REG-Bisichi Mining PLC: Final Results <Origin Href="QuoteRef">BISI.L</Origin> - Part 3
22/04/2016 15:35
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statements and
for being satisfied that they give a true and fair view. Our responsibility is
to audit and express an opinion on the financial statements in accordance with
applicable law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Financial Reporting Council's (FRC's)
Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on
the FRC's website at www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion:
• the financial statements give a true and fair view of the state of the
group's and the parent company's affairs as at 31 December 2015 and of the
group's loss for the year then ended;
• the group financial statements have been properly prepared in accordance
with IFRSs as adopted by the European Union;
• the parent company financial statements have been properly prepared in
accordance with United Kingdom Generally Accepted Accounting Practice; and
• the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006; and, as regards the group financial
statements, Article 4 of the IAS Regulation.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
• the part of the directors' remuneration report to be audited has been
properly prepared in accordance with the Companies Act 2006; and
• the information given in the strategic report and directors' report for
the financial year for which the financial statements are prepared is
consistent with the financial statements.
Matters on which we are required to report by exception
Under the Companies Act 2006 we are required to report to you if, in our
opinion:
• adequate accounting records have not been kept by the parent company, or
returns adequate for our audit have not been received from branches not visited
by us; or
• the parent company financial statements and the part of the directors'
remuneration report to be audited are not in agreement with the accounting
records and returns; or
• certain disclosures of directors' remuneration specified by law are not
made; or
• we have not received all the information and explanations we require for
our audit.
Ryan Ferguson (senior statutory auditor)
For and on behalf of BDO LLP, statutory auditor
London, United Kingdom
20 April 2016
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127).
Consolidated income statement
for the year ended 31 December 2015
2015 2014
Revaluations Revaluations
2015 and 2015 2014 and 2014
Trading impairment Total Trading impairment Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
Group revenue 1 25,655 - 25,655 26,500 - 26,500
Operating costs 2 (23,938) - (23,938) (22,224) - (22,224)
Operating profit before depreciation, 1,717 - 1,717 4,276 - 4,276
fair value adjustments and exchange
movements
Depreciation 2 (1,284) - (1,284) (2,682) - (2,682)
Operating profit before fair value 1 433 - 433 1,594 - 1,594
adjustments and exchange movements
Exchange losses (497) - (497) (143) - (143)
Increase/(decrease) in value of 3 - 225 225 - (6) (6)
investment properties
(Decrease)/increase in value of other - (11) (11) - 1 1
investments
Loss on held for trading investments - - - - (82) (82)
Operating (loss)/profit 1 (64) 214 150 1,451 (87) 1,364
Share of profit/(loss) in joint 12 104 (35) 69 65 498 563
ventures
Loss on reclassification of asset as 14 - (138) (138) - - -
held for sale
Profit before interest and taxation 40 41 81 1,516 411 1,927
Interest receivable 245 - 245 234 - 234
Interest payable 6 (473) - (473) (593) - (593)
(Loss)/Profit before tax 4 (188) 41 (147) 1,157 411 1,568
Taxation 7 (84) (24) (108) (348) (17) (365)
(Loss)/Profit for the year (272) 17 (255) 809 394 1,203
Attributable to:
Equity holders of the company (276) 17 (259) 709 394 1,103
Non-controlling interest 27 4 - 4 100 - 100
(Loss)/Profit for the year (272) 17 (255) 809 394 1,203
(Loss)/Profit per share - basic 9 (2.43p) 10.33p
(Loss)/Profit per share - diluted 9 (2.43p) 10.23p
Trading gains and losses reflect all the trading activity on mining and
property operations. Revaluation gains and losses reflects the revaluation of
investment properties and other assets within the group and any proportion of
these amounts within Joint Ventures, together with impairment loss on
reclassification of assets to held for sale. The total column represents the
consolidated income statement presented in accordance with IAS 1.
