More annual reports from Southern Hemisphere Mining Limited:
2023 Report2022 ANNUAL REPORT & FINANCIAL STATEMENTS C O N T E N T S Strategic Report 2 3 4 7 9 Vision and Objectives The Group at a Glance The Executive Chairman’s Report s172 Report - Promoting the success of the Group for the benefit of its shareholders Financial Review 12 Principal Business Risks Governance 13 14 16 19 20 23 24 Directors and Advisors Directors’ Report Statement of Compliance with QCA Corporate Governance Code Corporate, Environmental and Social Responsibility Report Report on Remuneration Statement of Directors’ Responsibilities Independent Auditor’s Report Consolidated Group Financial Statements under IFRS 28 29 30 31 32 33 58 Consolidated Income Statement 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 59 60 61 Company Balance Sheet Company Statement of Changes in Equity Notes to the Company Financial Statements 2 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 F O R T H E Y E A R E N D E D 3 1 M A R C H 2 0 2 2 STRATEGIC REPORT V I S I O N A N D O B J E C T I V E S Sutton Harbour Group plc, listed on the Alternative O U R O B J E C T I V E S Investment Market (AIM) of the London Stock Exchange since 1996, is the parent of a number of wholly owned subsidiary companies which include: • Sutton Harbour Company, the statutory harbour authority company, which operates the Plymouth fishmarket (known as Plymouth Fisheries), The Marina at Sutton Harbour, together with a number of operations related properties; • A number of other ‘Sutton Harbour’ group companies engaged in waterfront property regeneration and investment including King Point • To develop a mix of trading activities for medium to long-term sustainable growth and to provide a balanced risk profile. • To provide a secure investment proposition in a profitable Group which has a strong income producing asset base by increasing and improving the income earning asset portfolio of the Group. • To build on the Group’s strength as a specialist in waterfront destination and regeneration in the South West region. Marina, the development of Harbour Arch Quay, • To provide asset-based value growth to car park operating activities; and shareholders in the medium term. • Plymouth City Airport Limited, the company holding legal interests in the former airport site. G R O U P V I S I O N The Group is the owner and custodian of a unique C U R R E N T B U S I N E S S P L A N S • Retention of strategic assets and development of new adjacent assets for investment and revenue generation until they reach their full potential. historic harbour asset adjacent to Plymouth city • Realisation of inventory assets through development centre to the north and Plymouth Sound to the south, and sale of some assets which have attained their connecting the sea to the South West of England. full potential. The Group owns property assets around the harbour • Investment in infrastructure to increase capacity, and directly supports the City’s objective to create improve service and enhance quality. the first National Marine Park, and to assist it to fulfil its ambitions as the Ocean City thereby creating a prime location for living, working, visiting and hosting waterside events. • Growth of earnings from core divisions, harbour, marina, fisheries, leisure and retail and parking. • Maintain strong reputation for quality and customer service. 3 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 F O R T H E Y E A R E N D E D 3 1 M A R C H 2 0 2 2 STRATEGIC REPORT T H E G R O U P AT A G L A N C E M A R I N E Sutton Harbour currently has capacity for berthing 492 leisure and commercial vessels (as of June 2022 was accommodating 488 vessels) and achieves an increasing, core annual revenue stream in the form of dues, fees and rents from the established fisheries, marinas and property operations. Marinas Sutton Harbour Marina for leisure berthing is currently 99% occupied and is trading at capacity. The King Point Marina, which opened in 2013, has now transitioned into a mature business with 99% occupancy. The facility has 119 leisure berths with additional berthing taking approximately a third of the total space occupied by Princess Yachts. Plymouth Fisheries, the trading name of the fishmarket in Plymouth, is recognised as an important fishing port in England. The Group’s subsidiary, Sutton Harbour Company has been trading since 1847 and during this long period of operating the harbour and associated assets have experienced successive economic cycles. This long history serves as a guide to continue to develop the asset for further performance and value growth in the future. The location of Sutton Harbour, in central Plymouth and adjoining the historic Barbican quarter, has undergone two main phases of regeneration over the past 3 decades. The first phase to unlock the potential of the area was realised when Sutton Lock was installed in 1992 creating a usable depth of water, followed by the relocation of the fishmarket to the eastern side in 1995. In the second phase the development of quality residential and commercial buildings overlooking the harbour, and improvements to berthing facilities, added to the attractiveness of the area to create a sustainable location for business, leisure and living. The Group is now focused on bringing forward the third phase with new planning applications secured and in preparation which will integrate the city centre to communities east of the Harbour, a long held aspiration of the City of Plymouth. 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, including office space, retail and leisure facilities. 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 Old Barbican Market, the former fishmarket which was converted to retail use in 1998, is currently undergoing a major refit to accommodate three new national covenant tenants and is scheduled to be completed by late Summer 2022. 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. These facilities and operators attract visitors and citizens of Plymouth, strengthening the natural attractiveness, leisure and social enjoyment of the Harbour. The Group has been active in establishing a business community around the northern side of Sutton Harbour and has been successful in attracting a number of chartered accountants’ practices, legal firms and other professional services companies. C A R P A R K I N G The Group has two major car parks at Sutton Harbour, a 340 space multi storey close to the National Marine Aquarium and a 51 space surface car park in the Barbican area. Additionally, the Group controls parking on the fishmarket complex, at the marina, around Sutton Harbour 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. Sutton Harbour The Group has established a track record for the delivery of six major regeneration schemes around Sutton Harbour and a further two schemes in other locations elsewhere in the South West. A key feature of all these schemes was working in partnership with other public and private sector bodies. Following the change of majority control of the Group in January 2018, consent has been achieved for three planning applications for development schemes on Sutton Harbour. These schemes include; a 14 unit apartment building (Harbour Arch Quay) which is currently under construction and due for completion in Spring 2023; the iconic Sugar Quay tower, consisting of a planned 170 units, with retail/office space incorporated facing the harbour and the extension to an existing multi storey car park owned by the Group is also approved, to be implemented in parallel with Sugar Quay. The Group has also been working with the Local Planning Authority to build significant residential complexes on Sutton Road which will facilitate improved east west linkage across Sutton Harbour joining the city centre and existing easterly residential areas. Former Airport Site In 2000, the Group purchased Plymouth City Airport Limited and a long lease of the regional airport site from Plymouth City Council. The Group also owns some freehold land on the 113 acre site. In 2003 the Group set up and operated the regional airline, Air Southwest which was subsequently sold in November 2010 to Eastern Airways International Limited (Eastern Airways). On 28 July 2011 Air Southwest (under the ownership of Eastern Airways) ceased flights in and out of Plymouth City Airport. Plymouth City Council agreed upon the closure of the former airport as of 23 December 2011, due to withdrawal of flight services and unsustainable losses. The decision also resulted in cancellation of the airport operating licence and cancellation of the air space. In March 2019, Plymouth City Council produced a new local plan which was scrutinised at public hearings and by Government Planning Inspectors. The plan was accepted together with the Council’s proposal to safeguard the former airport site for aviation operations but limited to five years, which is due to end in March 2024. Accordingly, the Group is working towards options for the site and developing a masterplan. This strategic asset will either be redeveloped for a range of uses or re-opened as an airport, but in either case the intrinsic value of the asset is represented by its potential uses. Sutton Harbour Group plc – Annual Report & Financial Statements 2022 4 F O R T H E Y E A R E N D E D 3 1 M A R C H 2 0 2 2 STRATEGIC REPORT E X E C U T I V E C H A I R M A N ’ S R E P O R T I N T R O D U C T I O N I am pleased to report on a successful year’s results for the year ended 31 March 2022. The year’s trading performance reflects the overall resilience of the mix of business activities and restoration of full operations following the Lockdowns imposed by the UK Government throughout the previous trading year. As a result, the Group has achieved record earnings from its marina and car parking trading businesses and a 22.6% uplift in the valuation of the owner occupied asset portfolio. The broad mix of tenants occupying the Group’s investment properties and focus on the destination leisure property has protected the Group from void rates associated with other sectors. The Group maintained its property occupancy rate at 89% and is currently converting the space vacated by Edinburgh Woollen Mill into three units for new national covenant tenants, at materially improved £/sq ft rental rates. Contract and financing preparations made during the previous year enabled the Group to press ahead with the construction of the Harbour Arch Quay development, the first new build by the Group in almost a decade, which started in February 2022. The Group has secured an updated unanimous planning consent for the 170 apartment Sugar Quay development and agreement to the s106 agreement by the Local Authority. To maintain progress with the development programme, the Company raised £3.417m net from the issue of 14 million new ordinary shares in August 2021. This equity issue also allowed the purchase of certain development sites adjacent at Sutton Road, Plymouth. 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 adjusted profit before taxation for the year was £0.366m (2021: £0.162m loss before taxation) which excludes non-cash fair value adjustments. In this financial year these adjustments relate to property asset valuation, undertaken by external valuers as at 31 March 2022. The profit before taxation for the year under review as per the consolidated income statement, inclusive of the aforementioned adjustments, was £0.561m (2021: £2.373m loss). The financial impact of the recovery from the Covid-19 pandemic is evident in the Gross Profit which is up by £0.586m to £2.348m in the year to 31 March 2022 (year to 31 March 2021: £1.762m). Net debt (including lease liabilities) decreased to £24.408m as at 31 March 2022 from £26.874m at 31 March 2021, a fall of £2.466m. The net proceeds of £3.417m from the new equity raise by way of Open Offer in August 2021 were partly used for the pre-construction costs of development projects and the purchase of land at Sutton Road, Plymouth. The increase in development property inventory, including the aforementioned site acquisition, was £2.586m during the year. Gearing (net debt: net assets) as at 31 March 2022 stood at 43.4% (2021: 57.0%). Net finance costs of £0.789m in the year (2021: £0.753m) are stated after capitalisation of interest of £0.343m (2021: £0.138m). As at 31 March 2022, net assets were £56.211m (2021: £47.153m), a net asset value of 43.3p per ordinary share (2021: 40.6p per ordinary share). The movement includes the valuation of the Group’s property assets which gave rise to an overall valuation surplus of £7.208m, as reconciled in the table below, of which a £0.380m surplus relates to the investment property portfolio and a net £6.828m surplus relates to the owner- occupied properties. The valuation surplus’ follow further improvement in trading performance and the restoration of car parks activity after the end of the Lockdowns. The ongoing weaker level of trading at Plymouth Fisheries has informed the valuer’s lower overall Fisheries asset value. VALUATION SURPLUS/(DEFICIT) ACCOUNTING* Owner Occupied Portfolio Fisheries (£0.185m) Marinas Car Parks £5.526m £1.487m Fair valuation adjustment recorded in the Income Statement as no revaluation reserve available to absorb the deficit Credited to the Revaluation Reserve in the Balance Sheet Credited to the Revaluation Reserve in the Balance Sheet Investment Property Portfolio £0.380m Fair valuation adjustment recorded in the Income Statement TOTAL £7.208m Financing During the year the Company issued 14 million new ordinary shares each at 25p and raised £3.417m after costs pursuant to an Open Offer. A loan from a private finance lender, which was used to purchase land in December 2020, was repaid after the year end and secured assets were unencumbered. Funds to repay this loan were made available by way of two unsecured loans from major shareholders at a lower rate of interest and on more flexible terms. The full general banking facility with Nat West reduced from £27m to £26.9m during the year after a repayment was made from the proceeds of a minor investment property, Unit 1 Penrose House. After the year end the temporary £2m Covid support facility expired reducing the full committed facility to £24.9m. This facility expires in December 2023 and the board is actively considering whether to elect for a twelve month extension, which is allowed for in the facility agreement, or to enter into a new facility. In accordance with the Dividend Policy, the board does not recommend payment of a dividend on the year’s results in order to preserve headroom in the bank facility. The Group regards itself as an asset-based investment with its opportunities to reduce bank debt and realise value vested in the success of future development projects. Directors and Staff There have been no Board changes during the year. Headcount as at 31 March 2022 was 32 (31 March 2021: 31). 5 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 OPERATIONS REPORT REAL ESTATE AND CAR PARKING MARINE Sutton Harbour Marina and King Point Marina have enjoyed the busiest ever season with overall annual berth sales up by 20.3% and overall occupancy up to 98% by 31 March 2022 (92% by 31 March 2021). Overall berthing revenue, including visitor berthing across both marinas was up by £0.334m compared to the previous year, with no berthing rate increases. The new season has started strongly with more early bookings than usual, as available berthing along the South Coast of England has become scarcer. The outlook for strong revenue growth is encouraging after berthing rates were increased from 1 April 2022. Some changes were made to berthing configuration over the Winter and opportunities to maximise use of the water space are under review for creation of additional berths in the future. Three new positions have been created in the marina team to allow the Company to maintain a high level of customer service to a growing clientele. Trading at Plymouth Fisheries has returned to a level close to the pre-pandemic period, although competition from other local ports and a declining local fleet continue to lower the performance of the port. Against a backdrop of rising fuel prices, which makes it increasingly difficult for fishers to make profitable trips to sea, the Company is working with suppliers to try to improve fuel buying prices and to pass savings on to customers. The Company’s long-standing Harbour Master, Pete Bromley, retired in December 2021 and he has been successfully replaced by Mark Veale. As at 31 March 2022 tenant occupancy across the Company’s portfolio of real estate assets stood at 89% (31 March 2021: 97%). The Company supported some tenants through the Covid crisis with extended time to pay. These deferred rents were almost all cleared by 31 March 2022 and with the exception of two tenant failures, Edinburgh Woollen Mill and a gym operator, tenants restored normal operations during the year under review, many benefiting from improved footfall around Sutton Harbour. At the heart of the Sutton Harbour and Barbican area, the Old Barbican (fish) Market, is undergoing refurbishment and is due to open during summer 2022 with three new national covenant tenants. After a slow start in April and May 2021, as visitors to the area increased, the revenue from car parking returned to the previous peak trading level recorded before the pandemic. The resumption of local events in Summer 2022, high marina occupancy and continued popularity of UK based tourism are conditions which are expected to underpin trading performance in the current financial year. REGENERATION Sutton Harbour The 14 apartment building known as Harbour Arch Quay located on the north eastern quay of Sutton Harbour is currently under construction with completion currently due in Spring 2023. The agency and digital marketing campaigns are in place and to date reservations for five apartments, including one of the penthouses, all at full asking price, have been received. Contracts are currently with lawyers Starting in Autumn 2022, the Environment Agency pending exchange. The development is