REG-Bisichi Mining PLC: Annual Financial Report
29/04/2019 07:05
BISICHI MINING PLC
Results for the year ended 31 December 2018
Summary:
Reported EBITDA: £8,600,000 (2016: £3,700,000)
Adjusted EBITDA: £9,100,000 (2016: £5,800,000)
* Another strong performance from Black Wattle, the group’s South African
coal mining operation.
* Mine infrastructure improvements completed in 2017 allowed Black Wattle to
wash coal at consistent levels of production and achieve an increased overall
yield compared to prior years.
* Black Wattle was able to benefit from the significantly improved coal prices
during the year.
* Agreement signed to acquire an additional 1.9million metric tonnes of Run of
Mine coal contiguous to Black Wattle’s operations.
* UK property portfolio continues to perform well with average rental yields
for the portfolio remaining stable during the year.
* In light of the strong results achieved for the year, a special dividend of
2p (2016: 1p) per share proposed in addition to a final dividend of 3p (2017:
3p) taking full year dividend to 6p (2016: 5p) per share.
* Dividend yield of 6.5% at year end share price.
Chairman, Sir Michael Heller, comments:
“These results can be attributed mainly to the strong performance from Black
Wattle which continued to benefit from the infrastructure improvements to the
coal washing plant that were reported to shareholders in 2017. These
improvements have enabled the group to wash at consistent levels of production
and achieve an increased overall yield compared to prior years. In addition,
the mine was able to benefit from significantly improved coal prices
achievable for our coal during the year.
Looking forward, although we have seen global economic factors impact coal
demand in some international markets, the demand for South African coal has
remained strong and we expect overall levels of production from Black Wattle
to remain consistent with 2018. Accordingly, we continue to be confident about
the ability of our South African coal mining operations to contribute strongly
to our group earnings and cash generation for the foreseeable future.”
For further information, please call:
Andrew Heller or Garrett Casey, Bisichi Mining PLC 020 7415 5030
BISICHI MINING PLC
ANNUAL REPORT 2018
Strategic report
Strategic report
The Directors present the Strategic Report of the company for the year ending
31 December 2018. The aim of the Strategic Report is to provide shareholders
with the ability to assess how the Directors have performed their duty to
promote the success of the company for the collective benefit of shareholders.
Earnings before interest, tax, depreciation and amortisation (EBITDA) of Operating profit before depreciation, fair value adjustments and exchange movements (Adjusted EBITDA) of Dividend yield of
£8.6million £9.1million 6.5%
(2017: £3.7 million) (2017: £5.8 million) at year end share price.
STRATEGIC REPORT
Chairman’s Statement
For the year ended 31 December 2018, I am pleased to report that your company
achieved earnings before interest, tax, depreciation and amortisation (EBITDA)
of £8.6million (2017: £3.7 million) and operating profit before
depreciation, fair value adjustments and exchange movements (Adjusted EBITDA)
of £9.1million (2017: £5.8million).
These results can be attributed mainly to the strong performance from Black
Wattle, our South African coal mining operation, which continued to benefit
from the infrastructure improvements to the coal washing plant that were
reported to shareholders in 2017. These improvements have enabled the group to
wash at consistent levels of production and achieve an increased overall yield
compared to prior years. In addition, the mine was able to benefit from
significantly improved coal prices achievable for our coal during the year.
Looking forward, although we have seen global economic factors impact coal
demand in some international markets, the demand for South African coal has
remained strong and we expect overall levels of production from Black Wattle
to remain consistent with 2018. Accordingly, we continue to be confident about
the ability of our South African coal mining operations to contribute strongly
to our group earnings and cash generation for the foreseeable future.
I am also pleased to report that during the course of the year Black Wattle
signed an agreement to acquire additional coal reserves. This will enable us
to further benefit from the strong levels of domestic demand and is in line
with the group’s strategy of actively seeking new opportunities to extend
the life of mine of its existing mining operations. The new reserve has an
expected run of mine tonnage of 1.9million metric tonnes and is contiguous to
Black Wattle’s operations. The acquisition, which is still subject to local
regulatory approval, will be financed from the group’s existing South
African cash resources and banking facilities.
A fuller explanation on the performance of our mining operations for the year
can be found within the Mining Review and Financial & Performance Review
sections of this report.
The group’s UK retail property portfolio, which underpins the group and
which is managed actively by London & Associated Properties Plc, continues to
perform well, with average rental yields for the portfolio remaining stable
during the year. As reported to shareholders earlier this year, the Group has
formed a joint venture with London & Associated Properties PLC and Metroprop
Real Estate Ltd which has acquired the freehold of a retail and residential
redevelopment in West Ealing, London. The joint venture has planning consent
for 20 flats at first and second floor levels which will be eligible for the
UK Government Help to Buy Scheme. Since reporting this investment, the joint
venture has begun preparing a planning application for a larger residential
redevelopment of 55 flats on the site and we look forward to updating
shareholders as the development progresses. A fuller explanation of the
portfolio’s valuation results and financial position are discussed in the
Financial & Performance Review and Directors report.
Looking forward, management is currently investigating other major investment
opportunities in both the mining sector and the domestic property sector and
is conserving the group’s cash reserves accordingly.
Finally, in light of the strong results achieved for the year, your directors
recommend a special dividend of 2p (2017: 1p) per share in addition to a final
dividend of 3p (2017: 3p). Both dividends will be payable on Friday 26 July
2019 to shareholders registered at the close of business on 5 July 2019. This
takes the total dividends per share for the year to 6p (2017: 5p). Based on
the 2018 year end share price, this represents a 6.5% yield.
On behalf of the Board and shareholders, I would like to thank all of our
staff for their hard work during the course of the year.
Sir Michael Heller
Chairman
25 April 2019
STRATEGIC REPORT
Principal activity, strategy & business model
The company carries on business as a mining company and its principal activity
is coal mining in South Africa. The company’s strategy is to create and
deliver long term sustainable value to all our stakeholders through our
business model which can be broken down into three key areas:
1 Acquisition & investment
The group actively seeks new opportunities to extend
the life of mine of its existing mining operations or develop new independent
mining operations in South Africa. The group aims to achieve this through new
commercial arrangements and the acquisition of additional coal reserves nearby
to or independent from our existing mining operations.
In addition, we seek to balance the high risk of our mining operations with a
dependable cash flow from our UK property investment operations. The company
primarily invests in retail property across the UK as well as residential
property development. The UK Retail property portfolio is managed by London &
Associated Properties PLC whose responsibility is to actively manage the
portfolio to improve rental income and thus enhance the value of the portfolio
over time.
2 Production & sustainability
The group strives to mine its coal reserves in an economical and sustainable
manner that delivers long term value to all our stakeholders.
3 Processing & marketing
The group seeks to achieve additional value from its mining investments
through the washing, transportation and marketing of coal into both the
domestic and export markets.
STRATEGIC REPORT
Mining Review
As noted in the Chairman’s statement, the group’s strong performance in
2018 can be attributed mainly to Black Wattle, our South African coal mining
operation. During the year the mine was able to benefit fully from the coal
infrastructure improvement implemented in 2017 achieving an increased overall
yield compared to the prior year and a consistent Run of Mine production
through the washing plant. This allowed the group to benefit from the higher
prices achievable for our coal during the year.
Production and operations
For the first half of 2018, the mine achieved mining production of 670,000
metric tonnes (2017 H1: 582,000 metric tonnes), improving on the first half
production achieved in 2017, which was impacted by water and stone
contamination issues. During the second half of the year, production remained
fairly consistent with the exception of some temporary blasting and water
issues at our opencast area which had a limited impact on production in the
last quarter of the year. Overall the mine achieved production of 649,000
metric tonnes (2017 H2: 714,000 metric tonnes) during the second half of the
year.
As a result of the higher production in the first half of the year, overall
mining production from Black Wattle increased in 2018, with total mining
production for the year of 1.32million metric tonnes (2017: 1.30million metric
tonnes). In 2019 we have commenced mining in a new opencast area at Black
Wattle contiguous to the area that was mined in 2018. This new area will be
mined throughout 2019 and we expect mining production levels and yields
achieved in 2018 to be maintained in 2019.
As mentioned in the Chairman’s statement, we are pleased to report that
Black Wattle has signed an agreement to acquire a new coal reserve contiguous
to Black Wattle’s operations. The reserve has an expected run of mine
tonnage of 1.9million metric tonnes, can be mined by opencast and is of a
similar quality to Black Wattle’s existing reserves. The acquisition is
subject to regulatory approval from the South African Department of Mineral
Resources and will be financed out of the group’s existing South African
cash resources and banking facilities. The group continues to seek further
opportunities to extend the life of mine of its existing mining operations or
develop new independent mining operations in South Africa.
The infrastructure improvements to the washing plant that were completed in
2017, will allow the group to mine or buy in coal from similar reserves within
the area that may be affected by stone contamination issues. This broadens the
scope of new opportunities for the group to achieve additional value from our
coal washing operations in South Africa separate from the group’s existing
mining operations. In order to maximise these opportunities, in January 2019,
Black Wattle transferred its washing plant operations into a wholly owned
subsidiary called Sisonke Coal Processing which will operate as a stand-alone
commercial entity. In addition, the group has committed to further
improvements to the washing plant to be implemented in 2019, including a new
high-pressure filter press segment which will improve the management and
quality of coal fines produced from our washing plant. We look forward to the
positive impact the further improvements to the washing plant will have on the
returns achievable from our remaining reserves.
Main trends/markets
During 2018 management continued to sell coal into both the export and
domestic market. Black Wattle’s export sales were via Richards Bay Coal
Terminal and primarily under the Quattro programme, which allows junior
black-economic empowerment coal producers direct access to the coal export
market via Richards Bay Coal Terminal. We would like to thank Vunani Limited,
our black economic empowered shareholders at Black Wattle, for managing and
developing this opportunity.
A shortage of coal in the domestic market and strong demand for coal in the
international market impacted positively on the prices achievable for our coal
during the period. At the beginning of 2018, the average weekly price of Free
on Board (FOB) Coal from Richards Bay Coal Terminal (API4) was $95. During the
year the API4 price remained mainly range bound between $90 and $105 ending
again at $95 by the end of the year. Overall the average weekly API4 price for
2018 was $98 compared to $84 in 2017. The higher overall coal prices compared
to the prior period, along with a year on year stable Rand attributed to the
group achieving an overall increase in the average Rand price of R879 per
tonne of export coal sold in 2018 from the mine compared to R773 in 2017.
Looking forward into 2019, although we have seen a weakening in the API$ price
in the first quarter of 2019, we expect demand to remain stable for South
African coal in the seaborne market.
In the domestic market, a continued high demand impacted positively on prices
achievable for our coal in 2018. Overall, the group achieved an average price
of R500 per tonne of domestic coal sold in 2018 compared to R397 in 2017.
Looking forward, domestic prices to date have remained stable and we have
continued to see strong demand for our coal.
Overall, the increase in group revenue, compared to the prior year, can mainly
be attributed to the increased overall yield and higher prices achieved for
our coal at Black Wattle.
Sustainable development
Black Wattle continues to strive to conduct business in a safe,
environmentally and socially responsible manner. Some highlights of our
Health, Safety and Environment performance in 2018:
• Black Wattle Colliery recorded one Lost Time Injury during 2018
(2017: One).
• No cases of Occupational Diseases were recorded.
• Zero claims for the Compensation for Occupational Diseases were
submitted.
In South Africa, the new government regulated Broad-Based Socio-Economic
Empowerment Charter for the Mining and Minerals Industry, 2018 (New Mining
Charter) came into force from March 2019. The New Mining Charter is a
regulatory instrument that facilitates sustainable transformation, growth and
development of the mining industry. The group is committed to fully complying
with the New Mining Charter and providing adequate resources to this area in
order to ensure opportunities are expanded for historically disadvantaged
South Africans (HDSAs) to enter the mining and minerals industry. In addition,
we continue to adhere and make progress in terms of our Social and Labour Plan
and our various BEE initiatives. A fuller explanation of these can be found in
our Sustainable Development Report on page 8.
Prospects
Looking forward to 2019, management will focus on maintaining production at
Black Wattle at the levels achieved in 2018 and increasing our life of mine
through the acquisition of additional reserves. Management will also seek to
achieve additional value from its investments in the washing plant that is now
held in Sisonke Coal Processing. With strong demand for our coal, we believe
the group is in a strong position to achieve significant value from our South
African mining operations in 2019.
Andrew Heller
Managing Director
25 April 2019
STRATEGIC REPORT
Sustainable development
The group is fully committed to ensuring the sustainability of both our UK and
South African mining operations and delivering long term value to all our
stakeholders.
Social, community and human rights issues
The group believes that it is in the shareholders’ interests to consider
social and human rights issues when conducting business activities both in the
UK and South Africa. Various policies and initiatives implemented by the group
that fall within these areas are discussed within this report.
Health, Safety & Environment (HSE)
Black Wattle is committed to creating a safe and healthy working environment
for its employees and the health and safety of our employees is of the utmost
importance.
HSE performance in 2018:
• No cases of Occupational Diseases were recorded.
• Zero claims for the Compensation for Occupational Diseases were
submitted.
• No machines operating at Black Wattle exceeded the regulatory
noise level.
• Black Wattle Colliery recorded one Lost time Injury during 2018.
In addition to the required personnel appointments and assignment of direct
health and safety responsibilities on the mine, a system of Hazard
Identification and Risk Assessments has been designed, implemented and
maintained at Black Wattle.
Health and Safety training is conducted on an on going basis. We are pleased
to report all relevant employees to date have received training in hazard
identification and risk assessment in their work areas.
A medical surveillance system is also in place which provides management with
information used in determining measures to eliminate, control and minimise
employee health risks and hazards and all Occupational Health hazards are
monitored on an on going basis.
Various systems to enhance the current HSE strategy have been introduced as
follows:
• In order to improve hazard identification before the commencing of
tasks, mini risk assessment booklets have been distributed to all mine
employees and long term contractors on the mine.
• Dover testing is conducted for all operators. Dover testing is a
risk detection and accident reduction tool which identifies employees’
problematic areas in their fundamental skills in order to receive appropriate
training.
• On going basic rigging training is being conducted for all washing
plant personnel.
• A Job Safety Analysis form is utilised to ensure effective
identification of hazards in the workplace.
• In order to capture and record investigation findings from
incidents, an incident recording sheet is utilised by line management and
contractors.
• Black Wattle Colliery utilises ICAM (Incident Cause Analysis
Method).
• On going training on conveyor belt operation is being conducted
with all employees involved with this discipline.
Black Wattle Colliery Social and Labour Plan (SLP) and Community Projects
Black Wattle Colliery is committed to true transformation and empowerment as
well as poverty eradication within the surrounding and labour providing
communities.
Black Wattle is committed to providing opportunities for the sustainable
socio-economic development of its stakeholders, such as:
• Employees and their families, through Skills Development,
Education Development, Human Resource Development, Empowerment and Progression
Programmes.
• Surrounding and labour sending communities, through Local Economic
Development, Rural and Community Development, Enterprise Development and
Procurement Programmes.
• Empowering partners, through Broad-Based Black Economic
Empowerment (BBBEE) and Joint Ventures with Historically Disadvantaged South
African (HDSA) new mining entrants and enterprises.
• The company engages in on going consultation with its stakeholders
to develop strong company-employee relationships, strong company-community
relationships and strong company-HDSA enterprise relationships.
The key focus areas in terms of the detailed SLP programmes were updated as
follows:
• Implementation of new action plans, projects, targets and budgets
were established through regular workshops with all stakeholders.
• A comprehensive desktop socio-economic assessment was undertaken
on baseline data of the Steve Tshwete Local Municipality (STLM) and Nkangala
District Municipality (NDM).
• Black Wattle has drawn up a new SLP Plan for the next five years
(2017 – 2021).
• The current Black Wattle Colliery Local Economic Development (LED)
programmes were upgraded, and new LED projects were selected in consultation
with the key stakeholders from the STLM.
• An appropriate forum was established on the mine and a process
initiated for the consultation, empowerment and participation of the employee
representatives in the Black Wattle Colliery SLP process.
• Included within the new SLP Plan is a new LED project which
includes the upgrading of Phumelele Secondary School in the Rockdale Township.
The primary focus is to build additional facilities, including classrooms to
cater for the growing population in the area.
• Various upgrades were initiated at the Evergreen School nearby to
Black Wattle including the erection of new toilet facilities for the boys and
girls, which formed part of the mines portable skills development programme
for our employees.
Black Wattle has implemented various community initiatives including:
• A community training environmental project, where local community
members are trained to safely cut and remove non- indigenous vegetation.
• Certain community members have been identified for training in
areas regarding mining and beneficiation. These areas include but are not
limited to conveyor maintenance and operation of mining machinery.
• Two new local community students were enrolled at university for
the 2019 academic year.
Environment & Environment Management Programme
South Africa
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. In addition to these
routine activities, Black Wattle regularly carries out environmental
monitoring activities on and around the mine, including evaluation of ground
water quality, air quality, noise and lighting levels, ground vibrations, air
blast monitoring, and assessment of visual impacts. In addition to this Black
Wattle also performs quarterly monitoring of all boreholes around the mine to
ensure that no contaminated water filters through to the surrounding
communities.
Black Wattle is fully compliant with the regulatory requirements of the
Department of Water Affairs and Forestry and has an approved water use
licence.
Black Wattle Colliery has substantially improved its water management by
erecting and upgrading all its pollution control dams in consultation with the
Department of Water Affairs and Forestry.
A performance assessment audit was conducted to verify compliance to our
Environmental Management Programme
and no significant deviations were found.
United Kingdom
The group’s UK activities are principally retail property investment as well
as residential property development whereby we provide or develop premises
which are rented to retail businesses or sold on to end users. We seek to
provide tenants and users in both these areas with good quality premises from
which they can operate or reside in an environmentally sound manner.
Procurement
Black Wattle is a level 7 contributor to B-BBEE and has achieved a 50% BEE
procurement recognition level. In compliance with the Mining Charter and the
Mineral and Petroleum Resource Development Act, Black Wattle has implemented a
BBBEE-focussed procurement policy which strongly encourages our suppliers to
establish and maintain BBBEE credentials. At present, BBBEE companies provide
approximately 92 percent of Black Wattle’s equipment and services.
Mining Charter
In South Africa, the new government regulated Broad-Based Socio-Economic
Empowerment Charter for the Mining and Minerals Industry, 2018 (New Mining
Charter) came into force from March 2019. The New Mining Charter is a
regulatory instrument that facilitates sustainable transformation, growth and
development of the mining industry. The group’s mining operation is expected
to reach various levels of compliance to the New Mining Charter over a period
of five years from March 2019. The group is committed to providing adequate
resources to this area in order to ensure full compliance to the New Mining
Charter is achieved over the transitional period. As part of Black Wattle’s
commitment to the New Mining Charter, the company seeks to:
• Expand opportunities for historically disadvantaged South Africans
(HDSAs), including women and youth, to enter the mining and minerals industry
and benefit from the extraction and processing of the country’s resources;
• Utilise the existing skills base for the empowerment of HDSAs; and
• Expand the skills base of HDSAs in order to serve the community.
Employment
Black Wattle is committed to achieving the goals of the South African
Employment Equity Act and is pleased to report the following:
• Black Wattle Colliery has exceeded the 10 percent women in
management and core mining target.
• Black Wattle Colliery has achieved 12 percent women in core
mining.
• 94 percent of the women at Black Wattle Colliery are HDSA females.
Black Wattle Colliery has successfully submitted their annual Employment
Equity Report to the Department of Labour.
In terms of staff training some highlights for 2018 were:
• 13 employees were trained in ABET (Adult Basic Educational
Training) on various levels;
• An additional 5 disabled women continued their training on ABET
levels one to four.
• 3 HDSA Females and 3 HDSA Males are progressing in their
respective apprenticeships at the mine.
• Black Wattle had several of the staff of Silver Solutions CC, a
black owned private contractor on the mine, trained to become competent to
perform plastic pipe welding. The mine makes extensive use of their services
in this area.
Employment terms and conditions for our employees based at our UK office and
at our South African mining operations are regulated by and are operated in
compliance with all relevant prevailing national and local legislation.
Employment terms and conditions provided to mining staff meet or exceed the
national average. The group’s mining operations and coal washing plant
facility are labour intensive and unionised. During the year no labour
disputes, strikes or wage negotiations disrupted production or had a
significant impact on earnings. The group’s relations to date with labour
representatives and labour related unions continue to remain strong.
In terms of directors, employees and gender representation, at the year end
the group had 7 directors (7 male, 0 female), 7 senior managers (6 male, 1
female) and 246 employees (175 male, 71 female).
Anti-slavery and human trafficking
The group is committed to the prevention of the use of forced labour and has a
zero tolerance policy for human trafficking and slavery. The group’s
policies and initiatives in this area can be found within the group’s
Anit-slavery and human trafficking statement found on the group’s website
at www.bisichi.co.uk.
