REG-Bisichi Mining PLC: Annual Financial Report <Origin Href="QuoteRef">BISI.L</Origin> - Part 2
28/04/2017 11:50
- Part 2: For the preceding part double click ID:nPRrS92E4a
PRINCIPLE RISK PERFORMANCE AND MANAGEMENT OF THE RISK
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 9.
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 20 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 commercial properties. A fall in UK commercial 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 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. Refer to page 20 for details of the property portfolio performance.
Financial & performance review
The movement in the Group’s Adjusted EBITDA from £1.7million in 2015 to
£1.5million in 2016 can mainly be attributable to the lower Run of Mine
production at Black Wattle offsetting the impact of the higher prices
achievable for our coal in the last quarter. As we continue into 2017, the
group’s financial position remains strong and we expect to achieve
significant additional 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. 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: 2016 £’000 2015 £’000
For the group:
Operating profit before depreciation, fair value adjustments and exchange movements (adjusted EBITDA) 1,516 1,717
EBITDA 2,415 1,365
Profit/(loss) before tax 346 (147)
For our property investment operations:
Net property valuation (excluding joint ventures) 13,245 12,800
Net property revenue (excluding joint ventures) 1,084 1,014
For our mining activities:
Operating profit before depreciation, fair value adjustments and exchange movements (adjusted EBITDA) 755 996
EBITDA 1,204 499
Tonnes ‘000 Tonnes ‘000
Mining production 1,260 1,580
The key performance indicators of the group can be reconciled as follows: Mining £’000 Property £’000 Other £’000 2016 £’000 2015 £’000
Revenue 21,703 1,084 28 22,815 25,655
Mining and washing costs (16,184) - - (16,184) (19,177)
Other operating costs excluding depreciation (4,764) (348) (3) (5,115) (4,761)
Operating profit before depreciation, fair value adjustments and exchange movements (adjusted EBITDA) 755 736 25 1,516 1,717
Exchange movements 449 - - 449 (497)
Fair value adjustments - 445 12 457 214
Operating profit excluding depreciation 1,204 1,181 37 2,422 1,434
Share of (loss)/profit in joint venture - (7) - (7) 69
Loss on reclassification of asset as held for sale - - - - (138)
EBITDA 1,204 1,174 37 2,415 1,365
Net interest movement (284) (228)
Depreciation (1,785) (1,284)
Profit/(loss) before tax 346 (147)
Adjusted EBITDA is used as a key indicator of the trading performance of the
group and its operating segments before the impact of depreciation, fair value
adjustments and foreign exchange movements. The group’s operating segments
include its South African mining operations and UK property investments. The
performance of these two operating segments are discussed in more detail
below.
The group achieved EBITDA for the year of £2.4million (2015: £1.4million).
The movement compared to the prior year can mainly be attributable to
revaluation gains on our UK investment property of £0.4million (2015:
£0.2million) and exchange rate gains of £0.4million (2015: loss of
£0.5million) related to the rand denominated intercompany balances held by
the company with our South African mining subsidiary.
Depreciation for the year, related to our mining operations, increased to
£1.8million (2015: £1.3million). This increase can mainly be attributable to
capital expenditure incurred during 2016 in developing our new opencast areas.
This increase impacted on the group’s overall profit before tax reported of
£0.3million (2015: loss of £0.1million).
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
2016 R’000 2015 R’000 2016 £’000 2015 £’000
Revenue 432,481 479,903 21,703 24,608
Mining and washing costs (322,505) (373,982) (16,184) (19,177)
Operating profit before other operating costs and depreciation 109,976 105,921 5,519 5,431
Other operating costs (excluding depreciation) (4,764) (4,435)
Operating profit before depreciation, fair value adjustments and exchange movements (adjusted EBITDA) 755 996
Exchange movements 449 (497)
EBITDA 1,204 499
2016 ‘000 2015 ‘000
Mining production in tonnes 1,260 1,580
2016 R 2015 R
Revenue per tonne 343 302
Mining and washing costs per tonne (256) (235)
Operating profit per tonne before other operating costs and depreciation 87 67
Total revenue for the group’s mining operations for the year increased on a
per tonne basis from R303 in 2015 to R343 with the improved South African Rand
prices achievable for our coal in the second half of the year, and in
particular the last quarter. As a result of the overall lower Run of Mine
production, overall revenue for the group’s South African mining operations
decreased in the year to R432.5million (2015: R480.0million).
