not propose a final dividend for the year ended 31 March 2017 (2016: £nil). 40 Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 Notes to the Consolidated Financial Statements For the year ended 31 March 2017 12. Earnings per share Continuing operations: Basic earnings per share Diluted earnings per share 2017 Pence 0.04 0.04 2016 Pence 1.55 1.55 Basic earnings per share Basic earnings per share have been calculated using the profit for the year of £40,000 (2016: profit of £1,497,000) for the continuing operations. The average number of ordinary shares in issue, excluding those options granted under the SAYE scheme, of 96,277,086 (2016: 96,277,086) has been used in the calculation. Diluted earnings per share Diluted earnings per share uses an average number of 96,277,086 (2016: 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’. The weighted average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares of nil (2016: nil), is calculated as follows: Weighted average number of shares at 31 March Effect of share options in issue Weighted average number of ordinary shares (diluted) at 31 March 2017 2016 96,277,086 - - 96,277,086 96,277,086 96,277,086 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 both the current and prior year. Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 41 Notes to the Consolidated Financial Statements For the year ended 31 March 2017 13. Property, plant and equipment Cost or valuation Balance at 1 April 2015 Additions Revaluations to income statement Revaluations Impairment Transfers Transfer to investment property (note 14) Disposals Balance at 31 March 2016 Balance at 1 April 2016 Additions Revaluations to income statement Revaluations Impairment Transfers Disposals Balance at 31 March 2017 Accumulated depreciation Balance at 1 April 2015 Depreciation charge for the year Impairment Transfers Disposals Balance at 31 March 2016 Balance at 1 April 2016 Depreciation charge for the year Impairment Transfers Disposals Balance at 31 March 2017 Net book value At 31 March 2016 At 31 March 2017 Assets in the course of Construction £000 Plant, machinery equipment, fixtures and fittings £000 Land and buildings £000 25,212 419 (377) (1,167) - - (899) - 23,188 23,188 132 (215) (765) - - - 22,340 66 50 - - - 116 116 134 - - - 250 23,072 22,090 - - - - - - - - - - 71 - - - - - 71 - - - - - - - - - - - - - 71 6,301 192 - - (66) - (10) (16) 6,401 6,401 118 - - - - (48) 6,471 1,968 223 - - (13) 2,178 2,178 202 - - (37) 2,343 4,223 4,128 Total £000 31,513 611 (377) (1,167) (66) - (909) (16) 29,589 29,589 321 (215) (765) - - (48) 28,882 2,034 273 - - (13) 2,294 2,294 336 - - (37) 2,593 27,295 26,289 Included in Land and Buildings is long leasehold land at a value of £2,200,000 (2016: £2,050,000). Revaluations Land and buildings are measured using the revaluation model as set out in note 2. These assets were independently valued by Jones Lang LaSalle (“JLL”) at 31 March 2017. The valuation by JLL was in accordance with the Practice Statements in the Valuations Standards (The Red Book) published by the Royal Institution of Chartered Surveyors, on a market-based evidence approach. At 31 March 2017, had the freehold land and buildings been measured using the cost model (historical cost less accumulated depreciation and accumulated impairment losses), their carrying value would be £24,438,000 (2016: £23,440,000). 42 Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 Notes to the Consolidated Financial Statements For the year ended 31 March 2017 At 31 March 2017, had the leasehold land and buildings been measured using the cost model (historical cost less accumulated depreciation and accumulated impairment losses), their carrying value would be £919,000 (2016: £919,000). Assets in the course of construction, plant, machinery and equipment and fixtures and fittings are all measured using the cost model, as set out in note 2. The Group’s obligations under finance leases are secured by the lessor’s title to the fixed assets. The carrying value of plant, machinery and equipment which is subject to finance leases is £921,000 (2016: £916,000). 