REG-Bisichi Mining PLC: Final Results <Origin Href="QuoteRef">BISI.L</Origin> - Part 1
30/04/2015 16:10
BISICHI MINING PLC
Results for the year ended 31 December 2014
Financial summary:
* EBITDA: £4,609,000 (2013: £3,039,000)
* Profit before tax: £1,568,000 (2013: £102,000)
* £3.5million EBITDA in the second half of the year
Summary:
* Strong performance at Black Wattle colliery in the second half attributed to
implementation of turnaround plan by management and improved production at
Black Wattle's profitable opencast pits
* Delivery of coal from new 2.6million tonne reserve commenced and expected to
contribute to earnings in 2015
* Physical demand for Black Wattle coal remains strong despite historically low
international coal prices
* UK property portfolio continues to perform well with a new £6million loan
facility signed with Santander UK PLC
* Final Dividend proposed of 3p per share payable in cash in addition to the
interim dividend of 1p per share
* Dividend yield of 5% at year end share price
Chairman, Sir Michael Heller, comments:
"Although we expect depressed coal prices to continue, Black Wattle will
continue its focus on keeping its cost of production low. Meanwhile, our UK
retail property investment portfolio, which underpins our direct mining
business, remains virtually fully let. We have confidence, therefore, in the
prospects for Bisichi in 2015."
For further information, please call:
Andrew Heller or Garrett Casey, Bisichi Mining PLC 020 7415 5030
Bisichi Mining PLC
Annual Report 2014
Earnings before interest, tax, depreciation and amortisation
(EBITDA) of £4.6million (2013: £3.0million)
£3.5million EBITDA in the second half of the year
UK property portfolio continues to perform well with a new £6million loan
facility signed with Santander UK PLC
Dividend yield of 5% at year end share price
STRATEGIC REPORT
CHAIRMAN'S STATEMENT
I am very pleased to be able to inform shareholders that your Company achieved
earnings before interest, tax, depreciation and amortisation (EBITDA) of £4.6
million (2013: £3.0 million). Of these earnings, £3.5 million were generated in
the second half of the year.
To a significant extent, this strong performance in the second half of the year
can be attributed to the successful implementation of the turnaround plan put
in place by your management in London and at Black Wattle Colliery, our direct
coal mining asset, in South Africa.
As reported last year, at the end of 2013 the open cast mining operations at
Black Wattle were severely impacted when one of our main production pits ran
into unrecorded old underground workings. A turnaround plan was put in place.
This involved the swift movement of the machinery to two of our more profitable
production pits in order to increase production from these areas.
Although the plan initially suffered a short-term set-back caused by the
unusually heavy rainfall in the first quarter of 2014, Black Wattle steadily
increased production from its lower costing pits. This increased production
from the two existing pits ensured that the mine returned to acceptable levels
of profitability in the second half of 2014.
In regard to the new reserve at Blue Nightingale, plans were initiated to
develop the reserve by the end of 2014. We are pleased to report that delivery
of coal from the reserve has commenced and we expect the reserve to begin to
contribute to earnings in 2015.
Black Wattle continues to perform well 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.
During the second half of last year, Black Wattle became a level 4 contributor
to Broad Based Black Economic Empowerment ("BBBEE"). Our staff deserve our
thanks for their hard work in achieving this status as well as for their
continued efforts in improving our BBBEE rating and credentials.
The coal mined during the year, at a lower cost of production than 2013, helped
offset the impact of the weaker international coal prices experienced
throughout 2014. Although we expect depressed coal prices to continue, Black
Wattle will continue its focus on keeping its cost of production low and we
remain highly confident on the prospects of our coal mining activities in South
Africa.
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. We are pleased to report that in December 2014, the group signed a £6
million 5-year term loan facility with Santander UK PLC. This new loan replaces
the previous £5 million term facility and overdraft facility held with Royal
Bank of Scotland. This new loan is secured against the group's UK retail
property portfolio which was externally valued at the 2014 year end at £
11.6million (2013: £11.6million).
On the behalf of all shareholders, I would like to thank Robert Corry, who
retired at the end of 2014, for his services to the Group. Robert, a director
of Black Wattle Colliery for over 20 years, has made a significant contribution
to the development of our coal business and the banking side of Bisichi's UK
property portfolio. We wish him the very best in his retirement.