Total mining and washing costs for the group decreased from R374.0million in
2015 to R322.5million in 2016. This decrease can also mainly be attributable
to the lower Run of Mine production in the second half of the year. The
overall increase in cost per tonne from R304 per tonne to R343 per tonne can
mainly be attributable to the deterioration of the Blue nightingale reserve in
the first half of the year and the impact on mining production and washing
costs as a result of the stone contamination issues in the second half of the
year.
Other operating costs (excluding depreciation) of £4.8million (2015:
£4.4million) 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
was in line with management’s expectations and local inflation.
Overall, the group’s South African mining operations achieved an adjusted
EBITDA of £0.8million (2015: £1.0million) with the lower Run of Mine
production for the year offsetting the impact of the higher prices achievable
for our coal.
The volatility in the South African Rand continued to impact on earnings
during the year. Although our mining activities achieved an EBITDA of
£1.2million (2015: £0.5million), this result, compared to the prior year,
was positively impacted by an exchange rate gain of £0.4million in the
current year compared to an exchange rate loss of £0.5million incurred during
the prior year. 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 5.
Other mining Investments
The group holds a £1.8million (2015: £1.2million) investment in
Ezimbokodweni Mining (Pty) Limited made up of a £1.35million loan (2015:
£0.9million) and a £0.45million (2015: £0.3million) joint venture
investment. The increase in the overall investment, compared to the prior
year, can mainly be attributable to exchange rate gains on translation of year
end South African Rand balances into Sterling of £0.5million. The carrying
value of the investment is dependent upon the completion of the acquisition of
the Pegasus coal project (“the project”) in South Africa and details of
the background to the transaction, significant developments and the
significant judgment applied in determining that the transaction will
ultimately complete are set out in the financial statements on page 60. The
carrying value of the underlying project is supported by its coal reserves and
Life of Mine plan and is considered appropriate given the underlying economic
value of the project.
Uk property investment
Performance
The group’s portfolio is managed actively by London & Associated properties
plc and continues to perform well with voids across the portfolio at the low
level of 1.79%. Overall, the group achieved Net Property revenue (excluding
joint ventures) of £1.09million (2015: £1.01million). The increase, compared
to the prior year, can mainly be attributable to the contribution to revenue
from our new retail property in Northampton, which was acquired in October
2015.
The property portfolio was externally valued at 31 December 2016 and the value
of UK investment properties attributable to the group at year end was £13.25
million (2015: £12.8million). This increase, compared to the prior year, can
also mainly be attributable to our new retail property in Northampton which
was valued at £1.35million (2015: £1.0million) at year end. Certain units
within the property have recently undergone complete refurbishment and the
property has achieved increased rental levels from its re-let units.
Joint venture property investments
The group holds a £0.9million (2015: £0.9million) joint venture investment
in Dragon Retail Properties Limited, a UK property investment company. In
March 2016, the group disposed of its joint venture investment in Langney
Shopping Centre in Eastbourne for £1.14million in cash. The investment was
classified as a non-current asset held for sale within the group’s
consolidated balance sheet in the prior period with a loss on discontinued
operations in 2015 of £0.1million.
The open market value of the company’s share of investment properties
included within its joint venture investment in Dragon Retail Properties is
£1.3million (2015: £1.3million) and within non-current assets held for sale
is £nil (2015: £2.3million).
Overall, the group achieved net property revenue of £1.2million (2015:
£1.3million) for the year which includes the company’s share of net
property revenue from its investment in joint ventures of £86,000 (2015:
£86,000) and non-current assets held for sale of £nil
(2015: £172,000).
Loans
South Africa
In South Africa, the group holds a R80million (South African Rand) structured
trade finance facility with Absa Bank Limited, a South African subsidiary of
Barclays Bank PLC. The facility is renewable annually at 30 June and is
secured against inventory, debtors and cash that are held in the group’s
South African operations. This facility comprises of a R60million revolving
loan to cover the fluctuating working capital requirements of the group’s
South African operations, and a fully drawn R20million loan facility to cover
guarantee requirements related to the group’s South African mining
operations. The Board anticipate the facility will be renewed again this year.
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. The interest cost of the loan is 2.35% above LIBOR. During the year
the group breached a loan to value covenant on the bank loan and a payment of
£123,300 (2015: £nil) was made against the loan during the year and the
covenant breach was remediated. This covenant is intact at the year end.
