REG-Bisichi Mining PLC: Final Results <Origin Href="QuoteRef">BISI.L</Origin> - Part 1
22/04/2016 15:35
BISICHI MINING PLC
Results for the year ended 31 December 2015
Summary:
* ADJUSTED EBITDA: £1,700,000 (2014: £4,300,000)
* Challenging second half at Black Wattle Colliery
* Physical demand for Black Wattle coal remains strong
* UK property portfolio continues to perform well
* Final Dividend proposed of 3p per share, taking full year dividend to 4p per
share
* Dividend yield of 5.2% at year end share price
Chairman, Sir Michael Heller, comments:
"Although the resources sector is going through a very difficult time at the
moment we believe that there is still substantial value for our shareholders in
our South African coal assets and I look forward to the coming year with
confidence."
For further information, please call:
Andrew Heller or Garrett Casey, Bisichi Mining PLC 020 7415 5030
STRATEGIC REPORT
Chairman's Statement
The second half of 2015 has been a challenging period for your company and in
particular for Black Wattle, our direct coal mining subsidiary in South Africa.
Overall for the year ended 31 December 2015, your company achieved operating
profit before depreciation, fair value adjustments and exchange movements
(adjusted EBITDA) of £1.7 million (2014: £4.3 million).
Although Black Wattle was profitable for the first half of the year, the mine
operated at a loss in the second half. This was largely because of issues over
which we have no control, namely the continued weakness in the coal price and
delays associated with the granting of blasting permissions. A fuller
explanation of these issues and the way that your management have addressed the
delays in the permissions is detailed in the Mining Review. On a related issue,
your company has been both a beneficiary and a victim of the weakness of the
South African Rand. On the upside we have benefitted from the fact that our
export coal is priced in US Dollars, but the weakness of the Rand against
Sterling, particularly in the second half of the year, has meant that we have
taken a substantial exchange rate loss of £1.2million (2014: £0.1million) on
consolidation of our South African Rand denominated net assets into the group
balance sheet and a £0.5million loss (2014: £0.1million) through the Income
Statement related to the retranslation of intercompany trading balances.
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.
Obviously the resources sector is going through a very difficult time at the
moment. Nevertheless we believe that there is still substantial value for our
shareholders to be added from our South African coal assets.
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. We are pleased to report that in October 2015, the group acquired a new
retail property in Northampton for a total cost of £960,000 in cash. In a
separate transaction, in March 2016, the group disposed of its investment in
Langney Shopping Centre in Eastbourne for £1.14million. A fuller explanation of
the portfolio's valuation results and financial position are discussed in the
Directors report.
Looking forward, management will continue to look for opportunities to
strengthen and develop the company's UK retail property portfolio.
Finally, your directors have decided to hold the dividend at the 2014 level and
will recommend to you, our shareholders, a final dividend of 3p (2014: 3p)
payable on Friday 29 July 2016 to shareholders registered at the close of
business on 8 July 2016 making the total for the year 4p (2014: 4p). Based on
the 2015 year end share price, this represents a 5.2% 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
18 April 2016
STRATEGIC REPORT
Mining Review
As noted in the Chairman's statement, the challenging environment experienced
in the second half at Black Wattle, our South African coal mining operation,
had a material effect on the mine's overall performance for the year.
Although we continue to operate in an environment of historically low coal
prices, many of the mining challenges experienced in the second half of 2015
have now been overcome. Looking forward, management will continue to focus on
keeping cost of production low and ensuring adequate levels of production are
achieved.
Production and operations
Although overall Run of Mine production from Black Wattle improved in 2015,
with total production for the year of 1.58million metric tonnes (2014:
1.53million metric tonnes), production was severely hampered in the last four
months of the year. Average monthly Run of Mine production decreased from
143,000 metric tonnes in the first eight months of the year to 105,000 metric
tonnes in the last four months. As noted in the Chairman's Statement, this
decrease in production can mainly be attributable to the delays in obtaining
the necessary regulatory blasting permissions.