Finally, your directors have decided to hold the dividend at the 2013 level and
will recommend to you, our shareholders, a final dividend of 3p (2013: 3p)
payable on Friday 31 July 2015 to shareholders registered at the close of
business on 3 July 2015 making the total for the year 4p (2013: 4p). Based on
the 2014 year end share price, this represents a 5% yield, which is at the high
end of the mining sector.
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
27 April 2015
STRATEGIC REPORT
Mining REVIEW
The strong earnings achieved in the second half of the year at Black Wattle,
our South African coal mining operation, can be mainly attributed to improved
production at Black Wattle's profitable opencast pits.
Although we continue to operate in an environment of historically low coal
prices, we expect the changes implemented at Black Wattle to result in a
continued strong performance from our South African operations going into 2015.
Production and operations
Although overall Run of Mine production from Black Wattle weakened in 2014,
with total production for the year of 1.53million metric tonnes (2013:
1.77million metric tonnes), production improved in the second half of the year.
Average monthly Run of Mine production increased from 115,000 metric tonnes in
the first half of the year to 140,000 metric tonnes in the second half.
As announced in the Chairman's Statement, we are expecting a contribution to
earnings from the Blue Nightingale reserve in 2015. Blue Nightingale, is a
South African black owned and managed mining company and we are very pleased to
be continuing our successful relationship. As previously reported, the coal
delivered is part of an agreement to purchase Run of Mine coal from an opencast
reserve nearby to Black Wattle. Additional drilling at year end has confirmed
that the reserve consists of approximately 2.6million tonnes of coal which can
be sold either directly to local power utilities or transported to Black Wattle
where it will be washed and sold into our existing domestic and export markets.
Black Wattle will look to combine production from Black Wattle's existing
reserves with coal received from the new reserve at Blue Nightingale.
Main trends/markets
International coal prices continued to weaken. At the beginning of 2014, the
average weekly price of Free on Board (FOB) Coal from Richards Bay Coal
Terminal (API4) was $85. By the end of the year the price had weakened to under
$64. Further weakness in 2015 has seen the coal price go below $60, less than
half the price of $120 achieved three years previously in 2011. A depreciation
in the South African Rand against the US Dollar has helped to partially offset
this decline. Looking forward, we continue to see strong demand for our coal in
both the domestic and export markets and we will continue to focus on keeping
our cost of production low in order to offset the impact of lower international
coal prices.
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 2014:
• No new 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 2014.
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 ongoing basis. We are pleased to
report all 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 ongoing 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.
• A Job Safety Analysis form has been introduced to ensure effective
identification of hazards in the workplace.
• In order to improve the current reporting practice of incidents on the mine,
initial reporting of incidents booklets were handed out to all employees and
contractors.
• In order to capture and record investigation findings from incidents, an
incident recording sheet was introduced to line management and contractors.
• Black Wattle Colliery utilises ICAM (Incident cause analysis method).
• Hazard Identification and Risk Assessment training was given to all levels of
employees, line management, Heads of Departments, contractor representatives
and contractor employees.
• Ongoing training on conveyor belt operation is being conducted with all
employees involved with this discipline.
Environment Management Programme
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.
Black Wattle is fully compliant with the regulatory requirements of the
Department of Water Affairs and Forestry and has an approved and externally
audited 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.
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, Housing and Living Condition,
Enterprise Development and Procurement Programmes; and
• Empowerment 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 ongoing 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:
• New implementation 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).
• 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.
• 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 and the project was awarded a new
bailing machine as part of the award. An additional piece of ground has been
identified to extend the project to a different area within the Mhluzi Township
nearby to Black Wattle. During 2014 the project self-funded the purchase of an
additional bailing machine, an important milestone in bringing the project to a
position of self-sustainability.
• Various upgrades were initiated at the Evergreen School nearby to Black
Wattle including upgrades to the roof, classrooms and outer areas.
Procurement
As reported in the Chairman's Statement, Black Wattle Colliery is now a level 4
BBBEE contributor.