Green House Gas reporting
We have reported on all of the emission sources required under the Companies
Act 2006 (Strategic Report and Directors’ Reports) Regulations.
The group has used the main requirements of the ISO standard 14064-1 to
calculate the Scope 1 (Direct Emissions) and Scope 2 (Indirect Emissions) from
coal extraction and onsite mining processes for Black Wattle Colliery. We have
not measured and reported on our Scope 3 emissions sources. Excluded from the
footprint boundary are emission sources considered non material by the group,
including refrigerant use onsite.
The following sources of the carbon emissions factors was used:
• UK Government GHG Conversion Factors for Company Reporting,
2018.
• IEA data from IEA CO2 emissions from fuel combustion 2017.
• Methodology adapted from the Intergovernmental Panel on Climate
Change (2006)
The group’s carbon footprint: 2018 CO2e Tonnes 2017 CO2e Tonnes
Emissions source:
Scope 1 Combustion of fuel & operation of facilities 21,348 15,575
Scope 1 Emissions from coal mining activities (see note below) 27,428 27,004
Scope 2 Electricity, heat, steam and cooling purchased for own use 12,177 11,210
Total 60,953 53,779
Intensity:
Intensity 1 Tonnes of CO2 per pound sterling of revenue 0.0012 0.0013
Intensity 2 Tonnes of CO2 per tonne of coal produced 0.0462 0.0415
Note: The group has recalculated emissions from coal mining activities using a
more up to date methane conversion factor; because of this, 2017 emissions
from coal mining activities have been restated.
Principal risks & uncertainties
PRINCIPAL RISK PERFORMANCE AND MANAGEMENT OF THE RISK
COAL PRICE RISK The group is exposed to coal price risk as its future revenues will be derived based The group primarily focuses on managing its underlying production costs to mitigate coal price volatility as well as from time to time entering into forward sales contracts with the goal of preserving future revenue streams. The group has not entered into any such contracts in 2018 and 2017. The group’s export and domestic sales are determined based on the ability to deliver the quality of coal required by each market and Quattro programme quotas, together with the market factors set out opposite. Volumes of export sales achieved during the year were primarily dependent on the mine’s ability to produce the higher quality of coal required for export as well as allowable quotas under the Quattro programme and overall global demand. The volume of domestic market sales achieved during the year were primarily dependant on local demand and supply as well as the mine’s ability to produce the lower overall quality of coal required. The group assesses on an ongoing basis the impact any regulatory changes related to climate change and governmental CO2 emission commitments may have on the group’s mining operations and future investment decisions.
on contracts or agreements with physical off-take partners at prices that will be determined by
reference to market prices of coal at delivery date. The group’s South African mining operational
earnings are significantly dependent on movements in both the export and domestic coal price. The
price of export sales is derived from a US Dollar-denominated export coal price and therefore the
price achievable in South African Rands can be influenced by movements in exchange rates and overall
global demand and supply. The domestic market coal prices are denominated in South African Rand and
are primarily dependant on local demand and supply. Longer term both the demand and supply of coal in
the domestic and global market may be negatively impacted by regulatory changes related to climate
change and governmental CO2 emission commitments.
MINING RISK As with many mining operations, the reserve that is mined has the risk of not having the This risk is managed by engaging independent geological experts, referred to in the industry as the “Competent Person”, to determine the estimated reserves and their technical and commercial feasibility for extraction. In addition, management engage Competent Persons to assist management in the production of detailed life of mine plans as well as in the monitoring of actual mining results versus expected performance and management’s response to variances. The group continued to engage an independent Competent Person in the current year. Refer to page 6 for details of mining performance.
qualities and accessibility expected from geological and environmental analysis. This can have a
negative impact on revenue and earnings as the quality and quantity of coal mined and sold by our
mining operations may be lower than expected.
CURRENCY RISK The group’s operations are sensitive to currency movements, especially those between Export sales within the group’s South African operations are derived from a US Dollar-denominated export coal price. A weakening of the US Dollar can have a negative impact on the South African Rand prices achievable for coal sold by the group’s South African mining operations. This in turn can have a negative impact on the group’s mining operations revenue as well as operational earnings as the group’s mining operating costs are Rand denominated. In order to mitigate this, the group may enter into forward sales contracts in local currencies with the goal of preserving future revenue streams. The group has not entered into any such contracts in 2018 and 2017. Although it is not the group’s policy to obtain forward contracts to mitigate foreign exchange risk on inter-company trading balances or on the retranslation of the group’s South African functional currency net assets, management regularly review the requirement to do so in light of any increased risk of future volatility. Refer to the ‘Financial Review’ for details of significant currency movement impacts in the year.
the South African Rand, US Dollar and British Pound. These movements can have a negative impact on the
group’s mining operations revenue as noted above, as well as operational earnings. The group is
exposed to currency risk in regard to the Sterling value of inter-company trading balances with its
South African operations. It arises as a result of the retranslation of Rand denominated inter-company
trade receivable balances into Sterling that are held within the UK and which are payable by South
African Rand functional currency subsidiaries. The group is exposed to currency risk in regard to the
retranslation of the group’s South African functional currency net assets to the Sterling reporting
functional currency of the group. A weakening of the South African Rand against Sterling can have a
negative impact on the financial position and net asset values reported by the group.
NEW RESERVES AND MINING PERMISSIONS The life of the mine, acquisition of additional reserves, The work performed in the acquisition and renewal of mining permits as well as the maintenance of compliance with permits includes factors such as environmental management, health and safety, labour laws and Black Empowerment legislation (such as the New Mining Charter); as failure to maintain appropriate controls and compliance may in turn result in the withdrawal of the necessary permissions to mine. The management of these regulatory risks and performance in the year is noted in the Mining Review on page 6 as well as in the Sustainable Development report on page 8 and in this section under the headings environmental risk, health & safety risk and labour risk. Additionally, in order to mitigate this risk, the group strives to provide adequate resources to this area including the employment of adequate personnel and the utilisation of third party consultants competent in regulatory compliance related to mining rights and mining permissions. The group also continues to actively seek new opportunities to expand it mining operations in South Africa through the acquisition of additional coal reserves and new commercial arrangements with existing mining right holders.
permissions to mine (including ongoing and once-off permissions) and new mining opportunities in South
Africa generally are contingent on a number of factors outside of the group’s control such as approval
by the Department of Mineral Resources, the Department of Water Affairs and Forestry and other
regulatory or state owned entities. In addition, the group’s South African operations are subject to
the government Mining Charter with the New Mining Charter coming into force from March 2019. Failure
to meet existing targets or further regulatory changes to the Mining Charter, could adversely affect
the mine’s ability to retain its mining rights in South Africa.
POWER SUPPLY RISK The current utility provider for power supply in South Africa is the government run The group’s mining operations have to date not been affected by power cuts. However the group manages this risk through regular monitoring of Eskom’s performance and ongoing ability to meet power requirements. In addition, the group continues to assess the ability to utilise diesel generators as an alternative means of securing power in the event of power outages.
Eskom. Eskom continues to undergo capacity problems resulting in power cuts and lack of provision of
power supply to new projects. Any power cuts or lack of provision of power supply to the group’s
mining operations may disrupt mining production and impact on earnings.
FLOODING RISK The group’s mining operations are susceptible to seasonal flooding which could disrupt Management monitors water levels on an ongoing basis and various projects have been completed, including the construction of additional dams, to minimise the impact of this risk as far as possible.
mining production and impact on earnings.
ENVIRONMENTAL RISK The group’s South African mining operations are required to adhere to local environmental regulations. Any failure to adhere to local environmental regulations, could adversely affect the mine’s ability to mine under its mining right in South Africa. In line with all South African mining companies, the management of this risk is based on compliance with the Environment Management Plan. In order to ensure compliance, the group strives to provide adequate resources to this area including the employment of personnel and the utilisation of third party consultants competent in regulatory compliance related to environmental management. To date, Black Wattle is fully compliant with the regulatory requirements of the Department of Water Affairs and Forestry and has an approved water use licence. Further details of the group’s Environment Management Programme are disclosed in the Sustainable development report on page 8.
HEALTH & SAFETY RISK Attached to mining there are inherent health and safety risks. Any such safety incidents disrupt operations, and can slow or even stop production. In addition, the group’s South African mining operations are required to adhere to local Health and Safety regulations. The group has a comprehensive Health and Safety programme in place to mitigate this risk. Management strive to create an environment where Health and safety of our employees is of the utmost importance. Our Health & Safety programme provides clear guidance on the standards our mining operation is expected to achieve. In addition, management receive regular updates on how our mining operations are performing. Further details of the group’s Health and Safety Programme are disclosed in the Sustainable Development report on page 8.
LABOUR RISK The group’s mining operations and coal washing plant facility are labour intensive and unionised. Any labour disputes, strikes or wage negotiations may disrupt production and impact earnings. In order to mitigate this risk, the group strives to ensure open and transparent dialogue with employees across all levels. In addition, appropriate channels of communication are provided to all employment unions at Black Wattle to ensure effective and early engagement on employment matters, in particular wage negotiations and disputes. Refer to the ‘Employment’ section on page 12 for further details.
CASHFLOW RISK Commodity price risk, currency volatility and the uncertainties inherent in mining may result in favourable or unfavourable cashflows. In order to mitigate this, we seek to balance the high risk of our mining operations with a dependable cash flow from our UK property investment operations which are actively managed by London & Associated Properties PLC. Due to the long term nature of the leases, the effect on cash flows from property investment activities are expected to remain stable as long as tenants remain in operation. Refer to page 23 for details of the property portfolio performance.
PROPERTY VALUATION RISK Fluctuations in property values, which are reflected in the Consolidated Income Statement and Balance Sheet, are dependent on an annual valuation of the group’s commercial and residential development properties. A fall in UK commercial and residential property can have a marked effect on the profitability and the net asset value of the group as well as impact on covenants and other loan agreement obligations. The economic performance of the United Kingdom, including the potential impact of the United Kingdom leaving the European Union (“Brexit”) as well as the current economic performance and trends of the UK retail market, may impact the level of rental income, yields and associated property valuations of the group’s UK property assets including its investments in Joint Ventures. The group utilises the services of London & Associated Properties PLC whose responsibility is to actively manage the portfolio to improve rental income and thus enhance the value of the portfolio over time. In addition, management regularly monitor banking covenants and other loan agreement obligations as well as the performance of our property assets in relation to the overall market over time. Management continue to monitor and evaluate the impact of Brexit and the current economic performance of the UK retail market on the future performance of the Group’s existing UK portfolio. In addition, the group assesses on an ongoing basis the impact of Brexit and the current economic performance of the UK retail market on the group’s banking covenants, loan obligations and future investment decisions. Refer to page 23 for details of the property portfolio performance.
Financial & performance review
The movement in the Group’s Adjusted EBITDA from £5.8million in 2017 to
£9.1million in 2018 can mainly be attributed to the increased overall yield
and higher prices achieved for our coal at Black Wattle offsetting the impact
of higher mining and washing costs. As we continue into 2019, the group’s
financial position remains strong and we expect to achieve significant value
from our existing mining operations as noted in the Mining Review.
EBITDA, adjusted EBITDA and mining production are used as key performance
indicators for the group and its mining activities as the group has a
strategic focus on the long term development of its existing mining reserves
and the acquisition of additional mining reserves in order to realise
shareholder value. Mining production can be defined as the coal quantity in
metric tonnes extracted from our reserves during the period and held by the
mine before any processing through the washing plant. Whilst profit/(loss)
before tax is considered as one of the key performance indicators of the
group, the profitability of the group and the group’s mining activities can
be impacted by the volatile and capital intensive nature of the mining sector.
Accordingly, EBITDA and adjusted EBITDA are primarily used as key performance
indicators as they are indicative of the value associated with the group’s
mining assets expected to be realised over the long term life of the group’s
mining reserves. In addition, for the group’s property investment
operations, the net property valuation and net property revenue are utilised
as key performance indicators as the group’s substantial property portfolio
reduces the risk profile for shareholders by providing stable cash generative
UK assets and access to capital appreciation.
Key performance indicators The key performance indicators for the group are: 2018 2017 £’000
£’000
For the group:
Operating profit before depreciation, fair value adjustments and exchange movements (adjusted EBITDA) 9,088 5,819
EBITDA 8,587 3,734
Profit/(loss) before tax 5,959 1,485
For our property investment operations:
Net property valuation (excluding joint ventures) 13,045 13,245
Net property revenue (excluding joint ventures) 1,232 1,125
For our mining activities:
Operating profit before depreciation, fair value adjustments and exchange movements (adjusted EBITDA) 8,206 4,894
EBITDA 8,143 2,811
Tonnes ‘000 Tonnes ‘000
Mining production 1,320 1,296
Revenue recognition restatement – presentation of revenue & costs
During the review of revenue recognition in South Africa a revenue recognition
error was identified in respect of the treatment of transport and loading
costs to deliver export coal under certain export agreements. The costs in
prior periods, have been recorded as a deduction against revenue rather than
being shown as an operating cost.
Although this impact has been correctly accounted for in the current year, the
equivalent restatement in the prior year is to increase both revenue and
operating costs by £2,891,000. There is no profit or net assets impact as a
result of the prior year restatement. In prior year figures within the report
where there has been an impact from the restatement, the column is reflected
with the word “Restated”.
The key performance indicators of the group can be reconciled as follows: Mining £’000 Property £’000 Other £’000 2018 £’000
Revenue 48,666 1,232 47 49,945
Transport and loading cost (3,103) - - (3,103)
Mining and washing costs (31,340) - - (31,340)
Other operating costs excluding depreciation (6,017) (394) (3) (6,414)
Operating profit before depreciation, fair value adjustments and exchange movements (adjusted EBITDA) 8,206 838 44 9,088
Exchange movements (63) - - (63)
Fair value adjustments - (215) - (215)
Losses on investments held at fair value through profit and loss (FVPL) - - (171) (171)
Operating profit excluding depreciation 8,143 623 (127) 8,639
Share of (loss)/profit and write off’s in joint venture - (52) - (52)
EBITDA 8,143 571 (127) 8,587
Net interest movement (515)
Depreciation (2,113)
Profit/(loss) before tax 5,959
The key performance indicators of the group can be reconciled as follows: Mining £’000 Restated Property £’000 Other £’000 2017 £’000 Restated
Revenue 39,191 1,125 34 40,350
Transport and loading cost (2,891) - - (2,891)
Mining and washing costs (25,664) - - (25,664)
Other operating costs excluding depreciation (5,742) (228) (6) (5,976)
Operating profit before depreciation, fair value adjustments and exchange movements (adjusted EBITDA) 4,894 897 28 5,819
Exchange movements (256) - - (256)
Fair value adjustments - (13) - (13)
Gain on disposal of other investments - - 3 3
Operating profit excluding depreciation 4,638 884 31 5,553
Share of (loss)/profit and write off’s in joint venture (1,827) 8 - (1,819)
EBITDA 2,811 892 31 3,734
Net interest movement (459)
Depreciation (1,790)
Profit/(loss) before tax 1,485
Adjusted EBITDA is used as a key indicator of the trading performance of the
group and its operating segments representing operating profit before the
impact of depreciation, fair value adjustments, gains/(losses) on disposal of
other investments and foreign exchange movements. The group’s operating
segments include its South African mining operations and UK property. The
performance of these two operating segments are discussed in more detail
below.
The group achieved EBITDA for the year of £8.6 million (2017: £3.7 million).
The movement compared to the prior year can mainly be attributed to increased
operating profits before depreciation from our mining activities of
£8.2million (2017: £4.9million) as well as the group’s share of losses in
joint venture mining assets of £1.8million incurred in 2017 which is
discussed in further detail below.
Depreciation for the year, related to our mining operations increased to
£2.1million (2017: £1.8million) with the group reporting an overall profit
before tax of £6.0million (2017: £1.5million).
South African mining operations
Performance The key performance indicators of the group’s South African mining operations are presented in South African Rand and UK Sterling as follows: South African Rand UK Sterling
2018 R’000 2017 R’000 Restated 2018 £’000 2017 £’000 Restated
Revenue 852,650 672,277 48,666 39,191
Transport and loading costs (54,366) (49,586) (3,103) (2,891)
Mining and washing costs (549,090) (440,241) (31,340) (25,664)
Operating profit before other operating costs and depreciation 249,194 182,450 14,223 10,636
Other operating costs (excluding depreciation) (6,017) (5,742)
Operating profit before depreciation, fair value adjustments and exchange movements (adjusted EBITDA) 8,206 4,894
Exchange movements (63) (256)
Share of loss in joint ventures - (1,827)
EBITDA 8,143 2,811
2018 ‘000 2017 ‘000
Mining production in tonnes 1,320 1,296
2018 R 2017 R
Net Revenue per tonne of mining production 605 480
Mining and washing costs per tonne of mining production (416) (340)
Operating profit per tonne of mining production before other operating costs and depreciation 189 140
Net Revenue per tonne of mining production can be defined as the revenue price
achieved per metric tonne of mining production less transportation and loading
costs.
A breakdown of the quantity of coal sold and revenue of the group’s South
African mining operations are presented in metric tonnes and South African
Rand as follows:
Domestic ‘000 Export ‘000 2018 ‘000 Domestic ‘000 Export ‘000 2017 ‘000
Quantity of coal sold in tonnes 1,292 174 1,466 1,267 155 1,422
Domestic R’000 Export R’000 2018 R’000 Domestic R’000 Export R’000 2017 R’000
Total Net Revenue 645,386 152,898 798,284 502,818 119,873 622,691
R R R R R R
Net Revenue per tonne of coal sold 500 879 545 397 773 438
The quantity of coal sold can be defined as the quantity of coal sold in
metric tonnes from the mine in any given period. Net Revenue per tonne of coal
sold can be defined as the revenue price achieved per metric tonne of coal
sold less transportation and loading costs.
Total net revenue for the group’s mining operations increased for the year
from R438 per tonne of coal sold in 2017 to R545 in 2018, attributable to the
average price increases achieved in both the domestic and export market. As a
result of the overall higher mining production, the quantity of coal sold for
the year increased to 1.466million tonnes (2017: 1.422million tonnes). This
increase in tonnes produced can be attributed to the impact of water and stone
contamination issues on production in 2017 which offset the temporary blasting
and water issues at our opencast area in the second half of 2018. Overall, the
revenue for the group’s South African mining operations increased in the
year to R798.3 million (2017: R622.7 million).
The overall increase in mining and washing cost per tonne from R340 per tonne
to R416 per tonne can mainly be attributed to higher inherent mining costs
from mining operations at our opencast reserves at Black Wattle. As a result
of the higher mining cost per tonne and the increase in total mining
production, total mining and washing costs for the group increased from
R440.2million in 2017 to R549.1million in 2018.
Other operating costs (excluding depreciation) of £6.0million (2017:
£5.7million) include general administrative costs as well as administrative
salaries and wages related to our South African mining operations that are
incurred both in South Africa and in the UK. These costs are not significantly
impacted by movements in mining production and the increase during the year
can mainly be attributed to salaries and wages related to our South African
mining operations that are incurred in the UK offset by exchange movements on
the translation of South African Rand costs into Sterling. Overall costs in
South Africa were in line with management’s expectations and local
inflation.
Overall, the group’s South African mining operations achieved an adjusted
EBITDA of £8.2million (2017: £4.9million) attributable to the increase in
mining production for the year and higher prices achievable for our coal
offsetting the higher mining cost per tonne of our opencast reserves at Black
Wattle.
The movement in the group’s EBITDA for mining activities of £8.1million
(2017: £2.8million) for the year, in comparison to the result achieved for
adjusted EBITDA was as a result of a small exchange rate loss of £0.1million.
In 2017, this movement was impacted by the share of loss in joint ventures of
£1.8million related to the write off of our investment in Ezimbokodweni
Mining (Pty) Ltd as well as an exchange loss of £0.3million. These exchange
movements can mainly be attributable to the retranslation of Rand denominated
inter-company trade receivable balances with our South African mining
operations that are held within the UK.
A further explanation of the mines operational performance can be found in the
Mining Review on page 6.
Other mining Investments
There were no movements in other mining investments outside of Black Wattle
Colliery (Pty) Limited in 2018. During the prior year the group wrote off its
£1.8million investment in Ezimbokodweni Mining (Pty) Limited
(“Ezimbokodweni”) made up of a £1.4million loan and a £0.4million joint
venture investment.
As reported in the Mining review, in January 2019, Black Wattle Colliery (Pty)
Limited transferred its washing plant operations into a wholly owned
subsidiary called Sisonke Coal Processing (Pty) Limited which will operate as
a stand-alone commercial entity. As the transaction is internal there was no
material impact on the financial reporting of the group. Further details on
the impact of the transaction on the group’s finance facilities can be found
in the section on loans below.
