REG-Bisichi Mining PLC: Annual Financial Report
23/04/2018 08:15
BISICHI MINING PLC
Results for the year ended 31 December 2017
Summary:
Reported EBITDA: £3,700,000 (2016: £2,400,000)
Adjusted EBITDA: £5,800,000 (2016: £1,500,000)
· Improved performance in the second half of the year from
Black Wattle, the group’s South African coal mining operation.
· Investment in significant infrastructure improvements
allowed Black Wattle to mine at a sustainably higher rate of production and
achieve an increased yield from its washing plant.
· Black Wattle was able to benefit from the significantly
improved coal prices during the second half of the year.
· 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 1p (2016: Nil) per share proposed in addition to a final
dividend of 3p (2016: 3p) taking full year dividend to 5p (2016: 4p) per
share.
· Dividend yield of 7.1% at year end share price.
Chairman, Sir Michael Heller, comments:
"The permanent infrastructure improvements at Black Wattle will have a
positive impact on the returns achievable from our existing coal reserves and
should open up new opportunities to mine similar coal reserves in the
surrounding area. Accordingly, we remain confident about the ability of our
South African coal mining operations to continue to contribute 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 2017
Building on success at Black Wattle
Earnings before interest, tax, depreciation and amortisation (EBITDA) of
£3.7million
(2016: £2.4 million)
Operating profit before depreciation, fair value adjustments and exchange
movements (Adjusted EBITDA) of
£5.8million
(2016: £1.5 million)
Dividend yield of
7.1%
at year end share price.
Strategic report
The directors present the Strategic Report of the company for the year ending
31 December 2017. 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.
Chairman’s Statement
For the year ended 31 December 2017, we are very pleased to report that your
company achieved earnings before interest, tax, depreciation and amortisation
(EBITDA) of £3.7million (2016: £2.4 million) and operating profit before
depreciation, fair value adjustments and exchange movements (Adjusted EBITDA)
of £5.8million (2016: £1.5million).
These results can be attributed mainly to an improved performance in the
second half of the year from Black Wattle, our South African coal mining
operation. The decision by your management in the first half of the year to
invest in significant infrastructure improvements to the mine’s washing
plant has allowed Black Wattle to mine at a higher rate of production and
achieve an increased yield. In addition, the mine was able to benefit from
significantly improved coal prices during the second half of the year. The
permanent infrastructure improvements at Black Wattle will have a positive
impact on the returns achievable from our existing coal reserves and should
open up new opportunities to mine similar coal reserves in the surrounding
area. Accordingly, we remain confident about the ability of our South African
coal mining operations to continue to contribute to our group earnings and
cash generation for the foreseeable future.
In other mining news, we are pleased to announce the appointment of Millicent
Zvarayi to the Board of Black Wattle Colliery (Pty) Ltd. Since 2012, Ms
Zvarayi has had a major role in the management of Black Wattle’s export
sales via Richards Bay Coal Terminal under the Quattro programme. As a member
of its Board, we look forward to Ms Zvarayi’s direct contribution to the
development of Black Wattle’s long term strategy.
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 company’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. 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. This is in line with
the company’s stated strategy of balancing the high risk of our mining
operations with a dependable cash flow from our UK property investment
operations.
Finally, in light of the strong results achieved for the year, your directors
recommend a special dividend of 1p (2016: Nil) per share in addition to a
final dividend of 3p (2016: 3p). Both dividends will be payable on Friday 27
July 2018 to shareholders registered at the close of business on 6 July 2018.
This takes the total dividends per share for the year to 5p (2016: 4p). Based
on the 2017 year end share price, this represents a 7.1% 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
20 April 2018
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 2 Production & sustainability 3 Processing & marketing
Strategy 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 Strategy The group strives to mine its coal reserves in an economical and sustainable manner that delivers long term value to all our stakeholders. Strategy 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.
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 to the three key areas outlined above, we seek to balance the high
risk of our mining operations with a dependable cash flow from our UK property
investment operations. The company invests in retail property across the UK.
The UK 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.
Mining Review
The strong performance of Black Wattle, our South African coal mining
operation, can be attributed to increased mining production from our opencast
reserves and the successful completion of coal infrastructure improvements to
our washing plant. This allowed the group to benefit from the higher prices
achievable for our coal, particularly in the second half of the year.
Production and operations
For the first half of 2017 production at Black Wattle was impacted by higher
than expected seasonal rains as well as ongoing stone contamination issues at
our opencast areas. Overall, the mine achieved mining production of 582,000
metric tonnes (2016 H1: 795,000 metric tonnes) during the first half of the
year. The stone contamination issues affected both yield and mining production
through the washing plant, thus impacting on sales volumes and earnings in the
first half of the year.
During the second half of the year, further development of our opencast areas
and the successful completion of infrastructure improvements to our washing
plant allowed the mine to increase mining production to 714,000 metric tonnes
(2016 H2: 465,000 tonnes) during the period. In addition, the completion of
infrastructure improvements assisted in reducing the stone contamination
through the washing plant and increasing our overall yield.
As a result of the higher production in the second half of the year, overall
mining production from Black Wattle increased in 2017, with total mining
production for the year of 1.30million metric tonnes (2016: 1.26million metric
tonnes). As part of Black Wattle’s mining plan, the opencast areas that were
mined in 2017 will continue to be mined throughout 2018. We expect mining
production levels achieved in the second half of 2017 to be maintained in
2018.
As mentioned in the Chairman’s statement, the infrastructure improvements
completed at Black Wattle in 2017 will continue to have a positive impact on
the returns achievable from our remaining reserves. In addition, the new
machinery will allow Black Wattle to mine or buy in coal from similar reserves
within the area that may be affected by stone contamination issues thus
broadening the scope of new opportunities for the group to extend the life of
mine of our mining operations in South Africa.
Main trends/markets
During 2017 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.
Although International coal prices fell in the first half of 2017, a surge in
the international price in the second half of the year ensured an overall
improvement in prices achievable for our coal for the year. At the beginning
of 2017, the average weekly price of Free on Board (FOB) Coal from Richards
Bay Coal Terminal (API4) was $85. During the year the API4 price steadily
decreased to around $70 by May 2017 before rebounding and steadily increasing
to $95 by the end of the year. A less volatile South African Rand against the
US Dollar ensured that the movements in the Rand prices achievable for our
export coal as a result of exchange movements remained limited. Overall, the
group achieved an average Rand price of R773 per tonne of export coal sold in
2017 from the mine compared to R632 in 2016.
In the domestic market, a continued high demand impacted positively on prices
achievable for our coal in 2017. In the last quarter of 2016, the average Rand
price achievable per tonne of coal sold was R276 increasing to R390 by the
second quarter of 2017 and over R400 by the last quarter of 2017. Overall, the
group achieved an average price of R397 per tonne of domestic coal sold in
2017 compared to R279 in 2016. Looking forward, domestic prices are expected
to remain stable as long as the shortage of coal in the domestic market
continues.
Overall, the increase in group revenue, compared to the prior year, can mainly
be attributed to the higher volume of coal sold at Black Wattle as well as the
higher prices achieved for our coal.
Looking forward into 2018, both the export and domestic coal prices have
continued to remain stable at these higher levels and we continue to see
strong demand for our coal in both markets.
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 2017:
• Black Wattle Colliery recorded one Lost Time Injury during 2017 (2016:
One).
• No cases of Occupational Diseases were recorded.
• Zero claims for the Compensation for Occupational Diseases were submitted.
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 2018, management will focus on maintaining production at
the higher levels achieved in the second half of 2017 and increasing our life
of mine through the acquisition of additional reserves. With strong demand and
improved prices achievable for our coal, we believe the group is in a strong
position to achieve significant value from our South African mining operations
in 2018.
Andrew Heller
Managing Director
20 April 2018
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.
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 2017:
* 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 2017.
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) progress
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.
* Black Wattle Colliery has concluded extensive work on various Agricultural
projects as well as the E-Bag Recycling projects. The E-Bag Recycling project
aims to minimize the environmental impact of post-consumer Polyethylene
Terephthalate plastic (PET) on the South African landscape. The project was
awarded the PET Entrepreneur award for 2013. To date in 2017, the E-Bag
recycling project has initiated up to 70 local community jobs in the region.
Black Wattle Colliery has entered into a joint venture project with
Enviroserve Waste Management to further develop and ensure the future
sustainability of this project.
* 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.
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.
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 does 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 property investment whereby we
provide premises which are rented to retail businesses. We seek to provide
those tenants with good quality premises from which they can operate in an
efficient and 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 88 percent of Black Wattle’s equipment and services.
We closely monitor our monthly expenditure and welcome potential BBBEE
suppliers to compete for equipment and service contracts at Black Wattle.
Employment
As part of Black Wattle’s commitment to the South African government Mining
Charter, the company seeks to:
* Expand opportunities for historically disadvantaged South Africans (HDSAs),
including women, 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.
In addition 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 2017 were:
* 11 employees were trained in ABET (Adult Basic Educational Training) on
various levels;
* An additional 5 disabled women continued their training on ABET level one
and two.
* 2 HDSA Females have completed and qualified 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 6 directors (6 male, 0 female), 7 senior managers (6 male, 1
female) and 196 employees (143 male, 53 female).
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 employed the Operational Control boundary definition to outline
our carbon footprint boundary. Included within that boundary are Scope 1 & 2
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.
We have used the GHG Protocol Corporate Accounting and Reporting Standard
(revised edition) and a methodology adapted from the Intergovernmental Panel
on Climate Change (2006) to calculate fugitive emissions from surface coal
mining activities. Further emission factors were used from UK Government’s
GHG Conversion Factors for company Reporting 2017.
The group’s carbon footprint: 2017 CO2e Tonnes 2016 CO2e Tonnes
Emissions source:
Scope 1 Combustion of fuel & operation of facilities 15,575 11,860
Scope 1 Emissions from coal mining activities 22,683 22,171
Scope 2 Electricity, heat, steam and cooling purchased for own use 11,210 8,530
Total 49,468 42,561
Intensity:
Intensity 1 Tonnes of CO2 per pound sterling of revenue 0.0013 0.0019
Intensity 2 Tonnes of CO2 per tonne of coal produced 0.038 0.034
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 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. 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 2017 and 2016. 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.
MINING RISK As with many mining operations, the reserve that is mined has the risk of not having the 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. 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.
CURRENCY RISK The group’s operations are sensitive to currency movements, especially those between 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. 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 2017 and 2016. 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.
NEW RESERVES AND MINING PERMISSIONS The life of the mine, acquisition of additional reserves, 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. Any regulatory changes to the Mining Charter, or failure to meet existing targets, could adversely affect the mine’s ability to retain its mining rights in South Africa. The maintenance of compliance with permits includes factors such as environmental management, health and safety, labour laws and Black Empowerment legislation; 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 on page 17 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.