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 80 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. Black Wattle also sells much of its coal
products to empowered companies.
Employment in South Africa
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 18.5 percent women in core mining.
• 94 percent of the women at Black Wattle Colliery are HDSA females.
In terms of staff training some highlights for 2014 were:
• 13 employees were trained in ABET (Accreditation Board for Engineering and
Technology) level one;
• An additional 5 disabled women have started training on ABET level one and
two; and
• Plans have been put in place for 2015 for a further 10 employees to be
trained on ABET level one, two or three and 1 employee will be trained on ABET
level four.
• 4 HDSA Females have commenced apprenticeship at the mine.
Prospects
Plans have been put in place to ensure Black Wattle is able to provide
consistent production from its own existing reserves as well as reserves
developed in partnership with our BEE partners. Although international coal
prices remain depressed, management continue to remain confident in the ability
to achieve significant value from our existing South African mining operations.
As a result, I look forward to the coming year with confidence.
Andrew Heller
Managing Director
27 April 2015
STRATEGIC REPORT
RISK & PERFORMANCE
The directors present the Strategic Report of the Company for the year ending
31 December 2014. 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.
Business review
The Chairman's Statement and the Mining Review which form part of the Strategic
Report on the preceding pages 2 to 7 give a comprehensive and fair review of
the group's activities during the past year and prospects for the forthcoming
year.
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 terms sustainable value to our stakeholders through our business model
which can be broken down into four key areas:
• acquiring and securing additional coal reserves in South Africa
• coal mining
• coal washing
• coal transportation and marketing
In addition to the four 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.
Risk & uncertainties
Coal price risk: The group's mining operational earnings are largely dependent
on movements in the coal price.
Coal washing: The group's mining operation's earnings are highly sensitive to
coal washing, therefore a stoppage or disruption to the process could
significantly impact earnings. However, there is scope to raise earnings
substantially if the yield from the washing process is improved even
marginally.
Mining risk: Attached to mining there are inherent health and safety risks. Any
such safety incidents disrupt operations, and can slow or even stop production.
The group has a comprehensive Health and Safety programme in place to mitigate
this. 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.
Currency risk: The group's South African operations are sensitive to currency
movements, especially those between the South African Rand, US Dollar and
British Pound.
New reserves and mining permissions: The acquisition of additional reserves,
permissions to mine and new mining opportunities in South Africa generally are
contingent on a number of factors outside of the group's control, e.g. approval
by the Department of Mineral Resources and the Department of Water Affairs and
Forestry.
Regulatory risk: The group's South African operations are subject to the
government Mining Charter and scorecard which primarily seeks to:
• Promote equitable access to South Africa's mineral resources for all people
in South Africa;
• 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;
• Expand the skills base of HDSAs in order to serve the community;
• Promote employment and the social and economic welfare of mining communities
and areas supplying mining labour; and
• Promote beneficiation of South Africa's mineral commodities beyond mining and
processing, including the production of consumer goods.
The group continues to make good progress towards meeting the Charter
requirements. However any regulatory changes to these, or failure to meet
existing targets, could adversely affect the mine's ability to retain its
mining rights in South Africa.
Transport risk: At present the government owned Transnet Freight Rail (TFR) is
the sole rail freight provider for coal in South Africa. The group's South
African operations are therefore reliant on TFR for delivery of its export
quality coal directly or indirectly via the Southern African ports to its end
customers.
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. The group's mining operations have to date not been affected by power
cuts.
Flooding risk: The group's mining operations are susceptible to seasonal
flooding which could disrupt production. Management monitors water levels on an
ongoing basis and various projects have been completed, including the
construction of additional dams, to mitigate this risk.
Environmental risk: The group's South African mining operations are required to
adhere to local environmental regulations. Details of the groups Environment
Management Programme are disclosed in the Mining Review on page 6.
Health & Safety risk: The group's South African mining operations are required
to adhere to local Health and Safety regulations. Details of the group's Health
and Safety Programme are disclosed in the Mining Review on page 5.
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.
Cashflow risk: We seek to balance the high risk of our mining operations with a
dependable cash flow from our UK property investment operations. 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. However, due to the long
term nature of the leases, the effect on cash flows from property investment
activities will remain stable as long as tenants remain in operation.