UK property investment
Performance
The group’s portfolio is managed actively by London & Associated properties
plc and continues to perform well. Net property revenue (excluding joint
ventures and service charge income) across the portfolio decreased marginally
during the year to £1.095million (2017: £1.125million). The property
portfolio was externally valued at 31 December 2018 and the value of UK
investment properties attributable to the group at year end decreased to
£13.045 million (2017: £13.250million) mainly due to valuation yields
applied in a more challenging retail market compared to the prior year.
Joint venture property investments
The group holds a £0.8million (2017: £0.9million) joint venture investment
in Dragon Retail Properties Limited, a UK property investment company. The
open market value of the company’s share of investment properties included
within its joint venture investment in Dragon Retail Properties marginally
decreased during the year to £1.24million (2017: £1.32million).
During the year the group acquired and held a £0.5million (2017: £nil) 50%
joint venture investment in West Ealing Projects Limited, a UK unlisted
property development company. West Ealing Projects Limited’s only asset is a
property development in West Ealing, London. The carrying value of the
group’s share of the trading property inventory included within this
development is valued at £3.1million (2017: £nill).
Overall, the group achieved net property revenue of £1.2million (2017:
£1.2million) for the year which includes the company’s share of net
property revenue from its investment in joint ventures of £95,000 (2017:
£83,000).
Cashflow & financial position
The following table summarises the main components of the consolidated cashflow for the year: Year ended 31 December 2018 £’000 Year ended 31 December 2017 £’000
Cash flow generated from operations before working capital and other items 9,112 5,819
Cash flow from operating activities 4,767 7,270
Cash flow from investing activities (3,373) (1,936)
Cash flow from financing activities 200 (429)
Net (decrease) / increase in cash and cash equivalents 1,594 4,905
Cash and cash equivalents at 1 January 4,065 (890)
Exchange adjustment 27 50
Cash and cash equivalents at 31 December 5,686 4,065
Cash and cash equivalents at 31 December comprise:
Cash and cash equivalents as presented in the balance sheet 9,221 5,327
Bank overdrafts (secured) (3,535) (1,262)
5,686 4,065
Cash flow generated from operating activities decreased compared to the prior
year to £4.8million (2017: £7.3million). The improved operating profit
during the year of £6.5million (2017: £3.8million) was offset by an increase
in income tax paid of £2.28million (2017: £0.01million) both as a result of
the high profitability of our South African mining operations. In addition,
cashflow generation from operating activities was also impacted by a cashflow
decrease from trade receivables of £0.9million (2017: increase of
£0.9million), as a result of an increase in the trade receivables balances of
our South African domestic coal customers, and a cashflow decrease from
inventories of £0.8million (2017: increase of £0.9million), mainly as a
result of reduced export coal sales from our South African mining operations
in the last quarter of 2018 due to temporary weather related issues at
Richards Bay Coal Terminal.
Investing cashflows primarily reflect the net effect of capital expenditure
during the year of £2.9million (2017: £1.8million) which can mainly be
attributable to mine development costs at Black Wattle of £1.2million
(£0.4million), the acquisition of new rehabilitation mining machinery of
£0.7million (2017: £nil) and infrastructure improvements to the washing
plant facility, dams and rail siding at Black Wattle of £0.8million (2017:
£1.2million). As at year end the group’s mining reserves, plant and
equipment had a carrying value of £8.5million (2017: £8.6million) with
capital expenditure being offset by depreciation of £2.1million (2017:
£1.8milion) and exchange translation movements of £0.8million (2017:
£0.1million) for the year. Other investing cashflows also include the new
joint venture investment in West Ealing Projects limited of £0.5million
(2017: £nil).
Cash inflows from financing activities includes an increase in borrowings
drawn attributable to our South African banking facilities of £0.75million
(2017: £0.02million) related to mining asset finance offset by dividends paid
to shareholders of £0.53million (2017: 0.43 million).
Overall, the group managed to achieve an increase in cash and cash equivalents
of £1.6million (2017: £4.9million) for the year. After taking into account
an exchange gain of £0.03million (2017: loss of £0.05million) on the
translation of the group’s year end net balance of cash and cash equivalents
that were held in South African Rands, the group’s net balance of cash and
cash equivalents (including bank overdrafts) at year end was £5.7 million
(2017: £4.1million).
The group has considerable financial resources available at short notice
including cash and cash equivalents (excluding bank overdrafts) of
£9.2million (2017: £5.3million) and investments available for sale of
£0.9million (2017: £1.1million). The above financial resources totalling
£10.1million (2017: £6.4million).
The net assets of the group reported as at year end were £20.1million (2017:
£17.7million). Total assets increased to £41.6million (2017: £36.6million)
mainly due to the movement in the groups’ cash and cash equivalents,
inventories and trade receivables held at year end, along with the groups’
joint venture investment in West Ealing Projects limited as outlined above.
Liabilities increased from £18.9million to £21.5million during the year
primarily due to an increase in South African current borrowings from
£0.03million in 2017 to £3.74million in 2018. This increase can mainly be
attributed to an increase in borrowings drawn from the groups’ South African
structured trade facility utilised by the groups’ mining operations. The
overall exchange loss recorded through the translation reserve on translation
of the group’s South African net assets at year end increased to
£0.4million (2017: gain of £0.1million) as a result of the weakening of the
South African Rand against UK sterling year to year.
Further details on the group’s cashflow and financial position are stated in
the Consolidated Cashflow Statement on page 61 and the Consolidated Balance
Sheet on page 58.
Loans
South Africa
The group has a South African structured trade finance facility with Absa Bank
Limited for R100million (South African Rand) which covers the fluctuating
working capital requirements of the group’s South African operations. As
part of the process and sale of the washing plant facilities from Black Wattle
Colliery (Pty) Limited to its wholly owned subsidiary Sisonke Coal Processing
(Pty) Limited (“Sisonke Coal Processing”), the R100million bank overdraft
facility held by Black Wattle Colliery (Pty) Limited with Absa Bank Limited at
year end was replaced in January 2019 by a new structured trade finance
facility for R100million held by Sisonke Coal Processing (“new trade
facility”). The new trade facility is renewable annually at 25 January and
is secured against inventory, debtors and cash that are held in the group’s
South African operations.
United Kingdom
In December 2014, the group signed a £6 million term loan facility with
Santander. The Loan is secured against the group’s UK retail property
portfolio. The facility has a five year term, and is repayable at the end of
the term in December 2019. The amount repayable on the loan at year end was
£5.9million (2017: £5.9million). The interest cost of the loan is 2.35%
above LIBOR. The group’s intention is to enter into a new facility agreement
prior to the termination of the existing facility agreement. Nonetheless the
group has adequate financial resources at short notice, including cash and
listed equity investments, to repay the existing facility should a new
facility not be finalised prior to December 2019. During the year the group
reduced its UK loan by £14,000 in order to rectify a breach of one of its UK
loan banking covenants. No other banking covenants were breached by the group
during the year.
Future prospects
As we continue into 2019, the group’s financial position remains strong and
we expect to achieve significant additional value from our existing mining
operations. The group continues to seek to expand its operations in South
Africa through the acquisition of additional coal reserves. In the UK,
management is looking forward to progressing its development in West Ealing
and is currently investigating other major investment opportunities in the
domestic property sector. This is in line with the groups’ overall strategy
of balancing the high risk of our mining operations with a dependable cash
flow and capital appreciation from our UK property investment operations.
Further information on the outlook of the company can be found in both the
Chairman’s Statement on page 2 and the Mining Review on page 6 which form
part of the Strategic Report.
Signed on behalf of the Board of Directors
Garrett Casey
Finance Director
25 April 2019
Governance
Governance
Management team
1 Sir Michael Heller
Chairman
Bisichi Mining PLC
2 Andrew Heller
Managing Director
Bisichi Mining PLC
Managing Director
Black Wattle Colliery
3 Christopher Joll
Senior Independent Director
Chairman Audit and Remuneration Committees
4 Garrett Casey
Finance Director
Bisichi Mining PLC
Director
Black Wattle Colliery
5 Robert Grobler
Director of Mining
Bisichi Mining PLC
Director
Black Wattle Colliery
6 Ethan Dube
Director
Black Wattle Colliery
7 Millicent Zvarayi
Director
Black Wattle Colliery
8 Nico Serfontein
Mine Manager
Black Wattle Colliery
Bisichi Mining PLC
* Sir Michael Heller
MA, FCA (Chairman)
Andrew R Heller
MA, ACA
(Managing Director)
Garrett Casey
CA (SA)
(Finance Director)
Robert Grobler
Pr Cert Eng
(Director of mining)
O+ Christopher A Joll
MA (Non-executive)
Christopher Joll was appointed a Director on 1 February 2001. He has held a
number of non-executive directorships of quoted and un-quoted companies and
currently runs his own event management business. He is also a published
author, lecturer and a writer and director of documentary films.
O * John A Sibbald
BL (Non-executive)
John Sibbald has been a Director since 1988. After qualifying as a Chartered
Accountant he spent over 20 years in stockbroking, specialising in mining and
international investment.
* Member of the nomination committee
+ Senior independent director
O Member of the audit, nomination and remuneration committees.
Directors and advisors
Secretary and registered office
Garrett Casey CA (SA)
24 Bruton Place
London W1J 6NE
Black Wattle Colliery Directors
Andrew Heller
(Managing Director)
Ethan Dube
Robert Grobler
Garrett Casey
Millicent Zvarayi
Property portfolio asset manager
James Charlton BSc MRICS
Company Registration
Company registration No. 112155 (Incorporated in England and Wales)
Website
www.bisichi.co.uk
E-mail
admin@bisichi.co.uk
Auditor
BDO LLP, London
Principal bankers
United Kingdom
Santander UK PLC
National Westminster Bank PLC
Investec PLC
South Africa
ABSA Bank (SA)
First National Bank (SA)
Standard Bank (SA)
Corporate solicitors
United Kingdom
Fladgate LLP, London
Memery Crystal, London
Olswang LLP, London
South Africa
Brandmullers Attorneys, Middelburg
Herbert Smith Freehills, Johannesburg
Hogan Lovells, Johannesburg
Eversheds Sutherland, Johannesburg
Tugendhaft Wapnick Banchetti and Partners, Johannesburg
Stockbrokers
Shore Capital Stockbrokers Limited
Registrars and 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
Five year summary
2018 £’000 2017 £’000 Restated 2016 £’000 Restated 2015 £’000 Restated 2014 £’000 Restated
Consolidated income statement items
Revenue 49,945 40,350 24,923 27,603 28,716
Operating profit/(loss) 6,526 3,763 637 150 1,364
Profit/(loss) before tax 5,959 1,485 346 (147) 1,568
Trading profit/(loss) before tax 6,397 3,317 (74) (188) 1,157
Revaluation and impairment (loss)/profit before tax (438) (1,832) 420 41 411
EBITDA 8,587 3,734 2,415 1,365 4,609
Operating profit before depreciation, fair value adjustments and exchange movements (adjusted EBITDA) 9,088 5,819 1,516 1,717 4,276
Consolidated balance sheet items
Investment properties 13,045 13,245 13,245 12,800 11,575
Fixed asset investments 1,357 925 2,703 2,112 4,090
14,402 14,170 15,948 14,912 15,665
Investments held at fair value 887 1,050 781 594 796
15,289 15,220 16,729 15,506 16,461
Other assets less liabilities less non-controlling interests 4,280 1,922 (72) (196) 854
Total equity attributable to equity shareholders 19,569 17,142 16,657 15,310 17,315
Net assets per ordinary share (attributable) 183.3p 160.6p 156.0p 143.4p 162.2p
Dividend per share 6.00p 5.00p 4.00p 4.00p 4.00p
Financial calendar
11 June 2019 Annual General Meeting
26 July 2019 Payment of final and special dividend for 2018 (if approved)
Late August 2019 Announcement of half-year results to 30 June 2019
Late April 2020 Announcement of results for year ending 31 December 2019
Governance
Directors’ report
The directors submit their report together with the audited financial
statements for the year ended 31 December 2018.
Review of business, future developments and post balance sheet events
The group continues its mining activities. Income for the year was derived
from sales of coal from its South African operations. The group also has a
property investment portfolio for which it receives rental income and a joint
venture investment in a UK residential property development.
The results for the year and state of affairs of the group and the company at
31 December 2018 are shown on pages 55 to 99 and in the Strategic Report on
pages 2 to 25. Future developments and prospects are also covered in the
Strategic Report and further details of any post balance sheet events can be
found in note 32 to the financial statements. Over 99 per cent. of staff are
employed in the South African coal mining industry – employment matters and
health and safety are dealt with in the Strategic Report.
The management report referred to in the Director’s responsibilities
statement encompasses this Directors’ Report and Strategic Report on pages 2
to 25.
Corporate responsibility
Environment
The environmental considerations of the group’s South African coal mining
operations are covered in the Strategic Report on pages 2 to 25.
The group’s UK activities are principally property investment whereby
premises are provided for rent to retail businesses and a joint venture
investment in a UK residential property development.
The group seeks to provide those tenants with good quality premises from which
they can operate in an efficient and environmentally friendly manner. Wherever
possible, improvements, repairs and replacements are made in an
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 2018 can be found on page 12 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
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.
Dividend policy
An interim dividend for 2018 of 1p was paid on 8 February 2019 (Interim 2017:
1p). The directors recommend the payment of a final dividend for 2018 of 3p
per ordinary share (2017: 3p) as well as a special dividend of 2p (2017: 1p)
making a total dividend for 2018 of 6p (2017: 5p).
Subject to shareholder approval, the total dividend per ordinary share for
2018 will be 6p per ordinary share.
The final dividend and the special dividend will be payable on Friday 26 July
2019 to shareholders registered at the close of business on 5 July 2019.
Investment properties and other properties
The investment property portfolio is stated at its open market value of
£13,045,000 at 31 December 2018 (2017: £13,245,000) as valued by
professional external valuers. The open market value of the company’s share
of investment properties and development property inventory held at cost
included within its investments in joint ventures is £4,334,000 (2017:
£1,315,000).
Financial instruments
Note 22 to the financial statements sets out the risks in respect of financial
instruments. The Board reviews and agrees overall treasury policies,
delegating appropriate authority to the managing director. Financial
instruments are used to manage the financial risks facing the group. Treasury
operations are reported at each Board meeting and are subject to weekly
internal reporting.
Directors
The directors of the company for the whole year were Sir Michael Heller, A R
Heller, G J Casey, C A Joll, R J Grobler (a South African citizen), and J A
Sibbald.
The directors retiring by rotation are Sir M A Heller, Mr C A Joll and Mr J A
Sibbald who offers themselves for re-election.
Sir Michael Heller has been an executive Director since 1972 and Chairman
since 1981. He is a Chartered Accountant and has a contract of employment
determinable at six months’ notice.
Christopher Joll was appointed a Director on 1 February 2001. He has held a
number of non-executive directorships of quoted and un-quoted companies and
currently runs his own event management business. He is also a published
author, lecturer and a writer and director of documentary films.
John Sibbald has been a non-executive Director since 1988. He is a retired
Chartered Accountant. For most of his career he was employed in stockbroking
in the City of London where he specialised in mining and international
investment. He has a contract of service determinable at three months’
notice.
No director had any material interest in any contract or arrangement with the
company during the year other than as shown in this report.
Directors’ shareholdings
The interests of the directors in the shares of the company, including family
and trustee holdings where appropriate, are shown on page 40 of the Annual
Remuneration Report.
Substantial interests
The following have advised that they have an interest in 3 per cent. or more
of the issued share capital of the company as at 15 April 2019:
London & Associated Properties PLC – 4,432,618 shares representing 41.52 per
cent. of the issued capital. (Sir Michael Heller is a director and shareholder
of London & Associated Properties PLC).
Sir Michael Heller – 330,117 shares representing 3.09 per cent. of the issued capital.
A R Heller – 785,012 shares representing 7.35 per cent. of the issued capital.
Cavendish Asset Management Limited – 1,946,154 shares representing 18.23 per cent. of the issued share capital.
James Hyslop – 350,000 shares representing 3.28 per cent. of the issued share capital.
Disclosure of information to auditor
The directors in office at the date of approval of the financial statements
have confirmed that as far as they are aware that there is no relevant audit
information of which the auditor is unaware. Each of the directors has
confirmed that they have taken all reasonable steps they ought to have taken
as directors to make themselves aware of any relevant audit information and to
establish that it has been communicated to the auditor.
Indemnities and insurance
The Articles of Association and Constitution of the company provide for them
to indemnify, to the extent permitted by law, directors and officers
(excluding the Auditor) of the companies, 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 for the purposes of the UK Companies Act 2006 and each of these
qualifying third-party indemnities was in force during the course of the
financial year ended 31 December 2018 and as at the date of this Directors’
report. No amount has been paid under any of these indemnities during the
year.
The group has purchased directors’ and officers’ insurance during the
year. In broad terms, the insurance cover indemnifies individual directors and
officers against certain personal legal liability and legal defence costs for
claims arising out of actions taken in connection with group business.
Corporate Governance
The Board acknowledges the importance of good corporate governance. The
paragraphs below set out how the company has applied this guidance during the
year.
Principles of corporate governance
The group’s Board appreciates the value of good corporate governance not
only in the areas of accountability and risk management, but also as a
positive contribution to business prosperity. The Board endeavours to apply
corporate governance principles in a sensible and pragmatic fashion having
regard to the circumstances of the group’s business. The key objective is to
enhance and protect shareholder value.
Board structure
During the year the Board comprised the executive chairman, the managing
director, two other executive directors and two non-executive directors. Their
details appear on page 29. 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 48. 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 meets
bi-monthly.
The Board is responsible for overall group strategy, approval of major capital
expenditure projects and consideration of significant financing matters.
The following Board committees, which have written terms of reference, deal
with specific aspects of the group’s affairs:
• The nomination committee is chaired by Christopher Joll and
comprises the non-executive directors 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 are used to assist the process. Each director is
subject to re-election at least 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 contractual 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 the non-executive directors. It is chaired by
Christopher Joll. The company’s executive chairman is normally invited to
attend meetings. The report on directors’ remuneration is set out on pages
37 to 44.
• The audit committee comprises the two non-executive directors and
is chaired by Christopher Joll. Its prime tasks are to review the scope of
external audit, to receive regular reports from the company’s auditor 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
judgment and estimation. The committee is responsible for monitoring the
controls which are in force to ensure the integrity of the information
reported to the shareholders. The committee acts as a forum for discussion of
internal control issues and contributes to the Board’s review of the
effectiveness of the group’s internal control and risk management systems
and processes. The committee also considers annually the need for an internal
audit function. It advises the Board on the appointment of external auditors
and on their remuneration for both audit and non-audit work, and discusses the
nature and scope of the audit with the external auditors. The committee, which
meets formally at least twice a year, provides a forum for reporting by the
group’s external auditors.
Meetings are also attended, by invitation, by the company chairman, managing
director and finance director.
The audit committee also undertakes a formal assessment of the auditors’
independence each year which includes:
• a review of non-audit services provided to the group and related
fees;
• discussion with the auditors of a written report detailing
consideration of any matters that could affect independence or the perception
of independence;
• 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
• obtaining written confirmation from the auditors that, in their
professional judgement, they are independent.
The audit committee report is set out on page 45.
An analysis of the fees payable to the external audit firm in respect of both
audit and non-audit services during the year is set out in Note 5 to the
financial statements.
Performance evaluation – board, board committees and directors
The performance of the board as a whole and of its committees and the
non-executive directors is assessed by the chairman and the managing director
and is discussed with the senior independent 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 and both the executive and
non-executive directors individually outside of formal meetings. The directors
will take outside advice in reviewing performance but have not found this
necessary to date.
Independent directors
The senior independent non-executive director is Christopher Joll. The other
independent non-executive director is John Sibbald.
Christopher Joll has been a non-executive director for over eighteen years and
John Sibbald has been a non-executive director for over thirty years. The
Board encourages Christopher Joll and John Sibbald to act independently. The
board considers that their length of service does not, and has not, resulted
in their inability or failure to act independently. In the opinion of the
Board, Christopher Joll and John Sibbald continue to fulfil their role as
independent non-executive directors.
The independent directors regularly meet prior to Board meetings to discuss
corporate governance issues.
Board and board committee meetings
The number of meetings during 2018 and attendance at regular Board meetings
and Board committees was as follows:
Meetings held Meetings Attended
Sir Michael Heller Board Nomination committee Audit committee 5 1 2 5 1 2
A R Heller Board Audit committee 5 2 5 2
G J Casey Board Audit committee 5 2 5 2
R J Grobler Board 5 1
C A Joll Board Audit committee Nomination committee Remuneration committee 5 2 1 1 5 2 1 1
J A Sibbald Board Audit committee Nomination committee Remuneration committee 5 2 1 1 5 2 1 1
Internal control
The directors are responsible for the group’s system of internal control and
review of its effectiveness annually. The Board has designed the group’s
system of internal control in order to provide the directors with reasonable
assurance that its 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 with a formal schedule of matters
reserved to it for 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;
• UK property and financial operations are closely monitored by
members of the Board and senior managers to enable them to assess risk and
address the adequacy of measures in place for its monitoring and control. The
South African operations are closely supervised by the UK based executives
through daily, weekly and monthly reports from the directors and senior
officers in South Africa. This is supplemented by monthly visits by the UK
based finance director to the South African operations which include checking
the integrity of information supplied to the UK. The directors are guided by
the internal control guidance for directors issued by the Institute of
Chartered Accountants in England and Wales.