POWER SUPPLY RISK The current utility provider for power supply in South Africa is the government run 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. 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.
PRINCIPAL RISK PERFORMANCE AND MANAGEMENT OF THE RISK
FLOODING RISK The group’s mining operations are susceptible to seasonal flooding which could disrupt mining production and impact on earnings. 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.
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 22 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 economic performance of the United Kingdom, including the potential impact of the United Kingdom leaving the European Union (“Brexit”), may impact the level of rental income, yields and associated property valuations of the group’s UK property assets. 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 on the future performance of the Group’s existing
UK portfolio. In addition, the group assesses on an ongoing basis the impact of Brexit on the group’s banking covenants, loan obligations and future investment decisions. Refer to page 22 for details of the property portfolio performance.
Financial & performance review
The movement in the Group’s Adjusted EBITDA from £1.5million in 2016 to
£5.8million in 2017 can mainly be attributed to the higher prices achieved
for our coal and increased mining production at Black Wattle offsetting the
impact of higher mining and washing costs. As we continue into 2018, 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: 2017 £’000 2016 £’000
For the group:
Operating profit before depreciation, fair value adjustments and exchange movements (adjusted EBITDA) 5,819 1,516
EBITDA 3,734 2,415
Profit/(loss) before tax 1,485 346
For our property investment operations:
Net property valuation (excluding joint ventures) 13,245 13,245
Net property revenue (excluding joint ventures) 1,125 1,084
For our mining activities:
Operating profit before depreciation, fair value adjustments and exchange movements (adjusted EBITDA) 4,894 755
EBITDA 2,811 1,204
Tonnes ‘000 Tonnes ‘000
Mining production 1,296 1,260
The key performance indicators of the group can be reconciled as follows: Mining £’000 Property £’000 Other £’000 2017 £’000
Revenue 36,300 1,125 34 37,459
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
The key performance indicators of the group can be reconciled as follows: Mining £’000 Property £’000 Other £’000 2016 £’000
Revenue 21,703 1,084 28 22,815
Mining and washing costs (16,184) - - (16,184)
Other operating costs excluding depreciation (4,764) (348) (3) (5,115)
Operating profit before depreciation, fair value adjustments and exchange movements (adjusted EBITDA) 755 736 25 1,516
Exchange movements 449 - - 449
Fair value adjustments - 445 12 457
Operating profit excluding depreciation 1,204 1,181 37 2,422
Share of (loss)/profit in joint venture - (7) - (7)
EBITDA 1,204 1,174 37 2,415
Net interest movement (284)
Depreciation (1,785)
Profit/(loss) before tax 346
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
investments. The performance of these two operating segments are discussed in
more detail below.
The group achieved EBITDA for the year of £3.7 million (2016: £2.4million).
The movement compared to the prior year can mainly be attributed to increased
operating profits before depreciation from our mining activities of
£4.9million (2016: £1.2million) offset by the group’s share of losses in
joint venture mining assets of £1.8million (2016: £nil). The share of losses
in joint ventures can be attributed to the write off of our joint venture
mining investment in Ezimbokodweni Mining (Pty) LTD of £1.8million which is
discussed in further detail below.
Depreciation for the year, related to our mining operations, remained stable
at £1.8million (2016: £1.8million) with the group reporting an overall
profit before tax of £1.5million (2016: £0.3million).
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
2017 R’000 2016 R’000 2017 £’000 2016 £’000
Revenue 622,691 432,481 36,300 21,703
Mining and washing costs (440,241) (322,505) (25,664) (16,184)
Operating profit before other operating costs and depreciation 182,450 109,976 10,636 5,519
Other operating costs (excluding depreciation) (5,742) (4,764)
Operating profit before depreciation, fair value adjustments and exchange movements (adjusted EBITDA) 4,894 755
Exchange movements (256) 449
Share of loss in joint ventures (1,827) -
EBITDA 2,811 1,204
2017 ‘000 2016 ‘000
Mining production in tonnes 1,296 1,260
2017 R 2016 R
Revenue per tonne of mining production 480 343
Mining and washing costs per tonne of mining production (340) (256)
Operating profit per tonne of mining production before other operating costs and depreciation 140 87
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 2017 ‘000 Domestic ‘000 Export ‘000 2016 ‘000
Quantity of coal sold in tonnes 1,267 155 1,422 1,219 147 1,366
Domestic R’000 Export R’000 2017 R’000 Domestic R’000 Export R’000 2016 R’000
Total Revenue 502,818 119,873 622,691 339,611 92,870 432,481
R R R R R R
Revenue per tonne of coal sold 397 773 438 279 632 317
The quantity of coal sold can be defined as the quantity of coal sold in
metric tonnes from the mine in any given period. Revenue per tonne of coal
sold can be defined as the net revenue price achieved per metric tonne of coal
sold.
Total revenue for the group’s mining operations increased for the year from
R317 per tonne of coal sold in 2016 to R438 in 2017, 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 1.422million tonnes (2016: 1.366million tonnes).
Overall, the revenue for the group’s South African mining operations
increased in the year to R622.7million (2016: R432.5 million).
The overall increase in cost per tonne from R256 per tonne to R340 per tonne
can mainly be attributed to the movement of mining operations to new opencast
reserves at Black Wattle which have higher inherent mining costs. 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
R322.5million in 2016 to R440.2million in 2017.
Other operating costs (excluding depreciation) of £5.7million (2016:
£4.8million) 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 exchange movements on the translation of South
African Rand costs into Sterling. Overall costs were in line with
management’s expectations and local inflation.
Overall, the group’s South African mining operations achieved an adjusted
EBITDA of £4.9million (2016: £0.8million) 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 new opencast reserves.
The group’s EBITDA for mining activities of £2.8million (2016:
£1.2million) for the year, in comparison to the result achieved for adjusted
EBITDA were negatively impacted by the share of loss in joint ventures of
£1.8million (2016: £nil) related to the write off of our investment in
Ezimbokodweni Mining (Pty) Ltd as well as an exchange rate loss of
£0.3million in the current year compared to an exchange rate gain of
£0.4million 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 6.
Other mining Investments
During the year the group wrote off its £1.8million investment in
Ezimbokodweni Mining (Pty) Limited (“Ezimbokodweni”) made up of a
£1.4million loan (2016: £1.4million) and a £0.4million (2016: £0.4million)
joint venture investment.
The carrying value of the investment was dependent upon the completion of the
acquisition of the Pegasus coal project (“the project”) in South Africa.
Although a proposed sale and purchase agreement had been negotiated and a
deposit paid for the project, the conclusion of the transaction had been
delayed pending the commercial transfer of the prospecting right from the
current owners of the project to Ezimbokodweni. Although the group has always
remained committed to completing the transaction, previous negotiations to
complete the commercial acquisition of the project had been beset by various
delays outside of its control and at the beginning of 2017, the current owners
of the project notified Ezimbokodweni that they no longer wished to divest the
project. More recently, the group was notified that an agreement was reached
between the current owners of the project and the directors of Ezimbokodweni
for the deposit for the project to be returned and any further negotiations
with Ezimbokodweni to acquire the project to be terminated. Although, a legal
claim by the group has been issued against Ezimbokodweni and its
representatives, in order for the group to recover some of the investment, the
Board has considered it to be appropriate to write off the investment in full
in the 2017 year end.
Uk property investment
Performance
The group’s portfolio is managed actively by London & Associated properties
plc and continues to perform well with net property revenue (excluding joint
ventures) across the portfolio increasing marginally during the year to
£1.125million (2016: £1.084million). The property portfolio was externally
valued at 31 December 2017 and the value of UK investment properties
attributable to the group at year end remained unchanged at £13.25 million
(2016: £13.25million).
Joint venture property investments
The group holds a £0.9million (2016: £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 remained
unchanged at £1.3million (2016: £1.3million).
Overall, the group achieved net property revenue of £1.21million (2016:
£1.17million) for the year which includes the company’s share of net
property revenue from its investment in joint ventures of £83,000 (2016:
£86,000).
Loans
South Africa
In July 2017, the group increased its South African structured trade finance
facility with Absa Bank Limited from R80million (South African Rand) to
R100million. 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 R80million revolving facility
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. No covenants
were breached during the year.
Cashflow & financial position The following table summarises the main components of the consolidated cashflow for the year: Year ended 31 December 2017 £’000 Year ended 31 December 2016 £’000
Cash flow generated from operations before working capital and other items 5,819 1,625
Cash flow from operating activities 7,270 2,614
Cash flow from investing activities (1,936) (1,691)
Cash flow from financing activities (429) (521)
Net (decrease) / increase in cash and cash equivalents 4,905 402
Cash and cash equivalents at 1 January (890) (626)
Exchange adjustment 50 (666)
Cash and cash equivalents at 31 December 4,065 (890)
Cash and cash equivalents at 31 December comprise:
Cash and cash equivalents as presented in the balance sheet 5,327 2,444
Bank overdrafts (secured) (1,262) (3,334)
4,065 (890)
Cash flow generated from operating activities increased compared to the prior
year to £7.3million (2016: £2.6 million) mainly due to the improved
operating performance of our South African mining operations, as outlined
above. Overall the group achieved an increase in operating profit during the
year of £3.8million (2016: £0.6million). In addition to operating profit,
the increase in cashflow generation from operating activities can also be
attributed to a cashflow increase from trade receivables of £0.9million
(2016: £0.2million), as a result of an decrease in the trade receivables
balances of our South African domestic coal customers, and a cashflow increase
from inventories of £0.9million (2016: decrease of £0.26million), as a
result of improved coal sales from our South African mining operations in the
last quarter of 2017.
Investing cashflows primarily reflect the net effect of capital expenditure
during the year of £1.8million (2016: £2.9million) which can mainly be
attributable to the new infrastructure improvements to the washing plant
facility at Black Wattle, as outlined in the Mining Review. As at year end the
group’s mining reserves, plant and equipment had a net asset value of
£8.6million (2016: £8.5million) with capital expenditure being offset by
depreciation of £1.8million (2016: £1.8milion) for the year.
Cash outflows from financing activities included dividends paid to
shareholders of £0.4million (2016: 0.4 million).
Overall, the group managed to achieve an overall increase in cash and cash
equivalents of £4.9million (2016: £0.4million) for the year. After taking
into account an exchange gain of £0.05million (2016: loss of £0.7million) 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 £4.1
million (2016: balance owing of: £0.9million).
The group has considerable financial resources available at short notice
including cash and cash equivalents (excluding bank overdrafts) of
£5.3million (2016: £2.4million), investments available for sale of
£1.1million (2016: £0.8million) and its £2m loan to Dragon Retail
Properties Limited which accrues annual interest at 6.875 per cent. The above
financial resources totalling £8.4million (2016: £5.2million).