Key Performance Indicators
The Key Performance Indicators for the Group are:
2014 2013
£'000 £'000
For South African mining activities:
Earnings before interest, tax, depreciation, and amortisation 3,139 2,268
(EBITDA)
For our UK property investment operations:
Net property valuation 11,575 11,559
For the Group:
Profit before tax 1,568 102
Earnings before interest, tax, depreciation, and amortisation 4,609 3,039
(EBITDA)
Financial position
In December 2014, the group signed a £6 million term loan facility with
Santander. This new loan replaces the previous £5 million term facility and
overdraft held with Royal Bank of Scotland. The Loan is secured against the
group's UK retail property portfolio. The new debt package has a five year term
and is repayable at the end of the term. The interest cost of the loan is 2.35%
above LIBOR.
The property portfolio was externally valued at 31 December 2014 and the value
of UK investment properties attributable to the group at year end was £
11.6million (2013: £11.6million).
In South Africa, an increase in the structured trade finance facility from
R60million (South African Rand) to R80million was signed by Black Wattle
Colliery (Pty) Limited ("Black Wattle") in October 2013 with Absa Bank Limited,
a South African subsidiary of Barclays Bank PLC. The facility is renewed
annually at 30 June and is secured against inventory, debtors and cash that are
held in the group's South African operations. This facility comprises of a
R60million revolving loan to cover the 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 group's cash and cash equivalents (excluding bank overdrafts) at year end
were £2.8million (2013: £1.7million). The net assets of the group at the year
end were £17.7million (2013: £17.0million). During 2012 the Company lent £
2million to Dragon Retail Properties Limited, our joint venture company at
6.875 per cent annual interest. This money is repayable on demand and not
included in the groups cash and cash equivalents.
The group has considerable financial resources available at short notice
including cash, held for trading investments and its £2m loan to Dragon Retail
Properties Limited.
Further details on the group's financial position are stated in the
Consolidated Balance Sheet on page 42.
Cashflow
The Company at year end had a net amount of cash and cash equivalents
(including bank overdrafts) of £0.7 million (2013: net balance owing of £1.3
million). Details on the group's cashflow position are stated in the
Consolidated Cashflow Statement on page 45. Cash and cash equivalents as per
the Cashflow Statement comprise Cash and cash equivalents as presented in the
balance sheet and bank overdrafts (secured).
Environment
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.
Further information relating to the Company's position on the Environment and
Environmental Management issues related to our South African operations can be
found in The Mining Review which forms part of the Strategic Report on the
preceding pages 5 to 7.
Employment
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.
Further information relating to the Company's position on Employment issues can
be found in The Mining Review which forms part of the Strategic Report on the
preceding pages 5 to 7.
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 2015.
The Group's carbon footprint:
2014 2013
CO2e CO2e
Tonnes Tonnes
Emissions source:
Scope 1 Combustion of fuel & operation of facilities 14,867 24,862
Scope 1 Emissions from coal mining activities 26,872 31,014
Scope 2 Electricity, heat, steam and cooling purchased for own 8,300 9,947
use
Total 50,039 65,823
Intensity:
Intensity 1 Tonnes of CO2 per pound sterling of revenue 0.00189 0.00188
Intensity 2 Tonnes of CO2 per tonne of coal produced 0.0327 0.0372
Social, community and human rights issues
The Company 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. Further information relating to the Company's position on
social and community issues can be found in the Mining Review which form part
of the Strategic Report on the preceding pages 5 to 7.
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 217 employees (165 male, 52 female).
Future prospects
The group seeks to expand its operations in South Africa through the
acquisition of additional coal reserves. Further information on the outlook of
the Company can be found in both the Chairman's Statement on page 2 and the
Mining Review on page 5 which form part of the Strategic Report.