Consolidated statement of comprehensive income
for the year ended 31 December 2015
2015 2014
£'000 £'000
(Loss)/Profit for the year (255) 1,203
Other comprehensive (expense)/income:
Items that may be subsequently recycled to the income statement:
Exchange differences on translation of foreign operations (1,167) (121)
(Loss)/Gain on available for sale investments (202) 56
Taxation 41 (15)
Other comprehensive expense for the year net of tax (1,328) (80)
Total comprehensive (expense)/income for the year net of tax (1,583) 1,123
Attributable to:
Equity shareholders (1,500) 1,036
Non-controlling interest (83) 87
(1,583) 1,123
Consolidated balance sheet
at 31 December 2015
Notes 2015 2014
£'000 £'000
Assets
Non-current assets
Value of investment properties 10 12,800 11,575
Fair value of head lease 31 194 195
Investment properties 12,994 11,770
Mining reserves, plant and equipment 11 5,374 6,064
Investments in joint ventures accounted 12 1,198 2,898
for using equity method
Loan to joint venture 12 900 1,040
Other investments 12 14 152
Total non-current assets 20,480 21,924
Current assets
Inventories 16 1,049 1,760
Trade and other receivables 17 6,187 6,860
Corporation tax recoverable 29 35
Available for sale investments 18 594 796
Cash and cash equivalents 1,608 2,838
Non-current assets held for sale 14 1,168 -
Total current assets 10,635 12,289
Total assets 31,115 34,213
Notes 2015 2014
£'000 £'000
Liabilities
Current liabilities
Borrowings 20 (2,267) (2,139)
Trade and other payables 19 (4,234) (4,986)
Current tax liabilities - (23)
Total current liabilities (6,501) (7,148)
Non-current liabilities
Borrowings 20 (5,940) (6,013)
Provision for rehabilitation 21 (847) (930)
Finance lease liabilities 31 (194) (195)
Deferred tax liabilities 23 (2,002) (2,208)
Total non-current liabilities (8,983) (9,346)
Total liabilities (15,484) (16,494)
Net assets 15,631 17,719
Equity
Share capital 24 1,068 1,068
Share premium account 258 258
Translation reserve (2,757) (1,677)
Available for sale reserve (120) 41
Other reserves 25 574 652
Retained earnings 16,287 16,973
Total equity attributable to equity 15,310 17,315
shareholders
Non-controlling interest 27 321 404
Total equity 15,631 17,719
These financial statements were approved and authorised for issue by the board
of directors on 18 April 2016 and signed on its behalf by:
A R Heller G J Casey Company
Registration No. 112155
Director Director
Consolidated statement of changes in shareholders' equity
for the year ended 31 December 2015
Available- Non-
Share Share Translation for-sale Other Retained controlling Total
capital Premium reserves reserves reserves earnings Total interest equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 January 1,064 249 (1,569) - 587 16,297 16,628 359 16,987
2014
Revaluation and - - - - - 394 394 - 394
impairments
Trading - - - - - 709 709 100 709
Profit for the year - - - - - 1,103 1,103 100 1,203
Other comprehensive - - (108) 41 - - (67) (13) (80)
(expense)/income
Total comprehensive - - (108) 41 - 1,103 1,036 87 1,123
expense/income for
the year
Dividend (note 8) - - - - - (427) (427) (42) (469)
Share issues 4 9 - - - - 13 - 13
Share options issued - - - - 65 - 65 - 65
Balance at 1 January 1,068 258 (1,677) 41 652 16,973 17,315 404 17,719
2015
Revaluation and - - - - - 17 17 - 17
impairments
Trading - - - - - (276) (276) 4 (272)
Loss/Profit for the - - - - - (259) (259) 4 (255)
year
Other comprehensive - - (1,080) (161) - - (1,241) (87) (1,328)
expense
Total comprehensive - - (1,080) (161) - (259) (1,500) (83) (1,583)
expense/income for
the year
Dividend (note 8) - - - - - (427) (427) - (427)
Share options issued - - - - 31 - 31 - 31
Share options - - - - (109) - (109) - (109)
cancelled
Balance at 31 1,068 258 (2,757) (120) 574 16,287 15,310 321 15,631
December 2015
Consolidated cash flow statement
for the year ended 31 December 2015
Year ended Year ended
31 December 31 December
2015 2014
£'000 £'000
Cash flows from operating activities
Operating profit 150 1,364
Adjustments for:
Depreciation 1,284 2,682
Share based payments 31 65
Loss on investment held for trading - 82
Unrealised loss on investment properties (225) 6
Unrealised (gain)/loss on other investments 132 (1)
Exchange adjustments 497 143
Cash flow before working capital 1,869 4,341
Change in inventories 393 (4)
Change in trade and other receivables (212) 2,438
Change in trade and other payables (71) (3,083)
Cash generated from operations 1,979 3,692
Interest received 115 234
Interest paid (363) (506)
Income tax paid - (14)
Cash flow from operating activities 1,731 3,406
Cash flows from investing activities
Acquisition of reserves, property, plant and equipment (2,992) (1,903)
Share of profit in joint ventures 104 -
Cash flow from investing activities (2,888) (1,903)
Year ended Year ended
31 December 31 December
2015 2014
£'000 £'000
Cash flows from financing activities
Borrowings drawn 18 5,902
Borrowings repaid (66) (5,000)
Equity dividends paid (427) (427)
Net proceeds from issue of ordinary shares - 13
Cancelled share options (109) -
Cash flow from financing activities (584) 488
Net (decrease) / increase in cash and cash equivalents (1,741) 1,991
Cash and cash equivalents at 1 January 719 (1,322)
Exchange adjustment 396 50
Cash and cash equivalents at 31 December (626) 719
Cash and cash equivalents at 31 December comprise:
Cash and cash equivalents as presented in the balance 1,608 2,838
sheet
Bank overdrafts (secured) (2,234) (2,119)
(626) 719
Group accounting policies
for the year ended 31 December 2015
Basis of accounting
The results for the year ended 31 December 2015 have been prepared in
accordance with International Financial Reporting Standards (IFRS) as adopted
by the European Union and with those parts of the Companies Act 2006 applicable
to companies reporting under IFRS. The principal accounting policies are
described below:
The group financial statements are presented in £ sterling and all values are
rounded to the nearest thousand pounds (£000) except when otherwise stated.