being financed will embark on a six-month programme to replace by a £5m development loan from Atelier Finance and the cills of the Sutton Harbour lock. These works partly by the Group. The Group has secured planning consent and s106 agreement for the updated plans for the 170 apartment Sugar Quay building. This will be a landmark 20 storey building on the eastern quay of Sutton Harbour. During the forthcoming year, the Company will prepare pre-construction work and source financing for this major new development. The intention is to start the building by mid-2023 with completion to follow some 30 months later. are necessary to ensure the proper working of the lock, a flood defence for Plymouth, and flood protection for a least a decade to come. This will result in restrictions to harbour users at certain times when passage through the lock will be constrained. A comprehensive communications programme has been organised to provide real time information to harbour users such that activities of the fishing industry, marina and public continue with minimal disruption. The Group is arranging for interim alternatives to facilitate some of the landing of fish at a nearby location which can then be transported to the Plymouth Fisheries complex for auction, processing and distribution, as is currently the case with c. 50% fish which arrives at the Plymouth Fisheries auction by road. This approach integrates the lessons learned from the similar major works that were completed some 13 years ago on the lock gates. Sutton Harbour Group plc – Annual Report & Financial Statements 2022 6 The Group has continued with planning work for the With interest rises to date and the pressure to control future development of the Sutton Road site, opening and inflation with further interest rate rises, the Company extending the eastern side of the Harbour and linking will incur higher interest rate costs in the coming with Plymouth city centre and residential communities to year. Each additional 1% in bank base rate will cost an the east of Gdynia Way. The original plans are now being additional c. £263,000 per annum based on average refined following the purchase during the year of a small draw on the general banking facility. At the present adjacent site which will enable improved road access and time, the Group has not entered into any interest rate site layout. The Group is working on a wider masterplan swap agreements to manage exposure to rising rates for a comprehensive housing led regeneration of the east due to their high cost, however this a matter for close of Sutton Harbour area and has engaged regularly with and monthly review by the board. The development the Local Planning Authority and potential partners. loan for Harbour Arch Quay and the major shareholders’ loan incur interest at fixed rates. The Plymouth Fisheries complex is now 27 years old and the Group recognises, as does the industry and Plymouth City Council, that modernisation of the facility would S U M M A R Y A N D O U T L O O K support the future of fishing in Plymouth and improve the port’s competitive position. Redevelopment of the facility would require state support in the form of fishery industry and other grants and the Company is working, together with the local authority, on planning applications and grant submissions Former Airport Site In 2019, when the new Local plan was agreed, a safeguard of a maximum five years was supported by Government Planning inspectors. More than three of the five years have now passed and the Company has continued to refine a masterplan for the alternative use of the 113 acre brownfield site. The Company’s masterplan illustrates a mixed use development to accommodate various types of housing, institutional uses, business uses and areas of green space providing links to integrate with established surrounding neighbourhoods and institutions. The Company has a unique mix of trading businesses concentrated around Sutton Harbour, a strongly supported visitor destination. Post Covid, the trading businesses have recovered and continues to improve, providing a growing cash inflow to the Company. The resilience of the property asset portfolio is shown in the valuation uplift. The strong asset base and annuity incomes provide a secure platform from which the Company has been able to restart property construction and develop a new pipeline of consented projects to follow. In time, the profits and investment revenues achieved by new developments will enable the Company the flexibility to reduce its borrowings. The Group celebrates the 175th anniversary of its core subsidiary this year and the stated strategic objectives provide a long term plan for the Group’s future success. F I N A N C I A L O U T L O O K P H I L I P B E I N H A K E R E X E C U T I V E C H A I R M A N The Company has emerged from the pandemic period 19 July 2022 with trading results and asset valuation showing resilience and growth recovery. Like most businesses, emerging inflationary conditions are beginning to bite. In order to retain and attract good quality personnel the Company has needed to increase pay and in some roles by more than 10%. The Company is a major consumer of electricity to power the Sutton Lock gates, ice making and chilling plant at Plymouth Fisheries and lighting required for a large estate. Boilers across company premises are gas powered although consumption is less significant. The current power contracts expire in September 2022, whereafter the Company will experience a sharp increase. Much of this consumption is recharged to tenants and berth- holders, however the Company will need to raise the prices it charges for some of its services. The Company has already installed power efficient lighting at some locations, upgraded fisheries boilers and modernised fisheries plant to assist with consumption efficiency. Other costs are expected to increase in line with general inflation. 7 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 F O R T H E Y E A R E N D E D 3 1 M A R C H 2 0 2 2 STRATEGIC REPORT s17 2 R E P O R T - P R O M OT I N G T H E S U C C E S S O F T H E G R O U P F O R T H E B E N E F I T O F I T S S H A R E H O L D E R S The s172 report explains how the Board has sought to promote the success of the Group for the benefit of shareholders and highlights the key decisions taken by the Group in the past year. DECISION MAKING ENGAGING WITH STAKEHOLDERS Typically major decision making concerns financing/funding, strategic business direction, key contracts and major business transactions, risk management, human resources and pay matters, Board appointments and regulatory reporting matters. Implications of specific decisions and operational matters are researched to ensure communications to specific stakeholder groups make clear the business reasons, the benefits and the costs, as applicable. The Group works closely with its key stakeholders being bankers, major investors, Plymouth City Council, other governance and trade bodies and consults with these parties where appropriate to ensure the ongoing success of business activities. Key stakeholders are set out in the table below. Stakeholders Marine - Marinas Marine - Fisheries Real Estate Car Parking Regeneration Corporate Service Users / Customers Berth-holders Fishers Fishing Industry Trawler Agents Tenants General public National Marine Aquarium Finance Government & Regulatory Marine Management Organisation Plymouth City Council Environment Agency Marine Management Organisation Plymouth City Council - Planning Authority Plymouth City Council - Planning Authority Plymouth City Council - Planning Authority AIM rules/ London Stock Exchange compliance Project Financiers Association Shareholders Company Bankers Staff Trade Bodies The Group’s board, management team and employed personnel. 3rd party contractors – advisors and operations delivery British Marine Industries Federation Yacht Harbour The British Ports Association British Parking Association The Group’s approach is to collaborate with partners to promote the success of the Group, balanced proportionately with needs of collaborators to meet their own criteria for success. The Group communicates with investors about progress at regular reporting intervals and when other reportable events occur. The Group works closely with its key stakeholders being bankers, major investors, Plymouth City Council, other governance and trade bodies and consults with these parties where appropriate to ensure the ongoing success of business activities. The Group has established a forum to meet with the local fishing industry customers of Plymouth Fisheries as well as leaders and officers of Plymouth City Council to discuss operational matters and proposals to redevelop the Fisheries Complex to meet the future needs of users. This has been a constructive process to understand concerns, address specific issues and to work collaboratively on future developments to improve the facility. Following consultation and in face of difficulties presented to the fishers by the escalating cost of fuel, the Group had agreed full transparency on calculation of selling price of fuel and reduction of the margin charged by the Group. The Group engages professional advisors to assist with the formulation of strategies that are best positioned for success and deliverability and for advice on technical, legal or special matters, regarding developments and operations. The Group is available to talk directly to key customers and tenants as matters arise. Staff communications are managed informally and more formally through monthly one to one meetings and annual appraisals given the small number of employees (currently 32). Sutton Harbour Group plc – Annual Report & Financial Statements 2022 8 Philip Beinhaker and Corey Beinhaker continue to be the board appointees nominated by FB Investors LLP, the majority shareholder in the Company. It has been agreed by the board that no decision or meeting would be quorate unless at least one of the Non-Executive Directors is present in addition to the FB Investors’ appointees. and financial specialism are valuable contributions to the governance of the Group. Philip Beinhaker and Corey Beinhaker continue to be the board appointees nominated by FB Investors LLP, the majority shareholder in the Company. It has been agreed by the board that no decision or meeting would be quorate unless at least one of the Non-Executive Directors is present in addition to the FB Investors’ appointees. P H I L I P B E I N H A K E R E X E C U T I V E C H A I R M A N 19 July 2022 The Board agreed to the disposal of Unit 1 Penrose House, a small investment property peripheral to the core estate, on the basis that the tenant’s offer exceeded the independent valuation as at 31 March 2021. The Board has considered disposal of other assets peripheral to the core estate during the year to raise funds however has not pursued offers which are below valuation. Staffing and Pay Following two redundancies during the previous year, the impact of the Covid pandemic did not result in further reductions in headcount. During the year the Group created roles for two additional staff at the marinas to maintain customer service to an increasing number of berth-holders. In order to retain and recruit staff, in operational roles where the local market is short of available personnel, the Board agreed to advance the annual pay review from April to January 2022 and to increase pay by an average of more than 10% to remain competitive. Dividend The board does not recommend a dividend the year’s results in line with its policy stated on page 11 in the Financial Review. Board Composition No changes to the Board’s composition have occurred in the last year. The Board has reconsidered its composition during the year and is satisfied that taking into account the size of the Group, its AIM listing and its principal interests it has the right balance of finance, property development and governance expertise to manage its affairs efficiently and effectively. The Board has reviewed its balance of independent and non-independent directors and is satisfied that a single Independent Director, Graham Miller who has now served 8 years on the board, is acceptable given his experience on other boards. The Board also notes, that whilst Sean Swales has served more than 10 years on the Board, that his long term experience of the Group, knowledge of property investment and financial specialism are valuable contributions to the governance of the Group. KEY DECISIONS TAKEN IN THE YEAR Financing Following the difficulties of the Covid pandemic and impact on revenues to the Group, yet with the board’s decision to progress with consented developments and planning costs of other projects, together with the opportunity to purchase of an additional site on Sutton Road, the Company introduced new capital by way of an Open Offer which raised a net £3.417m from the issue of 14 million new ordinary shares in August 2021. To facilitate the start of the consented Harbour Arch Quay development, the Group secured a £5m development loan from Atelier Finance. Consents were sought from the Group’s bankers for the new loan to be secured against the land and development asset, which were documented in a facility revision in September 2021. A secured loan taken out with another private lender, MSP Finance, to fund the purchase of the Sutton Road land was due to expire in May 2022. The board agreed, in the Group’s interests, to replace this loan with two unsecured loans totalling £2.3m from major shareholders on less expensive and more flexible terms. The loan repayment to MSP and draw down of the new loans were completed in May 2022. Continuity of Regeneration work Following the new equity capital injection in August 2021 and procurement of development financing for the Harbour Arch Quay project, the Board agreed to the start of construction of the 14 apartment Harbour Arch Scheme. Pre- construction works commenced in Autumn 2021 with construction on site following in February 2022. Additionally, the re-application to secure variations to the previously consented Sugar Quay was submitted and approved with unanimous Planning Committee approval in April 2022. The section 106 agreement was completed and signed by PCC and the Group in June 2022. The Group has continued with pre-planning and master-planning work for other sites, including Sutton Road, Fish Quay and the Former Airport Site, during the year. Property Transactions The Board agreed to the purchase of another site on Sutton Road, Plymouth, adjacent to land already held, to assist with assembly of land for a new residential led development in due course. 9 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 F O R T H E Y E A R E N D E D 3 1 M A R C H 2 0 2 2 STRATEGIC REPORT F I N A N C I A L R E V I E W K E Y P E R F O R M A N C E I N D I C AT O R S The key performance indicators used to measure performance of the Group are stated below and narrative to these is provided in the Executive Chairman’s Report. 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/(Loss) before tax from continuing operations Deduct fair value adjustment Adjusted profit/(loss) before tax excluding fair value adjustments (Loss) after tax Basic (loss) after tax per share Dividend per share Total Comprehensive Income for the year attributable to shareholders Total Comprehensive Income per share Net Debt Gearing (Net Debt/Net Assets) 2 0 2 2 £56.211m 43.3p £0.561m (£0.195m) £0.366m (£0.259m) (0.02p) 0.0p £5.638m 4.33p £24.408m 43.4% 2 0 21 £47.153m 40.6p (£2.373m) £2.211m (£0.162m) (£2.175m) (1.88p) 0.0p £1.070m 0.92p £26.874m 57.0% BUSINESS SEGMENTS The Group separates its activities into 3 trading segments: Marine (comprising Fisheries, Harbour and Marina operations), Real Estate being the business of renting the portfolio of commercial premises owned by the Group and Car Parking which records results from the operation of two public car parks and various other parking areas. A fourth regeneration segment is activated when active construction of new build assets is underway. Plymouth Fisheries receives its income from landings dues (a percentage of the value of the fish determined at auction), the margin on fuel sales, sales of ice and rental of commercial space at the Fisheries complex. The Group has improved its marina results through increases in overall occupancy. Continued digital targeted marketing and the renewed popularity of UK based leisure boating have been key success factors in stimulating growth. Property Asset Performance Key Performance Indicators, which are markers of the portfolio’s success are reporting as follows: 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 A S AT 3 1 M A R C H 2 0 2 2 A S AT 3 1 M A R C H 2 0 21 £54.320m £36.125m £18.195m 72 £1.385m 8.46% 8.96% 89% £0.319m 8.3 years £0.736m £18.445m £0.200m £13.216m £31.861m £47.320m £29.475m £17.845m 73 £1.620m 8.72% 9.61% 97% £0.106m 8.1 years £0.349m £16.113m £0.200m £12.962m £29.275m Sutton Harbour Group plc – Annual Report & Financial Statements 2022 10 The Group assesses the performance of its realisable value, with net realisable value including The public hearing took place in early 2018, with property assets through annual independent developer’s return where applicable. The carrying the Government Inspectors’ report subsequently valuation and monthly review of the property value of £13.216m is derived as follows: issued in March 2019. The Government metrics as above. Success is measured in terms of occupancy rate, the number of vacant properties available and the rent that letting voids could yield. Car parking cash takings are monitored weekly and are cross referenced to activity levels in the harbour and compared to results • The land and building asset was independently valued twice yearly until 31 March 2013, when the asset was transferred to development inventory. The airport closed in December 2011. Inspectors supported a ‘safeguard’ of the former airport site for a maximum of five years. The Inspectors advised that a safeguarding period longer than five years would not be appropriate given