Signed on behalf of the Board of Directors
Garrett Casey
Finance Director
27 April 2015
Management team
1 Sir Michael Heller
Chairman
Bisichi Mining PLC
2 Andrew Heller
Managing Director
Bisichi Mining PLC,
Managing Director
Black Wattle Colliery
3 Christopher Joll
Senior Independent Director,
Chairman Audit
and Remuneration
Committees
4 Garrett Casey
Finance Director
Bisichi Mining PLC,
Director
Black Wattle Colliery
5 Robert Grobler
Director of Mining
Bisichi Mining PLC,
Director
Black Wattle Colliery
6 Ethan Dube
Director
Black Wattle Colliery
7 Nico Serfontein
Mine Manager
Black Wattle Colliery
Directors & 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.
Secretary & Registered office
Garrett Casey CA (SA)
24 Bruton Place
London W1J 6NE
Black Wattle Colliery
Directors
Andrew Heller (Managing Director)
Ethan Dube
Robert Grobler
Garrett Casey
Property portfolio asset manager
James Charlton BSc MRICS
Company Registration
Company registration No. 112155 (Incorporated in England and Wales)
Website
www.bisichi.co.uk
E-mail
admin@bisichi.co.uk
* Member of the nomination committee
+ Senior independent director
O Member of the audit, nomination and remuneration committees.
Auditor
BDO LLP
Principal bankers
United Kingdom
Santander UK PLC
Barclays Bank PLC
National Westminster Bank PLC
Investec PLC
South Africa
ABSA Bank (SA)
First National Bank (SA)
Standard Bank (SA)
Corporate solicitors
United Kingdom
Olswang LLP, London
Memery Crystal, London
Fladgate LLP, London
South Africa
Tugendhaft Wapnick Banchetti and Partners, Johannesburg
Hogan Lovells, Johannesburg
Brandmullers Attorneys, Middelburg
Stockbrokers
Shore Capital & Corporate Ltd
Registrars and transfer office
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent, BR3 4TU
Telephone: 0871 664 0300
(calls cost 10 pence per minute plus network extras)
Or +44 (0)203 728 5000 for overseas callers
www.capitaassetservices.com
E-mail: ssd@capitaregistrars.com
GOVERNANCE
FIVE YEAR SUMMARY
2014 2013 2012 2011 2010
£'000 £'000 £'000 £'000 £'000
Consolidated income statement
Revenue 26,500 35,105 35,962 29,909 32,824
Operating profit/ (loss) 1,364 123 2,568 (1,328) (1,705)
Profit/ (loss) before tax 1,568 102 2,190 (1,450) (1,813)
Trading profit before tax 1,157 17 2,808 (1,210) (2,209)
Revaluation profit before tax 411 85 (618) (240) 396
Profit before interest, taxation and 4,609 3,039 4,684 1,150 770
depreciation
Consolidated balance sheet
Investment properties 11,575 11,559 11,612 12,068 12,110
Fixed asset investments 4,090 4,370 4,309 2,727 3,757
15,665 15,929 15,921 14,795 15,867
Current asset investments 796 822 787 2,515 605
16,461 16,751 16,708 17,310 16,472
Other assets less liabilities less 854 (123) 607 (537) 1,482
non-controlling interests
Total equity attributable to equity 17,315 16,628 17,315 16,773 17,954
shareholders
Net assets per ordinary share 162.2p 156.3p 164.0p 158.9p 171.8p
Dividend per share 4.00p 4.00p 4.00p 4.00p 4.00p
GOVERNANCE
FINANCIAL CALENDAR
10 June 2015 Annual General Meeting
31 July 2015 Payment of final dividend for 2014 (if approved)
Late August 2015 Announcement of half-year results to 30 June 2015
Late April 2016 Announcement of results for year ending 31 December 2015
GOVERNANCE
DIRECTOR'S REPORT
The directors submit their report together with the audited financial
statements for the year ended 31 December 2014.
Activities and review of business
The group continues its mining activities. Income for the year was derived from
sales of coal from its South African operations. The group also has a property
investment portfolio for which it receives rental income.
The results for the year and state of affairs of the group and the company at
31 December 2014 are shown on pages 40 to 80 and in the Strategic Report on
pages 2 to 15. Future developments and prospects are also covered in the
Strategic Report. Over 99 per cent. of staff are employed in the South African
coal mining industry - employment matters and health and safety are dealt with
in the Strategic Report.
The management report referred to in the Director's responsibilities statement
encompasses this Directors' Report and Strategic Report on pages 2 to 15.