The net assets of the group reported as at year end were £17.7million (2016:
£17.0million). Total assets remained stable at £36.6million (2016:
£36.9million) mainly due to a decrease in inventory and trade receivables
balances at year end, as outlined above, and the write off of the groups’
joint venture investment in Ezimbokodweni Mining (Pty) Ltd of £1.8million
offsetting the increase in the groups’ cash and cash equivalents balance
from £2.4million to £5.3million during the year. Liabilities decreased from
£19.9million to £18.8million during the year primarily due to a decrease in
current borrowings from £3.4million in 2016 to £1.3million in 2017. This
decrease can mainly be attributed to a decrease in borrowings drawn from the
groups’ South African structured trade facility utilised by the groups’
mining operations. The overall exchange gain recorded through the translation
reserve on translation of the group’s South African net assets at year end
decreased to £0.1million (2016: £1.0million) as a result of the reduced
movement 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 59 and the Consolidated Balance
Sheet on page 56.
FUTURE PROSPECTS
As we continue into 2018, 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 particular in
areas surrounding Black Wattle where additional value can be achieved through
the use of our existing infrastructure. In addition, management is currently
investigating other major investment opportunities in the domestic property
sector 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
20 April 2018
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
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
Millicent Zvarayi
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
Brandmullers Attorneys, Middelburg
Herbert Smith Freehills, Johannesburg
Hogan Lovells, Johannesburg
Tugendhaft Wapnick Banchetti and Partners, Johannesburg
Stockbrokers
Shore Capital & Corporate Ltd
Registrars and transfer office
Link Asset Services
65 Gresham Street
London
EC2V 7NQ
Telephone 0871 664 0300
(Calls cost 12p per minute + network extras) or
+44 (0) 371 664 0300 for overseas callers
www.linkassetservices.com
Email: shareholderenquiries@linkgroup.co.uk
Five year summary
2017 £’000 2016 £’000 2014 £’000 2013 £’000 2012 £’000
Consolidated income statement items
Revenue 37,459 22,815 25,655 26,500 35,105
Operating profit/(loss) 3,763 637 150 1,364 123
Profit/(loss) before tax 1,485 346 (147) 1,568 102
Trading profit/(loss) before tax 3,317 (74) (188) 1,157 17
Revaluation and impairment profit/(loss) before tax (1,832) 420 41 411 85
EBITDA 3,734 2,415 1,365 4,609 3,039
Operating profit before depreciation, fair value adjustments and exchange movements (adjusted EBITDA) 5,819 1,516 1,717 4,276 3,834
Consolidated balance sheet items
Investment properties 13,245 13,245 12,800 11,575 11,559
Fixed asset investments 925 2,703 2,112 4,090 4,370
14,170 15,948 14,912 15,665 15,929
Available for sale investments 1,050 781 594 796 822
15,220 16,729 15,506 16,461 16,751
Other assets less liabilities less non-controlling interests 1,922 (72) (196) 854 (123)
Total equity attributable to equity shareholders 17,142 16,657 15,310 17,315 16,628
Net assets per ordinary share (attributable) 160.6p 156.0p 143.4p 162.2p 156.3p
Dividend per share 5.00p 4.00p 4.00p 4.00p 4.00p
Financial calendar
6 June 2018 Annual General Meeting
27 July 2018 Payment of final and special dividend for 2017 (if approved)
Late August 2018 Announcement of half-year results to 30 June 2018
Late April 2019 Announcement of results for year ending 31 December 2018
Directors’ report
The directors submit their report together with the audited financial
statements for the year ended 31 December 2017.
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.
The results for the year and state of affairs of the group and the company at
31 December 2017 are shown on pages 54 to 94 and in the Strategic Report on
pages 2 to 23. 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 31 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 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 2017 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 2017 of 1p was paid on 9 February 2018 (Interim 2016:
1p). The directors recommend the payment of a final dividend for 2017 of 3p
per ordinary share (2016: 3p) as well as a special dividend of 1p (2016: Nil)
making a total dividend for 2017 of 5p (2016: 4p).
Subject to shareholder approval, the total dividend per ordinary share for
2017 will be 5p per ordinary share.
The final dividend and the special dividend will be payable on Friday 27 July
2018 to shareholders registered at the close of business on 6 July 2018.
Investment properties
The investment property portfolio is stated at its open market value of
£13,245,000 at 31 December 2017 (2016: £13,245,000) 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 (2016: £1,315,000).
Financial instruments
Note 21 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 Mr A R Heller and Mr R J Grobler who
offers themselves for re-election.
Mr A R Heller has been an executive director of the company since 1998. He is
a Chartered Accountant and has been employed by the group since 1994 under a
contract of employment determinable at three months’ notice. The board
recommends the re-election of AR Heller.
Mr R J Grobler was appointed as General Mine Manager by Black Wattle Colliery
(Proprietary) Ltd on 1 May 2000. He was appointed to the Board of Bisichi
Mining PLC as Director of Mining on 22 August 2008. He has over 40 years’
experience in the South African coal mining industry. The board recommends the
re-election of RJ Grobler.
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 16 April 2018:
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 – 1,892,654 shares representing 17.73 per cent. of the issued share capital.
James Hyslop – 351,126 shares representing 3.29 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 2017 and as at the date of this Directors’
report. No amount has been paid under any of these indemnities during the
year.
The Group 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 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 46. 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 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 43.
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 2017 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 2017 (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, 6 June 2018 at 11.00
a.m. Resolutions 1 to 9 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 10 to 12 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.
Directors’ authority to allot shares (Resolution 9)
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 9.1.1 of resolution 9 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 16 April 2018 (being the last practicable date
prior to the publication of this Directors’ Report). Paragraph 9.1.2 of
resolution 9 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 16 April 2018 (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 9 is £711,788.
Resolution 9 complies with guidance issued by the Investment Association (IA).
The authority granted by resolution 9 will expire on 31 August 2019 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.
Disapplication of pre-emption rights (Resolution 10)
A special resolution will be proposed at the Annual General Meeting in respect
of the disapplication of pre-emption rights.
Shares allotted for cash must normally first be offered to shareholders in
proportion to their existing shareholdings. The directors will, at the
forthcoming Annual General Meeting seek power to allot equity securities (as
defined by section 560 of the Companies Act 2006) or sell treasury shares for
cash as if the pre-emption rights contained in Section 561 of the Companies
Act 2006 did not apply:
(a) in relation to pre-emptive offers and offers to holders of other equity
securities if required by the rights of those securities or as the directors
otherwise consider necessary, up to a maximum nominal amount of £355,894
which represents approximately 1/3 (one third) of the ordinary share capital
of the company in issue (excluding treasury shares) and, in relation to rights
issues only, up to a maximum additional amount of £355,894 which represents
approximately 1/3 (one third) of the ordinary share capital of the company in
issue (excluding treasury shares), in each case as at 16 April 2018 (being the
last practicable date prior to the publication of this Directors’ Report);
and
(b) in any other case, up to a maximum nominal amount of £53,384 which
represents approximately 5 per cent. of the ordinary share capital of the
company in issue (excluding treasury shares) as at 16 April 2018 (being the
last practicable date prior to the publication of this Directors’ Report).
In compliance with the guidelines issued by the Pre-emption group, the
directors will ensure that, other than in relation to a rights issue, no more
than 7.5 per cent. of the issued ordinary shares (excluding treasury shares)
will be allotted for cash on a non-pre-emptive basis over a rolling three year
period unless shareholders have been notified and consulted in advance.
The power in resolution 10 will expire when the authority given by resolution
9 is revoked or expires.
The directors have no present intention to make use of this authority.
NOTICE OF GENERAL MEETINGS (RESOLUTION 11)
Resolution 11 will be proposed to allow the company to call general meetings
(other than an Annual General Meeting) on 14 clear days’ notice. A
resolution in the same terms was passed at the Annual General Meeting in 2017.
The notice period required by the Companies Act 2006 for general meetings of
the company is 21 days unless shareholders approve a shorter notice period,
which cannot however be less than 14 clear days. Annual General Meetings must
always be held on at least 21 clear days’ notice. It is intended that the
flexibility offered by this resolution will only be used for time-sensitive,
non-routine business and where merited in the interests of shareholders as a
whole. The approval will be effective until the company’s next Annual
General Meeting, when it is intended that a similar resolution will be
proposed. In order to be able to call a general meeting on less than 21 clear
days’ notice, the company must make a means of electronic voting available
to all shareholders for that meeting.
Purchase of own Ordinary Shares (Resolution 12)
The effect of resolution 12 would be to renew the directors’ current
authority to make limited market purchases of the company’s ordinary shares
of 10 pence each. The power is limited to a maximum aggregate number of
1,067,683 ordinary shares (representing approximately 10 per cent. of the
company’s issued share capital as at 16 April 2018 (being the last
practicable date prior to publication of this Directors’ Report)). The
minimum price (exclusive of expenses) which the company would be authorised to
pay for each ordinary share would be 10 pence (the nominal value of each
ordinary share). The maximum price (again exclusive of expenses) which the
company would be authorised to pay for an ordinary share is an amount equal to
105 per cent. of the average market price for an ordinary share for the five
business days preceding any such purchase.
The authority conferred by resolution 12 will expire at the conclusion of the
company’s next annual general meeting or 15 months from the passing of the
resolution, whichever is the earlier. Any purchases of ordinary shares would
be made by means of market purchase through the London Stock Exchange. If
granted, the authority would only be exercised if, in the opinion of the
directors, to do so would result in an increase in earnings per share or net
asset value per share and would be in the best interests of shareholders
generally. In exercising the authority to purchase ordinary shares, the
directors may treat the shares that have been bought back as either cancelled
or held as treasury shares (shares held by the company itself). No dividends
may be paid on shares which are held as treasury shares and no voting rights
are attached to them.
As at 16 April 2018 (being the last practicable date prior to the publication
of this Directors’ Report) the total number of new ordinary shares over
which options have been granted was 380,000 shares representing 3.56 per cent.
of the company’s issued share capital (excluding treasury shares) as at that
date. Such number of options to subscribe for new ordinary shares would
represent approximately 3.95 per cent. of the reduced issued share capital of
the company (excluding treasury shares) assuming full use of the authority to
make market purchases sought under resolution 12.
Donations
No political or charitable donations were made during the year (2016: 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 22 of the Strategic Report. In addition Note 21 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 July 2017, the group increased its South African structured trade finance
facility with Absa Bank Limited from R80million (South African Rand) to
R100million. 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 R80million revolving facility
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 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 the improved coal market conditions experienced by
Black Wattle Colliery, its direct mining asset in 2017 and the first quarter
of 2018 will be similar for at least the next 12 months. The directors
therefore have a reasonable expectation that the mine will continue to achieve
positive levels of cash generation for the group for at least the next 12
months. 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 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 are
expected to achieve for at least 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
20 April 2018
Statement of the Chairman of the remuneration committee
The remuneration committee presents its report for the year ended 31 December
2017.