14. Investment property At fair value: Balance at the beginning of the year Additions – arising from capitalised subsequent expenditure Fair value adjustments Items transferred from property, plant and equipment Balance at the end of the year Notes 13 2017 £000 19,350 - 7 110 - 19,460 2016 £000 16,605 1,829 909 19,350 Investment property is measured using the fair value model as set out in note 2. The fair value of the Group’s investment property at 31 March 2017 has been determined by a valuation carried out at that date by independent, external valuers, JLL in accordance with the Practice Statements in the Valuation Standards (The Red Book) published by the Royal Institution of Chartered Surveyors. JLL is a member of the Royal Institution of Chartered Surveyors and have appropriate qualifications and recent experience in the valuation of properties in the relevant locations. The valuations, which are supported by market evidence, are prepared by considering the aggregate of the net annual rents receivable from the properties and, where relevant, associated costs. A yield which reflects the specific risks inherent in the net cash flows is then applied to the net annual rentals to arrive at the property valuation. All of the Group’s investment property is held under freehold interests with the exception of four (2016: four) properties which are held under long leaseholds. 15. Investments At 31 March 2017 the Group has the following subsidiaries: Subsidiaries Sutton Harbour Company Sutton Harbour Services Limited Plymouth City Airport Limited Sutton Harbour Property and Regeneration Limited Sutton Harbour Commercial Limited Sutton Harbour Projects Limited Sutton Harbour Car Parks Limited Sutton Harbour Projects (No 2) Limited Class of Ownership shares held 2017 2016 Nature of Business Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Harbour Authority Marine Leisure & Property Property Developer Property Property Property Car Park Operator Investment Company All of the above companies were incorporated in the United Kingdom and registered in England and Wales and for each the registered address is Tin Quay House, Sutton Harbour, Plymouth PL4 0RA. All subsidiaries are included in the Group consolidated financial statements. Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 43 Notes to the Consolidated Financial Statements For the year ended 31 March 2017 16. Derivative financial instruments The Group utilises a hedge of interest payments by interest rate swaps hedging future interest rate risk. All hedges are remeasured to fair value as at the balance sheet date. Assets Liabilities Current Interest rate swaps – cash flow hedges Total current derivative financial instruments Non-current Interest rate swaps – cash flow hedges Total non-current derivative financial instruments 2017 £000 - - 2017 £000 - - 2016 £000 - - 2017 £000 - - Assets Liabilities 2016 £000 - - 2017 £000 (76) (76) 2016 £000 (33) (33) 2016 £000 (40) (40) The fair value of hedges as at 31 March 2017 was as follows: Hedges of interest payments by interest rate swaps hedging future interest rate risk: Fair value of financial liability of £76,000, contract for £10.0m at 0.87% based on the GBP LIBOR rate ruling each month between 19 June 2016 and 31 March 2019. The fair value of hedges as at 31 March 2016 was as follows: Hedges of interest payments by interest rate swaps hedging future interest rate risk: Fair value of financial liability of £33,000, contract for £15.0m at 1.45% based on the GBP LIBOR rate ruling each month between 18 June 2013 and 18 June 2016. Fair value of financial liability of £40,000, contract for £10.0m at 0.87% based on the GBP LIBOR rate ruling each month between 19 June 2016 and 31 March 2019. 44 Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 Notes to the Consolidated Financial Statements For the year ended 31 March 2017 17. Deferred tax assets and liabilities Recognised deferred tax assets and liabilities Deferred tax assets and liabilities are attributable to the following: Assets Liabilities Net Property, plant and equipment Investment property Employee benefits Losses carried forward Tax assets / (liabilities) Movement in deferred tax during the year Property, plant and equipment Investment property Employee benefits Losses carried forward 2017 £000 2016 £000 - - - 7 7 - - - 180 180 1 April 2016 £000 (1,164) (645) - 180 (1,629) 2017 £000 (1,208) (441) - - (1,649) Change in deferred tax rate £000 65 35 - (10) 90 2016 £000 (1,164) (645) - - (1,809) 2017 £000 (1,208) (441) - - 7 2016 £000 (1,164) (645) 180 (1,642) (1,629) Recognised in income £000 Recognised in equity £000 31 March 2017 £000 (109) 169 - (163) (103) - - - - - (1,208) (441) - 7 (1,642) The Directors believe the deferred tax asset relating to losses carried forward will be utilised by future taxable profits. 