Cashflow & financial position The following table summarises the main components of the consolidated cashflow for the year: Year ended 31 December 2016 £’000 Year ended 31 December 2015 £’000
Cash flow generated from operations before working capital and other items 1,625 1,869
Cash flow from operating activities 2,614 1,731
Cash flow from investing activities (1,691) (2,888)
Cash flow from financing activities (521) (584)
Net (decrease) / increase in cash and cash equivalents 402 (1,741)
Cash and cash equivalents at 1 January (626) 719
Exchange adjustment (666) 396
Cash and cash equivalents at 31 December (890) (626)
Cash and cash equivalents at 31 December comprise:
Cash and cash equivalents as presented in the balance sheet 2,444 1,608
Bank overdrafts (secured) (3,334) (2,234)
(890) (626)
Cash flow generated from operating activities of £2.6million (2015: £1.7
million) increased compared to the prior year as a result of an increase in
working capital of £1.4million (2015: £0.1million) for the year, mainly
attributable to an increase in trade payables of £1.4million as a result of
an increase in trade payables related to mining production costs at our new
opencast operations at Black Wattle which offset the reduced adjusted EBITDA
of the group’s South African mining operations as outlined above.
Investing cashflows primarily reflect the net effect of capital expenditure
during the year of £2.9million (2015: £3.0million) which can mainly be
attributable to development costs at our new opencast operations at Black
Wattle and the disposal of its joint venture investment in Langney Shopping
Centre for £1.14million in cash. As at year end the group’s mining
reserves, plant and equipment had a net asset value of £8.5million (2015:
£5.4million). In addition to movements in capital expenditure and
depreciation during the year, the increase in value of the group’s mining
reserves, plant and equipment can be attributed to exchange rate gains on
translation of the group’s South African assets into Sterling of
£2.1million (2015: loss of £1.4million).
Cash outflows from financing activities included dividends paid to
shareholders of £0.4million (2015: 0.4 million) and a £0.1million payment
against the company’s UK loan facility with Santander.
Overall, the group managed to achieve an overall increase in cash and cash
equivalents of £0.4million (2015: decrease of £1.7million) for the year.
After taking into account an exchange loss of £0.7million on the translation
of the group’s year end net cash borrowings that were held in South African
Rands, the group’s net balance owing of cash and cash equivalents (including
bank overdrafts) at year end was £0.9 million (2015: £0.6million).
The group has considerable financial resources available at short notice
including cash and cash equivalents (excluding bank overdrafts) of
£2.4million (2015: £1.6million), investments available for sale of
£0.8million (2015: £0.6million) and its £2m loan to Dragon Retail
Properties Limited which accrues annual interest at 6.875 per cent.
The net assets of the group reported as at year end were £17.0million (2015:
£15.6million). Total assets increased from £31.1million to £36.9million
mainly due to the capital expenditure noted above, property fair value uplifts
and the impact of exchange rate gains on retranslation of assets held by the
South African mining subsidiary. Liabilities increased from £15.5million to
£19.9million primarily due to the increased trade payables noted above and
the effect of exchange rate movements on liabilities held by the South African
mining subsidiary. The overall exchange gain recorded through the translation
reserve on translation of the group’s South African net assets at year end
was £1.0million (2015: loss of £1.1million).
Further details on the group’s cashflow and financial position are stated in
the Consolidated Cashflow Statement on page 57 and the Consolidated Balance
Sheet on page 54.
Future prospects
As we continue into 2017, the group’s financial position remains strong. The
group expects to achieve significant additional value from our existing mining
operations. In addition, the group seeks to expand its operations in South
Africa through the acquisition of additional coal reserves. 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 5 which form
part of the Strategic Report.
Signed on behalf of the Board of Directors
Garrett Casey
Finance Director
26 April 2017
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 Nico Serfontein
Mine Manager
Black Wattle Colliery
Directors and advisors
* 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
is currently senior partner of MJ2 Events LLP an event management business.
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.