The remuneration committee presents its report for the year ended 31 December
2017.
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 2018.
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
20 April 2018
Annual remuneration report
The following information has been audited:
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
Single total figure of remuneration for the year ended 31 December 2016:
Salaries and Fees £’000 Bonuses £’000 Benefits £’000 Pension £’000 Total Share options £’000 Total 2016 £’000
before
Share
options
£’000
Executive Directors
Sir Michael Heller 75 - - - 75 - 75
A R Heller 450 300 68 32 850 - 850
G J Casey 133 100 14 18 265 - 265
R Grobler 154 60 14 8 236 - 236
Non–Executive Directors
C A Joll* 30 - - - 30 - 30
J A Sibbald* 2 - 3 - 5 - 5
Total 844 460 99 58 1,461 - 1,461
*Members of the remuneration committee for the year ended 31 December 2016
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 (2016: Three) directors have benefits under money purchase pension
schemes. Contributions in 2017 were £61,000 (2016: £58,000), see table
above.
Scheme interests awarded during the year
No scheme interests were awarded in the year ended 31 December 2017.
Subsequent to year end 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 one “Unapproved” Share Option Schemes which is
not subject to HM Revenue and Customs (HMRC) approval. The “2010 Scheme”
was approved by shareholders on 7 June 2011. The “2012 Scheme” was
approved by the remuneration committee of the company on 28 September 2012.
Number of share options
Option price* 1 January 2017 Options lapsed in 2017 31 December 2017 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
G J Casey 87.01p 150,000 - 150,000 18/09/2015 17/09/2025
*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 conditions attached to the 2012
Unapproved Share Option scheme.
On the 5 February 2018 the company entered into an agreement with Garrett
Casey to surrender the 80,000 Options which were granted on 31 August 2010
under the 2010 Scheme. The aggregate consideration paid by the Company to
effect the cancellation was £1.
Payments to past directors
No payments were made to past directors in the year ended 31 December 2017.
Payments for loss of office
No payments for loss of office were made in the year ended 31 December 2017.
STATEMENT OF DIRECTORS’ SHAREHOLDING AND SHARE INTEREST
Directors’ interests
The interests of the directors in the shares of the company, including family
and trustee holdings where appropriate, were as follows:
Beneficial Non-beneficial
31.12.2017 1.1.2017 31.12.2017 1.1.2017
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
2017 was 70.5p (2016-74p). During the year the share price ranged between
68.25p and 82.50p.
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 2008
to 31 December 2017.
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* %
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
2008 A R Heller 961 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
2017 2016 % change 2017 2016 % change
Base salary 450 450 0% 208 208 0%
Benefits 66 68 (3.03%) 14 14 0%
Bonuses 350 300 16.67% 125 100 25%
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
28 and 8 to the financial statements) is shown below:
2017 £’000 2016 £’000
Employee remuneration 6,396 5,321
Distribution to shareholders 534 427
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 2017. No increases were awarded and no external advice was
taken in reaching this decision.
SHAREHOLDER VOTING
At the Annual General Meeting on 7 June 2017, there was an advisory vote on
the resolution to approve the remuneration report, other than the part
containing the remuneration policy. In addition, on 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 (7 June 2017) 74.75% 25.18% -
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 37 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 2017 is shown in the table on page 36.
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 37) 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 37). 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 36) 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 28
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 4 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 the carrying value of the group’s
total assets, given that the group operates a principally asset based
business. The Board also gave consideration to 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 (Formerly Baker Tilly UK
Audit LLP). In South Africa Grant Thornton (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
20 April 2018
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 2017 by the company as
detailed in our Valuation Report dated 20 February 2018.
Having regard to the foregoing, we are of the opinion that the open market
value as at 31 December 2017 of the interests owned by the company was
£13,245,000 being made up as follows:
£’000
Freehold 10,550
Leasehold 2,695
13,245
Leeds 20 February 2018 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 2017 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 ?ow 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 their preparation is applicable
law and International Financial Reporting Standards (IFRSs) as adopted by the
European Union and, as regards the parent company financial statements, as
applied in accordance with the provisions of the Companies Act 2006.
In our opinion the financial statements:
* give a true and fair view of the state of the group’s and of the parent
company’s affairs as at 31 December 2017 and of the group’s profit for
the year then ended;
* the group financial statements have been properly prepared in accordance
with IFRSs as adopted by the European Union;
* the parent company financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union and as applied in
accordance with the provisions of the Companies Act 2006; 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 company in accordance with the ethical requirements that are
relevant to our audit of the financial statements in the UK, including the
FRC’s Ethical Standard as applied to listed public interest entities, and we
have fulfilled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to
which the ISAs (UK) require us to report to you where:
* the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is not appropriate; or
* the directors have not disclosed in the financial statements any identified
material uncertainties that may cast significant doubt about the group’s or
the parent company’s ability to continue to adopt the going concern basis of
accounting for a period of at least twelve months from the date when the
financial statements are authorised for issue.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were
of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) that we identified. These matters
included those which had the greatest effect on: the overall audit strategy,
the allocation of resources in the audit; and directing the efforts of the
engagement team. These matters were addressed in the context of our audit of
the financial statements as a whole, and in forming our opinion thereon, and
we do not provide a separate opinion on these matters.
The following key audit matters were identified for the period under review:
1. The risk that estimates and judgments in the life of mine model may be
inappropriate and mining assets require impairment.
2. The risk that investment property valuations are inappropriate.
3. The risk that judgments, estimates and disclosure associated with the
carrying value of Ezimbokedwini and impairment charges are inappropriate
Key Audit Matter How the matter was addressed in our audit
The risk that estimates and judgments in the life of mine model may be inappropriate and mining assets require impairment. The mining assets amounted to £8.6m as at 31 December 2017 (2016: £8.5m) and relate to the South African mining operations. These assets represent a significant part of the Group’s balance sheet (See note 11). Management performed an impairment assessment based on the Board approved Life of Mine plan at 31 December 2017 as detailed in the Key Judgements and Estimates note. The assessment by management of inputs to the Life of Mine plan requires significant judgment and estimate, including determination of forecast coal prices, production, coal reserves and costs These factors caused this area to be a significant focus for our audit. We have evaluated management’s discounted cash flow impairment assessment, including the underlying Life of Mine plan. In doing so, we critically assessed key inputs to the model including forecast coal prices, exchange rates, production, costs and the
discount rate. This included assessment compared to empirical data and trends, pricing information and market data. In respect of the coal reserves included in the model, we reviewed the independent Competent Person’s Report and held discussions with the
Competent Person. In relying on the Competent Person we assessed their independence and competence. We performed sensitivity analysis on the impairment model in respect of factors such as pricing, costs, yields, exchange rates and the discount rate. We
evaluated the disclosures in the Key Judgements and Estimates note based on our audit procedures.
Our findings Our work on the impairment test supported management’s conclusion that no impairment exists to be appropriate. We found the key assumptions to be balanced and appropriately considered by management and the disclosures in the Key Judgements and Estimates note to be sufficient.
Key Audit Matter How the matter was addressed in our audit
The risk that investment property valuations are inappropriate. The Group holds investment property at fair value of £13.2m together with further investment property held at fair value of £2.6m (100% basis) in the Group’s Dragon Retail Joint Venture (notes 10 and 13). 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 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
valuation. 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 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.
Our findings We found the valuations determined by the group for its investment properties in note 10 and investment properties included within the Dragon retain Joint Venture in note 13 to be consistent with the independent external valuation reports.
Key Audit Matter How the matter was addressed in our audit
The risk that judgments, estimates and disclosure associated with the carrying value of Ezimbokedweni and impairment charges are inappropriate. As at 31 December 2016 the group’s net investment in Ezimbokedweni Mining (Pty) Limited (“Ezimbokedweni”), an We will have made specific inquiries of management and the Board to gain an understanding of the fact pattern and events during the year regarding Ezimbokedweni. We have reviewed minutes of Board meetings, legal documents and correspondence relating to the joint venture, the Business Rescue and assessments of the resulting financial position and interests of the joint venture. We have assessed the Board’s conclusion that the net investment is impaired based on the facts and circumstances, including assessment of the probability of value being recovered from the joint venture. We have assessed the tax treatment of the transaction applied by management in conjunction with our valuation specialists and those of the component auditor in South Africa. We have assessed the accounting entries in respect of the impairment as well as the disclosures in note 13 and the Key Estimates and Judgments note.
equity accounted joint venture was £1.8m. The carrying value was dependent upon the ultimate completion of a sale and purchase agreement to acquire the Pegasus coal project in South Africa, under which a deposit had been paid by Ezimbokedweni. During the
year the joint venture was placed into Business Rescue under the South African Companies Act by the group’s joint venture partner. The original deposit has been returned to Ezimbokodweni and as a result, the Board consider there to be no reasonable
prospect of the Pegasus coal project transaction completing. Further to these developments, the Board performed an impairment review of the carrying value of the net investment in Ezimbokedwini and recorded an impairment of the net investment of £1.8m,
with any further movements since 31 December 2016 reflecting foreign exchange differences. The assessment of the carrying value, subsequent impairment and associated disclosure represented a significant focus for our audit. Additionally, the tax
treatment of this transaction was considered to be an area of risk of material misstatement. This was also considered to be an area requiring specialist knowledge and expertise.
Our findings We consider the judgements made by management relating to the impairment recorded by the group to be appropriate based on the developments during the year. We consider the disclosures at note 13 and the Key Estimates and Judgments note to be acceptable.
Our application of materiality
The materiality level we applied was calculated based on 1% of total assets
reflecting both the significant asset base of the group and the transitionary
phase of mining.
Whilst materiality for the Financial Statements as a whole was £300,000 (FY
2016: £350,000), each significant component of the Group was audited to a
lower materiality as detailed in the table below.
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.
Performance materiality was set at £225,000 (2016: £260,000) which
represents 75% (2016 75%) of the above materiality levels.
Materiality FY2017 FY2016
Materiality for the Financial Statements as a whole £300,000 £350,000
Materiality levels used for the audits of the significant components of the audit £23,000 to £170,000 £15,000 to £210,000
Audit scope coverage 100% of total assets, 100% of revenue and 100% of profit before tax
We agreed with the Audit Committee that we would report to them all individual
audit differences identified during the course of our audit in excess of
£15,000. We also agreed to report differences below that threshold 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
investment property in the United Kingdom and an operating mine located in
South Africa. We assessed there to be 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 non-BDO member firm performed a full scope audit of the mine in South
Africa, under our direction and supervision as group auditors under ISA 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.
