REG-Bisichi Mining PLC: Annual Financial Report <Origin Href="QuoteRef">BISI.L</Origin> - Part 5
28/04/2017 11:50
- Part 5: For the preceding part double click ID:nPRrS92E4d
tax 1,693 (1,583)
Attributable to:
Equity shareholders 1,665 (1,500)
Non-controlling interest 28 (83)
1,693 (1,583)
Consolidated balance sheet
at 31 December 2016
Notes 2016 £’000 2015 £’000
Assets
Non-current assets
Value of investment properties 10 13,245 12,800
Fair value of head lease 31 181 194
Investment properties 13,426 12,994
Mining reserves, plant and equipment 11 8,520 5,374
Investments in joint ventures accounted for using equity method 12 1,321 1,198
Loan to joint venture 12 1,350 900
Other investments 12 32 14
Total non-current assets 24,649 20,480
Current assets
Inventories 16 1,721 1,049
Trade and other receivables 17 7,246 6,187
Corporation tax recoverable 32 29
Available for sale investments 18 781 594
Cash and cash equivalents 2,444 1,608
Non-current assets held for sale 14 - 1,168
Total current assets 12,224 10,635
Total assets 36,873 31,115
Notes 2016 £’000 2015 £’000
Liabilities
Current liabilities
Borrowings 20 (3,358) (2,267)
Trade and other payables 19 (6,950) (4,234)
Current tax liabilities (18) -
Total current liabilities (10,326) (6,501)
Non-current liabilities
Borrowings 20 (5,876) (5,940)
Provision for rehabilitation 21 (1,236) (847)
Finance lease liabilities 31 (181) (194)
Deferred tax liabilities 23 (2,248) (2,002)
Total non-current liabilities (9,541) (8,983)
Total liabilities (19,867) (15,484)
Net assets 17,006 15,631
Equity
Share capital 24 1,068 1,068
Share premium account 258 258
Translation reserve (1,751) (2,757)
Available for sale reserve 60 (120)
Other reserves 25 683 574
Retained earnings 16,339 16,287
Total equity attributable to equity shareholders 16,657 15,310
Non-controlling interest 27 349 321
Total equity 17,006 15,631
These financial statements were approved and authorised for issue by the board
of directors on 26 April 2017 and signed on its behalf by:
A R Heller G J
Casey Company
Registration No. 112155
Director Director
Consolidated statement of changes in shareholders’ equity
for the year ended 31 December 2016
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 2015 1,068 258 (1,677) 41 652 16,973 17,315 404 17,719
Revaluation and impairments - - - - - 17 17 - 17
Trading - - - - - (276) (276) 4 (272)
Profit/(loss) for the year - - - - - (259) (259) 4 (255)
Other comprehensive expense - - (1,080) (161) - - (1,241) (87) (1,328)
Total comprehensive expense for the year - - (1,080) (161) - (259) (1,500) (83) (1,583)
Dividend (note 8) - - - - - (427) (427) - (427)
Share options charge - - - - 31 - 31 - 31
Share options cancelled - - - - (109) - (109) - (109)
Balance at 1 January 2016 1,068 258 (2,757) (120) 574 16,287 15,310 321 15,631
Revaluation and impairments - - - - - 331 331 - 331
Trading - - - - - 148 148 (72) 76
Profit/(loss) for the year - - - - - 479 479 (72) 407
Other comprehensive income - - 1,006 180 - - 1,186 100 1,286
Total comprehensive income for the year - - 1,006 180 - 479 1,665 28 1,693
Dividend (note 8) - - - - - (427) (427) - (427)
Share options charge (note 26) - - - - 109 - 109 - 109
Balance at 31 December 2016 1,068 258 (1,751) 60 683 16,339 16,657 349 17,006
Consolidated cash flow statement
for the year ended 31 December 2016
Year ended 31 December 2016 £’000 Year ended 31 December 2015 £’000
Cash flows from operating activities
Operating profit 637 150
Adjustments for:
Depreciation 1,785 1,284
Share based payments 109 31
Unrealised gain on investment properties (445) (225)
Unrealised (gain)/loss on other investments and other write-offs (12) 132
Exchange adjustments (449) 497
Cash flow before working capital 1,625 1,869
Change in inventories (258) 393
Change in trade and other receivables 224 (212)
Change in trade and other payables 1,396 (71)
Cash generated from operations 2,987 1,979
Interest received 121 115
Interest paid (448) (363)
Income tax paid (46) -
Cash flow from operating activities 2,614 1,731
Cash flows from investing activities
Acquisition of reserves, property, plant and equipment (2,859) (2,992)
Share of profit in joint ventures 30 104
Disposal of non-current asset held for sale 1,138 -
Cash flow from investing activities (1,691) (2,888)
Cash flows from financing activities
Borrowings drawn 37 18
Borrowings repaid (131) (66)
Equity dividends paid (427) (427)
Cancelled share options - (109)
Cash flow from financing activities (521) (584)
Net increase / (decrease) 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)
Group accounting policies
for the year ended 31 December 2016
Basis of accounting
The results for the year ended 31 December 2016 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 47 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 13 for joint
arrangements and associates.