the strategic value of this brown-field site and based on their determination that five years of previous comparative periods. The Group • As at 31 March 2013 the land and building should be more than enough time to realize a is actively pursuing new planning consents, in asset was transferred to development viable business plan for aviation activity, if such addition to the live consents already held, and inventory and combined with the activity was viable. cost of the pre-construction work is capitalised pre-existing inventory total, which included to the carrying value. the cost of building the Link Road and planning D I S P O S A L O F A S S E T S During the year the Group disposed of Unit 1, Penrose House at a sales price of £260,000. The Group sold the unit which was deemed peripheral to the core estate at a price higher than the valuation at 31 March 2021. £100,000 of the proceeds were used to repay part of the committed loan facility from Nat West. R E G E N E R AT I O N P R O J E C T S Costs incurred in pre-construction projects are held as development stock and are expensed against delivery of the project. In the year to 31 March 2022 construction work began on the development of Harbour Arch Quay. This 14 apartment development is due for completion in Spring 2023. A S S E T V A L U AT I O N During the year, independent valuation of intellectual property costs. • It was agreed at 31 March 2013 that the transfer would be made at valuation, inclusive of historic revaluations. As at 31 March 2013 the carrying value of the former airport asset was £11.479m, inclusive of past revaluations The Group has continued to prepare its masterplan for alternative use of the site, reflecting the guidance of the Government Planning Inspectors that presided over the 2019 new Local Plan, for submission to the Local Authority in good time to allow full participation in the forthcoming 5-year totalling £3.969m. The net increase in former review of the Local Plan. airport asset valuation from 31 March 2013 (£11.479m) to 31 March 2022 (£13.216m) of £1.737m represents the capitalised costs of developing the planning intellectual property less the cost attributed to sales of small plots. £13.216m represents the historic cost of the airport asset as at 31 March 2022. • In addition to the net cash expenditure on the airport asset, the former aviation operations, ongoing site maintenance and security, together with interest costs thereon (Present Value of total cash The Group does not regard the carrying value of the former airport site to be reflective of its value for alternative use, which is in turn significantly less than the value that can be earnt from redevelopment of this strategic asset. The Group regards the value that can be earned from this strategic asset is significantly greater than both the carrying value and the Present Value of total cash expended. expended) is more than double the £13.216m. An Emphasis of Matter paragraph has been included within the 2015, to 2019 Audit Reports (previous auditor) due to uncertainty about the impact on Net Realisable Value of the planning process (Plymouth and South West Devon Joint Local Plan 2017-2034) and the outcome of a Government Report about the future of Plymouth City Airport. The present audit firm also reports the same ‘Emphasis of Matter’ in the 2020, 2021 and 2022 Audit Reports. C A S H F L O W A N D F I N A N C I N G The Group’s main sources of cash inflow are commercial property rentals, marina berthing fees, car parking fees, fish landings dues and fuel and ice sales income. These incomes cover the overhead and debt servicing costs and routine capital infrastructure replacements of the Group. the Group’s investment and owner-occupied In December 2016 the Department for portfolio was undertaken as at 31 March 2022. Transport published the ‘Plymouth Airport This valuation gave rise to a net surplus of Study Report’, which concluded that a lack of £7.208m reconciled as £0.380m surplus on the demand and a short runway mean commercially investment portfolio and £6.828m surplus on the viable passenger services could not be run out 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 of which the Group directly owns c.8 acres and holds c.105 acres through an unexpired 135 year leasehold interest, with a right to renew for a further 150 years, totalling 285 years, is held as development inventory at a carrying value of £13.216m. 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 of the former Plymouth Airport site as it would remain “financially vulnerable” in a “high risk environment”. PCC prepared its new local plan to for submission to the Government Planning Inspectorate in which they called for the retention of the airport site for a possible reopening. In April 2017, the Group submitted its representations and detailed evidence base in support of allocation of the former Airport Site for alternative use in advance of the Government Inspectors’ public hearing of proposed new local planning framework. 11 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 The bank facility and from time to time, new The board decided to transition from LIBOR equity capital, has been drawn upon to fund based interest rate calculation to the SONIA pre-construction costs of new regeneration based rate calculation at the transition date of projects. Other loan financing has been used to 31 December 2021 in respect of servicing of the finance land purchases; in December 2020 a loan interest on its Group banking facility . This took from a private lender was taken out to fund the place seamlessly on 31 December 2022. The purchase of a site on Sutton Road, Plymouth, Group has not identified any need to change the After the year end, in May 2022, this loan was approach to financial risk management as a result repaid funded by two unsecured loans totalling of the transition. £2.3m were provided major shareholders on less expensive and more flexible terms. Separate development funding is sought for the construction and project delivery costs. The Group had total borrowing net of cash and cash equivalents of £24.408m at 31 March 2022 (2021: £26.874m) with a gearing level of 43.4% (2021: 57.0%). The Group has operated within its authorised facilities. The bank facilities were With the pipeline of consented development projects to finance, the Group is having discussions to put in place funds to progress to construction as conditions allow. Debt servicing costs continue to be a major expense to the Group and the board considers monthly the merits of entering into interest rate swap arrangements to fix interest on part of the amended in December 2020 to permit the carve total debt. There are currently no interest rate out of the Sugar Quay site provided as security swap agreements in place. to a different lender for the purchase of the Sutton Road site. The facilities were amended again in March 2021 to extend the additional TA X AT I O N £2m RCF until May 2022 and to amend certain covenants in line with Covid crisis impacted trading expectations. In September 2021 facilities were amended to permit the transfer of the land for the Harbour Arch Quay to be transferred to the subsidiary undertaking the development and to allow the development lender to take security thereon. After the year end, the Group gained the bank’s consent to allow two unsecured loans with major shareholders to be taken out upon conditions that the loan to purchase the Sutton The standard rate of tax applicable to the Group is 19% (2021: 19%). The overall tax charge for the year is £0.820m (2021: credit of £0.198m). £1.116m of deferred tax charges relating to the revaluation of owner occupied property was recognised through Other Comprehensive Income. No current tax is due on the year’s results with the tax charge resulting from movements in timing differences. Road site was repaid and evidenced by release D I V I D E N D P O L I C Y of security to that lender. The bank facility of £26.9m at 31 March 2022 (2021: 27.0m) reduced to £24.9m in May 2022 after the £2m Covid support RCF expired. The bank facility expires in December 2023. The Taking into account the current level of bank borrowing and consequent debt servicing costs and the Group’s need for bank facility headroom to maintain current operations and the planning stages of future real estate development, the Board does not recommend a dividend on the year’s results. The Group regards itself as an terms of the facility agreement provide for a 12 asset-based investment with its opportunities to month extension of the committed facility. The reduce bank debt and realise value vested in the board is currently considering this option and success of future development projects. the alternative or renewal of the bank facility, one of which will need be put in place before 31 March 2023. 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 19 July 2022 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 12 F O R T H E Y E A R E N D E D 3 1 M A R C H 2 0 2 2 STRATEGIC REPORT P R I N C I PA L 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 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. Principal Risks and Uncertainties are as follows: P R I N C I P A L R I S K / U N C E R TA I N T Y Financing 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 availability of adequate borrowing and other funding facilities The Group’s current banking facilities to a maximum of £24.9m expire in December 2023, and negotiation of extension/renewal of facilities will start in Summer 2022 to have sufficient future financing in place by March 2023.. Development is and will be funded through specific loans and equity capital. The Group has raised £9.250m equity finance since January 2018 to fund project and capital maintenance expenditure. Major shareholders have demonstrated their ongoing support through their participation in new equity issue and in the provision of unsecured loans (£2.3m) in May 2022 to support repayment of a loan. Compliance with bank terms and covenants 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. Interest rate rises The Group currently has total debt exceeding £24m and any further material increase in interest rates could have a significant impact on debt servicing costs. The Group regularly reviews interest rates and its exposure. Interest swap agreements may be entered into to manage interest risk exposure, as agreed by the board. Reputation The impact of negative publicity about the Group, its operations or stakeholders The Group retains the advice of public relations specialists to advise on potentially contentious matters. Key stakeholders are consulted with as appropriate to the matter. Media publicity about the Group is actively followed and reported where it is misleading or untrue. Risk of materials cost rises and ultimate disposal of apartments to allow repayment of development loans. The Group secured priced contracts on all subcontractor packages for the development. The apartments are due to be complete in Spring 2023. To date enquiries for the apartments have been strong with reservation deposits already placed on five apartments, including the penthouse at full asking price. Construction Risk - The Group is undertaking a development project of 14 apartments at Harbour Arch Quay. A P P R O V A L The Strategic Report from pages 1 to 12 was approved by the Board of Directors on 19 July 2022 and signed on its behalf by P H I L I P B E I N H A K E R E X E C U T I V E C H A I R M A N 13 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 F O R T H E Y E A R E N D E D 3 1 M A R C H 2 0 2 2 GOVERNANCE D I R E C TO R S A N D A D V I S O R S Company Number 02425189 Directors Philip H. Beinhaker (Executive Chairman) Corey B. Beinhaker (Chief Operating Officer) Natasha C. Gadsdon (Finance Director) Graham S. Miller (Non-Executive Director) Sean J. Swales (Non-Executive Director) Secretary Natasha C. Gadsdon Registered Office Independent Auditors Nominated Broker and Nominated Advisor Registrar Bankers Sutton Harbour Office Guy’s Quay Office Sutton Harbour Plymouth PL4 0ES Tel: 01752 204186 www.suttonharbourgroup.com PKF Francis Clark Centenary House Peninsula Park Rydon Lane Exeter EX2 7XE Strand Hanson Limited 26 Mount Row Mayfair London W1K 3SQ Computershare Services plc PO Box 82 The Pavilions Bridgwater Road Bristol BS99 7NH National Westminster Bank plc 135 Bishopsgate EC2M 3UR Sutton Harbour Group plc – Annual Report & Financial Statements 2022 14 F O R T H E Y E A R E N D E D 3 1 M A R C H 2 0 2 2 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 2022. 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 19 July 2022 the Group’s register of shareholdings showed the following interests in 3% or more of the Group’s share capital: FB Investors LLP Crystal Amber Fund Limited Rotolok (Holdings) Limited % O R D I N A R Y S H A R E S 72.91 10.76 5.70 94,746,750 13,978,650 7,409,996 The Directors are not aware of any other interest in its share capital in excess of 3%. 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 Group as at 31 March 2022 are set out below. Philip H. Beinhaker Corey B. Beinhaker Graham S. Miller Natasha C. Gadsdon Sean J. Swales There has been no dividend paid or proposed in the year. 2 0 2 2 - - 610,762 27,838 10,000 2 0 21 - - 450,700 24,839 3,199 15 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 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 P H I L I P H . B E I N H A K E R G R A H A M S . M I L L E R Aged 81. Appointed Non-Executive Director and Chairman on 22 January 2018 following the ‘Partial Offer and Acceptance’ which precipitated a change in control of the Group whereby FB Investors LLP acquired a controlling interest in the Group’s shares and appointed Executive Chairman in April 2018. Philip is a Director and the Chairman of Beinhaker Design Services Limited, which is a member of FB Investors LLP. He is also a member of the Audit Committee. Philip served as co-founding partner and Chief Executive Officer of IBI Group, a world-leading firm in architecture, engineering and project management from its formation in 1974 until 2013, continuing as a Senior Director of the IBI Group Management Partnership. C O R E Y B . B E I N H A K E R Aged 52. Appointed Executive Director and Chief Operating Officer on 23 October 2019. Prior to his involvement with Sutton Harbour Group, Corey Beinhaker worked for IBIB Group Consultants (Israel) Limited from 2010 to 2017 latterly as its Chief Executive Officer where he, amongst other things, was contract manager for a number of significant projects including the Tel Aviv Red 10 Line Underground Station design and the design and technical specification for the traffic management for the inter-urban network in Israel. Corey Beinhaker has been working closely with the Group since January 2018 when FB Investors LLP acquired a 72.65% holding in the Group’s share capital, initially through Beinhaker Design Services Limited (a Company of which he is a Director) and then as an employee of Sutton Harbour Group from July 2019. Aged 59. Appointed Non-Executive Director and Chairman on 23 September 2013, stepping down from the Chairman role on 22 January 2018. 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. S E A N J . S W A L E S Aged 54. Appointed Non-Executive Director in December 2009, he is a Chartered Accountant and Group Managing Director of Rotolok (Holdings) Limited, the Group’s third largest shareholder. He is also a member of the Audit and Remuneration Committees. N ATA S H A C . G A D S D O N Aged 52. 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 Group Secretary since 2001. In accordance with the Group’s Articles of Association Philip H. Beinhaker and Graham S. Miller 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 10. 