During the period, the audit committee has reviewed the effectiveness of
internal control as described above. The Board receives periodic reports from
its committees.
There were no significant issues identified during the year ended 31 December
2018 (and up to the date of approval of the report) concerning 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
Communication with shareholders is a matter of priority. Extensive information
about the group and its activities is given in the Annual Report, which is
made available to shareholders. Further information is available on the
company’s website, www.bisichi.co.uk. There is a regular dialogue with
institutional investors. Enquiries from individuals on matters relating to
their shareholdings and the business of the group are dealt with informatively
and promptly.
Takeover directive
The company has one class of share capital, ordinary shares. Each ordinary
share carries one vote. All the ordinary shares rank pari passu. There are no
securities issued in the company which carry special rights with regard to
control of the company. The identity of all substantial direct or indirect
holders of securities in the company and the size and nature of their holdings
is shown under the “Substantial interests” section of this report above.
A relationship agreement dated 15 September 2005 (the “Relationship
Agreement”) was entered into between the company and London & Associated
Properties PLC (“LAP”) in regard to the arrangements between them whilst
LAP is a controlling shareholder of the company. The Relationship Agreement
includes a provision under which LAP has agreed to exercise the voting rights
attached to the ordinary shares in the company owned by LAP to ensure the
independence of the Board of directors of the company.
Other than the restrictions contained in the Relationship Agreement, there are
no restrictions on voting rights or on the transfer of ordinary shares in the
company. 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 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.
The Bribery Act 2010
The Bribery Act 2010 came into force on 1 July 2011, and the Board took the
opportunity to implement a new Anti-Bribery Policy. The company is committed
to acting ethically, fairly and with integrity in all its endeavours and
compliance of the code is closely monitored.
Annual General Meeting
The annual general meeting of the company (“Annual General Meeting”) will
be held at 24 Bruton Place, London W1J 6NE on Tuesday, 11 June 2019 at 11.00
a.m. Resolutions 1 to 10 will be proposed as ordinary resolutions. More than
50 per cent. of shareholders’ votes cast must be in favour for those
resolutions to be passed.
The directors consider that all of the resolutions to be put to the meeting
are in the best interests of the company and its shareholders as a whole. The
Board recommends that shareholders vote in favour of all resolutions.
Please note that the following paragraph is a summary of resolution 10 to be
proposed at the Annual General Meeting and not the full text of the
resolution. You should therefore read this section in conjunction with the
full text of the resolutions contained in the notice of Annual General
Meeting.
Directors’ authority to allot shares (Resolution 10)
In certain circumstances it is important for the company to be able to allot
shares up to a maximum amount without needing to seek shareholder approval
every time an allotment is required. 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 £355,894. This represents approximately
1/3 (one third) of the ordinary share capital of the company in issue
(excluding treasury shares) at 24 April 2019 (being the last practicable date
prior to the publication of this Directors’ Report). 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 £355,894, in
connection with a pre-emptive rights issue. This amount represents
approximately 1/3 (one third) of the ordinary share capital of the company in
issue (excluding treasury shares) at 24 April 2019 (being the last practicable
date prior to the publication of this Directors’ Report).
Therefore, the maximum nominal value of shares or rights to subscribe for, or
convert any security into, shares which may be allotted or granted under
resolution 10 is £711,788.
Resolution 10 complies with guidance issued by the Investment Association
(IA).
The authority granted by resolution 10 will expire on 31 August 2020 or, if
earlier, the conclusion of the next annual general meeting of the company. The
directors have no present intention to make use of this authority. However, if
they do exercise the authority, the directors intend to follow emerging best
practice as regards its use as recommended by the IA.
Donations
No political donations were made during the year (2017: £nil).
Going concern
The group’s business activities, together with the factors likely to affect
its future development are set out in the Chairman’s Statement on the
preceding page 2, the Mining Review on pages 6 to 7 and its financial position
is set out on page 23 of the Strategic Report. In addition Note 22 to the
financial statements includes the group’s treasury policy, interest rate
risk, liquidity risk, foreign exchange risks and credit risk.
The group has prepared cash flow forecasts which demonstrate that the group
has sufficient resources to meet its liabilities as they fall due for at least
the next 12 months.
In South Africa, a structured trade finance facility with Absa Bank Limited
for R100million is held by Sisonke Coal Processing (Pty) Limited, a 100%
subsidiary of Black Wattle Colliery (Pty) Limited. This facility comprises of
a R100million revolving facility to cover the working capital requirements of
the group’s South African operations. The facility is renewable annually at
25 January and is secured against inventory, debtors and cash that are held in
the group’s South African operations. The Directors do not foresee any
reason why the facility will not continue to be renewed at the next renewal
date, in line with prior periods and based on their banking relationships.
The directors expect that that the coal market conditions experienced by Black
Wattle Colliery, its direct mining asset, in 2018 and the first quarter of
2019 will be similar going into the remainder of 2019. The directors therefore
have a reasonable expectation that the mine will achieve positive levels of
cash generation for the group in 2019. As a consequence, the directors believe
that the group is well placed to manage its South African business risks
successfully.
In the UK, a £6 million term loan facility repayable in December 2019 is held
with Santander Bank PLC. The loan is secured against the company’s UK retail
property portfolio. The amount repayable on the loan at year end was
£5.9million (2017: £5.9million). The debt package has a five year term and
is repayable at the end of the term. The interest cost of the loan is 2.35%
above LIBOR. The group’s intention is to enter into a new facility agreement
prior to the termination of the existing facility agreement. Nonetheless the
group has adequate financial resources at short notice, including cash and
listed equity investments, to repay the existing facility should a new
facility not be finalised prior to December 2019. In addition its investment
property assets benefit from long term leases with the majority of its
tenants.
As a result of the banking facilities held as well as the acceptable levels of
profitability and cash generation the group’s South African operations is
expected to achieve for the next 12 months, the Directors believe that the
group has adequate resources to continue in operational existence for the
foreseeable future and that the 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.
By order of the board
G.J Casey
Secretary
24 Bruton Place
London W1J 6NE
25 April 2019
Governance
Statement of the Chairman of the remuneration committee
The remuneration committee presents its report for the year ended 31 December
2018.
The Annual Remuneration Report 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 2019.
A copy of the remuneration policy, which details the remuneration policy for
directors, can be found at www.bisichi.co.uk. The current remuneration policy
was subject to a binding vote which was approved by shareholders at the AGM in
June 2017. The approved policy took effect from 7 June 2017 and will apply
for a three year period.
The remuneration committee reviewed the existing policy and deemed no changes
necessary to the current arrangements.
Both of the above reports have been prepared in accordance with The Large and
Medium-sized Companies and Groups (Accounts and Reports) (Amendment)
Regulations 2013.
The company’s auditors, BDO LLP are required by law to audit certain
disclosures and where disclosures have been audited they are indicated as
such.
Christopher Joll
Chairman – remuneration committee
24 Bruton Place
London W1J 6NE
25 April 2019
Governance
Annual remuneration report
The following information has been audited:
Single total figure of remuneration for the year ended 31 December 2018:
Salaries and Fees £’000 Bonuses £’000 Benefits £’000 Pension £’000 Total Share options £’000 Total 2018 £’000
before
Share
options
£’000
Executive Directors
Sir Michael Heller 82 200 2 - 284 - 284
A R Heller 495 500 71 5 1,071 2 1,073
G J Casey 143 200 28 20 391 2 393
R Grobler 201 137 27 14 379 - 379
Non–Executive Directors
C A Joll* 33 - - - 33 - 33
J A Sibbald* 2 - 3 - 5 - 5
Total 956 1,037 131 39 2,163 4 2,167
*Members of the remuneration committee for the year ended 31 December 2018
Single total figure of remuneration for the year ended 31 December 2017:
Salaries and Fees £’000 Bonuses £’000 Benefits £’000 Pension £’000 Total Share options £’000 Total 2017 £’000
before
Share
options
£’000
Executive Directors
Sir Michael Heller 75 - - - 75 - 75
A R Heller 450 350 66 32 898 - 898
G J Casey 133 125 14 18 290 - 290
R Grobler 188 122 16 11 337 - 337
Non–Executive Directors
C A Joll* 30 - - - 30 - 30
J A Sibbald* 2 - 3 - 5 - 5
Total 878 597 99 61 1,635 - 1,635
*Members of the remuneration committee for the year ended 31 December 2017
Summary of directors’ terms Date of contract Unexpired term Notice period
Executive directors
Sir Michael Heller November 1972 Continuous 6 months
A R Heller January 1994 Continuous 3 months
G J Casey June 2010 Continuous 3 months
R J Grobler April 2008 Continuous 3 months
Non-executive directors
C A Joll February 2001 Continuous 3 months
J A Sibbald October 1988 Continuous 3 months
Pension schemes and incentives
Three (2017: Three) directors have benefits under money purchase pension
schemes. Contributions in 2018 were £39,000 (2017: £61,000), see table
above.
Scheme interests awarded during the year
During the year the company granted options over ordinary shares in the
Company of 10 pence (the “Options”) to the following directors of the
Company, under the Company’s Unapproved Executive Share Option Scheme 2012
(“the Scheme”), as set out below:
• Andrew Heller: 150,000 options granted on 6 February 2018 at an
exercise price of £0.7350 per share
• Garrett Casey: 230,000 options granted on 6 February 2018 at an
exercise price of £0.7350 per share
The above Options are subject to the terms and conditions set out in the rules
of the Scheme, and subject to the memorandum and articles of association of
the Company. These Options are exercisable at any time during the next 10
years from the dates of grant stated above. No consideration has been paid for
the granting of these Options.
Share option schemes
The company currently has only Unapproved Share Option Scheme which is not
subject to HM revenue and Customs (HMRC) approval. The 2012 scheme was
approved by the remuneration committee of the company on 28 September 2012.
The “2010 Scheme” which was approved by shareholders on 7 June 2011, was
cancelled on the 5 February 2018 when the company entered into an agreement
with Garrett Casey to surrender the 80,000 Options which were granted on 31
August 2010 under the Scheme. The aggregate consideration paid by the Company
to effect the cancellation was £1.
Number of share options
Option price* 1 January 2018 Options granted/( Surrendered) in 2018 31 December 2018 Exercisable from Exercisable to
The 2010 Scheme
G J Casey 202.05p 80,000 (80,000) - 31/08/2013 30/08/2020
The 2012 Scheme
A R Heller 87.01p 150,000 - 150,000 18/09/2015 17/09/2025
A R Heller 73.50p - 150,000 150,000 06/02/2018 06/02/2028
G J Casey 87.01p 150,000 - 150,000 18/09/2015 17/09/2025
G J Casey 73.50p - 230,000 230,000 06/02/2018 06/02/2028
*Middle market price at date of grant
No consideration is payable for the grant of options under the 2012 Unapproved
Share Option Scheme. There are no performance or service conditions attached
to the 2012 Unapproved Share Option scheme.
Payments to past directors
No payments were made to past directors in the year ended 31 December 2018
(2017: £nil).
Payments for loss of office
No payments for loss of office were made in the year ended 31 December 2018
(2017: £nil).
Statement of Directors’ shareholding and share interest
Directors’ interests
The interests of the directors in the shares of the company, including family
and trustee holdings where appropriate, were as follows:
Beneficial Non-beneficial
31.12.2018 1.1.2018 31.12.2018 1.1.2018
Sir Michael Heller 148,783 148,783 181,334 181,334
A R Heller 785,012 785,012 - -
C A Joll - - - -
J A Sibbald - - - -
R J Grobler - - - -
G J Casey 40,000 40,000 - -
The following section is unaudited.
The following graph illustrates the company’s performance compared with a
broad equity market index over a ten year period. Performance is measured by
total shareholder return. The directors have chosen the FTSE All Share Mining
index as a suitable index for this comparison as it gives an indication of
performance against a spread of quoted companies in the same sector.
The middle market price of Bisichi Mining PLC ordinary shares at 31 December
2018 was 92.5p (2017: 70.5p). During the year the share price ranged between
70.5p and 117.5p.
Remuneration of the Managing Director over the last ten years
The table below demonstrates the remuneration of the holder of the office of
Managing Director for the last ten years for the period from 1 January 2009
to 31 December 2018.
Year Managing Director Managing Director Single total figure of remuneration £’000 Annual bonus payout against maximum opportunity* % Long-term incentive vesting rates against maximum opportunity* %
2018 A R Heller 1,073 34% N/A
2017 A R Heller 898 25% N/A
2016 A R Heller 850 22% N/A
2015 A R Heller 912 22% N/A
2014 A R Heller 862 22% N/A
2013 A R Heller 614 N/A N/A
2012 A R Heller 721 N/A N/A
2011 A R Heller 626 N/A N/A
2010 A R Heller 568 N/A N/A
2009 A R Heller 817 N/A N/A
Bisichi Mining PLC does not have a Chief Executive so the table includes the
equivalent information for the Managing Director.
*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 remuneration of director undertaking role of Managing
Director
Managing Director £’000 UK based employees £’000
2018 2017 % change 2018 2017 % change
Base salary 495 450 10% 225 208 8%
Benefits 71 66 8% 30 14 114%
Bonuses 500 350 43% 400 125 220%
Bisichi Mining PLC does not have a Chief Executive so the table includes the
equivalent information for the Managing Director. The comparator group chosen
is all UK based employees as the remuneration committee believe this provides
the most accurate comparison of underlying increases based on similar annual
bonus performances utilised by the group.
Relative importance of spend on pay
The total expenditure of the group on remuneration to all employees (see Notes
29 and 9 to the financial statements) is shown below:
2018 £’000 2017 £’000
Employee remuneration 7,335 6,396
Distribution to shareholders 641 534
Statement of implementation of new remuneration policy
The remuneration policy was approved at the AGM in June 2017. The policy took
effect from 7 June 2017 and will apply for 3 years unless changes are deemed
necessary by the Remuneration committee. The company may not 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.
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 2018.
Shareholder voting
At the Annual General Meeting on 6 June 2018, there was an advisory vote on
the resolution to approve the remuneration report, other than the part
containing the remuneration policy. In addition, on 7 June 2017 there was a
binding vote on the resolution to approve the current remuneration policy the
results of which are detailed below:
% of votes for % of votes against No of votes withheld
Resolution to approve the Remuneration Report (6 June 2018) 70.72% 29.28% -
Resolution to approve the Remuneration Policy (7 June 2017) 74.77% 25.16% -
Service contracts
All executive directors have full-time contracts of employment with the
company. Non-executive directors have contracts of service. No director has a
contract of employment or contract of service with the company, its joint
venture or associated companies with a fixed term which exceeds twelve months.
Directors notice periods (see page 39 of the annual remuneration report) are
set in line with market practice and of a length considered sufficient to
ensure an effective handover of duties should a director leave the company.
All directors’ contracts as amended from time to time, have run from the
date of appointment. Service contracts are kept at the registered office.
Remuneration policy table
The remuneration policy table below is an extract of the group’s current
remuneration policy on directors’ remuneration, which was approved by a
binding vote at the 2017 AGM. The approved policy took effect from 7 June
2017. A copy of the full policy can be found at www.bisichi.co.uk.
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 Paid monthly in cash No individual director will be awarded a base salary in excess of £700,000 per annum.
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 can include but are not limited to: 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 his
base salary. No specific performance conditions are attached to contractual benefits.
The value of benefits for each director for the year ended 31 December 2018 is shown
in the table on page 38.
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. Bonuses are generally offered in cash The remuneration committee determines the level of bonus on an annual basis applying such performance conditions and performance measures as it considers appropriate The current maximum bonus opportunity 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 Granted under existing schemes (see page 39) Offered at appropriate times by the remuneration committee Entitlement to share options is not subject to any specific performance conditions.
Share options will be offered by the remuneration committee as appropriate. 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. In
determining the limits no account shall be taken of any shares where the right to
acquire the shares has been released, lapsed or has otherwise become incapable of
exercise. The company currently has two Share Option Schemes (see page 39). The
performance conditions for the 2010 scheme requires growth in net assets over a three
year period to exceed the growth in the retail price index by a scale of percentages.
For the 2012 scheme the remuneration committee has the ability to impose performance
criteria in respect of any new share options granted, however there is no requirement
to do so. There are no performance conditions attached to the options already issued
under the 2012 scheme.
Non-executive directors
Base salary To recognise: Skills Experience 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 director will be awarded a base salary in excess of £40,000 per annum.
No specific 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 38) 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 the benefit offered is closely controlled and reviewed on
an annual basis. No director will receive benefits of a value in excess of 30% of his
base salary. No specific performance conditions are attached to contractual benefits.
Share Options Non-executive directors do not participate in the share option schemes
In order to ensure that shareholders have sufficient clarity over director
remuneration levels, the company has, where possible, specified a maximum that
may be paid to a director in respect of each component of remuneration. The
remuneration committee consider the performance measures outlined in the table
above to be appropriate measures of performance and that the KPI’s chosen
align the interests of the directors and shareholders.
For details of remuneration of other company employees can be found in Note 29
to the financial statements.
Audit committee report
The committee’s terms of reference have been approved by the board and
follow published guidelines, which are available from the company secretary.
The audit committee comprises the two non-executive directors, Christopher
Joll (chairman), an experienced financial PR executive and John Sibbald, a
retired chartered accountant.
The Audit Committee’s prime tasks are to:
• review the scope of external audit, to receive regular reports
from the auditor 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 judgment and estimation;
• monitor the controls which are in force to ensure the integrity of
the information reported to the shareholders;
• assess key risks 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;
• 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;
• consider each year the need for an internal audit function;
• advise the board on the appointment of external auditors and
rotation of the audit partner every five years, and on their remuneration for
both audit and non-audit work, and discuss the nature and scope of their audit
work;
• participate in the selection of a new external audit partner and
agree the appointment when required;
• undertake a formal assessment of the auditors’ independence each
year which includes:
~ a review of non-audit services provided to the
group and related fees;
~ discussion with the auditors of a written report
detailing all relationships with the company and any other parties that could
affect independence or the perception of independence;
~ 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
~ obtaining written confirmation from the auditors
that, in their professional judgement, they are independent.
Meetings
The committee meets prior to the annual audit with the external auditors to
discuss the audit plan and again prior to the publication of the annual
results. These meetings are attended by the external audit partner, managing
director, director of finance and company secretary. Prior to bi-monthly board
meetings the members of the committee meet on an informal basis to discuss any
relevant matters which may have arisen. Additional formal meetings are 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 due to the size and nature of operation there was not
a current need for an internal audit function;
• agreed the independence of the auditors and approved their fees
for both audit related and non-audit services as set out in note 5 to the
financial statements.
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 judgment and/or estimation. When assessing the
identified financial reporting matters, the committee assessed quantitative
materiality primarily by reference to profit before tax. The Board also gave
consideration to the carrying value of the group’s total assets, given that
the group operates a principally asset based business as well as the value of
revenues generated by the group, given the importance of production, and its
Adjusted EBITDA, given that it is a key trading KPI, when determining
quantitative materiality. 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 £300,000 to £350,000 to be material.
External Auditors
BDO LLP held office throughout the year. In the United Kingdom the company is
provided with extensive administration and accounting services by London &
Associated Properties PLC which has its own audit committee and employs a
separate firm of external auditors, RSM UK Audit LLP. BDO South Africa Inc.
(formerly GT (Jhb) Inc.) acts as the external auditor to the South African
companies, and the work of that firm was reviewed by BDO LLP for the purpose
of the group audit.
Christopher Joll
Chairman – audit committee
24 Bruton Place
London W1J 6NE
25 April 2019
Valuers’ certificates
To the directors of Bisichi Mining PLC
In accordance with your instructions we have carried out a valuation of the
freehold property interests held as at 31 December 2018 by the company as
detailed in our Valuation Report dated 28 January 2019.
Having regard to the foregoing, we are of the opinion that the open market
value as at 31 December 2018 of the interests owned by the company was
£13,045,000 being made up as follows:
£’000
Freehold 10,350
Leasehold 2,695
13,045
Leeds 28 January 2019 Carter Towler Regulated by Royal Institute of Chartered Surveyors
Directors’ responsibilities statement
The directors are responsible for preparing the annual report and the
financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each
financial year. Under that law the directors are required to prepare the group
financial statements in accordance with International Financial Reporting
Standards as adopted by the European Union and have elected to prepare the
company financial statements in accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom Accounting Standards and
applicable law). Under company law the directors must not approve the
financial statements unless they are satisfied that they give a true and fair
view of the state of affairs of the group and company and of the profit or
loss for the group for that period.