The exchange rates used in the accounts were as follows:
£1 Sterling: Rand £1 Sterling: Dollar
2016 2015 2016 2015
Year-end rate 16.9472 22.9067 1.23321 1.47634
Annual average 19.9269 19.5017 1.35477 1.51750
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.
In South Africa, a structured trade finance facility for R80million is held by
Black Wattle Colliery (Pty) Limited (“Black Wattle”) 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. 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 R60million revolving loan to cover
the working capital requirements of the group’s South African operations,
and a R20million loan facility to cover guarantee requirements related to the
group’s South African mining operations.
The directors expect that that the improved coal market conditions experienced
by Black Wattle Colliery, its direct mining asset, in the last quarter of 2016
and the first quarter of 2017 will be similar going into the remainder of
2017. The directors therefore have a reasonable expectation that the mine will
achieve positive levels of cash generation for the group in 2017. 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 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 (2015: £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.
If required, the group has sufficient financial resources available at short
notice including cash, available-for-sale investments and its £2m loan to
Dragon Retail Properties Limited which is repayable on demand. 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 in 2017, 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 2016. The adoption of these new and revised Standards and
Interpretations had no material effect on the profit or loss or financial
position of the Group.
The Group has not adopted any Standards or Interpretations in advance of the
required implementation dates.
IFRS 15 ‘Revenue from Contracts with Customers’ was issued by the IASB in
May 2014. It is effective for accounting periods beginning on or after 1
January 2018. The new standard will replace existing accounting standards, and
provides enhanced detail on the principle of recognising revenue to reflect
the transfer of goods and services to customers at a value which the company
expects to be entitled to receive. The standard also updates revenue
disclosure requirements. The standard was endorsed by the EU on 22 September
2016. The Directors are continuing to assess the impact of IFRS 15 on the
results of the Group and the impact of adopting this standard cannot be
reliably estimated until this work is substantially complete.
IFRS 9 was published in July 2014 and will be effective for the group from 1
January 2018. The standard was endorsed by the EU on 22 November 2016. It is
applicable to financial assets and financial liabilities, and covers the
classification, measurement, impairment and de-recognition of financial assets
and financial liabilities together with a new hedge accounting model. The
Directors are continuing to assess the impact on the results of the Group.
IFRS 16 ‘Leases’ – IFRS 16 ‘Leases’ was issued by the IASB in
January 2016 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
has yet to be endorsed by the EU. The Standard 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. 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 the most significant effect on the amounts
recognised in the financial statements and to be the area where the financial
statements are at most risk of a material adjustment due to estimation
uncertainty. The life of mine remaining is currently estimated at 5 years.
This life of mine is based on the groups existing coal reserves and excludes
future run of mine coal purchases and coal reserve acquisitions. The group’s
coal reserves are subject to assessment by an independent Competent Person and
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 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 11.
Provision for mining rehabilitation including restoration and de-commissioning
costs
A provision for future rehabilitation including restoration and
decommissioning costs requires estimates and assumptions to be made around the
relevant regulatory framework, the timing, extent and costs of the
rehabilitation activities and of the risk free rates used to determine the
present value of the future cash outflows. The provisions, including the
estimates and assumptions contained therein, are reviewed regularly by
management. The group engages an independent expert to assess the cost of
restoration and decommissioning annually as part of management’s assessment
of the provision. Details of the provision for mining rehabilitation can be
found in note 21.
Impairment
Property, plant and equipment representing the group’s mining assets in
South Africa are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying value may not be fully recoverable.
The impairment test is performed using the approved Life of Mine plan and
those future cash flow estimates are discounted using asset specific discount
rates and are based on expectations about future operations. The impairment
test requires estimates about production and sales volumes, commodity prices,
proven and probable reserves (as assessed by the Competent Person), operating
costs and capital expenditures necessary to extract reserves in the approved
Life of Mine plan. Changes in such estimates could impact recoverable values
of these assets. Details of the carrying value of property, plant and
equipment can be found in note 11.
The impairment test indicated significant headroom as at 31 December 2016 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 an
increase in yield of 8% associated with new mining areas based on assessments
by the Competent Person and empirical data. A 50% reduction in average
forecast coal export prices or a 15% reduction in yield would give rise to a
breakeven scenario. If export coal prices reduce by 10% a 5.25 % decrease in
yield below expectation would be required to create breakeven scenario.
However, the directors consider the forecasted yield levels to be achievable.