Corporate responsibility
Environment
The environmental issues of the group's South African coal mining operations
are covered in the Strategic Report on pages 2 to 15.
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
2014 can be found on page 15 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 2014 of 1p was paid on 6 February 2014 (Interim 2013:
1p). The directors recommend the payment of a final dividend for 2014 of 3p per
ordinary share (2013: 3p) making a total dividend for 2014 of 4p (2013: 4p).
Subject to shareholder approval, the total dividend per ordinary share for 2014
will be 4p per ordinary share.
The final dividend will be payable on Friday 31 July 2015 to shareholders
registered at the close of business on 3 July 2015.
Investment properties
The investment property portfolio is stated at its open market value of £
11,575,000, at 31 December 2014 (2013: £11,559,000) 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 £4,021,000
(2013: £3,599,000).
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 - speculative transactions are
not permitted. 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 R J Grobler and Mr A R Heller who
offers themselves for re-election.
Robert 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. He is a professional
engineer and member of the South African Coal Managers Association.
Andrew Heller has been an executive director 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.
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 30 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 27 April 2015:
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 1,671,610 shares representing 15.7 per cent. of
Limited - the issued share capital.
James Hyslop - 341,126 shares representing 3.20 per cent. of the
issued share capital.
Disclosure of information to auditor
The directors in office at 31 December 2014 have confirmed that they are aware
that there is no relevant audit information of which the auditor is unaware.
Each of the directors has confirmed that they have taken all reasonable steps
they ought to have taken as directors to make themselves aware of any relevant
audit information and to establish that it has been communicated to the
auditor.
Corporate governance
The company has adopted the Corporate Governance Code for Small and Mid-Size
Quoted Companies (the QCA Code) published by the Quoted Companies Alliance. The
QCA Code provides governance guidance to small and mid-size quoted companies.
The paragraphs below set out how the company has applied this guidance during
the year. The company has complied with the QCA Code throughout the year.
Principles of corporate governance
The 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 19. 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 37. 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 28 to 34.
• The audit committee comprises the two non-executive directors and is chaired
by Christopher Joll. Its prime tasks are to review the scope of external audit,
to receive regular reports from the company's auditor and to review the
half-yearly and annual accounts before they are presented to the Board,
focusing in particular on accounting policies and areas of management judgment
and estimation. The committee is responsible for monitoring the controls which
are in force to ensure the integrity of the information reported to the
shareholders. The committee acts as a forum for discussion of internal control
issues and contributes to the Board's review of the effectiveness of the
group's internal control and risk management systems and processes. The
committee also considers annually the need for an internal audit function. It
advises the Board on the appointment of external auditors and on their
remuneration for both audit and non-audit work, and discusses the nature and
scope of the audit with the external auditors. The committee, which meets
formally at least twice a year, provides a forum for reporting by the group's
external auditors. Meetings are also attended, by invitation, by the company
chairman, managing director and finance director.
The audit committee also undertakes a formal assessment of the auditors'
independence each year which includes:
• a review of non-audit services provided to the group and related fees;
• discussion with the auditors of a written report detailing all relationships
with the company and any other parties that could affect independence or the
perception of independence;
• a review of the auditors' own procedures for ensuring the independence of the
audit firm and partners and staff involved in the audit, including the regular
rotation of the audit partner; and
• obtaining written confirmation from the auditors that, in their professional
judgement, they are independent.
The audit committee report is set out on page 35.
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 ten years and John
Sibbald has been a non-executive director for over twenty 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 2014 and attendance at regular Board meetings and
Board committees was as follows:
Meetings held Meetings Attended
Sir Michael Heller Board 6 6
Nomination committee 1 1
A R Heller Board 6 6
Audit committee 2 2
G J Casey Board 6 5
Audit committee 2 2
R J Grobler Board 6 2
C A Joll Board 6 6
Audit committee 2 2
Nomination committee 1 1
Remuneration committee 1 1
J A Sibbald Board 6 6
Audit committee 2 2
Nomination committee 1 1
Remuneration committee 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 2014 (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. All directors and staff
continue to complete an e-learning training course on a bi-annual basis. 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 Wednesday, 10
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