30 April 2018
LONDON & ASSOCIATED PROPERTIES PLC
(‘’LAP’’):
ANNUAL RESULTS FOR
12 MONTHS TO 31 DECEMBER 2017
HIGHLIGHTS
- Brixton Markets sale completed post year end at £37.25 million
- A significant increase on historic professional valuation
- Revaluation to selling price contributed to a £10.76 million
improvement in LAP Group pre-tax profit
- Sale generated £20.5 million of cash for future investment
- Rental income stable despite challenging market
- Voids remain minimal at 2%
- Net assets attributable to ordinary shareholders up 20% to
£45.85 million
- NAV per ordinary share up 20% to 53.74p from 44.83p
- Bisichi had an excellent year although impacted by exceptional
loss on a joint venture
- Dividends increased
- Final dividend increase of 6% to 0.175p recommended
- Special one-off dividend of 0.125p also recommended following
completion of Brixton Markets sale
- Total dividend for the year 0.30p
“We believe our portfolio is relatively well protected from
online shopping as our core property holdings are either part of a
major city that will remain a destination in its own right with a
differentiated offer, which forms part of a leisure experience; or,
they fulfil a role providing convenience retail facilities. We
believe these sections of the retail world will continue to be
relevant for the foreseeable future”, said Sir Michael Heller, Chairman, and John Heller, CEO.
Contact:
London & Associated Properties
PLC
Tel: 020 7415 5000
John Heller, CEO, or Anil Thapar,
Finance Director
Baron Phillips
Associates
Tel: 07767 444193
Baron Phillips
LONDON &
ASSOCIATED PROPERTIES
ANNUAL REPORT 2017
OVERVIEW
LAP AT A GLANCE
CHAIRMAN AND CHIEF EXECUTIVE’S STATEMENT
STRATEGIC REPORT
FINANCIAL REVIEW AND PERFORMANCE
PRINCIPAL ACTIVITIES, STRATEGY & BUSINESS MODEL
RISKS AND UNCERTAINTIES
BISICHI RISKS AND UNCERTAINTIES
KEY PERFORMANCE INDICATORS
CORPORATE RESPONSIBILITY
GOVERNANCE
DIRECTORS & ADVISORS
DIRECTORS’ REPORT
CORPORATE GOVERNANCE
GOVERNANCE STATEMENT BY THE CHAIRMAN OF THE REMUNERATION
COMMITTEE
ANNUAL REMUNERATION REPORT
REMUNERATION POLICY SUMMARY
AUDIT COMMITTEE REPORT
DIRECTORS’ RESPONSIBILITIES STATEMENT
INDEPENDEND AUDITOR’S REPORT
FINANCIAL STATEMENTS
CONDOLIDATED INCOME STATEMENT
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
CONSOLIDATED BALANCE SHEET
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
CONSOLIDATED CASH FLOW STATEMENT
GROUP ACCOUNTING POLICIES
NOTES TO THE FINANCIAL STATEMENTS
FIVE YEAR FINANCIAL SUMMARY
Financial calendar
Annual General Meeting
19 June 2018
Announcement of half year results to 30
June 2018
Late August 2018
Payment of final and special dividend for 2017 (if approved)
14 September 2018
Announcement of annual results for 2018
Late April 2019
LAP at a glance
London & Associated
Properties PLC (“LAP”) is a main market listed group which
invests in UK shopping centres and retail property whilst also
managing property assets for institutional clients. LAP owns and/or
manages £186 million of property investments. As a property company
we look to create environments where tenants can thrive.
The Group also holds a substantial investment in Bisichi Mining
PLC, which operates coal mines in South Africa and owns UK
property investments. In accordance with IFRS 10 the results of
Bisichi have been consolidated in the group accounts.
Financial highlights
Fully diluted net
assets per share |
IFRS net assets |
Properties portfolio
valuation* |
53.74p |
£56.7m |
£186m |
2016: 44.83p |
2016: £48.6m |
2016: £221m
*Including properties under management |
OVERALL PORTFOLIO SPLIT
PORTFOLIO BY RENTAL INCOME
|
KEY PROJECTS |
HIGHLIGHT |
Wholly owned |
• Market Row and
Brixton Village Brixton
• Orchard Square, Sheffield
• Kings Square, West Bromwich |
Market Row and Brixton Village sold
in April 2018 |
Investments
and management |
• Kingsgate Centre,
Dunfermline
• The Rushes Centre, Loughborough
• The Vancouver Quarter Centre Kings Lynn |
Co-investment with Oaktree Capital
Management and manage three of their shopping centres |
Coal production |
• In South Africa, Black
Wattle produced 1.30 million metric tonnes of Run of Mine Coal in
2017 (2016: 1.26 million metric tonnes) |
OVERVIEW
Chairman and Chief Executive’s statement
We are pleased to report on a very satisfactory period for the
12 months to 31st December 2017.
The most significant event in 2017 was our decision to offer for
sale the two markets in Brixton, valued at £24.5 million last year
and yielding around £0.5 million annually, net of interest expense.
We believed that the timing was right to realise this asset and
generate a significant profit. Sale proceeds of £37.25 million were
received in April 2018. Allowing for
costs and repayment of related loans, this will leave the Company
with cash from this disposal of £20.5 million.
We are already in discussions with third parties on potential
new investments and will look for opportunities to reinvest the
cash and expand the portfolio over the coming months.
The year was also marked by a successful conclusion to a long
running dispute with The Market Village Company Limited (the tenant
of the two Brixton Markets). The lease entitles LAP to a share of
total income less specified expenses. The Court supported our claim
that inappropriate expenses had been deducted in calculating the
income due. As a result, rental income for 2017 includes £0.6
million for back rent which is now due from the tenant.
LAP Group (excluding Bisichi and Dragon) property revenue for
the year to 31st December 2017 was
£6.8 million as compared with £6.1 million in the previous year.
Excluding the extra Brixton and other income, our property revenue
would have been £6.1 million, which is a creditable result in the
very challenging current trading environment.
Within the LAP Group we have been particularly focused on
operating costs during 2017 and we are pleased to report that in
2017 these were approximately 8% lower at £3.8 million compared to
£4.1 million the year before.
Consolidated results
The Group (including Bisichi and Dragon) net assets at the year
end were £56.71 million (2016: £48.63 million).
Total net assets of LAP Group (including our net interest in
Bisichi) have increased by almost 20% to £45.85 million (2016:
£38.24 million), while net asset value per share has increased by
20% to 53.74p from 44.83p in 2016. Total property assets owned by
LAP, Bisichi and other companies in which LAP has a financial
interest amount to £186 million (2016: £221 million).
The Group profit after valuation movements and before taxation
for the year was £11.28 million (loss 2016: £0.97 million). Besides
the improvements in Bisichi (as detailed in the Bisichi section
below) and LAP income and costs (as stated above), the main
improvement was due to the increase in valuation of investment
properties by £9.37 million (2016: £0.53 million). A full breakdown
of group income and result by sector is included in the financial
review and in the segmental analysis in Note 1 to the financial
statements.
Debt Management
In June 2017 we repaid £0.75
million of Prudential debenture stock which carried a coupon of
11.6% per annum. In August 2018, the
residual £3 million of this debenture will expire. We are currently
talking to a number of lenders about refinancing the portfolio
against which the debenture is secured, and we are pleased to
report that interest is strong. We will update shareholders on the
terms of any new loan once we have selected the lender. We are
confident that we will make a significant saving on the £0.3
million per annum interest we are currently paying.
LAP PROPERTY ACTIVITIES
Orchard Square, Sheffield
The shops at Orchard Square have remained effectively fully let
throughout 2017, and we therefore have no significant new lettings
to report. However, we have a number of lease expiries in 2018 and
have commenced negotiations with tenants to renew their leases.
Responses to date have been positive.
Kings Square, West Bromwich
Kings Square, our shopping centre at West Bromwich, has had a strong year during
which we have achieved several good lettings. The principal mall
remains fully let and recent lettings have underscored rental
growth compared to a year ago. Additionally, the side mall, which
has always been the weakest of the malls within the Centre, is
fully let following a period of intensive marketing.
The town seems to be finding its equilibrium after the opening
of a new Tesco Extra and adjacent shopping centre and Kings Square
is clearly the location of choice for discount retailers. This is
helped by the tram and bus terminus being attached to the rear of
our centre. We therefore believe that this Centre will continue to
trade successfully.
414 Coldharbour Lane, Brixton
Shareholders are aware that, following lease expiry in 2015, we
are in the process of trying to obtain vacant possession of this
property from the current tenant. We believe that the tenant has
lost the statutory rights of renewal. In December 2017, the Court found in favour of LAP
on two counts. A third and final count requires a separate hearing
which is scheduled for September
2018. We are confident of our position and we will update
shareholders in due course.
Other
The rest of our property portfolio continues to trade well and
the LAP Group portfolio has a void level of 1.47%, (2016:
2.15%).
Properties outlook
There has been a lot of press coverage recently about retailer
insolvencies and the increasing migration to online shopping. So
far we have not directly suffered any increased level of retailer
insolvency but we cannot be isolated entirely from general high
street trends. Like all retail landlords, we will be forced to
compete against an increased supply of empty shops.
As highlighted in Chairman’s Statements over the last few years,
we believe that our portfolio is relatively protected from online
shopping as our core property holdings are all either part of a
major city that will remain a destination in its own right; a
differentiated offer which forms part of a leisure experience; or
they fulfil a role providing convenience retail facilities. We
still believe that these sections of the retail world will continue
to be relevant for the foreseeable future.
Harrogate joint venture
Our Harrogate joint venture
with Oaktree Capital Management, which owns three shopping centres
in Dunfermline, Kings Lynn and
Loughborough, underwent a
refinancing during the year. A loan at 80% of valuation was secured
from Goldman Sachs with mezzanine funding provided by DRC. During
this refinancing, we declined the option to put further cash into
the joint venture and consequently our share of the equity was
diluted from 6.95% to 3.17%. However, our asset and property
management contracts remain unchanged and we continue to receive
fees for managing the centres.
Mining and property activities by Bisichi Mining PLC
The management of Bisichi report that for the year ended
31st December 2017, the company
achieved earnings before interest, tax, depreciation and
amortisation (EBITDA) of £3.7 million (2016: £2.4 million). This
significant improvement was achieved despite the impact on Black
Wattle, its direct coal mining subsidiary in South Africa, of mining challenges in the
first half of the year.
For the first half of 2017 production at Black Wattle was
impacted by higher than expected seasonal rains as well as ongoing
stone contamination issues at its opencast areas. Overall, during
this period, the mine achieved production of 582,000 metric tonnes
(2016 H1: 795,000 metric tonnes). The stone contamination issues
affected both yield and mining production through the washing
plant, thus impacting on sales volumes and earnings in the first
half of the year.
During the second half of the year, further development of Black
Wattle’s opencast areas and the successful completion of
infrastructure improvements to its washing plant allowed the mine
to increase production to 714,000 metric tonnes (2016 H2: 465,000
tonnes). In addition, the completion of these infrastructure
improvements assisted in reducing the stone contamination through
the washing plant and increasing its overall yield.
As a result of the higher production in the second half of the
year, overall mining production from Black Wattle increased in
2017, with total production for the year of 1.30 million metric
tonnes (2016: 1.26 million metric tonnes). As part of Black
Wattle’s mining plan, the opencast areas that were mined in 2017
will continue to be mined throughout 2018. Bisichi expect mining
production levels achieved in the second half of 2017 to be
maintained in 2018.
Looking forward to 2018, Bisichi management will focus on
maintaining production at the higher levels achieved in the second
half of 2017 and increasing the life of the mine through the
acquisition of additional reserves. With strong demand and improved
prices achievable for the company’s coal, Bisichi believes the
group is in a strong position to achieve significant value from its
South African mining operations in 2018.
Bisichi’s property portfolio is managed by LAP and continues to
perform well. Overall, net property revenue (excluding joint
ventures) was £1.12 million (2016: £1.06 million).
The property portfolio was externally valued at 31st December 2017 and the value of UK investment
properties attributable to the group at year end remained unchanged
at £13.25 million.
Bisichi has decided to recommend a final dividend of 3p (2016:
3p) and in light of the strong results achieved, a special dividend
of 1p (2016: nil). The total Bisichi dividend for the year is 5p
(2016: 4p). LAP’s cash share of this is £221,000 (2016:
£177,000).
Dragon Retail Properties
Dragon has a single retail asset in Bristol. There is a lease renewal on the
ground floor. The tenant has requested a new lease, and we believe
the rent to be reversionary. Negotiations are underway.
LAP Dividend
We are pleased to recommend a final dividend of 0.175p, an
increase of over 6% on the 2016 dividend of 0.165p. We are also
pleased to report that we will recommend a special dividend of
0.125p following the sale of our Brixton properties. This means we
will pay a total dividend of 0.30p.
Finally, we would like to thank all of our directors, staff and
advisors for their hard work during the year. We look forward to
the year ahead with cautious optimism.
Sir Michael Heller, John
Heller,
Chairman
Chief Executive
27 April 2018
STRATEGIC REPORT
Financial and performance review
The financial statements for 2017 have been prepared to reflect
the requirements of IFRS 10. This means that the accounts of
Bisichi Mining PLC (a London Stock Exchange main market quoted
company – BISI) (“Bisichi”), have been consolidated with those
of LAP.
Bisichi continues to operate as a fully independent company and
currently LAP owns only 41.52% of the issued ordinary share
capital. However, because related parties also have shareholdings
in Bisichi and there is a wide disposition of other shareholdings,
LAP is deemed under IFRS 10 to have effective control of Bisichi
for accounting purposes. This treatment means that the income and
net assets of Bisichi are disclosed in full and the value
attributable to the “non-controlling interest” (58.48%) is shown
separately in the equity section as a non-controlling interest.
There is no impact on the net assets attributable to LAP
shareholders.
Dragon Retail Property Limited (“Dragon”), our 50:50 joint
venture with Bisichi is also consolidated.
Shareholders are aware that LAP is a property business with a
significant investment in a listed mining company. The effect of
consolidating the results, assets and liabilities of the property
business and the mining company make the figures complex and less
transparent. Property company accounts are already subject to
significant volatility as valuations of property assets as well as
derivative liabilities can be subject to major movements based on
market sentiment. Most of these changes, though, have little or no
effect on the cash position and it is, of course, self-evident that
cash flow is the most important factor influencing the success of a
property business. We explain the factors affecting the property
business first, clearly separating these from factors affecting the
mining business which we do not manage. Comments about Bisichi (the
mining business) are based on information provided by the
independent management of that company.
LOANS
Long term debt of LAP (excluding Bisichi and Dragon which are
detailed separately below), consists of a £45 million facility
expiring in July 2019 and two
debentures: one of £10 million expiring in August 2022 and another of £3 million expiring in
August 2018. During the year £0.75
million of debenture was repaid. As in previous years, all loans
and debentures are secured on core property and cash deposits and
are covenant compliant.
LAP’s five year £35 million non-recourse loan from Santander, as
senior lender, is supported by a £10 million loan from Europa
Capital Mezzanine Limited, as mezzanine lender. The senior loan
facility is fully hedged and at the year end, 50% of the loan was
swapped at a rate of 2.25% and the remaining 50% was covered by an
interest cap at 2.25%. This gives a blended current interest rate
of 4.73% for the total £45 million debt. On completion of the sale
of Brixton Markets, £15.9 million of senior and mezzanine loans are
repayable.
Cash flow
The operating cash flow and net cash balances at the year-end
were as follows:
CASH FLOW FROM
OPERATIONS |
2017
£’000 |
2016
£’000 |
LAP |
2,708 |
2,623 |
Bisichi |
7,593 |
2,879 |
Dragon |
(14) |
84 |
Group total |
10,287 |
5,586 |
Note: The figures exclude inter-company transactions.
NET CASH BALANCES |
2017
£’000 |
2016
£’000 |
LAP |
2,109 |
3,706 |
Bisichi |
4,065 |
(890) |
Dragon |
92 |
115 |
Group total |
6,266 |
2,931 |
Our investment with Oaktree Capital Management (HRGT Shopping
Centres LP), remains profitable and generates management fees
(2017: £0.46 million and 2016: £0.46 million) for our wholly owned
subsidiary (London &
Associated Management Services Limited). We also received £0.1
million (2016: £0.1 million) as a partial repayment of our
loan.
Income statement
The segmental analysis in Note 1 to the financial statements
gives more detail but the tables below give a clearer summary of
the Group results.
RESULTS BEFORE REVALUATIONS AND
NON-CASH MOVEMENTS |
2017
£’000 |
2016
£’000 |
LAP |
(130) |
(1,070) |
Bisichi |
3,536 |
(241) |
Dragon |
(29) |
9 |
Group total |
3,377 |
(1,302) |
Note: The figures exclude inter-company transactions.
Rental income in LAP includes a one off receipt of £0.6 million
for Brixton back rent. Additionally, renewed efforts to cut costs
at LAP are reflected in lower overheads and property expenses,
resulting in an improvement of £0.9 million in the operating result
before revaluations of the core property business.
Bisichi’s improvement of £3.8 million is explained under Bisichi
Mining PLC, in this review.
The Group property portfolio, including assets held for sale
(including Bisichi) of £114.46 million increased on revaluation by
£9.37 million, a 9% increase.
The improved property revenues, reductions in running costs and
increased property valuations, have resulted in the LAP Group
property business showing an increase of £10.76 million in the
profit before taxation to £9.61 million (2016: loss £1.15
million).
profit/(Loss) before
taxation |
2017
£’000 |
2016
£’000 |
LAP |
9,614 |
(1,150) |
Bisichi |
1,696 |
216 |
Dragon |
(32) |
(40) |
Group profit/(loss) before
taxation |
11,278 |
(974) |
Note: The figures exclude inter-company transactions.
Taxation
The LAP Group taxation charge of £2.98 million (2016: £1.17
million) is mainly due to changes in the rules governing the
utilisation of tax losses which has restricted the group’s ability
to offset the deferred tax liability arising on the revaluation
gains recognised in the year.
Balance sheet
Taking account of the changes required by IFRS 10 (see table
below) LAP has group net assets of £56.7 million (2016: £48.6
million).
Net assets attributable to equity shareholders at the year-end
were 53.74p per share (2016: 44.83p per share).
2017 |
LAP
Original
Group
£’000 |
Bisichi
Mining PLC
Group
£’000 |
Dragon
Retail
Properties
£’000 |
Consolidation
adjustments
£’000 |
LAP
Net assets
£’000 |
Investment properties |
65,231 |
13,397 |
2,630 |
- |
81,258 |
Other fixed assets |
116 |
8,613 |
6 |
- |
8,735 |
Investments in Bisichi Mining
PLC |
7,120 |
- |
- |
(7,120) |
- |
Investments in joint ventures |
874 |
874 |
- |
(1,748) |
- |
Other non current assets |
1,748 |
51 |
- |
- |
1,799 |
Held for sale assets |
36,441 |
- |
- |
- |
36,441 |
Current assets |
4,824 |
13,622 |
2,528 |
(4,416) |
16,558 |
Current liabilities |
(10,822) |
(9,025) |
(2,124) |
4,416 |
(17,555) |
Non-current liabilities |
(59,377) |
(9,858) |
(1,291) |
- |
(70,526) |
Net assets |
46,155 |
17,674 |
1,749 |
(8,868) |
56,710 |
2016 |
|
|
|
|
|
Investment properties |
93,791 |
13,426 |
2,630 |
– |
109,847 |
Other fixed assets |
112 |
8,520 |
21 |
– |
8,653 |
Investments in Bisichi Mining
PLC |
6,918 |
– |
– |
(6,918) |
– |
Investments and loans in joint
ventures
and assets held for sale |
866 |
2,671 |
– |
(1,732) |
1,805 |
Other non current assets |
3,008 |
32 |
– |
– |
3,040 |
Current assets |
5,559 |
12,224 |
2,447 |
(4,347) |
15,883 |
Current liabilities |
(9,014) |
(10,326) |
(2,078) |
4,347 |
(17,071) |
Non-current liabilities |
(62,697) |
(9,541) |
(1,288) |
– |
(73,526) |
Net assets |
38,543 |
17,006 |
1,732 |
(8,650) |
48,631 |
Bisichi mining plc
Although the results of Bisichi Mining PLC have been
consolidated in these financial statements, the Board of LAP has no
direct influence over the management of Bisichi. The comments below
are based on the published accounts of Bisichi.
The Bisichi group results are stated in full in its published
2017 financial statements which are available on its website:
www.bisichi.co.uk.
The Bisichi group increased its EBITDA to £3.7 million (2016:
£2.4 million) mainly due to increased operating profits before
depreciation from the mining activities of £4.6 million (2016: £1.2
million) offset by the group’s share of losses in its joint venture
of £1.8 million (2016: £nil). The share of losses in joint ventures
arises from writing off the investment in Ezimbokodweni Mining
(Pty) Ltd of £1.8 million, as detailed in Notes 12 and 13 to the
accounts. Depreciation in the year relating to mining activities
remained unchanged at £1.8 million. Profit for the year after tax
was £1.5 million (2016: £0.3 million). Bisichi has two core revenue
streams – investment in retail property in the UK and coal mining
in South Africa.
The increase in operating profit was mainly attributable to the
higher prices achieved by coal and increased mining production at
Black Wattle offsetting the impact of the higher mining and washing
costs.
The UK retail property portfolio was valued at the year end at
£13.25 million (2016: £13.25 million). The property portfolio is
actively managed by LAP and generated rental income of £1.1 million
in the year (2016: £1.1 million).
In South Africa, a subsidiary
of Bisichi signed an increase in the structured trade finance
facility from R80 million to R100 million (South African Rand) in
July 2017 with Absa Bank Limited.
This facility is renewable annually at 30th June and is secured
against inventory, debtors and cash that are held in the Bisichi
group’s South African operations. This facility is expected to be
renewed again in 2018.
In the UK, the Bisichi group signed a £6 million five-year term
loan with Santander in December 2014.
This loan is secured against UK investment property. No covenants
were breached during the year.
Overall the Bisichi group achieved a net increase in cash and
cash equivalents of £4.9 million (2016: £0.4 million). This
increase was mainly attributable to improved coal mining operations
which generated a substantial (£7.3 million) increase in cash from
operating activities. Bisichi group’s net balance of cash and cash
equivalents (including bank overdrafts) at the year end was £4.1
million (owing 2016: £0.9 million). The Bisichi group’s cash and
cash equivalents (excluding bank overdrafts), at the year-end was
£5.3 million (2016: £2.4 million).
The Bisichi group’s financial position remains strong. Its net
assets at 31st December 2017 were
£17.7 million (2016: £17 million). The group expects to continue
achieving significant value in 2018 from its existing mining
operation. In addition, Bisichi seeks to expand its operations in
South Africa through the
acquisition of additional coal reserves.
DRAGON RETAIL PROPERTIES LIMITED
Dragon is a UK property investment company. The company has a
Santander bank loan of £1.25 million secured against its investment
property and is covenant compliant. It paid management fees of
£84,000 (2016: £72,000) split equally to the two joint venture
partners. Its results continue to be near breakeven after taxation.
Dragon has net assets of £1.7 million (2016: £1.7 million).
Accounting judgements and going concern
The most significant judgements made in preparing these accounts
relate to the carrying value of the properties, investments and
interest rate hedges. The hedges have been valued by the hedge
provider. The Group uses external property valuers to determine the
fair value of its properties.
Under IFRS10 the Group has included Bisichi Mining PLC in the
consolidated accounts, as it is deemed to be under the effective
control of LAP and has therefore been treated as a subsidiary.
The Directors exercise their commercial judgement when reviewing
the Group’s cash flow forecasts and the underlying assumptions on
which the forecasts are based. The Group’s business activities,
together with the factors likely to affect its future development,
are set out in the Chairman and Chief Executive’s Statement and in
this review. In addition, the Directors consider that Note 23 to
the financial statements sets out the Group’s objectives, policies
and processes for managing its capital; its financial risk
management objectives; details of its financial instruments and
hedging activities; and its exposure to credit risk, liquidity risk
and other risks.
With a quality property portfolio comprising a majority of
tenants with long leases supported by suitable financial
arrangements, the Directors believe the group is well placed to
manage its business risks successfully, despite the continuing
uncertain economic climate. The Directors therefore have a
reasonable expectation that the group and the company have adequate
resources to continue in operational existence for the foreseeable
future. Thus, they continue to adopt the going concern basis of
accounting in preparing the annual financial statements.
TAXation
The LAP Group tax strategy is to account for tax on an accurate
and timely basis. We only structure our affairs based on sound
commercial principles and wish to maintain a low tax risk position.
We do not engage in aggressive tax planning.
The LAP Group (excluding Bisichi and Dragon) has unused tax
losses and deductions with a potential value of £10.167 million of
which only £4.74 million has been recognised in the 2017 financial
statements. As LAP returns to profit, these tax losses and
deductions should be utilised.
Dividends and future prospects
The directors are proposing a final dividend of 0.175p per
ordinary share payable in September
2018.
The directors are also proposing a special dividend of 0.125p
per ordinary share payable in September
2018.
The Group remains cautiously confident about its trading and
future outlook and it continues to look at further reducing its
overhead costs and interest payable, while it stabilises its
property income together with seeking out growth opportunities.
STRATEGIC REPORT
Principal activities, strategy & business model
The LAP Group’s principal business model is the investment in
and management of town centre retail property through direct
investment and joint ventures, where we manage the property
ourselves and on behalf of our partners.
The principal activity of Bisichi Mining PLC is coal mining in
South Africa. Further information
is available in its 2017 Financial Statements which are available
on their web site: www.bisichi.co.uk
STRATEGIC PRIORITIES ARE |
OUR STRATEGY IS |
MAXIMISING INCOME |
By achieving an appropriate tenant
mix and shopping experience we can increase footfall through the
centres, hence increase tenant demand for space and enhance
income. |
CREATING QUALITY
PROPERTY |
We look to improve the consumer
experience at all our centres by achieving an appropriate tenant
mix and a vibrant trading environment through investment activity,
enhancement, refurbishment and development. |
CAPITAL STRENGTH |
We operate within a prudent and
flexible financial structure. Our gearing, which has been
substantially reduced, provides financial stability whilst giving
capacity and flexibility to look for further investments. |
MAINTAIN THE VALUE OF
INVESTMENT IN BISICHI |
By encouraging the Bisichi
management to maximise sustainable profits and cash
distributions. |
Risks and uncertainties
DESCRIPTION OF RISK |
DESCRIPTION
OF IMPACT |
MITIGATION |
ASSET MANAGEMENT: |
|
|
TENANT FAILURE |
Financial loss. |
Initial and subsequent assessment of
tenant covenant strength combined with an active credit control
function. |
LEASES NOT RENEWED |
Financial loss. |
Lease expiries regularly reviewed.
Experienced in house teams with strong tenant and market knowledge
who manage appropriate tenant mix. |
ASSET LIQUIDITY (SIZE AND
GEOGRAPHICAL LOCATION) |
Assets may be illiquid and affect
flexing of balance sheet. |
Regular reporting of current and
projected position to the Board with efficient treasury
management. |
PEOPLE: |
|
|
RETENTION AND RECRUITMENT
OF STAFF |
Unable to retain and attract the
best people for the key roles. |
Nomination Committee and senior
staff review skills gaps and succession planning. Training and
development offered. |
REPUTATION: |
|
|
BUSINESS INTERRUPTION |
Loss in revenue.
Impact on footfall.
Adverse publicity.
Potential for criminal/
civil proceedings. |
Documented Recovery
Plan in place.
General and terrorism insurance policies in place and risks
monitored by trained security staff.
Health and Safety policies in place.
CCTV in centres. |
FINANCING: |
|
|
FLUCTUATION IN PROPERTY
VALUES |
Impact on covenants and other loan
agreement obligations. |
Secure income
flows.
Regular monitoring of LTV and IC covenants and
other obligations.
Focus on quality assets. |
REDUCED AVAILABILITY OF
BORROWING FACILITIES |
Insufficient funds to meet existing
debts/interest payments and operational payments. |
Efficient treasury
management.
Loan facilities extended where possible.
Regular reporting of current and projected position to the
Board. |
LOSS OF CASH AND
DEPOSITS |
Financial loss. |
Only use a spread of banks and
financial institutions which have a strong credit rating. |
FLUCTUATION OF INTEREST
RATES |
Uncertainty of interest rate
costs. |
Manage derivative contracts to
achieve a balance between hedging interest rate exposure and
minimising potential cash calls. |
STRATEGIC REPORT
Bisichi risks and uncertainties
Bisichi (although it is consolidated into group accounts as
required by IFRS 10) is managed independently of LAP. The risks
outlined below are an abbreviated summary of the risks reported by
the Directors of Bisichi to the shareholders of that Company. Full
details are available in the published accounts of Bisichi
(www.bisichi.co.uk).
These risks, although critical to Bisichi, are of less
significance to LAP which only has a minority investment of 41.52%
in the company. In the unlikely event that Bisichi was unable to
continue trading, it would not affect the ability of LAP to
continue operating as a going concern.
DESCRIPTION OF RISK |
DESCRIPTION
OF IMPACT |
MITIGATION |
COAL PRICES CAN BE IMPACTED
MATERIALLY BY MARKET AND CURRENCY VARIATIONS |
Affects sales value and therefore
margins. |
Forward sales contracts are used to
manage value expectations. |
MINING OPERATIONS ARE INHERENTLY
RISKY. MINERAL RESERVES, REGULATIONS, LICENSING, POWER
AVAILABILITY, HEALTH AND SAFETY CAN ALL DAMAGE
OPERATIONS |
Loss of production causing loss of
revenue. |
Use of geology experts, careful
attention to regulations, health and safety training, employee
dialogue to minimise controllable risks. |
CURRENCY RISK |
Affects realised sales value and
therefore margins. |
Regular monitoring and review of
forward currency situation. |
CASHFLOW VARIATION BECAUSE OF
MINING RISKS, COMMODITY PRICE OR CURRENCY VARIATIONS |
Variations can deliver significant
shifts in cash flow. |
UK property investments used to
offset high risk mining operations. |
STRATEGIC REPORT
Key performance indicators
The Group’s Key Performance Indicators are selected to ensure
clear alignment between its strategy and shareholder interests.
The KPIs are calculated using data from management reporting
systems.
Strategic priority |
KPI |
Performance |
MAXIMISING INCOME –
LIKE FOR LIKE PROPERTY INCOME |
To increase the like-for-like
income from the property year on year. |
Like-for-like rental
income as a percentage of the prior year rental. |
The like-for-like
rental
income has remained unchanged.