The functional currency for each entity in the group, and for joint
arrangements and associates, is the currency of the country in which the entity
has been incorporated. Details of which country each entity has been
incorporated can be found in note 15 for subsidiaries and Note 13 for joint
arrangements and associates.
Going concern
The group has prepared cash flow forecasts which demonstrate that the group has
sufficient resources to meet its liabilities as they fall due for at least the
next 12 months.
In October 2013, 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") with Absa Bank Limited, a South African
subsidiary of Barclays Bank PLC. The facility is renewable annually at 30 June
and is secured against inventory, debtors and cash that are held in the group's
South African operations. The Directors do not foresee any reason why the
facility will not continue to be renewed at the next renewal date, in line with
prior periods and based on their banking relationships This facility comprises
of a R60million revolving loan to cover the working capital requirements of the
group's South African operations, and a R20million loan facility to cover
guarantee requirements related to the group's South African mining operations.
In December 2014, the group signed a £6 million term loan facility with
Santander. The loan is secured against the company's UK retail property
portfolio. The debt package has a five year term and is repayable at the end of
the term. The interest cost of the loan is 2.35% above LIBOR.
If required, the group has sufficient financial resources available at short
notice including cash, available-for-sale investments and its £2m loan to
Dragon Retail Properties Limited which is repayable on demand. In addition its
investment property assets benefit from long term leases with the majority of
its tenants. Although the directors expect that that the challenging coal
market conditions experienced by Black Wattle Colliery, its direct mining
asset, in 2015 will be similar going into 2016, they have a reasonable
expectation that the mine will continue to achieve positive levels of cash
generation for the group in 2016. As a consequence, the directors believe that
the group is well placed to manage its business risks successfully.
As a result of the banking facilities held as well as the acceptable levels of
profitability and cash generation the mine is expected to achieve in 2016, the
Directors believe that the group has adequate resources to continue in
operational existence for the foreseeable future and that the group is well
placed to manage its business risks. Thus they continue to adopt the going
concern basis of accounting in preparing the annual financial statements.
International Financial Reporting Standards (IFRS)
The financial statements are prepared in accordance with International
Financial Reporting Standards and Interpretations in force at the reporting
date. These are prepared under the historic cost basis as modified by the
revaluation of investment properties and available for sale investments.
During 2015, there were no new standards or interpretations effective for the
first time for periods beginning on or after 1 January 2015 that would have had
material impact on the financial statements.
None of the amendments to Standards that are effective from that date have
resulted in a change of the group's accounting policy and they had no material
impact on the group's financial position or performance.
The group has not adopted any standards or interpretations in advance of the
required implementation dates. The following new or revised standards that are
applicable to the group were issued but not yet effective:
• IFRS 9 - Financial instruments
• IFRS 15 - Revenue from Contracts with Customers
• Amendment to IAS 1 - Presentation of Financial Statements Disclosure
Initiative.
• Amendments to IAS 16 and IAS 38 - Clarification of Acceptable Methods of
Depreciation and Amortisation
• Amendments to IFRS 11 - Accounting amendments relating to acquisitions of
interests in joint operations.
The effects of IFRS 15 Revenues from Contracts with Customers and IFRS 9
Financial Instruments are still being assessed, as these new standards may have
a significant effect on the group's future financial statements.
Key judgements and estimates
Areas where key estimates and judgements are considered to have a significant
effect on the amounts recognised in the financial statements include:
Life of mine and reserves
The directors consider their judgements and estimates surrounding the life of
the mine and its reserves to have the most significant effect on the amounts
recognised in the financial statements and to be the area where the financial
statements are at most risk of a material adjustment due to estimation
uncertainty. The group's coal reserves are subject to assessment by an
independent Competent Person and impact assessments of the carrying value of
property, plant and equipment, depreciation calculations and rehabilitation and
decommissioning provisions. There are numerous uncertainties inherent in
estimating coal reserves and changes to these assumptions may result in
restatement of reserves. These assumptions include factors such as commodity
prices, production costs and yield.