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 10, 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 12.
Carrying value of Ezimbokodweni joint venture
The group holds a £1.8million (2015: £1.2million) net investment in
Ezimbokodweni Mining (Pty) Limited (“Ezimbokodweni”) made up of a
£1.35million loan (2015: £0.9million) and a £0.45million (2015:
£0.3million) joint venture investment. The carrying value of the investment
is dependent upon the completion of the acquisition of the Pegasus coal
project (“the project”) in South Africa.
Although the South African Department of Mineral Resources (“DMR”) has
previously approved the transfer of legal title for the reserve to
Ezimbokodweni, a proposed sale and purchase agreement has been negotiated and
a deposit paid for the project, the conclusion of the transaction has been
delayed pending the commercial transfer of the prospecting right from the
current owners of the project to Ezimbokodweni. Previous negotiations to
complete the commercial acquisition of the project have been beset by various
delays outside the control of the group. More recently, Ezimbokodweni has
indicated to the current owners of the project their ability to fund and
complete the transaction via a consortium of newly proposed shareholders of
Ezimbokodweni. The proposed consortium include Anglo American PLC, Butsunani
Energy Investment Holdings, Vunani Limited, our BEE partner in Black Wattle,
and Bisichi Mining PLC. The consortium meets the Black Economic Empowerment
requirements as required for the transaction as per the DMR. The current
owners of the project have very recently notified Ezimbokodweni that they do
not wish to divest the project at this stage and, accordingly, the Board have
considered the likelihood of the acquisition ultimately completing in due
course as part of its assessment of the carrying value of the investment in
Ezimbokodweni. The Board remain committed to engaging with the current owners,
the DMR and relevant stakeholders in order to conclude the transaction and
plan further discussions with these parties in the near future.
In light of the previously approved legal transfer from the DMR, our
understanding of the potential concerns the DMR may have if current owners do
not ultimately divest of the asset and the support expressed for the
transaction by the DMR as an important stakeholder, the Board remain confident
of the transaction completing in due course. The Board has exercised
significant judgement in forming its assessment that the transaction will
ultimately complete. We will continue to evaluate the status of our investment
on an ongoing basis as the planned engagement with the relevant stakeholders
is undertaken. However at present, we believe the group is still able to
achieve significant value from the project in excess of its carrying value.
The carrying value of the net investment in the joint venture was tested for
impairment based on the economic model for the project and no impairment
indicators were considered to exist in terms of the underlying value of the
asset. 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.
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. Revenue is
recognised when the customer has a legally binding obligation to settle under
the terms of the contract and has assumed all significant risks and rewards of
ownership.
Revenue is only recognised on individual sales of coal when all of the
significant risks and rewards of ownership have been transferred to a third
party. Export revenue is generally recognised when the product is delivered to
the export terminal location specified by the customer, at which point the
customer assumes risks and rewards under the contract. Domestic coal revenues
are generally recognised on collection by the customer from the mine when
loaded into transport, where the customer pays the transportation costs.
Rental income which excludes services charges recoverable from tenants, 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.
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
The cost of property, plant and equipment comprises its purchase price and any
costs directly attributable to bringing the asset to the location and
condition necessary for it to be capable of operating in accordance with
agreed specifications. Freehold land is not depreciated. Other property, plant
and equipment is stated at historical cost less accumulated depreciation. The
cost recognised includes the recognition of any decommissioning assets related
to property, plant and equipment.
Mine reserves and development cost
The purpose of mine development is to establish secure working conditions and
infrastructure to allow the safe and efficient extraction of recoverable
reserves. Depreciation on mine development is not charged until production
commences or the assets are put to use. On commencement of full commercial
production, depreciation is charged over the life of the associated mine
reserves extractable using the asset on a unit of production basis. The unit
of production calculation is based on tonnes mined as a ratio to proven and
probable reserves and also includes future forecast capital expenditure. The
cost recognised includes the recognition of any decommissioning assets related
to mine development.
Post production stripping
In surface mining operations, the group may find it necessary to remove waste
materials to gain access to coal reserves prior to and after production
commences. Prior to production commencing, stripping costs are capitalised
until the point where the overburden has been removed and access to the coal
seam commences. Subsequent to production, waste stripping continues as part of
extraction process as a run of mine activity. There are two benefits accruing
to the group from stripping activity during the production phase: extraction
of coal that can be used to produce inventory and improved access to further
quantities of material that will be mined in future periods. Economic coal
extracted is accounted for as inventory. The production stripping costs
relating to improved access to further quantities in future periods are
capitalised as a stripping activity asset, if and only if, all of the
following are met:
• it is probable that the future economic benefit associated with the
stripping activity will flow to the group;
• the group can identify the component of the ore body for which access has
been improved; and
• the costs relating to the stripping activity associated with that
component or components can be measured reliably.