In the continuing difficult trading environment, this is considered
satisfactory.
|
MAXIMISING INCOME –
OCCUPANCY |
|
We aim to maximise the total
income in our properties by
achieving full occupancy.
|
The ERV of the empty
units as a percentage of our total income. |
Void levels have remained unchanged
at 2.06%. |
CAPITAL STRENGTH –
GROWTH IN NET ASSET VALUE PER SHARE |
The net assets per share is the
principal measure used by the group for monitoring its performance
and is an indicator of the level of reserves available for
distribution by way of dividend. |
Movement in the
net assets
per share. |
The net assets per
share
increased by 8.91 pence per share
or nearly 20% to 53.74p.
The strategic realisation of Brixton markets is the main reason for
the significant increase this year. This is in accordance with our
policy of selling assets when we believe that they have achieved
maximum value. |
|
|
|
|
STRATEGIC REPORT
Corporate responsibility
Sustainable Development
Bisichi’s Black Wattle continues to strive to conduct business
in a safe, environmentally and socially responsible manner. Some
highlights of their Health, Safety and Environment performance in
2017:
• Black Wattle Colliery recorded one Lost Time
Injury during 2017 (2016: One).
• No cases of Occupational Diseases were
recorded.
• Zero claims for the Compensation for Occupational
Diseases were submitted.
They continue to be compliant and make progress in terms of
their Social and Labour Plan and their various BEE initiatives. A
fuller explanation of these can be found in Bisichi’s 2017
Financial Statements which are available on their web site:
www.bisichi.co.uk
Greenhouse gas reporting
We have reported on all of the emission sources required under
the Companies Act 2006 (Strategic Report and Directors’ Reports)
Regulations 2013 for the reporting period 1st January 2017 to 31st
December 2017. The emissions are detailed in tables 1, 2, 3
and 4 below.
We have employed the Financial Control definition to outline our
carbon footprint boundary reporting Scope 1 & 2 emissions only.
Emissions from both landlord and tenant controlled areas of LAP
owned shopping centres and facilities that fall within the
footprint boundary. LAP has landlord controlled areas in Kings
Square, Orchard Square, Brewery Street, Shipley and Bridgend.
Excluded from our footprint boundary are: properties that we manage
on behalf of others or are not wholly owned by LAP and emissions
are considered non material by the business.
Emissions for landlord controlled areas have been calculated
based on actual consumption information collected from each
shopping centre. Emissions from tenant controlled areas have been
calculated based on floor area and energy consumption benchmarks
for general retail services in the UK.
The Bisichi Group has employed the Operational Control boundary
definition to outline the carbon footprint boundary. Included
within that boundary are Scope 1 & 2 emissions from coal
extraction and onsite mining processes for Black Wattle Colliery.
Excluded from the footprint boundary are emission sources
considered non material by Bisichi Group, including refrigerant use
onsite.
We have used the ISO14046-1 Standard (2006) and guidance
provided by UK’s Department of Environment and Rural Affairs
(DEFRA) on voluntary and mandatory carbon reporting. Emission
factors were used from UK Government’s GHG Conversion Factors for
Company Reporting 20171.
As well as reporting Scope 1 and Scope 2 emissions, legislation
requires that at least one intensity ratio is reported for the
given reporting period. The intensity figure represented below
shows the emissions in tCO2e per thousand pounds
revenue.
Table 1. landlord & tenant controlled areas
|
Emissions Source |
2017 |
2016 |
Scope 1 emissions |
Natural gas (tCO2e) |
71 |
234 |
|
Refrigerants (tCO2e) |
0 |
5 |
Scope 2 emissions |
Electricity (tCO2e) |
2,938 |
3,491 |
|
Total tCO2e |
3,009 |
3,730 |
|
Intensity ratio
(tCO2e/£thousand) |
0.467 |
0.076 |
Table 2. LAP controlled areas
|
Emissions Source |
2017 |
2016 |
Scope 1 emissions |
Natural gas (tCO2e) |
71 |
234 |
|
Refrigerants (tCO2e) |
0 |
5 |
Scope 2 emissions |
Electricity (tCO2e) |
176 |
236 |
|
Total tCO2e |
247 |
475 |
Table 3. Tenant controlled areas
|
Emissions Source |
2017 |
2016 |
Scope 1 emissions |
Natural gas (tCO2e) |
- |
- |
|
Refrigerants (tCO2e) |
- |
- |
Scope 2 emissions |
Electricity (tCO2e) |
2,762 |
3,255 |
|
Total tCO2e |
2,762 |
3,255 |
1. 2017 Guidelines to DEFRA/DECC’s GHG Conversion Factors for
Company Reporting, Department for environment,
Food and Rural Affairs (DEFRA) and Department for Energy and
Climate Change (DECC)
Table 4. Coal mining carbon footprint
|
2017
CO2e
Tonnes |
2016
CO2e
Tonnes |
Emissions source: |
|
|
Scope 1 Combustion of fuel & operation of facilities |
15,575 |
11,860 |
Scope 1 Emissions from coal mining activities |
22,683 |
22,171 |
Scope 2 Electricity, heat, steam and cooling purchased for own
use |
11,210 |
8,530 |
Total |
49,468 |
42,561 |
Intensity: |
|
|
Intensity 1 Tonnes of CO2 per pound sterling of revenue |
0.0013 |
0.0019 |
Intensity 2 Tonnes of CO2 per pound of coal produced |
0.038 |
0.034 |
Environment
United Kingdom
The Group’s principal UK activity is property investment, which
involves renting premises to retail businesses. We seek to provide
those tenants with good quality premises from which they can
operate in an efficient and environmentally friendly manner. Where
possible, improvements, repairs and replacements are made in an
environmentally efficient manner and waste re-cycling arrangements
are in place at all of the Company’s locations.
South Africa
The Bisichi group’s principal activity in South Africa is coal mining. Under the terms
of the mine’s Environmental Management Programme approved by the
Department of Mineral Resource (“DMR”), Black Wattle undertakes a
host of environmental protection activities to ensure that the
approved Environmental Management Plan is fully implemented. A
performance assessment audit was conducted to verify compliance to
their Environmental Management Programme and no significant
deviations were found.
Employee, social, community and human rights
The Group’s policy is to attract staff and motivate employees by
offering competitive terms of employment. The Group provides equal
opportunities to all employees and prospective employees including
those who are disabled and operates in compliance with all relevant
national legislation.
Diversity and equality
The board recognises the importance of diversity, both in its
membership, and in the Group’s employees. It has a clear policy to
promote diversity across the business. The Board considers that the
quotas are not appropriate in determining its composition and has
therefore chosen not to set targets. All aspects of diversity,
including but not limited to gender, are considered at every level
of recruitment. Gender diversity of the Board and the Group is set
out below.
Directors, employees and gender representation
At the year end the LAP Group (excluding Bisichi and Dragon),
had 6 directors (6 male, 0 female),
2 senior managers (2 male, 0 female) and 23 employees (12
male, 11 female).
Bisichi Mining PLC
Bisichi Mining PLC’s group at the year end had 6 directors (6
male, 0 female), 7 senior managers (6 male, 1 female) and 196
employees (143 male, 53 female).
Detailed information relating to Bisichi Strategic Report is
available in its 2017 financial statements.
Approved on behalf of the board of directors
Anil Thapar,
Finance Director
27 April 2018
GOVERNANCE
Directors & advisors
EXECUTIVE DIRECTORS
Sir Michael Heller MA FCA*
(Chairman)
John A Heller LLB MBA
(Chief Executive)
Anil K Thapar FCCA
(Finance Director)
NON-EXECUTIVE DIRECTORS
Howard D Goldring BSC (ECON) ACA†
Howard Goldring is Executive
Chairman of Delmore Asset Management Limited which specialises in
the discretionary management of investment portfolios for pension
funds, charities, family trusts and private clients. He also acts
as an advisor providing high level asset allocation advice to
family offices and pension schemes, including Tesco Pension
Investment Ltd. He has been a member of the LAP Board since
July 1992, and has almost 40 years’
experience of the real estate market. He was a director of
Baronsmead VCT 2 PLC from 2010-2016, and has specialised in
providing many companies with investor relations support.
Clive A Parritt FCA CF FIIA #†
Clive Parritt joined the board on
1 January 2006. He is a chartered
accountant with over 40 years’ experience of providing strategic,
financial and commercial advice to businesses of all sizes. He is
Chairman of BG Training Limited and a director of Jupiter US
Smaller Companies plc. Until April
2016 he was Group Finance Director of Audiotonix Limited (an
international manufacturer of audio mixing consoles). He has
chaired and been a director of a number of other public and private
companies. Clive Parritt was
President of the Institute of Chartered Accountants in England and Wales in 2011-12. He is Chairman of the Audit
Committee and as Senior Independent Director he chairs the
Nomination and Remuneration Committees.
Robin Priest MA
Robin Priest joined the board on
31 July 2013. He is chairman of
private real estate company Property Alliance Group and a senior
advisor to Alvarez & Marsal LLP (“A&M”) and to a major
listed German real estate investment fund manager. He has more than
36 years’ experience in real estate and structured finance. He was
formerly Managing Director of A&M’s real estate practice,
advising private sector and public sector clients on both
operational and financial real estate matters. Prior to joining
A&M, Robin was lead partner for Real Estate Corporate Finance
in London with Deloitte LLP and
before this he founded and ran a property company backed by private
equity. He is also a trustee of London’s Oval House Theatre.
* Member of the nomination committee
† Member of the audit, remuneration and nomination
committees
# Senior independent director
SECRETARY & REGISTERED OFFICE
Anil K Thapar FCCA
24 Bruton Place
London W1J 6NE
AUDITOR
RSM UK Audit LLP
PRINCIPAL BANKERS
Santander UK plc
Abbey National Treasury Services plc
Europa Capital Mezzanine Ltd
SOLICITORS
Olswang LLP
Pinsent Masons LLP
STOCKBROKER
Stockdale Securities Limited
REGISTRARS & TRANSFER OFFICE
Link Asset Services
Shareholder Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
UK telephone: 0871 664 0300
International telephone: +44 371 664 0300
(Calls cost 12p per minute plus your phone company’s access charge.
Calls outside the United
Kingdom will be charged at the applicable international
rate).
Lines are open between 9.00am to
5.30pm, Monday to Friday, excluding public holidays in
England and Wales.
Website: www.linkassetservices.com
Email: enquiries@linkgroup.co.uk
Company registration number
341829 (England and Wales)
WEBSITE
www.lap.co.uk
E-MAIL
admin@lap.co.uk
GOVERNANCE
Directors’ report
The Directors submit their report and the audited financial
statements for the year ended 31 December 2017.
Strategic report
A comprehensive review and assessment of the Group’s activities
during the year as well as its position at the year end and
prospects for the forthcoming year are included in the Chairman and
Chief Executive’s Statement and the Strategic Report. These reports
can be found on pages 2 to 11 and should be read in conjunction
with this report.
Activities
The principal activities of the Group during the year were
property investment and development, as well as investment in joint
ventures and an associated company. The associated company is
Bisichi Mining PLC (Bisichi) in which the Company holds a 41.52 per
cent interest. Bisichi is listed on the main market of the London
Stock Exchange and operates in England and South
Africa with subsidiaries which are involved in overseas
mining and mining investment. The results, together with the assets
and liabilities, of Bisichi are consolidated with those of LAP in
accordance with the terms of IFRS 10 even though the Group only has
a minority interest – under IFRS 10 the 58% majority interest is
disclosed as a “non-controlling interest”.
Business review AND POST BALANCE SHEET EVENTS
Review of the Group’s development and performance
A review of the Group’s development and performance can be found
below and should be read in conjunction with the Strategic Report
on pages 4 to 11.
Details of any post balance sheet events are disclosed in Note
32 to the financial statements.
Future developments
The Group continues to look for new opportunities to acquire
real estate assets where it feels it can increase value by applying
its intensive management skills. At the same time, it seeks to
reduce its interest payments on its loans as they expire or where
opportunities arise to refinance on better terms. We also seek to
improve our existing estate through the continued pursuit of asset
management initiatives.
Property activities
The Group is a long-term investor in property. It acquires
retail properties, actively manages those assets to improve rental
income, and thus seeks to enhance the value of its properties over
time. In reviewing performance, the principal areas regularly
monitored by the Group include:
• Rental income – the aim of the Group is to
maximise the maintainable income from each property by careful
tenant management supported by sympathetic and revenue enhancing
development. Income may be affected adversely by the inability of
tenants to pay their rent, but careful monitoring of rent
collection and tenant quality helps to mitigate this risk. Risk is
also minimised by a diversified tenant base, which should limit the
impact of the failure of any individual tenant.
• Cash flow – allowing for voids, acquisitions,
development expenditure, disposals and the impact of operating
costs and interest charges, the Group aims to maintain a positive
cash flow over time.
• Financing costs – the exposure of the Group to interest
rate movements is managed partly by the use of swap and cap
arrangements (see Note 23 on page 56 for full details of the
contracts in place) and also by using loans with fixed terms and
interest rates. These arrangements are designed to ensure that our
interest costs are known in advance and are always covered by
anticipated rental income. Details of key estimates that have been
adopted are contained in the accounting policies Note on page
37.
• Property valuations – market sentiment and
economic conditions have a direct effect on property valuations,
which can vary significantly (upwards or downwards) over time.
Bearing in mind the long term nature of the Group’s business,
valuation changes have little direct effect on the ongoing
activities or the income and expenditure of the Group. Tenants
generally have long term leases, so rents are unaffected by short
term valuation changes. Borrowings are secured against property
values and if those values fall very significantly, this could
limit the ability of the Group to develop the business using
external borrowings. The risk is minimised by trying to ensure that
there is adequate cover to allow for fluctuations in value on
a short term basis.
It continues to be the policy of the Group to realise property
assets when the valuation of those assets reaches a level at which
the directors consider that the long-term rental yield has been
reached. The Group also seeks to acquire additional property
investments on an opportunistic basis when the potential rental
yields offer scope for future growth.
Investment activities
The investments in joint ventures and Bisichi are for the long
term.
LAP manages the UK property assets of Bisichi. However, the
principal activity of Bisichi is overseas mining investment (in
South Africa). While IFRS 10
requires the consolidation of Bisichi, the investment is held to
generate income and capital growth over the longer term. It is
managed independently of LAP and should be viewed by shareholders
as an investment and not a subsidiary. The other listed investments
are held as current assets to provide the liquidity needed to
support the property activities while generating income and capital
growth.
Investments in property are made through joint ventures when the
financing alternatives and spreading of risk make such an approach
desirable.
Dividend
The directors are recommending payment of a final dividend for
2017 of 0.175p per share (2016 0.165p per share) and a special
dividend for 2017 of 0.125p (2016: nil).
Subject to shareholder approval, the ordinary final dividend and
special dividend will be payable on Friday 14 September 2018 to shareholders registered at
the close of business on Friday 17 August
2018.
The company’s ordinary shares held in treasury
At 31 December 2017, 221,061
(2016: 221,061) ordinary shares were held in Treasury with a market
value of £54,160 (2016: £46,422). At the Annual General Meeting
(AGM) in June 2017 members renewed
the authority for the Company to purchase up to 10 per cent of its
issued ordinary shares. The Company will be asking members to renew
this authority at the next AGM to be held on Tuesday 19 June 2018.
Treasury shares held at 1 January
2017 and 31 December 2017 |
221,061 |
Treasury shares are not included in issued share capital for the
purposes of calculating earnings per share or net assets per share
and they do not qualify for dividends payable.
Investment properties
The freehold and long leasehold properties of the Company, its
subsidiaries and Bisichi were revalued as at 31 December 2017 by independent professional
firms of chartered surveyors – Allsop LLP, London (80.69 per cent of the portfolio),
Carter Towler, Leeds (16.98 per cent) – and by the Directors
(2.34 per cent). The valuations, which are reflected in the
financial statements, amount to £78 million (2016: £105.08
million).
Investment property of £36.4 million sold in 2018 is stated
under current assets, as Assets held for sale.
Taking account of prevailing market conditions, the valuation of
the properties at 31 December 2017
resulted in an increase of £9.37 million (2016: increase of £0.53
million). The proportion of this revaluation attributable to the
Group (net of taxation) is reflected in the consolidated income
statement and the consolidated balance sheet.
Financial instruments
Note 23 to the financial statements sets out the risks in
respect of financial instruments. The board reviews and agrees
overall treasury policies, delegating appropriate authority for
applying these policies to the Chief Executive and Finance
Director. Financial instruments are used to manage the financial
risks facing the Group and speculative transactions are prohibited.
Treasury operations are reported at each board meeting and are
subject to weekly internal reporting. Hedging arrangements are in
place for the Company, its subsidiaries and joint ventures in order
to limit the effect of higher interest rates upon the Group. Where
appropriate, hedging arrangements are covered in the Chairman and
Chief Executive’s Statement and the Financial Review.
Directors
Sir Michael Heller, J A Heller, A
K Thapar, H D Goldring, C A Parritt and R Priest were
Directors of the company for the whole of 2017.
C A Parritt, J A Heller and A K Thapar are retiring by rotation
at the Annual General Meeting in 2018 and offer themselves for
re-election.
Clive Parritt has been a Director
since January 2006 and has a contract
of service determinable upon three months’ notice and is the Senior
Independent Director and Chairman of the audit, nomination and
remuneration committees. He is a Chartered Accountant with over 40
years’ experience in providing strategic, financial and commercial
advice to business. His financial knowledge and broad commercial
experience are of significant benefit to the business. The board
has considered the re-appointment of Clive
Parritt and recommends his re-election as a Director.
John Heller has been a Director
since 1998 and was appointed Chief Executive in September 2001. He has a contract of employment
determinable upon twelve months’ notice. The board has considered
the re-appointment of John Heller
and recommends his re-election as a Director.
Anil Thapar has been Finance Director since January 2015 and is also the Company Secretary.
He has a contract of employment determinable upon three months’
notice. Anil Thapar is a Chartered Certified Accountant and has
worked at LAP since November 2005.
The board has considered the re-appointment of Anil Thapar and
recommends his re-election as a Director.
Directors’ interests
The interests of the Directors in the ordinary shares of the
Company, including family and trustee holdings, where appropriate,
can be found on page 22 of the Annual Remuneration Report.
Substantial shareholdings
At 31 December 2017, Sir
Michael Heller and his family had an
interest in 48.08 million shares of the Company, representing 56.35
per cent of the issued share capital net of treasury shares (2016:
48.08 million shares representing 56.35 per cent). Cavendish Asset
Management Limited had an interest in 7,909,464 shares representing
9.27 per cent of the issued share capital of the Company (2016:
8,173,875 shares representing 9.58 per cent). James Hyslop had an interest in 4,846,258 shares
representing 5.68 per cent of the issued share capital of the
Company (2016: 4,456,258 shares representing 5.22 per cent).
The Company does not consider that the Heller family have a
controlling share interest irrespective of the number of shares
held as no individual party holds a majority and there is no legal
obligation for shareholders to act in concert. The Directors do not
consider that any single party has control.
The Company is not aware of any other holdings exceeding 3 per
cent of the issued share capital.
share capital and Takeover directive
The Company has one class of share capital, namely ordinary
shares. Each ordinary share carries one vote. All the ordinary
shares rank pari passu. There are no securities issued by the
Company which carry special rights with regard to control of the
Company.
The identity of all significant direct or indirect holders of
securities in the Company and the size and nature of their holdings
is shown in “Substantial Shareholdings” above.
The rights of the ordinary shares to which the HMRC approved
Share Incentive Plan relates are exercisable by the trustees on
behalf of the employees.
There are no restrictions on voting rights or on the transfer of
ordinary shares in the Company, save in respect of treasury shares.
The rules governing the appointment and replacement of Directors,
alteration of the articles of association of the Company and the
powers of the Company’s Directors accord with usual English company
law provisions. Each Director is re-elected at least every three
years. The Company has requested authority from shareholders to buy
back its own ordinary shares and there will be a resolution to
renew the authority at this year’s AGM (Resolution 12).
The Company is not party to any significant agreements that take
effect, alter or terminate upon a change of control of the Company
following a takeover bid. The Company is not aware of any
agreements between holders of its ordinary shares that may result
in restrictions on the transfer of its ordinary shares or on voting
rights.
There are no agreements between the Company and its Directors or
employees providing for compensation for loss of office or
employment that occurs because of a takeover bid.
Statement as to disclosure of information to the auditor
The Directors in office at the date of approval of the financial
statements have confirmed that, so far as they are aware, there is
no relevant audit information of which the auditor is unaware. Each
of the Directors has confirmed that they have taken all the steps
that they ought to have taken as a Director in order to make them
aware of any relevant audit information and to establish that it
has been communicated to the auditor.
indemnities and insurance
The Articles of Association of the company provide for it to
indemnify, to the extent permitted by law, directors and officers
(excluding the Auditor) of the company, including officers of
subsidiaries and associated companies, against liabilities arising
from the conduct of the Group’s business. The indemnities are
qualifying third party indemnity provisions of the Companies Act
2006 and each of these qualifying third party indemnities was in
force during the course of the financial year ended 31 December 2017 and as at the date of this
Directors’ report. No amount has been paid under any of these
indemnities during the year.
The Group maintains Directors and officers insurance, which is
reviewed annually and is considered to be adequate by the Company
and its insurance advisers.
Donations
No political donations were made during the year (2016: £Nil).
£1,000 of donations for charitable purposes were made during the
year (2016: £2,000).
CORPORATE RESPONSIBILITY
Environment
The environmental considerations of the group’s South African
coal mining operations are covered in the Bisichi Mining PLC
Strategic Report.
The group’s UK activities are principally property investment
whereby premises are provided for rent to retail businesses. The
group seeks to provide those tenants with good quality premises
from which they can operate in an efficient and environmentally
efficient manner and waste re-cycling arrangements are in place at
all the company’s locations.
Greenhouse gas emissions
Details of the group’s greenhouse gas emissions for the year
ended 31 December 2017 can be found
on pages 10 and 11 of the Strategic Report.
Employment
The group’s policy is to attract staff and motivate employees by
offering competitive terms of employment. The group provides equal
opportunities to all employees and prospective employees including
those who are disabled. The Bisichi Mining PLC Strategic Report
gives details of the group’s activities and policies concerning the
employment, training, health and safety and community support and
social development concerning the group’s employees in South Africa.
Going concern
The directors have reviewed the cash flow forecasts of the Group
and the underlying assumptions on which they are based. The Group’s
business activities, together with the factors likely to affect its
future development, are set out in the Chairman’s and Chief
Executive’s Statement and Financial Review. In addition, Note 23 to
the financial statements sets out the Group’s objectives, policies
and processes for managing its capital; its financial risk
management objectives; details of its financial instruments and
hedging activities; and its exposure to credit risk and liquidity
risk.
With secured long term banking facilities, sound financial
resources and long term leases in place the Directors believe it
remains appropriate to adopt the going concern basis of accounting
in preparing the annual financial statements.
The Bisichi directors continue to adopt the going concern basis
of accounting in preparing the Bisichi annual financial
statements.
Corporate Governance
The Corporate governance report can be found on pages 17 and 18
of the annual report and accounts.
Annual General Meeting
The Annual General Meeting will be held at Royal Automobile
Club, 89 Pall Mall, London, SW1Y
5HS on Tuesday 19 June 2018 at
10.00 a.m. Items 1 to 10 and 14 will
be proposed as ordinary resolutions. More than 50 per cent. of
shareholders’ votes cast at the meeting must be in favour for those
ordinary resolutions to be passed. Items 11 to 13 will be proposed
as special resolutions. At least 75 per cent. of shareholders’
votes cast at the meeting must be in favour for those special
resolutions to be passed. The Directors consider that all of the
resolutions (other than 14), to be put to the meeting are in the
best interests of the Company and its shareholders as a whole and
accordingly the board unanimously recommends that shareholders vote
in favour of all of the resolutions, other than 14, as the
Directors intend to do in respect of their own beneficial holdings
of ordinary shares. The Directors do not consider resolution 14 to
be in the best interests of the Company and its shareholders as a
whole. The Directors recommend that shareholders vote against this
resolution.Please note that the following paragraphs are only
summaries of certain of the resolutions to be proposed at the
Annual General Meeting and do not represent the full text of the
resolutions. You should therefore read this section in conjunction
with the full text of the resolutions contained in the notice of
Annual General Meeting which accompanies this Directors’
Report.
Ordinary resolutions
Resolution 10 – Authority to allot securities
Paragraph 10.1.1 of Resolution 10 would give the Directors the
authority to allot shares in the Company and grant rights to
subscribe for or convert any security into shares in the Company up
to an aggregate nominal value of £2,836,478. This represents
approximately 1/3 (one third) of the ordinary share capital of the
Company in issue (excluding treasury shares) as at 26 April 2018 (being the last practicable date
prior to the publication of this Directors’ Report).
In line with guidance issued by the Investment Association
(‘IA’), paragraph 10.1.2 of Resolution 10 would give the directors
the authority to allot shares in the Company and grant rights to
subscribe for or convert any security into shares in the Company up
to a further aggregate nominal value of £2,836,478, in connection
with an offer by way of a rights issue. This amount represents
approximately 1/3 (one third) of the ordinary share capital of the
Company in issue (excluding treasury shares) as at 26 April 2018 (being the last practicable date
prior to the publication of this Directors’ Report).
The Directors’ authority will expire on the earlier of
31 August 2019 or the next AGM. The
Directors do not currently intend to make use of this
authority. However, if they do exercise the authority, the
Directors intend to follow best practice as recommended by the IA
regarding its use (including as regards the Directors standing for
re-election in certain cases).
Special resolutions
The following special resolutions will be proposed at the
Annual General Meeting:
Resolution 11 – Disapplication of pre-emption rights
Under English company law, when new shares are allotted or
treasury shares are sold for cash (otherwise than pursuant to an
employee share scheme) they must first be offered at the same price
to existing shareholders in proportion to their existing
shareholdings. This special resolution gives the Directors
authority, for the period ending on the date of the next annual
general meeting to be held in 2019, to: (a) allot shares of the
Company and sell treasury shares for cash in connection with a
rights issue or other pre-emptive offer; and (b) otherwise allot
shares of the Company, or sell treasury shares, for cash up to an
aggregate nominal value of £425,472 representing, in accordance
with institutional investor guidelines, approximately 5 per cent.
of the total ordinary share capital in issue as at 26 April 2018 (being the last practicable date
prior to the publication of this Directors’ Report) in each case as
if the pre-emption rights in English company law did not apply.
Save in respect of issues of shares in respect of employee share
schemes and share dividend alternatives, the Directors do not
currently intend to make use of these authorities. The board
intends to adhere to the provisions in the Pre-emption Group’s
Statement of Principles not to allot shares for cash on a
non-pre-emptive basis in excess of an amount equal to 7.5 per cent.
of the Company’s ordinary share capital within a rolling three-year
period without prior consultation with shareholders. The Directors’
authority will expire on the earlier of 31
August 2019 or the date of next AGM.
Resolution 12 – Purchase of own ordinary shares
The effect of Resolution 12 would be to renew the Directors’
current authority to make limited market purchases of the Company’s
ordinary shares of 10 pence each. The
power is limited to a maximum aggregate number of 8,509,435
ordinary shares (representing approximately 10 per cent. of the
Company’s issued share capital as at 26
April 2018 (being the latest practicable date prior to
publication of this Directors’ Report)). The minimum price
(exclusive of expenses) which the Company would be authorised to
pay for each ordinary share would be 10
pence (the nominal value of each ordinary share). The
maximum price (again exclusive of expenses) which the Company would
be authorised to pay for an ordinary share is an amount equal to
105 per cent. of the average market price for an ordinary share for
the five business days preceding any such purchase. The authority
conferred by Resolution 12 will expire at the conclusion of the
Company’s next annual general meeting to be held in 2019 or 15
months from the passing of the resolution, whichever is the
earlier. Any purchases of ordinary shares would be made by means of
market purchases through the London Stock Exchange.
If granted, the authority would only be exercised if, in the
opinion of the Directors, to do so would result in an increase in
earnings per share or asset values per share and would be in the
best interests of shareholders generally. In exercising the
authority to purchase ordinary shares, the Directors may treat the
shares that have been bought back as either cancelled or held as
treasury shares (shares held by the Company itself). No dividends
may be paid on shares which are held as treasury shares and no
voting rights are attached to them.
Resolution 13 – Notice of General Meetings
Resolution 13 shall be proposed to allow the Company to call
general meetings (other than an Annual General Meeting) on 14 clear
days’ notice. A resolution in the same terms was passed at the
Annual General Meeting in 2017. The notice period required by the
Companies Act 2006 for general meetings of the Company is 21 days,
unless shareholders approve a shorter notice period, which cannot
however be less than 14 clear days. Annual General Meetings must
always be held on at least 21 clear days’ notice. It is intended
that the flexibility offered by this resolution will only be used
for time-sensitive, non-routine business and where merited in the
interests of shareholders as a whole. The approval will be
effective until the Company’s next Annual General Meeting, when it
is intended that a similar resolution will be proposed.
Other matters
RSM UK Audit LLP has expressed its willingness to continue in
office as auditor. A proposal will be made at the Annual General
Meeting for its reappointment.
By order of the board
Anil Thapar
Secretary
27 April 2018
24 Bruton Place
London
W1J 6NE
GOVERNANCE
Corporate Governance
The Company has adopted the Corporate Governance Code for Small
and Mid-Size Quoted Companies (the QCA Code) published by the
Quoted Companies Alliance. The QCA Code provides governance
guidance to small and mid-size quoted companies. The paragraphs
below set out how the Company has applied this guidance during the
year. The Company has complied with the QCA Code throughout the
year.
Principles of corporate governance
The board promotes good corporate governance in the areas of
risk management and accountability as a positive contribution to
business prosperity. The board endeavors to apply corporate
governance principles in a sensible and pragmatic fashion having
regard to the circumstances of the business. The key objective is
to enhance and protect shareholder value.
Board structure
During the year the board comprised the Chairman, the Chief
Executive, one other executive Director and three non-executive
Directors. Their details appear on page 12 The board is responsible
to shareholders for the proper management of the Group.
The Directors’ responsibilities statement in respect of the
accounts is set out on page 27. The non-executive Directors have a
particular responsibility to ensure that the strategies proposed by
the executive Directors are fully considered. To enable the board
to discharge its duties, all Directors have full and timely access
to all relevant information and there is a procedure for all
Directors, in furtherance of their duties, to take independent
professional advice, if necessary, at the expense of the Group. The
board has a formal schedule of matters reserved to it and normally
has eleven regular meetings scheduled each year. Additional
meetings are held for special business when required.
The board is responsible for overall Group strategy, approval of
major capital expenditure and consideration of significant
financial and operational matters.
The board committees, which have written terms of reference,
deal with specific aspects of the Group’s affairs:
• The nomination committee is chaired by C A Parritt
and comprises one other non-executive Director and the executive
Chairman. The committee is responsible for proposing candidates for
appointment to the board, having regard to the balance and
structure of the board. In appropriate cases recruitment
consultants may be used to assist the process. All Directors are
subject to re-election at a maximum of every three years.