These approvals have now been received and as we continue into 2016, we will
look to combine production from new opencast areas opened at Black Wattle with
coal received from the opencast reserve already being mined at Blue
Nightingale. As previously reported, the coal delivered from Blue Nightingale
is part of an agreement to purchase Run of Mine coal from an opencast reserve
nearby to Black Wattle. Blue Nightingale is a South African black owned and
managed mining company and we are very pleased to be continuing our successful
relationship.
Main trends/markets
Along with the general downturn in commodity and energy prices in 2015,
international coal prices continued to weaken. At the beginning of 2015, the
average weekly price of Free on Board (FOB) Coal from Richards Bay Coal
Terminal (API4) was $64. By the end of the year the price had weakened to under
$50, less than half the $120 achieved in 2011. A strong depreciation in the
South African Rand against the US Dollar in the last quarter of 2015 has helped
to partially offset this decline together with a stable domestic market. Total
mining costs increased from £18.2 million in 2014 to £19.2 million in 2015,
inclusive of the impact of the depreciation in the South African Rand against
the US Dollar.
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 2015:
• 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 two Lost time Injuries during 2015.
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.
• Dover testing for all operators was introduced in the last quarter of
2015.
• All of the plant personnel have undergone basic rigging training in 2015
• Black Wattle Colliery has extensively revised all the SOP's related to
machinery and refresher training was done with all the machine operators.
• 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 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. To date in 2016, 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 upgrades to the roof, classrooms and outer areas. Further
upgrades to this school will commence in 2016 whereby proper toilet facilities
will be erected for the boys and girls, this will form part of the mines skills
development program for our employees.
Procurement
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 18.4 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 2015 were:
• 17 employees were trained in ABET (Adult Basic Educational Training) on
various levels;
• An additional 5 disabled women continue their training on ABET level one
and two.
• 4 HDSA Females have commenced apprenticeship at the mine.
• 78 Plant personnel were trained in Basic Rigging skills.
• One HDSA male is currently undergoing an intensive one year safety
training course on the mine.
Prospects
Management continue to focus on providing 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
18 April 2016
STRATEGIC REPORT
Risk & Performance
The directors present the Strategic Report of the company for the year ending
31 December 2015. 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 South African mining operational earnings are
largely dependent on movements in both the export and domestic 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 life of the mine, 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 and property: 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 are expected to remain stable as long as
tenants remain in operation.
Financial position
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 renewable
annually at 30 June and is secured against inventory, debtors and cash that are
held in the group's South African operations. This facility comprises of a
R60million revolving loan to cover the fluctuating working capital requirements
of the group's South African operations, and a fully drawn R20million loan
facility to cover guarantee requirements related to the group's South African
mining operations.
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, is fully drawn 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 2015 and the value of
UK investment properties attributable to the group at year end was £12.8
million (2014: £11.6million).
In October 2015, the group acquired a new retail property in Northampton for a
total cost of £960,000 in cash. The group's portfolio is managed actively by
London & Associated properties plc and continues to perform well with voids
across the portfolio at the low level of 1.12%.
In a separate transaction, in March 2016 the group disposed of its joint
venture investment in Langney Shopping Centre in Eastbourne for £1.14million in
cash. The investment is classified as a non-current asset held for sale within
the group's consolidated balance sheet.
The open market value of the company's share of investment properties included
within its joint venture investment in Dragon Retail Properties is £1.3million
(2014: £4million) and within non-current assets held for sale is £2.3million
(2014: £nil). Overall, the group achieved net property revenue of £1.3million
(2014: £1.2million) for the year which includes the company's share of net
property revenue from its investment in joint ventures of £86,000 (2014: £
236,000) and non-current assets held for sale of £172,000 (2014: £nil).