* 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 other information comprises the information included in the annual report,
other than the financial statements and our auditor’s report thereon. The
directors are responsible for the other information. Our opinion on the
financial statements does not cover the other information and, except to the
extent otherwise explicitly stated in our report, we do not express any form
of assurance conclusion thereon. In connection with our audit of the financial
statements, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the
financial statements or our knowledge obtained in the audit or otherwise
appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to
determine whether there is a material misstatement in the financial statements
or a material misstatement of the other information. If, based on the work we
have performed, we conclude that there is a material misstatement of the other
information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, the part of the directors’ remuneration report to be audited
has been properly prepared in accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
* the information given in the strategic report and the directors’ report
for the financial year for which the financial statements are prepared is
consistent with the financial statements; and
* the strategic report and the directors’ report have been prepared in
accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent
company and 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, or returns adequate for our
audit have not been received from branches not visited by us; or
* the parent company financial statements are not in agreement with the
accounting records and returns; or
* 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 46, 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
This report is made solely to the company’s members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit
work has been undertaken so that we might state to the company’s members
those matters we are required to state to them in an auditor’s report and
for no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the company and the
company’s members as a body, for our audit work, for this report, or for the
opinions we have formed.
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 2017 and
subsequent financial periods. The period of total uninterrupted engagement is
30 years, covering the years ending 1987 to 2017.
The non-audit services prohibited by the FRC’s Ethical Standard were not
provided to the group or the parent company and we remain independent of the
group and the parent company in conducting our audit.
Our audit opinion is consistent with the additional report to the audit
committee.
Ryan Ferguson
(Senior Statutory Auditor)
For and on behalf of BDO LLP
Statutory Auditor
London, United Kingdom
20 April 2018
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127).
Financial statements
Consolidated income statement
for the year ended 31 December 2017
Notes 2017 Trading £’000 2017 Revaluations and 2017 Total £’000 2016 Trading £’000 2016 Revaluations and impairment £’000 2016 Total £’000
impairment £’000
Group revenue 1 37,459 - 37,459 22,815 - 22,815
Operating costs 2 (31,640) - (31,640) (21,299) - (21,299)
Operating profit before depreciation, fair value adjustments and exchange movements 5,819 - 5,819 1,516 - 1,516
Depreciation 2 (1,790) - (1,790) (1,785) - (1,785)
Operating profit/(loss) before fair value adjustments and exchange movements 1 4,029 - 4,029 (269) - (269)
Exchange (losses)/gains (256) - (256) 449 - 449
Decrease/increase in value of investment properties 3 - (13) (13) - 445 445
Gain on disposal of other investments 3 - 3 - - -
Increase in value of other investments - - - - 12 12
Operating profit/(loss) 1 3,776 (13) 3,763 180 457 637
Share of profit/(loss) in joint ventures 12 - 8 8 30 (37) (7)
Write-off of investment in joint venture 12 - (1,827) (1,827) - - -
Profit/(loss) before interest and taxation 3,776 (1,832) 1,944 210 420 630
Interest receivable 205 - 205 270 - 270
Interest payable 6 (664) - (664) (554) - (554)
Profit/(loss) before tax 4 3,317 (1,832) 1,485 (74) 420 346
Taxation 7 (588) 24 (564) 150 (89) 61
Profit/(loss) for the year 2,729 (1,808) 921 76 331 407
Attributable to:
Equity holders of the company 2,557 (1,808) 749 148 331 479
Non-controlling interest 26 172 - 172 (72) - (72)
Profit/(loss) for the year 2,729 (1,808) 921 76 331 407
Profit per share – basic 9 7.02p 4.48p
Profit per share – diluted 9 7.02p 4.48p
Trading gains and losses reflect all the trading activity on mining and
property operations and realised gains from Joint ventures. 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.
Consolidated statement of other comprehensive income
for the year ended 31 December 2017
2017 £’000 2016 £’000
Profit for the year 921 407
Other comprehensive income/(expense):
Items that may be subsequently recycled to the income statement:
Exchange differences on translation of foreign operations 91 1,106
Gain on available for sale investments 103 193
Taxation (20) (13)
Other comprehensive income for the year net of tax 174 1,286
Total comprehensive income for the year net of tax 1,095 1,693
Attributable to:
Equity shareholders 912 1,665
Non-controlling interest 183 28
1,095 1,693
Consolidated balance sheet
at 31 December 2017
Notes 2017 £’000 2016 £’000
Assets
Non-current assets
Value of investment properties 10 13,245 13,245
Fair value of head lease 30 152 181
Investment properties 13,397 13,426
Mining reserves, plant and equipment 11 8,613 8,520
Investments in joint ventures accounted for using equity method 12 874 1,321
Loan to joint venture 12 - 1,350
Other investments 12 51 32
Total non-current assets 22,935 24,649
Current assets
Inventories 15 828 1,721
Trade and other receivables 16 6,417 7,246
Corporation tax recoverable - 32
Available for sale investments 17 1,050 781
Cash and cash equivalents 5,327 2,444
Total current assets 13,622 12,224
Total assets 36,557 36,873
Notes 2017 £’000 2016 £’000
Liabilities
Current liabilities
Borrowings 19 (1,288) (3,358)
Trade and other payables 18 (7,381) (6,950)
Current tax liabilities (356) (18)
Total current liabilities (9,025) (10,326)
Non-current liabilities
Borrowings 19 (5,872) (5,876)
Provision for rehabilitation 20 (1,349) (1,236)
Finance lease liabilities 30 (152) (181)
Deferred tax liabilities 22 (2,485) (2,248)
Total non-current liabilities (9,858) (9,541)
Total liabilities (18,883) (19,867)
Net assets 17,674 17,006
Equity
Share capital 23 1,068 1,068
Share premium account 258 258
Translation reserve (1,671) (1,751)
Available for sale reserve 143 60
Other reserves 24 683 683
Retained earnings 16,661 16,339
Total equity attributable to equity shareholders 17,142 16,657
Non-controlling interest 26 532 349
Total equity 17,674 17,006
These financial statements were approved and authorised for issue by the board
of directors on 20 April 2018 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 2017
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 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 expense - - 1,006 180 - - 1,186 100 1,286
Total comprehensive expense for the year - - 1,006 180 - 479 1,665 28 1,693
Dividend (note 8) - - - - - (427) (427) - (427)
Share options charge - - - - 109 - 109 - 109
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/(loss) 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 8) - - - - - (427) (427) - (427)
Balance at 31 December 2017 1,068 258 (1,671) 143 683 16,661 17,142 532 17,674
Consolidated cash flow statement
for the year ended 31 December 2017
Year ended 31 December 2017 £’000 Year ended 31 December 2016 £’000
Cash flows from operating activities
Operating profit 3,763 637
Adjustments for:
Depreciation 1,790 1,785
Share based payments - 109
Unrealised loss/(gain) on investment properties 13 (445)
Realised gain on disposal of other investments (3) -
Unrealised gain on other investments - (12)
Exchange adjustments 256 (449)
Cash flow before working capital 5,819 1,625
Change in inventories 896 (258)
Change in trade and other receivables 919 224
Change in trade and other payables 69 1,396
Cash generated from operations 7,703 2,987
Interest received 124 121
Interest paid (546) (448)
Income tax paid (11) (46)
Cash flow from operating activities 7,270 2,614
Cash flows from investing activities
Acquisition of reserves, property, plant and equipment (1,754) (2,859)
Share of income from joint ventures - 30
Disposal of other investments 14 -
Acquisition of available for sale investments (196) -
Disposal of non-current asset held for sale - 1,138
Cash flow from investing activities (1,936) (1,691)
Cash flows from financing activities
Borrowings drawn 23 37
Borrowings repaid (25) (131)
Equity dividends paid (427) (427)
Cash flow from financing activities (429) (521)
Net increase in cash and cash equivalents 4,905 402
Cash and cash equivalents at 1 January (890) (626)
Exchange adjustment 50 (666)
Cash and cash equivalents at 31 December 4,065 (890)
Cash and cash equivalents at 31 December comprise:
Cash and cash equivalents as presented in the balance sheet 5,327 2,444
Bank overdrafts (secured) (1,262) (3,334)
4,065 (890)
Group accounting policies
for the year ended 31 December 2017
Basis of accounting
The results for the year ended 31 December 2017 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 44 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 14 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
2017 2016 2017 2016
Year-end rate 16.6686 16.9472 1.35028 1.23321
Annual average 17.1540 19.9269 1.29174 1.35477
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 R100million 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 R80million revolving facility 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 coal market conditions experienced by Black
Wattle Colliery, its direct mining asset, in the second half of 2017 and the
first quarter of 2018 will be similar going into the remainder of 2018. The
directors therefore have a reasonable expectation that the mine will achieve
positive levels of cash generation for the group in 2018. 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 (2016: £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 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 2017. An amendment to IAS 7 “Statement of Cash Flows: Disclosure
Initiative”, which is mandatory for 2017, requires entities to provide
disclosures about changes in liabilities arising from financing activities,
including changes from financing cash flows and non-cash changes (such as
foreign exchange gains or losses). This amendment has been endorsed by the EU.
The adoption of this amendment and other new and revised Standards and
Interpretations had no material effect on the profit or loss or financial
position of the Group.
The Group has not adopted any Standards or Interpretations in advance of the
required implementation dates.
IFRS 15 ‘Revenue from Contracts with Customers’ was issued by the IASB in
May 2014. It is effective for accounting periods beginning on or after 1
January 2018. The new standard will replace existing accounting standards, and
provides enhanced detail on the principle of recognising revenue to reflect
the transfer of goods and services to customers at a value which the company
expects to be entitled to receive. The standard also updates revenue
disclosure requirements. The standard was endorsed by the EU on 22 September
2017. The Directors are continuing to assess the impact of IFRS 15 on the
results of the Group. Whilst management do not envisage a material impact, the
impact of adopting this standard cannot be reliably estimated until the
transition review is complete.
IFRS 9 was published in July 2014 and will be effective for the group from 1
January 2018. The standard was endorsed by the EU on 22 November 2017. It is
applicable to financial assets and financial liabilities, and covers the
classification, measurement, impairment and de-recognition of financial assets
and financial liabilities together with a new hedge accounting model. IFRS 9
also introduces the expected credit loss model for impairment of financial
assets. Application of the IFRS 9 impairment model is expected to have minimal
impact given the Group’s credit risk management policies. The Directors are
continuing to assess the impact on the results of the Group and will complete
the assessment during H1 2018.