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 Group’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 Group’s auditors are aware of that information. On behalf 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 19 July 2022 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 16 F O R T H E Y E A R E N D E D 3 1 M A R C H 2 0 2 2 GOVERNANCE STATEMENT OF COMPLIANCE WITH QCA CORPOR ATE GOVERNANCE CODE S E N I O R I N D E P E N D E N T D I R E C T O R ’ S I N T R O D U C T I O N The Group is the owner and operator of specialist marine assets (which include two marinas and a commercial fishmarket), car parks, real estate investment properties and is the holder of land assets identified for regeneration. The Group undertakes new developments on land it owns or redevelops existing assets to realise the value of land holdings or to retain as investment assets. The Group’s assets and operations are all located in Plymouth, Devon, primarily at Sutton Harbour. Our vision is to conserve and improve the historic Sutton Harbour and its immediate environs for harbour users, local residents, businesses, visitors to the area and for the wider stakeholder community in the City of Plymouth. To achieve this the Board is concerned with setting the strategy to facilitate maintenance of existing land, property and specialised assets and also the regeneration of underutilised assets to improve the attractiveness of the area and to ensure it has a sustainable and vibrant future and to deliver shareholder value growth. The Group’s corporate governance framework manages the decision-making processes of the Board having regard to opportunities and risks of specific strategies and the objective to deliver value growth to shareholders in the medium-long term. G R A H A M M I L L E R S E N I O R I N D E P E N D E N T D I R E C TO R ( N O N - E X E C U T I V E ) The Board of Directors OFFICE APPOINTEE COMMIT TEE ROLES AT TENDANCE OF BOARD/ COMMIT TEE MEETINGS SHAREHOLDING AND INDEPENDENCE Executive Chairman Senior Independent Director (Non- Executive) Philip Beinhaker Audit Committee Member Board Meeting – 9/9 Remuneration Committee Chair Audit Committee – 2/2 Nomination Committee Chair Remuneration Committee – 1/1 Nomination Committee - 0/0 Graham Miller Audit Committee Chair Board Meeting – 9/9 Remuneration Committee Member Audit Committee – 2/2 Nomination Committee Member Remuneration Committee – 1/1 Nomination Committee – 0/0 Non - Sean Swales Audit Committee Member Board Meeting – 9/9 Executive Director Remuneration Committee Member Audit Committee – 2/2 Nomination Committee Member Remuneration Committee – 1/1 Nomination Committee – 0/0 Board Meeting – 9/9 Board Meeting – 9/9 Corey Beinhaker Natasha Gadsdon Chief Operating Officer (Executive) Finance Director (Executive) and Group Secretary 17 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 Philip Beinhaker has no personal shareholding in the Group. FB Investors LLP, which owns 72.91% of the issued share capital, is jointly owned by Beinhaker Design Services Limited and 1895 Management Holdings UIC. Philip is a Director and Chairman of Beinhaker Design Services Limited. Graham Miller and his spouse together hold 610,762 shares in the Group and he is the Senior Independent Director on the Board. Graham was appointed a Director in 2013. Sean Swales holds 10,000 shares in the Group. He is also the corporate representative of Rotolok (Holdings) Limited which has an interest in 7,409,996 (5.70%) of the Group’s shares. Sean was appointed a Director in 2009. Until 10 January 2018, Rotolok (Holdings) Limited was interested in 28.79% of the Group’s shares and was reported as having significant influence. Sean Swales is now regarded as an independent Director as Rotolok (Holdings) Limited no longer has significant control and the board composition has changed. Although Sean has served twelve years on the board, the continuity of his experience through the recent majority shareholder change and board composition transition is valued. Corey Beinhaker holds no shares in the Group. FB Investors LLP, which owns 72.91% of the issued share capital, is jointly owned by Beinhaker Design Services Limited and 1895 Management Holdings UIC. Corey Beinhaker is a Director and 100% shareholder of Beinhaker Design Services Limited. Natasha Gadsdon holds 27,838 shares in the Group and has been an Executive Director since 2004. She also holds options over 143,340 ordinary shares exercisable under provisions of the Group Share Option Plan rules. The Board composition has undergone a transition, which started in January 2018 after a change in majority ownership of the Group and is S H A R E H O L D E R R E L AT I O N S H I P A G R E E M E N T W I T H F B I N V E S T O R S L L P that such decisions can only be taken where either Graham Miller or Sean Swales are present with Philip Beinhaker and Corey Beinhaker. now complete. The Relationship Agreement dated 23 The key procedures which the Directors have During the year, the Board has re-evaluated its November 2017, addresses amongst other things, established with a view to providing effective composition and is satisfied with the current the composition of the SHG Board providing FB internal controls are as follows: mix of experience of board members and Investors with the ability to appoint up to two representation of large, medium and minority Directors to the SHG Board (one of whom may size shareholder interests. The performance be the Chairman for so long as it holds, directly of the board is assessed from month to month or indirectly, 50 per cent or more of the issued by monitoring the progress made with specific voting share capital of the Group). It contains projects, with reference to achievement of certain restrictions in relation to Directors milestones (eg. Design, planning submission, appointed by FB Investors voting at meetings of planning consent, financing, project delivery, the SHG Board on matters in which FB Investors financial result) and for ongoing trading activities is interested. Under the Relationship Agreement, by reference to Key Performance Indicators. FB Investors has agreed not to vote in relation Project and trading outcomes are measured to any resolution put to SHG Shareholders to against original project appraisals and budgets, cancel its admission to trading on AIM, pursuant and in the context of the evolving business to Rule 41 of the AIM Rules, for a minimum conditions. The Non-Executive Directors’ period of two years following the Partial Offer knowledge of the Group’s interests and experience of other organisations in which unless such resolution is recommended by those Board members of the Board not appointed by they hold board level positions, allows critical FB Investors. FB Investors has nominated Philip review of Group’s current operations and Beinhaker and Corey Beinhaker to serve as proposals for new projects and provides the Directors of Sutton Harbour Group plc. basis of appropriate challenge to the Group’s management. Philip Beinhaker is appointed Executive Chairman (since April 2018, previously Non-Executive Chairman from January – April 2018) and presides over the business of the Board as well as directing and overseeing the operations of the Group through the senior management team. Corey Beinhaker was appointed Chief Operating Officer in October 2019 with a wide-ranging role focusing on Group operations and regeneration projects. Graham Miller, the previous independent and Non-Executive Chairman, is now the Senior Independent Non-Executive Director on the Board. He is the main contact to handle matters where other Directors have a conflict of interest. Sean Swales, a Non-Executive Director since December 2009. A Chartered Accountant, he B O A R D D E C I S I O N M A K I N G , Q U O R U M A N D I N T E R N A L C O N T R O L 9 full Board meetings were held in the financial year to 31 March 2022 (attendances are summarised in the table above). Prior to each meeting an agenda together with narrative business reports and supporting appendices are circulated to each Board member. Matters for Board decision are highlighted in advance of the meeting. The advice of non-board where additional specialist information is required to inform a decision. Following the change of majority shareholder in early 2018 and Board level changes, the Board considers its effectiveness annually and has concluded that its present composition, taking into account the size of the Company, its AIM listing, the skills and experience it requires and current diversity of continues to contribute actively to the Board due Board personnel, is appropriately balanced with to his financial specialism, property investment experienced appointees. and development expertise and regional knowledge. The Board is responsible for setting the strategy to deliver shareholder value growth over the Natasha Gadsdon, a Chartered Accountant, is medium to long term. Decisions about financing, appointed Finance Director and Group Secretary. acquisitions and disposals, project and capital She is responsible for financial reporting and compliance and oversees risk management, human resources, corporate responsibility. She is responsible for preparing detailed monthly reports to the Board. expenditure, senior staffing, key third party appointments, budget approval, approval of annual and interim financial reports, dividend policy, insurances and strategic direction of the trading businesses are all matters reserved for the Board’s decision. To ensure decisions are made with independent input it has been agreed 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. 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. G O V E R N A N C E C O M M I T T E E S The roles of the Board’s governance committees The Remuneration Committee within its terms of reference determines and agrees with the Board the employment terms and remuneration packages of the Executive Directors and other senior personnel. The Executive Directors make recommendations to the Board on the remuneration of Non-Executive Directors. Independent advice on remuneration is taken where considered appropriate. The Audit Committee has written terms of reference and provides a forum for reporting by the Group’s auditors. The Committee may request Executive personnel to attend all or part of any meeting as the Committee considers appropriate. The Audit Committee meets two or three times a year to review the Interim and Annual Reports and Accounts, agree the Audit Plan, confirm the Auditor engagement, review risk management and insurance provision, assess the adequacy of the Group’s finance personnel colleagues and professional advisors is sought are set out below. Sutton Harbour Group plc – Annual Report & Financial Statements 2022 18 and any other matters pertaining to financial Public Bodies management, the statutory audit and tax The Group maintains an active relationship compliance. In accordance with FRC Ethical Standard prohibiting auditors of AIM listed companies from offering services to prepare computations of taxation, the Audit Committee engaged a different firm of accountants, from the auditors, to undertake this work. The Nomination Committee is responsible for proposing candidates to the Board having regard to its balance, expertise and structure. R I S K M A N A G E M E N T The Group maintains a register of risks, split by category, and identifies potential impact and likelihood, together with the response deployed to manage/mitigate the risk. The risk register with Plymouth City Council, the Local Planning Authority, the Environment Agency and other public agencies in connection with a wide range of issues relating to the land and property assets held by the Group. Open public consultation is undertaken in relation to proposed applications to the Local Planning authority. Customers The Group maintains a number of websites and social media platforms, to communicate with different customer groups in addition to direct email and postal communications. The Company has established a communications forum to meet with the local fishing industry on a quarterly basis. Surveys of marina customer satisfaction are undertaken annually. Employees is regularly updated with input from across the The Group is committed to paying, as a Group and external advice is taken if required. Included in the monthly reports to the Board, minimum, the living wage as recommended by the Living Wage Foundation, to its employees. new risks are identified together with proposals Pay reviews are undertaken at least annually to manage/mitigate the risk. Group Bankers and Insurers are kept appraised of business risks and vulnerabilities on an ongoing basis. Annual independent health and safety audits are undertaken with the results reported to following a detailed review of market rates in the area to ensure pay remains competitive and attractive. The Group undertakes appraisals for all employees annually, arranges monthly contact meetings for all employees with their line the Board. Advice from the appointed external manager, sponsors their essential qualifications Health and Safety Advisor is taken where appropriate S TA K E H O L D E R E N G A G E M E N T A N D R E S P O N S I B I L I T I E S T Investor Relations The Group maintains an active dialogue and continuing professional development (as appropriate to role) and has a schedule of monthly function meetings with a Director present at each. C O R P O R AT E V A L U E S Refer also to the Corporate, Social Responsibility with major institutional investors and invites and Environment Report on page 19. Senior shareholders to open days, which are held Managers are regularly invited to present at from time to time, which include a tour of the Board Meetings and to respond to questions assets. The Board welcomes the participation and this forum sets the cultural tone. At annual of shareholders at the Annual General Meeting appraisals performance of employees is reviewed with the opportunity to answers questions of against specific targets and conduct in line with any Board member offered. The Annual Report the Group’s standards of conduct as set out in and Accounts, Interim Reports and other announcements and presentations are the main formalised communications to shareholders. The Annual General Meeting and Open Day are opportunities for two-way communication between the Board and shareholders. The Group the foreword of the Employee Handbook. 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 Secretary is normally the first point of contact for 19 July 2022 any general enquiries or arrangement regarding shareholder meetings. Email: n.gadsdon@sutton-harbour.co.uk 19 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 F O R T H E Y E A R E N D E D 3 1 M A R C H 2 0 2 2 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 C O R P O R AT E C U LT U R E The Group has a good health and safety • Ensure that it meets and if plausible exceeds record with no enforcement notices and no environmental legislative requirements. The Group’s executive management team sets the tone of professionalism and proactivity. Actions are prioritised daily in collaborative meetings to make the most beneficial use of management time to ensure trading progress and project delivery are on track to achieve performance targets. The Group has made good use of virtual meeting technology to 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 Group, a Statutory Harbour Authority, and a wholly owned subsidiary of the improve efficiency and inclusiveness of sharing of Group, is committed to undertaking statutory information and ideas. This approach has allowed duties in accordance with the standards defined the Group to continue to make good progress within the Port Marine Safety Code. To ensure towards its targets during the last two years in full compliance with the code an independent which trading conditions were impacted by the audit of the Sutton Harbour Safety Management • Use and operate sound procedures to avert water pollution in Sutton Harbour. • Tackle the issues that arise from car travel by introducing ways of reducing the impact of travel to work and business mileage. • Review its purchasing requirements and practices also whenever possible to do so make environmentally sound purchasing decisions and increase local purchasing. System is carried out annually. The Maritime and Coastguard Agency audit took place in March 2015. 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 difficulties presented by the Covid pandemic. 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 E N V I R O N M E N TA L I S S U E S employees, customers and others who are The Board has agreed the following directly or indirectly affected by the Group’s Environmental Statement: operations. The Group’s Health and Safety Committee is chaired by Natasha Gadsdon and has The environment plays a key role in the continuing success of the Sutton Harbour Group and the Group recognises that it needs to set representation from all Group activities. The itself achievable environmental standards. Health and Safety Committee is an open forum and minutes of the meetings are made available to all staff upon request. Committee meetings are also attended by the Group’s Health and Safety Officer and an Independent Health and Safety Consultant. The Committee has a The Group has looked at the areas of its business which could have both positive and negative impacts on the environment and has identified the following policy aims to enhance its overall environmental performance. comprehensive agenda and is briefed on new The Group is working to: legislation or regulation by the Independent Health and Safety Consultant. The Group does not currently undertake direct construction on site. An excellent Health and Safety management record is a key criterion in the selection of contractors. • Reduce its Carbon Footprint by minimising energy use and cutting out energy waste. • Minimise the amount of waste it creates and ensures that it recycles as much of the waste generated as is feasible. The area of Sutton Harbour is located in the heart of Plymouth. The Group supports various community and tourist initiatives. The Group has a long-established commitment to the community and its neighbourhood. Throughout its regeneration work, the Group has undertaken extensive public consultation which has led to the reshaping and design of many successful quality regeneration projects surrounding the historic harbour. 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. The Group supports local charities and other community initiatives. 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 19 July 2022 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 20 F O R T H E Y E A R E N D E D 3 1 M A R C H 2 0 2 2 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: Philip Beinhaker – 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 car allowance 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; they 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 Group, although there is no specified minimum holding. B O N U S P AY M E N T S T O 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 2022 were £5,000 in respect of Corey B. Beinhaker (2021: £nil) and £5,000 in respect of Natasha C. Gadsdon (2021: £1,900). S H A R E O P T I O N S An Inland Revenue approved Group Share Option Scheme was established in November 2019 for the Remuneration Committee to make discretionary awards of share options to certain Executive Directors and other Group personnel to reward performance. On 23 June 2021, Natasha Gadsdon was awarded 12,000 share options with an exercise price of 25p per share. These options are not expected to vest before 8 July 2023, subject to the scheme rules. The expense in connection with the unexercised share options is calculated using a Black Scholes model and expensed annually until exercise or lapse of options. 