The Group holds £1,225,000 (2014: £1,722,000) of loans and joint venture
investment in Ezimbokedwini Mining (Pty) Limited the carrying value of which is
dependent upon the completion of the acquisition of the Pegasus coal project in
South Africa. The carrying value of the underlying project is supported by its
coal reserves and Life of Mine plan and is considered appropriate given the
underlying economic value of the project. Further details on the financial
positions of the Groups joint ventures can be found in note 13 to the financial
statements.
The group's cash and cash equivalents (excluding bank overdrafts) at year end
were £1.6million (2014: £2.8million). The net assets of the group at the year
end were £15.6million (2014: £17.7million). The group has considerable
financial resources available at short notice including cash, investments
available for sale and its £2m loan to Dragon Retail Properties Limited which
accrues annual interest at 6.875 per cent.
Further details on the group's overall financial position are stated in the
Consolidated Balance Sheet on page 42.
Cashflow
The company at year end had a net balance owing of cash and cash equivalents
(including bank overdrafts) of £0.6 million (2014: net positive balance of £0.7
million). For the year, the group had a net cash generated from operating
activities of £1.7million (2014: £3.4million) and an overall net decrease in
cash and cash equivalents of £1.7million (2014: Increase of £2.0million) after
taking into account financing and investing activities. 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).
Key Performance Indicators
The Key Performance Indicators for the group are:
2015 2014
£'000 £'000
For our UK property investment operations:
Net property valuation 12,800 11,575
For South African mining activities:
Operating profit before depreciation, fair value adjustments and exchange 625 3,161
movements (adjusted EBITDA)
Tonnes Tonnes
Mining production 1,580 1,530
2015 2014
£'000 £'000
For the group:
(Loss)\Profit before tax (147) 1,568
Operating profit before depreciation, fair value adjustments and exchange 1,717 4,276
movements (adjusted EBITDA)
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:
2015 2014
CO2e CO2e
Tonnes Tonnes
Emissions source:
Scope 1 Combustion of fuel & operation of facilities 10,571 14,867
Scope 1 Emissions from coal mining activities 27,789 26,872
Scope 2 Electricity, heat, steam and cooling purchased for own 7,571 8,300
use
Total 45,931 50,039
Intensity:
Intensity 1 Tonnes of CO2 per pound sterling of revenue 0.00179 0.00189
Intensity 2 Tonnes of CO2 per tonne of coal produced 0.0291 0.0327
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 forms 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 205 employees (154 male,
51 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
18 April 2016
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
GOVERNANCE
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
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 12p per minute + network extras) or
+44 (0) 208 639 3399 for overseas callers
www.capitaassetservices.com
Email: ssd@capitaregistrars.com
Five year summary
2015 2014 2013 2012 2011
£'000 £'000 £'000 £'000 £'000
Consolidated income statement items
Revenue 25,655 26,500 35,105 35,962 29,909
Operating profit/(loss) 150 1,364 123 2,568 (1,328)
Profit/(loss) before tax (147) 1,568 102 2,190 (1,450)
Trading profit/(loss) before tax (188) 1,157 17 2,808 (1,210)
Revaluation and impairment profit / 41 411 85 (618) (240)
(loss) before tax
Operating profit before depreciation, 1,717 4,276 3,834 5,484 (144)
fair value adjustments and exchange
movements (adjusted EBITDA)
Consolidated balance sheet items
Investment properties 12,800 11,575 11,559 11,612 12,068
Fixed asset investments 2,112 4,090 4,370 4,309 2,727
14,912 15,665 15,929 15,921 14,795
Available for sale investments 594 796 822 787 2,515
15,506 16,461 16,751 16,708 17,310
Other assets less liabilities less (196) 854 (123) 607 (537)
non-controlling interests
Total equity attributable to equity 15,310 17,315 16,628 17,315 16,773
shareholders
Net assets per ordinary share 143.4p 162.2p 156.3p 164.0p 158.9p
(attributable)
Dividend per share 4.00p 4.00p 4.00p 4.00p 4.00p
Financial calendar
10 June 2016 Annual General Meeting
29 July 2016 Payment of final dividend for 2015 (if approved)
Late August 2016 Announcement of half-year results to 30 June 2016
Late April 2017 Announcement of results for year ending 31 December 2016
Directors' report
The directors submit their report together with the audited financial
statements for the year ended 31 December 2015.