18. Inventories Stores and materials Goods for resale Development property 2017 £000 24 33 20,512 2016 £000 44 28 20,025 20,569 20,097 Included within inventories is £20,512,000 (2016: £20,023,000) expected to be recovered in more than 12 months. Inventories to the value of £1,855,000 were recognised as an expense in the year (2016: £1,675,000). Interest capitalised during the year in relation to development property was £23,000 (2016: £35,000). In the course of the year, £nil of development property inventory was written down (2016: £206,000). Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 45 Notes to the Consolidated Financial Statements For the year ended 31 March 2017 19. Trade and other receivables Trade receivables Provision for impairment of trade receivables Other receivables Prepayments and accrued income 2017 £000 539 (52) 487 145 1,428 2,060 2016 £000 626 (60) 566 96 1,376 2,038 Included within trade and other receivables is £906,000 (2016: £761,000) expected to be recovered in more than 12 months. The fair value of trade and other receivables classified as loans and receivables are not materially different to their carrying values. The Group regularly reviews the ageing profile of trade receivables and actively seeks to collect any amounts that have fallen outside the defined credit terms. The Group provides, in full, for any debts it believes have become non-recoverable. Movements on the Group specific provision for impairment of trade receivables are as follows: As at the beginning of the year Provision for receivables impairment Receivables written off during the year as uncollectable As at the end of the year The ageing of trade receivables that have not been provided for are: Not yet due: 0 – 29 days Overdue: 30 – 59 days 60 – 89 days 90 – 119 days 120 + days 2017 £000 60 24 (32) 52 2017 £000 278 148 - 3 10 51 487 2016 £000 46 14 - 60 2016 £000 333 166 11 53 566 As at 31 March 2016, trade receivables of £210,000 (2016: £233,000) were past due but not impaired (as disclosed in the above table). These relate to a number of independent customers for whom there is no recent history of default. 46 Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 Notes to the Consolidated Financial Statements For the year ended 31 March 2017 20. Cash and cash equivalents Cash and cash equivalents per balance sheet Cash and cash equivalents per cash flow statement 2017 £000 703 703 At 31 March 2017, the Group had an agreed bank facility of £25.0m (2016: £25.0m) which expires on 10 March 2019. The facility incurs interest charged at rates over LIBOR during the term of the facilities. LIBOR rates have been hedged on £10m of the £25.0m facility until 31 March 2019 by way of interest rate swaps. Security over the assets of the Group has been given in relation to the bank facilities. Undrawn facilities: Expiring within one year Expiring within one to two years Expiring between two and five years 21. Bank loans 2017 £000 - - 2,200 - 2,200 2016 £000 686 686 2016 £000 - 2,500 2,500 This note provides information about the contractual terms of the Group’s interest-bearing loans. For more information about the Group’s exposure to interest rate, see note 3. Non-current liabilities Secured bank loans 2017 £000 22,800 22,800 2016 £000 22,500 22,500 Secured bank loans: The current secured bank loans relate to a facility of £25.0m comprising four loans which incur interest at various rates over LIBOR during the term of the facilities and fall due for renewal more than 12 months from the Balance Sheet date. LIBOR rates have been hedged on £10.0m of the £25.0m facility until 31 March 2019 by way of an interest rate swap (see note 16). Assets with a carrying amount of £55.0m (2016: £55.5m) have been pledged to secure borrowings of the Group. Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 47 Notes to the Consolidated Financial Statements For the year ended 31 March 2017 22. Deferred income and deferred government grants Deferred income classified as current liabilities comprises advance rental income and advance marina fees. Deferred government grants relate to grants received in relation to the Airport runway and lighting surrounding the runway, fit out of units at the fishmarket, floating walkways within the lock and for construction of the new ice plant and chill chain. The grant liability relating to the airport runway and lighting will not be released prior to any future sale of the site. Deferred Deferred income government grants 2016 £000 2016 £000 2017 £000 2017 £000 1,542 (1,542) 1,479 1,479 1,479 - 1,479 1,504 (1,504) 1,542 1,542 