IFRS 16 ‘Leases’ – IFRS 16 ‘Leases’ was issued by the IASB in
January 2017 and is effective for accounting periods beginning on or after 1
January 2019. The new standard will replace IAS 17 ‘Leases’ and will
eliminate the classification of leases as either operating leases or finance
leases and, instead, introduce a single lessee accounting model. The standard,
which has been endorsed by the EU, provides a single lessee accounting model,
specifying how leases are recognised, measured, presented and disclosed. The
Directors are currently evaluating the financial and operational impact of
this standard including the application to service contracts at the mine
containing leases. The review of the impact of IFRS 16 will require an
assessment of all leases and the impact of adopting this standard cannot be
reliably estimated until this work is substantially complete.
The Directors do not anticipate that the adoption of the other standards and
interpretations not listed above will have a material impact on the accounts.
Certain of these standards and interpretations will, when adopted, require
addition to or amendment of disclosures in the accounts.
We are committed to improving disclosure and transparency and will continue to
work with our different stakeholders to ensure they understand the detail of
these accounting changes. We continue to remain committed to a robust
financial policy
Key judgements and estimates
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 at most risk of a significant estimation uncertainty. The life of mine
remaining is currently estimated at 4 years. This life of mine is based on the
groups existing coal reserves and excludes future coal purchases and coal
reserve acquisitions. The group’s estimates of proven and probable reserves
are prepared and subject to assessment by an independent Competent Person
experienced in the field of coal geology and specifically opencast and pillar
coal extraction. Estimates of coal reserves impact assessments of the carrying
value of property, plant and equipment, depreciation calculations and
rehabilitation and decommissioning provisions. There are numerous
uncertainties inherent in estimating coal reserves and changes to these
assumptions may result in restatement of reserves. These assumptions include
geotechnical factors as well as economic factors such as commodity prices,
production costs and yield.
Depreciation, amortisation of mineral rights, mining development costs and
plant & equipment
The annual depreciation/amortisation charge is dependent on estimates,
including coal reserves and the related life of 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 20.
Impairment
Property, plant and equipment representing the group’s mining assets in
South Africa are reviewed for impairment at each reporting date. The
impairment test is performed using the approved Life of Mine plan and those
future cash flow estimates are discounted using asset specific discount rates
and are based on expectations about future operations. The impairment test
requires estimates about production and sales volumes, commodity prices,
proven and probable reserves (as assessed by the Competent Person), operating
costs and capital expenditures necessary to extract reserves in the approved
Life of Mine plan. Changes in such estimates could impact recoverable values
of these assets. Details of the carrying value of property, plant and
equipment can be found in note 11.
The impairment test indicated significant headroom as at 31 December 2017 and
therefore no impairment is considered appropriate. The key assumptions
include: coal prices, including domestic coal prices based on recent pricing
and assessment of market forecasts for export coal; production based on proven
and probable reserves assessed by the independent Competent Person and yields
associated with mining areas based on assessments by the Competent Person and
empirical data. A 9% reduction in average forecast coal prices or a 9%
reduction in yield would give rise to a breakeven scenario. However, the
directors consider the forecasted yield levels and pricing 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.
Write off of Ezimbokodweni joint venture
During the year the group wrote off its £1.8million (2016: £1.8million)
investment in Ezimbokodweni Mining (Pty) Limited (“Ezimbokodweni”) made up
of a £1.4million loan (2016: £1.4million) and a £0.4million (2016:
£0.4million) joint venture investment.
The carrying value of the investment was dependent upon the completion of the
acquisition of the Pegasus coal project (“the project”) in South Africa.
Although a proposed sale and purchase agreement had been negotiated and a
deposit paid for the project, the conclusion of the transaction had been
delayed pending the commercial transfer of the prospecting right from the
current owners of the project to Ezimbokodweni. Although the group has always
remained committed to completing the transaction, previous negotiations to
complete the commercial acquisition of the project had been beset by various
delays outside of its control and at the beginning of 2017, the current owners
of the project notified Ezimbokodweni that they no longer wished to divest the
project. More recently, the group was notified that an agreement was reached
between the current owners of the project and the directors of
Ezimbokodweni for the deposit for the project to be returned and any further
negotiations with Ezimbokodweni to acquire the project to be terminated.
Although, a legal claim by the group has been issued against Ezimbokodweni and
its representatives, in order for the group to recover some of the investment,
the board has exercised significant judgement in considering it to be
appropriate to write off the investment in full in the 2017 year end.
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 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 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. 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 21.
These facilities are considered to form an integral part of the treasury
management of the group and can fluctuate from positive to negative balances
during the period.
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 2017
1. SEGMENTAL REPORTING
2017
Business analysis Mining £’000 Property £’000 Other £’000 Total £’000
Significant revenue customer A 27,528 - - 27,528
Significant revenue customer B 7,226 - - 7,226
Significant revenue customer C 412 - - 412
Other revenue 1,134 1,125 34 2,293
Segment revenue 36,300 1,125 34 37,459
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 Total £’000
Revenue 1,159 36,300 37,459
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
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
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
2. OPERATING COSTS
2017 £’000 2016 £’000
Mining 25,664 16,184
Property 151 211
Cost of sales 25,815 16,395
Administration 7,615 6,689
Operating costs 33,430 23,084
The direct property costs are:
Ground rent 8 10
Direct property expense 130 177
Bad debts 13 24
151 211
Operating costs above include depreciation of £1,790,000 (2016: £1,785,000).
3. (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:
2017 £’000 2016 £’000
Investment surplus 16 458
Loss on valuation movement in respect of head lease payments (29) (13)
(Loss)/gain on revaluation of investment properties (13) 445
4. PROFIT/(LOSS) BEFORE TAXATION
(Loss)/profit before taxation is arrived at after charging:
2017 £’000 2016 £’000
Staff costs (see note 28) 6,396 5,321
Depreciation 1,790 1,785
Exchange loss/(gain) 256 (449)
Fees payable to the company’s auditor for the audit of the company’s annual accounts 41 40
Fees payable to the company’s auditor and its associates for other services:
The audit of the company’s subsidiaries pursuant to legislation 10 10
Audit related services 1 32
Non-audit related services 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.
5. DIRECTORS’ EMOLUMENTS
Directors’ emoluments are shown in the Directors’ remuneration report on
page 36 which is within the audited part of that report.
6. INTEREST PAYABLE
2017 £’000 2016 £’000
On bank overdrafts and bank loans 443 395
Unwinding of discount 92 78
Other interest payable 129 81
Interest payable 664 554
7. TAXATION
2017 £’000 2016 £’000
(a) Based on the results for the year:
Current tax - UK 231 10
Current tax - Overseas 136 60
Corporation tax – adjustment in respect of prior year – UK (5) -
Current tax 362 70
Deferred tax 202 (131)
Total tax in income statement charge / (credit) 564 (61)
The 2016 deferred tax recognised in income of £131,000 includes a credit of
£168,000 arising on the correction of an error in the calculation of deferred
tax in 2015 related to the accounting of a deferred tax liability incorrectly
recognised in respect of management fees. The company adjusted the effect of
this error in its 2016 financial statements by reducing the tax charge for the
year by £168,000 and reducing the associated deferred tax liability as it was
not considered to be material to the current or prior year financial
statements.
(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 19.25% (2016: 20%).
The differences are explained below:
Profit/(Loss) on ordinary activities before taxation 1,485 346
Tax on profit on ordinary activities at 19.25% (2016: 20%) 286 69
Effects of:
Expenses not deductible for tax purposes 107 20
Capital gains on disposal - 153
Adjustment to tax rate 201 (117)
Other differences (27) (32)
Adjustment in respect of prior years (3) (154)
Total tax in income statement (credit) / charge 564 (61)
(c) Analysis of United Kingdom and overseas tax:
United Kingdom tax included in above:
2017 £’000 2016 £’000
Corporation tax 231 10
Adjustment in respect of prior years (5) -
Current tax 226 10
Deferred tax (197) 8
29 18
Overseas tax included in above:
Current tax 136 60
Deferred tax 399 (139)
535 (79)
8. DIVIDENDS PAID
2017 Per share 2017 £’000 2016 Per share 2016 £’000
Dividends paid during the year relating to the prior period 4.00p 427 4.00p 427
Dividends relating to the current period:
Interim dividend for 2017 paid on 9 February 2018 1.00p 107 1.00p 107
Proposed final dividend for 2017 3.00p 320 3.00p 320
Proposed special dividend for 2017 1.00p 107 - -
5.00p 534 4.00p 427
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
2017, will be accounted for as an appropriation of retained earnings in the
year ending 31 December 2018.
9. PROFIT AND DILUTED PROFIT PER SHARE
Both the basic and diluted profit per share calculations are based on a profit
of £749,000 (2016: £479,000). The basic profit per share has been calculated
on a weighted average of 10,676,839 (2016: 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 (2016:
10,676,839) plus the dilutive potential ordinary shares arising from share
options of nil (2016: nil) totalling 10,676,839 (2016: 10,676,839).
Share options exercisable as at 31 December 2017 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.
10. INVESTMENT PROPERTIES
Freehold £’000 Long Leasehold £’000 Total £’000
Valuation at 1 January 2017 10,550 2,695 13,245
Additions 13 - 13
Revaluation (13) - (13)
Valuation at 31 December 2017 10,550 2,695 13,245
Valuation at 1 January 2016 10,150 2,650 12,800
Revaluation 400 45 445
Valuation at 31 December 2016 10,550 2,695 13,245
Historical cost
At 31 December 2017 5,836 728 6,564
At 31 December 2016 5,823 728 6,551
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:
2017 £’000 2016 £’000
Carter Towler 13,245 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 2017 £’000 Carrying/ fair value 2016 £’000 Range (weighted average) 2017 Range (weighted average) 2016
unobservable inputs
Freehold – external valuation Income capitalisation Estimated rental value per sq ft p.a 10,550 10,550 £7 – £25 (£18) £7 – £27 (£20)
Equivalent Yield 7.1% – 11.0% (8.7%) 7.8% – 11.0% (8.9%)
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 7.7% – 7.7% (7.7%) 7.6% – 7.6% (7.6%)
At 31 December 2017 13,245 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 value 10% increase or decrease Equivalent yield 25 basis point contraction or expansion
2017 £’000 2016 £’000 2017 £’000 2016 £’000
Freehold – external valuation 1,055 / (1,055) 1,055 / (1,055) 331 / (311) 316 / (298)
Long Leasehold – external valuation 270 / (270) 270 / (270) 90 / (85) 92 / (86)
11. 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 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
Cost at 1 January 2016 995 15,453 150 120 16,718
Exchange adjustment 350 5,858 47 19 6,274
Additions - 2,814 38 7 2,859
Disposals - (401) - - (401)
Cost at 31 December 2016 1,345 23,724 235 146 25,450
Accumulated depreciation at 1 January 2016 949 10,201 99 95 11,344
Exchange adjustment 336 3,824 28 14 4,202
Charge for the year 2 1,746 27 10 1,785
Disposals - (401) - - (401)
Accumulated depreciation at 31 December 2016 1,287 15,370 154 119 16,930
Net book value at 31 December 2016 58 8,354 81 27 8,520
12. INVESTMENTS HELD AS NON-CURRENT ASSETS
2017 Net investment in joint ventures assets £’000 2017 Other £’000 2016 Net investment in joint ventures assets £’000 2016 Other £’000
At 1 January 1,321 36 1,198 29
Share of gain in investment - 19 - 6
Exchange adjustment (8) - 130 1
Share of (loss)/gain in joint ventures 8 - (7) -
Write-off of investment (447) - - -
Net assets at 31 December 874 55 1,321 36
Loan to joint venture (Ezimbokodweni):
At 1 January 1,350 - 900 -
Exchange adjustments (16) - 336 -
Additions - interest 46 - 114 -
Write-off of loan (1,380) - - -
At 31 December - - 1,350 -
At 31 December 874 55 2,671 36
Provision for diminution in value:
At 1 January - (4) - (15)
Exchange adjustment - - - (1)
Write back/(down) of investment - - - 12
At 31 December - (4) - (4)
Net book value at 31 December 874 51 2,671 32
2017 £’000 2016 £’000
Net book value of unquoted investments - -
Net book and market value of investments listed on overseas stock exchanges 51 32
51 32
13. 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 £874,000 (2016: £866,000). 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 (2016: 500,000) ordinary shares of £1 each. No dividends were
received during the period.