• The remuneration committee is responsible for
making recommendations to the board on the Company’s framework of
executive remuneration and its cost. The committee determines the
contract terms, remuneration and other benefits for each of the
executive directors, including performance related bonus schemes,
pension rights and compensation payments. The board itself
determines the remuneration of the non-executive Directors.
The committee comprises two non-executive Directors and it is
chaired by C A Parritt. The executive Chairman of the board is
normally invited to attend. The Annual Remuneration Report is
set out on pages 20 to 23.
• The audit committee comprises two non-executive
Directors and is chaired by C A Parritt. The audit committee
report, with its terms of reference, is set out on page 26 The
Chief Executive and Finance Director are normally invited to
attend.
Board and board committee meetings held in 2017
The number of regular meetings during the year and attendance
was as follows:
|
|
Meetings
held |
Meetings
attended |
Sir Michael Heller |
Board
Nomination committee
Remuneration committee |
10
1
1 |
10
1
1 |
J A Heller |
Board
Audit committee |
10
2 |
10
2 |
A K Thapar |
Board
Audit committee |
10
2 |
9
2 |
C A Parritt |
Board
Audit committee
Nomination committee
Remuneration committee |
10
2
1
1 |
10
2
1
1 |
H D Goldring |
Board
Audit committee
Nomination committee
Remuneration committee |
10
2
1
1 |
10
2
1
1 |
R Priest |
Board |
10 |
7 |
Performance evaluation – board, board committees and
directors
The performance of the board as a whole, its committees and the
non-executive Directors is assessed by the Chairman and the Chief
Executive and is discussed with the senior independent
non-executive Director. Their recommendations are discussed at the
nomination committee prior to proposals for re-election being
recommended to the board. The performance of executive Directors is
discussed and assessed by the remuneration committee. The senior
independent Director meets regularly with the Chairman, executive
and non-executive Directors individually outside of formal
meetings. The Directors will take outside advice in reviewing
performance but have not found this to be necessary to date.
Independent directors
The senior independent non-executive Director is C A Parritt.
The other independent non-executive Directors are H D Goldring and
R Priest. Delmore Holdings Limited (Delmore) is a Company in which
H D Goldring is the majority shareholder and the Executive
Chairman. Delmore provides consultancy services to the Company on a
fee paying basis. R Priest provides services to the Company on a
fee paying basis. C A Parritt also provides some advisory services
as part of his accounting practice.
The board encourages all three non-executive Directors to act
independently and does not consider that length of service of any
individual non-executive Director, nor any connection with the
above mentioned consultancy and advisory companies, has resulted in
the inability or failure to act independently. In the opinion of
the board the three non-executive Directors continue to fulfil
their roles as independent non-executive Directors.
The independent Directors exchange views regularly between board
meetings and meet when required to discuss corporate governance and
other issues concerning the Group.
Internal control
The Directors are responsible for the Group’s system of internal
control and for reviewing its effectiveness at least annually, and
for the preparation and review of its financial statements. The
board has designed the Group’s system of internal control in order
to provide the Directors with reasonable assurance that assets are
safeguarded, that transactions are authorised and properly recorded
and that material errors and irregularities are either prevented or
would be detected within a timely period. However, no system of
internal control can eliminate the risk of failure to achieve
business objectives or provide absolute assurance against material
misstatement or loss. The key elements of the control system in
operation are:
• The board meets regularly on full notice with a
formal schedule of matters reserved for its decision and has put in
place an organisational structure with clearly defined lines of
responsibility and with appropriate delegation of authority;
• There are established procedures for planning,
approval and monitoring of capital expenditure and information
systems for monitoring the Group’s financial performance against
approved budgets and forecasts;
• The departmental heads are required annually to
undertake a full assessment process to identify and quantify the
risks that face their departments and functions, and assess the
adequacy of the prevention, monitoring and modification practices
in place for those risks. In addition, regular reports about
significant risks and associated control and monitoring procedures
are made to the executive Directors. The process adopted by the
Group accords with the guidance contained in the document “Internal
Control Guidance for Directors on the Combined Code” issued by the
Institute of Chartered Accountants in England and Wales. The audit committee receives reports
from external auditors and from executive Directors of the Group.
During the period the audit committee has reviewed the
effectiveness of the system of internal control as described above.
The board receives periodic reports from all committees.
• There are established procedures for the presentation
and review of the financial statements and the Group has in place
an organisational structure with clearly defined lines of
responsibility and with appropriate delegation of authority.
There are no internal control issues to report in the annual
report and financial statements for the year ended 31 December 2017. Up to the date of approval of
this report and the financial statements, the board has not been
required to deal with any related material internal control issues.
The Directors confirm that the board has reviewed the effectiveness
of the system of internal control as described during the
period.
Communication with shareholders
Prompt communication with shareholders is given high priority.
Extensive information about the Group and its activities is
provided in the Annual Report. In addition, a half-year report is
produced for each financial year and published on the Company’s
website. The Company’s website www.lap.co.uk is updated promptly
with announcements and Annual Reports upon publication. Copies from
previous years are also available on the website.
The Company’s share price is published daily in the Financial
Times.
The share price history and market information can be found at
http://www.londonstockexchange.com/prices-and-markets/markets/prices.htm.
The company code is LAS.
There is a regular dialogue with the Company’s stockbrokers and
institutional investors. Enquiries from individuals on matters
relating to their shareholdings and the business of the Group are
dealt with promptly and informatively.
The Company’s website is under continuous development to enable
better communication with both existing and potential new
shareholders.
The Bribery Act 2010
The Company is committed to acting ethically, fairly and with
integrity in all its endeavours and compliance with the code
is monitored closely.
GOVERNANCE
Governance Statement by the Chairman
of The Remuneration Committee
The remuneration committee is pleased to present its report for
the year ended 31 December 2017. The
report is presented in two parts in accordance with the
regulations.
The first part is the Annual Remuneration Report which details
remuneration awarded to Directors and non-executive Directors
during the year. The shareholders will be asked to approve the
Annual Remuneration Report as an ordinary resolution (as in
previous years) at the AGM in June
2018.
The second part is the Remuneration Policy which details the
remuneration policy for Directors. This policy was subject to a
binding vote by shareholders at the AGM in 2017 and was approved
for a 3 year period commencing from then. The committee reviewed
the existing policy and deemed that no changes were necessary to
the current arrangements.
Both of the reports have been prepared in accordance with The
Large and Medium-sized Companies and Groups (Accounts and Reports)
(Amendment) Regulations 2013.
The Company’s auditor, RSM UK Audit LLP is required by law to
audit certain disclosures and where disclosures have been audited
that is indicated.
C A Parritt
Chairman, Remuneration Committee
27 April 2018
GOVERNANCE
Annual remuneration report
The following information has been audited
Single total figure of remuneration for the year ended
31 December 2017
|
Salary and fees
£’000 |
BONUSES
£’000 |
BENEFITS
£’000 |
PENSIONS
£’000 |
TOTAL
BEFORE
SHARE
OPTIONS
£’000 |
SHARE OPTIONS
£’000 |
TOTAL 2017
£’000 |
Executive Directors |
|
|
|
|
|
|
|
Sir Michael Heller* |
7 |
- |
49 |
- |
56 |
n/a |
56 |
Sir Michael Heller - Bisichi |
75 |
- |
- |
- |
75 |
n/a |
75 |
J A Heller |
333 |
100 |
37 |
17 |
487 |
n/a |
487 |
A K Thapar |
157 |
30 |
9 |
10 |
206 |
n/a |
206 |
|
572 |
130 |
95 |
27 |
824 |
- |
824 |
Non-executive Directors |
|
|
|
|
|
|
|
H D Goldring*+ |
17 |
- |
7 |
- |
24 |
n/a |
24 |
C A Parritt*+ |
38 |
- |
- |
- |
38 |
n/a |
38 |
R Priest* |
35 |
- |
- |
- |
35 |
n/a |
35 |
|
90 |
- |
7 |
- |
97 |
- |
97 |
Total |
662 |
130 |
102 |
27 |
921 |
- |
921 |
Single total figure of remuneration for the year ended
31 December 2016
|
Salary and fees
£’000 |
BONUSES
£’000 |
BENEFITS
£’000 |
PENSIONS
£’000 |
TOTAL
BEFORE
SHARE
OPTIONS
£’000 |
SHARE OPTIONS
£’000 |
TOTAL 2016
£’000 |
Executive Directors |
|
|
|
|
|
|
|
Sir Michael Heller* |
7 |
- |
43 |
- |
50 |
n/a |
50 |
Sir Michael Heller - Bisichi |
75 |
- |
- |
- |
75 |
n/a |
75 |
J A Heller |
333 |
166 |
40 |
30 |
569 |
n/a |
569 |
A K Thapar |
152 |
35 |
11 |
15 |
213 |
n/a |
213 |
|
567 |
201 |
94 |
45 |
907 |
- |
907 |
Non-executive Directors |
|
|
|
|
|
|
|
H D Goldring*+ |
32 |
- |
5 |
- |
37 |
n/a |
37 |
C A Parritt*+ |
38 |
- |
- |
- |
38 |
n/a |
38 |
R Priest* |
51 |
- |
- |
- |
51 |
n/a |
51 |
|
121 |
- |
5 |
- |
126 |
- |
126 |
Total |
688 |
201 |
99 |
45 |
1,033 |
- |
1,033 |
* Note 28 “Related party transactions”
+ Members of the remuneration committee for years ended
31 December 2016 and 31 December 2017
Benefits include the provision of car, health and other
insurance and subscriptions.
Sir Michael Heller is a director
of Bisichi Mining PLC, (a subsidiary for IFRS 10 purposes) and
received a salary from that company of £75,000 (2016: £75,000) for
services.
Although Sir Michael Heller
receives reduced remuneration in respect of his services to LAP,
the Company does supply office premises, property management,
general management, accounting and administration services for a
number of companies in which Sir Michael
Heller has an interest. The board estimates that the annual
value of these services, if supplied to a third party, would have
been £300,000 (2016: £300,000). Further details of these services
are set out in Note 28 to the financial statements “Related party
transactions”.
J A Heller is a director of Dragon Retail Properties Limited, (a
subsidiary for IFRS 10 purposes) and received benefits from that
company of £10,698 (2016: £11,336) for services. This is included
in the remuneration figures disclosed above.
The remuneration figures disclosed for H D Goldring include fees
paid to his company, Delmore Holdings Limited for consultancy
services provided to the Group. This is detailed in Note 28 to the
financial statements.
The remuneration figures for C A Parritt include fees paid to
his accountancy practice for consultancy services provided to the
Group. This is detailed in Note 28 to the financial statements.
R Priest provides consultancy services to the Group. This is
detailed in Note 28 to the financial statements.
Summary of directors’ terms
|
Date of contract |
Unexpired term |
Notice period |
Executive Directors |
|
|
|
Sir Michael Heller |
1 January 1971 |
Continuous |
6 months |
John Heller |
1 May 2003 |
Continuous |
12 months |
Anil Thapar |
1 January 2015 |
Continuous |
3 months |
Non-executive Directors |
|
|
|
H D Goldring |
1 July 1992 |
Continuous |
3 months |
C A Parritt |
1 January 2006 |
Continuous |
3 months |
R Priest |
31 July 2013 |
Continuous |
3 months |
Total pension entitlements
Two directors had benefits under money purchase schemes. Under
their contracts of employment, they were entitled to a regular
employer contribution (currently £17,000 and £10,000 a year). There
are no final salary schemes in operation. No pension costs are
incurred on behalf of non-executive Directors.
Share Incentive Plan (SIP)
In 2006 the Directors set up an HMRC approved share incentive
plan (SIP). The purpose of the plan, which is open to all eligible
LAP executive Directors and head office based staff, is to enable
them to acquire shares in the Company and give them a continuing
stake in the Group. The SIP comprises four types of share – (1)
free shares under which the Company may award shares of up to the
value of £3,000 each year, (2) partnership shares, under which
members may save up to £1,500 per annum to acquire shares, (3)
matching shares, through which the Company may award up to two
shares for each share acquired as a partnership share, and (4)
dividend shares, acquired from dividends paid on shares within the
SIP.
1. Free shares: No free shares were issued for 2017 bonuses or
for 2016 bonuses.
2. Partnership shares: No partnership shares were issued between
November 2016 and October 2017.
3. Matching shares: The partnership share agreements for the
year to 31 October 2017 provide for
two matching shares to be awarded free of charge for each
partnership share acquired. No partnership shares were acquired in
2017 (2016: nil). Matching shares will usually be forfeited if a
member leaves employment in the Group within five years of their
grant.
4. Dividend shares: Dividends on shares acquired under the SIP
will be utilised to acquire additional shares. Accumulated
dividends received on shares in the SIP to 31 December 2017 amounted to £Nil (2016:
£602).
Dividend shares issued:
|
Number of
members |
Number of
shares |
Value of
shares |
|
2017 |
2016 |
2017 |
2016 |
2017
£ |
2016
£ |
Directors:
J A Heller |
- |
1 |
- |
402 |
- |
85 |
A K Thapar |
- |
1 |
- |
495 |
- |
105 |
Staff |
- |
6 |
- |
1,934 |
- |
412 |
Total at 31 December |
- |
8 |
- |
2,831 |
- |
602 |
The SIP is set up as an employee benefit trust. The trustee is
London & Associated Securities
Limited, a wholly owned subsidiary of LAP, and all shares and
dividends acquired under the SIP will be held by the trustee until
transferred to members in accordance with the rules of the SIP.
Share Option Schemes
The Company has an HMRC approved scheme (Approved Scheme). It
was set up in 1986 in accordance with HMRC rules to gain HMRC
approved status which gave the members certain tax advantages.
There are no performance criteria for the exercise of options under
the Approved Scheme, as this was set up before such requirements
were considered to be necessary. No Director has any options
outstanding under the Approved Scheme nor were any options granted
under the Approved Scheme for the year ended 31 December 2017.
A share option scheme known as the “Non-approved Executive Share
Option Scheme” (Unapproved Scheme) which does not have HMRC
approval was set up during 2000. At 31
December 2017 there were no options to subscribe for
ordinary shares outstanding. The exercise of options under the
Unapproved Scheme is subject to the satisfaction of objective
performance conditions specified by the remuneration committee
which conforms to institutional shareholder guidelines and best
practice provisions. Further details of this scheme are set out in
Note 26 “Share Capital” to the financial statements.
Payments to past directors
No payments were made to past Directors in the year ended
31 December 2017.
Payments for loss of office
No payments for loss of office were made in the year ended
31 December 2017.
Statement of directors’ shareholding and share interest
Directors’ interests
The interests of the Directors in the ordinary shares of the
Company, including family and trustee holdings, where appropriate,
were as follows:
|
Beneficial interests |
Non-beneficial interests |
|
31 Dec 17 |
1 Jan 17 |
31 Dec 17 |
1 Jan 17 |
Sir Michael Heller |
5,753,541 |
6,053,541 |
19,277,931 |
19,277,931 |
H D Goldring |
19,819 |
19,819 |
- |
- |
J A Heller |
1,867,393 |
1,867,393 |
†14,073,485 |
†14,073,485 |
C A Parritt |
36,168 |
36,168 |
- |
- |
R Priest |
- |
- |
- |
- |
A K Thapar |
120,495 |
120,495 |
- |
- |
†These non-beneficial holdings are duplicated with those of Sir
Michael Heller.
The beneficial holdings of Directors shown above include their
interests in the Share Incentive Plan.
The following information is unaudited:
The graph illustrates the Company’s performance as compared with
a broad equity market index over a five year period. Performance is
measured by total shareholder return. The directors have chosen the
FTSE All Share – Total Return Index as a suitable index for this
comparison as it gives an indication of performance against a large
spread of quoted companies.
The middle market price of London & Associated Properties PLC
ordinary shares at 31 December 2017
was 24.50p (2016: 21p). During the year the share middle market
price ranged between 18.25p and 24.50p.
Total Shareholder Return
Remuneration of the Chief Executive over the last ten years
Year |
CEO |
Chief Executive Single
total figure of
remuneration
£’000 |
Annual bonus payment
against maximum opportunity*
% |
Long-term incentive vesting
rates
against maximum opportunity*
% |
2017 |
J A Heller |
487 |
11% |
n/a |
2016 |
J A Heller |
569 |
18% |
n/a |
2015 |
J A Heller |
762 |
41 % |
n/a |
2014 |
J A Heller |
835 |
49 % |
n/a |
2013 |
J A Heller |
716 |
n/a |
n/a |
2012 |
J A Heller |
417 |
n/a |
n/a |
2011 |
J A Heller |
671 |
n/a |
n/a |
2010 |
J A Heller |
577 |
n/a |
n/a |
2009 |
J A Heller |
982 |
n/a |
n/a |
2008 |
J A Heller |
688 |
n/a |
n/a |
*There were no formal criteria or conditions to apply in
determining the amount of bonus payable or the number of shares to
be issued prior to 2014.
Percentage change in Chief Executive’s Remuneration
(audited)
The table below shows the percentage change in Chief Executive
remuneration for the prior year compared to the average percentage
change for all other Head Office based employees. To provide a
meaningful comparison, the same group of employees (although not
necessarily the same individuals) appears in the 2016 and 2017
group. The remuneration committee chose head office based employees
as the comparator group as this group forms the closest comparator
group.
|
Chief
Executive
£’000 |
Head
Office Employees
£’000 |
|
2017 |
2016 |
% change |
2017 |
2016 |
% change |
Base salary and allowances |
333 |
333 |
0% |
643 |
692 |
(7.1%) |
Taxable benefits |
37 |
40 |
(7.5%) |
81 |
77 |
5.2% |
Annual bonus |
100 |
166 |
(39.75%) |
80 |
97 |
(17.5%) |
Total |
470 |
539 |
(12.8%) |
804 |
866 |
(7.2%) |
Relative importance of spend on pay
The total expenditure of the Group on remuneration to all
employees (Note 29 refers) is shown below:
|
2017
£’000 |
2016
£’000 |
Employee Remuneration |
8,113 |
7,173 |
Distributions to shareholders |
141 |
136 |
Statement of implementation of remuneration policy
The policy was approved at the AGM in June 2017 and was effective from 6 June 2017. The vote on the remuneration policy
is binding in nature. The Company may not then make a remuneration
payment or payment for loss of office to a person who is, is to be,
or has been a director of the Company unless that payment is
consistent with the approved remuneration policy, or has otherwise
been approved by a resolution of members. It is to be presented for
approval at the forthcoming AGM.
Consideration by the directors of matters relating to directors’
remuneration
The Remuneration Committee considered the executive Directors’
remuneration and the board considered the non-executive Directors’
remuneration in the year ended 31 December
2017. No increases were awarded and no external advice was
taken in reaching this decision.
Shareholder voting
At the Annual General Meeting on 6 June
2017, there was an advisory vote on the resolution to
approve the Remuneration Report, other than the part containing the
remuneration policy.
In addition, on 6 June 2017, there
was a binding vote on the resolution to approve the Remuneration
Policy. The results are detailed below:
|
% of votes
for |
% of votes
against |
Number of votes
withheld |
Resolution to approve the
Remuneration Report |
83.16 |
0.18 |
9,765,315 |
Resolution to approve the
Remuneration Policy |
83.14 |
16.69 |
89,602 |
GOVERNANCE
Remuneration policy
INTRODUCTION
Set out below is the LAP Group policy on directors’ remuneration
(excluding Bisichi). This policy was approved at the 2017 AGM and
it is effective from 6 June 2017.
Unless changed it will be presented next for approval at the AGM in
2020.
A copy of the full policy can be found at www.lap.co.uk.
In setting the policy, the Remuneration Committee has taken
the following into account:
• The need to attract, retain and motivate
individuals of a calibre who will ensure successful leadership and
management of the company
• The LAP Group’s general aim of seeking to reward
all employees fairly according to the nature of their role and
their performance
• Remuneration packages offered to similar companies
within the same sector
• The need to align the interests of shareholders as a
whole with the long-term growth of the Group; and
• The need to be flexible and adjust with operational
changes throughout the term of this policy
The remuneration of non-executive directors is determined by the
board, and takes into account additional remuneration for services
outside the scope of the ordinary duties of non-executive
directors.
Future policy table
Element |
Purpose |
Policy |
Operation |
Opportunity and performance
conditions |
Executive
directors |
|
|
|
Base salary |
To recognise:
Skills
Responsibility
Accountability
Experience
Value |
Considered by
remuneration committee on appointment
Set at a level considered appropriate to attract, retain, motivate
and reward the right individuals |
Reviewed annually
whenever there is a change
of role or operational responsibility
Paid monthly in cash |
There is no prescribed
maximum salary or maximum rate of increase
No individual director will be awarded a base salary in excess of
£700,000 a year
No specific performance conditions are attached to base
salaries |
Pension |
To provide competitive retirement
benefits |
Company contribution offered at up
to 10% of base salary as part of overall remuneration package |
The contribution
payable by the Company is included in the director’s contract of
employment
Paid into money purchase schemes |
Company contribution
offered at up to 10% of base salary as part of overall remuneration
package
No specific performance conditions are attached to pension
contributions |
Benefits |
To provide a competitive benefits
package |
Contractual benefits
include:
Car or car allowance
Group health cover
Death in service cover
Permanent health insurance |
The committee retains the discretion
to approve changes in contractual benefits in exceptional
circumstances or where factors outside the control of the Group
lead to increased costs
(e.g. medical inflation) |
The costs associated
with benefits offered are closely controlled and reviewed on an
annual basis
No director will receive benefits of a value in excess of 30% of
their base salary
No specific performance conditions are attached to contractual
benefits |
Annual
bonus |
To reward and incentivise |
In assessing the performance of the
executive team, and in particular to determine whether bonuses are
merited the remuneration committee takes into account the
overall performance of the business, as well as
individual contribution to the business in the period |
The remuneration
committee determines the level of bonus on an annual basis
In assessing performance consideration is given to the level of net
rental income, cash flow, voids, realised development gains and
income from managing joint ventures. Achieved results are then
compared with expectation taking account of market conditions
Bonuses are generally offered in cash or shares |
The current maximum
bonus will not exceed 200% of base salary in any one year but the
remuneration committee reserves the power to award up to 300% in an
exceptional year
Performance conditions will be assessed on an annual basis
The performance measures applied may be financial, non-financial,
corporate, divisional or individual and in such proportion as the
remuneration committee considers appropriate |
Share
options |
To provide executive directors
with
a long-term interest in the company |
Share options may be
granted under existing schemes (see page 21)
Where it is necessary to attract, retain, motivate and reward the
right individuals, the directors may establish new schemes to
replace any expired schemes |
Offered at appropriate times by
the
remuneration committee |
Entitlements to share
options granted under the Approved Option scheme are not subject to
performance criteria. Share Options granted under the Unapproved
Scheme are subject to the performance criteria specified in the
Scheme rules
The aggregate number of shares over which options may be granted
under all of the company’s option schemes (including any options
and awards granted under the company’s employee share plans) in any
period of ten years, will not exceed, at the time of grant, 10 % of
the ordinary share capital of the company from time to time
Share options will be offered by the remuneration committee as
appropriate |
Share incentive plan
(SIP) |
To offer a shorter term incentive in
the company and to give directors a stake
in the group |
Offered to executive directors and
head office staff |
Maximum participation levels are set
by HMRC |
Of any bonus awarded, Directors may
opt to have maximum of £3,000 per year paid in ‘Free Shares’ under
the SIP scheme rules |
Non-executive
directors |
|
|
|
Base salary |
To recognise:
Skills
Responsibility
Experience
Risk
Value |
Considered by the board
on appointment
Set at a level considered appropriate to attract, retain and
motivate the individual
Experience and time required for the role are considered on
appointment |
Reviewed annually |
No individual
non-executive director will be awarded a base salary in excess of
£40,000 a year
No performance conditions are attached to base salaries |
Pension |
|
No pension offered |
|
|
Benefits |
|
No benefits offered except to one
non-executive director who is eligible for health cover (see annual
remuneration report page 20) |
The committee retains the discretion
to approve changes in contractual benefits in exceptional
circumstances or where factors outside the control of the
Group lead to increased costs (e.g. medical inflation) |
The costs associated
with benefits offered are closely controlled and reviewed on an
annual basis
No non-executive director will receive benefits in excess of
£10,000 a year
No specific performance conditions are attached to contractual
benefits |
Share
options |
|
Non-executive directors do not
participate in the share option schemes |
|
|
Notes to the Remuneration Policy
The remuneration committee considers the performance measures
outlined in the table above to be appropriate measures of
performance and that the KPIs chosen align the interests of the
directors and shareholders.
GOVERNANCE
Audit committee report
The committee’s terms of reference have been approved by the
board and follow published guidelines, which are available on
request from the company secretary.
At the year end the audit committee comprised two of the
non-executive directors – H D Goldring and C A Parritt, both of
whom are Chartered Accountants.
The audit committee’s primary tasks are to:
• review the scope of external audit, to receive
regular reports from RSM UK Audit LLP and to review the half-yearly
and annual accounts before they are presented to the board,
focusing in particular on accounting policies and areas of
management judgement and estimation;
• monitor the controls which are in force to ensure
the integrity of the information reported to the shareholders;
• act as a forum for discussion of internal control
issues and contribute to the board’s review of the effectiveness of
the Group’s internal control and risk management systems and
processes;
• to review the risk assessments made by management,
consider key risks with action taken to mitigate these and to act
as a forum for discussion of risk issues and contribute to the
board’s review of the effectiveness of the Group’s risk management
control and processes;
• consider once a year the need for an internal
audit function;
• advise the board on the appointment of the
external auditors, the rotation of the audit partner every five
years and on their remuneration for both audit and non-audit work;
discuss the nature and scope of their audit work and undertake a
formal assessment of their independence each year, which
includes:
i) a review of non-audit services
provided to the Group and related fees;
ii) discussion with the auditors of their
written report detailing all relationships with the Company and any
other parties that could affect independence or the perception of
independence;
iii) a review of the auditors’ own
procedures for ensuring the independence of the audit firm and
partners and staff involved in the audit, including the regular
rotation of the audit partner; and
iv) obtaining a written confirmation
from the auditors that, in their professional judgement, they are
independent.
Meetings
The committee meets at least twice prior to the publication of
the annual results and discusses and considers the half year
results prior to their approval by the board. The audit committee
meetings are attended by the external audit partner, chief
executive, finance director and company secretary. During the year
the members of the committee also meet on an informal basis to
discuss any relevant matters which may have arisen. Additional
formal meetings may be held as necessary.
During the past year the committee:
• met with the external auditors, and discussed
their reports to the audit committee;
• approved the publication of annual and half year
financial results;
• considered and approved the annual review of
internal controls;
• decided that there was no current need for an
internal audit function;
• agreed the independence of the auditors and
approved their fees for both audit and non-audit services as set
out in Note 2 to the financial statements; and
• the chairman of the audit committee has also had
separate meetings and discussions with the external audit
partner.
FINANCIAL REPORTING
As part of its role, the Audit Committee assessed the audit
findings that were considered most significant to the financial
statements, including those areas requiring significant judgement
and/or estimation. When assessing the identified financial
reporting matters, the committee assessed quantitative materiality
primarily by reference to the carrying value of the group’s total
assets, given that the group operates a principally asset based
business. When determining quantitative materiality, the Board also
gave consideration to the value of revenues generated by the group
and net asset value, given that they are key trading and business
KPIs. The qualitative aspects of any financial reporting matters
identified during the audit process were also considered when
assessing their materiality. Based on the considerations set out
above we have considered quantitative errors individually or in
aggregate in excess of approximately £0.8 million in relation to
the consolidated balance sheet and £0.3 million for underlying
profitability and the Bisichi group to be material.
External Auditor
RSM UK Audit LLP held office throughout the period under review.
In the United Kingdom London & Associated Properties PLC
provides extensive administration and accounting services to
Bisichi Mining PLC, which has its own audit committee and employs
BDO LLP, a separate and independent firm of registered auditor.
C A Parritt
Chairman – Audit Committee
27 April 2018
GOVERNANCE
Directors’ responsibilities statement
The Directors are responsible for preparing the Strategic Report
and the Directors’ Report, the Directors’ Remuneration Report and
the financial statements in accordance with applicable law and
regulations.
English company law requires the Directors to prepare Group and
Company financial statements for each financial year. The Directors
are required under the Listing Rules of the Financial Conduct
Authority to prepare Group financial statements in accordance with
International Financial Reporting Standards (“IFRS”) as adopted by
the European Union (“EU”) and have elected under English company
law to prepare the Company financial statements in accordance with
United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards and applicable law) including FRS101
‘Reduced Disclosure Framework’.
The Group financial statements are required by law and IFRS
adopted by the EU to present fairly the financial position and
performance of the Group; the Companies Act 2006 provides in
relation to such financial statements that references in the
relevant part of that Act to financial statements giving a true and
fair view are references to their achieving a fair
presentation.
Under English company law the Directors must not approve the
financial statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Group and the
Company and of the profit or loss of the Group for that
period.
In preparing each of the Group and Company financial statements,
the Directors are required to:
a. select suitable accounting policies and then apply them
consistently;
b. make judgements and accounting estimates that are reasonable
and prudent;
c. for the Group financial statements, state whether they have
been prepared in accordance with IFRS adopted by the EU and for the
company financial statements state whether applicable UK accounting
standards have been followed, subject to any material departures
disclosed and explained in the financial statements; and
d. prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and the
Company will continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group’s and the
Company’s transactions and disclose with reasonable accuracy at any
time the financial position of the Group and the Company and enable
them to ensure that the financial statements and the Directors’
Remuneration Report comply with the Companies Act 2006 and, as
regards the Group financial statements, Article 4 of the IAS
Regulations. They are also responsible for safeguarding the assets
of the Group and the Company and hence for taking reasonable steps
for the prevention and detection of fraud and other
irregularities.
Directors’ statement pursuant to the Disclosure GUIDANCE
and Transparency Rules
Each of the directors, whose names and functions are listed on
page 12, confirms that to the best of each person’s
knowledge:
a. the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit of the
Company and the undertakings included in the consolidation taken as
a whole; and
b. the Strategic Report contained in the Annual Report includes
a fair review of the development and performance of the business
and the position of the Company and the undertakings included in
the consolidation taken as a whole, together with a description of
the principal risks and uncertainties that they face.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
London & Associated Properties
PLC website.
Legislation in the United
Kingdom governing the preparation and dissemination of
financial statements may differ from legislation in other
jurisdictions.