1,542 - 1,542 1,214 (45) - 1,169 - 1,169 1,169 2017 £000 770 97 122 184 1,173 2017 £000 578 173 5 5 3 9 770 994 (29) 249 1,214 - 1,214 1,214 2016 £000 754 64 108 192 1,118 2016 £000 516 174 26 35 754 At the beginning of the year Released to the income statement Income and grants received and deferred At the end of the year Current Non-current 23. Trade and other payables Trade payables Other payables Other taxation and social security costs Accruals The ageing of trade payables is as follows: Not yet due: 0 – 29 days Overdue: 30 – 59 days 60 – 89 days 90 – 119 days 120 + days 48 Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 Notes to the Consolidated Financial Statements For the year ended 31 March 2017 24. Finance lease liabilities Capital element Minimum lease payments of lease payments 2016 £000 2016 £000 2017 £000 2017 £000 Amounts payable under finance leases: Within one year In the second to fifth years inclusive At the end of the year Less: future finance charges Present value of lease obligations Current Non-current 137 255 392 (31) 361 121 316 437 (38) 399 123 238 361 n/a 361 123 238 361 105 294 399 n/a 399 105 294 399 It is the Group’s policy to lease certain of its property, plant and equipment under finance leases. The average lease term is 3.1 years (2016: 4.0 years). For the year ended 31 March 2017, the average effective borrowing rate was 4.5% (2016: 4.6%). Interest rates are fixed at the contract date. All finance leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments. All lease obligations are denominated in sterling and the fair value of the Group’s lease obligations approximates to their carrying amount. 25. Employee benefits Pension plans Defined contribution plans The Group operates a number of defined contribution pension plans. The total expense relating to these plans in the current year was £153,000 (2016: £153,000). There were no amounts outstanding or prepaid at the year end (2016: £nil). 26. Provisions for other liabilities and charges Balance at 1 April 2015 Provisions made during the year Provision utilised during the year Balance at 31 March 2016 Balance at 1 April 2016 Provisions made during the year Provisions utilised during the year Balance at 31 March 2017 Current Non-current Onerous leases £000 Total £000 177 - (36) 141 141 173 (61) 253 71 182 253 177 - (36) 141 141 173 (61) 253 71 182 253 Onerous leases are those where expected rents payable exceed rents receivable on sub-let office space in respect of two leases expiring in 2021. Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 49 Notes to the Consolidated Financial Statements For the year ended 31 March 2017 27. Capital and reserves Share capital Ordinary shares Deferred shares Total shares Thousands of shares 2017 2017 2017 2016 2016 2016 In issue at the beginning and end of the financial year - fully paid Authorised Ordinary share capital 100,000,000 Ordinary shares of 1p each (2016: 100,000,000 Ordinary shares of 1p each) Allotted, called up and fully paid 96,277,086 (2016: 96,277,086) Ordinary shares of 1p each (2016: 1p each) 62,943,752 (2016: 62,943,752) Deferred shares of 24p each (2016: 24p) 96,277 96,277 62,944 62,944 159,221 159,221 2017 £000 2016 £000 2017 £000 2016 £000 2017 £000 2016 £000 1,000 1,000 963 - 963 963 - 963 - - - - 1,000 1,000 963 963 15,106 15,106 15,106 15,106 15,106 16,069 15,106 16,069 There is no limit to the authorised deferred share capital. The holders of Ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. On a winding up each Ordinary share shall rank in priority to the Deferred shares. The holders of Deferred shares are not entitled to receive dividends nor are they entitled to vote at meetings of the Company. On a winding up each Deferred share shall only be entitled to the nominal capital paid up or credited as paid up after paying the nominal capital paid up or credited as paid up on the Ordinary shares, the Deferred shares and/or any other shares in issue, together with the sum of £1,000,000 on each Ordinary share. Other reserves Share premium account The share premium account represents premiums paid over the nominal value of share capital issued. Revaluation reserve The revaluation reserve relates to the revaluation of land and buildings included within property, plant and equipment. Merger reserve The merger reserve was created when Sutton Harbour Company was incorporated into the holding company, Sutton Harbour Holdings plc. It was further increased when a cash box placing of shares occurred on 4 September 2009, creating an additional £3.6m. Hedging reserve The hedging reserve contains the effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges. Retained earnings Retained earnings represent retained earnings attributable to owners of the parent. 