In preparing these financial statements, the directors are required to:
• select suitable accounting policies and then apply them
consistently;
• make judgements and accounting estimates that are reasonable and
prudent;
• state with regard to the group financial statements whether they
have been prepared in accordance with IFRSs as adopted by the European Union
subject to any material departures disclosed and explained in the financial
statements;
• state with regard to the parent company financial statements,
whether applicable UK accounting standards have been followed, subject to any
material departures disclosed and explained in the financial statements;
• prepare the financial statements on the going concern basis unless
it is inappropriate to presume that the company and the group will continue in
business; and
• prepare a director’s report, a strategic report and director’s
remuneration report which comply with the requirements of the Companies Act
2006.
The directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the company’s transactions and disclose with
reasonable accuracy at any time the financial position of the company and
enable them to ensure that the financial statements comply with the Companies
Act 2006 and, as regards the group financial statements, Article 4 of the IAS
Regulation. They are also responsible for safeguarding the assets of the
company and hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities. The Directors are responsible for ensuring
that the annual report and accounts, taken as a whole, are fair, balanced, and
understandable and provides the information necessary for shareholders to
assess the group’s performance, business model and strategy.
Website publication
The directors are responsible for ensuring the annual report and the financial
statements are made available on a website. Financial statements are published
on the company’s website in accordance with legislation in the United
Kingdom governing the preparation and dissemination of financial statements,
which may vary from legislation in other jurisdictions. The maintenance and
integrity of the company’s website is the responsibility of the directors.
The directors’ responsibility also extends to the ongoing integrity of the
financial statements contained therein.
Directors’ responsibilities pursuant to DTR4
The directors confirm to the best of their knowledge:
• the group financial statements have been prepared in accordance
with International Financial Reporting Standards (IFRSs) as adopted by the
European Union and Article 4 of the IAS Regulation and give a true and fair
view of the assets, liabilities, financial position and profit and loss of the
group.
• the annual report includes a fair review of the development and
performance of the business and the financial position of the group and the
parent company, together with a description or the principal risks and
uncertainties that they face.
Independent auditor’s report
To the members of Bisichi Mining PLC
Opinion
We have audited the financial statements of Bisichi Mining Plc (the ‘Parent
Company’) and its subsidiaries (the ‘Group’) for the year ended 31
December 2018 which comprise the consolidated income statement, the
consolidated statement of other comprehensive income, the consolidated balance
sheet, the consolidated statement of changes in shareholders’ 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 Financial Reporting Standard 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 2018 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 the 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 and viability statement
We have nothing to report in respect of the following information in the
annual report, in relation to which the ISAs (UK) require us to report to you
whether we have anything material to add or draw attention to:
* 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 including 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.
The following key audit matters were identified for the period under review:
KEY AUDIT MATTER HOW THE MATTER WAS ADDRESSED IN OUR AUDIT
Property Valuation. The Group holds investment property at fair value (see note 11 and Key judgements and estimates) together with further investment property held at fair value in the Group’s Dragon Retail Joint Venture (note 14). The assessment of fair value for the property portfolio requires significant judgement and estimates by the Directors, including assessment of independent third party valuations obtained for the portfolio. Each valuation requires consideration of the individual nature of the property, its location, its cash flows and comparable market transactions. The valuation of these properties requires assessment of the market yield as well as consideration of the current rental agreements. Any significant input inaccuracies or unreasonable bases used in these judgements (such as in respect of estimated rental value and net initial yield applied) could result in a material misstatement. There is also an inherent risk that management may influence valuation judgments. Given these factors, this area was considered to be a significant focus for our audit given the subjective nature of certain assumptions inherent in each valuation. We obtained an understanding of management’s approach to the valuation of investment properties. We reviewed the independent external valuation reports and confirmed their consistency with the valuations presented in the financial statements. We met with
the Group’s independent external valuers, who valued all of the Group’s investment properties, to understand the assumptions and methodologies used in valuing these properties, the market evidence supporting the valuation assumptions and the valuation
movements in the period. We assessed the competency, independence and objectivity of the independent external valuer which included making inquiries regarding interests and relationships that may have created a threat to the valuer’s objectivity. We have
reviewed the scope of the valuation and confirmed that it is in accordance with the Statements of Asset Valuation and Guidance Notes published by The Royal Institution of Chartered Surveyors. We used our knowledge and experience to evaluate and challenge
the valuation assumptions, methodologies and the inputs used. This included establishing our own range of expectations for the valuation of investment property based on externally available metrics. We agreed a sample of key observable valuation inputs
supplied to and used by the external valuer and Directors to information audited by us, where applicable, or supporting market documentation.
Key observations We found the valuations determined by the Group for its investment properties in note 11 and investment properties included within the Dragon retail Joint Venture in note 14 to be consistent with the independent external valuation reports.
Revenue recognition The group generated revenues from coal sales, rental income and service charge income (See note 2 and Group Accounting Policies). We considered it appropriate, noting that this was the first year of application of IFRS 15, to assess the appropriateness of the group’s revenue recognition policies and their application for compliance with IFRS. In addition, we considered there to be a risk that coal sales revenue is recorded in the incorrect period. As reported under the group accounting policies, during the course of the audit a material error was identified in respect of the group’s accounting treatment of transport costs to deliver export coal to the export terminal under a specific agreement. Such transport costs were previously incorrectly recorded as a deduction against revenue. Management have revised the accounting treatment in 2018 and restated the prior year revenue and operating costs accordingly. The impact on FY 2018 is to increase revenue and operating costs by £3.1m. The impact of the prior year restatement was to increase revenue and operating costs by £2.9m. There is no profit or net assets effect of the restatement. We assessed the group’s revenue recognition policy for domestic and export coal sales for compliance with the relevant accounting standard. In doing so, we reviewed sales contracts and terms with material customers. We tested controls over domestic coal
sales focused on the authorisation and recording of revenue. We performed tests of detail verifying a sample of domestic revenue to supporting documentation. We obtained third party confirmations which we confirmed to amounts recorded in the ledgers for
export sales and confirmed a sample of sales to contract terms. We tested the recording of revenue around the year end and assessed the revenue recognition point for consistency with the group’s revenue recognition policy, customer terms and supporting
documents regarding despatch / delivery as applicable. We reviewed credit notes around the year end for indications that revenue had been inappropriately recorded. In respect of the change in accounting treatment for transport costs and associated
restatement of the prior year revenues and operating costs, we have reviewed the relevant contract and assessed the appropriateness of the accounting treatment under relevant accounting standards for the current and prior period. In doing so, we consulted
with our financial reporting technical experts. We have agreed a sample of the costs to supporting documentation and reviewed the general ledgers in detail to check the completeness and accuracy of the adjustments in the current and prior period.
Key observations We found the Group’s revenue recognition policies to be compliant with IFRS and found that, subsequent to the restatement and adjustment, revenue is recorded in line with the Group’s stated policies.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit,
and in evaluating the effect of misstatements. We consider materiality to be
the magnitude by which misstatements, including omissions, could influence the
economic decisions of reasonable users that are taken on the basis of the
financial statements. Importantly, misstatements below these levels will not
necessarily be evaluated as immaterial as we also take into account of the
nature of identified misstatements, and the particular circumstances of their
occurrence, when evaluating their effect on the financial statements as a
whole.
The Materiality level we applied was calculated based on 5% of profit before
tax (2017: 1% of total assets), reflecting the result for the year and the
fact that the Group is no longer in a transitionary phase of mining in respect
of its South African operations.
The key materiality figures used in the audit are detailed in the table below.
Materiality FY2018 FY2017
Materiality for the Financial Statements as a whole £300,000 £300,000
Performance Materiality levels used for the audits of the significant components of the audit £26,000 to £188,000 £24,000 to £170,000
Materiality for the Parent Company £220,000 £225,000
Performance materiality for the Parent Company £165,000 £170,000
Audit scope coverage 100% of total assets, 100% of revenue and 100% of profit before tax 100% of total assets, 100% of revenue and 100% of profit before tax
Performance materiality is the application of materiality at the individual
account or balance level set at an amount to reduce to an appropriately low
level the probability that the aggregate of uncorrected and undetected
misstatements exceeds materiality for the financial statements as a whole.
We agreed with the audit committee that we would report to the committee all
individual audit differences identified during the course of our audit in
excess of £15,000 (2017: £15,000). We also agreed to report differences
below these thresholds that, in our view, warranted reporting on qualitative
grounds.
An overview of the scope of our audit
Whilst Bisichi Mining Plc is a company listed on the Standard Segment of the
London Stock Exchange, the Group’s operations principally comprise property
interests in the United Kingdom and an operating mine located in South Africa.
We assessed there to be 6 significant components within the Group, comprising
the mine in South Africa, corporate accounting function and property
companies.
We performed a full scope audit of each of the UK property companies,
corporate accounting function and consolidation.
A BDO member firm performed a full scope audit of the mine in South Africa,
under our direction and supervision as Group auditors under ISA (UK) 600.
As part of our audit strategy, as Group auditors:
* Detailed Group reporting instructions were sent to the component auditor,
which included the significant areas to be covered by the audit (including
areas that were considered to be key audit matters as detailed above), and set
out the information required to be reported to the Group audit team.
* The audit partner visited the Group’s mining operation to update our
understanding of the operations and meet with component management.
* We performed a review of the component audit files and held meetings with
the component audit team during the planning and completion phases of their
audit.
* The Group audit team was actively involved in the direction of the audits
performed by the component auditors for Group reporting purposes, along with
the consideration of findings and determination of conclusions drawn. We
performed our own additional procedures in respect of the significant risk
areas that represented Key Audit Matters in addition to the procedures
performed by the component auditor.
* The remaining non-significant companies within the Group were principally
subject to analytical review procedures.
Other information
The Directors are responsible for the other information. The other information
comprises the information included in the Bisichi Mining Plc Annual Report
2018, other than the financial statements and our auditor‘s report thereon.
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 those reports 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 its 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 48, 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.
A further description of our responsibilities for the audit of the financial
statements is located on the Financial Reporting Council’s website
at: www.frc.org.uk/auditorsresponsibilities. This description forms part of
our auditor’s report.
Other matters which we are required to address
Following the recommendation of the audit committee, we were appointed to
audit the financial statements for the year ending 31 December 2018 and
subsequent financial periods. The period of total uninterrupted engagement is
31 years, covering the years ending 1987 to 2018.
Under the FRC’s Ethical Standard we are required to rotate off as the
Company’s Auditors in 2021. During the uninterrupted engagement period the
engagement partner has rotated in accordance with the applicable requirements.
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.
Our audit opinion is consistent with the additional report to the audit
committee.
Use of our report
This report is made solely to the Parent Company’s members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit
work has been undertaken so that we might state to the Parent Company’s
members those matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we
do not accept or assume responsibility to anyone other than the Parent Company
and the Parent Company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.
Ryan Ferguson
(Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, United Kingdom
25 April 2019
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127).
Consolidated income statement
for the year ended 31 December 2018
Notes 2018 Trading £’000 2018 Revaluations and 2018 Total £’000 2017 Trading £’000 Restated 2017 Revaluations and impairment £’000 2017 Total £’000 Restated
impairment £’000
Group revenue 2 49,945 - 49,945 40,350 - 40,350
Operating costs 3 (40,857) - (40,857) (34,531) - (34,531)
Operating profit before depreciation, fair value adjustments and exchange movements 9,088 - 9,088 5,819 - 5,819
Depreciation 3 (2,113) - (2,113) (1,790) - (1,790)
Operating profit before fair value adjustments and exchange movements 1 6,975 - 6,975 4,029 - 4,029
Exchange losses (63) - (63) (256) - (256)
Decrease in value of investment properties 4 - (215) (215) - (13) (13)
Gain on disposal of other investments available for sale - - - 3 - 3
Loss on investments held at fair value - (171) (171) - - -
Operating profit/(loss) 1 6,912 (386) 6,526 3,776 (13) 3,763
Share of (loss)/profit in joint ventures 13 - (52) (52) - 8 8
Write-off of investment in joint venture 13 - - - - (1,827) (1,827)
Profit/(loss) before interest and taxation 6,912 (438) 6,474 3,776 (1,832) 1,944
Interest receivable 126 - 126 205 - 205
Interest payable 7 (641) - (641) (664) - (664)
Profit/(loss) before tax 5 6,397 (438) 5,959 3,317 (1,832) 1,485
Taxation 8 (1,971) 55 (1,916) (588) 24 (564)
Profit/(loss) for the year 4,426 (383) 4,043 2,729 (1,808) 921
Attributable to:
Equity holders of the company 3,697 (383) 3,314 2,557 (1,808) 749
Non-controlling interest 27 729 - 729 172 - 172
Profit/(loss) for the year 4,426 (383) 4,043 2,729 (1,808) 921
Profit per share – basic 10 31.05p 7.02p
Profit per share – diluted 10 30.85p 7.02p
Trading gains and losses reflect all the trading activity on mining and
property operations and realised gains. Revaluation gains and losses reflects
the revaluation of investment properties and other assets within the group and
any proportion of unrealised gains and losses within Joint Ventures. The total
column represents the consolidated income statement presented in accordance
with IAS 1. A revenue recognition error was identified in respect of the prior
year. An amount of £2,891,000 had been incorrectly recorded as a deduction
against revenue rather than shown as an operating cost. The above comparatives
have been restated accordingly. Refer to the group’s accounting policies on
page 62.
Financial statements
Consolidated statement of other comprehensive income
for the year ended 31 December 2018
2018 £’000 2017 £’000
Profit for the year 4,043 921
Other comprehensive income/(expense):
Items that may be subsequently recycled to the income statement:
Exchange differences on translation of foreign operations (430) 91
Gain on available for sale investments - 103
Taxation - (20)
Other comprehensive income for the year net of tax (430) 174
Total comprehensive income for the year net of tax 3,613 1,095
Attributable to:
Equity shareholders 2,937 912
Non-controlling interest 676 183
3,613 1,095
Financial statements
Consolidated balance sheet
at 31 December 2018
Notes 2018 £’000 2017 £’000
Assets
Non-current assets
Value of investment properties 11 13,045 13,245
Fair value of head lease 31 185 152
Investment properties 13,230 13,397
Mining reserves, plant and equipment 12 8,531 8,613
Investments in joint ventures accounted for using equity method 13 1,322 874
Other investments at fair value through profit and loss (“FVPL”) (previously classified as other investments available for sale) 13 35 51
Total non-current assets 23,118 22,935
Current assets
Inventories 16 1,511 828
Trade and other receivables 17 6,837 6,417
Corporation tax recoverable 19 -
Investments in listed securities held at FVPL (previously classified as Available for sale investments) 18 887 1,050
Cash and cash equivalents 9,221 5,327
Total current assets 18,475 13,622
Total assets 41,593 36,557
Liabilities
Current liabilities
Borrowings 20 (9,580) (1,288)
Trade and other payables 19 (7,257) (7,381)
Current tax liabilities (92) (356)
Total current liabilities (16,929) (9,025)
Non-current liabilities
Borrowings 20 (547) (5,872)
Provision for rehabilitation 21 (1,571) (1,349)
Finance lease liabilities 31 (185) (152)
Deferred tax liabilities 23 (2,226) (2,485)
Total non-current liabilities (4,529) (9,858)
Total liabilities (21,458) (18,883)
Net assets 20,135 17,674
Equity
Share capital 24 1,068 1,068
Share premium account 258 258
Translation reserve (2,048) (1,671)
Available for sale reserve - 143
Other reserves 25 707 683
Retained earnings 19,584 16,661
Total equity attributable to equity shareholders 19,569 17,142
Non-controlling interest 27 566 532
Total equity 20,135 17,674
These financial statements were approved and authorised for issue by the board
of directors on 25 April 2019 and signed on its behalf by:
A R Heller G J
Casey Company
Registration No. 112155
Director Director
Financial statements
Consolidated statement of changes in shareholders’ equity
for the year ended 31 December 2018
Share capital £’000 Share Premium £’000 Translation reserves £’000 Available- Other reserves £’000 Retained earnings £’000 Total £’000 Non- controlling interest £’000 Total equity £’000
for-sale reserves £’000
Balance at 1 January 2017 1,068 258 (1,751) 60 683 16,339 16,657 349 17,006
Revaluation and impairments - - - - - (1,808) (1,808) - (1,808)
Trading - - - - - 2,557 2,557 172 2,729
Profit for the year - - - - - 749 749 172 921
Other comprehensive income - - 80 83 - - 163 11 174
Total comprehensive income for the year - - 80 83 - 749 912 183 1,095
Dividend (note 9) - - - - - (427) (427) - (427)
Balance at 31 December 2017 1,068 258 (1,671) 143 683 16,661 17,142 532 17,674
IFRS 9 Reclassification - - - (143) - 143 - - -
Balance at 1 January 2018 1,068 258 (1,671) - 683 16,804 17,142 532 17,674
Revaluation and impairments - - - - - (383) (383) - (383)
Trading - - - - - 3,697 3,697 729 4,426
Profit for the year - - - - - 3,314 3,314 729 4,043
Other comprehensive expense - - (377) - - - (377) (53) (430)
Total comprehensive income for the year - - (377) - - 3,314 2,937 676 3,613
Dividend (note 9) - - - - - (534) (534) (642) (1,176)
Share options charge - - - - 24 - 24 - 24
Balance at 31 December 2018 1,068 258 (2,048) - 707 19,584 19,569 566 20,135
Consolidated cash flow statement
for the year ended 31 December 2018
Year ended 31 December 2018 £’000 Year ended 31 December 2017 £’000
Cash flows from operating activities
Operating profit 6,526 3,763
Adjustments for:
Depreciation 2,113 1,790
Share based payments 24 -
Unrealised loss/(gain) on investment properties 215 13
Realised gain on disposal of other investments available for sale - (3)
Loss on investments held at FVPL 171 -
Exchange adjustments 63 256
Cash flow before working capital 9,112 5,819
Change in inventories (797) 896
Change in trade and other receivables (894) 919
Change in trade and other payables 100 69
Cash generated from operations 7,521 7,703
Interest received 126 124
Interest paid (598) (546)
Income tax paid (2,282) (11)
Cash flow from operating activities 4,767 7,270
Cash flows from investing activities
Acquisition of reserves, property, plant and equipment (2,881) (1,754)
Investment in joint venture (500) -
Disposal of other investments 8 14
Acquisition of other investments - (196)
Cash flow from investing activities (3,373) (1,936)
Cash flows from financing activities
Borrowings drawn 753 23
Borrowings repaid (19) (25)
Equity dividends paid (534) (427)
Cash flow from financing activities 200 (429)
Net increase in cash and cash equivalents 1,594 4,905
Cash and cash equivalents at 1 January 4,065 (890)
Exchange adjustment 27 50
Cash and cash equivalents at 31 December 5,686 4,065
Cash and cash equivalents at 31 December comprise:
Cash and cash equivalents as presented in the balance sheet 9,221 5,327
Bank overdrafts (secured) (3,535) (1,262)
5,686 4,065
Financial statements
Group accounting policies
for the year ended 31 December 2018
Basis of accounting
The results for the year ended 31 December 2018 have been 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. In applying the group’s
accounting policies and assessing areas of judgment and estimation materiality
is applied as detailed on page 46 of the Audit Committee Report. The
principal accounting policies are described below:
The group financial statements are presented in £ 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 and associates, is the currency of the country in which the
entity has been incorporated. Details of which country each entity has been
incorporated can be found in Note 15 for subsidiaries and Note 14 for joint
arrangements and associates.
The exchange rates used in the accounts were as follows:
£1 Sterling: Rand £1 Sterling: Dollar
2018 2017 2018 2017
Year-end rate 18.3723 16.6686 1.2690 1.35028
Annual average 17.5205 17.1540 1.3096 1.29174
Revenue recognition restatement
During the review of revenue recognition in South Africa a revenue recognition
error was identified in respect of the treatment of transport and loading
costs to deliver export coal under certain export agreements. The costs in
prior periods, had been incorrectly recorded as a deduction against revenue
rather than shown as an operating cost. In the current year such costs have
been recorded in operating costs and the comparatives restated accordingly.
The impact on the current year is to increase both revenue and operating costs
by £3,101,000 and the prior year requires an equivalent restatement totalling
£2,891,000. There is no profit or net assets impact as a result of the prior
year restatement.
Going concern
The group has prepared cash flow forecasts which demonstrate that the group
has sufficient resources to meet its liabilities as they fall due for at least
the next 12 months from date of signing.
In South Africa, a structured trade finance facility with Absa Bank Limited
for R100million is held by Sisonke Coal Processing (Pty) Limited, a 100%
subsidiary of Black Wattle Colliery (Pty) Limited. The facility is renewable
annually at 25 January and is secured against inventory, debtors and cash that
are held in the group’s South African operations. The Directors do not
foresee any reason why the facility will not continue to be renewed at the
next renewal date, in line with prior periods and based on their banking
relationships. This facility comprises of a R100million revolving facility to
cover the working capital requirements of the group’s South African
operations.