GOVERNANCE
Independent auditor’s report
TO THE MEMBERS OF LONDON &
ASSOCIATED PROPERTIES PLC
Opinion
We have audited the financial statements of London & Associated Properties PLC (“the
parent company”) and its subsidiaries (“the group”) for the year
ended 31 December 2017 which comprise
the consolidated income statement, the consolidated statement of
comprehensive income, the consolidated balance sheet, the
consolidated statement of changes in equity, the consolidated cash
flow statement, the parent company balance sheet, the parent
company statement of changes in equity and 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 December 2017 and of the
group’s profit for the year then ended;
• the group financial statements have been properly
prepared in accordance with IFRSs as adopted by the European
Union;
• the parent company financial statements have been
properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
• the financial statements have been prepared in
accordance with the requirements of the Companies Act 2006 and, as
regards the group financial statements, Article 4 of the IAS
Regulation.
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 public
interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe
that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in
relation to which the ISAs (UK) require us to report to you
where:
• the directors’ use of the going concern basis of
accounting in the preparation of the financial statements is not
appropriate; or
• the directors have not disclosed in the financial
statements any identified material uncertainties that may cast
significant doubt about the group’s or the parent company’s ability
to continue to adopt the going concern basis of accounting for a
period of at least twelve months from the date when the financial
statements are authorised for issue.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those which had
the greatest effect on: the overall audit strategy, the allocation
of resources in the audit; and directing the efforts of the
engagement team. These matters were addressed in the context of our
audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these
matters.
Valuation of investment properties
The group’s properties are accounted for in the financial
statements as investment properties under IAS 40 and held at fair
value. The investment properties are valued by two firms of
external third party valuers and these valuations are adopted in
the financial statements. At 31 December
2017 investment property valued at £78.0m (Note 10) was
disclosed within non-current assets in the financial statements.
Separately, property valued at £36.4m (Note 14) was disclosed as
assets held for sale, within current assets.
The directors’ assessment of the fair value of investment
properties is considered a key audit matter due to the relative
importance of these assets to the group’s financial statements, the
potential impact of movements in the fair values of the assets, and
the subjectivity and complexity of the valuation process, which
involves significant judgements and estimates as disclosed on page
37 of the financial statements.
The valuation is carried out by two firms of professional
external valuers together with, in respect of one property, an
internal valuer in accordance with the methodology described in
Note 10.
Our response to the key audit matter included:
• agreeing the valuations of all properties recorded
in the financial statements and subject to the external valuation
process to the valuation reports prepared by the valuers. These
reports covered all except £1.8m of the value of investment
properties, which were subject to internal valuation;
• agreeing the carrying value (sales price less
costs to sell) of the Brixton Village and Market Row properties,
included as assets held for sale, to the agreement for sale, and
the costs to invoices;
• assessing the qualifications and expertise of the
valuers, and considering their objectivity and any threats to their
independence. We concluded that there was no threat which might
impair the valuers’ independence and objectivity; and
• challenging and discussing the assumptions used
with the valuers, both external and internal, and comparing the key
inputs to the valuation to underlying records of the leases and
records of rents received and against our knowledge of market
yields.
Our findings
The carrying values of the investment properties are consistent
with the valuation reports provided and, in the case of assets held
for sale, with the agreed selling price less direct costs to
sell.
Accuracy of life of mine estimates
The mining assets amounted to £8.5m as at 31 December 2017 (2016: £8.4m) and relate to the
South African mining operations. These assets represent a
significant part of the Bisichi group’s balance sheet (see Note
11).
Bisichi’s management performed an impairment assessment based on
the Bisichi Board’s approved Life of Mine plan at 31 December 2017 as detailed in the key
judgements and estimates Note on page 37.
The assessment by Bisichi management of inputs to the Life of
Mine plan requires significant judgment and estimate, including
determination of forecast coal prices, production, coal reserves
and costs. These factors caused this area to be a significant focus
for our audit.
Management’s discounted cash flow impairment assessment,
including the underlying Life of Mine plan, was evaluated. In doing
so, key inputs to the model including forecast coal prices,
exchange rates, production, costs and the discount rate were
critically assessed. This included assessment compared to empirical
data and trends, pricing information and market data.
In respect of the coal reserves included in the model, the
independent Competent Person’s Report was reviewed and discussions
were held with the Competent Person. In relying on the Competent
Person their independence and competence was assessed.
Sensitivity analysis was performed on the impairment model in
respect of factors such as pricing, costs, yields, exchange rates
and the discount rate.
The disclosures in the key judgements and estimates note were
evaluated based on the audit procedures.
Our findings
The work on the impairment test found Bisichi management’s
conclusion that no impairment exists to be appropriate. The key
assumptions were found to be balanced and appropriately considered
by Bisichi management and the disclosures in the key judgements and
estimates note to be sufficient.
Impairment of Ezimbokodweni
As at 31 December 2016 the group’s
net investment in Ezimbokedweni Mining (Pty) Limited
(“Ezimbokedweni”), an equity accounted joint venture, was £1.8m
(Notes 12 and 13). The carrying value was dependent upon the
ultimate completion of a sale and purchase agreement to acquire the
Pegasus coal project in South
Africa, under which a deposit had been paid by
Ezimbokedweni.
During the year the joint venture was placed into Business
Rescue under the South African Companies Act by the joint venture
partner. The original deposit has been returned to Ezimbokodweni
and as a result, the Bisichi Board considers there to be no
reasonable prospect of the Pegasus coal project transaction
completing.
Further to these developments, the Bisichi Board performed an
impairment review of the carrying value of the net investment in
Ezimbokodweni and recorded an impairment of the net investment of
£1.8m, with any further movements since 31
December 2016 reflecting foreign exchange differences.
The assessment of the carrying value, subsequent impairment and
associated disclosure represented a significant focus for our
audit.
Additionally, the tax treatment of this transaction was
considered to be an area of risk of material misstatement. This was
also considered to be an area requiring specialist knowledge and
expertise.
Specific inquiries were made of Bisichi’s management and Board
to gain an understanding of the fact pattern and events during the
year regarding Ezimbokedweni.
Minutes of Bisichi Board meetings, legal documents and
correspondence relating to the joint venture, the Business Rescue
and assessments of the resulting financial position and interests
of the joint venture were reviewed.
The Bisichi Board’s conclusion that the net investment is
impaired based on the facts and circumstances, including assessment
of the probability of value being recovered from the joint venture
was assessed.
The tax treatment of the transaction applied by Bisichi
management was assessed in conjunction with specialists.
The accounting entries in respect of the impairment as well as
the disclosures in Note 12 and the key judgements and estimates
note were assessed.
Our findings
The judgements made by Bisichi management relating to the
impairment recorded by the group are considered to be appropriate
based on the developments during the year. The disclosures at Note
12 and the key judgements and estimates note are also considered to
be acceptable.
Our application of materiality
When establishing our overall audit strategy, we set certain
thresholds which help us to determine the nature, timing and extent
of our audit procedures and to evaluate the effects of
misstatements, both individually and on the financial statements as
a whole.
During planning we determined a magnitude of uncorrected
misstatements that we judge would be material for the financial
statements as a whole (FSM). During planning FSM was calculated
as £1.1m, which was not changed during the course of our audit.
The London & Associated
Properties PLC group consists of two distinct components: a UK
based property investment group, and a fully listed mining group
carrying out mining operations in South
Africa with a relatively small investment property
portfolio.
During planning, we determined materiality in respect of these
components at:
• for the London
& Associated Properties PLC property investment sub group
balance sheet, £0.8 million and to underlying profitability £0.3
million; and
• for the Bisichi Mining PLC coal mining and
property investment sub group, £0.3 million.
We agreed with the audit committee that we would report to them
all unadjusted differences in excess of £15,000 for both components
of the group. We also agreed to report other differences below that
threshold which, in our view, warranted reporting for other
reasons.
An overview of the scope of our audit
The audit was scoped to support our audit opinion on the company
and group financial statements of London & Associated Properties PLC and was
based on group materiality and an assessment of risk at group
level. We planned our 2017 audit on the understanding that the
activities of the group had changed very little from the previous
year, and that there had been no changes in the valuation
methodologies to be applied, or the accounting standards applicable
to the group and company’s financial statements.
The group comprises 27 trading, or active holding, companies and
12 dormant companies. Full scope audits, using component
materiality, were performed on 24 of the active entities with the
other three entities subjected to desktop review. Six of the full
scope audits and the three desktop reviews were performed by
component auditors whose work we evaluated and reviewed for the
purpose of the group audit.
This resulted in coverage of 100% of total revenues and profit
before tax of the group, and 100% of total gross assets of the
group.
Other information
The other information comprises the information included in the
annual report other than the financial statements, the audited part
of the directors’ remuneration report 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 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 the 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, the part of the directors’ remuneration report
to be audited has been properly prepared in accordance with 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
the parent company and their environment obtained in the course of
the audit, we have not identified 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 by
the parent company, or returns adequate for our audit have not been
received from branches not visited by us; or
• the parent company financial statements and the
part of the directors’ remuneration report to be audited are not in
agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration
specified by law are not made; or
• we have not received all the information and
explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors’ responsibilities
statement set out on page 27 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 the 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 or the parent company or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities 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.
As part of our audit, we will consider the susceptibility of the
group and parent company to fraud and other irregularities, taking
account of the business and control environment established and
maintained by the directors, as well as the nature of transactions,
assets and liabilities recorded in the accounting records. Owing to
the inherent limitations of an audit, there is an unavoidable risk
that some material misstatements of the financial statements may
not be detected, even though the audit is properly planned and
performed in accordance with the ISAs. However, the principal
responsibility for ensuring that the financial statements are free
from material misstatement, whether caused by fraud or error, rests
with management who should not rely on the audit to discharge those
functions.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council’s website at:
http://www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditor’s report.
Other matters which we are required to address
Following the recommendation of the audit committee, we were
appointed by the Board of Directors on 27
July 1987 to audit the financial statements for the year
ended 31 December 1987 and subsequent
financial periods.
The period of total uninterrupted engagement is 31 years,
covering the years ending 31 December
1987 to 2017.
The non-audit services prohibited by the FRC’s Ethical Standard
were not provided to the group or the parent company and we remain
independent of the group and the parent company in conducting our
audit.
During the period under review agreed upon procedures under ISRS
4400 were completed in respect of a number of the group’s service
charge account, and in respect of two deeds of release relating to
two debentures.
Our audit opinion is consistent with the additional report to
the audit committee.
This report is made solely to the company’s members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
company’s members those matters we are required to state to them in
an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the company and the company’s members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Geoff Wightwick (Senior Statutory
Auditor)
For and on behalf of RSM UK Audit LLP, Statutory Auditor
Chartered Accountants
25 Farringdon Street
London
EC4A 4AB
27 April 2018
London &
Associated Properties PLC
Report and accounts 2017
Financial statements
Consolidated Income Statement
for the year ended 31 December
2017
|
Notes |
2017
£’000 |
2016
£’000 |
|
|
|
|
Group
revenue |
1 |
44,979 |
29,704 |
Operating costs |
|
(37,428) |
(26,860) |
Gain on disposal
of other investments |
|
3 |
– |
Income from
listed investments held for trading |
3 |
– |
2 |
Operating
profit |
|
7,554 |
2,846 |
Finance income |
5 |
105 |
144 |
Finance expenses |
5 |
(4,268) |
(4,292) |
Debenture break
cost |
23 |
(14) |
– |
Result before
revaluation and other movements |
|
3,377 |
(1,302) |
|
|
|
|
Non–cash changes in
valuation of assets and liabilities and other movements |
|
|
|
Increase in value of
investment properties |
10 |
9,373 |
532 |
Write off investment
in joint venture |
12,
13 |
(1,827) |
– |
Increase in trading
investments |
|
– |
1 |
Increase in value of
other investments |
|
– |
12 |
Adjustment to interest
rate derivative |
23 |
355 |
(217) |
Profit/(loss) for
the year before taxation |
2 |
11,278 |
(974) |
Income tax charge |
6 |
(2,982) |
(1,175) |
Profit/(loss) for
the year |
|
8,296 |
(2,149) |
|
|
|
|
Attributable
to: |
|
|
|
Equity holders of the
Company |
|
7,686 |
(2,357) |
Non–controlling
interest |
27 |
610 |
208 |
Profit/(loss) for the
year |
|
8,296 |
(2,149) |
|
|
|
|
Earnings per
share |
|
|
|
Profit/(loss) per
share – basic and diluted |
9 |
9.01p |
(2.77)p |
Consolidated Statement of
Comprehensive Income
for the year ended 31 December
2017
Profit/(loss) for
the year |
|
8,296 |
(2,149) |
Other comprehensive
income/(expense): |
|
|
|
Items that may be
subsequently recycled to the income statement: |
|
|
|
Exchange differences
on translation of Bisichi Mining PLC foreign operations |
|
91 |
1,106 |
Transfer of gain on
available for sale investments |
|
103 |
193 |
Taxation |
|
(20) |
(13) |
Other comprehensive
income for the year net of tax |
|
174 |
1,286 |
Total comprehensive
income/(expense) for the year net of tax |
|
8,470 |
(863) |
Attributable
to: |
|
|
|
Equity
shareholders |
|
7,753 |
(1,864) |
Non–controlling
interest |
|
717 |
1,001 |
|
|
8,470 |
(863) |
Consolidated Balance Sheet
at 31
December 2017
|
Notes |
2017
£’000 |
2016
£’000 |
|
|
|
|
Non–current
assets |
|
|
|
Market value of
properties attributable to Group |
10 |
78,025 |
105,080 |
Present value of head
leases |
31 |
3,233 |
4,767 |
Property |
|
81,258 |
109,847 |
Mining reserves, plant
and equipment |
11 |
8,735 |
8,653 |
Investments in joint
ventures |
12 |
– |
455 |
Loan to joint
venture |
13 |
– |
1,350 |
Held to maturity
investments |
17 |
1,748 |
1,874 |
Other investments |
17 |
51 |
32 |
Deferred tax |
24 |
– |
1,134 |
|
|
91,792 |
123,345 |
Current
assets |
|
|
|
Inventories |
16 |
828 |
1,721 |
Assets held for
sale |
14 |
36,441 |
– |
Trade and other
receivables |
18 |
7,132 |
7,061 |
Interest rate
derivatives |
23 |
1 |
4 |
Corporation tax
recoverable |
|
– |
32 |
Available for sale
investments |
19 |
1,050 |
781 |
Investments held for
trading |
19 |
19 |
19 |
Cash and cash
equivalents |
|
7,528 |
6,265 |
|
|
52,999 |
15,883 |
Total
assets |
|
144,791 |
139,228 |
Current
liabilities |
|
|
|
Trade and other
payables |
20 |
(12,909) |
(12,942) |
Borrowings |
21 |
(4,288) |
(4,108) |
Current tax
liabilities |
|
(358) |
(21) |
|
|
(17,555) |
(17,071) |
Non–current
liabilities |
|
|
|
Borrowings |
21 |
(61,661) |
(64,401) |
Interest rate
derivatives |
23 |
(435) |
(793) |
Present value of head
leases on properties |
31 |
(3,233) |
(4,767) |
Provisions |
22 |
(1,349) |
(1,236) |
Deferred tax
liabilities |
25 |
(3,848) |
(2,329) |
|
|
(70,526) |
(73,526) |
Total liabilities |
|
(88,081) |
(90,597) |
Net assets |
|
56,710 |
48,631 |
Consolidated Balance Sheet
at 31 December 2017
|
Notes |
2017
£’000 |
2016
£’000 |
|
|
|
|
Equity attributable
to the owners of the parent |
|
|
|
Share capital |
26 |
8,554 |
8,554 |
Share premium
account |
|
4,866 |
4,866 |
Translation reserve
(Bisichi Mining PLC) |
|
(695) |
(728) |
Capital redemption
reserve |
|
47 |
47 |
Retained earnings
(excluding treasury shares) |
|
33,227 |
25,648 |
Treasury shares |
26 |
(145) |
(145) |
Retained earnings |
|
33,082 |
25,503 |
Total equity
attributable to equity shareholders |
|
45,854 |
38,242 |
Non–controlling
interest |
27 |
10,856 |
10,389 |
Total
equity |
|
56,710 |
48,631 |
|
|
|
|
Net assets per
share |
9 |
53.74p |
44.83p |
Diluted net assets
per share |
9 |
53.74p |
44.83p |
These financial statements were approved by the board of
directors and authorised for issue on 27
April 2018 and signed on its behalf by:
Sir Michael
Heller
Anil
Thapar
Company Registration No. 341829
Director
Director
Consolidated Statement of Changes in Shareholders’ Equity
for the year ended 31 December
2017
|
Share
capital
£’000 |
Share
premium
£’000 |
Translation
reserves
£’000 |
Capital
redemption
reserve
£’000 |
Treasury
shares
£’000 |
Retained
earnings
excluding
treasury
shares
£’000 |
Total
excluding
Non–
Controlling
Interests
£’000 |
Non–
controlling
Interests
£’000 |
Total
equity
£’000 |
|
|
|
|
|
|
|
|
|
|
Balance at 1
January 2016 |
8,554 |
4,866 |
(1,145) |
47 |
(482) |
28,238 |
40,078 |
9,574 |
49,652 |
Loss for year |
– |
– |
– |
– |
– |
(2,357) |
(2,357) |
208 |
(2,149) |
Other comprehensive
expense: |
|
|
|
|
|
|
|
|
|
Currency
translation |
– |
– |
417 |
– |
– |
– |
417 |
689 |
1,106 |
Gain on available for
sale investments (net of tax) |
– |
– |
– |
– |
– |
76 |
76 |
104 |
180 |
Total other
comprehensive expense |
– |
– |
417 |
– |
– |
76 |
493 |
793 |
1,286 |
Total comprehensive
expense |
– |
– |
417 |
– |
– |
(2,281) |
(1,864) |
1,001 |
(863) |
Transactions with
owners: |
|
|
|
|
|
|
|
|
|
Share options
charge |
– |
– |
– |
– |
– |
45 |
45 |
64 |
109 |
Dividends – equity
holders |
– |
– |
– |
– |
– |
(136) |
(136) |
– |
(136) |
Dividends –
non–controlling interests |
– |
– |
– |
– |
– |
– |
– |
(250) |
(250) |
Disposal of own
shares |
– |
– |
– |
– |
119 |
– |
119 |
– |
119 |
Loss on transfer of
own shares |
– |
– |
– |
– |
218 |
(218) |
– |
– |
– |
Transactions with
owners |
– |
– |
– |
– |
337 |
(309) |
28 |
(186) |
(158) |
Balance at 31
December 2016 |
8,554 |
4,866 |
(728) |
47 |
(145) |
25,648 |
38,242 |
10,389 |
48,631 |
Profit for year |
– |
– |
– |
– |
– |
7,686 |
7,686 |
610 |
8,296 |
Other comprehensive
income: |
|
|
|
|
|
|
|
|
|
Currency
translation |
– |
– |
33 |
– |
– |
– |
33 |
58 |
91 |
Gain on available for
sale investments (net of tax) |
– |
– |
– |
– |
– |
34 |
34 |
49 |
83 |
Total other
comprehensive income |
– |
– |
33 |
– |
– |
34 |
67 |
107 |
174 |
Total comprehensive
income/ (expense) |
– |
– |
33 |
– |
– |
7,720 |
7,753 |
717 |
8,470 |
Transactions with
owners: |
|
|
|
|
|
|
|
|
|
Dividends – equity
holders |
– |
– |
– |
– |
– |
(141) |
(141) |
– |
(141) |
Dividends –
non–controlling interests |
– |
– |
– |
– |
– |
– |
– |
(250) |
(250) |
Transactions with
owners |
– |
– |
– |
– |
– |
(141) |
(141) |
(250) |
(391) |
Balance at 31
December 2017 |
8,554 |
4,866 |
(695) |
47 |
(145) |
33,227 |
45,854 |
10,856 |
56,710 |
Consolidated Cash Flow Statement
for the year ended 31 December 2017
|
|
2017
£’000 |
2016
£’000 |
|
|
|
|
Operating
activities |
|
|
|
Profit/(loss) for the
year before taxation |
|
11,278 |
(974) |
Finance income |
|
(105) |
(144) |
Finance expense |
|
4,268 |
4,292 |
Debenture break
cost |
|
14 |
– |
Realised gain on
disposal of other investments |
|
(3) |
– |
Decrease in value of
investment properties |
|
(9,373) |
(532) |
Write off investment
in joint venture |
|
1,827 |
– |
Increase in trading
investments |
|
– |
(1) |
Increase in value of
other investments |
|
– |
(12) |
Adjustment to interest
rate derivative |
|
(355) |
217 |
Depreciation |
|
1,804 |
1,818 |
Profit on disposal of
non-current assets |
|
(3) |
(32) |
Share based payment
expense |
|
– |
109 |
Gain on investment
held for trading |
|
– |
4 |
Exchange
adjustments |
|
258 |
(449) |
Change in
inventories |
|
896 |
(258) |
Change in
receivables |
|
196 |
468 |
Change in
payables |
|
(415) |
1,080 |
Cash generated from
operations |
|
10,287 |
5,586 |
Income tax paid |
|
(14) |
(57) |
Cash inflows from
operating activities |
|
10,273 |
5,529 |
Investing
activities |
|
|
|
Disposal of shares and
loans held to maturity |
|
– |
121 |
Disposal of assets
held for sale |
|
(56) |
2,275 |
Share of profit in
joint ventures (assets held for sale) |
|
– |
60 |
Acquisition of
investment properties, mining reserves, plant and equipment |
|
(1,771) |
(3,022) |
Sale of plant and
equipment |
|
29 |
32 |
Residual receipt from
Windsor Shopping Centre disposal |
|
– |
414 |
Interest received |
|
137 |
133 |
Cash
(outflows)/inflows from investing activities |
|
(1,661) |
13 |
Financing
activities |
|
|
|
Sale of treasury
shares |
|
– |
119 |
Interest paid |
|
(3,963) |
(3,943) |
Interest obligation
under finance leases |
|
(178) |
(216) |
Debenture stock break
costs paid |
|
(14) |
– |
Receipt of bank loan -
Bisichi Mining PLC |
|
23 |
37 |
Repayment of bank loan
- Bisichi Mining PLC |
|
(25) |
(131) |
Short term loan from
joint ventures and related parties |
|
(30) |
– |
Repayment of debenture
stocks |
|
(750) |
– |
Equity dividends
paid |
|
(141) |
(136) |
Equity dividends paid
- non-controlling interests |
|
(250) |
(250) |
Cash outflows from
financing activities |
|
(5,328) |
(4,520) |
Net increase in
cash and cash equivalents |
|
3,284 |
1,022 |
Cash and cash
equivalents at beginning of year |
|
2,931 |
2,575 |
Exchange
adjustment |
|
51 |
(666) |
Cash and cash
equivalents at end of year |
|
6,266 |
2,931 |
The cash flows above relate to continuing and discontinued
operations. See note 7 for information on discontinued
operations.
Cash and cash equivalents
For the purpose of the cash flow statement, cash and cash
equivalents comprise the following balance sheet amounts:
|
|
2017 |
2016 |
|
£’000 |
£’000 |
Cash and cash
equivalents (before bank overdrafts) |
|
7,528 |
6,265 |
Bank overdrafts |
|
(1,262) |
(3,334) |
Cash and cash
equivalents at end of year |
|
6,266 |
2,931 |
£120,000 of cash deposits at 31 December
2017 were charged as security to debenture stocks.
financial statements
group accounting policies
The following are the principal Group accounting policies:
Basis of accounting
The Group financial statements are prepared in accordance with
International Financial Reporting Standards (IFRS), as adopted by
the European Union and with those parts of the Companies Act 2006
applicable to companies reporting under IFRS.
The Company has elected to prepare the parent company’s
financial statements in accordance with Financial Reporting
Standard 101 ’Reduced Disclosure Framework’ (FRS 101) and Companies
Act 2006 and these are presented in note 33. The financial
statements are prepared under the historical cost convention,
except for the revaluation of freehold and leasehold properties and
financial assets held for trading as well as fair value of interest
derivatives.
The Group financial statements are presented in Pounds Sterling
and all values are rounded to the nearest thousand pounds (£’000)
except when otherwise stated.
The functional currency for each entity in the Group, and for
joint arrangements, is the currency of the country in which the
entity has been incorporated. Details of the country in which each
entity has been incorporated can be found in note 15 for
subsidiaries and note 12 for joint ventures.
The exchange rates used in the accounts were as follows:
|
£1 Sterling: Rand |
£1 Sterling: Dollar |
|
2017 |
2016 |
2017 |
2016 |
Year-end rate |
16.6686 |
16.9472 |
1.35028 |
1.23321 |
Annual average |
17.1540 |
19.9269 |
1.29174 |
1.35477 |
London & Associated
Properties PLC (“LAP”), the parent company, is a listed public
company incorporated and domiciled in England and quoted on the London Stock
Exchange. The Company registration number is 341829. LAP and its
subsidiaries (“the Group”) consists of LAP, all of its subsidiary
undertakings, including Bisichi Mining PLC (“Bisichi”) and Dragon
Retail Properties Limited (“Dragon”). The Group without Bisichi and
Dragon is referred to as LAP Group.
Going concern
In reviewing going concern it is necessary to consider
separately the position of LAP Group and Bisichi. Although
both are consolidated into group accounts (as required by IFRS 10),
they are managed independently and in the unlikely event that
Bisichi was unable to continue trading this would not affect the
ability of LAP Group to continue operating as a going
concern. The same would be true for Bisichi in reverse.
The directors have reviewed the cash flow forecasts of the LAP
Group and the underlying assumptions on which they are based. The
LAP Group’s business activities, together with the factors likely
to affect its future development, are set out in the Chairman and
Chief Executive’s Statement and Financial Review. In addition, note
23 to the financial statements sets out the Group’s objectives,
policies and processes for managing its capital; its financial risk
management objectives; details of its financial instruments and
hedging activities; and its exposure to credit risk and liquidity
risk.
The directors believe that the LAP Group has adequate resources
to continue in operational existence for the foreseeable future and
that the LAP Group is well placed to manage its business risks.
Thus they continue to adopt the going concern basis of accounting
in preparing the annual financial statements.
The Bisichi directors continue to adopt the going concern basis
of accounting in preparing the Bisichi annual financial
statements.
International Accounting Standards (IAS/IFRS)
The Group has adopted all of the new and revised Standards and
Interpretations issued by the International Accounting Standards
Board (“IASB”) that are relevant to its operations and effective
for accounting periods beginning 1 January
2017. An amendment to IAS 7 “Statement of Cash Flows:
Disclosure Initiative”, which is mandatory for 2017, requires
entities to provide disclosures about changes in liabilities
arising from financing activities, including changes from financing
cash flows and non-cash changes (such as foreign exchange gains or
losses). This amendment has been endorsed by the EU. The adoption
of this amendment and other new and revised Standards and
Interpretations had no material effect on the profit or loss or
financial position of the Group.
The Group has not adopted any Standards or Interpretations in
advance of the required implementation dates.
IFRS 15 ‘Revenue from Contracts with Customers’ was issued by
the IASB in May 2014. It is effective
for accounting periods beginning on or after 1 January 2018. The new standard will replace
existing accounting standards, and provides enhanced detail on the
principle of recognising revenue to reflect the transfer of goods
and services to customers at a value which the company expects to
be entitled to receive. The standard also updates revenue
disclosure requirements. The standard was endorsed by the EU on
22 September 2017. The Directors are
continuing to assess the impact of IFRS 15 on the results of the
Group. Whilst management do not envisage a material impact, the
impact of adopting this standard cannot be reliably estimated until
the transition review is complete.
IFRS 9 was published in July 2014
and will be effective for the Group from 1
January 2018. The standard was endorsed by the EU on
22 November 2017. It is applicable to
financial assets and financial liabilities, and covers the
classification, measurement, impairment and de-recognition of
financial assets and financial liabilities together with a new
hedge accounting model. IFRS 9 also introduces the expected credit
loss model for impairment of financial assets. Application of the
IFRS 9 impairment model is expected to have minimal impact given
the Group’s credit risk management policies. The Directors are
continuing to assess the impact on the results of the Group and
will complete the assessment during H1 2018.
IFRS 16 ‘Leases’ – IFRS 16 ‘Leases’ was issued by the IASB in
January 2017 and is effective for
accounting periods beginning on or after 1
January 2019. The new standard will replace IAS 17 ‘Leases’
and will eliminate the classification of leases as either operating
leases or finance leases and, instead, introduce a single lessee
accounting model. The standard, which has been endorsed by the EU,
provides a single lessee accounting model, specifying how leases
are recognised, measured, presented and disclosed. The Directors
are currently evaluating the financial and operational impact of
this standard including the application to service contracts at the
mine containing leases. The review of the impact of IFRS 16 will
require an assessment of all leases and the impact of adopting this
standard cannot be reliably estimated until this work is
substantially complete.
The Directors do not anticipate that the adoption of the other
standards and interpretations not listed above will have a material
impact on the accounts. Certain of these standards and
interpretations will, when adopted, require addition to or
amendment of disclosures in the accounts.
We are committed to improving disclosure and transparency and
will continue to work with our different stakeholders to ensure
they understand the detail of these accounting changes. We continue
to remain committed to a robust financial policy
Key judgements and estimates
The preparation of the financial statements requires management
to make assumptions and estimates that may affect the reported
amounts of assets and liabilities and the reported income and
expenses, further details of which are set out below. Although
management believes that the assumptions and estimates used are
reasonable, the actual results may differ from those estimates.
Further details of the estimates are contained in the Directors’
Report.
Property operations
Fair value measurements of investment properties and
investments
An assessment of the fair value of certain assets and
liabilities, in particular investment properties, is required to be
performed. In such instances, fair value measurements are estimated
based on the amounts for which the assets and liabilities could be
exchanged between market participants. To the extent possible, the
assumptions and inputs used take into account externally verifiable
inputs. However, such information is by nature subject to
uncertainty.
Mining operations
Life of mine and reserves
The directors consider their judgements and estimates
surrounding the life of the mine and its reserves to have
significant effect on the amounts recognised in the financial
statements and to be an area where the financial statements are at
most risk of a significant estimation uncertainty. The life of the
mine remaining is currently estimated at 4 years. This life of mine
is based on the Groups existing coal reserves and excludes future
coal purchases and coal reserve acquisitions. The Group’s estimates
of proven and probable reserves are prepared and subject to
assessment by an independent Competent Person experienced in the
field of coal geology and specifically opencast and pillar coal
extraction. Estimates of coal reserves impact assessments of the
carrying value of property, plant and equipment, depreciation
calculations and rehabilitation and decommissioning provisions.
There are numerous uncertainties inherent in estimating coal
reserves and changes to these assumptions may result in restatement
of reserves. These assumptions include geotechnical factors as well
as economic factors such as commodity prices, production costs and
yield.
Depreciation, amortisation of mineral
rights, mining development costs and plant & equipment
The annual depreciation/amortisation charge is dependent on
estimates, including coal reserves and the related life of the
mine, expected development expenditure for probable reserves, the
allocation of certain assets to relevant ore reserves and estimates
of residual values of the processing plant. The charge can
fluctuate when there are significant changes in any of the factors
or assumptions used, such as estimating mineral reserves which in
turn affects the life of mine or the expected life of reserves.