50 Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 Notes to the Consolidated Financial Statements For the year ended 31 March 2017 28. Operating leases Leases as lessee Non-cancellable operating lease rentals are payable as follows: Less than one year Between one and five years Greater than five years 2017 £000 225 507 - 732 2016 £000 219 815 98 1,132 During the year £224,000 was recognised in respect of operating leases expense in the income statement (2016: £221,000): £196,000 in cost of sales (2016: £196,000) and £28,000 in administrative expenses (2016: £25,000). Included within operating lease rentals is an amount of £880,000 (2016: £1,078,000) due in relation to the lease of part of a property which has been sublet. Income will therefore be generated to offset some of these lease rental amounts. Leases as lessor The Group leases certain properties under operating leases (see notes 13 and 14). The future minimum lease rentals receivable under non-cancellable leases are as follows: Investment property: Less than one year Between one and five years More than five years Owner-occupied properties: Less than one year Between one and five years More than five years 2017 £000 1,490 5,446 26,011 32,947 43 139 222 404 2016 £000 1,446 5,653 27,395 34,494 37 142 257 436 Total contingent rents recognised in the year were £39,000 (2016: £60,000). Contingent rents are determined by reference to specific clauses within the leases. During the year ended 31 March 2017 £1,588,000 (2016: £1,582,000) was recognised as rental income in the income statement. Repair and maintenance expense recognised in cost of sales for the year to 31 March 2017 was £46,000 (2016: £60,000). Owner-occupied property is classified within property, plant and equipment on the balance sheet, reflecting their principal use in the business. Operating leases on the properties have terms between 5 years and 125 years in length and cannot be cancelled before the end of the lease, unless there is a break clause. Rent reviews usually occur at five year intervals. Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 51 Notes to the Consolidated Financial Statements For the year ended 31 March 2017 29. Cash flow statements Cash flows from operating activities Profit for the year from continuing operations Adjustments for: Taxation on loss from continuing activities Financial income Financial expense Fair value adjustments on investment property Revaluation of property, plant and equipment Depreciation Amortisation of grants Impairment of assets Loss on sale of property, plant and equipment Cash generated from continuing operations before changes in working capital and provisions Increase in inventories Increase in trade and other receivables Increase/(decrease) in trade and other payables (Decrease)/increase in deferred income Increase/(decrease) in provisions Cash generated from continuing operations 2017 £000 40 13 - 934 (110) 215 336 (45) - 9 6 1,392 (472) (18) 57 (63) 112 1,008 2016 £000 1,497 93 (2) 1,009 (1,829) 377 273 (29) 66 1,461 (202) (514) (126) 38 (36) 621 52 Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 Notes to the Consolidated Financial Statements For the year ended 31 March 2017 30. Related parties The parent of the Group is Sutton Harbour Holdings plc. There is no ultimate controlling party. Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Transactions with key management personnel: Executive Directors of the Company and their immediate relatives control 0.12% (2016: 0.12%) of the voting shares of the Company. The compensation of key management personnel (the Executive and Non Executive Directors) is as follows: Fees Short term employee benefits including taxable benefits Social security costs Company contributions to money purchase pension schemes 2017 £000 83 276 39 57 455 2016 £000 83 260 36 55 434 Mr D McCauley/Rotolok (Holdings) Limited (“Rotolok”) is the Group’s second largest shareholder, holding 28.79% of the issued share capital of Sutton Harbour Holdings plc, and also has representation on the Board of Directors by virtue of Sean Swales, the Group Managing Director of Rotolok (Holdings) Limited. As a consequence, Rotolok is considered to have significant influence over the Group as defined in IAS 24 ‘Related party transaction’ and hence transactions with Rotolok are required to be disclosed. In the year there were no transactions with Rotolok. 