The directors expect that that the coal market conditions experienced by Black
Wattle Colliery, its direct mining asset, in 2018 and the first quarter of
2019 will be similar going into the remainder of 2019. The directors therefore
have a reasonable expectation that the mine will achieve positive levels of
cash generation for the group in 2019. As a consequence, the directors believe
that the group is well placed to manage its South African business risks
successfully.
In the UK, a £6 million term loan facility repayable in December 2019 is held
with Santander Bank PLC. The loan is secured against the company’s UK retail
property portfolio. The amount repayable on the loan at year end was
£5.9million (2017: £5.9million). The debt package has a five year term and
is repayable at the end of the term. The interest cost of the loan is 2.35%
above LIBOR. . The group’s intention is to enter into a new facility
agreement prior to the termination of the existing facility agreement.
Nonetheless the group has adequate financial resources at short notice,
including cash and listed equity investments, to repay the existing facility
should a new facility not be finalised prior to December 2019. In addition its
investment property assets benefit from long term leases with the majority of
its tenants.
As a result of the banking facilities held as well as the acceptable levels of
profitability and cash generation the group’s South African operations is
expected to achieve for the next 12 months, the Directors believe that the
group has adequate resources to continue in operational existence for the
foreseeable future and that the 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.
International Financial Reporting Standards (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 2018.
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 replaces the 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 assessed the impact of IFRS 15 on the results of the Group
and the only material impact related to the inclusion of UK property service
charge income in revenue rather than being set off against service charge
expenditure in operating costs. The impact on the current year was an increase
in revenue and an increase in operating costs in the income statement of
£137,000. Changes in accounting policies resulting from IFRS 15 have been
applied using the full retrospective method, with no restatement of
comparative information for prior year in accordance with the practical
expedient not to restate contracts that begin and end within the same annual
reporting period.
IFRS 9 was published in July 2014 and is effective for the group from 1
January 2018. The standard was endorsed by the EU on 22 November 2017. IFRS 9
supersedes IAS 39 “Financial Instruments: Recognition and Measurement” and
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. The
adoption of IFRS 9 has resulted in changes in the Group's accounting policies
for the recognition, classification and measurement of financial assets and
financial liabilities and impairment of financial assets. IFRS 9 modifies the
classification and measurement of certain classes of financial assets and
liabilities and required the Group to reassess classification of financial
assets into three primary categories (amortised cost, fair value through
profit and loss, fair value through other comprehensive income), reflecting
the business model in which assets are managed and their cash flow
characteristics. Financial liabilities continue to be measured at either fair
value through profit and loss or amortised cost. In addition, IFRS 9
introduced an expected credit loss (“ECL”) impairment model, which means
that anticipated as opposed to incurred credit losses are recognised which may
result in earlier recognition of impairments. The only material impact of IFRS
9 on the Group financial statements related to the movement in fair value of
the Groups held for trading (previously available for sale) investments and
non-current other investments (“the investments”). Under IAS 39 the
movement in the investments was measured at fair value through other
comprehensive income and taken to an available for sale reserve. Under IFRS 9
the movements are measured at fair value through profit and loss and recorded
in the income statement. The Group has not restated prior periods as allowed
by the transition provisions of IFRS 9. In order to reclassify the impact of
historic movements on the investments, an adjustment of £143,000 has been
made to the Group statement of changes in equity at 1 January 2018
transferring the historical fair value movements of the investments from the
available for sale reserve to retained earnings.
The Group has not adopted any Standards or Interpretations in advance of the
required implementation dates. The following new and revised IFRS standards,
which are applicable to the group, were issued but are not yet effective:
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
Areas where key estimates and judgements are considered to have a significant
effect on the amounts recognised in the financial statements include:
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 subject to significant estimation uncertainty. The life of mine remaining
is currently estimated at 4 years. This life of mine is based on the group’s
existing coal reserves including reserves acquired but subject to regulatory
approval of 1.9million tonnes. The life of mine excludes future coal purchases
and coal reserve acquisitions. The group’s estimates of proven and probable
reserves are prepared utilising the South African code for the reporting of
exploration results, mineral resources and mineral reserves (the SAMREC code)
and are 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 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 12.
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 annually engages an independent expert to assess the
cost of restoration and final decommissioning as part of management’s
assessment of the provision. Details of the provision for mining
rehabilitation can be found in note 21.
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 12.
The impairment test indicated significant headroom as at 31 December 2018 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 15% reduction in average forecast coal prices or a 17%
reduction in yield would give rise to a breakeven scenario. However, the
directors consider the forecasted yield levels and pricing to be appropriate
and supportable best estimates.
Fair value measurements of investment properties
An assessment of the fair value of 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 directors note that the fair value
measurement of the investment properties, can be considered to be less
judgemental where external valuers have been used and as a result of the
nature of the underlying assets. The fair value of investment property is set
out in note 11, whilst the carrying value of investments in joint ventures
which themselves include investment property held at fair value by the joint
venture is set out at note 13.
Measurement of development property
The development property included within the group’s joint venture
investment in West Ealing Projects limited is considered by Management to fall
outside the scope of investment property. A property intended for sale in
the ordinary course of business or in the process of construction or
development for such sale, for example, property acquired exclusively with a
view to subsequent disposal in the near future or for development and resale
is expected to be recorded under the accounting standard of IAS 2 Inventories.
The directors have discussed the commercial approach with the directors of the
underlying joint venture and the current plan is to obtain further planning
permission for the development and then sell or to complete the development
and sell. The Directors therefore consider the accounting treatment of the
property development under IAS 2 Inventories to be correct.
IAS 2 Inventories require the capitalised costs to be held at the lower of
cost or Net realisable value. At 31 December 2018, the costs capitalised
within the development based on a director’s appraisal for the property
estimated the net realisable value at a surplus over the cost for the
development. The directors have reviewed the underlying inputs and key
assumptions made in the appraisal and consider them adequate. However, such
information is by nature subject to uncertainty. The cost of the development
property is set out in note 12.
Basis of consolidation
The group accounts incorporate the accounts of Bisichi Mining PLC and all of
its subsidiary undertakings, together with the group’s share of the results
of its joint ventures. Non-controlling interests in subsidiaries are presented
separately from the equity attributable to equity owners of the parent
company. On acquisition of a non-wholly owned subsidiary, the non-controlling
shareholders’ interests are initially measured at the non-controlling
interests’ proportionate share of the fair value of the subsidiaries net
assets. Thereafter, 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. For subsequent changes in
ownership in a subsidiary that do not result in a loss of control, the
consideration paid or received is recognised entirely in equity.
The definition of control assumes the simultaneous fulfilment of the following
three criteria:
• The parent company holds decision-making power over the relevant
activities of the investee,
• The parent company has rights to variable returns from the
investee, and
• The parent company can use its decision-making power to affect the
variable returns.
Investees are analysed for their relevant activities and variable returns, and
the link between the variable returns and the extent to which their relevant
activities could be influenced in order to ensure the definition is correctly
applied.
Revenue
Revenue comprises sales of coal and property rental income. Coal revenue is
recognised when the customer has a legally binding obligation to settle under
the terms of the contract when the performance obligations have been
satisfied, which is once control of the goods has transferred to the buyer at
the delivery point. Coal Revenue is measured based on consideration specified
in the contract with a customer on a per metric tonne basis.
Export revenue is generally recognised when the product is delivered to the
export terminal location specified in the customer contract, at which point
control of the goods have been transferred to the customer. Domestic coal
revenues are generally recognised on collection by the customer from the mine
or from the mine’s rail siding when loaded into transport, where the
customer pays the transportation costs. Fulfilment costs to satisfy the
performance obligations of coal revenues such as transport and loading costs
borne by the group from the mine to the delivery point are recoded in
operating costs.
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. Service charges recoverable from tenants are recognised over time
as the service is rendered.
Expenditure
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.
Investment properties
Investment properties comprise freehold and long leasehold land and buildings.
Investment properties are carried at fair value in accordance with IAS 40
‘Investment Properties’. Properties are recognised as investment
properties when held for long-term rental yields, and after consideration has
been given to a number of factors including length of lease, quality of tenant
and covenant, value of lease, management intention for future use of property,
planning consents and percentage of property leased. Investment properties are
revalued annually by professional external surveyors and included in the
balance sheet at their fair value. Gains or losses arising from changes in the
fair values of assets are recognised in the consolidated income statement in
the period to which they relate. In accordance with IAS 40, investment
properties are not depreciated. The fair value of the head leases is the net
present value of the current head rent payable on leasehold properties until
the expiry of the lease.
Mining reserves, plant and equipment and development cost
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 included within mining reserves 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.
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 costs 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
extraction process as a mining production 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 the tons mined and reserve of the
relevant ore body component or phase. The cost is recognised within Mine
development costs within the balance sheet.
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. This includes the washing plant and other key surface
infrastructure. 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. Heavy surface mining
and other plant and equipment is depreciated at varying rates depending upon
its expected usage.
The depreciation rates generally applied are:
Mining equipment 5 – 10 per cent per annum, but shorter of its useful life or the life of the mine
Motor vehicles 25 – 33 per cent per annum
Office equipment 10 – 33 per cent per annum
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.
Employee benefits
Share based remuneration
The company operates a share option scheme. The fair value of 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. The fair value of options granted
is calculated using a binomial or Black-Scholes-Merton model. Payments made to
employees on the cancellation or settlement of options granted are accounted
for as the repurchase of an equity interest, ie as a deduction from equity.
Details of the share options in issue are disclosed in the Directors’
Remuneration Report on page 39 under the heading Share option schemes which is
within the audited part of that report.
Pensions
The group 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 as trading balances and are not expected to
be repaid in the foreseeable future. Where foreign operations are disposed of,
the cumulative exchange differences of 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
Financial assets and financial liabilities are recognised in the Group’s
consolidated statement of financial position when the group becomes a party to
the contractual provisions of the instrument.
Financial assets
Financial assets are classified as either financial assets at amortised cost,
at fair value through other comprehensive income (“FVTOCI”) or at fair
value through profit or loss (“FVPL”) depending upon the business model
for managing the financial assets and the nature of the contractual cash flow
characteristics of the financial asset.
A loss allowance for expected credit losses is determined for all financial
assets, other than those at FVPL, at the end of each reporting period. The
Group applies a simplified approach to measure the credit loss allowance for
trade receivables using the lifetime expected credit loss provision. The
lifetime expected credit loss is evaluated for each trade receivable taking
into account payment history, payments made subsequent to year end and prior
to reporting, past default experience and the impact of any other relevant and
current observable data. The group applies a general approach on all other
receivables classified as financial assets. The general approach recognises
lifetime expected credit losses when there has been a significant increase in
credit risk since initial recognition.
The Group derecognises a financial asset when the contractual rights to the
cash flows from the asset expire, or when it transfers the financial asset and
substantially all the risks and rewards of ownership of the asset to another
party. The Group derecognises financial liabilities when the Group’s
obligations are discharged, cancelled or have expired.
Bank loans and overdrafts
Bank loans and overdrafts are included as financial liabilities on the group
balance sheet at the amounts drawn on the particular facilities net of the
unamortised cost of financing. Interest payable on those facilities is
expensed as finance cost 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
initially calculated as the present value of the minimum lease payments,
reducing in subsequent reporting periods by the apportionment of payments to
the lessor.
Investments
Current financial asset investments and other investments classified as
non-current (“The investments”) comprise of shares in listed companies.
The investments are measured at fair value. Any changes in fair value are
recognised in the profit or loss account and accumulated in retained earnings.
Trade receivables
Trade receivables are accounted for at amortised cost. Trade receivables do
not carry any interest and are stated at their nominal value as reduced by
appropriate expected credit loss allowances for estimated recoverable amounts
as the interest that would be recognised from discounting future cash payments
over the short payment period is not considered to be material.
Trade payables
Trade payables cost are not 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.
Other financial assets and liabilities
The groups other financial assets and liabilities not disclosed above are
accounted for at amortised cost.
Joint ventures
Investments in joint ventures, being those entities over whose activities the
group has joint control, as established by contractual agreement, are included
at cost together with the group’s share of post-acquisition reserves, on an
equity basis. Dividends received are credited against the investment. Joint
control is the contractually agreed sharing of control over an arrangement,
which exists only when decisions about relevant strategic and/or key operating
decisions require unanimous consent of the parties sharing control. Control
over the arrangement is assessed by the group in accordance with the
definition of control under IFRS 10. Loans to joint ventures are classified as
non-current assets when they are not expected to be received in the normal
working capital cycle. Trading receivables and payables to joint ventures are
classified as current assets and liabilities.
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.
Impairment
Whenever events or changes in circumstance indicate that the carrying amount
of an asset may not be recoverable an 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 their 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 cash generating unit basis.
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) if that is less
than the asset’s carrying amount. Any change in carrying value is recognised
in the comprehensive income statement.
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 accounted for 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 historical cost of the
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 other comprehensive income, in which
case it is also dealt with in other comprehensive income.
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 22.
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.
Segmental reporting
For management reporting purposes, the group is organised into business
segments distinguishable by economic activity. The group’s material business
segments are mining activities and investment properties. 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 segment 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
percent 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 Company has no visibility over the
ultimate destination of the coal. Accordingly, the export sales are recorded
as South African revenue.
Financial statements
Notes to the financial statements
for the year ended 31 December 2018
1. SEGMENTAL REPORTING
2018
Business analysis Mining £’000 Property £’000 Other £’000 Total £’000
Significant revenue customer A 34,112 - - 34,112
Significant revenue customer B 11,557 - - 11,557
Significant revenue customer C 1,040 - - 1,040
Other revenue 1,957 1,232 47 3,236
Segment revenue 48,666 1,232 47 49,945
Operating (loss)/profit before fair value adjustments & exchange movements 6,093 838 44 6,975
Revaluation of investments & exchange movements (63) (215) (171) (449)
Operating profit and segment result 6,030 623 (127) 6,526
Segment assets 15,809 14,333 906 31,048
Unallocated assets
– Non-current assets 2
– Cash & cash equivalents 9,221
Total assets excluding investment in joint ventures and assets held for sale 40,271
Segment liabilities (8,729) (2,392) (210) (11,331)
Borrowings (4,287) (5,840) - (10,127)
Total liabilities (13,016) (8,232) (210) (21,458)
Net assets 18,813
Non segmental assets
– Investment in joint ventures 1,322
Net assets as per balance sheet 20,135
Geographic analysis United Kingdom £’000 South Africa £’000 Total £’000
Revenue 1,279 48,666 49,945
Operating profit/(loss) and segment result 441 6,085 6,526
Non-current assets excluding investments 13,231 8,530 21,761
Total net assets 15,567 4,568 20,135
Capital expenditure 17 2,864 2,881
2017
Business analysis Mining £’000 Restated Property £’000 Other £’000 Total £’000 Restated
Significant revenue customer A 27,528 - - 27,528
Significant revenue customer B 10,117 - - 10,117
Significant revenue customer C 412 - - 412
Other revenue 1,134 1,125 34 2,293
Segment revenue 39,191 1,125 34 40,350
Operating (loss)/profit before fair value adjustments & exchange movements 3,104 897 28 4,029
Revaluation of investments & exchange movements (256) (13) 3 (266)
Operating profit and segment result 2,848 884 31 3,763
Segment assets 13,500 13,803 3,050 30,353
Unallocated assets
– Non-current assets 3
– Cash & cash equivalents 5,327
Total assets excluding investment in joint ventures and assets held for sale 35,683
Segment liabilities (9,238) (2,270) (214) (11,722)
Borrowings (1,329) (5,832) - (7,161)
Total liabilities (10,567) (8,102) (214) (18,883)
Net assets 16,800
Non segmental assets
– Investment in joint ventures 874
Net assets as per balance sheet 17,674
Geographic analysis United Kingdom £’000 South Africa £’000 Restated Total £’000 Restated
Revenue 1,159 39,191 40,350
Operating profit/(loss) and segment result 854 2,909 3,763
Non-current assets excluding investments 13,400 8,610 22,010
Total net assets 13,416 4,258 17,674
Capital expenditure 13 1,741 1,754
2. REVENUE
2018 £’000 2017 £’000 Restated
Revenue from contracts with customers:
Coal Sales 48,666 39,191
Service charges recoverable from tenants 137 -
Other:
Rental income 1,095 1,125
Other revenue 47 34
Revenue 49,945 40,350
Segmental mining revenue is derived principally from coal sales and is
recognised once the control of the goods has transferred from the group to the
buyer. Segmental property revenue is derived from rental income and service
charges recoverable from tenants. This is consistent with the revenue
information disclosed for each reportable segment (see note 1). Rental income
is recognised on a straight-line basis over the term of the lease. Service
charges recoverable from tenants are recognised over time as the service is
rendered. Revenue is measured based on the consideration specified in the
contract with the customer or tenant.
3. OPERATING COSTS
2018 £’000 2017 £’000 Restated
Mining 34,443 28,555
Property 338 151
Cost of sales 34,781 28,706
Administration 8,189 7,615
Operating costs 42,970 36,321
The direct property costs are:
Ground rent 11 8
Direct property expense 297 130
Bad debts 30 13
338 151
Operating costs above include depreciation of £2,113,000 (2017: £1,790,000).
4. (LOSS)/GAIN ON REVALUATION OF INVESTMENT PROPERTIES
The reconciliation of the investment surplus to the gain on revaluation of
investment properties in the income statement is set out below:
2018 £’000 2017 £’000
Investment (deficit)/surplus (248) 16
Gain/(Loss) on valuation movement in respect of head lease payments 33 (29)
Loss on revaluation of investment properties (215) (13)
5. PROFIT BEFORE TAXATION
Profit before taxation is arrived at after charging:
2018 £’000 2017 £’000
Staff costs (see note 29) 7,335 6,396
Depreciation 2,113 1,790
Exchange loss 63 256
Fees payable to the company’s auditor for the audit of the company’s annual accounts 56 41
Fees payable to the company’s auditor and its associates (2017: affiliate) for other services:
The audit of the company’s subsidiaries pursuant to legislation 22 10
Audit related services 1 1
Non-audit related services 6 1
The directors consider the auditors were best placed to provide the above
non-audit and audit related services which refer to regulatory matters. The
audit committee reviews the nature and extent of non-audit services to ensure
that independence is maintained.
6. DIRECTORS’ EMOLUMENTS
Directors’ emoluments are shown in the Directors’ remuneration report on
page 38 which is within the audited part of that report.
7. INTEREST PAYABLE
2018 £’000 2017 £’000
On bank overdrafts and bank loans 539 443
Unwinding of discount 43 92
Other interest payable 59 129
Interest payable 641 664
8. TAXATION
2018 £’000 2017 £’000
(a) Based on the results for the year:
Current tax - UK - 231
Current tax - Overseas 2,026 136
Corporation tax - adjustment in respect of prior year – UK (19) (5)
Current tax 2,007 362
Deferred tax (91) 202
Total tax in income statement charge 1,916 564
(b) Factors affecting tax charge for the year:
The corporation tax assessed for the year is different from that at the
standard rate of corporation tax in the United Kingdom of 19.00% (2017:
19.25%).
The differences are explained below:
Profit on ordinary activities before taxation 5,959 1,485
Tax on profit on ordinary activities at 19.00% (2017: 19.25%) 1,132 286
Effects of:
Expenses not deductible for tax purposes 56 107
Adjustment to tax rate 623 201
Other differences 124 (27)
Adjustment in respect of prior years (19) (3)
Total tax in income statement (credit) / charge 1,916 564
(c) Analysis of United Kingdom and overseas tax:
United Kingdom tax included in above:
Corporation tax - 231
Adjustment in respect of prior years (19) (5)
Current tax (19) 226
Deferred tax (175) (197)
(194) 29
Overseas tax included in above:
Current tax 2,026 136
Deferred tax 84 399
2,110 535
Overseas tax is derived from the group’s South African mining operation.
Refer to note 1 for a report on the groups’ mining and South African
segmental reporting. The adjustment to tax rate arises due to the corporation
tax rate assessed in South Africa for the year being different from that in
the UK. The South African rate assessed is 28% (2017: 28%).
9. SHAREHOLDER DIVIDENDS
2018 Per share 2018 £’000 2017 Per share 2017 £’000
Dividends paid during the year relating to the prior period 5.00p 534 4.00p 427
Dividends relating to the current period:
Interim dividend for 2018 paid on 8 February 2019 1.00p 107 1.00p 107
Proposed final dividend for 2018 3.00p 320 3.00p 320
Proposed special dividend for 2018 2.00p 214 1.00p 107
6.00p 641 5.00p 534
The dividends relating to the current period are not accounted for until they
have been approved at the Annual General Meeting. The amount, in respect of
2018, will be accounted for as an appropriation of retained earnings in the
year ending 31 December 2019.