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 Group is as follows: Fees Other Emoluments Pension Contributions Expense of Unexercised Share Options 2 0 2 2 £ 0 0 0 144 285 32 6 467 2 0 21 £ 0 0 0 144 275 32 2 453 21 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 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 2 2 Philip H. Beinhaker Graham S. Miller Corey B. Beinhaker Natasha C. Gadsdon Sean J. Swales F O R T H E Y E A R T O 3 1 M A R C H 2 0 2 1 Philip H. Beinhaker Graham S. Miller Corey B. Beinhaker Natasha C. Gadsdon Sean J. Swales Directors’ salaries £000 Taxable benefits £000 Bonus Payments £000 Share Options £000 Directors’ fees £000 - - 160 101 - 261 - - - 14 - 14 - - 5 5 - 10 - - - 6 - 6 101 23 - - 20 144 Directors’ salaries £000 Taxable benefits £000 Bonus Payments £000 Contractual Payments £000 Directors’ fees £000 - - 160 99 - 259 - - - 14 - 14 - - - 2 - 2 - - - 2 - 2 101 23 - - 20 144 Total £000 101 23 165 126 20 435 Total £000 101 23 160 117 20 421 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 22 The pension contributions made in respect of the Executive Directors to the Group’s defined contribution scheme were: Corey B. Beinhaker Natasha C. Gadsdon C O N T R A C T S 2 0 2 2 £ 0 0 0 - 32 32 2 0 21 £ 0 0 0 - 32 32 On 27 June 2018, the Group entered into a revised 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. On 23 October 2019, the Group entered into a service contract with Corey B. Beinhaker. Under this agreement he is employed as a full time Executive Director with a one year rolling contract. He was appointed Chief Operating Officer in October 2019. The Non-Executive Directors are appointed with three months’ notice and the Executive Chairman has a six month notice period. On Behalf of the Board P H I L I P H B E I N H A K E R E X E C U T I V E C H A I R M A N 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 19 July 2022 23 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 GOVERNANCE Statement of Directors’ Responsibilities For the year ended 31 March 2022 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 UK adopted IAS, and the Parent 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 Parent 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 UK adopted IAS 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 Group and Parent Company will continue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s transactions and disclose with reasonable accuracy at any time the financial position of the Group 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 Group and the Parent Company 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 Group’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 Group’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 G R O U P S E C R E TA R Y 19 July 2022 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 24 GOVERNANCE Independent Auditor’s Report For the year ended 31 March 2022 OPINION We have audited the financial statements of Sutton Harbour Group plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the year ended 31 March 2022 which comprise the Consolidated Income Statement, the Consolidated Statement of Other Comprehensive Income, the Consolidated and Company Balance Sheets, the Consolidated and Company Statement of Changes in Equity, the Consolidated Cash Flow Statement, and the notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in the preparation of the group 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 including FRS 101 “Reduced Disclosure Framework” (United Kingdom Generally Accepted Accounting Practice). 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 2022 and of the group’s loss for the year then ended; • The group financial statements have been properly prepared in accordance with UK-adopted IAS; • The parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and EMPHASIS OF MATTER – VALUATION OF INVENTORY We draw attention to the Strategic Report and note 4 of the consolidated financial statements which describes the potential impact of government future planning permission applications upon the valuation of the Plymouth airport site, which is held as inventory on the Balance Sheet at £13.2m. The ultimate outcome of these future applications cannot be presently determined, and the financial statements do not reflect any impairment that may be required if the result is unfavourable. Our opinion is not modified in respect of this matter. AN OVERVIEW OF THE SCOPE OF OUR AUDIT We planned and performed our audit by obtaining an understanding of the group and its environment, including the accounting processes and controls, and the industry in which it operates. The group comprises 12 wholly owned subsidiaries • We performed statutory audits on 3 entities (Sutton Harbour Group plc, Sutton Harbour Company and Plymouth City Airport Limited). • We performed audit procedures on risk significant balances and transactions in Sutton Harbour Services Limited, Sutton Harbour Car Parks Limited, Sutton Harbour Projects Limited, Sutton East Holdings Limited and Harbour Arch Quay Limited. • We performed analytical review procedures on Sutton Harbour Property and Regeneration Limited. • Remaining components are dormant. • The financial statements have been prepared in accordance with the requirements of the Companies Act 2006. The components within the scope of audit work covered 97% of group revenue, 100% of group loss before tax and 97% of group net assets. BASIS FOR OPINION We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with those requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. KEY AUDIT MATTERS We have determined the matters described below to be the key audit matters to be communicated in our report. Key audit matters include the most significant assessed risks of material misstatement, including those risks that had the greatest effect on our overall audit strategy, the allocation of resources in the audit and the direction of the efforts of the audit team. In addressing these matters, we have performed the procedures below which were designed to address the matters in the context of the financial statements as a whole and in forming our opinion thereon. Consequently, we do not provide a separate opinion on these individual matters. 25 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 25 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 K E Y A U D I T M AT T E R Valuation of Investment Properties and Owner Occupied Land and Buildings The group adopts a policy of revaluation for its owner-occupied land and buildings as well as its investment properties, with all such properties stated at fair value. Under IFRS 13, fair value measurement is required to be based on the ‘highest and best use’ and in most cases an entity’s current model is presumed to be its highest and best use, although consideration needs to be made on a property by property basis to ensure that market opportunities and conditions do not suggest otherwise. Investment properties are held at £18m and owner occupied land and buildings are held at £34.4m. Due to the significance of the valuation for the financial statements and their inherently judgemental nature, we have considered this area as a key audit focus. An external valuation has been performed at 31 March 2022. R E S P O N S E A N D C O N C L U S I O N The main procedures performed on the valuation assessment and areas where we challenged management were as follows: • Agreeing the valuations recognised in the accounts to the reports prepared by a professional third party. • Assessing the professional valuation firm as independent and sufficiently competent, with respect to qualifications, experience and reputation. • Considering the appropriateness of the assumptions that had the most material impact. Key variables in the valuations include Fair Maintainable Operating Profit, yields and market rates. • Considering deferred tax treatment in respect of the valuations in line with IAS 12. • Considering the appropriateness of the disclosures made in the financial statements, in particular as regards the judgements and estimates in respect of the fair value movements through profit and loss and other comprehensive income. Conclusion We have reviewed the external valuation performed at 31 March 2022, along with other available information, in the Board’s determination of fair values at 31 March 2022 and are satisfied that the carrying values of investment properties and owner occupied land and buildings are materially correct. We are satisfied that deferred tax Valuation of Former Plymouth City Airport Site Our work included Within development inventory the group holds the former airport site at a carrying value of £13.2m. IAS 2 requires inventory to be held at the lower of cost and net realisable value. As detailed in the Strategic Report and note 4, a Government Inspectors’ Report was issued in March 2019 which supported a 5-year safeguard period to allow time for a potential airport operator to bring forward a plan for a licensed general aviation airport. This creates significant uncertainty in the Group’s ability to realise value of this site. • Reviewing management’s assessment of the carrying value of the site, which includes the latest external opinion/appraisals and discussed these with management to obtain an understanding of the current situation. • Critically assessing and challenging the assumptions used in these reports. • Reconfirming ownership of the site. • Vouching a sample of current year expenditure to source documentation. • Considering the adequacy of the related disclosures in the financial statements. Conclusion We are satisfied with the current treatment adopted by the directors’ based on our work. However, the safeguarding period until 2024 impacts the value and timing of any potential development of the site as detailed in the Strategic Report and note 4. This is the reason for the Emphasis of Matter paragraph above. Valuation Of Development Sites Our work included The group has a number of development sites, in particular Sugar Quay and Harbour Arch Quay, with substantial balances held in WIP. The requirement is to carry these at the lower of cost and net realisable value. The development of Harbour Arch Quay commenced in the year ended 31 March 2022. • Focussing on the material balances within Group inventory, being Sugar Quay (£10.7m), incorporating Sutton Road acquisition (£4m) and Harbour Arch Quay (£2.2m). • Reviewing management’s assessment of the carrying values of the key sites, which includes the planning permission obtained, site appraisals and overall project profitability. • Critically assessing and challenging the assumptions used in those site appraisals in the light of available external market data and our experience of the residential construction sector (appreciating the specialist nature of these projects). • Vouching a sample of expenditure to source documentation, including the purchase of Sutton Road land. • Reconfirming ownership of the sites. Specifically for the ongoing development at Harbour Arch Quay • Reviewing third party reports on the progress of the development up to June 2022, including agreeing costs incurred per the report to the accounts and the original budget. We have considered the risk in potential overruns in costs and have confirmed that a significant portion of contracts with subcontractors are fixed and agreed, meaning minimal risk in this area. • We have also reviewed management’s considerations of expected book profit on the development and headroom within this, suggesting no impairment is required. Conclusion As a result of the procedures performed, we are satisfied that development costs are stated at the lower of cost and net realisable value. Sutton Harbour Group plc – Annual Report & Financial Statements 2022 25 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 23 OUR APPLICATION OF MATERIALITY Materiality for the group financial statements as a whole was set at £890,000. We determined materially by reference to the group’s total assets. We consider total assets to be an appropriate measure for a group of companies with significant value in investments and development activities which are fundamental to the current and future trading of the group. Materiality represents 1% of group’s total assets as presented on the face of the Consolidated Balance Sheet. We report to the Audit Committee any corrected or uncorrected identified misstatements exceeding £26,700, in addition to other identified misstatements that warrant reporting on qualitative grounds. Materiality for the parent company financial statements was set at £363,000. This has been determined with reference to the total assets of the parent company, which we consider to be one of the principal considerations for members of the company in assessing the performance of the company. Materiality represents 1% of the parent company’s total assets as presented on the face of the Balance Sheet. We report to the Audit Committee any corrected or uncorrected identified misstatements exceeding £10,890, in addition to other identified misstatements that warrant reporting on qualitative grounds The range of materiality at the two components subject to full scope audit is £133,000 - £481,000. CONCLUSIONS RELATING TO GOING CONCERN In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the group’s and parent company’s ability to continue to adopt the going concern basis of accounting included: • Reviewing and challenging management’s assessment of going concern and key assumptions (including assessment at the planning stage of the audit process). Our work included assessing the timing and amount of turnover and related cashflows in the forecast models. We also tested the integrity and mathematical accuracy of the models used. is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. OPINIONS 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 the financial statements; and • The strategic report and the directors’ report have been prepared in accordance with applicable legal requirements. MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION In the light of the knowledge and understanding of the group and parent company and its environment obtained in the course of the audit, we have not identified any material misstatements in the strategic report or the directors’ report. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: • adequate accounting records have not been kept, 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 • Reviewing and assessing the appropriateness of management’s sensitivity analysis including changes in turnover and related cashflows. • certain disclosures of Directors’ remuneration specified by law are not made; or • Reviewing the bank facility agreement dated 26 March 2021 which confirmed £22.4m in term loans and a £2.5m revolving credit facility in place until December 2023. • Assessing the amount of available facilities and other options available to the group and expected headroom based on the forecast over the next 12 months and covenant compliance. • Evaluating the reliability of the forecast through discussion with management, review of post year end trading and considering the historic reliability of forecasts compared to actual results. • Reviewing going concern related disclosures in the financial statements to ensure they are appropriate. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group’s and parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. OTHER INFORMATION The other information comprises the information included in the annual report and financial statements, other than the group and parent company financial statements and our auditor’s report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility • we have not received all the information and explanations we require for our audit RESPONSIBILITIES OF DIRECTORS As explained more fully in the directors’ responsibilities statement set out on page 23, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the group’s and parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group and parent company or to cease operations, or have no realistic alternative but to do so. AUDITORS RESONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. 26 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 24 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 USE OF OUR REPORT This report is made solely to the parent 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 parent 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 parent company and the parent company’s members as a body, for our audit work, for this report, or for the opinions we have formed. G L E N N N I C O L S E N I O R S TAT U T O R Y A U D I T O R PKF Francis Clark Statutory Auditor Centenary House Peninsula Park Rydon Lane Exeter EX2 7XE 19 July 2022 Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below. We obtained an understanding of the legal and regulatory framework applicable to the parent company, the group and the industry in which it operates. We identified the principal risks of non-compliance with laws and regulations as relating to breaches around health and safety and specifically the Port Marine Safety Code. We also considered those laws and regulations that have a direct impact on the preparation of the financial statements such as financial reporting legislation (including the Companies Act 2006) and relevant taxation legislation. We considered the extent to which any non-compliance with these laws and regulations may have a negative impact on the group’s ability to continue trading and the risk of a material misstatement in the financial statements. We also evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements and determined that the principal risks related to the misstatement of the result for the year and impairment in relation to development WIP. We considered the adequacy of the design and implementation of internal controls in relation to supplier payments and cash collection. Based on this understanding we designed our audit procedures to identify irregularities. Our procedures involved the following: • Valuation of development WIP was assessed as a Key Audit Matter and our work in respect of that is detailed above. • We made enquiries of senior management as to their knowledge of any non-compliance or potential non-compliance with laws and regulations that could affect the financial statements. As part of these enquiries we also discussed with management whether there have been any known instances of material fraud. • We identified the individuals with responsibility for ensuring compliance with laws and regulations and discussed with them the procedures and policies in place. • We obtained and reviewed the annual review of the Port Marine Safety Code and general health and safety management of Sutton Harbour performed by an external health and safety consultant. • We reviewed minutes of meetings of senior management and those charged with governance. • We challenged the assumptions and judgements made by management in its significant accounting estimates. • We audited the risk of management override of controls, including through substantively testing journal entries and other adjustments for appropriateness, and evaluating the business rationale of significant transactions outside the normal course of business. Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements. This risk increases the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements as we are less likely to become aware of instances of non- compliance. The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment, collusion, omission or misrepresentation. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. Sutton Harbour Group plc – Annual Report & Financial Statements 2022 27 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 25 Consolidated Income Statement For the year ended 31 March 2022 Revenue Cost of sales Gross profit Fair value adjustments on investment properties and fixed assets Administrative expenses Operating profit/(loss) Finance income Finance costs Net finance costs Profit/(loss) before tax from continuing operations Taxation (charge)/credit on (loss)/profit from continuing operations (Loss) for the year from continuing operations (Loss) for the year attributable to owners of the parent Basic and diluted earnings/(loss) per share from continuing operations Diluted earnings/(loss) per share from continuing operations (Loss)/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 32 to 53 are an integral part of these consolidated financial statements. 28 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 26 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 Note 5 13,14 5,6 9 9 10 2022 £000 7,194 (4,846) 2,348 195 (1,193) 1,350 - (789) (789) 561 (820) (259) (259) 2021 £000 65,400 (3,638) 1,762 (2,211) (1,171) (1,620) - (753) (753) (2,373) 198 (2,175) (2,175) 12 (0.20p) (1.88p) (0.20p) (1.88p) Note 13 2021 £000 (2,175) 3,245 - 3,245 1,070 2020 £000 (988) 1,338 - 1,338 350 Consolidated Statement of Other Comprehensive Income For the year ended 31 March 2022 (Loss) for the year Items that will not be reclassified subsequently to profit or loss: Revaluation of property, plant and equipment Deferred tax in respect of property revaluation 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 33 to 57 are an integral part of these consolidated financial statements. Note 13 10 2022 £000 (259) 7,016 (1,116) - 5,900 5,641 2021 £000 (2,175) 3,245 - - 3,245 1,070 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 29 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 27 Consolidated Balance Sheet As at 31 March 2022 Non-current assets Property, plant and equipment Investment property Inventories Current assets Inventories Trade and other receivables Tax recoverable Cash and cash equivalents Total assets Current liabilities Other Loans Trade and other payables Lease liabilities Deferred income Provisions Non-current liabilities Bank loans Lease liabilities Deferred government grants Deferred tax liabilities Provisions Total liabilities Net assets Issued capital and reserves attributable to owners of the parent Share capital Share premium Other reserves Retained earnings Total equity Note 13 14 17 17 18 19 20 22 23 21 25 20 23 21 16 25 26 2022 £000 36,398 18,195 13,216 67,809 18,734 1,810 9 970 21,523 89,332 2,275 1,880 165 2,225 - 6,545 22,863 75 646 2,992 - 2021 £000 29,766 17,845 12,962 60,573 16,359 2,396 6 928 19,689 80,262 - 1,730 141 1,819 56 3,746 27,475 186 646 1,056 - 26,576 29,363 33,121 33,109 56,211 47,153 16,406 13,972 22,180 3,653 56,211 16,266 10,695 16,280 3,912 47,153 The notes on pages 33 to 57 are an integral part of these consolidated financial statements. The Financial Statements on pages 28 to 32 were approved and authorised by the Board of Directors on 19 July 2022 and were signed on its behalf by: 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 30 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 28 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 Consolidated Statement of Changes in Equity For the year ended 31 March 2022 Notes Share capital Share premium £000 £000 Revaluation reserve Hedging reserve -------------- --- Other reserves ------------------ £000 Merger reserve £000 £000 Balance at 1 April 2020 16,266 10,695 9,164 3,871 Comprehensive income Loss for the year Other comprehensive income Revaluation of property, plant and equipment 13 Total comprehensive income - - - - - 3,245 3,245 - - Balance at 1 April 2021 16,266 10,695 12,409 3,871 Comprehensive income Loss for the year Other comprehensive income Share issue Revaluation of property, plant and equipment 13 Deferred tax on revaluation Total comprehensive income Balance at 31 March 2022 - 140 - - - 3,277 - - 140 3,277 16,406 13,972 - 7,016 (1,116) 5,900 18,309 - - - - 3,871 - - - - - - - - - - The notes on pages 33 to 57 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 26. Retained earnings Total equity £000 £000 6,087 46,083 (2,175) (2,175) - 3,245 (2,175) 1,070 3,912 47,153 (259) (259) 3,417 7,016 (1,116) - - (259) 9,058 3,653 56,211 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 31 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 29 2022 £000 2021 £000 59 (2,536) Consolidated Cash Flow Statement For the year ended 31 March 2022 Cash generated/(used) from total operating activities Cash flows from investing activities Net expenditure on investment property Expenditure on property, plant and equipment Proceeds from disposal Cash generated/ (used) in investing activities Cash flows from financing activities Proceeds from issue of share capital Interest paid Loan (repaid)/drawdown Lease finance (paid)/received Cash payments of lease liabilities Grants received Net cash (used)/ generated from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year Note 28 14 13 19 19 (52) (196) 262 14 3,417 (1,033) (2,337) 62 (148) 8 (31) 42 928 970 Reconciliation of financing activities for the year ended 31 March 2022 Bank loans Other loans Lease liabilities Long term debt 2022 £000 Cash flow £000 22,800 (2,400) 2,338 240 63 (87) 25,378 (2,424) 2021 £000 25,200 2,275 327 27,802 Cash flow £000 950 2,275 236 3,461 The notes on pages 33 to 57 are an integral part of these consolidated financial statements. 32 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 30 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 (10) (161) - (171) - (754) 3,225 378 (142) 136 2,843 136 792 928 2020 £000 24,250 - 91 24,341 Notes to the Consolidated Financial Statements For the year ended 31 March 2022 1. General information Sutton Harbour Group plc, (‘the Group’) 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 Group 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 Sutton Harbour Office, Guy’s Quay, Plymouth, Devon, PL4 0ES. 2. Group accounting policies Basis of preparation The Group financial statements consolidate those of the Group and its subsidiaries. The consolidated financial statements have been prepared in accordance with UK adopted IAS, 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. Changes in accounting policies and disclosures There are no new accounting standards this year. There are no changes to accounting standard expected in the coming 12 months that would have a material impact on the accounts. Going concern The review of the Group’s business activities is set out in the combined Executive Chairman’s Report on pages 4 and 6. The financial position of the Group, its cash flows and financing position are described in the Financial Review on page 10. 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 Directors have not identified any material uncertainties relating to events or conditions that individually or collectively may cast significant doubt on the group’s ability to continue as a going concern for a period of at least twelve months from the financial statements are authorised for issue. Measurement convention The financial statements are prepared on the historical cost basis as modified by the fair value of property. 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 Group 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. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Intra-Group 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 is divided into the following classes: Land and buildings Assets in the course of construction Plant, machinery and equipment Fixtures and fittings Land and buildings Land and buildings include: Sutton Harbour Group plc – Annual Report & Financial Statements 2022 33 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 31 Notes to the Consolidated Financial Statements For the year ended 31 March 2022 - 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; 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 Leased assets acquired 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. 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 where the lessor maintains the risks and rewards of ownership is described in the 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. The portfolio is valued on an annual 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. 34 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 32 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 Notes to the Consolidated Financial Statements For the year ended 31 March 2022 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 IFRS 16 ‘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. 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 non-current or current assets, depending on the estimated time of ultimate realisation, 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. 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. Revenue Revenue comprises the fair value of the consideration received or receivable, net of value-added-tax, rebates and discounts. Revenue is recognised in accordance with the transfer of promised goods or services to customers (i.e. when the customer gain control of ownership that has 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 the tenant had control of the service. 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 on the transfer of goods to the customer. Car park revenue Car park revenue is recognised at the point that a car parking ticket is paid for, normally a maximum of one day’s parking. Where seasonal parking permits are sold for longer periods the income is spread over the period the permit relates to. Property sales Revenue from property sales is recognised when 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 Group plc – Annual Report & Financial Statements 2022 35 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 33 Notes to the Consolidated Financial Statements For the year ended 31 March 2022 Lease payments The Directors have considered the application of IFRS16 on its leasing arrangements. The Group has a small number of short term leases and leases of low value items and therefore continues to recognise payments made under these agreements on a straight line basis over the term of the lease. The Group has one leasing arrangement in relation to a property, which is due to expire in September 2022. The Directors have concluded that the expected right of use asset and corresponding lease liability would be immaterial to the Group’s financial statements and have therefore not adopted the requirements of IFRS16 in relation to this arrangement. Details of the future payments under this arrangement are disclosed in Note 27. 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 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 and is paused when a project pauses. 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 Group; these awards are granted by the Group. 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. 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. 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 operating segments have been identified: Marine Real Estate Car Parking Regeneration 36 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 34 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 Notes to the Consolidated Financial Statements For the year ended 31 March 2022 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 initially measured at the transaction price less impairment. In measuring the impairment, the Group has applied the simplified approach to expected credit losses as permitted by IFRS9. Expected credit losses are assessed by considering the Group’s historical credit loss experience, factors specific for each receivable, the current economic climate and expected changes in forecasts of future events. Changes in expected credit losses are recognised in the Group income statement. 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. Sutton Harbour Group plc – Annual Report & Financial Statements 2022 37 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 35 Notes to the Consolidated Financial Statements For the year ended 31 March 2022 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. Capital risk management The capital structure of the Group consists of net debt which includes the borrowings disclosed in notes 19 and 20 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 the final stages before start of construction and development refinancing or ultimate disposal. The Group currently has three consented schemes with planning, with final stages of preconstruction work underway. The Group structures borrowings into general facilities and secures specific financing for individual property projects as deemed appropriate. The gearing ratio at the year end was as follows: Borrowings and loans Lease liabilities Cash and cash equivalents Net debt Equity Net debt to equity ratio 2022 £000 (25,138) (240) 970 (24,408) 56,211 43.3% 2021 £000 (27,475) (327) 928 (26,874) 47,153 57.0% Bank borrowing facilities and financial covenants The Group had total borrowing net of cash and cash equivalents of £24.408m at 31 March 2022 (2021: £26.874m) with a gearing level of 43.3% (2021: 57.0%). The Group has operated within its authorised facilities and has met all bank covenants during the year. The bank facilities were renewed in December 2019, when the Group entered into an agreement which provides a maximum £24.9m committed facility with a confirmed expiry date of December 2023 with the possibility of a further 12 month extension. Subsequently, in May 2021 the Group agreed an amendment with bankers to extend the maximum facility to £27m for twelve months, which ended in May 2022. 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. 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. 38 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 36 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 Notes to the Consolidated Financial Statements For the year ended 31 March 2022 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 2022: Bank loans* Other loans* Trade and other payables* Lease liabilities* Derivatives financial instruments** As at 31 March 2021: Bank loans* Other loans* Trade and other payables* Lease liabilities* Derivative financial instruments** Total £000 0 to <1 year £000 1 to <2 years £000 2 to <5 years £000 (22,800) (2,338) (1,800) (240) - - (2,275) (1,800) (165) - (22,800) (63) - (75) - (27,258) (4,320) (22,938) - - - - - - Total £000 0 to <1 years £000 1 to < 2 years £000 2 to <5 years £000 (25,200) (2,275) (1,730) (325) - (29,530) - - (1,730) (139) - (1,869) (200) (2,275) - (186) - (2,661) (25,000) - - - - (25,000) * financial liabilities at amortised cost ** financial liabilities at fair value Interest rate risk There is currently no SONIA swap in place to fix interest on any of the Group’s bank debt. 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 2022 £000 48 383 127 558 2021 £000 56 422 334 812 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. 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 2022, it is estimated that a general increase of a percentage point in interest rates (being the best estimate of future anticipated changes in interest rates), would have decreased the Group’s profit before tax from continuing operations by approximately £263,000 (2021: £240,000). Net assets would have decreased by the same amount. Sutton Harbour Group plc – Annual Report & Financial Statements 2022 39 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 37 Notes to the Consolidated Financial Statements For the year ended 31 March 2022 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% – 11.21% with the average yield being 8.46%. Assuming all else stayed the same; a decrease of 1.0% in the average yield would result in an increase in fair value of £2.72m. An increase of 1.0% in the average yield would result in a corresponding decrease in fair value of £2.11m. These assets were independently valued by Jones Lang LaSalle (“JLL”) at 31 March 2022. 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. 