30. Capital commitments At March 2017 the Group has no capital commitments. Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 53 Historical Financial Information For the year ended 31 March 2017 Net Assets Revenue Operating profit before fair value adjustments, impairments and onerous leases Fair value adjustments on investment property and fixed assets 2017 £000 40,141 2016 £000 2015 £000 2014 £000 2013 £000 40,869 40,459 38,554 36,562 6,718 6,509 6,955 7,045 7,039 1,288 1,467 1,274 1,167 1,391 (105) 1,452 917 311 (3,426) Impairment of assets, onerous leases (173) (272) (403) (354) (978) Operating profit/(loss) after fair value adjustments and impairments 1,010 2,647 1,788 1,124 (3,013) Other gains and losses - - - - 69 Net financing costs (excludes joint ventures/associates) (957) (1,057) (927) (859) (735) Profit/(loss) before tax on continuing activities Loss from discontinued activities Profit/(loss) attributable to equity shareholders Dividends paid Basic earnings/(loss) per share Diluted earnings/(loss) per share 53 - 40 - 0.04p 0.04p 1,590 861 265 (3,679) - - - - 1,497 655 1,323 (2,849) - - - - 1.55p 0.68p 1.37p (2.96)p 1.55p 0.68p 1.37p (2.96)p Dividends paid and proposed per ordinary share (adjusted for changes in issued share capital) - - - - - 54 Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 Fixed assets Investments Current assets Debtors Cash at bank and in hand Current liabilities Creditors: amounts falling due within one year Net current assets Total assets less current liabilities Creditors: amounts falling due after more than one year Net assets Capital and reserves Called up share capital Share premium account Merger Reserve Profit and loss account Total shareholders’ funds Company Balance Sheet As at 31 March 2017 Note 5 6 7 8 9 11 11 11 2017 £000 4,657 4,657 42,953 10 42,963 28 42,935 47,592 19,951 27,641 16,069 5,368 3,620 2,584 27,641 2016 £000 4,657 4,657 41,373 8 41,381 21 41,360 46,017 18,834 27,183 16,069 5,368 3,620 2,126 27,183 The notes on pages 57 to 61 are an integral part of these financial statements. In the year the Company made a profit of £458,000 (2016: profit of £699,000). The Financial Statements were approved and authorised by the Board of Directors on 27 June 2017 and were signed on its behalf by: Jason W. H. Schofield Director Company number: 2425189 Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 55 Company Statement of Changes in Equity As at 31 March 2017 Called up capital £000 Share premium account £000 Merger reserve £000 Profit and loss account £000 Total £000 26,484 699 27,183 27,183 458 1,427 699 2,126 2,126 458 2,584 27,641 Balance at 1 April 2015 Profit for the year Balance at 31 March 2016 Balance at 1 April 2016 Profit for the year Balance at 31 March 2017 16,069 - 16,069 16,069 - 16,069 5,368 - 5,368 5,368 - 5,368 3,620 - 3,620 3,620 - 3,620 56 Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 Notes to the Company Financial Statements For the year ended 31 March 2017 1. General information Sutton Harbour Holdings plc (“the Company”) is a limited company incorporated in the United Kingdom under the Companies Act 2006. These financial statements cover the financial year from 1 April 2016 to 31 March 2017, with comparatives for the year 1 April 2015 to 31 March 2016 and are compliant with FRS101. 2. Accounting policies Basis of preparation The accounting policies which follow set out those policies which apply in preparing the financial statements for the year ended 31 March 2017. The company has taken advantage of the following disclosure exemptions under FRS 101: • the requirements of IFRS 7 Financial Instruments: Disclosure; • the requirements of paragraphs 30 and 31 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors; • the requirements of paragraphs 91-99 of IFRS 13 Fair Value Measurement, • the requirement in paragraph 38 of IAS 1 ‘Presentation of Financial Statements’ to present comparative information in respect of paragraph 79(a)(iv) of IAS 1; • the requirements of paragraphs 10(d), 10(f ), 16,, 38(a), 38(b), 38(c), 38(d), 40(a), 40(b), 40(c), 40(d), 111 and 134-136 of IAS 1 Presentation of Financial Statements; • the requirements of IAS 7 Statement of Cash Flows; • the requirements of paragraph 17 of IAS 24 Related Party Disclosures; • the requirements in IAS 24 Related Party Disclosures to disclose related party transactions entered