Estimates of proven and probable reserves are prepared by an
independent Competent Person. Assessments of
depreciation/amortisation rates against the estimated reserve base
are performed regularly. Details of the depreciation/amortisation
charge can be found in note 11.
Provision for mining rehabilitation
including restoration and de-commissioning costs
A provision for future rehabilitation including restoration and
decommissioning costs requires estimates and assumptions to be made
around the relevant regulatory framework, the timing, extent and
costs of the rehabilitation activities and of the risk free rates
used to determine the present value of the future cash outflows.
The provisions, including the estimates and assumptions contained
therein, are reviewed regularly by management. The Group engages an
independent expert to assess the cost of restoration and
decommissioning annually as part of management’s assessment of the
provision. Details of the provision for mining rehabilitation can
be found in note 22.
Mining impairment
Property, plant and equipment representing the Group’s mining
assets in South Africa are
reviewed for impairment at each reporting date. The impairment test
is performed using the approved Life of Mine plan and those future
cash flow estimates are discounted using asset specific discount
rates and are based on expectations about future operations. The
impairment test requires estimates about production and sales
volumes, commodity prices, proven and probable reserves (as
assessed by the Competent Person), operating costs and capital
expenditures necessary to extract reserves in the approved Life of
Mine plan. Changes in such estimates could impact recoverable
values of these assets. Details of the carrying value of property,
plant and equipment can be found in note 11.
The impairment test indicated significant headroom as at
31 December 2017 and therefore no
impairment is considered appropriate. The key assumptions
include: coal prices, including domestic coal prices based on
recent pricing and assessment of market forecasts for export coal;
production based on proven and probable reserves assessed by the
independent Competent Person and yields associated with mining
areas based on assessments by the Competent Person and empirical
data. A 9% reduction in average forecast coal prices or a 9%
reduction in yield would give rise to a breakeven scenario.
However, the Bisichi directors consider the forecasted yield levels
and pricing to be achievable.
EZIMBOKODWENI JOINT VENTURE
During the year the Group wrote off its £1.8million (2016:
£1.8million) investment in Ezimbokodweni Mining (Pty) Limited
(“Ezimbokodweni”) made up of a £1.35million loan (2016:
£1.35million) and a £0.45million (2016: £0.45million) joint venture
investment.
The carrying value of the investment was dependent upon the
completion of the acquisition of the Pegasus coal project (“the
project”) in South Africa.
Although a proposed sale and purchase agreement had been negotiated
and a deposit paid for the project, the conclusion of the
transaction had been delayed pending the commercial transfer of the
prospecting right from the current owners of the project to
Ezimbokodweni. Although the Group has always remained committed to
completing the transaction, previous negotiations to complete the
commercial acquisition of the project had been beset by various
delays outside of its control and at the beginning of 2017, the
current owners of the project notified Ezimbokodweni that they no
longer wished to divest the project. More recently, the Group was
notified that an agreement was reached between the current owners
of the project and the directors of Ezimbokodweni for the deposit
for the project to be returned and any further negotiations with
Ezimbokodweni to acquire the project to be terminated.
Although, a legal claim by the Group has been issued against
Ezimbokodweni and its representatives, in order for the Group to
recover some of the investment, the Bisichi Board has exercised its
judgement and decided that it is appropriate and prudent to write
off the investment in full at this time.
DEFERRED TAX
The calculation of deferred tax involves the exercise of
judgement in relation to the amount of income and gains which will
be realised in future to support the recognition of a deferred tax
asset in respect of unrelieved losses.
INTEREST RATE HEDGES
All interest rate hedges are held at fair value as valued by the
hedge provider.
Further detail is provided in notes 21 and 23.
Basis of consolidation
The Group accounts incorporate the accounts of LAP and all of
its subsidiary undertakings, together with the Group’s share of the
results and net assets of its joint ventures.
Non–controlling interests in subsidiaries are presented
separately from the equity attributable to equity owners of the
parent company. When changes in ownership in a subsidiary do not
result in a loss of control, the non–controlling shareholders’
interests are initially measured at the non–controlling interests’
proportionate share of the subsidiaries’ net assets. Subsequent to
this, the carrying amount of non–controlling interests is the
amount of those interests at initial recognition plus the
non–controlling interests’ share of subsequent changes in equity.
Total comprehensive income is attributed to non–controlling
interests even if this results in the non–controlling interests
having a deficit balance.
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group
controls an entity when it is exposed to, or has rights to,
variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity.
Subsidiaries acquired during the year are consolidated using the
acquisition method. Their results are incorporated from the date
that control passes.
All intra Group transactions, balances, income and expenses are
eliminated on consolidation. Details of the Group’s trading
subsidiary companies are set out in note 15.
The directors are required to consider the implications of IFRS
10 on the LAP investment in Bisichi Mining PLC (“Bisichi”). Related
parties also have shareholdings in Bisichi. When combined with the
42% held by LAP and, taking account of the wide disposition of
other shareholders, there is potential for LAP and these related
parties to exercise voting control over Bisichi. IFRS 10 makes it
clear that possible voting control is of more significance than
actual management control.
For this reason the directors have concluded that there is a
requirement to consolidate Bisichi with LAP. While, in theory, they
could achieve control, in practice they do not get involved in the
day to day operations of Bisichi. The directors have presented
consolidated accounts using the published accounts of Bisichi but
it is important to note that any figures, risks and assumptions
attributable to that company are the responsibility of the Bisichi
Board of directors who are independent from LAP.
As a result of treating Bisichi as a subsidiary, Dragon Retail
Properties Limited is also a subsidiary for accounting purposes, as
LAP and Bisichi each own 50% of that joint venture business.
Joint ventures
Investments in joint ventures, being those entities over whose
activities the Group has joint control, as established by
contractual agreement, include the appropriate share of the results
and net assets of those undertakings.
Loans to joint ventures are classified as non-current assets
when they are not expected to be received in the normal working
capital cycle.
Goodwill
Goodwill arising on acquisition is recognised as an intangible
asset and initially measured at cost, being the excess of the cost
of the acquired entity over the Group’s interest in the fair value
of the assets and liabilities acquired. Goodwill is carried at cost
less accumulated impairment losses. Goodwill arising from the
difference in the calculation of deferred tax for accounting
purposes and fair value in negotiations is judged not to be an
asset and is accordingly impaired on completion of the relevant
acquisition.
Revenue
Revenue comprises sales of coal, property rental income and
property management fees.
Rental income
Rental income arises from operating leases granted to tenants.
An operating lease is a lease other than a finance lease. A finance
lease is one whereby substantially all the risks and rewards of
ownership are passed to the lessee. Rental income is recognised in
the Group income statement on a straight–line basis over the term
of the lease. This includes the effect of lease incentives to
tenants, which are normally in the form of rent free periods.
Contingent rents, being the difference between the rent currently
receivable and the minimum lease payments, are recognised in
property income in the periods in which they are receivable. Rent
reviews are recognised when such reviews have been agreed with
tenants.
Reverse surrender premiums
Payments received from tenants to surrender their lease
obligations are recognised immediately in the income statement.
Dilapidations
Dilapidations monies received from tenants in respect of their
lease obligations are recognised immediately in the income
statement.
Other revenue
Revenue in respect of listed investments held for trading
represents investment dividends received and profit or loss
recognised on realisation. Dividends are recognised in the income
statement when the dividend is received.
Property operating expenses
Operating expenses are expensed as incurred and any property
operating expenditure not recovered from tenants through service
charges is charged to the income statement.
Employee benefits
Share based remuneration
The Company operates a long–term incentive plan and two share
option schemes. The fair value of the conditional awards on shares
granted under the long–term incentive plan and the options granted
under the share option scheme is determined at the date of grant.
This fair value is then expensed on a straight–line basis over the
vesting period, based on an estimate of the number of shares that
will eventually vest. At each reporting date, the fair value of the
non–market based performance criteria of the long–term incentive
plan is recalculated and the expense is revised. In respect of the
share option scheme, the fair value of options granted is
calculated using a binomial method.
Pensions
The Company operates a defined contribution pension scheme. The
contributions payable to the scheme are expensed in the period to
which they relate.
Foreign currencies
Monetary assets and liabilities are translated at year end
exchange rates and the resulting exchange rate differences are
included in the consolidated income statement within the results of
operating activities if arising from trading activities, including
inter-company trading balances and within finance cost / income if
arising from financing.
For consolidation purposes, income and expense items are
included in the consolidated income statement at average rates, and
assets and liabilities are translated at year end exchange rates.
Translation differences arising on consolidation are recognised in
other comprehensive income. Foreign exchange differences on
intercompany loans are recorded in other comprehensive income when
the loans are not considered trading balances and are not expected
to be repaid in the foreseeable future. Where foreign
operations are sold or closed, the cumulative exchange differences
attributable to that foreign operation are recognised in the
consolidated income statement when the gain or loss on disposal is
recognised.
Transactions in foreign currencies are translated at the
exchange rate ruling on transaction date.
Financial instruments
Investments
Held to maturity investments are stated at amortised cost using
the effective interest rate method.
Investments held for trading are included in current assets at
fair value. For listed investments, fair value is the bid market
listed value at the balance sheet date. Realised and unrealised
gains or losses arising from changes in fair value are included in
the income statement of the period in which they arise.
Trade and other receivables
Trade and other receivables are recognised initially at fair
value. A provision for impairment of trade receivables is made when
there is evidence that the Group will not be able to collect all
amounts due. Trade receivables do not carry any interest, as any
interest that would be recognised from discounting future cash
payments over the short period is not considered to be
material.
Trade and other payables
Trade and other payables are non-interest bearing and are stated
at their nominal value, as the interest that would be recognised
from discounting future cash payments over the short payment period
is not considered to be material.
Bank loans and overdrafts
Bank loans and overdrafts are included as financial liabilities
on the Group balance sheet net of the unamortised discount and
costs of issue. The cost of issue is recognised in the Group income
Statement over the life of the bank loan. Interest payable on those
facilities is expensed as a finance cost in the period to which it
relates.
Debenture loans
The debenture loans are included as a financial liability on the
balance sheet net of the unamortised costs on issue. The cost of
issue is recognised in the Group income statement over the life of
the debenture. Interest payable to debenture holders is expensed in
the period to which it relates.
Finance lease liabilities
Finance lease liabilities arise for those investment properties
held under a leasehold interest and accounted for as investment
property. The liability is calculated as the present value of the
minimum lease payments, reducing in subsequent reporting periods by
the apportionment of payments to the lessor. Lease payments are
allocated between the liability and finance charges so as to
achieve a constant financing rate. Contingent rents payable, such
as rent reviews or those related to rental income, are charged as
an expense in the period in which they are incurred.
Interest rate derivatives
The Group uses derivative financial instruments to hedge the
interest rate risk associated with the financing of the Group’s
business. No trading in such financial instruments is undertaken.
At each reporting date, these interest rate derivatives are
recognised at their fair value to the business, being the Net
Present Value of the difference between the hedged rate of interest
and the market rate of interest for the remaining period of the
hedge.
Ordinary shares
Shares are classified as equity when there is no obligation to
transfer cash or other assets. Incremental costs directly
attributable to the issue of new shares are shown in equity as a
deduction, net of tax, from the proceeds.
Treasury shares
When the Group’s own equity instruments are repurchased,
consideration paid is deducted from equity as treasury shares until
they are cancelled. When such shares are subsequently sold or
reissued, any consideration received is included in equity.
Investment properties
Valuation
Investment properties are those that are held either to earn
rental income or for capital appreciation or both, including those
that are undergoing redevelopment. They are reported on the Group
balance sheet at fair value, being the amount for which an
investment property could be exchanged between knowledgeable and
willing parties in an arm’s length transaction. The directors’
property valuation is at fair value.
The external valuation of properties is undertaken by
independent valuers who hold recognised and relevant professional
qualifications and have recent experience in the locations and
categories of properties being valued. Surpluses or deficits
resulting from changes in the fair value of investment property are
reported in the Group income statement in the period in which they
arise.
Capital expenditure
Investment properties are measured initially at cost, including
related transaction costs. Additions to capital expenditure, being
costs of a capital nature, directly attributable to the
redevelopment or refurbishment of an investment property, up to the
point of it being completed for its intended use, are capitalised
in the carrying value of that property. The redevelopment of an
existing investment property will remain an investment property
measured at fair value and is not reclassified. Capitalised
interest is calculated with reference to the actual rate payable on
borrowings for development purposes, or for that part of the
development costs financed out of borrowings the capitalised
interest is calculated on the basis of the average rate of interest
paid on the relevant debt outstanding.
Disposal
The disposal of investment properties is recorded on completion
of the contract. On disposal, any gain or loss is calculated as the
difference between the net disposal proceeds and the valuation at
the last year end plus subsequent capitalised expenditure in the
period.
Depreciation and amortisation
In applying the fair value model to the measurement of
investment properties, depreciation and amortisation are not
provided in respect of investment properties.
Other assets and depreciation
The cost, less estimated residual value, of other property,
plant and equipment is written off on a straight–line basis over
the asset’s expected useful life. Residual values and useful lives
are reviewed, and adjusted if appropriate, at each balance sheet
date. Changes to the estimated residual values or useful lives are
accounted for prospectively. The depreciation rates generally
applied are:
Motor vehicles |
25–33 per cent per annum |
Office equipment |
10–33 per cent per annum |
Assets held for sale
Non-current assets, or disposal groups comprising assets and
liabilities, are classified as held-for-sale if it is highly
probable that they will be recovered primarily through sale rather
through continuing use. Such assets, or disposal groups, are
generally measured at the lower of their carrying amount and fair
value less costs of sale. Any impairment loss on a disposal group
is allocated first to goodwill and then to the remaining assets and
liabilities on a pro rata basis, except that no loss is allocated
to inventories, financial assets, deferred tax assets, employee
benefit assets, or investment property which continues to be
measured in accordance with the Group’s other accounting policies.
Impairment losses on initial classification as assets held-for-sale
and subsequent gains and losses on remeasurement are recognised in
profit or loss. Once classified as held-for-sale, intangible assets
and property, plant and equipment are no longer amortised or
depreciated, and any equity-accounted investment is no longer
equity accounted.
Available for sale assets
Financial assets available for sale are measured at fair
value. Any changes in fair value above cost are recognised in
other comprehensive income and accumulated in the
available-for-sale reserve. For any changes in fair value below
cost a provision for impairment is recognised in the profit or loss
account.
Other investments classified as non-current available for sale
investments comprise shares in listed companies and are carried at
fair value.
Income taxes
The charge for current taxation is based on the results for the
year as adjusted for disallowed or non–assessable items. Tax
payable upon realisation of revaluation gains recognised in prior
periods is recorded as a current tax charge with a release of the
associated deferred tax. Deferred tax is the tax expected to be
payable or recoverable on differences between the carrying amounts
of assets and liabilities in the financial statements and the
corresponding tax bases used in the tax computations and is
recorded using the balance sheet liability method. Deferred tax
liabilities are generally recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent
that it is probable that taxable profits will be available against
which deductible temporary differences can be utilised. In respect
of the deferred tax on the revaluation surplus, this is calculated
on the basis of the chargeable gains that would crystallise on the
sale of the investment portfolio as at the reporting date. The
calculation takes account of indexation on the historic cost of
properties and any available capital losses. Deferred tax is
calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised.
Deferred tax is charged or credited in the Group income statement,
except when it relates to items charged or credited directly to
equity, in which case it is also dealt with in equity.
Dividends
Dividends payable on the ordinary share capital are recognised
as a liability in the period in which they are approved.
Cash and cash equivalents
Cash comprises cash in hand and on-demand deposits. Cash and
cash equivalents comprises short-term, highly liquid investments
that are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value and original
maturities of three months or less. The cash and cash equivalents
shown in the cashflow statement are stated net of bank overdrafts
that are repayable on demand as per IAS 7. This includes the
structured trade finance facility held in South Africa as detailed in note 21. These
facilities are considered to form an integral part of the treasury
management of the Group and can fluctuate from positive to negative
balances during the period.
Bisichi Mining PLC
Mining revenue
Revenue is recognised when the customer has a legally binding
obligation to settle under the terms of the contract and has
assumed all significant risks and rewards of ownership.
Revenue is only recognised on individual sales of coal when all
of the significant risks and rewards of ownership have been
transferred
to a third party. Export revenue is generally recognised when the
product is delivered to the export terminal location specified by
the customer, at which point the customer assumes risks and rewards
under the contract. Domestic coal revenues are generally
recognised on collection by the customer from the mine when loaded
into transport, where the customer pays the transportation
costs.
MINING COSTS
Expenditure is recognised in respect of goods and services
received. Where coal is purchased from third parties at point
of extraction the expenditure is only recognised when the coal is
extracted and all of the significant risks and rewards of ownership
have been transferred.
Mining reserves, plant and
equipment
The cost of property, plant and equipment comprises its purchase
price and any costs directly attributable to bringing the asset to
the location and condition necessary for it to be capable of
operating in accordance with agreed specifications. Freehold land
is not depreciated. Other property, plant and equipment is stated
at historical cost less accumulated depreciation. The cost
recognised includes the recognition of any decommissioning assets
related to property, plant and equipment.
Heavy surface mining and other plant and equipment is
depreciated at varying rates depending upon its expected usage. The
depreciation rates generally applied are between 5-10 per cent per
annum, but limited to the shorter of its useful life or the life of
the mine.
Other non–current assets, comprising motor vehicles and office
equipment, are depreciated at a rate of between 10% and 33% per
annum which is calculated to write off the cost, less estimated
residual value of the assets, on a straight line basis over their
expected useful lives.
Mine inventories
Inventories are stated at the lower of cost and net realisable
value. Cost includes materials, direct labour and overheads
relevant to the stage of production. Cost is determined using the
weighted average method. Net realisable value is based on estimated
selling price less all further costs to completion and all relevant
marketing, selling and distribution costs.
Mine provisions
Provisions are recognised when the Group has a present
obligation as a result of a past event which it is probable
will result in an outflow of economic benefits that can be reliably
estimated.
A provision for rehabilitation of the mine is initially recorded
at present value and the discounting effect is unwound over time as
a finance cost. Changes to the provision as a result of
changes in estimates are recorded as an increase/decrease in the
provision and associated decommissioning asset. The decommissioning
asset is depreciated in line with the Group’s depreciation policy
over the life of mine. The provision includes the restoration of
the underground, opencast, surface operations and de-commissioning
of plant and equipment. The timing and final cost of the
rehabilitation is uncertain and will depend on the duration of the
mine life and the quantities of coal extracted from the
reserves.
Mine impairment
Whenever events or changes in circumstance indicate that the
carrying amount of an asset may not be recoverable that asset is
reviewed for impairment. This includes mining reserves, plant and
equipment and net investments in joint ventures. A review involves
determining whether the carrying amounts are in excess of the
recoverable amounts.
An asset’s recoverable amount is determined as the higher of its
fair value less costs of disposal and its value in use. Such
reviews are undertaken on an asset-by-asset basis, except where
assets do not generate cash flows independent of other assets, in
which case the review is undertaken on a company or Group
level.
If the carrying amount of an asset exceeds its recoverable
amount an asset’s carrying value is written down to its estimated
recoverable amount (being the higher of the fair value less cost to
sell and value in use). Any change in carrying value is recognised
in the comprehensive income statement.
Mine reserves and development cost
The purpose of mine development is to establish secure working
conditions and infrastructure to allow the safe and efficient
extraction of recoverable reserves. Depreciation on mine
development is not charged until production commences or the assets
are put to use. On commencement of full commercial production,
depreciation is charged over the life of the associated mine
reserves extractable using the asset on a unit of production
basis. The unit of production calculation is based on tonnes
mined as a ratio to proven and probable reserves and also includes
future forecast capital expenditure. The cost recognised
includes the recognition of any decommissioning assets related to
mine development.
Post production stripping
In surface mining operations, the Group may find it necessary to
remove waste materials to gain access to coal reserves prior to and
after production commences. Prior to production commencing,
stripping costs are capitalised until the point where the
overburden has been removed and access to the coal seam
commences. Subsequent to production, waste stripping
continues as part of the extraction process as a run of mine
activity. There are two benefits accruing to the Group from
stripping activity during the production phase: extraction of coal
that can be used to produce inventory and improved access to
further quantities of material that will be mined in future
periods. Economic coal extracted is accounted for as
inventory. The production stripping costs relating to
improved access to further quantities in future periods are
capitalised as a stripping activity asset, if and only if, all of
the following are met:
- it is probable that the future economic benefit associated with
the stripping activity will flow to the Group;
- the Group can identify the component of the ore body for which
access has been improved; and
- the costs relating to the stripping activity associated with
that component or components can be measured reliably.
In determining the relevant component of the coal reserve for
which access is improved, the Group componentises its mine into
geographically distinct sections or phases to which the stripping
activities being undertaken within that component are allocated.
Such phases are determined based on assessment of factors such as
geology and mine planning.
The Group depreciates deferred costs capitalised as stripping
assets on a unit of production method, with reference to the tons
mined and reserve of the relevant ore body component or phase.
Segmental reporting
For management reporting purposes, the Group is organised into
business segments distinguishable by economic activity. The Group’s
business segments are LAP operations, Bisichi operations and Dragon
operations. These business segments are subject to risks and
returns that are different from those of other business segments
and are the primary basis on which the Group reports its segmental
information. This is consistent with the way the Group is managed
and with the format of the Group’s internal financial reporting.
Significant revenue from transactions with any individual customer,
which makes up 10 per cent or more of the total revenue of the
Group, is separately disclosed within each segment. All coal
exports are sales to coal traders at Richard Bay’s terminal in
South Africa with the risks and
rewards passing to the coal trader at the terminal. Whilst
the coal traders will ultimately sell the coal on the international
markets the Group has no visibility over the ultimate destination
of the coal. Accordingly, the export sales are recorded as
South Africa revenue.
Notes to the Financial Statements
for the year ended 31 December 2017
1. Results for the year and
segmental analysis
Operating Segments are based on the internal reporting and
operational management of the Group. LAP is focused primarily on
property activities (which generate trading income), but it also
holds and manages investments. IFRS 10 requires the Group to treat
Bisichi as a subsidiary and therefore it is consolidated, rather
than being included in the accounts as an associate using the
equity method. The Group has also consolidated Dragon, a
company which the Company jointly controls with Bisichi; Bisichi is
a coal mining company with operations in South Africa and also holds investment
property in the United Kingdom and
derives income from property rentals. Dragon is a property
investment company and derives its income from property rentals.
These operating segments (LAP, Bisichi and Dragon) are each viewed
separately and have been so reported below.
Business segments
|
|
|
|
|
|
|
2017 |
|
LAP |
|
BISICHI |
|
DRAGON |
|
TOTAL |
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
BUSINESS
ANALYSIS |
|
|
|
|
|
|
|
Rental income |
6,825 |
|
1,112 |
|
166 |
|
8,103 |
Management income from
third party properties |
542 |
|
– |
|
– |
|
542 |
Mining |
– |
|
36,334 |
|
– |
|
36,334 |
Group
Revenue |
7,367 |
|
37,446 |
|
166 |
|
44,979 |
Direct property
costs |
(926) |
|
(152) |
|
(1) |
|
(1,079) |
Direct mining
costs |
– |
|
(25,664) |
|
– |
|
(25,664) |
Overheads |
(2,869) |
|
(5,589) |
|
(164) |
|
(8,622) |
Exchange losses |
– |
|
(256) |
|
– |
|
(256) |
Depreciation |
(13) |
|
(1,790) |
|
(1) |
|
(1,804) |
Operating
profit |
3,559 |
|
3,995 |
|
– |
|
7,554 |
Finance income |
38 |
|
67 |
|
– |
|
105 |
Finance expenses |
(3,713) |
|
(526) |
|
(29) |
|
(4,268) |
Debenture break
costs |
(14) |
|
– |
|
– |
|
(14) |
Result before
valuation movements |
(130) |
|
3,536 |
|
(29) |
|
3,377 |
Other segment
items |
|
|
|
|
|
|
|
Net
increase/(decrease) on revaluation of investment properties |
9,386 |
|
(13) |
|
– |
|
9,373 |
Write off investment
in joint venture |
– |
|
(1,827) |
|
– |
|
(1,827) |
Adjustment to interest
rate derivative |
358 |
|
– |
|
(3) |
|
355 |
Revaluation and
other movements |
9,744 |
|
(1,840) |
|
(3) |
|
7,901 |
Profit/(loss) for
the year before taxation |
9,614 |
|
1,696 |
|
(32) |
|
11,278 |
Segment
assets |
|
|
|
|
|
|
|
- Non-current assets -
property |
65,231 |
|
13,397 |
|
2,630 |
|
81,258 |
- Non-current assets -
plant & equipment |
116 |
|
8,613 |
|
6 |
|
8,735 |
- Cash & cash
equivalents |
2,109 |
|
5,327 |
|
92 |
|
7,528 |
- Non-current assets -
other |
1,748 |
|
51 |
|
– |
|
1,799 |
- Current assets -
others |
2,715 |
|
6,285 |
|
30 |
|
9,030 |
Total assets
excluding investment in joint ventures and assets held for
sale |
71,919 |
|
33,673 |
|
2,758 |
|
108,350 |
Segment
liabilities |
|
|
|
|
|
|
|
Borrowings |
(57,571) |
|
(7,160) |
|
(1,218) |
|
(65,949) |
Current
liabilities |
(5,588) |
|
(7,556) |
|
(123) |
|
(13,267) |
Non-current
liabilities |
(4,806) |
|
(3,986) |
|
(73) |
|
(8,865) |
Total
liabilities |
(67,965) |
|
(18,702) |
|
(1,414) |
|
(88,081) |
Net assets |
3,954 |
|
14,971 |
|
1,344 |
|
20,269 |
Assets held for
sale |
36,441 |
|
– |
|
– |
|
36,441 |
Net assets as per
balance sheet |
|
|
|
|
|
|
56,710 |
|
|
|
|
|
|
|
|
Major customers |
|
|
|
|
|
|
|
Customer A |
– |
|
27,528 |
|
– |
|
27,528 |
Customer B |
– |
|
7,226 |
|
– |
|
7,226 |
These customers are
for mining revenue in South Africa. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United |
|
South |
|
2017 |
|
|
|
Kingdom |
|
Africa |
|
Total |
Geographic
analysis |
|
|
£’000 |
|
£’000 |
|
£’000 |
Revenue |
|
|
8,692 |
|
36,287 |
|
44,979 |
Operating profit |
|
|
4,645 |
|
2,909 |
|
7,554 |
Non-current assets
excluding investments |
|
|
81,383 |
|
8,610 |
|
89,993 |
Total net assets |
|
|
52,452 |
|
4,258 |
|
56,710 |
Capital
expenditure |
|
|
30 |
|
1,741 |
|
1,771 |
|
LAP
£’000 |
BISICHI
£’000 |
DRAGON
£’000 |
2016
TOTAL
£’000 |
BUSINESS ANALYSIS |
|
|
|
|
Rental income |
6,241 |
1,060 |
171 |
7,472 |
Management income from third party
properties |
501 |
– |
– |
501 |
Mining |
– |
21,731 |
– |
21,731 |
Group Revenue |
6,742 |
22,791 |
171 |
29,704 |
Direct property costs |
(1,168) |
(187) |
5 |
(1,350) |
Direct mining costs |
– |
(16,184) |
– |
(16,184) |
Overheads |
(2,926) |
(4,903) |
(128) |
(7,957) |
Exchange gains |
– |
449 |
– |
449 |
Depreciation |
(25) |
(1,785) |
(8) |
(1,818) |
Operating profit before listed
investments held for trading |
2,623 |
181 |
40 |
2,844 |
Listed investments held for
trading |
2 |
– |
– |
2 |
Operating profit |
2,625 |
181 |
40 |
2,846 |
Finance income |
11 |
132 |
1 |
144 |
Finance expenses |
(3,706) |
(554) |
(32) |
(4,292) |
Result before valuation
movements |
(1,070) |
(241) |
9 |
(1,302) |
Other segment items |
|
|
|
|
Net increase/(decrease) on
revaluation of investment properties |
125 |
445 |
(38) |
532 |
Increase in value of other
investments |
– |
12 |
– |
12 |
Net increase on revaluation of
investments held for trading |
1 |
– |
– |
1 |
Adjustment to interest rate
derivative |
(206) |
– |
(11) |
(217) |
Revaluation and other
movements |
(80) |
457 |
(49) |
328 |
(Loss)/profit for the year before
taxation |
(1,150) |
216 |
(40) |
(974) |
|
|
|
|
|
Segment assets |
|
|
|
|
- Non – current assets –
property |
93,791 |
13,426 |
2,630 |
109,847 |
- Non – current assets – plant and
equipment |
112 |
8,520 |
21 |
8,653 |
- Cash and cash equivalents |
3,706 |
2,444 |
115 |
6,265 |
- Non – current assets – other |
1,874 |
32 |
– |
1,906 |
- Non – current assets – deferred
tax asset |
1,134 |
– |
– |
1,134 |
- Current assets – others |
1,853 |
7,745 |
20 |
9,618 |
Total assets excluding investment
in joint ventures and assets held for sale |
102,470 |
32,167 |
2,786 |
137,423 |
Segment liabilities |
|
|
|
|
Borrowings |
(58,068) |
(9,234) |
(1,207) |
(68,509) |
Current liabilities |
(6,074) |
(6,811) |
(78) |
(12,963) |
Non-current liabilities |
(5,379) |
(3,665) |
(81) |
(9,125) |
Total liabilities |
(69,521) |
(19,710) |
(1,366) |
(90,597) |
Net assets |
32,949 |
12,457 |
1,420 |
46,826 |
Investment in joint ventures non
segmental |
– |
– |
– |
1,805 |
Net assets as per balance
sheet |
– |
– |
– |
48,631 |
|
|
|
|
|
Major customer |
|
|
|
|
|
|
|
|
|
Customer A |
– |
14,543 |
– |
14,543 |
This customer is for mining revenue in South Africa.
Geographic analysis |
|
United
Kingdom
£’000 |
South
Africa
£’000 |
2016
Total
£’000 |
Revenue |
|
8,025 |
21,679 |
29,704 |
Operating profit/(loss) |
|
3,441 |
(595) |
2,846 |
Non–current assets excluding
investments |
|
111,117 |
8,517 |
119,634 |
Total net assets |
|
43,916 |
4,715 |
48,631 |
Capital expenditure |
|
164 |
2,858 |
3,022 |
Group revenue is external to the Group and the directors
consider that inter segmental revenues are not material. Revenue
includes contingent rents of £0.7 million (2016: £0.2 million).