Ezimbokodweni Mining (Pty) Ltd
The company owned 49% of the issued share capital of Ezimbokodweni Mining
(Pty) Limited (“Ezimbokodweni”), an unlisted coal exploration and
development company incorporated in South Africa. During the year the group
wrote off its net investment in Ezimbokodweni at a carrying value of
£1,827,000. The write-off included a loan at an amount of a £1,380,000 as
well as an equity investment of £447,000. At year end, the carrying value of
the net investment, as disclosed in joint venture assets in note 12, is a loan
to Ezimbokodweni of £nil (2016: £1,350,000) and an equity investment of
£nil (2016: £455,000). Refer to page 62 for details regarding the write-off
of the asset.
Dragon 50% £’000 Ezimbokodweni 49% £’000 2017 £’000 2016 £’000
Turnover 83 - 83 86
Profit and loss
Profit/(loss) before depreciation, interest and taxation 26 - 26 12
Depreciation and amortisation (6) - (6) (13)
Loss before interest and taxation 20 - 20 (1)
Interest Income 68 - 68 69
Interest expense (83) - (83) (85)
Loss before taxation 5 - 5 (17)
Taxation 3 - 3 10
Loss after taxation 8 - 8 (7)
Balance sheet
Non-current assets 1,317 - 1,317 2,672
Cash and cash equivalents 46 - 46 61
Other current assets 1,218 - 1,218 1,165
Current borrowings - - - -
Other current liabilities (1,062) - (1,062) (2,388)
Net current assets 202 - 202 (1,162)
Non-current borrowings (609) - (609) (603)
Other non-current liabilities (36) - (36) (41)
Share of net assets at 31 December 874 - 874 866
Reconciliation of net assets to carrying value of joint venture assets:
Share of net assets at 31 December 874 - 874 866
Pre-acquisition costs capitalised - - - 455
Carrying value of joint venture assets at 31 December 874 - 874 1,321
14. 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
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
26.
15. INVENTORIES
2017 £’000 2016 £’000
Coal
Washed 301 1,139
Mining Production 286 83
Work in progress 227 458
Other 14 41
828 1,721
16. TRADE AND OTHER RECEIVABLES
2017 £’000 2016 £’000
Amounts falling due within one year:
Trade receivables 3,908 4,076
Amount owed by joint venture 2,000 2,000
Other receivables 415 754
Prepayments and accrued income 94 416
6,417 7,246
17. AVAILABLE FOR SALE INVESTMENTS
2017 £’000 2016 £’000
Market value of listed Investments:
Listed in Great Britain 1,003 721
Listed outside Great Britain 47 60
1,050 781
Original cost of listed investments 922 737
Unrealised surplus / defecit of market value versus cost 128 44
The Directors have reviewed the individual investments for impairment and do
not consider the investments which are below cost to be impaired.
18. TRADE AND OTHER PAYABLES
2017 £’000 2016 £’000
Trade payables 3,771 3,610
Amounts owed to joint ventures 192 192
Other payables 1,402 1,422
Accruals 1,787 1,493
Deferred Income 229 233
7,381 6,950
19. FINANCIAL LIABILITIES – BORROWINGS
Current Non-current
2017 £’000 2016 £’000 2017 £’000 2016 £’000
Bank overdraft (secured) 1,262 3,334 - -
Bank loan (secured) 26 24 5,872 5,876
1,288 3,358 5,872 5,876
2017 £’000 2016 £’000
Bank overdraft and loan instalments by reference to the balance sheet date:
Within one year 1,288 3,358
From one to two years 17 26
From two to five years 5,855 5,850
7,160 9,234
Bank overdraft and loan analysis by origin:
United Kingdom 5,832 5,810
Southern Africa 1,328 3,424
7,160 9,234
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 £13,245,000. 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 £6,123,500. No 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:
2017 £’000 2016 £’000
Total bank loans and overdraft 7,160 9,234
Less cash and cash equivalents (excluding overdraft) (5,327) (2,444)
Net debt 1,833 6,790
Total equity attributable to shareholders of the parent 17,209 16,657
Gearing 10.7% 40.8%
Analysis of the changes in liabilities arising from financing activities:
Bank borrowings (including overdraft) £’000 Finance leases £’000 2017 £’000 2016 £’000
Balance at 1 January 9,234 181 9,415 8,401
Exchange adjustments (4) - (4) 854
Cash movements excluding exchange adjustments (2,070) - (2,070) 173
Valuation movements - (29) (29) (13)
Balance at 31 December 7,160 152 7,312 9,415
20. PROVISION FOR REHABILITATION
2017 £’000 2016 £’000
As at 1 January 1,236 847
Exchange adjustment 21 311
Unwinding of discount 92 78
As at 31 December 1,349 1,236
21. 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:
Loans and receivables £’000 Financial Liabilities measured at amortised cost £’000 Available for sale investments £’000 2017 £’000 2016 £’000
Cash and cash equivalents 5,327 - - 5,327 2,444
Current available for sale investments - - 1,050 1,050 781
Non-current available for sale investments - - 51 51 32
Trade and other receivables 6,323 - - 6,323 6,830
Bank borrowings and overdraft - (7,160) - (7,160) (9,234)
Finance leases - (152) - (152) (181)
Other liabilities - (7,152) - (7,152) (6,735)
11,650 (14,464) 1,101 (1,713) (6,063)
Available for sale investments are held at fair value and 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
2016 fall under the same category of financial instrument as 2017.
The carrying amount of short term (less than 12 months) trade receivable and
other liabilities approximate their fair values. The fair value of non-current
borrowings in note 19 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 30 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 2017, 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
£82,000 (2016: £56,000). The effect on equity of this change would be an
equivalent decrease or increase for the year of £82,000 (2016: £56,000).
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
cashlfows of financial liabilities as at 31 December:
2017 £’000 2016 £’000
Within one year 9,110 10,658
From one to two years 198 239
From two to five years 6,054 6,277
Beyond five years 105 125
15,467 17,299
The following table sets out the maturity profile of contractual undiscounted
cashlfows of financial liabilities as at 31 December maturing within one year:
2017 £’000 2016 £’000
Within one month 3,824 2,119
From one to three months 2,278 2,926
From four to twelve months 3,008 5,613
9,110 10,658
In South Africa, an increased structured trade finance facility for
R100million was signed by Black Wattle Colliery (Pty) Limited in July 2017
with Absa Bank Limited. The facility is renewable annually at 30 June and is
secured against inventory, debtors and cash that are held by Black Wattle
Colliery (Pty) Limited. The trade facility, which is repayable on demand, is
included in cash and cash equivalents within the cashflow statement.
This trade facility comprises of a R80million revolving facility 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 interest cost of the loan is at
the South African prime lending rate.
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. The interest cost of the loan is 2.35% above LIBOR.
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 £11,650,000 (2016: £9,274,000). The group’s credit risk is
primarily attributable to its trade receivables. The group had amounts due
from its significant revenue customers at the year end that represented 93%
(2016: 85%) of the trade receivables balance. These amounts have been
subsequently settled.
Trade debtor’s credit ratings are reviewed regularly. The group only
deposits surplus cash with well-established financial institutions of high
quality credit standing. As at year end the amount of trade receivables held
past due date was £24,000 (2016: £157,000). To date, the amount of trade
receivables held past due date that has not subsequently been settled is
£18,000 (2016: £134,000). Management have no reason to believe that this
amount will not be settled.
Financial assets maturity
On 31 December 2017, cash at bank and in hand amounted to £5,327,000 (2016:
£2,444,000) 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 2017 and 2016 the group did not hedge
its exposure of foreign investments held in foreign currencies.
The directors consider there to be no significant risk from exchange rate
movements of foreign currencies against the functional currencies of the
reporting companies within the group, excluding inter-company balances. 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
2017, 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 £34,000 (2016: £435,000). 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 £56,000 (2016: £725,000).
The 25% sensitivity has been determined based on the average historic
volatility of the exchange rate for 2016 and 2017.
The table below shows the currency profiles of cash and cash equivalents:
2017 £’000 2016 £’000
Sterling 3,402 1,717
South African Rand 1,923 725
US Dollar 2 2
5,327 2,444
Cash and cash equivalents earn interest at rates based on LIBOR in Sterling
and Prime in Rand.
The tables below shows the currency profiles of net monetary assets and
liabilities by functional currency of the group:
2017: Sterling £’000 South
African Rands £’000
Sterling (832) -
South African Rand 54 (1,304)
US Dollar 13 -
(765) (1,304)
2016: Sterling £’000 South African Rands £’000
Sterling (2,522) -
South African Rand 36 (2,262)
US Dollar 35 -
(2,451) (2,262)
22. DEFERRED TAXATION
2017 2016 £’000
£’000
As at 1 January 2,248 2,002
Recognised in income 202 (131)
Recognised in comprehensive income - 13
Exchange adjustment 35 364
As at 31 December 2,485 2,248
The deferred tax balance comprises the following:
Revaluation of properties 691 715
Capital allowances 2,389 2,361
Short term timing difference (513) (184)
Unredeemed capital deductions (80) (642)
Losses and other deductions (2) (2)
2,485 2,248
Refer to note 7 for details of adjustments in respect of the prior year
deferred tax in the current year.