In determining the relevant component of the coal reserve for which access is
improved, the group componentises its mine into geographically distinct
sections or phases to which the stripping activities being undertaken within
that component are allocated. Such phases are determined based on assessment
of factors such as geology and mine planning.
The group depreciates deferred costs capitalised as stripping assets on a unit
of production method, with reference 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 37 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
The group classifies financial instruments, or their component parts, on
initial recognition as a financial asset, a financial liability or an equity
instrument in accordance with the substance of the contractual arrangement.
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.
Available for sale investments
Financial assets available for sale are measured at fair value. Any changes in
fair value above cost are recognised in other comprehensive income and
accumulated in the available-for-sale reserve. For any changes in fair value
below cost a provision for impairment is recognised in the profit or loss
account.
Other investments classified as non-current available for sale investments
comprise of shares in listed companies and are carried at fair value.
Trade receivables
Trade receivables do not carry any interest and are stated at their nominal
value as reduced by appropriate 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 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. The loan to Ezimbokodweni is included in joint ventures
as a part of net investment in joint venture as it is not expected to be
repaid in the foreseeable future, as the recoverability of which is dependent
upon the acquisition of the Pegasus coal project in South Africa and
development over its life of mine. 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. 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.
Assets held for sale
Non-current assets, or disposal groups comprising assets and liabilities, are
classified as held-for-sale if it is highly probable that they will be
recovered primarily through sale rather through continuing use. Such assets,
or disposal groups, are generally measured at the lower of their carrying
amount and fair value less costs of sell. Any impairment loss on a disposal
group is allocated first to goodwill, and then to the remaining assets and
liabilities on a pro rata basis, except that no loss is allocated to
inventories, financial assets, deferred tax assets, employee benefit assets,
investment property which continue to be measured in accordance with the
group’s other accounting policies.
Impairment losses on initial classification as held-for-sale and subsequent
gains and losses on remeasurement are recognised in profit or loss. Once
classified as held-for-sale, intangible assets and property, plant and
equipment are no longer amortised or depreciated, and any equity-accounted
investment is no longer equity accounted.
Segmental reporting
For management reporting purposes, the group is organised into business
segments distinguishable by economic activity. The group’s only 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.
Notes to the financial statements
for the year ended 31 December 2016
1. SEGMENTAL REPORTING
2016
Business analysis Mining £’000 Property £’000 Other £’000 Total £’000
Significant revenue customer A 14,543 - - 14,543
Significant revenue customer B 4,581 - - 4,581
Significant revenue customer C 445 - - 445
Other revenue 2,134 1,084 28 3,246
Segment revenue 21,703 1,084 28 22,815
Operating (loss)/profit before fair value adjustments & exchange movements (1,030) 736 25 (269)
Revaluation of investments & exchange movements 449 445 12 906
Operating (loss)/profit and segment result (581) 1,181 37 637
Segment assets 15,082 13,889 2,781 31,752
Unallocated assets
– Non-current assets 6
– Cash & cash equivalents 2,444
Total assets excluding investment in joint ventures and assets held for sale 34,202
Segment liabilities (8,098) (2,320) (215) (10,633)
Borrowings (3,424) (5,810) - (9,234)
Total liabilities (11,522) (8,130) (215) (19,867)
Net assets 14,335
Non segmental assets
– Investment in joint ventures 1,321
– Loan to joint venture 1,350
– Non-current asset held for sale -
Net assets as per balance sheet 17,006
Geographic analysis United Kingdom £’000 South Africa £’000 Total £’000
Revenue 1,112 21,703 22,815
Operating profit/(loss) and segment result 1,231 (595) 636
Non-current assets excluding investments 13,432 8,517 21,949
Total net assets 12,291 4,715 17,006
Capital expenditure 1 2,858 2,859
2015
Business analysis Mining £’000 Property £’000 Other £’000 Total £’000
Significant revenue customer A 14,126 - - 14,126
Significant revenue customer B 2,561 - - 2,561
Significant revenue customer C 1,545 - - 1,545
Other revenue 6,376 1,014 33 7,423
Segment revenue 24,608 1,014 33 25,655
Operating (loss)/profit before fair value adjustments & exchange movements (288) 690 31 433
Revaluation of investments & exchange movements (497) 225 (11) (283)
Operating (loss)/profit and segment result (785) 915 20 150
Segment assets 10,102 13,525 2,594 26,221
Unallocated assets
– Non-current assets 20
– Cash & cash equivalents 1,608
Total assets excluding investment in joint ventures and assets held for sale 27,849
Segment liabilities (4,865) (2,183) (229) (7,277)
Borrowings (2,280) (5,927) - (8,207)
Total liabilities (7,145) (8,110) (229) (15,484)
Net assets 12,365
Non segmental assets
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