2. Profit/(Loss) before
taxation
|
|
2017 |
2016 |
|
|
£'000 |
£'000 |
Profit/(loss) before
taxation is stated after charging/(crediting): |
|
|
|
Staff costs (see note
29) |
|
8,113 |
7,173 |
Depreciation on
tangible fixed assets - owned assets |
|
1,804 |
1,818 |
Operating lease
rentals - land and buildings |
|
411 |
442 |
Exchange
loss/(gain) |
|
256 |
(449) |
Profit on disposal of
motor vehicles and office equipment |
|
(3) |
(32) |
Amounts payable to the
auditor in respect of both audit and non-audit services |
|
|
|
Audit services |
|
|
|
Statutory - Company
and consolidation |
|
83 |
88 |
Subsidiaries - audited
by RSM |
|
17 |
20 |
Subsidiaries - audited
by other auditors |
|
51 |
50 |
Further assurance
services |
|
4 |
4 |
Other services |
|
5 |
32 |
|
|
160 |
194 |
Staff costs are included in overheads.
3. Listed investments held for
trading
|
|
2017 |
2016 |
|
|
£'000 |
£'000 |
Dividends
receivable |
|
– |
2 |
Net profit from listed
investments |
|
– |
2 |
4. Directors’ emoluments
|
|
2017 |
2016 |
|
|
£'000 |
£'000 |
Emoluments |
|
894 |
988 |
Defined contribution
pension scheme contributions |
|
27 |
45 |
|
|
921 |
1,033 |
Sir Michael Heller received
£75,000 (2016: £75,000) as a Director of Bisichi Mining PLC.
Details of directors’ emoluments and share options are set out
in the remuneration report.
5. Finance income and
expenses
|
|
2017 |
2016 |
|
|
£'000 |
£'000 |
Finance
income |
|
105 |
144 |
Finance
expenses |
|
|
|
Interest on bank loans
and overdrafts |
|
(2,223) |
(2,243) |
Unwinding of discount
(Bisichi) |
|
(92) |
(78) |
Other loans |
|
(1,414) |
(1,420) |
Interest on
derivatives |
|
(337) |
(302) |
Interest on
obligations under finance leases |
|
(202) |
(249) |
Total finance
expenses |
|
(4,268) |
(4,292) |
|
|
(4,163) |
(4,148) |
6. Income tax
|
|
2017 |
2016 |
|
|
£'000 |
£'000 |
Current
tax |
|
|
|
Corporation tax on
profit of the period |
|
369 |
73 |
Corporation tax on
profit/(loss) of previous periods |
|
(5) |
– |
Total current
tax |
|
364 |
73 |
Deferred
tax |
|
|
|
Origination of timing
differences |
|
(35) |
874 |
Revaluation of
investment properties |
|
2,348 |
472 |
Accelerated capital
allowances |
|
235 |
(48) |
Fair value of interest
derivatives |
|
68 |
(40) |
Adjustment in respect
of prior years |
|
2 |
(156) |
Total deferred tax
(notes 24 and 25) |
|
2,618 |
1,102 |
Tax on profit on
ordinary activities |
|
2,982 |
1,175 |
The 2016 deferred tax recognised in income of £1,102,000
includes a credit of £168,000 arising in the Bisichi Group on the
correction of an error in the calculation of deferred tax in 2015
related to the accounting of a deferred tax liability incorrectly
recognised in respect of management fees. The Group adjusted the
effect of this error in its 2016 financial statements by reducing
the tax charge for the year by £168,000 and reducing the associated
deferred tax liability as it was not considered to be material to
the current or prior year financial statements.
Factors affecting tax charge for the year
The corporation tax assessed for the year is different from that
at the effective rate of corporation tax in the United Kingdom of 19.25 per cent
(2016: 20 per cent). The differences are explained below:
|
|
2017 |
2016 |
|
|
£'000 |
£'000 |
Profit/(loss) for the
year before taxation |
|
11,278 |
(974) |
Taxation at 19.25 per
cent (2016: 20 per cent) |
|
2,171 |
(195) |
|
|
|
|
Effects of: |
|
|
|
Capital gains |
|
1,792 |
800 |
Other differences |
|
(785) |
506 |
Adjustment in respect
of prior years |
|
(3) |
(157) |
Deferred tax rate
adjustment |
|
(193) |
221 |
Income tax charge for
the year |
|
2,982 |
1,175 |
Analysis of United Kingdom and
overseas tax:
United Kingdom tax included in
above:
|
2017
£’000 |
2016
£’000 |
Corporation tax |
233 |
13 |
Adjustment in respect of prior years |
(5) |
– |
Current tax |
228 |
13 |
Deferred tax |
2,219 |
1,241 |
|
2,447 |
1,254 |
Overseas tax included above:
|
2017
£’000 |
2016
£’000 |
Corporation tax |
136 |
60 |
Current tax |
136 |
60 |
Deferred tax |
397 |
(139) |
Adjustment in respect of prior years |
2 |
– |
Deferred tax |
399 |
(139) |
|
535 |
(79) |
Factors that may affect future tax charges:
Based on current capital expenditure plans, the Group expects to
continue to be able to claim capital allowances in excess of
depreciation in future years, but at a slightly lower level than in
the current year.
A deferred tax provision has been made for gains on revaluing
investment properties.
The Finance Bill 2016 was substantively enacted on 7 September
2016. This includes a reduction in the rate of Corporation
tax from 19% effective 1 April 2017
to 17% from 1 April 2020.
The Finance (no. 2) Act 2017 was substantively enacted on
16 November 2017. This includes a
restriction on the utilisation of brought forward tax losses and
corporate interest in certain circumstances effective from
1 April 2017.
7. Discontinued operations
As part of the Group’s strategy to focus on core assets, the
Group disposed of King Edward Court,
Windsor in 2013. The profits and
losses arising from this disposal were classified as discontinued
operations. Contracts for the sale of King Edward Court had been exchanged in 2013 and
completion took place in January 2014. Following the
settlement of a dispute additional proceeds of £414,000 were
received by the Group in 2016.
8. Dividend
|
|
|
|
|
|
2017 |
|
2016 |
|
|
|
|
|
|
|
Per
share |
£'000 |
Per
share |
£'000 |
Dividends
paid during the year relating to the prior period |
|
|
0.165p |
141 |
0.16p |
136 |
Dividends
to be paid: |
|
|
|
|
|
|
|
|
Proposed
final dividend for the year |
|
|
|
|
0.175p |
149 |
0.165p |
141 |
Proposed
special dividend for the year |
|
|
|
0.125p |
107 |
– |
– |
9. Profit/(Loss) per share and
net assets per share
Profit/(loss) per
share has been calculated as follows: |
|
|
|
|
|
2017 |
2016 |
Profit / (loss) for
the year for the purposes of basic and diluted profit/(loss) per
share (£’000) |
|
7,686 |
(2,357) |
Weighted average
number of ordinary shares in issue for the purpose of basic
profit/(loss) per share (’000) |
|
85,322 |
85,107 |
Basic profit / (loss)
per share |
|
9.01p |
(2.77)p |
Weighted average
number of ordinary shares in issue for the purpose of diluted
profit/(loss) per share (’000) |
|
85,322 |
85,107 |
Fully diluted profit
/(loss) per share |
|
9.01p |
(2.77)p |
Weighted average number of shares in issue is calculated after
excluding treasury shares of 221,061 (2016: 221,061).
Net assets per share have been calculated as follows:
|
|
2017 |
2016 |
Net assets
(£’000) |
|
45,854 |
38,242 |
Shares in issue
(’000) |
|
85,322 |
85,322 |
Basic net assets per
share |
|
53.74p |
44.83p |
Net assets diluted
(£’000) |
|
45,854 |
38,242 |
Shares in issue
(’000) |
|
85,322 |
85,322 |
Diluted net assets per
share |
|
53.74p |
44.83p |
10. Investment
properties
|
|
|
|
|
Leasehold |
|
Leasehold |
|
Total |
|
Freehold |
|
over
50 years |
|
under
50 years |
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
Cost or valuation at 1
January 2017 |
109,847 |
|
88,585 |
|
19,620 |
|
1,642 |
Transfer to assets
held for sale (note 14) |
(36,441) |
|
(36,441) |
|
– |
|
– |
Additions in year |
13 |
|
13 |
|
– |
|
– |
(Decrease)/increase in
present value of head leases |
(1,534) |
|
– |
|
(1,839) |
|
305 |
Increase/(decrease) on
revaluation |
9,373 |
|
10,268 |
|
(925) |
|
30 |
At 31 December
2017 |
81,258 |
|
62,425 |
|
16,856 |
|
1,977 |
|
|
|
|
|
|
|
|
Representing assets
stated at: |
|
|
|
|
|
|
|
Valuation |
78,025 |
|
62,425 |
|
14,570 |
|
1,030 |
Present value of head
leases |
3,233 |
|
– |
|
2,286 |
|
947 |
|
81,258 |
|
62,425 |
|
16,856 |
|
1,977 |
|
|
|
|
|
|
|
|
At 31 December
2017 |
81,258 |
|
62,425 |
|
16,856 |
|
1,977 |
At 31 December
2016 |
109,847 |
|
88,585 |
|
19,620 |
|
1,642 |
|
Total
£’000 |
Freehold
£’000 |
Leasehold
over
50 years
£’000 |
Leasehold
under
50 years
£’000 |
Cost or valuation at 1 January 2016 |
109,172 |
86,468 |
21,060 |
1,644 |
Additions in year |
160 |
160 |
– |
– |
Decrease in present value of head leases |
(17) |
– |
(15) |
(2) |
Increase/(decrease) on revaluation |
532 |
1,957 |
(1,425) |
– |
At 31 December 2016 |
109,847 |
88,585 |
19,620 |
1,642 |
Representing assets stated at: |
|
|
|
|
Valuation |
105,080 |
88,585 |
15,495 |
1,000 |
Present value of head leases |
4,767 |
– |
4,125 |
642 |
|
109,847 |
88,585 |
19,620 |
1,642 |
|
|
|
|
|
At 31 December 2016 |
109,847 |
88,585 |
19,620 |
1,642 |
At 31 December 2015 |
109,172 |
86,468 |
21,060 |
1,644 |
|
The leasehold and freehold properties, excluding the present
value of head leases and directors’ valuations, were valued as at
31 December 2017 by professional
firms of chartered surveyors. The valuations were made at fair
value. The directors’ property valuations were made at fair
value.
|
|
|
|
|
2017 |
|
2016 |
|
|
|
|
|
£'000 |
|
£'000 |
Allsop LLP |
|
|
|
|
62,955 |
|
90,010 |
Carter Towler |
|
|
|
|
13,245 |
|
13,245 |
Directors'
valuations |
|
|
|
|
1,825 |
|
1,825 |
|
|
|
|
|
78,025 |
|
105,080 |
Add: present value of
headleases |
|
|
|
|
3,233 |
|
4,767 |
|
|
|
|
|
81,258 |
|
109,847 |
The historical cost of investment properties, including total
capitalised interest of £1,161,000 (2016: £1,161,000) was as
follows:
|
|
|
|
2017 |
|
|
2016 |
|
|
|
|
|
Leasehold |
Leasehold |
|
Leasehold |
Leasehold |
|
|
|
|
Over
50 |
under
50 |
|
Over
50 |
under
50 |
|
|
|
Freehold |
years |
years |
Freehold |
years |
years |
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
Cost at 1 January |
|
|
72,711 |
17,653 |
1,939 |
72,551 |
17,653 |
1,939 |
Transfer
to assets held for sale (note 14) |
(5,022) |
– |
– |
– |
– |
– |
Additions |
|
|
13 |
– |
– |
160 |
– |
– |
Cost at 31
December |
|
|
67,702 |
17,653 |
1,939 |
72,711 |
17,653 |
1,939 |
Each year external valuers are appointed by the executive
directors on behalf of the Board. The valuers are selected based
upon their knowledge, independence and reputation for valuing
assets such as those held by the Group.
Valuations are performed annually and are performed consistently
across all properties in the Group’s portfolio. At each reporting
date appropriately qualified employees of the Group verify all
significant inputs and review the computational outputs. Valuers
submit their report to the Board on the outcome of each
valuation.
Valuations take into account tenure, lease terms and structural
condition. The inputs underlying the valuations include market rent
or business profitability, likely incentives offered to tenants,
forecast growth rates, yields, EBITDA, discount rates, construction
costs including any specific site costs (for example section 106),
professional fees, developer’s profit including contingencies,
planning and construction timelines, lease regear costs, planning
risk and sales prices based on known market transactions for
similar properties to those being valued.
Valuations are based on what is determined to be the highest and
best use. When considering the highest and best use the valuer will
consider, on a property by property basis, its actual and potential
uses which are physically, legally and financially viable. Where
the highest and best use differs from the existing use, the valuer
will consider the cost and likelihood of achieving and implementing
this change in arriving at the valuation.
There are often restrictions on Freehold and Leasehold property
which could have a material impact on the realisation of these
assets. The most significant of these occur when planning
permission or lease extension and renegotiation of use are required
or when a credit facility is in place. These restrictions are
factored into the property’s valuation by the external valuer.
The methods of fair value measurement are classified into a
hierarchy based on the reliability of the information used to
determine the valuation, as follows:
Level 1: valuation based on inputs on quoted market
prices in active markets.
Level 2: valuation based on inputs other than quoted
prices included within level 1 that maximise the use of observable
data directly or from market prices or indirectly derived from
market prices.
Level 3: where one or more significant inputs to
valuations are not based on observable market data.
Class of
property
Level 3 |
Carrying /
Fair value
2017
£’000 |
|
Carrying/ Fair value
2016
£’000 |
Valuation technique |
|
Key
unobservable
inputs |
Range (weighted
average)
2017 |
Range (weighted average) 2016 |
Freehold – external valuation |
60,600 |
|
86,760 |
Income capitalisation |
|
Estimated Rental
Value
Per sq ft p.a
Equivalent Yield |
£5 – £39
(£19)
4.9% – 12.9%
(8.4%) |
£5 – £37
(£19)
5% – 14%
(8%) |
Leasehold over 50 years –
external valuation |
14,570 |
|
15,495 |
Income capitalisation |
|
Estimated Rental
Value
Per sq ft p.a
Equivalent Yield |
£5 – £10
(£9)
5.8% – 17.6%
(9%) |
£5 – £11
(£9)
7% – 18%
(11%) |
Leasehold under 50 years – external
valuation |
1,030 |
|
1,000 |
Income capitalisation |
|
Estimated Rental
Value
Per sq ft p.a
Equivalent Yield |
£4 – £5
(£5)
25.4% – 25.8%
(25.5%) |
£3 – £5
(£4)
18% – 23%
(19%) |
Freehold – Directors’ valuation |
1,825 |
|
1,825 |
Income capitalisation |
|
Estimated Rental
Value
Per sq ft p.a
Equivalent Yield |
£5 – £5
(£5)
6.1% – 6.1%
(6.1%) |
£5 – £5
(£5)
6% – 6%
(6%) |
At 31 December |
78,025 |
|
105,080 |
|
|
|
|
|
There are interrelationships between all these inputs as they
are determined by market conditions. The existence of an increase
in more than one input would be to magnify the input on the
valuation. The impact on the valuation will be mitigated by the
interrelationship of two inputs in opposite directions, for
example, an increase in rent may be offset by an increase in
yield.
The table below illustrates the impact of changes in key
unobservable inputs on the carrying / fair value of the Group’s
properties.
|
Estimated rental value
10% increase or (decrease) |
Equivalent yield
25 basis point contraction
or (expansion) |
|
2017
£’000 |
2016
£’000 |
2017
£’000 |
2016
£’000 |
|
Freehold – external valuation |
6,055/(6,055) |
8,671/(8,671) |
2,095/(1,956) |
3,585/(3,298) |
Leasehold over 50 years – external
valuation |
1,457/(1,457) |
1,545/(1,545) |
355/(338) |
394/(375) |
Leasehold under 50 years – external
valuation |
103/(103) |
100/(100) |
10/(10) |
13/(13) |
Freehold – Directors’ valuation |
183/(183) |
183/(183) |
78/(71) |
78/(72) |
11. Mining reserves, plant and
equipment
|
|
|
|
|
|
|
Office |
|
|
|
|
|
|
|
equipment |
|
|
|
Mining |
|
Mining |
|
and
motor |
|
Total |
|
reserves |
|
equipment |
|
vehicles |
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
Cost at 1 January
2017 |
25,817 |
|
1,344 |
|
23,724 |
|
749 |
Exchange
adjustment |
474 |
|
22 |
|
447 |
|
5 |
Additions |
1,758 |
|
– |
|
1,731 |
|
27 |
Disposals |
(53) |
|
– |
|
– |
|
(53) |
At 31 December
2017 |
27,996 |
|
1,366 |
|
25,902 |
|
728 |
|
|
|
|
|
|
|
|
Accumulated
depreciation at 1 January 2017 |
17,164 |
|
1,287 |
|
15,370 |
|
507 |
Exchange
adjustment |
332 |
|
21 |
|
308 |
|
3 |
Charge for the
year |
1,804 |
|
1 |
|
1,763 |
|
40 |
Disposals in year |
(39) |
|
(1) |
|
– |
|
(38) |
Accumulated
depreciation at 31 December 2017 |
19,261 |
|
1,308 |
|
17,441 |
|
512 |
Net book value at
31 December 2017 |
8,735 |
|
58 |
|
8,461 |
|
216 |
|
|
|
|
|
|
|
|
Cost at 1 January
2016 |
17,188 |
|
995 |
|
15,453 |
|
740 |
Exchange
adjustment |
6,273 |
|
349 |
|
5,858 |
|
66 |
Additions |
2,862 |
|
– |
|
2,814 |
|
48 |
Disposals |
(506) |
|
– |
|
(401) |
|
(105) |
Cost at 31 December
2016 |
25,817 |
|
1,344 |
|
23,724 |
|
749 |
|
|
|
|
|
|
|
|
Accumulated
depreciation at 1 January 2016 |
11,636 |
|
949 |
|
10,201 |
|
486 |
Exchange
adjustment |
4,202 |
|
336 |
|
3,824 |
|
42 |
Charge for the
year |
1,818 |
|
2 |
|
1,746 |
|
70 |
Disposals |
(492) |
|
– |
|
(401) |
|
(91) |
Accumulated
depreciation at 31 December 2016 |
17,164 |
|
1,287 |
|
15,370 |
|
507 |
Net book value at 31
December 2016 |
8,653 |
|
57 |
|
8,354 |
|
242 |
12. Investment in
joint venture
Shares in joint venture:
|
|
2017 |
2016 |
|
|
£’000 |
£’000 |
At 1 January |
|
455 |
325 |
Write off of
investment |
|
(447) |
– |
Exchange
adjustment |
|
(8) |
130 |
At 31 December |
|
– |
455 |
At 31 December 2017 the joint
venture had non-current assets of £nil (2016: £1,346,000), current
assets of £nil (2016: £3,000) and current liabilities of £nil
(2016: £,1,349,000).
|
|
2017 |
2016 |
|
|
£’000 |
£’000 |
At 1 January |
|
455 |
325 |
Write off of
investment |
|
(447) |
– |
Exchange
adjustment |
|
(8) |
130 |
At 31 December |
|
– |
455 |
Bisichi owned 49% of the issued share capital of Ezimbokodweni
(an unlisted coal production company in South Africa). The Directors of Bisichi have
now concluded that the joint venture (which has not traded to date)
is unlikely to generate income in the foreseeable future. For that
reason, the investment and the loan (note 13) have been written
off.
13. Loan to joint venture
|
|
2017
Joint
ventures
assets
£’000 |
2016
Joint
ventures
assets
£’000 |
Loan to Ezimbokodweni
Mining (Pty) Limited |
|
|
|
At 1 January |
|
1,350 |
900 |
Exchange
adjustment |
|
(16) |
336 |
Additions –
interest |
|
46 |
114 |
Write-off |
|
(1,380) |
– |
At 31 December |
|
– |
1,350 |
14. Assets
held for sale
|
|
|
|
2017 |
2016 |
|
|
|
£’000 |
£’000 |
At 1
January |
|
|
|
– |
2,335 |
Transfer from
investment property (note 10) |
|
|
|
36,441 |
– |
Disposal |
|
|
|
– |
(2,335) |
At 31 December |
|
|
|
36,441 |
– |
In March 2018 contracts were
exchanged for the sale of both Brixton markets for a combined price
of £37.25 million. The properties were held at a valuation of
£24.52 million at 31 December 2016 and a revaluation gain of £11.92
million is recognised in note 10 prior to the transfer of the
property to assets held for sale. Following the Market Row
completion on 23 April 2018, £15.9 million of bank loans related to
those properties have been repaid as required by the terms of the
loan agreements. The Brixton Village completion was on 26 April
2018. As required under IFRS, these properties have been
reclassified from investment properties to assets held for sale, at
fair value less costs to sell of £36.44 million. Related loans are
classified as non-current in note 23. |
15. Subsidiary
companies
In accordance with Section 409 of the Companies Act 2006 a full
list of subsidiaries, the principal activity, the country of
incorporation and the percentage of equity owned, as at
31 December 2017 is disclosed
below:
Entity |
Activity |
Percentage of
share capital |
Registered address |
Country of
incorporation |
Analytical Investments Limited |
Dormant |
100% |
24 Bruton Place, London, W1J
6NE |
England and Wales |
Analytical Portfolios Limited |
Dormant |
100% |
24 Bruton Place, London, W1J
6NE |
England and Wales |
Analytical Properties Holdings
Limited |
Property |
100% |
24 Bruton Place, London, W1J
6NE |
England and Wales |
Analytical Properties Limited |
Property |
100% |
24 Bruton Place, London, W1J
6NE |
England and Wales |
Analytical Ventures Limited |
Property |
100% |
24 Bruton Place, London, W1J
6NE |
England and Wales |
24 Bruton Place Limited |
Dormant |
100% |
24 Bruton Place, London, W1J
6NE |
England and Wales |
24 BPL (Harrogate) Limited |
Investment |
88% |
24 Bruton Place, London, W1J
6NE |
England and Wales |
24 BPL (Harrogate ) Two Limited |
Investment |
100% |
24 Bruton Place, London, W1J
6NE |
England and Wales |
Brixton Village Limited |
Property |
100% |
24 Bruton Place, London, W1J
6NE |
England and Wales |
Market Row Limited |
Property |
100% |
24 Bruton Place, London, W1J
6NE |
England and Wales |
Newincco 1243 Limited |
Property |
100% |
24 Bruton Place, London, W1J
6NE |
England and Wales |
Newincco 1244 Limited |
Property |
100% |
24 Bruton Place, London, W1J
6NE |
England and Wales |
Newincco 1245 Limited |
Property Management Services |
100% |
24 Bruton Place, London, W1J
6NE |
England and Wales |
Newincco 1299 Limited |
Property |
100% |
24 Bruton Place, London, W1J
6NE |
England and Wales |
Newincco 1300 Limited |
Property |
100% |
24 Bruton Place, London, W1J
6NE |
England and Wales |
LAP Ocean Holdings Limited |
Property |
100% |
24 Bruton Place, London, W1J
6NE |
England and Wales |
LAP Ocean Two Limited |
Property |
100% |
24 Bruton Place, London, W1J
6NE |
England and Wales |
London & Associated Limited |
Dormant |
100% |
24 Bruton Place, London, W1J
6NE |
England and Wales |
London & Associated (Rugeley)
Limited |
Dormant |
100% |
24 Bruton Place, London, W1J
6NE |
England and Wales |
London & Associated Securities
Limited |
Dormant |
100% |
24 Bruton Place, London, W1J
6NE |
England and Wales |
London & Associated Management
Services Limited |
Property Management Services |
100% |
24 Bruton Place, London, W1J
6NE |
England and Wales |
London & African Investments
Limited |
Dormant |
100% |
24 Bruton Place, London, W1J
6NE |
England and Wales |
Orchard Chambers Residential
Limited |
Dormant |
100% |
24 Bruton Place, London, W1J
6NE |
England and Wales |
Bisichi Mining PLC (note D) |
Coal mining |
41.52% |
24 Bruton Place, London, W1J
6NE |
England and Wales |
Mineral Products Limited (note
A)(note D) |
Share dealing |
100% |
24 Bruton Place, London, W1J
6NE |
England and Wales |
Bisichi (Properties) Limited (note
A)(note D) |
Property |
100% |
24 Bruton Place, London, W1J
6NE |
England and Wales |
Bisichi Mining (Exploration) Limited
(note A)(note D) |
Holding company |
100% |
24 Bruton Place, London, W1J
6NE |
England and Wales |
Black Wattle Colliery (Pty) Limited
(note A)(note D) |
Coal mining |
62.5% |
Samora Machel Street, Bethal Road,
Middelburg, Mpumalanga, 1050 |
South Africa |
Bisichi Coal Mining (Pty) Limited
(note A)(note D) |
Coal mining |
100% |
Samora Machel Street, Bethal Road,
Middelburg, Mpumalanga, 1050 |
South Africa |
Urban First (Northampton) Limited
(note A)(note D) |
Dormant |
100% |
24 Bruton Place, London, W1J
6NE |
England and Wales |
Bisichi Trustee Limited (note
A)(note D) |
Property |
100% |
24 Bruton Place, London, W1J
6NE |
England and Wales |
Bisichi Mining
Management Services Limited (note A)
(note D) |
Dormant |
100% |
24 Bruton Place, London, W1J
6NE |
England and Wales |
Ninghi Marketing Limited (note
A)(note D) |
Dormant |
90.1% |
24 Bruton Place, London, W1J
6NE |
England and Wales |
Bisichi Northampton Limited (note
A)(note D) |
Property |
100% |
24 Bruton Place, London, W1J
6NE |
England and Wales |
Amandla Ehtu Mineral Resource
Development (Pty) Limited (note A)(note D) |
Dormant |
70% |
Samora Machel Street, Bethal Road,
Middelburg, Mpumalanga, 1050 |
South Africa |
Black Wattle Klipfontein (Pty)
Limited (note A)(note D) |
Coal mining |
62.5% |
Samora Machel Street, Bethal Road,
Middelburg, Mpumalanga, 1050 |
South Africa |
Dragon Retail Properties Limited
(note B)(note D) |
Property |
50% |
24 Bruton Place, London, W1J
6NE |
England and Wales |
Newincco 1338 Limited (note C) |
Property |
100% |
24 Bruton Place, London, W1J
6NE |
England and Wales |
Details on the non–controlling interest in subsidiaries are
shown under note 27.
Note A: these companies are owned by Bisichi and the
equity shareholdings disclosed relate to that company.
Note B: this entity is a joint venture owned 50% by LAP
and 50% by Bisichi.
Note C: this company is owned by Dragon and the equity
shareholdings disclosed relate to that company.
Note D: Bisichi and Dragon and their subsidiaries are
included in the consolidated financial statements in accordance
with IFRS 10.
16. Inventories
|
|
2017 |
2016 |
|
|
£'000 |
£'000 |
Coal |
|
|
|
Washed |
|
301 |
1,139 |
Mining production |
|
286 |
83 |
Work in progress |
|
227 |
458 |
Other |
|
14 |
41 |
|
|
828 |
1,721 |
17. Held to
maturity investments and other investments
Held to maturity investments:
|
|
|
2017 |
Unlisted |
Loan |
2016 |
Unlisted |
Loan |
|
|
|
Total |
shares |
stock |
Total |
shares |
stock |
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
At 1 January |
|
|
1,874 |
1 |
1,873 |
1,995 |
1 |
1,994 |
Repayments |
|
|
(126) |
– |
(126) |
(121) |
– |
(121) |
At 31 December |
|
|
1,748 |
1 |
1,747 |
1,874 |
1 |
1,873 |
The Group owns a 3.17% (2016: 6.95%) interest in the equity and
loans of HRGT Shopping Centres LP (HRGT), a limited partnership set
up in England to acquire and own 3
shopping centres in Dunfermline, Kings
Lynn and Loughborough.
96.4% (2016: 92.10%) of the equity and loans are owned by Oaktree
Capital Management and 0.43% (2016: 0.95%) by Gooch Cunliffe Whale
LLP. London & Associated
Management Services Limited has a management contract to manage the
properties on behalf of HRGT.
OTHER
INVESTMENTS: |
|
|
|
|
|
2017 |
2016 |
|
|
£'000 |
£'000 |
Net book and market
value of investments listed on overseas stock exchange |
|
51 |
32 |
18. Trade and other
receivables
|
|
2017 |
2016 |
|
|
£'000 |
£'000 |
Trade receivables |
|
4,920 |
4,701 |
Other receivables |
|
736 |
1,010 |
Prepayments and
accrued income |
|
1,476 |
1,350 |
|
|
7,132 |
7,061 |
The directors consider that the carrying amount of trade and
other receivables approximates to their fair value.
19. Investments
available for sale and held for trading
|
|
2017 |
2016 |
|
|
£'000 |
£'000 |
Market bid value of
the listed investment portfolio - available for sale |
|
1,050 |
781 |
Market bid value of
the listed investment portfolio - held for trading |
|
19 |
19 |
Unrealised gain of
market value over cost |
|
129 |
45 |
Listed investment
portfolio at cost |
|
940 |
755 |
Investments are listed on the London Stock Exchange with the
exception of £47,000 (2016: £60,000) listed outside Great Britain.
The directors have reviewed the individual investments for
impairment and do not consider the investments which are below cost
to be impaired.
20. Trade and other
payables
|
|
2017 |
2016 |
|
|
£'000 |
£'000 |
Trade payables |
|
3,937 |
3,618 |
Other taxation and
social security costs |
|
629 |
739 |
Other payables |
|
2,842 |
2,815 |
Accruals and deferred
income |
|
5,501 |
5,770 |
|
|
12,909 |
12,942 |
The directors consider that the carrying amount of trade and
other payables approximates to their fair value.
21. Borrowings
|
|
2017 |
2017 |
2016 |
2016 |
|
|
£’000 |
£’000 |
£’000 |
£’000 |
|
|
Current |
Non-current |
Current |
Non-current |
Other loans
(Bisichi) |
|
26 |
– |
24 |
– |
£1.25 million term
bank loan (secured) repayable by 2020 (Dragon)* |
|
– |
1,218 |
– |
1,207 |
£3.75 million first
mortgage debenture stock 2018 at 11.6 per cent |
|
3,000 |
– |
750 |
3,000 |
Bank overdrafts
(secured) (Bisichi) |
|
1,262 |
– |
3,334 |
– |
Bank loan
(secured)(Bisich) |
|
– |
– |
– |
66 |
£10 million first
mortgage debenture stock 2022 at 8.109 per cent* |
|
– |
9,922 |
– |
9,905 |
£5.876 million term
bank loan (secured) repayable by 2019 (Bisichi)* |
|
– |
5,872 |
– |
5,810 |
£34.897 million term
bank loan (secured) repayable by 2019* |
|
– |
34,640 |
– |
34,468 |
£10.105 million term
bank loan (secured) repayable by 2019 at 9.5 per cent* |
|
– |
10,009 |
– |
9,945 |
|
|
4,288 |
61,661 |
4,108 |
64,401 |
Borrowings analysis by origin:
|
2017
£’000 |
2016
£’000 |
United Kingdom |
64,621 |
65,085 |
South Africa |
1,328 |
3,424 |
|
65,949 |
68,509 |
* The £10 million debenture and bank loans are shown after
deduction of un-amortised issue costs.