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
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
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
Tugendhaft Wapnick Banchetti and Partners, Johannesburg
Hogan Lovells, Johannesburg
Brandmullers Attorneys, Middelburg
Stockbrokers
Shore Capital & Corporate Ltd
Registrars and transfer office
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent, BR3 4TU
Telephone 0871 664 0300
(Calls cost 12p per minute + network extras) or
+44 (0) 208 639 3399 for overseas callers
www.capitaassetservices.com
Email: ssd@capitaregistrars.com
Five year summary
2016 £’000 2015 £’000 2014 £’000 2013 £’000 2012 £’000
Consolidated income statement items
Revenue 22,815 25,655 26,500 35,105 35,962
Operating profit/(loss) 637 150 1,364 123 2,568
Profit/(loss) before tax 346 (147) 1,568 102 2,190
Trading profit/(loss) before tax (74) (188) 1,157 17 2,808
Revaluation and impairment profit/(loss) before tax 420 41 411 85 (618)
EBITDA 2,415 1,365 4,609 3,039 4,684
Operating profit before depreciation, fair value adjustments and exchange movements (adjusted EBITDA) 1,516 1,717 4,276 3,834 5,484
Consolidated balance sheet items
Investment properties 13,245 12,800 11,575 11,559 11,612
Fixed asset investments 2,703 2,112 4,090 4,370 4,309
15,948 14,912 15,665 15,929 15,921
Available for sale investments 781 594 796 822 787
16,729 15,506 16,461 16,751 16,708
Other assets less liabilities less non-controlling interests (72) (196) 854 (123) 607
Total equity attributable to equity shareholders 16,657 15,310 17,315 16,628 17,315
Net assets per ordinary share (attributable) 156.0p 143.4p 162.2p 156.3p 164.0p
Dividend per share 4.00p 4.00p 4.00p 4.00p 4.00p
Financial calendar
7 June 2017 Annual General Meeting
28 July 2017 Payment of final dividend for 2016 (if approved)
Late August 2017 Announcement of half-year results to 30 June 2017
Late April 2018 Announcement of results for year ending 31 December 2017
Directors’ report
The directors submit their report together with the audited financial
statements for the year ended 31 December 2016.
Activities and review of business
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.
The results for the year and state of affairs of the group and the company at
31 December 2016 are shown on pages 51 to 92 and in the Strategic Report on
pages 2 to 23. Future developments and prospects are also covered in the
Strategic Report. 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 23.
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 23.
The group’s UK activities are principally property investment whereby
premises are provided for rent to retail businesses. The group seeks to
provide those tenants with good quality premises from which they can operate
in an efficient and environmentally 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 2016 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 2016 of 1p was paid on 5 February 2017 (Interim 2015:
1p). The directors recommend the payment of a final dividend for 2016 of 3p
per ordinary share (2015: 3p) making a total dividend for 2016 of 4p (2015:
4p).
Subject to shareholder approval, the total dividend per ordinary share for
2016 will be 4p per ordinary share.
The final dividend will be payable on Friday 28 July 2017 to shareholders
registered at the close of business on 7 July 2017.
Investment properties
The investment property portfolio is stated at its open market value of
£13,245,000 at 31 December 2016 (2015: £12,800,000) as valued by
professional external valuers. The open market value of the company’s share
of investment properties included within its investments in joint ventures is
£1,315,000 (2015: £1,334,000) and within non-current assets held for sale is
£nil (2015: £2,286,000).
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 director retiring by rotation is Mr G J Casey who offers himself for
re-election. Mr GJ Casey has been an executive director of the company since
2010. He is a chartered accountant and has a contract of employment
determinable at three months’ notice. The board recommends the re-election
of GJ Casey.
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 38 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 26 April 2017:
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 – 1,906,360 shares representing 17.86 per cent. of the issued share capital.
James Hyslop – 341,126 shares representing 3.20 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.
Corporate governance
The Board acknowledges the importance of the guidelines set out in the Quoted
Companies Alliance (QCA) published Corporate Governance Code and complies with
these so far as is appropriate having regard to the size and nature of the
company. 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 27. 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 49. 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 35 to 42.
• 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 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.
The audit committee report is set out on page 46.
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 4 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 fifteen years and
John Sibbald has been a non-executive director for over twenty five years. The
Board encourages Christopher Joll and John Sibbald to act independently. The
board considers that their length of service and connection with the
company’s public relations advisers, 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 2016 and attendance at regular Board meetings
and Board committees was as follows:
Meetings held Meetings Attended
Sir Michael Heller Board Nomination committee 5 1 5 1
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 are no significant issues disclosed in the Annual Report for the year
ended 31 December 2016 (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 Wednesday, 7 June 2017 at 11.00
a.m. Resolutions 1 to 8 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. Resolutions 9 to 11 will be proposed as special
resolutions. At least 75 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 paragraphs are only summaries of certain
resolutions to be proposed at the Annual General Meeting and not the full text
of the resolutions. You should therefore read this section in conjunction with
the full text of the resolutions contained in the notice of Annual General
Meeting.
Remuneration policy (Resolution 3)
Resolution 3 is to approve the new remuneration policy of the Company for the
three year period from the date of this Annual General Meeting in compliance
with section 439A of the Companies Act 2006. The vote on the remuneration
policy is binding in nature in that 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. If resolution 3 is passed, the remuneration policy will take
effect from the conclusion of the Annual General Meeting. The remuneration
policy will be put to shareholders again no later than the Company’s annual
general meeting in 2020.
Directors’ authority to allot shares (Resolution 8)
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 8.1.1 of resolution 8 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
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