23. SHARE CAPITAL
2017 £’000 2016 £’000
Authorised: 13,000,000 ordinary shares of 10p each 1,300 1,300
Allotted and fully paid:
2017 Number of ordinary shares 2016 Number of ordinary shares 2017 £’000 2016 £’000
At 1 January and outstanding at 31 December 10,676,839 10,676,839 1,068 1,068
24. OTHER RESERVES
2017 £’000 2016 £’000
Equity share options 597 597
Net investment premium on share capital in joint venture 86 86
683 683
25. SHARE BASED PAYMENTS
Details of the share option scheme are shown in the Directors’ remuneration
report on page 37 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 2016 Number of share options lapsed during year Number of share for which options outstanding at 31 December 2017
2010 202.5p Aug 2013 – Aug 2020 80,000 - 80,000
2016 87.0p Sep 2015 – Sep 2025 300,000 - 300,000
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 2017 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.
2017 Number 2017 Weighted average exercise price 2016 Number 2016 Weighted average exercise price
Outstanding at 1 January 380,000 111.3p 705,000 133.1p
Lapsed during the year - - (325,000) 237.5p
Outstanding at 31 December 380,000 111.3p 380,000 111.3p
Exercisable at 31 December 380,000 111.3p 380,000 111.3p
26. NON-CONTROLLING INTEREST
2017 £’000 2016 £’000
As at 1 January 349 321
Share of profit/(loss) for the year 172 (72)
Exchange adjustment 11 100
As at 31 December 532 349
The non-controlling interest comprises of a 37.5% shareholding in Black Wattle
Colliery (Pty) Ltd. A coal mining company incorporated in South Africa.
Summarised financial information reflecting 100% of the underlying
subsidiary’s relevant figures, is set out below.
2017 £’000 2016 £’000
Revenue 36,300 21,703
Expenses (35,150) (22,185)
Profit/(loss) for the year 1,150 (482)
Other comprehensive Income - -
Total comprehensive income for the year 1,150 (482)
Balance sheet
Non-current assets 8,613 8,516
Current assets 6,747 8,600
Current liabilities (8,652) (12,151)
Non-current liabilities (3,155) (2,635)
Net assets at 31 December 3,553 2,330
The non-controlling interest relates to the disposal of a 37.5% shareholding
in Black Wattle 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.
27. 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)) 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
London & Associated Properties PLC (note (a)) 35 - 138 (162)
Langney Shopping Centre Unit Trust (note (b)) - - - 64
Dragon Retail Properties Limited (note (c)) 123 (2,000) (174) 150
Ezimbokodweni Mining (Pty) Limited (note (d)) - (1,350) (114) -
As at 31 December 2016 158 (3,350) (150) 52
(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) Langney Shopping Centre Unit Trust – Langney Shopping Centre Unit
Trust is an unlisted property unit trust incorporated in Jersey. On the 11
March 2016, the company disposed of its investment in Langney Shopping Centre
Unit Trust.
(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. During 2012
the company lent £2million to Dragon at 6.875 per cent annual interest which
has been classified as a trading balance and which is unsecured and payable on
demand.
(d) Ezimbokodweni Mining (Pty) Limited – Ezimbokodweni Mining is a
prospective coal production company based in South Africa. Ezimbokodweni
Mining (Pty) Limited is a joint venture and a loan to the joint venture is
treated as part of the net investment in the joint venture. Further details on
the net investment in Ezimbokodweni can be found in note 13.
Details of key management personnel compensation and interest in share options
are shown in the Directors’ Remuneration Report on pages 36 and 37 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 25 for details of IFRS 2 charges. The total employers’ national
insurance paid in relation to the remuneration of key management was £156,000
(2016: 143,000). 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 £56,000 (2016: £71,000) and a
repayment of £15,000 (2016: £15,000) was made during the year.
The non-controlling interest to Vunani Limited is shown in note 26. In
addition, the group holds an investment in Vunani Limited classified as
non-current available for sale investments with a fair value of £51,000
(2016: £32,000).
28. EMPLOYEES
2017 £’000 2016 £’000
The average weekly numbers of employees of the group during the year were as follows:
Production 192 185
Administration 15 15
207 200
Staff costs during the year were as follows:
Salaries 5,993 4,864
Social security costs 161 148
Pension costs 242 200
Share based payments - 109
6,396 5,321
29. CAPITAL COMMITMENTS
2017 £’000 2016 £’000
Commitments for capital expenditure approved and contracted for at the year end - 762
Share of commitment of capital expenditure in joint venture - 1,489
30. HEAD LEASE COMMITMENTS AND FUTURE PROPERTY LEASE RENTALS
Present value of head leases on properties
Minimum lease payments Present value of minimum lease payments
2017 £’000 2016 £’000 2017 £’000 2016 £’000
Within one year 10 11 10 11
Second to fifth year 38 45 30 36
After five years 1,199 1,436 112 134
1,247 1,492 152 181
Discounting adjustment (1,095) (1,311) - -
Present value 152 181 152 181
The Company has one finance lease contract for an investment property. The
remaining term for the leased investment property is 131 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 68 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:
2017 £’000 2016 £’000
Within one year 914 981
Second to fifth year 2,460 2,533
After five years 9,327 9,262
12,701 12,776
31. 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:
2017 £’000 2016 £’000
Rail siding 64 63
Rehabilitation of mining land 1,387 1,364
Water & electricity 58 57
Company balance sheet
at 31 December 2017
Notes 2017 £’000 2016 £’000
Fixed assets
Tangible assets 34 48 51
Investment in joint ventures 35 165 847
Other investments 35 7,395 7,599
7,609 8,497
Current assets
Debtors – amounts due within one year 36 3,471 3,253
Debtors – amounts due in more than one year 36 - 843
Bank balances 2,129 1,118
5,599 5,214
Creditors – amounts falling due within one year 37 (1,406) (1,328)
Net current assets 4,193 3,886
Total assets less current liabilities 11,802 12,383
Provision for liabilities and charges 38 (18) (18)
Net assets 11,784 12,365
Capital and reserves
Called up share capital 23 1,068 1,068
Share premium account 258 258
Available for sale reserve 25 6
Other reserves 598 598
Retained earnings 32 9,835 10,435
Shareholders’ funds 11,784 12,365
The loss for the financial year, before dividends, was £173,000 (2016: loss
of £224,000)
The company financial statements were approved and authorised for issue by the
board of directors on 20 April 2018 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 2017
Share capital £’000 Share premium £’000 Available for sale reserve £’000 Other reserve £’000 Retained earnings £’000 Shareholders funds £’000
Balance at 1 January 2016 1,068 258 - 489 11,086 12,901
Dividend paid - - - - (427) (427)
Share option charge - - - 109 - 109
Profit and total comprehensive income for the year - - 6 - (224) (218)
Balance at 1 January 2017 1,068 258 6 598 10,435 12,365
Dividend paid - - - - (427) (427)
Profit and total comprehensive income for the year - - 19 - (173) (154)
Balance at 31 December 2017 1,068 258 25 598 9,835 11,784
Company accounting policies
for the year ended 31 December 2017
The following are the main accounting policies of the company:
Basis of preperation
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.
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.
Other investments comprising of shares in listed companies are classified as
non-current available for sale investments and are carried 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.
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 64.
Deferred taxation
Details on the group’s accounting policy for deferred taxation can be found
on page 65.
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
64.
Share based remuneration
Details on the group’s accounting policy for share based remuneration can be
found on page 64. 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 this report.
32. 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 loss
for the financial year, before dividends, was £173,000 (2016: loss of
£224,000)
Details of share capital are set out in note 23 of the group financial
statements and details of the share options are shown in the Directors’
Remuneration Report on page 37 under the heading Share option schemes which is
within the audited part of this report and note 25 of the group financial
statements.
33. DIVIDENDS
Details on dividends can be found in note 8 in the group financial statements.
34. TANGIBLE FIXED ASSETS
Leasehold Property £’000 Motor vehicles £’000 Office equipment £’000 Total £’000
Cost at 1 January 2017 45 37 67 149
Revaluation - (37) - (37)
Cost at 31 December 2017 45 - 67 112
Accumulated depreciation at 1 January 2017 - 37 61 98
Charge for the year - - 3 3
Accumulated depreciation at 31 December 2017 - 37 64 101
Net book value at 31 December 2017 45 - 3 48
Net book value at 31 December 2016 45 - 6 51
Leasehold property consists of a single unit with a long leasehold tenant. The
term remaining on the lease is 42 years.
35. INVESTMENTS
Joint ventures shares £’000 Shares in subsidiaries £’000 Loans £’000 Other investments £’000 Total £’000
Net book value at 1 January 2017 847 6,356 1,211 32 7,599
Repaid during year - - (223) - (223)
Write-off of investment (682) - - - -
Unrealised surplus of market value versus cost - - - 19 19
Net book value at 31 December 2017 165 6,356 988 51 7,395
During the year, the company wrote off its investment in Ezimbokodweni Mining
(Pty) Ltd. Further information relating to the write down of Ezimbokodweni
Mining (Pty) Ltd can be found in Note 13.
Investments in subsidiaries are detailed in note 14. 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 £52,000 (2016: £32,000) shares.
36. DEBTORS
2017 £’000 2016 £’000
Amounts due within one year:
Amounts due from subsidiary undertakings 1,289 1,006
Trade receivables 16 7
Other debtors 78 89
Joint venture 2,000 2,070
Prepayments and accrued income 88 81
3,471 3,253
Amounts due in more than one year:
Amounts due from subsidiary undertakings - 834
37. CREDITORS
2017 £’000 2016 £’000
Amounts falling due within one year:
Amounts due to subsidiary undertakings 279 359
Joint venture 192 192
Current taxation 123 -
Other taxation and social security 38 26
Other creditors 659 592
Accruals and deferred income 115 159
1,406 1,328
38. PROVISIONS FOR LIABILITIES
2017 £’000 2016 £’000
Deferred taxation:
Balance at 1 January 18 182
Provision - (164)
Transfer - -
18 18
39. RELATED PARTY TRANSACTIONS
At 31 December During the year
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)) (165) (999) 2,768
Ninghi Marketing Limited (note (b)) (102) - -
As at 31 December 2017 (267) (999) 2,768
Black Wattle Colliery (Pty) Ltd (note (a)) (1,934) (1,421) 644
Ninghi Marketing Limited (note (b)) (102) - -
As at 31 December 2016 (2,036) (1,421) 644
(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
R17,000,000 (2016: 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 27 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 27 of the group financial
statements.
40. EMPLOYEES
2017 £’000 2016 £’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 1,227 1,125
Social security costs 161 148
Pension costs 62 65
Share based payments - 109
1,450 1,447
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