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 2015 are shown on pages 39 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
2015 can be found on page 13 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 2015 of 1p was paid on 5 February 2016 (Interim 2014:
1p). The directors recommend the payment of a final dividend for 2015 of 3p per
ordinary share (2014: 3p) making a total dividend for 2015 of 4p (2014: 4p).
Subject to shareholder approval, the total dividend per ordinary share for 2015
will be 4p per ordinary share.
The final dividend will be payable on Friday 29 July 2016 to shareholders
registered at the close of business on 8 July 2016.
Investment properties
The investment property portfolio is stated at its open market value of £
12,800,000 at 31 December 2015 (2014: £11,575,000) 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 £1,334,000
(2014: £4,021,000) and within non-current assets held for sale is £2,286,000.
Financial instruments
Note 22 to the financial statements sets out the risks in respect of financial
instruments. The Board reviews and agrees overall treasury policies, delegating
appropriate authority to the managing director. Financial instruments are used
to manage the financial risks facing the group - 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 Sir M A Heller , Mr C A Joll and Mr J A
Sibbald who offer themselves for re-election.
Sir Michael Heller has been an executive Director since 1972 and Chairman since
1981. He is a Chartered Accountant and has a contract of employment
determinable at six months' notice.
Christopher Joll has been a Director since 1 February 2001 and has a contract
of service determinable at three months' notice. He has held a number of
non-executive directorships of quoted and un-quoted companies and is currently
a senior partner of MJ2 Events LLP an event management business.
John Sibbald has been a non-executive Director since 1988. He is a retired
Chartered Accountant. For most of his career he was employed in stockbroking in
the City of London where he specialised in mining and international investment.
He has a contract of service determinable at three months notice.
No director had any material interest in any contract or arrangement with the
company during the year other than as shown in this report.
Directors' shareholdings
The interests of the directors in the shares of the company, including family
and trustee holdings where appropriate, are shown on page 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 18 April 2016:
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 - 1,848,110 shares representing 17.31per cent. of the
issued share capital.
James Hyslop - 341,126 shares representing 3.20 per cent. of the
issued share capital.
Disclosure of information to auditor
The directors in office at 31 December 2015 have confirmed that as far as they
are aware that there is no relevant audit information of which the auditor is
unaware. Each of the directors has confirmed that they have taken all
reasonable steps they ought to have taken as directors to make themselves aware
of any relevant audit information and to establish that it has been
communicated to the auditor.
Corporate governance
The Board acknowledges the importance of the guidelines set out in the Quoted
Companies Alliance (QCA) published Corporate Governance Code and complies with
these so far as is appropriate having regard to the size and nature of the
Company. The paragraphs below set out how the company has applied this guidance
during the year.
Principles of corporate governance
The group's Board appreciates the value of good corporate governance not only
in the areas of accountability and risk management, but also as a positive
contribution to business prosperity. The Board endeavours to apply corporate
governance principles in a sensible and pragmatic fashion having regard to the
circumstances of the group's business. The key objective is to enhance and
protect shareholder value.
Board structure
During the year the Board comprised the executive chairman, the managing
director, two other executive directors and two non-executive directors. Their
details appear on page 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 2015 and attendance at regular Board meetings and
Board committees was as follows:
Meetings held Meetings
Attended
Sir Michael Board 5 5
Heller Nomination 1 1
committee
A R Heller Board 5 5
Audit committee 2 2
G J Casey Board 5 5
Audit committee 2 2
R J Grobler Board 5 1
C A Joll Board 5 5
Audit committee 2 2
Nomination 1 1
committee 1 1
Remuneration
committee
J A Sibbald Board 5 5
Audit committee 2 2
Nomination 1 1
committee 1 1
Remuneration
committee
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 2015 (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
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