10. PROFIT AND DILUTED PROFIT PER SHARE
Both the basic and diluted profit per share calculations are based on a profit
after tax of £3,314,000 (2017: £749,000). The basic profit per share has
been calculated on a weighted average of 10,676,839 (2017: 10,676,839)
ordinary shares being in issue during the period. The diluted profit per share
has been calculated on the weighted average number of shares in issue of
10,676,839 (2017: 10,676,839) plus the dilutive potential ordinary shares
arising from share options of 67,350 (2017: nil) totalling 10,744,189 (2017:
10,676,839).
Share options exercisable as at 31 December 2018 do not have a dilutive effect
as the average market price of ordinary shares during the period does not
exceed the exercise price of the options.
11. INVESTMENT PROPERTIES
Freehold £’000 Long Leasehold £’000 Total £’000
Valuation at 1 January 2018 10,550 2,695 13,245
Additions 15 - 15
Revaluation (215) - (215)
Valuation at 31 December 2018 10,350 2,695 13,045
Valuation at 1 January 2017 10,550 2,695 13,245
Addition 13 - 13
Revaluation (13) - (13)
Valuation at 31 December 2017 10,550 2,695 13,245
Historical cost
At 31 December 2018 5,851 728 6,579
At 31 December 2017 5,836 728 6,564
Long leasehold properties are those for which the unexpired term at the
balance sheet date is not less than 50 years. All investment properties are
held for use in operating leases and all properties generated rental income
during the period.
Freehold and Long Leasehold properties were externally professionally valued
at 31 December on an open market basis by:
2018 £’000 2017 £’000
Carter Towler 13,045 13,245
The valuations were carried out in accordance with the Statements of Asset
Valuation and Guidance Notes published by The Royal Institution of Chartered
Surveyors.
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
investment 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 round.
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 a 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 implanting this change in arriving at its
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 in the property’s valuation by the external
valuer.
IFRS 13 sets out a valuation hierarchy for assets and liabilities measured at
fair value 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
The inter-relationship between key unobservable inputs and the groups’
properties is detailed in the table below:
Class of property Level 3 Valuation technique Key Carrying/ fair value 2018 £’000 Carrying/ fair value 2017 £’000 Range (weighted average) 2018 Range (weighted average) 2017
unobservable inputs
Freehold – external valuation Income capitalisation Estimated rental value per sq ft p.a 10,350 10,550 £7 – £28 (£20) £7 – £25 (£18)
Equivalent Yield 8.4% – 11.8% (9.3%) 7.1% – 11.0% (8.7%)
Long leasehold – external valuation Income capitalisation Estimated rental value per sq ft p.a 2,695 2,695 £8 – £8 (£8) £8 – £8 (£8)
Equivalent yield 7.9% – 7.9% (7.9%) 7.7% – 7.7% (7.7%)
At 31 December 2018 13,045 13,245
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 Equivalent yield 25 basis point contraction or expansion
value 10% increase
or decrease
2018 £’000 2017 £’000 2018 £’000 2017 £’000
Freehold – external valuation 1,035 / (1,035) 1,055 / (1,055) 292 / (276) 331 / (311)
Long Leasehold – external valuation 270 / (270) 270 / (270) 88 / (83) 90 / (85)
12. MINING RESERVES, PLANT AND EQUIPMENT
Mining reserves £’000 Mining equipment and development costs £’000 Motor vehicles £’000 Office equipment £’000 Total £’000
Cost at 1 January 2018 1,367 25,902 200 158 27,627
Exchange adjustment (127) (2,531) (22) (9) (2,689)
Additions - 2,777 75 14 2,866
Disposals - - - - -
Cost at 31 December 2018 1,240 26,148 253 163 27,804
Accumulated depreciation at 1 January 2018 1,309 17,441 135 129 19,014
Exchange adjustment (122) (1,712) (14) (6) (1,854)
Charge for the year 26 2,048 30 9 2,113
Disposals - - - - -
Accumulated depreciation at 31 December 2018 1,213 17,777 151 132 19,273
Net book value at 31 December 2018 27 8,371 102 31 8,531
Cost at 1 January 2017 1,345 23,724 235 146 25,450
Exchange adjustment 22 447 3 2 474
Additions - 1,731 - 10 1,741
Disposals - - (38) - (38)
Cost at 31 December 2017 1,367 25,902 200 158 27,627
Accumulated depreciation at 1 January 2017 1,287 15,370 154 119 16,930
Exchange adjustment 21 308 2 1 332
Charge for the year 1 1,763 17 9 1,790
Disposals - - (38) - (38)
Accumulated depreciation at 31 December 2017 1,309 17,441 135 129 19,014
Net book value at 31 December 2017 58 8,461 65 29 8,613
13. INVESTMENTS HELD AS NON-CURRENT ASSETS
2018 Net investment in joint ventures assets £’000 2018 Other £’000 2017 Net investment in joint ventures assets £’000 2017 Other £’000
At 1 January 874 55 1,321 36
Reclassification IFRS 9 - (4) - -
Share of (loss)/gain in investment - (15) - 19
Additions 500 -
Exchange adjustment - (1) (8) -
Share of (loss)/gain in joint ventures (52) - 8 -
Write-off of investment - - (447) -
Net assets at 31 December 1,322 35 874 55
Loan to joint venture (Ezimbokodweni):
At 1 January - - 1,350 -
Exchange adjustments - - (16) -
Additions - interest - - 46 -
Write-off of loan - - (1,380) -
At 31 December - - - -
At 31 December 1,322 35 874 55
Provision for diminution in value:
At 1 January - (4) - (4)
Reclassification IFRS 9 - 4 - -
At 31 December - - - (4)
Net book value at 31 December 1,322 35 874 51
2018 £’000 2017 £’000
Net book value of unquoted investments - -
Net book and market value of investments listed on overseas stock exchanges 35 51
35 51
The adoption of IFRS 9 has resulted in the reclassification of the group’s
non-current other investments. In the prior year the investments were
classified as available for sale investments measured at fair value with
movements taken through other comprehensive income and available for sale
reserves. In the current year the investments were reclassified as non-current
other investments held at fair value with movements taken through profit and
loss and retained earnings. The Group has not restated prior periods as
allowed by the transition provisions of IFRS 9.
14. JOINT VENTURES
Dragon Retail Properties Limited
The company owns 50% of the issued share capital of Dragon Retail Properties
Limited, an unlisted property investment company. At year end, the carrying
value of the investment held by the group was £815,000 (2017: £874,000). The
remaining 50% is held by London & Associated Properties PLC. Dragon Retail
Properties Limited is incorporated in England and Wales and its registered
address is 24 Bruton Place, London, W1J 6NE. It has issued share capital of
500,000 (2017: 500,000) ordinary shares of £1 each. No dividends were
received during the period.
West Ealing Projects Limited
The company owns 50% of the issued share capital of West Ealing Projects
Limited, an unlisted property development company. At year end, the carrying
value of the investment held by the group was £507,000 (2017: £nil). The
remaining 50% is held by London & Associated Properties PLC. West Ealing
Projects Limited is incorporated in England and Wales and its registered
address is 24 Bruton Place, London, W1J 6NE. It has issued share capital of
1,000,000 (2017: £nil) ordinary shares of £1 each. No dividends were
received during the period.
Dragon 50% £’000 West Ealing 50% £’000 2018 £’000 2017 £’000
Turnover 83 12 95 83
Profit and loss:
(Loss)/Profit before depreciation, interest and taxation (53) 8 (45) 26
Depreciation and amortisation (6) - (6) (6)
(Loss)/Profit before interest and taxation (59) 8 (51) 20
Interest Income 51 - 51 68
Interest expense (68) - (68) (83)
(Loss)/Profit before taxation (76) 8 (68) 5
Taxation 17 (1) 16 3
(Loss)/Profit after taxation (59) 7 (52) 8
Balance sheet
Non-current assets 1,235 - 1,235 1,317
Cash and cash equivalents 45 22 67 46
Property inventory - 3,099 3,099 -
Other current assets 207 39 246 1,218
Current borrowings - - - -
Other current liabilities (73) (951) (1,024) (1,062)
Net current assets 179 2,209 2,388 202
Non-current borrowings (582) (1,702) (2,284) (609)
Other non-current liabilities (17) - (17) (36)
Share of net assets at 31 December 815 507 1,322 874
15. SUBSIDIARY COMPANIES
The company owns the following ordinary share capital of the subsidiaries
which are included within the consolidated financial statements:
Activity Percentage of share capital Registered address Country of incorporation
Mineral Products Limited Share dealing 100% 24 Bruton Place, London, W1J6NE England and Wales
Bisichi (Properties) Limited Property 100% 24 Bruton Place, London, W1J6NE England and Wales
Bisichi Northampton Limited Property 100% 24 Bruton Place, London, W1J6NE England and Wales
Bisichi Trustee Limited Property 100% 24 Bruton Place, London, W1J6NE England and Wales
Urban First (Northampton) Limited Property 100% 24 Bruton Place, London, W1J6NE England and Wales
Bisichi Mining (Exploration) Limited Holding company 100% 24 Bruton Place, London, W1J6NE England and Wales
Ninghi Marketing Limited Dormant 90.1% 24 Bruton Place, London, W1J6NE England and Wales
Bisichi Mining Managements Services Limited Dormant 100% 24 Bruton Place, London, W1J6NE England and Wales
Black Wattle Colliery (Pty) Limited Coal mining 62.5% Samora Machel Street, Bethal Road, Middelburg, Mpumalanga, 1050 South Africa
Bisichi Coal Mining (Pty) Limited Coal mining 100% Samora Machel Street, Bethal Road, Middelburg, Mpumalanga, 1050 South Africa
Sisonke Coal Processing (Pty) Limited Coal processing 62.5% Samora Machel Street, Bethal Road, Middelburg, Mpumalanga, 1050 South Africa
Black Wattle Klipfontein (Pty) Limited Coal mining 62.5% Samora Machel Street, Bethal Road, Middelburg, Mpumalanga, 1050 South Africa
Amandla Ehtu Mineral Resource Development (Pty) Limited Dormant 70% Samora Machel Street, Bethal Road, Middelburg, Mpumalanga, 1050 South Africa
Details on the non-controlling interest in subsidiaries are shown under note
27.
16. INVENTORIES
2018 £’000 2017 £’000
Coal
Washed 777 301
Mining Production 316 286
Work in progress 378 227
Other 40 14
1,511 828
17. TRADE AND OTHER RECEIVABLES
2018 £’000 2017 £’000
Financial assets falling due within one year:
Trade receivables 5,311 3,908
Amount owed by joint venture 752 2,000
Other receivables 337 415
Non-financial instruments falling due within one year:
Prepayments and accrued income 437 94
6,837 6,417
Financial assets falling due within one year are held at amortised cost. The
fair value of trade and other receivables approximates their carrying amounts.
The Group applies a simplified approach to measure the credit loss allowance
for trade receivables using the lifetime expected credit loss provision. The
lifetime expected credit loss is evaluated for each trade receivable taking
into account payment history, payments made subsequent to year end and prior
to reporting, past default experience and the impact of any other relevant and
current observable data. The group applies a general approach on all other
receivables classified as financial assets. At year end, the group allowance
for doubtful debts provided against trade receivables was £12,000 (2017:
£19,000). There was no additional loss allowance or impairment required
during the year as a result of the implementation of IFRS 9.
18. INVESTMENTS IN LISTED SECURITIES HELD AT FVPL (PREVIOUSLY
CLASSIFIED AS AVAILABLE FOR SALE INVESTMENTS)
2018 £’000 2017 £’000
Market value of listed Investments:
Listed in Great Britain 847 1,003
Listed outside Great Britain 40 47
887 1,050
Original cost of listed investments 916 922
Unrealised surplus / deficit of market value versus cost (29) 128
The adoption of IFRS 9 has resulted in the reclassification of the groups
Investments in listed securities. In the prior year the investments were
classified as available for sale investments measured at fair value with
movements taken through other comprehensive income and available for sale
reserves. In the current year the investments were reclassified as Investments
in listed securities held at fair value with movements taken through profit
and loss and retained earnings. The Group has not restated prior periods as
allowed by the transition provisions of IFRS 9.
19. TRADE AND OTHER PAYABLES
2018 £’000 2017 £’000
Trade payables 3,949 3,771
Amounts owed to joint ventures 192 192
Other payables 1,791 1,402
Accruals 1,089 1,787
Deferred Income 236 229
7,257 7,381
20. FINANCIAL LIABILITIES – BORROWINGS
Current Non-current
2018 £’000 2017 £’000 2018 £’000 2017 £’000
Bank overdraft (secured) 3,535 1,262 - -
Bank loan (secured) 6,045 26 547 5,872
9,580 1,288 547 5,872
2018 £’000 2017 £’000
Bank overdraft and loan instalments by reference to the balance sheet date:
Within one year 9,580 1,288
From one to two years 223 17
From two to five years 324 5,855
10,127 7,160
Bank overdraft and loan analysis by origin:
United Kingdom 5,840 5,832
Southern Africa 4,287 1,328
10,127 7,160
In South Africa, as part of a restructuring and sale of the washing plant
facilities from Black Wattle Colliery (Pty) Limited (“Black Wattle”) to
its wholly owned subsidiary Sisonke Coal Processing (Pty) Limited (“Sisonke
Coal Processing”), the R100million bank overdraft facility held by Black
Wattle with Absa Bank Limited at year end (“old trade facility”) was
replaced in January 2019 by a new structured trade finance facility for
R100million held by Sisonke Coal Processing (“new trade facility”). The
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 which are included in the financial statements at a value
of £8,640,000.
The United Kingdom bank loans and overdraft 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 £13,045,000. During the year the group
reduced its UK loan by £14,000 in order to rectify a breach of one of its UK
loan banking covenants. No other banking covenants were breached by the group
during the year.
Consistent with others in the mining and property industry, the group monitors
its capital by its gearing levels. This is calculated as the total bank loans
and overdraft less remaining cash and cash equivalents as a percentage of
equity. At year end the gearing of the group was calculated as follows:
2018 £’000 2017 £’000
Total bank loans and overdraft 10,127 7,160
Less cash and cash equivalents (excluding overdraft) (9,221) (5,327)
Net debt 906 1,833
Total equity attributable to shareholders of the parent 19,569 17,142
Gearing 4.6% 10.7%
Analysis of the changes in liabilities arising from financing activities:
Bank borrowings (including overdraft) £’000 Finance leases £’000 2018 £’000 2017 £’000
Balance at 1 January 7,160 152 7,312 9,415
Exchange adjustments (273) - (273) (4)
Cash movements excluding exchange adjustments 3,240 - 3,240 (2,070)
Valuation movements - 33 33 (29)
Balance at 31 December 10,127 185 10,312 7,312
21. PROVISION FOR REHABILITATION
2018 £’000 2017 £’000
As at 1 January 1,349 1,236
Exchange adjustment (150) 21
Increase in provision 329 -
Unwinding of discount 43 92
As at 31 December 1,571 1,349
22. FINANCIAL INSTRUMENTS
Total financial assets and liabilities
The group’s financial assets and liabilities are as follows, representing
both the fair value and the carrying value:
Financial Assets measured at amortised cost £’000 Financial Liabilities measured at amortised cost £’000 Investments held at FVPL £’000 2018 £’000 2017 £’000
Cash and cash equivalents 9,221 - - 9,221 5,327
Non-current other investments held at FVPL (previously classified as other investments available for sale) - - 35 35 51
Investments in listed securities held at FVPL (previously classified as Available for sale investments) - - 887 887 1,050
Trade and other receivables 6,400 - - 6,400 6,323
Bank borrowings and overdraft - (10,127) - (10,127) (7,160)
Finance leases - (185) - (185) (152)
Other liabilities - (7,113) - (7,113) (7,152)
15,621 17,425 922 (882) (1,713)
Investments in listed securities held at fair value through profit and loss
(previously classified as Available for sale investments) 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. The comparative figures for
2017 fall under the same category of financial instrument as 2018.
The carrying amount of short term (less than 12 months) trade receivable and
other liabilities approximate their fair values. The fair value of non-current
borrowings in note 20 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
Although no derivative transactions were entered into during the current and
prior year, the group may use derivative transactions such as interest rate
swaps and forward exchange contracts as necessary 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,
market risk, credit risk, currency risk and commodity price risk. There have
been no changes during the year of the main risks arising from the group’s
finance structure. The policies for managing each of these risks and the
principal effects of these policies on the results are summarised below.
Interest rate risk
Interest rate risk is the risk that the value of a financial instrument or
cashflows associated with the instrument will fluctuate due to changes in
market interest rates. Interest rate risk arises from interest bearing
financial assets and liabilities that the group uses. Treasury activities take
place under procedures and policies approved and monitored by the Board to
minimise the financial risk faced by the group. Interest bearing assets
comprise cash and cash equivalents which are considered to be short-term
liquid assets and loans to joint ventures. Interest bearing borrowings
comprise bank loans, bank overdrafts and variable rate finance lease
obligations. The rates of interest vary based on LIBOR in the UK and PRIME in
South Africa.
As at 31 December 2018, with other variables unchanged, a 1% increase or
decrease in interest rates, on investments and borrowings whose interest rates
are not fixed, would respectively change the profit/loss for the year by
£101,000 (2017: £82,000). The effect on equity of this change would be an
equivalent decrease or increase for the year of £101,000 (2017: £82,000).
Liquidity risk
The group’s policy is to minimise refinancing risk. 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. As at year end the group held borrowing facilities in the UK in
Bisichi Mining PLC and in South Africa in Black Wattle Colliery (Pty) Ltd.
The following table sets out the maturity profile of contractual undiscounted
cash flows of financial liabilities as at 31 December:
2018 £’000 2017 £’000
Within one year 17,329 9,110
From one to two years 290 198
From two to five years 392 6,054
Beyond five years 127 105
18,138 15,467
The following table sets out the maturity profile of contractual undiscounted
cash flows of financial liabilities as at 31 December maturing within one
year:
2018 £’000 2017 £’000
Within one month 3,627 3,824
From one to three months 3,117 2,278
From four to twelve months 10,585 3,008
17,329 9,110
In South Africa, as part of the restructuring and sale of the washing plant
facilities from Black Wattle Colliery (Pty) Limited (“Black Wattle”) to
its wholly owned subsidiary Sisonke Coal Processing (Pty) Limited (“Sisonke
Coal Processing”), the R100million facility held by Black Wattle with Absa
Bank Limited at year end (“old trade facility”) was replaced in January
2019 by a new structured trade finance facility for R100million held by
Sisonke Coal Processing (“new trade facility”).
The new trade facility comprises of a R100million revolving facility to cover
the working capital requirements of the group’s South African operations.
The interest cost of the loan is at the South African prime lending rate. The
new trade facility is renewable annually each January, is repayable on demand
and is secured against inventory, debtors and cash that are held by Sisonke
Coal Processing (Pty) Limited.
The old trade facility, which was also repayable on demand, is included in
cash and cash equivalents within the cashflow statement.
In December 2014, the group signed a £6 million term loan facility with
Santander. The loan is secured against the group’s UK retail property
portfolio. The debt package has a five year term and is repayable at the end
of the term in December 2019. The interest cost of the loan is 2.35% above
LIBOR. The group’s intention is to enter into a new facility agreement prior
to the termination of the existing facility agreement. Nonetheless the group
has adequate financial resources to repay the existing facility should a new
facility not be finalised prior to December 2019.
As a result of the above agreed banking facilities, the Directors believe that
the group is well placed to manage its liquidity risk.
Credit risk
The group is mainly exposed to credit risk on its cash and cash equivalents,
trade and other receivables and amounts owed by joint ventures as per the
balance sheet. The maximum exposure to credit risk is represented by the
carrying amount of each financial asset in the balance sheet which at year end
amounted to £15,621,000 (2017: £11,650,000).
To mitigate risk on its cash and cash equivalents, the group only deposits
surplus cash with well-established financial institutions of high quality
credit standing.
The group’s credit risk is primarily attributable to its trade receivables.
Trade debtor’s credit ratings are reviewed regularly. The Group's review
includes measures such as the use of external ratings and establishing
purchase limits for each customer. The group had amounts due from its
significant revenue customers at the year end that represented 92% (2017: 93%)
of the trade receivables balance. These amounts have been subsequently
settled. The Group approach to measure the credit loss allowance for trade
receivables is outlined in note 17. At year end, the group allowance for
doubtful debts provided against trade receivables was £12,000 (2017:
£19,000). As at year end the amount of trade receivables held past due date
less credit loss allowances was £17,000 (2017: £24,000). To date, the amount
of trade receivables held past due date less credit loss allowances that has
not subsequently been settled is £14,000 (2017: £18,000). Management have no
reason to believe that this amount will not be settled.
The Group exposure to credit risk on its loans to joint ventures and other
receivables is mitigated through ongoing review of the underlying performance
and resources of the counterparty including evaluation of different scenarios
of probability of default and expected loss applicable to each of the
underlying balances.