Interest payable on the term bank loans is variable being based
upon the London inter–bank offered
rate (LIBOR) plus margin.
In June 2017, the Group repaid
early £0.75 million of the £5 million first mortgage debenture
stock 2018, at an additional cost of £14,000.
First Mortgage Debenture Stocks August
2018 and 2022 and the Santander £34.897 million and Europa
£10.105 million term bank loans repayable in July 2019 are secured by way of a charge on
specific freehold and leasehold properties which are included in
the financial statements at a value of £96.52 million. In
addition, £0.12 million of cash deposits are charged as security to
debenture stocks. The £34.897 million bank loan has an interest
cost of 2 per cent above LIBOR. An interest rate swap and cap
agreements are in place as detailed in note 23. Santander bank
loans of £12.8 million and Europa bank loans of £3.1m related to
Brixton Markets sales are repayable on completion in accordance
with the terms of the loan agreements.
The Bisichi United Kingdom bank loans of £5.832 million (2016:
£5.810 million) are secured by way of a first charge over the
investment properties in the UK which are included in the financial
statements at a value of £13.2 million. The interest cost of the
bank loan is 2.35 per cent above LIBOR.
The Bisichi South African bank loans and overdrafts of £1.328
million (2016: £3.424 million) are secured by way of a first charge
over specific pieces of mining equipment, inventory and the debtors
of the relevant company which holds the loan which are included in
the financial statements at a value of £6.1 million.
The bank loan of £1.25 million (Dragon) which is repayable in
November 2020 is secured by way of a
first charge on specific freehold property and which is included in
the financial statements at a value of £2.58 million. The interest
cost of the loan is 2 per cent above LIBOR.
The Group’s objectives when managing capital are:
– To safeguard the Group’s ability to continue as a
going concern, so that it may provide returns for shareholders and
benefits for other stakeholders; and
– To provide adequate returns to shareholders
by ensuring returns are commensurate with the risk.
Analysis of the changes in liabilities arising from financing
activities:
|
|
2017 |
2017 |
2016 |
2016 |
|
|
£’000 |
£’000 |
£’000 |
£’000 |
|
|
BORROWINGS |
FINANCE LEASES |
BORROWINGS |
FINANCE
LEASES |
Balance at 1
January |
|
68,509 |
4,767 |
67,218 |
4,784 |
Exchange
adjustments |
|
(4) |
– |
854 |
– |
Cash movements
excluding exchange adjustments |
|
(2,820) |
– |
173 |
– |
Valuation
movements |
|
264 |
(1,534) |
264 |
(17) |
Balance at 31
December |
|
65,949 |
3,233 |
68,509 |
4,767 |
22. Provisions
|
|
2017 |
2016 |
|
|
£'000 |
£'000 |
At 1 January |
|
1,236 |
847 |
Exchange
adjustment |
|
21 |
311 |
Unwinding of
discount |
|
92 |
78 |
At 31 December |
|
1,349 |
1,236 |
The above provision relates to mine rehabilitation costs in
Bisichi.
23. Financial
instruments
Total financial assets and liabilities
The Group’s financial assets and liabilities and their fair
values are as follows:
|
2017 |
|
2016 |
|
Fair |
|
Carrying |
|
Fair |
|
Carrying |
|
value |
|
value |
|
value |
|
value |
|
£’000 |
|
£’000 |
|
£’000 |
|
£’000 |
Cash and cash
equivalents |
7,528 |
|
7,528 |
|
6,265 |
|
6,265 |
Assets held for
sale |
36,441 |
|
36,441 |
|
– |
|
– |
Investments held to
maturity |
1,748 |
|
1,748 |
|
1,874 |
|
1,874 |
Loan to joint
venture |
– |
|
– |
|
1,350 |
|
1,350 |
Other investments |
51 |
|
51 |
|
32 |
|
32 |
Investments held for
trading |
19 |
|
19 |
|
19 |
|
19 |
Available for sale
investments |
1,050 |
|
1,050 |
|
781 |
|
781 |
Derivative assets |
1 |
|
1 |
|
4 |
|
4 |
Other assets |
5,656 |
|
5,656 |
|
5,711 |
|
5,711 |
Derivative
liabilities |
(435) |
|
(435) |
|
(793) |
|
(793) |
Bank overdrafts |
(1,262) |
|
(1,262) |
|
(3,334) |
|
(3,334) |
Bank loans |
(52,218) |
|
(51,765) |
|
(52,218) |
|
(51,520) |
Present value of head
leases on properties |
(3,233) |
|
(3,233) |
|
(4,767) |
|
(4,767) |
Other liabilities |
(6,779) |
|
(6,779) |
|
(6,432) |
|
(6,432) |
Total financial
liabilities before debentures |
(11,433) |
|
(10,980) |
|
(51,508) |
|
(50,810) |
Fair value of debenture stocks
Fair value of the Group’s debenture liabilities:
|
|
|
|
|
2017 |
|
2016 |
|
Book |
|
Fair |
|
Fair
value |
|
Fair
value |
|
value |
|
value |
|
adjustment |
|
adjustment |
|
£’000 |
|
£’000 |
|
£’000 |
|
£’000 |
Debenture stocks |
(13,000) |
|
(15,686) |
|
(2,686) |
|
(3,526) |
Tax at 19.25 per cent
(2016: 20 per cent) |
– |
|
– |
|
517 |
|
705 |
Post tax fair value
adjustment |
– |
|
– |
|
(2,169) |
|
(2,821) |
Post tax fair value
adjustment – basic pence per share |
– |
|
– |
|
(2.54)p |
|
(3.3)p |
|
|
|
|
|
|
|
|
There is no material difference in respect of other financial
liabilities or any financial assets.
The fair values were calculated by the directors as at
31 December 2017 and reflect the
replacement value of the financial instruments used to manage the
Group’s exposure to adverse rate movements.
The fair values of the debentures are based on the net present
value at the relevant gilt interest rate of the future payments of
interest on the debentures. The bank loans and overdrafts are at
variable rates and there is no material difference between book
values and fair values.
Investments held for trading and available for sale fall under
level 1 of the fair value hierarchy into which fair value
measurements are recognised in accordance with the levels set out
in IFRS 7. Held to maturity investments are held at cost and other
investments are held at fair value. The directors are of the
opinion that the difference in value between cost and fair value of
other investments is not significant or material. The comparative
figures for 2016 fall under the same category of financial
instrument as 2017.
The carrying amount of short term (less than 12 months) trade
receivable and other liabilities approximates its fair values. The
fair value of non-current borrowings in note 21 approximates its
carrying value and was determined under level 2 of the fair value
hierarchy and is estimated by discounting the future contractual
cash flows at the current market interest rates for UK borrowings
and for the South African overdraft facility. The fair value of the
finance lease liabilities in note 31 approximates its carrying
value and was determined under level 2 of the fair value hierarchy
and is estimated by discounting the future contractual cash flows
at the current market interest rates.
Treasury policy
The Group enters into derivative transactions such as interest
rate swaps and forward exchange contracts in order to help manage
the financial risks arising from the Group’s activities. The main
risks arising from the Group’s financing structure are interest
rate risk, liquidity risk and market price risk, credit risk,
commodity price risk and foreign exchange risk. The policies for
managing each of these risks and the principal effects of these
policies on the results are summarised below.
Sensitivity analysis
LAP and Dragon have variable interest term debts which are
covered by derivatives. Additionally, LAP has variable
interest term debt covered by interest caps. At 31 December 2017, with other variables unchanged,
a 1% increase in interest rates would change the profit/loss for
the year by £175,000 (2016: £173,000). Bisichi has variable
loans and a 1% increase in interest rates would change the
profit/loss for the year by £82,000 (2016: £56,000).
Interest rate risk
Treasury activities take place under procedures and policies
approved and monitored by the Board to minimise the financial risk
faced by the Group. The £34.897 million bank loan and Bisichi
United Kingdom bank loans and overdraft are secured by way of a
first charge on certain fixed assets. The rates of interest vary
based on LIBOR in the UK.
The £10.105 million term bank loan is secured by way of a second
charge on certain fixed assets. This loan is based on a fixed
interest rate.
The Bisichi South African bank loans are secured by way of a
first charge over specific pieces of mining equipment, inventory
and the debtors of the relevant company which holds the loan. The
rates of interest vary based on PRIME in South Africa.
The £1.25 million bank loan (Dragon) is secured by way of a
first charge on specific freehold property. The rate of interest
varies based on LIBOR in the UK.
Liquidity risk
The Group’s policy is to minimise refinancing risk by balancing
its exposure to interest risk and to refinancing risk. In effect
the Group seeks to borrow for as long as possible at the lowest
acceptable cost. Efficient treasury management and strict credit
control minimise the costs and risks associated with this policy
which ensures that funds are available to meet commitments as they
fall due. Cash and cash equivalents earn interest at rates based on
LIBOR in the UK. These facilities are considered adequate to meet
the Group’s anticipated cash flow requirements for the foreseeable
future.
In South Africa, an increased
structured trade finance facility for R100million was signed by
Black Wattle Colliery (Pty) Limited in July
2017 with Absa Bank Limited. The facility is renewable
annually at 30 June and is secured against inventory, debtors and
cash that are held by Black Wattle Colliery (Pty) Limited. The
trade facility, which is repayable on demand, is included in cash
and cash equivalents within the cashflow statement.
The table below analyses the Group’s financial liabilities
(excluding interest rate derivatives) into maturity Groupings and
also provides details of the liabilities that bear interest at
fixed, floating and non–interest bearing rates.
|
2017 |
|
Less
than |
|
2-5
years |
|
Over |
|
Total |
|
1
year |
|
|
|
5
years |
|
£’000 |
|
£’000 |
|
£’000 |
|
£’000 |
Bank overdrafts
(floating) |
1,262 |
|
1,262 |
|
– |
|
– |
Debentures
(fixed) |
12,922 |
|
3,000 |
|
9,922 |
|
– |
Bank loans
(fixed) |
10,009 |
|
– |
|
10,009 |
|
– |
Bank loans
(floating)* |
41,756 |
|
26 |
|
41,730 |
|
– |
Trade and other
payables (non–interest) |
6,779 |
|
6,779 |
|
– |
|
– |
|
72,728 |
|
11,067 |
|
61,661 |
|
– |
|
|
|
|
|
|
|
|
|
2016 |
|
Less
than |
|
2-5
years |
|
Over |
|
Total |
|
1
year |
|
|
|
5
years |
|
£’000 |
|
£’000 |
|
£’000 |
|
£’000 |
Bank overdrafts
(floating) |
3,334 |
|
3,334 |
|
– |
|
– |
Debentures
(fixed) |
13,655 |
|
750 |
|
3,000 |
|
9,905 |
Bank loans
(fixed) |
9,945 |
|
– |
|
9,945 |
|
– |
Bank loans
(floating)* |
41,575 |
|
24 |
|
41,551 |
|
– |
Trade and other
payables (non–interest) |
6,432 |
|
6,432 |
|
– |
|
– |
|
74,941 |
|
10,540 |
|
54,496 |
|
9,905 |
The Group would normally expect that sufficient cash is
generated in the operating cycle to meet the contractual cash flows
as disclosed above through effective cash management.
*Certain bank loans are fully hedged with appropriate interest
derivatives. Details of all hedges are shown below.
Market price risk
The Group is exposed to market price risk through interest rate
and currency fluctuations.
Credit risk
At the balance sheet date there were no significant
concentrations of credit risk. The maximum exposure to credit risk
is represented by the carrying amount of each financial asset in
the balance sheet. The Group only deposits surplus cash with
well–established financial institutions of high quality credit
standing.
Foreign exchange risk
Only Bisichi is subject to this risk. All trading is undertaken
in the local currencies except for certain export sales which are
invoiced in US Dollars. It is not the Bisichi Group’s policy to
obtain forward contracts to mitigate foreign exchange risk on these
contracts as payment terms are within 15 days of invoice or
earlier. Funding is also in local currencies other than
inter-company investments and loans and it is also not the Bisichi
Group’s policy to obtain forward contracts to mitigate foreign
exchange risk on these amounts. During 2017 and 2016 the Bisichi
Group did not hedge its exposure of foreign investments held in
foreign currencies.
The Bisichi directors consider there to be no significant risk
from exchange rate movements of foreign currencies against the
functional currencies of the reporting companies within the Bisichi
Group, excluding inter-company balances. The principal currency
risk to which the Bisichi Group is exposed in regard to
inter-company balances is the exchange rate between Pounds Sterling
and South African Rand. It arises as a result of the retranslation
of Rand denominated inter-company trade receivable balances held
within the UK which are payable by South African Rand functional
currency subsidiaries.
Based on the Bisichi Group’s net financial assets and
liabilities as at 31 December 2017, a
25% strengthening of Sterling against the South African Rand, with
all other variables held constant, would decrease the Bisichi
Group’s profit after taxation by £34,000 (2016: £435,000). A 25%
weakening of Sterling against the South African Rand, with all
other variables held constant would increase the Bisichi Group’s
profit after taxation by £56,000 (2016: £725,000).
The 25% sensitivity has been determined based on the average
historic volatility of the exchange rate for 2016 and
2017.
The table below shows the Bisichi currency profiles of cash and
cash equivalents:
|
2017
£’000 |
2016
£’000 |
Sterling |
3,402 |
1,717 |
South African Rand |
1,923 |
725 |
US Dollar |
2 |
2 |
|
5,327 |
2,444 |
Cash and cash equivalents earn interest at rates based on LIBOR
in Sterling and Prime in Rand.
The tables below shows the Bisichi currency profiles of net
monetary assets and liabilities by functional currency:
2017: |
UK
£’000 |
South
Africa
£’000 |
Sterling |
(832) |
– |
South African Rand |
54 |
(1,304) |
US Dollar |
13 |
– |
|
(765) |
(1,304) |
2016: |
UK
£’000 |
South Africa
£’000 |
Sterling |
(2,522) |
– |
South African Rand |
36 |
(2,262) |
US Dollar |
35 |
– |
|
(2,451) |
(2,262) |
Borrowing facilities
At 31 December 2017 the Group was
within its bank borrowing facilities and was not in breach of any
of the covenants. Term loan repayments are as set out on the next
page. Details of other financial liabilities are shown in notes 20
and 21.
Interest rate and hedge profile
|
|
|
|
|
2017 |
|
2016 |
|
|
|
|
|
£’000 |
|
£’000 |
Fixed rate
borrowings |
|
|
|
|
23,105 |
|
23,855 |
Floating rate
borrowings |
|
|
|
|
|
|
|
– Subject to interest
rate swap |
|
|
|
|
36,147 |
|
36,147 |
– Other
borrowings |
|
|
|
|
7,160 |
|
9,300 |
|
|
|
|
|
66,412 |
|
69,302 |
|
|
|
|
|
|
|
|
Average fixed interest
rate |
|
|
|
|
9.17% |
|
9.24% |
Weighted average
swapped interest rate |
|
|
|
|
3.32% |
|
3.30% |
Weighted average cost
of debt on overdrafts, bank loans and debentures |
|
|
|
|
5.45% |
|
5.80% |
Average period for
which borrowing rate is fixed |
|
|
|
|
2.9
years |
|
3.8
years |
Average period for
which borrowing rate is swapped |
|
|
|
|
1.5
years |
|
2.5
years |
The Group’s floating rate debt bears interest based on LIBOR for
the term bank loans and bank base rate for the overdraft.
At 31 December 2017 the Group had
hedges totalling £34.897 million to cover the £34.9 million bank
loan. These consisted of a 5 year swap for £17.5 million, at 2.25%
and a £17.397 million cap agreement at 2.25% to July 2019.
At the year end the fair value liability in the accounts was
£435,000 (2016: £793,000) as valued by the hedge provider.
At 31 December 2017, Dragon had
hedges of £1.25 million to cover the £1.25 million bank loan.
This consists of a 5 year £1.25 million cap agreement taken out in
November 2016 at 2.5%. At the
year end, the fair value asset in the accounts was £1,000 (2016:
£4,000), as valued by the hedge provider.
Fair value of financial instruments
Fair value estimation
The Group has adopted the amendment to IFRS 7 for financial
instruments that are measured in the balance sheet at fair value.
This requires the methods of fair value measurement to be
classified into a hierarchy based on the reliability of the
information used to determine the valuation, as follows:
– Quoted prices (unadjusted) in active markets
for identical assets or liabilities (level 1).
– Inputs other than quoted prices included
within level 1 that are observable for the asset or liability,
either directly (that is, as prices) or indirectly (that is,
derived from prices) (level 2).
– Inputs for the asset or liability that are
not based on observable market data (that is unobservable inputs)
(level 3).
|
Level 1
£’000 |
Level 2
£’000 |
Level 3
£’000 |
Total
£’000 |
2017
Gain/(loss)
to income
statement
£’000 |
Financial assets |
|
|
|
|
|
Other financial assets held for trading and
available for sale |
|
|
|
|
|
Quoted equities |
1,069 |
– |
– |
1,069 |
- |
Derivative financial instruments |
|
|
|
|
|
Interest rate swaps |
– |
1 |
– |
1 |
(3) |
Financial liabilities |
|
|
|
|
|
Derivative financial instruments |
|
|
|
|
|
Interest rate swaps |
– |
435 |
– |
435 |
358 |
|
Level 1
£’000 |
Level 2
£’000 |
Level 3
£’000 |
Total
£’000 |
2016
Gain/(loss)
to income
statement
£’000 |
Financial assets |
|
|
|
|
|
Other financial assets held for trading and
available for sale |
|
|
|
|
|
Quoted equities |
832 |
– |
– |
832 |
13 |
Derivative financial instruments |
|
|
|
|
|
Interest rate swaps |
– |
4 |
– |
4 |
(11) |
Financial liabilities |
|
|
|
|
|
Derivative financial instruments |
|
|
|
|
|
Interest rate swaps |
– |
793 |
– |
793 |
(206) |
Capital structure
The Group sets the amount of capital in proportion to risk. It
ensures that the capital structure is commensurate to the economic
conditions and risk characteristics of the underlying assets. In
order to maintain or adjust the capital structure, the Group may
vary the amount of dividends paid to shareholders, return capital
to shareholders, issue new shares or sell assets to reduce
debt.
The Group considers its capital to include share capital, share
premium, capital redemption reserve, translation reserve and
retained earnings, but excluding the interest rate derivatives.
Consistent with others in the industry, the Group monitors its
capital by its debt to equity ratio (gearing levels). This is
calculated as the net debt (loans less cash and cash equivalents)
as a percentage of the equity calculated as follows:
|
2017
£’000 |
2016
£’000 |
Total debt |
65,949 |
68,509 |
Less cash and cash equivalents |
(7,528) |
(6,265) |
Net debt |
58,421 |
62,244 |
Total equity |
56,710 |
48,631 |
|
103.0% |
128.0% |
The Group does not have any externally imposed capital
requirements.
Financial assets
The Group’s principal financial assets are bank balances and
cash, trade and other receivables, investments and assets held for
sale. The Group has no significant concentration of credit risk as
exposure is spread over a large number of counterparties and
customers. The credit risk in liquid funds and derivative financial
instruments is limited because the counterparties are banks with
high credit ratings assigned by international credit–rating
agencies. The Group’s credit risk is primarily attributable to its
trade receivables. The amounts presented in the balance sheet are
net of allowances for doubtful receivables, estimated by the
Group’s management based on prior experience and the current
economic environment.
Financial assets maturity
Cash and cash equivalents all have a maturity of less than three
months.
|
2017
£’000 |
2016
£’000 |
Cash at bank and in hand |
7,528 |
6,265 |
These funds are primarily invested in short term bank deposits
maturing within one year bearing interest at the bank’s variable
rates.
Financial liabilities maturity
The following table sets out the maturity profile of contractual
undiscounted cashflows of financial liabilities as at 31
December:
Repayment of borrowings
|
2017
£’000 |
2016
£’000 |
Bank loans and overdrafts: |
|
|
Repayable on demand or within one year |
1,288 |
3,358 |
Repayable between two and five years |
51,739 |
51,496 |
|
53,027 |
54,854 |
Debentures: |
|
|
Repayable within one year |
3,000 |
750 |
Repayable between two and five years |
9,922 |
3,000 |
Repayable in more than five years |
- |
9,905 |
|
65,949 |
68,509 |
Certain borrowing agreements contain financial and other
conditions that if contravened by the Group, could alter the
repayment profile.
Bank loans of £15.9 million currently shown as repayable between
two and five years related to Brixton markets sales are repayable
on completion.
24. Deferred tax
asset
|
|
2017 |
2016 |
|
|
£'000 |
£'000 |
Balance at 1
January |
|
1,134 |
2,390 |
Transferred to
consolidated income statement |
|
(1,134) |
(1,256) |
Balance at 31
December |
|
– |
1,134 |
|
|
|
|
The deferred tax
balance comprises the following: |
|
|
|
Revaluation of
properties |
|
– |
(2,719) |
Accelerated capital
allowances |
|
– |
(904) |
Fair value of interest
derivatives |
|
– |
151 |
Short-term timing
differences |
|
– |
(124) |
Loss relief |
|
– |
4,730 |
Deferred tax asset at
end of year: |
|
– |
1,134 |
25. Deferred tax
liabilities
|
|
2017 |
2016 |
|
|
£'000 |
£'000 |
Balance at 1
January |
|
2,329 |
2,106 |
Transferred from/(to)
consolidated income statement |
|
1,484 |
(154) |
Transferred from other
comprehensive income |
|
– |
13 |
Exchange
adjustment |
|
35 |
364 |
Balance at 31
December |
|
3,848 |
2,329 |
|
|
|
|
The deferred tax
balance comprises the following: |
|
|
|
Revaluation of
properties |
|
5,836 |
793 |
Accelerated capital
allowances |
|
2,522 |
1,347 |
Short-term timing
differences |
|
144 |
191 |
Unredeemed capital
deductions |
|
(83) |
(642) |
Losses and other
deductions |
|
(4,571) |
640 |
Deferred tax liability
provision at end of year: |
|
3,848 |
2,329 |
The directors consider the temporary differences arising in
connection with the interests in joint ventures are insignificant.
There is no time limit in respect of the Group tax loss
relief.
In addition, the Group has unused losses and reliefs with a
potential value of £5,427,000 (2016: £5,455,000), which have not
been recognised as a deferred tax asset. As the Group
returns to profit, these losses and reliefs can be utilised.
26. Share
capital
The Company has one class of ordinary
shares which carry no right to fixed income.
|
|
|
|
Number of |
Number
of |
|
|
|
|
|
|
|
ordinary 10p |
ordinary
10p |
|
|
|
|
|
|
|
shares |
shares |
|
2017 |
2016 |
|
|
|
|
2017 |
2016 |
|
£'000 |
£'000 |
Authorised:
ordinary shares of 10p each |
|
|
|
110,000,000 |
110,000,000 |
|
11,000 |
11,000 |
Allotted, issued and
fully paid share capital |
|
|
|
85,542,711 |
85,542,711 |
|
8,554 |
8,554 |
Less: held in Treasury
(see below) |
|
|
|
(221,061) |
(221,061) |
|
(22) |
(22) |
"Issued share capital"
for reporting purposes |
|
|
|
85,321,650 |
85,321,650 |
|
8,532 |
8,532 |
Treasury shares
|
|
|
|
Number of ordinary |
Cost/issue value |
|
|
|
|
10p shares |
|
|
|
|
|
|
|
|
|
|
2017 |
2016 |
|
|
|
|
2017 |
2016 |
|
£'000 |
£'000 |
Shares held in
Treasury at 1 January |
|
|
|
221,061 |
734,816 |
|
145 |
482 |
Issued for
share incentive plan -dividends investment (Jan 2016 - 25p) |
– |
(1,936) |
|
– |
(1) |
Issued to meet
directors bonuses (Jan 2016 - 24.50p) |
|
|
|
– |
(69,225) |
|
– |
(45) |
Issued to meet staff
bonuses (Jan 2016 - 24.50p) |
|
|
|
– |
(154,073) |
|
– |
(101) |
Issued for
new directors share incentive plan (Jan 2016 - 24.50p) |
– |
(24,488) |
|
– |
(16) |
Issued for
new staff share incentive plan (Jan 2016 - 24.50p) |
|
– |
(36,732) |
|
– |
(24) |
Issued for
share incentive plan -dividends investment (Nov 2016 - 21.25p) |
– |
(2,831) |
|
– |
(2) |
Issued to meet
directors bonuses (Nov 2016 - 21.25p) |
|
|
|
– |
(224,470) |
|
– |
(148) |
Shares held in
Treasury at 31 December |
|
|
|
221,061 |
221,061 |
|
145 |
145 |
Share Option Schemes
Employees’ share option scheme (Approved scheme)
At 31 December 2017 there were no
options to subscribe for ordinary shares outstanding, issued under
the terms of the Employees’ Share Option Scheme.
This share option scheme was approved by members in 1986, and
has been approved by Her Majesty’s Revenue and Customs (HMRC).
There are no performance criteria for the exercise of options
under the Approved scheme, as this was set up before such
requirements were considered to be necessary.
A summary of the shares allocated and options issued under the
scheme up to 31 December 2017 is as
follows:
|
|
Changes during the year |
|
|
At 1 |
|
|
|
At
31 |
|
January |
Options |
Options |
Options |
December |
|
2017 |
Exercised |
granted |
lapsed |
2017 |
Shares issued to
date |
2,367,604 |
– |
– |
– |
2,367,604 |
Shares allocated over
which options have not been granted |
1,549,955 |
– |
– |
– |
1,549,955 |
Total shares allocated
for issue to employees under the scheme |
3,917,559 |
– |
– |
– |
3,917,559 |
Non–approved Executive Share Option Scheme (Unapproved
scheme)
A share option scheme known as the “Non–approved Executive Share
Option Scheme” which does not have HMRC approval was set up during
2000. At 31 December 2017 there were
no options to subscribe for ordinary shares outstanding.
The exercise of options under the Unapproved scheme is subject
to the satisfaction of objective performance conditions specified
by the remuneration committee which confirms to institutional
shareholder guidelines and best practice provisions.
A summary of the shares allocated and options issued under the
scheme up to 31 December 2017 is as
follows:
|
|
Changes during the year |
|
|
At 1 |
|
|
|
At
31 |
|
January |
Options |
Options |
Options |
December |
|
2017 |
Exercised |
granted |
lapsed |
2017 |
Shares issued to
date |
450,000 |
– |
– |
– |
450,000 |
Shares allocated over
which options have not yet been granted |
550,000 |
– |
– |
– |
550,000 |
Total shares allocated
for issue to employees under the scheme |
1,000,000 |
– |
– |
– |
1,000,000 |
The Bisichi Mining PLC Unapproved Option Schemes
Details of the share option schemes in Bisichi are as
follows:
|
|
|
|
|
|
|
Number
of |
|
|
|
|
|
|
|
Number of
shares |
|
share
options |
|
Number
of shares |
|
|
|
Period
within |
|
for which
options |
|
issued/exercised/ |
|
for
which options |
|
Subscription |
|
which
options |
|
outstanding at |
|
(cancelled) |
|
outstanding at |
Year of grant |
price per
share |
|
exercisable |
|
31
December 2016 |
|
during
year |
|
31
December 2017 |
2010 |
202.5p |
|
Aug 2013
– Aug 2020 |
|
80,000 |
|
– |
|
80,000 |
2015 |
87.0p |
|
Sep 2015
– Sep 2025 |
|
300,000 |
|
– |
|
300,000 |
The exercise of options under the Unapproved Share Option
Schemes, for certain option issues, is subject to the satisfaction
of the objective performance conditions specified by the
remuneration committee, which will conform to institutional
shareholder guidelines and best practice provisions in force from
time to time.
On the 5 February 2018 Bisichi
entered into an agreement with G.Casey to surrender the 80,000
options which were granted in 2010. The aggregate consideration
paid by the Group to effect the cancellation was £1. There are no
performance or service conditions attached to 2015 options which
are outstanding at 31 December 2017
which vested in 2015.
On 6 February 2018 Bisichi granted
additional options to the following directors:
- A.Heller 150,000 options at an exercise price of 73.50p per
share.
- G.Casey 230,000 options at an exercise price of 73.50p per
share.
The above options vest on date of grant and are exercisable
within a period of 10 years from date of grant. There are no
performance or service conditions attached to the options.
|
|
|
|
|
2017 |
|
|
|
2016 |
|
|
|
|
|
Weighted |
|
|
|
Weighted |
|
|
|
2017 |
|
average |
|
2016 |
|
average |
|
|
|
Number |
|
exercise price |
|
Number |
|
exercise
price |
Outstanding at 1 January |
|
380,000 |
|
111.3p |
|
705,000 |
|
133.1p |
Lapsed
during the year |
|
– |
|
– |
|
(325,000) |
|
237.5p |
Outstanding at 31 December |
|
380,000 |
|
111.3p |
|
380,000 |
|
111.3p |
Exercisable at 31 December |
|
380,000 |
|
111.3p |
|
380,000 |
|
111.3p |
27. Non–controlling
interest (“NCI”)
|
|
2017 |
2016 |
|
|
£'000 |
£'000 |
As at 1 January |
|
10,389 |
9,574 |
Share of profit for
the year |
|
610 |
208 |
Share of gain on
available for sale investments |
|
49 |
104 |
Dividends
received |
|
(250) |
(250) |
Shares issued |
|
– |
64 |
Exchange movement |
|
58 |
689 |
As at 31 December |
|
10,856 |
10,389 |
The following subsidiaries had material NCI:
Bisichi Mining PLC
Black Wattle Colliery (Pty) Ltd
Summarised financial information for these subsidiaries is set
out below. The information is before inter–company eliminations
with other companies in the Group.
|
|
2017 |
2016 |
BISICHI MINING
PLC |
|
£'000 |
£'000 |
Revenue |
|
37,446 |
22,791 |
Profit for the year
attributable to owners of the parent |
|
749 |
479 |
Profit/(loss) for the
year attributable to NCI |
|
172 |
(72) |
Profit for the
year |
|
921 |
407 |
Other comprehensive
income attributable to owners of the parent |
|
163 |
1,186 |
Other comprehensive
income attributable to NCI |
|
11 |
100 |
Other comprehensive
income for the year |
|
174 |
1,286 |
Balance sheet |
|
|
|
Non–current
assets |
|
22,935 |
24,649 |
Current assets |
|
13,622 |
12,224 |
Total assets |
|
36,557 |
36,873 |
Current
liabilities |
|
(9,025) |
(10,326) |
Non–current
liabilities |
|
(9,858) |
(9,541) |
Total liabilities |
|
(18,883) |
(19,867) |
Net current assets at
31 December |
|
17,674 |
17,006 |
Cash flows |
|
|
|
From operating
activities |
|
7,692 |
2,941 |
From investing
activities |
|
(1,812) |
(1,570) |
From financing
activities |
|
(975) |
(969) |
Net cash flows |
|
4,905 |
402 |
The non–controlling interest comprises of a 37.5% shareholding
in Black Wattle Colliery (Pty) Ltd, a coal mining company
incorporated in South Africa.