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 UK adopted IAS 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. Estimates The following are the areas that require the use of estimates 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 2022 was £18,195,000 and £36,125,000 respectively; (2021: £17.845,000 and £29,475,000 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. JLL noted that there was uncertainty around the effect of Brexit on the Fisheries business, as well as what could be the effect of the conflict in Ukraine on the Global economy, but stated that their valuation figures could be relied on. Within the valuation of property held for use in the business, judgment is required to allocate the valuation between land and buildings. Any impact upon the valuation is therefore unknown at present. Further detail about the property valuation can be found in the Financial Review on page 10. Judgements The following are the areas that require the use of judgements that may impact the Group’s balance sheet and income statement: 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 2022: £31,861,000 see note 17; (2021: £29,275,000) • 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, contributions to the local authority under section 106 agreements, 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. The Inspectors also advised that a longer safeguarding period could risk the site being left vacant and unused and that that would not be appropriate. The Government Inspectors view of the importance of the site for alternative use, in absence of an airport operation, affirms the Group’s view of the value of the land. Should the board change its strategy with a view to an alternative, this may have an effect on the carrying value of the asset. No write down has been included in the current year. The second largest development inventory item relates to the Sugar Quay (East Quay) site at Sutton Harbour. At the present time, a planning submission is underway and it is expected that proceeds will exceed the carrying value of the inventory. 40 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 38 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 Notes to the Consolidated Financial Statements For the year ended 31 March 2022 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. 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 2022 is as follows: Year ended 31 March 2022 Revenue Segmental Operating Profit before fair value adjustment and unallocated expenses Fair value adjustment on investment properties and fixed assets Marine £000 4,771 1,199 (185) Real Estate £000 Car Parking £000 Regeneration £000 1,427 922 380 736 389 - 260 (162) - Unallocated: Administrative expenses Operating profit Financial income Financial expense Profit before tax from continuing activities Taxation Loss for the year from continuing operations Depreciation charge Marine Car Parking Administration Total £000 7,194 2,348 195 2,543 (1,193) 1,350 - (789) 561 (820) (259) 335 40 17 392 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 41 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 39 Notes to the Consolidated Financial Statements For the year ended 31 March 2022 Marine £000 3,509 770 1,542 1,020 (1,061) (1,150) Real Estate £000 Car Parking £000 Regeneration £000 349 110 - - (138) - Year ended 31 March 2021 Revenue Gross profit prior to non-recurring items Fair value adjustment on investment properties and fixed assets Unallocated: Administrative expenses Operating loss Financial income Financial expense Loss before tax from continuing activities Taxation Loss for the year from continuing operations Depreciation charge Marine Car Parking Administration Total £000 5,400 1,762 (2,211) (449) (1,171) (1,620) - (753) (2,373) 198 (2,175) 336 31 32 399 42 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 40 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 Notes to the Consolidated Financial Statements For the year ended 31 March 2022 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 Segment liabilities: Marine Real Estate Car Parking Regeneration Total segment liabilities Unallocated liabilities: Bank overdraft & borrowings Trade & other payables Deferred tax liabilities Tax payable Total liabilities Additions to property, plant and equipment Marine Car Parking Unallocated Total 2022 £000 31,068 18,628 6,428 31,936 88,060 61 241 970 89,332 2022 £000 2,622 464 132 1,234 4,452 25,378 296 2,994 1 33,121 (171) (1) (24) (196) 2021 £000 25,846 18,715 4,861 29,343 78,765 70 499 928 80,262 2021 £000 2,062 689 21 1,142 3,914 27,802 337 1,056 - 33,109 (161) - - (161) 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 Rental income and service recharges Provision of services Sale of property No revenues from any one customer represented more than 10% of the Group’s revenue for the year. 2022 £000 1,869 1,609 3,456 260 7,194 2021 £000 1,441 1,542 2,417 - 5,400 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 43 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 41 Notes to the Consolidated Financial Statements For the year ended 31 March 2022 6. Operating result The following items are included within operating profit/(loss): Staff costs Increase/(decrease) in provisions Rental income from investment property (Profit)/loss on sale of property, plant and equipment Direct operating expenses of investment properties (including repairs and maintenance) (Gain)/loss on re-measurement of investment property to fair value Loss on re-measurement of fixed assets Depreciation of property, plant and equipment Operating lease payments 7. Services provided by the Group’s auditors During the year the Group obtained the following services from the Group’s auditors: Note 8 25 27 14 13 13 27 Fees payable to Group’s auditors for the audit of Parent Company and consolidated financial statements Fees payable to the Group’s auditors for other services: The audit of Group’s subsidiaries pursuant to legislation Tax compliance services 2022 £000 1,467 (56) (1,427) (1) 547 (380) 183 392 - 2022 £000 25 31 - 2021 £000 1,441 (43) (1,542) 3 522 1,150 1,061 399 196 2021 £000 22 25 - 44 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 42 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 Notes to the Consolidated Financial Statements For the year ended 31 March 2022 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 2021 2022 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 24) The total remuneration of the Directors of the Group was as follows: Fees Other Emoluments Pension Contributions Expenses of Unexercised Share Options Details of the highest paid Director are detailed in the renumeration report on page 20 9. Finance income and finance costs Finance income Interest payable on bank loans and overdrafts Interest payable on lease liabilities Finance costs Finance costs are net of borrowing costs capitalised in the year. See note 17. 24 1 7 32 2022 £000 1,172 121 174 1,467 2022 £000 144 285 32 2 463 21 1 9 31 2021 £000 1,098 110 175 1,383 2021 £000 144 275 32 3 453 2022 £000 2021 £000 - 652 137 789 - 643 119 753 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 45 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 43 Notes to the Consolidated Financial Statements For the year ended 31 March 2022 10. Taxation Deferred tax Adjustments in respect of previous years Origination and reversal of temporary differences Change in tax rate Total tax charge/(credit) in income statement The tax assessed for the year uses the standard rate of corporation tax in the UK of 19% (2021: 19%). Reconciliation of effective tax rate Profit/(loss) before tax Tax on profit at standard corporation tax rate of 19% (2021: 19%) Expenses not deductible for tax purposes Adjustments respect of prior periods Movement on potential chargeable gain on revaluation Change in deferred tax rate Capital allowances in excess of depreciation Creation of tax losses Total tax charge/(credit) on continuing operations 11. Share based payment Note 16 2022 £000 (5) 107 718 820 2022 £000 561 107 6 (6) 718 - (5) 820 2021 £000 46 (244) - (198) 2021 £000 (2,373) (451) 448 46 (217) - - (24) (198) An Inland Revenue approved Group Share Option plan (CSOP) has been established by Sutton Harbour Group plc whereby the Group may at the discretion of the Remuneration Committee grant options over ordinary shares in the Group to key management personnel. The options are issued for nil consideration and are granted in accordance with the schemes rules at the absolute discretion of the Remuneration Committee. Option holders may exercise options after a minimum 3 year and maximum 10 year holding period, subject to the provisions and exceptions of the scheme rules. There are no other performance conditions governing the holder’s right to exercise the options after the minimum holding period. Share options may only be exercised for shares. During the year 24,000 share options were granted with an exercise price of £0.25. The fair value of the options was calculated using the Black Scholes model and the charge to the income statement for the year ended 31 March 2022 was £8,134 (2021: £3,134). A weight averaged volatility input to the Black Scholes of 48% was applied being the average % fluctuations (positive and negative) of the share price compared to the grant price of share options issued. Set out below is a summary of options granted under the CSOP plan: Grant Date Expiry Date Exercise Price Balance at start of year Granted Exercised Expired Balance at end of year Life of options remaining 27 Nov 2019 8 July 2020 23 Jun 2021 26 Nov 2029 8 July 2030 23 Jun 2031 22p 19p 25p 0 102,273 218,063 102,273 115,790 24,000 0 0 0 0 0 0 102,273 218,063 242,063 2,797 days 3,021 days 3,372 days The weighted average exercise price at 31 March 2022 was 20.84pence (31 March 2021: 20.41pence) 46 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 44 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 Notes to the Consolidated Financial Statements For the year ended 31 March 2022 12. Earnings per share Continuing operations: Basic earnings/(loss) per share Diluted earnings/(loss) per share 2022 Pence (0.20p) (0.20p) 2021 Pence (1.88p) (1.88p) Basic earnings per share Basic earnings per share have been calculated using the Loss for the year of £259,000 (2021: loss of £2,373,000) for the continuing operations. Diluted earnings per share Diluted earnings per share uses an average number of 125,710,426 (2021: 116,130,728) ordinary shares in issue in accordance with IAS 33 ‘Earnings per Share’. Sutton Harbour Group plc – Annual Report & Financial Statements 2022 47 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 45 Notes to the Consolidated Financial Statements For the year ended 31 March 2022 13. Property, plant and equipment Assets in the course of Construction £000 Plant, machinery and equipment, fixtures and fittings £000 Land and buildings £000 Cost or valuation Balance at 1 April 2020 Additions Revaluations to income statement Revaluations to revaluation reserve Impairment Transfers Disposals Balance at 31 March 2021 Balance at 1 April 2021 Additions Revaluations to income statement Revaluations to revaluation reserve Grants recieved Transfers Disposals Balance at 31 March 2022 Accumulated depreciation Balance at 1 April 2020 Depreciation charge for the year Transfers Disposals Balance at 31 March 2021 Balance at 1 April 2021 Depreciation charge for the year Transfers Disposals Balance at 31 March 2022 Net book value At 31 March 2021 At 31 March 2022 24,925 90 (1,061) 3,245 - 475 - 27,674 27,674 57 (185) 7,016 - - - 34,562 487 164 - - 651 651 145 - - 796 27,023 33,766 686 - - - (136) (475) - 75 75 3 - - - - - 78 - - - - - - - - - - 75 78 5,033 71 - - - - (157) 4,947 4,947 135 - - - - (41) 5,041 2,199 235 - (155) 2,279 2,279 248 - (40) 2,487 2,668 2,554 Total £000 30,644 161 (1,061) 3,245 (136) - (157) 32,696 32,696 195 (185) 7,016 - - (41) 39,681 2,686 399 - (155) 2,930 2,930 393 - (40) 3,283 29,766 36,398 Included in Land and Buildings is long leasehold land at a value of £2,200,000 (2021: £2,200,000). 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 2022 (see Strategic Report page 4). 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. Further detail about property revaluation is included in the Financial Review on page 10. At 31 March 2022, 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 £23,775,000 (2021: £19,550,000). 48 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 46 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 Notes to the Consolidated Financial Statements For the year ended 31 March 2022 At 31 March 2022, 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 £1,110,000 (2021: £1,110,000). 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 leases are secured by the lessor’s title to the fixed assets. The carrying value of plant, machinery and equipment which is subject to leases is £519,000 (2021: £327,000). 14. Investment property At fair value: Balance at the beginning of the year Additions during the year Fair value adjustments Disposals Intercompany transfers Balance at the end of the year 2022 £000 17,845 52 380 (232) 150 18,195 2021 £000 18,985 10 (1,150) - - 17,845 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 2022 has been determined by a valuation carried out on that date by independent, external valuers (see Strategic Report page 4), 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. Further detail about property valuation is included in the Financial Review on page 10. All of the Group’s investment property is held under freehold interests with the exception of four (2021: four) properties which are held under long leaseholds. 15. Investments At 31 March 2022 the Group has the following subsidiaries: Subsidiaries Sutton Harbour Company Sutton Harbour Services Limited Plymouth City Airport Limited Sutton Harbour Property and Regeneration Limited Harbour Arch Quay Limited Sutton Harbour Projects Limited Harbour Arch Quay Management Company Limited Sutton Harbour Car Parks Limited Sugar Quay Holdings Limited Sugar Quay Limited Sutton East Holdings Limited Sutton East Developco No1 Limited Class of Ownership shares held 2022 2021 Nature of Business Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary 100% 100% 100% 100% 100% 100% 100% 100% 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 Property Car Park Operator Investment Company Property Developer Property Developer Property Developer All of the above companies were incorporated in the United Kingdom and registered in England and Wales and for each the registered address is Sutton Harbour Office, Guy’s Quay, Plymouth PL4 0ES. All subsidiaries are included in the Group consolidated financial statements. . Sutton Harbour Group plc – Annual Report & Financial Statements 2022 49 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 47 Notes to the Consolidated Financial Statements For the year ended 31 March 2022 16. 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 Change in tax rate Losses carried forward Tax assets / (liabilities) Movement in deferred tax during the year Property, plant and equipment Investment property Employee benefits Losses carried forward 2022 £000 2021 £000 - - - 509 509 - - - 453 453 1 April 2021 £000 (1,090) (419) - 453 (1,056) 2022 £000 (1,561) (1,940) - - (3,501) Change in deferred tax rate £000 2021 £000 (1,090) (419) - - (1,509) 2022 £000 (1,561) (1,940) - 509 2021 £000 (1,090) (419) - 453 (2,992) (1,056) Recognised in income £000 Recognised in equity £000 31 March 2022 £000 - - - - - (538) (1,048) (133) (217) (1,936) - - - - - (1,628) (1,467) (133) 236 (2,992) The Directors believe the deferred tax asset relating to losses carried forward will be utilised by future taxable profits. 17. Inventories Stores and materials Goods for resale Development property 2022 £000 11 78 31,861 2021 £000 8 38 29,275 31,950 29,321 Included within inventories is £31,861,000 (2021: £29,275,000) expected to be recovered in more than 12 months. £13,216,000 (2021: £12,962,000) of the Development Property, being the carrying value of the former airport site, is classified in the Balance Sheet as a non-current asset as realisation of the asset may be in more than five years’ time. Inventories to the value of £1,576,000 were recognised as an expense in the year (2021: £1,003,000). Interest capitalised during the year in relation to development property was £343,000 (2021: £138,000). The capitalisation rate used to determine the amount of borrowing costs eligible for capitalisation was 3.0% (2021: 3.2%). In the course of the year, £nil of development property inventory was written down (2021: £nil). 50 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 48 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 Notes to the Consolidated Financial Statements For the year ended 31 March 2022 18. Trade and other receivables Trade receivables Provision for impairment of trade receivables Expected loss rate of trade receivables Other receivables Prepayments and accrued income 2022 £000 677 (119) 558 8% 50 1,202 1,810 2021 £000 885 (73) 812 8% 46 1,538 2,396 Included within trade and other receivables is £613,000 (2021: £794,000) 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 provision for impairment of trade receivables is arrived at by using the historic loss rate and adjusting for current expectations, customer base and economic conditions. With historic and expected future losses being low, the Directors consider it appropriate to apply a single average rate for expected credit losses to the overall population of trade receivables. 19. Cash and cash equivalents Cash and cash equivalents per Consolidated Balance Sheet Cash and cash equivalents per Cash Flow Statement 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 2022 £000 970 970 2022 £000 - 2,100 - 2,100 2021 £000 928 928 2021 £000 - 1,800 - 1,800 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 51 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 49 Notes to the Consolidated Financial Statements For the year ended 31 March 2022 20. Bank loans 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 risk, see note 3. Non-current liabilities Secured bank loans Current liabilities 2022 £000 22,863 2,275 25,138 2021 £000 25,200 2,275 27,475 Secured bank loans: The current secured bank loans relate to a facility of £24.9m comprising two loans which incur interest at various rates over SONIA during the term of the facilities and fall due for renewal more than 12 months from the Balance Sheet date. Assets with a carrying amount of £50.705m (2021: £47.320m) have been pledged to secure borrowings of the Group. 21. 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. 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 2021 £000 2021 £000 2022 £000 2022 £000 At the beginning of the year Adjustment to opening balances Released to the income statement Income and grants received and deferred At the end of the year 1,819 - (1,819) 2,225 2,225 1,544 - (1,405) 1,680 1,819 646 - - - 646 646 - - - 646 50 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 52 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 Notes to the Consolidated Financial Statements For the year ended 31 March 2022 22. 