into between two or more members of a group, provided that any subsidiary which is a party to the transaction is wholly owned by such a member ; and • the requirements of paragraphs 134(d)-134(f ) and 135(c)-135(e) of IAS 36 Impairment of Assets. Going concern The Company meets its day to day working capital requirements through intercompany funding and is therefore reliant on bank finance in the form of Group wide term loan and revolving credit facilities. In March 2016, Sutton Harbour Holdings plc and subsidiary companies (the “Group”) renewed its banking facilities for three years, with two term loans totalling £22.5m and a £2.5m revolving credit facility. The Group’s forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of the facilities and covenants over a period of at least twelve months from the date of approval of these financial statements. It has been confirmed that the intercompany balances in place will not be requested for repayment in the foreseeable future. In light of the above and considering the Group’s forecast covenant compliance, in the Directors’ opinion it remains appropriate to adopt the going concern basis of preparation for these financial statements. Measurement convention The financial statements are prepared on the historical cost basis as modified by the fair value of share based payments, financial assets and financial liabilities (including derivative instruments) at fair value through the profit or loss. Investment property and other property are carried at fair value. Non- current assets held for sale are stated at the lower of previous carrying amount and fair value less costs to sell. The functional currency of the Company is pounds sterling and therefore balances are shown in the financial statements in thousands of pounds sterling, unless otherwise stated. The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the Company’s financial statements: Cash and cash equivalents Cash in the balance sheet comprises cash at bank and in hand. Impairment The carrying amounts of the Company’s assets are considered at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. Where the asset does not generate cash flows that are independent from other assets, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where the carrying amount of an asset exceeds its recoverable amount it is impaired and is written down to its recoverable amount. Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 57 Notes to the Company Financial Statements For the year ended 31 March 2017 Interest-bearing borrowings Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the income statement over the period of the borrowings on an effective interest basis. Own shares Ordinary and Deferred shares are classified as equity. Incremental costs directly attributable to the issue of Ordinary and Deferred shares and share options are recognised as a deduction from equity. Taxation Tax on the profit for the year comprises current and deferred tax. Tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable profit for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax is recognised on all temporary differences except on the initial recognition of goodwill or on the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit. Dividends Interim dividends are recognised when paid, final dividends are recognised when approved by the shareholders. Dividends unpaid at the balance sheet date are only recognised as a liability at that date if they have been approved. Unpaid dividends that have not yet been approved are disclosed in the notes to the financial statements. Financial instruments Trade and other debtors, trade and other creditors and all intercompany balances are financial instruments and are carried at amortised cost. 58 Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 Notes to the Company Financial Statements For the year ended 31 March 2017 3. Services provided by the Company’s auditors During the year the Company obtained the following services from the Company’s auditors: Current auditors: Fees payable to Company’s auditor for the audit of Parent Company financial statements Fees payable to the Company’s auditor for other services: Tax services 2016 £000 6 2017 £000 6 1 1 For further details on other services provided by the Company’s auditors, see note 7 of the main Group consolidated financial statements. 4. Employees and Directors The Company has no employees. The Directors are not remunerated for their services to the Company. Remuneration in respect of subsidiary undertakings is disclosed in note 8 to the consolidated financial statements. 