Financial assets maturity
On 31 December 2018, cash at bank and in hand amounted to £9,221,000 (2017:
£5,327,000) which is invested in short term bank deposits maturing within one
year bearing interest at the bank’s variable rates. Cash and cash
equivalents all have a maturity of less than 3 months.
Foreign exchange risk
All trading is undertaken in the local currencies except for certain export
sales which are invoiced in dollars. It is not the 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 group’s policy to obtain forward contracts to mitigate foreign
exchange risk on these amounts. During 2018 and 2017 the group did not hedge
its exposure of foreign investments held in foreign currencies.
The principle currency risk to which the 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 group’s net financial assets and liabilities as at 31 December
2018, a 25% strengthening of Sterling against the South African Rand, with all
other variables held constant, would decrease the group’s profit after
taxation by £130,000 (2017: £34,000). A 25% weakening of Sterling against
the South African Rand, with all other variables held constant would increase
the group’s profit after taxation by £216,000 (2017: £56,000).
The 25% sensitivity has been determined based on the average historic
volatility of the exchange rate for 2017 and 2018.
The table below shows the currency profiles of cash and cash equivalents:
2018 £’000 2017 £’000
Sterling 6,897 3,402
South African Rand 2,322 1,923
US Dollar 2 2
9,221 5,327
Cash and cash equivalents earn interest at rates based on LIBOR in Sterling
and Prime in Rand.
The tables below shows the currency profiles of net monetary assets and
liabilities by functional currency of the group:
2018: Sterling £’000 South
African Rands £’000
Sterling 1,042 -
South African Rand 37 (1,974)
US Dollar 13 -
1,092 (1,974)
2017: Sterling £’000 South
African Rands £’000
Sterling (832) -
South African Rand 54 (1,304)
US Dollar 13 -
(765) (1,304)
23. DEFERRED TAXATION
2018 2017 £’000
£’000
As at 1 January 2,485 2,248
Recognised in income (91) 202
Exchange adjustment (168) 35
As at 31 December 2,226 2,485
The deferred tax balance comprises the following:
Revaluation of properties 636 691
Capital allowances 2,369 2,389
Short term timing difference (662) (513)
Unredeemed capital deductions - (80)
Losses and other deductions (117) (2)
2,226 2,485
Refer to note 8 for details of deferred tax recognised in income in the
current year. Tax rates of 17% (2017: 17%) in the UK and 28% (2017: 28%) in
South Africa were utilised to calculate year end deferred tax balances.
24. SHARE CAPITAL
2018 £’000 2017 £’000
Authorised: 13,000,000 ordinary shares of 10p each 1,300 1,300
Allotted and fully paid:
2018 Number of ordinary shares 2017 Number of ordinary shares 2018 £’000 2017 £’000
At 1 January and outstanding at 31 December 10,676,839 10,676,839 1,068 1,068
25. OTHER RESERVES
2018 £’000 2017 £’000
Equity share options 621 597
Net investment premium on share capital in joint venture 86 86
707 683
26. SHARE BASED PAYMENTS
Details of the share option scheme are shown in the Directors’ remuneration
report on page 39 under the heading Share option schemes which is within the
audited part of this report. Further details of the share option schemes are
set out below.
The Bisichi Mining PLC Unapproved Option Schemes:
Year of grant Subscription price per share Period within which options exercisable Number of share for which options outstanding at 31 December 2017 Number of share options lapsed/surrendered /awarded during year Number of share for which options outstanding at 31 December 2018
2010 202.5p Aug 2013 – Aug 2020 80,000 (80,000) -
2015 87.0p Sep 2015 – Sep 2025 300,000 - 300,000
2018 73.50p Feb 2018 – Feb 2028 - 380,000 380,000
On the 5 February 2018 the company 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 2018 which vested in 2015.
On 6 February 2018 the company granted additional options to the following
directors of the company:
• 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. The options were valued at £24,000 at date of grant
using the Black-Scholes-Merton model with the following assumptions:
Expected volatility
23.90%
Expected
life
4 years
Risk free rate
0.785%
Expected
dividends
6.71%
Expected volatility was determined by reference to the historical volatility
of the share price over a period commensurate with the option’s expected
life. The expected life used in the model is used on the risk-averse balance
likely to be required by the option holders.
2018 Number 2018 Weighted average exercise price 2017 Number 2017 Weighted average exercise price
Outstanding at 1 January 380,000 111.3p 380,000 111.3p
Lapsed/Surrendered during the year (80,000) 202.5p - -
Issued during the year 380,000 73.5p - -
Outstanding at 31 December 680,000 79.46p 380,000 111.3p
Exercisable at 31 December 680,000 79.46p 380,000 111.3p
27. NON-CONTROLLING INTEREST
2018 £’000 2017 £’000
As at 1 January 532 349
Share of profit/(loss) for the year 729 172
Dividends received (641) -
Exchange adjustment (54) 11
As at 31 December 566 532
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.
2018 £’000 2017 £’000 Restated
Revenue 48,666 39,191
Expenses (43,801) (38,041)
Profit/(loss) for the year 4,865 1,150
Other comprehensive Income - -
Total comprehensive income for the year 4,865 1,150
Balance sheet
Non-current assets 8,532 8,613
Current assets 9,587 6,747
Current liabilities (10,540) (8,652)
Non-current liabilities (3,800) (3,155)
Net assets at 31 December 3,779 3,553
The non-controlling interest relates to the disposal of a 37.5% shareholding
in Black Wattle Colliery (Pty) Ltd in 2010 when the total issued share capital
in Black Wattle Colliery (Pty) Ltd was increased from 136 shares to 1,000
shares at par of R1 (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 Colliery (Pty) Ltd.
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 R832,075,000.
A non-controlling interest of 15% in Black Wattle Colliery (Pty) Ltd 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 R832,075,000.
28. RELATED PARTY TRANSACTIONS
At 31 December During the year
Amounts owed to related party £’000 Amounts owed by related party £’000 Costs recharged (to)/by related party £’000 Cash paid (to)/by related party £’000
Related party:
London & Associated Properties PLC (note (a)) 3 - 153 (183)
West Ealing Projects Limited (note (b)) - (752) - (752)
Dragon Retail Properties Limited (note (c)) 193 - - 2,046
Ezimbokodweni Mining (Pty) Limited (note (d)) - - - -
As at 31 December 2018 196 (752) 153 1,111
London & Associated Properties PLC (note (a)) 33 - 138 (140)
Langney Shopping Centre Unit Trust (note (b)) - - - -
Dragon Retail Properties Limited (note (c)) 147 (2,000) (180) 204
Ezimbokodweni Mining (Pty) Limited (note (d)) - - (46) -
As at 31 December 2017 180 (2,000) (88) 64
(a) London & Associated Properties PLC – London & Associated Properties PLC
is a substantial shareholder and parent company of Bisichi Mining PLC.
Property management, office premises, general management, accounting and
administration services are provided for Bisichi Mining PLC and its UK
subsidiaries.
(b) West Ealing Projects Limited – West Ealing Projects Limited (“West
Ealing”) is an unlisted property company incorporated in England and Wales.
West Ealing is owned equally by the company and London & Associated Properties
PLC and is accounted as a joint venture and treated as a non-current asset
investment.
(c) Dragon Retail Properties Limited – (“Dragon”) is owned equally by
the company and London & Associated Properties PLC. Dragon is accounted as a
joint venture and is treated as a non-current asset investment.
(d) Ezimbokodweni Mining (Pty) Limited – Ezimbokodweni Mining is a dormant
prospective coal production company based in South Africa and is accounted as
a joint venture.
Details of key management personnel compensation and interest in share options
are shown in the Directors’ Remuneration Report on pages 38 and 39 under the
headings Directors’ remuneration, Pension schemes and incentives and Share
option schemes which is within the audited part of this report. Refer also to
note 26 for details of IFRS 2 charges. The total employers’ national
insurance paid in relation to the remuneration of key management was £225,000
(2017: 156,000). In 2012 a loan was made to one of the directors, Mr A R
Heller, for £116,000. Interest is payable on the Director’s Loan at a rate
of 6.14 per cent. There is no fixed repayment date for the Director’s Loan.
The loan amount outstanding at year end was £41,000 (2017: £56,000) and a
repayment of £15,000 (2017: £15,000) was made during the year.
The non-controlling interest to Vunani Limited is shown in note 27. In
addition, the group holds an investment in Vunani Limited classified as
non-current available for sale investments with a fair value of £35,000
(2017: £51,000).
29. EMPLOYEES
2018 £’000 2017 £’000
The average weekly numbers of employees of the group during the year were as follows:
Production 231 192
Administration 15 15
246 207
Staff costs during the year were as follows:
Salaries 6,809 5,993
Social security costs 231 161
Pension costs 271 242
Share based payments 24 -
7,335 6,396
30. CAPITAL COMMITMENTS
2018 £’000 2017 £’000
Commitments for capital expenditure approved and contracted for at the year end 751 -
31. HEAD LEASE COMMITMENTS AND FUTURE PROPERTY LEASE RENTALS
Present value of head leases on properties
Minimum lease payments Present value of minimum lease payments
2018 £’000 2017 £’000 2018 £’000 2017 £’000
Within one year 12 10 12 10
Second to fifth year 46 38 37 30
After five years 1,443 1,199 136 112
1,501 1,247 185 152
Discounting adjustment (1,316) (1,095) - -
Present value 185 152 185 152
The Company has one finance lease contract for an investment property. The
remaining term for the leased investment property is 130 years. The annual
rent payable is the higher of £7,500 or 6.25% of the revenue derived from the
leased assets.
The group has entered into operating leases on its investment property
portfolio consisting mainly of commercial properties. These leases have terms
of between 1 and 109 years. All leases include a clause to enable upward
revision of the rental charge on an annual basis according to prevailing
market conditions.
The future aggregate minimum rentals receivable under non-cancellable
operating leases are as follows:
2018 £’000 2017 £’000
Within one year 919 914
Second to fifth year 2,456 2,460
After five years 9,765 9,327
13,140 12,701
32. CONTINGENT LIABILITIES AND POST BLANCE SHEET EVENTS
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:
2018 £’000 2017 £’000
Rail siding 54 64
Rehabilitation of mining land 1,259 1,387
Water & electricity 52 58
Company balance sheet
at 31 December 2018
Notes 2018 £’000 2017 £’000
Fixed assets
Tangible assets 35 47 48
Investment in joint ventures 36 665 165
Other investments 36 6,391 7,395
7,103 7,608
Current assets
Debtors – amounts due within one year 37 3,028 3,471
Bank balances 5,132 2,129
8,160 5,600
Creditors – amounts falling due within one year 38 (1,575) (1,406)
Net current assets 6,585 4,194
Total assets less current liabilities 13,688 11,802
Provision for liabilities and charges 39 - (18)
Net assets 13,688 11,784
Capital and reserves
Called up share capital 24 1,068 1,068
Share premium account 258 258
Available for sale reserve - 25
Other reserves 622 598
Retained earnings 33 11,740 9,835
Shareholders’ funds 13,688 11,784
The profit for the financial year, before dividends, was £2,414,000 (2017:
loss of £173,000)
The company financial statements were approved and authorised for issue by the
board of directors on 25 April 2019 and signed on its behalf by:
A R Heller G J
Casey Company
Registration No. 112155
Director
Director
Company statement of changes in equity
for the year ended 31 December 2018
Share capital £’000 Share premium £’000 Available for sale reserve £’000 Other reserve £’000 Retained earnings £’000 Shareholders funds £’000
Balance at 1 January 2017 1,068 258 6 598 10,435 12,365
Dividend paid - - - - (427) (427)
Loss and total comprehensive income for the year - - 19 - (173) (154)
Balance at 1 January 2018 1,068 258 25 598 9,835 11,784
IFRS 9 Reclassification - - (25) - 25 -
Dividend paid - - - - (534) (534)
Share option charge - - - 24 - 24
Profit and total comprehensive income for the year - - - - 2,414 2,414
Balance at 31 December 2018 1,068 258 - 622 11,740 13,688
Company accounting policies
for the year ended 31 December 2018
The following are the main accounting policies of the company:
Basis of preparation
The financial statements have been prepared in accordance with Financial
Reporting Standard 100 Application of Financial Reporting Requirements and
Financial Reporting Standard 101 Reduced Disclosure Framework. The principal
accounting policies adopted in the preparation of the financial statements are
set out below.
The financial statements have been prepared on a historical cost basis, except
for the revaluation of investment property and certain financial instruments.
The adoption of IFRS 9 has resulted in changes in the company’s accounting
policies for the recognition, classification and measurement of financial
assets and financial liabilities and impairment of financial assets. The only
material impact of IFRS 9 on the Company financial statements related to the
movement in fair value of other investments comprising of shares in listed
companies. Under IAS 39 the movement in the investments was measured at fair
value through other comprehensive income and taken to an available for sale
reserve. Under IFRS 9 the movements are measured at fair value through profit
and loss and taken to retained earnings. The Group has not restated prior
periods as allowed by the transition provisions of IFRS 9. In order to
reclassify the impact of historic movements on the other investments, an
adjustment of £25,000 has been made to the Group statement of changes in
equity at 1 January 2018 transferring the historical fair value movements of
the investments from the available for sale reserve to retained earnings.
Disclosure exemptions adopted
In preparing these financial statements the company has taken advantage of all
disclosure exemptions conferred by FRS 101 as well as disclosure exemptions
conferred by IFRS 2, 7 and 13.
Therefore these financial statements do not include:
• certain comparative information as otherwise required by EU
endorsed IFRS;
• certain disclosures regarding the company’s capital;
• a statement of cash flows;
• the effect of future accounting standards not yet adopted;
• the disclosure of the remuneration of key management personnel;
and
• disclosure of related party transactions with the company’s
wholly owned subsidiaries.
In addition, and in accordance with FRS 101, further disclosure exemptions
have been adopted because equivalent disclosures are included in the
company’s Consolidated Financial Statements.
Dividends received
Dividends are credited to the profit and loss account when received.
Depreciation
Provision for depreciation on tangible fixed assets is made in equal annual
instalments to write each item off over its useful life. The rates generally
used are:
Motor vehicles 25 – 33 per cent
Office equipment 10 – 33 per cent
Joint ventures
Investments in joint ventures, being those entities over whose activities the
group has joint control as established by contractual agreement, are included
at cost, less impairment.
Other Investments
Investments of the company in subsidiaries are stated in the balance sheet as
fixed assets at cost less provisions for impairment.
The adoption of IFRS 9 has resulted in changes in the recognition,
classification and measurement of other investments. Other investments
comprising of shares in listed companies are classified in the current year at
fair value through profit and loss. In the previous year other investments are
classified as non-current available for sale investments carried at fair
value. In the prior year any changes in fair value above cost were recognised
in other comprehensive income and accumulated in the available-for-sale
reserve and any changes in fair value below cost a provision for impairment
were recognised in the profit or loss account.
Foreign currencies
Monetary assets and liabilities expressed in foreign currencies have been
translated at the rates of exchange ruling at the balance sheet date. All
exchange differences are taken to the profit and loss account.
Financial instruments
Details on the group’s accounting policy for financial instruments can be
found on page 67.
Deferred taxation
Details on the group’s accounting policy for deferred taxation can be found
on page 68.
Leased assets and obligations
All leases are “Operating Leases” and the annual rentals are charged to
the profit and loss account on a straight line basis over the lease term. Rent
free periods or other incentives received for entering into a lease are
accounted for over the period of the lease so as to spread the benefit
received over the lease term.
Pensions
Details on the group’s accounting policy for pensions can be found on page
67.
Share based remuneration
Details on the group’s accounting policy for share based remuneration can be
found on page 67. Details of the share options in issue are disclosed in the
directors’ remuneration report on page 39 under the heading share option
schemes which is within the audited part of this report.
33. PROFIT & LOSS ACCOUNT
A separate profit and loss account for Bisichi Mining PLC has not been
presented as permitted by Section 408(2) of the Companies Act 2006. The profit
for the financial year, before dividends paid, was £2,414,000 (2017: loss of
£173,000)
Details of share capital are set out in note 24 of the group financial
statements and details of the share options are shown in the Directors’
Remuneration Report on page 39 under the heading Share option schemes which is
within the audited part of this report and note 26 of the group financial
statements.
34. DIVIDENDS
Details on dividends can be found in note 9 in the group financial statements.
35. TANGIBLE FIXED ASSETS
Leasehold Property £’000 Motor vehicles £’000 Office equipment £’000 Total £’000
Cost at 1 January 2018 45 - 67 112
Revaluation - - 2 2
Cost at 31 December 2018 45 - 69 114
Accumulated depreciation at 1 January 2018 - - 64 64
Charge for the year - - 3 3
Accumulated depreciation at 31 December 2018 - - 67 67
Net book value at 31 December 2018 45 - 2 47
Net book value at 31 December 2017 45 - 3 48
Leasehold property consists of a single unit with a long leasehold tenant. The
term remaining on the lease is 41 years.
36. INVESTMENTS
Joint ventures shares £’000 Shares in subsidiaries £’000 Loans £’000 Other investments £’000 Total £’000
Net book value at 1 January 2018 165 6,356 988 51 7,395
Invested during the year 500 - - - -
Exchange loss - - (52) - (52)
Repayment - - (94) - (94)
Transfer - - (842) - (842)
Unrealised surplus over cost - - - (16) (16)
Net book value at 31 December 2018 665 6,356 - 35 6,391
Investments in subsidiaries are detailed in note 15. In the opinion of the
directors the aggregate value of the investment in subsidiaries is not less
than the amount shown in these financial statements.
Other investments comprise £35,000 (2017: £51,000) shares.
37. DEBTORS
2018 £’000 2017 £’000
Amounts due within one year:
Amounts due from subsidiary undertakings 2,140 1,289
Trade receivables 6 16
Other debtors 58 78
Joint venture 752 2,000
Prepayments and accrued income 72 88
3,028 3,471
Amounts due within one year are held at amortised cost. The Group applies a
simplified approach to measure the loss allowance for trade receivables using
the lifetime expected loss provision. The group applies a general approach on
all other receivables. The general approach recognises lifetime expected
credit losses when there has been a significant increase in credit risk since
initial recognition. The company has reviewed and assessed the underlying
performance and resources of its counterparties including its subsidiary
undertakings and joint ventures. There was no additional loss allowance or
impairment required during the year as a result of the implementation of IFRS
9.
38. CREDITORS
2018 £’000 2017 £’000
Amounts falling due within one year:
Amounts due to subsidiary undertakings 138 279
Joint venture 192 192
Current taxation - 123
Other taxation and social security 6 38
Other creditors 1,162 659
Accruals and deferred income 77 115
1,575 1,406
39. PROVISIONS FOR LIABILITIES
2018 £’000 2017 £’000
Deferred taxation:
Balance at 1 January 18 18
Provision - -
Transfer (18) -
- 18
40. RELATED PARTY TRANSACTIONS
At 31 During the year
December
At 31 December Amounts owed by related party £’000 Costs recharged / accrued (to)/ by related party £’000 Cash paid (to)/ by related party £’000
Related party:
Black Wattle Colliery (Pty) Ltd (note (a)) (134) (1,093) 1,125
Ninghi Marketing Limited (note (b)) (102) - -
As at 31 December 2018 (236) (1,093) 1,125
Black Wattle Colliery (Pty) Ltd (note (a)) (165) (999) 2,768
Ninghi Marketing Limited (note (b)) (102) - -
As at 31 December 2017 (267) (999) 2,768
(a) Black Wattle Colliery (Pty) Ltd – Black Wattle Colliery (Pty) Ltd is a
coal mining company based in South Africa.
(b) Ninghi Marketing Limited – Ninghi Marketing Limited is a dormant coal
marketing company incorporated in England & Wales.
Black Wattle Colliery (PTY) Ltd and NInghi Marketing Limited are subsidiaries
of the company.
In addition to the above, the company has issued a company guarantee of
R20,061,917 (2017: R17,000,000) (South African Rand) to the bankers of Black
Wattle Colliery (Pty) Ltd in order to cover bank guarantees issued to third
parties in respect of the rehabilitation of mining land.
A provision of £102,000 has been raised against the amount owing by Ninghi
Marketing Limited in prior years as the company is dormant.
In 2012 a loan was made to one of the directors, Mr A R Heller, for £116,000.
Further details on the loan can be found in Note 28 of the group financial
statements.
Under FRS 101, the company has taken advantage of the exemption from
disclosing transactions with other wholly owned group companies. Details of
other related party transactions are given in note 28 of the group financial
statements.
41. EMPLOYEES
2018 £’000 2017 £’000
The average weekly numbers of employees of the company during the year were as follows:
Directors & administration 5 5
Staff costs during the year were as follows:
Salaries 1,752 1,227
Social security costs 231 161
Pension costs 38 62
Share based payments 24 -
2,045 1,450
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