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 23. Lease liabilities 2022 £000 1,230 123 196 331 1,880 2022 £000 1,007 160 3 25 35 1,230 2021 £000 1,082 95 178 375 1,730 2021 £000 550 295 51 76 110 1,082 Capital element Minimum lease payments of lease payments 2021 £000 2021 £000 2022 £000 2022 £000 Amounts payable under lease liabilities: Within one year In the second to fifth years inclusive Less: future finance charges Present value of lease obligations Current Non-current 175 85 260 (20) 240 141 207 348 (21) 327 175 65 240 n/a 240 165 75 240 141 186 327 n/a 327 141 186 327 It is the Group’s policy to lease certain of its property, plant and equipment under leases. The average lease term is 1.9 years (2021: 1.9 years). For the year ended 31 March 2022, the average effective borrowing rate was 3.0% (2021: 3.2%). Interest rates are fixed at the contract date. All 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. Sutton Harbour Group plc – Annual Report & Financial Statements 2022 51 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 53 Notes to the Consolidated Financial Statements For the year ended 31 March 2022 24. 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 £174,000 (2021: £175,000). There were no amounts outstanding or prepaid at the year end (2021: £nil). 25. Provisions Balance at 1 April 2020 Provisions made during the year Provision utilised during the year Balance at 31 March 2021 Balance at 1 April 2021 Provisions made during the year Provisions utilised during the year Balance at 31 March 2022 Current Non-current Onerous leases £000 Total £000 99 - (43) 56 56 - (56) 56 56 - 56 99 - (43) 56 56 - (56) 56 56 - 56 54 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 52 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 Notes to the Consolidated Financial Statements For the year ended 31 March 2022 26. Capital and reserves Share capital Ordinary shares Deferred shares Total shares Thousands of shares 2022 2022 2022 2021 2021 2021 In issue at the beginning of the financial year - fully paid Issued for cash In issue at the end of the financial year – fully paid 115,944 14,000 115,944 - 62,944 - 62,944 - 178,888 14,000 178,888 - 129,944 115,944 62,944 62,944 192,888 178,888 Allotted, called up and fully paid 129,944,071(2021:115,944,071) Ordinary shares of 1p each (2021: 1p each) 62,943,752 (2021: 62,943,752) Deferred shares of 24p each (2021: 24p each) 2022 £000 1,300 - 1,300 2021 £000 1,160 - 1,160 2022 £000 - 15,106 15,106 2021 £000 - 15,106 15,106 2022 £000 2021 £000 1,300 15,106 16,406 1,160 15,106 16,266 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 Group. On a winding up each Ordinary share shall rank in priority to the Deferred shares. Following the difficulties of the Covid pandemic and impact on revenues to the Group, yet with the board’s decision to progress with consented developments and planning costs of other projects, together with the opportunity to purchase of an additional site on Sutton Road, the Company introduced new capital by way of an Open Offer which raised a net £3.417m from the issue of 14 million new ordinary shares in August 2021. The holders of Deferred shares are not entitled to receive dividends nor are they entitled to vote at meetings of the Group. 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 less transaction costs. 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 Group was incorporated into the holding Group, Sutton Harbour Group plc. It was further increased when a cash box placing of shares occurred on 4 September 2009, creating an additional £3.6m. Retained earnings Retained earnings represent retained earnings attributable to owners of the parent. Retained earnings include £3.873m (2021: £3.374m) in respect of unrealised valuation surpluses on the Investment property assets. Sutton Harbour Group plc – Annual Report & Financial Statements 2022 55 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 53 Notes to the Consolidated Financial Statements For the year ended 31 March 2022 27. Leases Leases Non-cancellable lease rentals are payable as follows: Less than one year Between one and five years Greater than five years 2022 £000 - - - - 2021 £000 196 - - 196 During the year £96,000 was recognised in respect of lease rentals in the income statement (2021: £191,000): £116,000 in cost of sales (2021: £172,000) and £nil in administrative expenses (2021: £8,000). Included within lease rentals is an amount of £nil (2021: £191,000) 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 (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 two years Between two and three years Between three and four years Between four and five years More than five years Owner-occupied properties: Less than one year Between one and two years Between two and three years Between three and four years Between four and five years More than five years 2022 £000 1,075 847 815 713 670 19,969 24,089 46 46 46 46 39 83 306 2021 £000 1,298 1,023 1,147 933 383 23,975 28,759 35 35 35 35 34 113 287 Total contingent rents recognised in the income statement in the year were £nil (2021: £89,000). Contingent rents are determined by reference to specific clauses within the leases. During the year ended 31 March 2022 £1,427,000 (2021: £1,542,000) was recognised as rental income in the income statement. Repair and maintenance expense recognised in cost of sales for the year to 31 March 2022 was £133,000 (2021: £30,000). 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. 56 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 54 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 Notes to the Consolidated Financial Statements For the year ended 31 March 2022 28. Cash flow statements Cash flows from operating activities Loss for the year from continuing operations Adjustments for: Taxation on loss from continuing activities Financial expense Fair value adjustments on investment property Revaluation of property, plant and equipment Depreciation Profit on disposal of Investment property Amortisation of Grants Loss on sale of property, plant and equipment Cash generated from continuing operations before changes in working capital and provisions (Increase) in inventories Transfer from Inventories to Investment property Decrease in trade and other receivables Increase in trade and other payables Increase in deferred income (Decrease) in provisions Cash from continuing operations 29. Related parties 2022 £000 (259) 820 789 (380) 185 392 (28) (9) (1) 1,509 (2,629) 93 586 150 406 (56) 59 2021 £000 (2,175) (198) 753 1,150 1,061 399 - - 3 993 (4,294) - 199 334 275 (43) (2,536) The parent of the Group is Sutton Harbour Group plc. The ultimate controlling party is FB Investors LLP, which is owned jointly by Beinhaker Design Services Limited and 1895 Management Group ULC. In the course of the year, Beinhaker Design Services Limited provided services to the value of £180,000 (2021: £175,000). Details of Related Party Loans which were drawn down after the year end are given in Note 30. Transactions between the Group and its subsidiaries, which are related parties of the Group, have been eliminated on consolidation and are not disclosed in this note. Transactions with key management personnel: Executive Directors of the Group and their immediate relatives control 73.0% (2021 73.00%) of the voting shares of the Group. The compensation of key management personnel (the Executive and Non Executive Directors) is set out on the Remuneration Report on page 20. 30. Events after the reporting period After the year end, the Group repaid loans to MSP Finance, totalling £2.275m. To meet the loan repayment two new unsecured Related Party Loans were received : £1.150m loan from Beinhaker Design Services Limited (a 50% owner of FB Investors LLP which owns 72.91% of Sutton Harbour Group plc’s share capital £1.150m loan Rotolok (Holdings) Limited which owns 5.70% of Sutton Harbour Group plc’s share capital The Related Party Loans are on flexible terms for repayment between May 2023 and May 2024 at a more competitive fixed interest rate than charged by MSP Finance. Sutton Harbour Group plc – Annual Report & Financial Statements 2022 57 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 55 Historical Financial Information For the year ended 31 March 2022 Net Assets Revenue 2022 £000 56,211 2021 £000 2020 £000 2019 £000 2018 £000 47,153 46,082 45,732 39,328 7,194 5,400 6,558 6,893 6,503 Operating profit before fair value adjustments, impairments, costs of change in ownership and onerous leases 1,155 591 1,065 973 761 Fair value adjustments on investment property and fixed assets 195 (2,211) (977) 1,444 (626) Operating profit/(loss) after fair value adjustments and impairments 1,350 (1,620) 88 2,417 (1,610) Net financing costs (excludes joint ventures/associates) (789) (753) (844) (901) (897) Profit/(loss) before tax on continuing activities 561 (2,373) (756) 1,516 (2,502) Profit/(loss) attributable to equity shareholders (259) (2,175) (988) 1,831 (2,198) Dividends paid - - - - - Basic earnings/(loss) per share (0.20)p (1.85)p (0.85)p 1.68p (2.24)p Diluted earnings/(loss) per share (0.20)p (1.88)p (0.85)p 1.68p (2.24)p 58 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 56 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 Fixed assets Investments Current assets Debtors Stock 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 2022 Note 2022 £000 2021 £000 5 6 7 8 9 11 11 11 11,268 11,268 24,558 500 15 25,073 29 25,044 36,312 400 35,912 16,406 13,972 3,620 1,914 35,912 11,268 11,268 23,857 - 5 23,862 62 23,800 35,068 2,700 32,368 16,266 10,695 3,620 1,787 32,368 The notes on pages 61 to 65 are an integral part of these financial statements. In the year the Company made a profit of £127,000 (2021: profit of £80,000). The Financial Statements were approved and authorised by the Board of Directors on 19 July 2022 and were signed on its behalf by: N ATA S H A G A D S D O N D I R E C T O R Sutton Harbour Group plc – Annual Report & Financial Statements 2022 59 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 57 Company Statement of Changes in Equity For the year end 31 March 2022 Called up capital £000 Share premium account £000 Merger reserve £000 Profit and loss account £000 Total £000 32,288 80 - 32,368 32,368 127 3,417 1,707 80 - 1,787 1,787 127 - 1,914 35,912 Balance at 1 April 2020 Profit for the year Issues of shares Balance at 31 March 2021 Balance at 1 April 2021 Profit for the year Issue of shares Balance at 31 March 2022 16,266 - - 16,266 16,266 - 140 16,406 10,695 - - 10,695 10,695 - 3,277 13,972 3,620 - - 3,620 3,620 - - 3,620 60 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 58 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 Notes to the Company Financial Statements For the year end 31 March 2022 1. General information Sutton Harbour Group 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 2021 to 31 March 2022, with comparatives for the year 1 April 2019 to 31 March 2021 and are compliant with FRS101. No income statement or statement of comprehensive income is presented by the Company as permitted by Section 408 of the Companies Act 2006. 2. Accounting policies Basis of preparation The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. These financial statements have been prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework. The financial statements have been prepared under the historical cost convention, and in accordance with the Companies Act 2006. The preparation of financial statements in conformity with FRS101 requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the company’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 2 of the consolidated accounts. 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 intra-group funding and is therefore reliant on bank finance in the form of Group wide term loan and revolving credit facilities. In December 2019, Sutton Harbour Group plc and subsidiary companies (the “Group”) renewed its banking facilities until December 2023, with two term loans totalling £22.4m 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 intra-group 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. Functional and presentation currency 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. Investments Investments are carried cost less any provision for impairment in value. Sutton Harbour Group plc – Annual Report & Financial Statements 2022 61 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 59 Notes to the Company Financial Statements For the year ended 31 March 2022 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. 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.. 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. Financial instruments Trade and other debtors, trade and other creditors and all intra-group balances are financial instruments and are carried at amortised cost. 62 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 60 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 Notes to the Company Financial Statements For the year ended 31 March 2022 3. Services provided by the Company’s auditors During the year the Company obtained the following services from the Group’s auditors: Current auditors: Fees payable to Group’s auditor for the audit of Parent Company financial statements Fees payable to the Group’s auditor for other services: Tax services 2022 £000 25 2021 £000 21 2 1 For further details on other services provided by the Group’s auditors, see note 7 to 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 Investments in subsidiary undertakings Subsidiary companies: At 31 March 2022, the Company has the following investments in subsidiaries: 2022 £000 2021 £000 11,268 11,268 Subsidiaries Sutton Harbour Company Sutton Harbour Services Limited Plymouth City Airport Limited Sutton Harbour Property and Regeneration Limited Harbour Arch Quay Limited Sutton Harbour Projects Limited Harbour Arch Quay Management Limited Sutton Harbour Car Parks Limited Sugar Quay Holdings Ltd Sugar Quay Ltd Sutton East Holdings Limited Sutton East Developco No1 Limited Class of Ownership shares held 2022 2021 Nature of Business Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary 100% 100% 100% 100% 100% 100% 100% 100% 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 Property Car Park Operator Investment Company Property Developer Property Developer Property Developer All of the above companies were incorporated in the United Kingdom and registered in England and Wales and for each the registered address is Sutton Harbour Offices, Guy’s Quay, Plymouth PL4 0ES. Sutton Harbour Group plc – Annual Report & Financial Statements 2022 63 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 61 Notes to the Company Financial Statements For the year ended 31 March 2022 6. Debtors Amounts owed by subsidiary undertakings Other debtors and prepayments Total debtors Amounts owed by subsidiary undertakings 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 Company has been given in relation to the bank facilities. 8. Creditors: amounts falling due after more than one year Bank borrowings Total creditors Interest is charged at rates over SONIA during the term of the bank facilities. 2022 £000 24,390 168 24,558 2022 £000 29 29 2022 £000 400 400 2021 £000 23,426 431 23,857 2021 £000 62 62 2021 £000 2,700 2,700 9. Called up share capital Ordinary Shares Deferred Shares Total Thousands of shares 2022 2021 2022 2021 2022 2021 In issue at the beginning of the financial year – fully paid Issued for cash In issue at the end of the financial year – fully paid 115,944 14,000 129,944 115,944 - 115,944 62,944 - 62,944 62,944 - 62,944 178,888 14,000 192,888 178,888 - 178,888 Allotted, called up and fully paid 129,944,071 (2021: 115,944,071) Ordinary shares of 1p each (2021: 1p each) 62,943,752 (2021: 62,943,752) Deferred shares of 24p each (2021: 24p each) 1,300 1,160 - - 1,300 1,160 - 1,300 - 1,160 15,106 15,106 15,106 15,106 15,106 16,406 15,106 16,266 64 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 62 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 Notes to the Company Financial Statements For the year ended 31 March 2022 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. 10. Contingencies The Company has given an unlimited guarantee in respect of bank borrowings of all subsidiary companies. At 31 March 2022, these borrowings amounted to £22,800,000 (2021: £25,200,000). 11. Description of reserves Called up share capital The called up share capital account represents equity share capital (see note 26 to the consolidated financial statements). Share premium account The share premium account represents premiums paid over the nominal value of share capital issued less transaction costs (see note 26 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 26 to the consolidated financial statements). Profit and loss account The profit and loss account represents retained profits. 12. Ultimate controlling party Sutton Harbour Group plc is the ultimate Parent Company of the Group. The ultimate controlling party is FB Investors LLP, which is owned jointly by Beinhaker Design Services Limited and 1895 Management Group ULC, and owns 73.0% of the issued share capital of Sutton Harbour Group plc. The consolidated financial statements of the Group headed by Sutton Harbour Group plc are presented separately on pages 33 to 57 of this document. The results of the Group are not consolidated in any other group’s financial statements. Sutton Harbour Group plc – Annual Report & Financial Statements 2022 65 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 63 Notes 66 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 64 Sutton Harbour Group plc – Annual Report & Financial Statements 2022 Sutton Harbour Office | Guy’s Quay Office | Sutton Harbour | Plymouth | PL4 0ES Tel: 01752 204186 | www.suttonharbourgroup.com
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