5. Investments Cost and net book value As at the beginning and end of the financial year Subsidiary companies: At 31 March 2017, the Company has the following investments in subsidiaries: Investment in subsidiary undertakings £000 Total £000 4,657 4,657 Subsidiaries Sutton Harbour Company Sutton Harbour Services Limited Plymouth City Airport Limited Sutton Harbour Property and Regeneration Limited Sutton Harbour Commercial Limited Sutton Harbour Projects Limited Sutton Harbour Car Parks Limited Sutton Harbour Projects (No 2) Limited Class of Ownership shares held 2017 2016 Nature of Business Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Harbour Authority Marine Leisure & Property Property Developer Property Property Property Car Park Operator Investment Company All of the above companies were incorporated in the United Kingdom and registered in England and Wales and for each the registered address is Tin Quay House, Sutton Harbour, Plymouth PL4 0RA. Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 59 Notes to the Company Financial Statements For the year ended 31 March 2017 6. Debtors Amounts owed by subsidiary undertakings Deferred tax Other debtors and prepayments Total debtors Amounts owed by subsidiary companies are all due in more than one year. 7. Creditors: amounts falling due within one year Other creditors Total creditors Security over the assets of the Group has been given in relation to the bank facilities. 8. Creditors: amounts falling due after more than one year Amounts owing to subsidiary undertakings Bank borrowings Interest is charged at rates over LIBOR during the term of the bank facilities. 2017 £000 42,604 6 343 42,953 2017 £000 28 28 2017 £000 19,651 300 - 19,951 2016 £000 40,797 126 450 41,373 2016 £000 21 21 2016 £000 18,834 18,834 60 Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 Notes to the Company Financial Statements For the year ended 31 March 2017 9. Called up share capital Ordinary Shares Deferred Shares Total Thousands of shares 2017 2016 2017 2016 2017 2016 In issue at the beginning and end of the financial year – fully paid 96,277 96,277 62,944 62,944 159,221 159,221 Ordinary Shares Deferred Shares Total 2017 £000 2016 £000 2017 £000 2016 £000 2017 £000 2016 £000 Allotted, called up and fully paid 96,277,086 (2016: 96,277,086) Ordinary shares of 1p each (2016: 25p each) 62,943,752 (2016: 62,943,752) Deferred shares of 24p each (2016: 24p each) Total 963 - 963 963 - 963 - - 963 963 15,106 15,106 15,106 15,106 15,106 16,069 15,106 16,069 The holders of Ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. The holders of Deferred shares are not entitled to receive dividends nor are they entitled to vote at meetings of the Company. On a winding up each Deferred share shall only be entitled to the nominal capital paid up or credited as paid up after paying the nominal capital paid up or credited as paid up on the Ordinary shares, the Deferred shares and/or any other shares in issue, together with the sum of £1,000,000 on each Ordinary share. 10. Contingencies The Company has given an unlimited guarantee in respect of bank borrowings of all subsidiary companies. At 31 March 2017, these borrowings amounted to £22,800,000 (2016: £22,500,000). 11. Description of reserves Called up share capital The called up share capital and share premium accounts represent equity share capital (see note 27 to the consolidated financial statements). Share premium account The share premium account represents premiums paid over the nominal value of share capital issued (see note 27 to the consolidated financial statements). Merger reserve The merger reserve was created when a cash box placing of shares occurred on 4 September 2009. In the opinion of the Directors, this reserve is distributable (see note 27 to the consolidated financial statements). Profit and loss account The profit and loss account represents retained profits. 12. Ultimate controlling party Sutton Harbour Holdings plc is the ultimate Parent Company of the Group and there is no separate controlling party. The consolidated financial statements of the Group headed by Sutton Harbour Holdings plc are presented separately on pages 22 to 53 of this document. The results of the Company are not consolidated in any other group’s financial statements. Sutton Harbour Holdings plc – Annual Report & Financial Statements 2017 61
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