Summarised financial information reflecting 100% of the
underlying subsidiary’s relevant figures, is set out below.
|
|
2017 |
2016 |
Black Wattle Colliery
(Pty) Limited (“Black Wattle”) |
|
£'000 |
£'000 |
Revenue |
|
36,300 |
21,703 |
Expenses |
|
(35,150) |
(22,185) |
Profit/(loss) for the
year |
|
1,150 |
(482) |
Total comprehensive
income/(expense) for the year |
|
1,150 |
(482) |
Balance sheet |
|
|
|
Non–current
assets |
|
8,613 |
8,516 |
Current assets |
|
6,747 |
8,600 |
Current
liabilities |
|
(8,652) |
(12,151) |
Non–current
liabilities |
|
(3,155) |
(2,635) |
Net assets at 31
December |
|
3,553 |
2,330 |
The non–controlling interest relates to the disposal of a 37.5%
shareholding in Black Wattle in 2010. The total issued share
capital in Black Wattle Colliery (Pty) Ltd was increased from 136
shares to 1,000 shares at par of ZAR1
(South African Rand) through the following shares issue:
– a subscription for 489 ordinary shares at
par by Bisichi Mining (Exploration) Limited increasing the number
of shares held from 136 ordinary shares to a total of 625 ordinary
shares;
– a subscription for 110 ordinary shares at
par by Vunani Mining (Pty) Ltd;
– a subscription for 265 “A” shares at par by
Vunani Mining (Pty) Ltd
Bisichi Mining (Exploration) Limited is a wholly owned
subsidiary of Bisichi Mining PLC incorporated in England and Wales.
Vunani Mining (Pty) Ltd is a South African Black Economic
Empowerment company and minority shareholder in Black Wattle.
The “A” shares rank pari passu with the ordinary shares save
that they will have no dividend rights until such time as the
dividends paid by Black Wattle Colliery (Pty) Ltd on the ordinary
shares subsequent to 30 October 2008
will equate to ZAR832,075,000.
A non–controlling interest of 15% in Black Wattle is recognised
for all profits distributable to the 110 ordinary shares held by
Vunani Mining (Pty) Ltd from the date of issue of the shares
(18 October 2010). An additional
non–controlling interest will be recognised for all profits
distributable to the 265 “A” shares held by Vunani Mining (Pty) Ltd
after such time as the profits available for distribution, in Black
Wattle Colliery (Pty) Ltd, before any payment of dividends after
30 October 2008, exceeds ZAR832,075,000.
28. Related party
transactions
|
Cost
recharged |
|
Amounts
owed |
Advanced
to |
|
to (by)
related |
|
by (to)
related |
(by)
related |
|
party |
|
party |
party |
|
£'000 |
|
£'000 |
£'000 |
Related party: |
|
|
|
|
Dragon Retail
Properties Limited |
|
|
|
|
Current account |
– |
|
24 |
(84) |
Loan account |
(1) |
|
– |
– |
Bisichi Mining
PLC |
|
|
|
|
Current account |
– |
|
– |
– |
Simon Heller
Charitable Trust |
|
|
|
|
Current account |
(63) |
|
– |
– |
Loan account |
– |
|
(700) |
– |
Directors and key
management |
|
|
|
|
M A Heller and J A
Heller |
15 |
(i) |
1 |
– |
H D Goldring (Delmore
Holdings Limited) |
(15) |
(ii) |
– |
– |
C A Parritt |
(18) |
(ii) |
(4) |
– |
R Priest |
(35) |
(ii) |
– |
– |
Ezimbokodweni Mining
(pty) Limited - see note 12 |
46 |
|
– |
– |
Totals at 31
December 2017 |
(71) |
|
(679) |
(84) |
Totals at 31 December
2016 |
53 |
|
340 |
(208) |
Nature of costs recharged – (i) Property management fees (ii)
Consultancy fees.
Directors
London & Associated
Properties PLC provides office premises, property management,
general management, accounting and administration services for a
number of private property companies in which Sir Michael Heller and J A Heller have an interest.
Under an agreement with Sir Michael
Heller no charge is made for these services on the basis
that he reduces by an equivalent amount the charge for his services
to London & Associated
Properties PLC. The board estimates that the value of these
services, if supplied to a third party, would have been £300,000
for the year (2016: £300,000).
The companies for which services are provided are: Barmik
Properties Limited, Cawgate Limited, Clerewell Limited, Cloathgate
Limited, Ken–Crav Investments Limited, London & South Yorkshire Securities
Limited, Metroc Limited, Penrith Retail Limited, Shop.com Limited,
South Yorkshire Property Trust Limited, Wasdon Investments Limited,
Wasdon (Dover) Limited, and Wasdon (Leeds) Limited.
In addition the Company receives management fees of £10,000
(2016: £10,000) for work done for two charitable foundations, the
Michael & Morven Heller Charitable Foundation and the Simon
Heller Charitable Trust.
The Simon Heller Trust has placed on deposit with LAP £700,000
at an interest rate of 9% which is refundable on demand.
Delmore Holdings Limited (Delmore) is a Company in which H D
Goldring is a majority shareholder and director. Delmore provides
consultancy services to the Company on an invoiced fee basis.
R Priest provided consultancy services to the Company on an
invoiced fee basis.
In 2012 a loan of £116,000 was made by Bisichi to one of the
Bisichi directors - A R Heller. The loan amount outstanding at the
year end was £56,000 (2016: £71,000) and a repayment of £15,000
(2016: £15,000) was made during the year. Interest is payable on
the loan at a rate of 6.14 percent. There is no fixed
repayment date for the loan.
The directors are considered to be the only key management
personnel and their remuneration including employer’s national
insurance for the year were £949,000 (2016: £1,103,000). All other
disclosures required including interest in share options in respect
of those directors are included within the remuneration report.
29. Employees
The average number of employees, including directors, of the
Group during the year was as follows:
|
|
2017 |
2016 |
Production |
|
192 |
185 |
Administration |
|
45 |
46 |
|
|
237 |
231 |
Staff costs during the year were as follows:
|
|
2017 |
2016 |
|
|
£’000 |
£’000 |
Salaries and other
costs |
|
7,426 |
6,397 |
Social security
costs |
|
327 |
332 |
Pension costs |
|
360 |
335 |
Share based
payments |
|
- |
109 |
|
|
8,113 |
7,173 |
30. Capital
Commitments
|
|
2017 |
2016 |
|
|
£'000 |
£'000 |
Commitments for
capital expenditure approved and contracted for at the year
end |
|
– |
762 |
Share of commitment of
capital expenditure in joint venture |
|
– |
1,489 |
All the above relates to Bisichi Mining PLC.
31. Operating and
finance leases
Operating leases on land and buildings
At 31 December 2017 the Group had
commitments under non–cancellable operating leases on land and
buildings expiring as follows:
|
|
2017 |
2016 |
|
|
£’000 |
£’000 |
Within one year |
|
240 |
240 |
Second to fifth
year |
|
960 |
960 |
After five years |
|
240 |
480 |
Operating lease payments represent rentals payable by the Group
for its office premises.
The leases are for an average term of ten years and rentals are
fixed for an average of five years.
Present value of head leases on properties
|
|
|
|
Present value |
|
|
Minimum lease |
of minimum |
|
|
Payments |
lease payments |
|
|
2017 |
2016 |
2017 |
2016 |
|
|
£’000 |
£’000 |
£’000 |
£’000 |
Within one year |
|
211 |
305 |
211 |
305 |
Second to fifth
year |
|
841 |
1,222 |
776 |
1,130 |
After five years |
|
16,682 |
29,734 |
2,246 |
3,332 |
|
|
17,734 |
31,261 |
3,233 |
4,767 |
Future finance charges
on finance leases |
|
(14,501) |
(26,494) |
– |
– |
Present value of
finance lease liabilities |
|
3,233 |
4,767 |
3,233 |
4,767 |
Finance lease liabilities are in respect of leased investment
property. Many leases provide for contingent rent in addition to
the rents above, usually a proportion of rental income.
Finance lease liabilities are effectively secured as the rights
to the leased asset revert to the lessor in the event of
default.
Future aggregate minimum rentals receivable
The Group leases out its investment properties to tenants under
operating leases. The future aggregate minimum rentals receivable
under non–cancellable operating leases are as follows:
|
|
2017 |
2016 |
|
|
£’000 |
£’000 |
Within one year |
|
5,088 |
6,684 |
Second to fifth
year |
|
14,597 |
20,104 |
After five years |
|
18,519 |
36,736 |
|
|
38,204 |
63,524 |
32. Contingent
liabilities and events after the reporting period
There were no contingent liabilities at 31 December 2017 (2016: £Nil), except as
disclosed in note 23.
Bank guarantees have been issued by the bankers of Black Wattle
Colliery (Pty) Limited on behalf of the Company to third parties.
The guarantees are secured against the assets of the Company and
have been issued in respect of the following:
|
|
2017 |
2016 |
|
|
£’000 |
£’000 |
Rail siding &
transportation |
|
64 |
63 |
Rehabilitation of
mining land |
|
1,387 |
1,364 |
Water &
electricity |
|
58 |
57 |
|
|
1,509 |
1,484 |
In March 2018 contracts were
exchanged for the sale of both Brixton markets for a combined sale
price of £37.25 million. Following the Market Row completion on
23 April 2018, £15.9 million of bank
loans related to those properties have been repaid. The Brixton
Village completion was on 26 April
2018. As required under IFRS, these properties have been
reclassified from Investment properties to Assets held for sale at
their net disposal value of £36.44 million.
33. Company financial
statements
Company balance sheet at 31 December
2017
|
|
|
|
|
2017 |
|
2016 |
Notes |
|
|
|
£'000 |
|
£'000 |
Fixed
assets |
|
|
|
|
|
|
|
Tangible assets |
33.3 |
|
|
|
25,397 |
|
27,383 |
Other
investments: |
|
|
|
|
|
|
|
Associated company –
Bisichi Mining PLC |
33.4 |
|
|
|
489 |
|
489 |
Subsidiaries and
others including Dragon Retail Properties Limited |
33.4 |
|
|
|
42,598 |
|
42,492 |
|
|
|
|
|
43,087 |
|
42,981 |
|
|
|
|
|
68,484 |
|
70,364 |
|
|
|
|
|
|
|
|
Current
assets |
|
|
|
|
|
|
|
Debtors |
33.5 |
|
|
|
1,025 |
|
1,130 |
Deferred tax due after
more than one year |
33.9 |
|
|
|
2,059 |
|
2,082 |
Investments |
33.6 |
|
|
|
19 |
|
19 |
Bank balances |
|
|
|
|
1,233 |
|
2,625 |
|
|
|
|
|
4,336 |
|
5,856 |
Creditors |
|
|
|
|
|
|
|
Amounts falling due
within one year |
33.7 |
|
|
|
(35,540) |
|
(34,790) |
Borrowings |
33.8 |
|
|
|
(3,000) |
|
(750) |
Net current
liabilities |
|
|
|
|
(34,204) |
|
(29,684) |
Total assets less
current liabilities |
|
|
|
|
34,280 |
|
40,680 |
|
|
|
|
|
|
|
|
Creditors |
|
|
|
|
|
|
|
Amounts falling due
after more than one year |
33.8 |
|
|
|
(13,003) |
|
(17,491) |
Net assets |
|
|
|
|
21,277 |
|
23,189 |
|
|
|
|
|
|
|
|
Capital and
reserves |
|
|
|
|
|
|
|
Share capital |
33.10 |
|
|
|
8,554 |
|
8,554 |
Share premium
account |
|
|
|
|
4,866 |
|
4,866 |
Capital redemption
reserve |
|
|
|
|
47 |
|
47 |
Treasury shares |
33.10 |
|
|
|
(145) |
|
(145) |
Retained earnings |
|
|
|
|
7,955 |
|
9,867 |
Shareholders’
funds |
|
|
|
|
21,277 |
|
23,189 |
|
|
|
|
|
|
|
|
The loss for the financial year, before dividends was £1,771,000
(2016: profit of £1,418,000)
These financial statements were approved by the board of
directors and authorised for issue on 27
April 2018 and signed on its behalf by:
Sir Michael
Heller
Anil
Thapar
Company Registration No. 341829
Director
Director
COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED
31 DECEMBER 2017
|
|
|
|
|
|
|
Retained |
|
|
|
|
|
|
|
|
earnings |
|
|
|
|
|
|
Capital |
|
excluding |
|
|
|
|
Share |
Share |
redemption |
Treasury |
treasury |
Total |
|
|
|
capital |
premium |
reserve |
shares |
shares |
equity |
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
Balance at
1 January 2016 |
8,554 |
4,866 |
47 |
(482) |
8,803 |
21,788 |
Profit for
the year |
– |
– |
– |
– |
1,418 |
1,418 |
Total
comprehensive income |
– |
– |
– |
– |
1,418 |
1,418 |
Transactions with owners: |
|
|
|
|
|
|
Dividends
– equity holders |
– |
– |
– |
– |
(136) |
(136) |
Disposal
of own shares |
– |
– |
– |
119 |
– |
119 |
Loss on
transfer of own shares |
– |
– |
– |
218 |
(218) |
– |
Transactions with owners |
– |
– |
– |
337 |
(354) |
(17) |
Balance
at 31 December 2016 |
8,554 |
4,866 |
47 |
(145) |
9,867 |
23,189 |
Loss for
the year |
– |
– |
– |
– |
(1,771) |
(1,771) |
Total
comprehensive expense |
– |
– |
– |
– |
(1,771) |
(1,771) |
Transaction with owners: |
|
|
|
|
|
|
Dividends
– equity holders |
– |
– |
– |
– |
(141) |
(141) |
Transactions with owners |
– |
– |
– |
– |
(141) |
(141) |
Balance
at 31 December 2017 |
8,554 |
4,866 |
47 |
(145) |
7,955 |
21,277 |
£6.5 million (2016: £7.9 million) of retained earnings
(excluding treasury shares) is distributable.
33.1. Company
Accounting policies
The following are the main accounting policies of the
Company:
Basis of Preparation
The financial statements have been prepared on a going concern
basis and in accordance with Financial Reporting Standard 101
’Reduced Disclosure Framework’ (FRS 101) and Companies Act 2006.
The financial statements are prepared under the historical cost
convention as modified to include the revaluation of freehold and
leasehold properties and fair value adjustments in respect of
current asset investments and interest rate hedges.
The results of the Company are included in the consolidated
financial statements. No profit or loss is presented by the Company
as permitted by Section 408 of the Companies Act 2006.
In these financial statements, the company has applied the
exemptions available under FRS 101 in respect of the following
disclosures:
- Cash Flow Statement and related notes;
- Comparative period reconciliations for share capital, tangible
fixed assets and intangible assets;
- Disclosures in respect of transactions with wholly owned
subsidiaries;
- Disclosures in respect of capital management;
- The effects of new but not yet effective IFRSs;
- Disclosures in respect of the compensation of Key Management
Personnel.
As the consolidated financial statements include the equivalent
disclosures, the Company has also taken the exemptions under FRS
101 available in respect of the following disclosures:
- IFRS 2 Share Based Payments in respect of Group settled share
based payments;
- The disclosures required by IFRS 7 and IFRS 13 regarding
financial instrument disclosures have not been provided apart from
those which are relevant for the financial instruments which are
held at fair value and are not either held as part of trading
portfolio or derivatives.
Key judgements and estimates
The preparation of the financial statements requires management
to make assumptions and estimates that may affect the reported
amounts of assets and liabilities and the reported income and
expenses, further details of which are set out below. Although
management believes that the assumptions and estimates used are
reasonable, the actual results may differ from those estimates.
Further details of the estimates are contained in the Directors’
Report and in the Group accounting policies.
INVESTMENTS IN SUBSIDIARIES,
ASSOCIATED UNDERTAKINGS AND JOINT VENTURES
Investments in subsidiaries, associated undertakings and joint
ventures are held at cost less accumulated impairment losses.
Fair value measurements of investment properties and
investments
An assessment of the fair value of certain assets and
liabilities, in particular investment properties, is required to be
performed. In such instances, fair value measurements are estimated
based on the amounts for which the assets and liabilities could be
exchanged between market participants. To the extent possible, the
assumptions and inputs used take into account externally verifiable
inputs. However, such information is by nature subject to
uncertainty. The fair value measurement of the investment
properties may be considered to be less judgemental where external
valuers have been used as is the case with the Company.
The following accounting policies are consistent with those of
the Group and are disclosed on page 36 to 41 of the Group financial
statements.
- Revenue
- Property operating expenses
- Employee benefits
- Financial instruments
- Investment properties
- Other assets and depreciation
- Assets held for sale
- Income taxes
- Leases
33.2. Result for the financial
year
The Company’s result for the year was a loss of £1,771,000
(2016: profit of £1,418,000). In accordance with the exemption
conferred by Section 408 of the Companies Act 2006, the Company has
not presented its own profit and loss account.
33.3. Tangible assets
|
Investment Properties |
Office |
|
|
|
|
|
equipment |
|
|
|
Leasehold |
Leasehold |
and
motor |
|
Total |
Freehold |
over
50 years |
under
50 years |
vehicles |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
Cost or valuation at 1
January 2017 |
27,618 |
8,885 |
16,744 |
1,642 |
347 |
Additions |
17 |
– |
– |
– |
17 |
(Decrease)/increase in
present value of head leases |
(1,505) |
– |
(1,810) |
305 |
– |
(Decrease)/increase on
revaluation |
(485) |
410 |
(895) |
– |
– |
Cost or valuation
at 31 December 2017 |
25,645 |
9,295 |
14,039 |
1,947 |
364 |
|
|
|
|
|
|
Representing assets
stated at: |
|
|
|
|
|
Valuation |
25,281 |
9,295 |
14,039 |
1,947 |
– |
Cost |
364 |
– |
– |
–
|
364 |
|
25,645 |
9,295 |
14,039 |
1,947 |
364 |
|
|
|
|
|
|
Depreciation at 1
January 2017 |
235 |
– |
– |
– |
235 |
Charge for the
year |
13 |
– |
– |
– |
13 |
Depreciation at 31
December 2017 |
248 |
– |
– |
– |
248 |
Net book value at 1
January 2017 |
27,383 |
8,885 |
16,744 |
1,642 |
112 |
Net book value at
31 December 2017 |
25,397 |
9,295 |
14,039 |
1,947 |
116 |
The freehold and leasehold properties, excluding the present
value of head leases and directors’ valuations, were valued as at
31 December 2017 by professional
firms of chartered surveyors. The valuations were made at fair
value. The directors’ property valuations were made at fair
value.
|
|
|
|
2017 |
2016 |
|
|
|
£’000 |
£’000 |
Allsop LLP |
|
|
|
20,375 |
20,860 |
Directors’
valuation |
|
|
|
1,825 |
1,825 |
|
|
|
|
22,200 |
22,685 |
Add: Present value of
headleases |
|
|
|
3,081 |
4,586 |
|
|
|
|
25,281 |
27,271 |
The historical cost of investment properties was as follows:
|
|
|
|
|
|
|
|
|
Leasehold |
Leasehold |
|
|
Freehold |
over
50 years |
under
50 years |
|
|
£’000 |
£’000 |
£’000 |
Cost at 1 January
2017 |
|
|
4,889 |
13,966 |
1,939 |
Cost at 31 December
2017 |
|
|
4,889 |
13,966 |
1,939 |
Long leasehold properties are held on leases with an unexpired
term of more than fifty years at the balance sheet date.
33.4. Other investments
Cost or
valuation |
|
|
Shares
in |
Shares
in |
|
|
subsidiary |
joint |
Shares
in |
Total |
companies |
ventures |
associate |
£’000 |
£’000 |
£’000 |
£’000 |
At 1 January 2017 |
|
42,981 |
42,328 |
164 |
489 |
Impairment
provision |
|
106 |
106 |
–
|
– |
At 31 December
2017 |
|
43,087 |
42,434 |
164 |
489 |
Subsidiary companies
Details of the Company’s subsidiaries are set out in note 15.
Under IFRS 10, Bisichi Mining PLC and its subsidiaries and Dragon
Retail Properties Limited are treated in the financial statements
as subsidiaries of the Company.
Impairment reflects reduction in value of investment due to
receipt of dividend of £15 million from a subsidiary.
In the opinion of the directors the value of the investment in
subsidiaries is not less than the amount shown in these financial
statements.
Details of the joint ventures are set out in notes 12 and
13.
33.5. Debtors
|
|
|
|
2017 |
2016 |
|
|
|
£’000 |
£’000 |
Trade debtors |
|
|
|
366 |
343 |
Amounts due from
associate and joint ventures |
|
|
|
33 |
35 |
Amounts due from
subsidiary companies |
|
|
|
100 |
150 |
Other debtors |
|
|
|
118 |
173 |
Prepayments and
accrued income |
|
|
|
408 |
429 |
|
|
|
|
1,025 |
1,130 |
33.6. Investments
|
|
|
|
2017 |
2016 |
|
|
|
£’000 |
£’000 |
Market value of the
listed investment portfolio |
|
|
|
19 |
19 |
Unrealised gain of
market value over cost |
|
|
|
1 |
1 |
Listed investment
portfolio at cost |
|
|
|
18 |
18 |
All investments are listed on the London Stock Exchange.
33.7. Creditors: amounts falling due
within one year
|
|
|
|
2017 |
2016 |
|
|
|
£’000 |
£’000 |
Amounts owed to
subsidiary companies |
|
|
|
29,775 |
28,750 |
Amounts owed to joint
ventures |
|
|
|
2,214 |
2,190 |
Other taxation and
social security costs |
|
|
|
278 |
388 |
Other creditors |
|
|
|
1,400 |
1,323 |
Accruals and deferred
income |
|
|
|
1,873 |
2,139 |
|
|
|
|
35,540 |
34,790 |
33.8. Creditors: amounts falling due
after more than one year
|
|
|
|
2017 |
2016 |
|
|
|
£’000 |
£’000 |
Present value of head
leases on properties |
|
|
|
3,081 |
4,586 |
Term Debenture
stocks: |
|
|
|
|
|
£3.75 million First
Mortgage Debenture Stock 2018 at 11.6 per cent |
|
|
|
– |
3,000 |
£10 million First
Mortgage Debenture Stock 2022 at 8.109 per cent* |
|
|
|
9,922 |
9,905 |
|
|
|
|
9,922 |
12,905 |
|
|
|
|
13,003 |
17,491 |
*The £10 million debenture is shown after deduction of
un–amortised issue costs.
Details of terms and security of overdrafts, loans and loan
renewal and debentures are set out in note 21.
Repayment of borrowings: |
2017
£’000 |
2016
£’000 |
Debentures: |
|
|
Repayable within one year |
3,000 |
750 |
Repayable between two and five
years |
9,922 |
3,000 |
Repayable in more than five
years |
- |
9,905 |
|
12,922 |
13,655 |
33.9. Deferred tax asset
|
|
|
|
2017 |
2016 |
|
|
|
£’000 |
£’000 |
Deferred
Taxation |
|
|
|
|
|
Balance at 1
January |
|
|
|
2,082 |
3,055 |
Transfer to profit and
loss account |
|
|
|
(23) |
(973) |
Balance at 31
December |
|
|
|
2,059 |
2,082 |
The deferred tax balance comprises the following:
Accelerated capital
allowances |
|
|
|
(833) |
(823) |
Short–term timing
differences |
|
|
|
(124) |
(124) |
Revaluation of
investment properties |
|
|
|
66 |
100 |
Loss relief |
|
|
|
2,950 |
2,929 |
Deferred tax asset
at year end |
|
|
|
2,059 |
2,082 |
33.10. Share capital
Details of share capital, treasury shares and share options are
set out in note 26.
33.11. Related party transactions
|
Cost
recharged |
|
Amounts owed |
Advanced
to |
|
to (by)
related |
|
by (to)
related |
(by)
related |
|
party |
|
party |
party |
|
£'000 |
|
£'000 |
£'000 |
Related party: |
|
|
|
|
Dragon Retail
Properties Limited |
|
|
|
|
Current account |
(95) |
(i) |
(214) |
– |
Loan account |
– |
|
(2,000) |
– |
Bisichi Mining
PLC |
|
|
|
|
Current account |
138 |
(ii) |
33 |
– |
Simon Heller
Charitable Trust |
|
|
|
|
Current account |
(63) |
|
– |
– |
Loan account |
– |
|
(700) |
– |
Directors and key
management |
|
|
|
|
M A Heller and J A
Heller |
15 |
(i) |
1 |
– |
H D Goldring (Delmore
Holdings Limited) |
(15) |
(iii) |
– |
– |
C A Parritt |
(18) |
(iii) |
(4) |
– |
R Priest |
(35) |
(iii) |
– |
– |
Totals at 31
December 2017 |
(73) |
|
(2,884) |
– |
Totals at 31 December
2016 |
(84) |
|
(2,916) |
(34) |
Nature of costs recharged – (i) Management fees (ii) Property
management fees (iii) Consultancy fees
During the period, the Company entered into transactions, in the
ordinary course of business, with other related parties. The
company has taken advantage of the exemption under paragraph 8(k)
of FRS101 not to disclose transactions with wholly owned
subsidiaries.
Dragon Retail Properties Limited – ‘Dragon’ is owned equally by
the Company and Bisichi Mining PLC. During 2013 Dragon lent the
company £2 million at 6.875 per cent annual interest.
Bisichi Mining PLC – The company has 41.52 per cent ownership of
‘Bisichi’.
Other details of related party transactions are given in note
28.
33.12. Employees
|
|
|
|
2017 |
2016 |
|
|
|
|
|
|
The
average weekly number of employees of the company during the year
were as follows: |
|
|
|
|
|
|
|
|
Directors &
Administration |
|
|
|
24 |
25 |
|
|
|
|
|
|
Staff costs during the
year were as follows: |
|
|
|
2017 |
2016 |
|
|
|
|
£’000 |
£’000 |
|
|
|
|
|
|
Salaries |
|
|
|
1,375 |
1,474 |
Social Security
costs |
|
|
|
163 |
178 |
Pension
costs |
|
|
|
119 |
135 |
33.13. Capital commitments
There were no capital commitments at 31
December 2017 (2016: £Nil).
33.14. Operating and finance
leases
At 31 December 2017 the Company
had commitments under non–cancellable operating leases on land and
buildings as follows:
|
2017
£’000 |
2016
£’000 |
Expiring in more than five years |
1,440 |
1,680 |
In addition, the Company has an annual commitment to pay ground
rents on its leasehold investment properties which amount to
£201,000 (2016: £246,000).
Present value of head leases on properties
|
|
|
|
Present value |
|
|
Minimum lease |
of minimum |
|
|
payments |
lease payments |
|
|
2017 |
2016 |
2017 |
2016 |
|
|
£’000 |
£’000 |
£’000 |
£’000 |
Within one year |
|
201 |
294 |
201 |
294 |
Second to fifth
year |
|
803 |
1,177 |
746 |
1,094 |
After five years |
|
15,483 |
28,298 |
2,134 |
3,198 |
|
|
16,487 |
29,769 |
3,081 |
4,586 |
Future finance charges
on finance leases |
|
(13,406) |
(25,183) |
– |
– |
Present value of
finance lease liabilities |
|
3,081 |
4,586 |
3,081 |
4,586 |
Finance lease liabilities are in respect of leased investment
property. A few leases provide for contingent rent in addition to
the rents above, usually a proportion of rental income.
Finance lease liabilities are effectively secured as the rights
to the leased asset revert to the lessor in the event of
default.
Future aggregate minimum rentals receivable
The Company leases out its investment properties to tenants
under operating leases. The future aggregate minimum rentals
receivable under non–cancellable operating leases are as
follows:
33.15. Contingent liabilities and post
balance sheet events
There were no contingent liabilities at 31 December 2017 (2016: £Nil).
Five year financial summary
|
2017
£M |
2016
£M |
2015
£M |
2014
£M |
2013
£M |
Portfolio size |
|
|
|
|
|
Investment properties–LAP^ |
62 |
89 |
89 |
89 |
87 |
Investment properties–joint ventures |
– |
– |
19 |
20 |
16 |
Investment properties–Dragon Retail
Properties |
3 |
3 |
3 |
3 |
3 |
Investment properties–Bisichi Mining^ |
13 |
13 |
13 |
12 |
12 |
|
78 |
105 |
124 |
124 |
118 |
|
|
|
|
|
|
Portfolio activity |
£M |
£M |
£M |
£M |
£M |
Acquisitions |
– |
– |
1.00 |
0.68 |
– |
Disposals |
– |
– |
(0.40) |
– |
(9.47) |
Capital Expenditure |
– |
0.16 |
0.36 |
– |
– |
|
– |
0.16 |
0.96 |
0.68 |
(9.47) |
|
|
|
|
|
|
Consolidated income statement |
£M |
£M |
£M |
£M |
£M |
Group income |
44.98 |
29.70 |
32.67 |
33.53 |
43.29 |
Profit/(loss) before tax |
11.28 |
(0.97) |
(2.09) |
(2.69) |
1.14 |
Taxation |
(2.98) |
(1.18) |
0.04 |
(3.70) |
2.55 |
Profit/(loss) attributable to shareholders |
7.69 |
(2.36) |
(1.90) |
(7.14) |
3.47 |
Earnings/(loss) per share – basic and diluted |
9.01p |
(2.77)p |
(2.24)p |
(8.45)p |
4.12p |
Dividend per share |
0.300p |
0.165p |
0.160p |
0.156p |
0.125p |
|
|
|
|
|
|
Consolidated balance sheet |
£M |
£M |
£M |
£M |
£M |
Shareholders’ funds attributable to equity
shareholders |
45.86 |
38.24 |
40.08 |
42.55 |
49.73 |
Net borrowings |
58.42 |
62.22 |
62.39 |
59.71 |
53.96 |
Net assets per
share
– basic |
53.74p |
44.83p |
47.26p |
50.35p |
59.00p |
– fully diluted |
53.74p |
44.83p |
47.26p |
50.35p |
59.00p |
|
|
|
|
|
|
Consolidated cash flow statement |
£M |
£M |
£M |
£M |
£M |
Cash generated from operations |
10.29 |
5.59 |
4.37 |
2.96 |
12.23 |
Capital investment and financial investment |
(1.80)) |
(0.18) |
(2.77) |
100.42 |
4.35 |
Notes:
^ Excluding the present value of head leases