Depreciation, amortisation of mineral rights, mining development costs and
plant & equipment
The annual depreciation/amortisation charge is dependent on estimates,
including coal reserves and the related life of mine, expected development
expenditure for probable reserves, the allocation of certain assets to relevant
ore reserves and estimates of residual values of the processing plant. The
charge can fluctuate when there are significant changes in any of the factors
or assumptions used, such as estimating mineral reserves which in turn affects
the life of mine or the expected life of reserves. Estimates of proven and
probable reserves are prepared by an independent Competent Person. Assessments
of depreciation/amortisation rates against the estimated reserve base are
performed regularly. Details of the depreciation/amortisation charge can be
found in note 11.
Provision for mining rehabilitation including restoration and de-commissioning
costs
A provision for future rehabilitation including restoration and decommissioning
costs requires estimates and assumptions to be made around the relevant
regulatory framework, the timing, extent and costs of the rehabilitation
activities and of the risk free rates used to determine the present value of
the future cash outflows. The provisions, including the estimates and
assumptions contained therein, are reviewed regularly by management. The group
engages an independent expert to assess the cost of restoration and
decommissioning annually as part of management's assessment of the provision.
Details of the provision for mining rehabilitation can be found in note 21.
Impairment
Property, plant and equipment representing the group's mining assets in South
Africa are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying value may not be fully recoverable. The impairment
test is performed using the approved Life of Mine plan and those future cash
flow estimates are discounted using asset specific discount rates and are based
on expectations about future operations. The impairment test requires estimates
about production and sales volumes, commodity prices, proven and probable
reserves (as assessed by the Competent Person), operating costs and capital
expenditures necessary to extract reserves in the approved Life of Mine plan.
Changes in such estimates could impact recoverable values of these assets.
Details of the carrying value of property, plant and equipment can be found in
note 11.
The impairment test indicated significant headroom as at 31 December 2015 and
therefore no impairment is considered appropriate. The key assumptions
include: coal prices, including domestic coal prices based on recent pricing
and assessment of market forecasts for export coal; production based on proven
and probable reserves assessed by the independent Competent Person and an
increase in yield associated with new mining areas based on assessments by the
Competent Person and empirical data. A 5.5% decrease in yield below expectation
would be required to create a break even scenario. However, the assumptions
used are considered appropriate.
Fair value measurements of investment properties
An assessment of the fair value of investment properties, is required to be
performed. In such instances, fair value measurements are estimated based on
the amounts for which the assets and liabilities could be exchanged between
market participants. To the extent possible, the assumptions and inputs used
take into account externally verifiable inputs. However, such information is by
nature subject to uncertainty. The directors note that the fair value
measurement of the investment properties, can be considered to be less
judgemental where external valuers have been used and as a result of the nature
of the underlying assets. The fair value of investment property is set out in
note 10, whilst the carrying value of investments in joint ventures which
themselves include investment property held at fair value by the joint venture
is set out at note 12.
Carrying value of Ezimbokedwini joint venture
The group holds a £1,225,000 (2014: £1,722,000) of loans and joint venture
investment in Ezimbokedwini Mining (Pty) Limited ("Ezimbokedwini"), the
recoverability 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.
Basis of consolidation
The group accounts incorporate the accounts of Bisichi Mining PLC and all of
its subsidiary undertakings, together with the group's share of the results of
its joint ventures. Non-controlling interests in subsidiaries are presented
separately from the equity attributable to equity owners of the parent company.
On acquisition of a non-wholly owned subsidiary, the non-controlling
shareholders' interests are initially measured at the non-controlling
interests' proportionate share of the fair value of the subsidiaries net
assets. Thereafter, the carrying amount of non-controlling interests is the
amount of those interests at initial recognition plus the non-controlling
interests' share of subsequent changes in equity. For subsequent changes in
ownership in a subsidiary that do not result in a loss of control, the
consideration paid or received is recognised entirely in equity.
The definition of control assumes the simultaneous fulfilment of the following
three criteria:
• The parent company holds decision-making power over the relevant
activities of the investee,
• The parent company has rights to variable returns from the investee, and
• The parent company can use its decision-making power to affect the
variable returns.
Investees are analysed for their relevant activities and variable returns, and
the link between the variable returns and the extent to which their relevant
activities could be influenced in order to ensure the definition is correctly
applied.
Revenue
Revenue comprises sales of coal and property rental income. Revenue is
recognised when the customer has a legally binding obligation to settle under
the terms of the contract and has assumed all significant risks and rewards of
ownership.
Revenue is only recognised on individual sales of coal when all of the
significant risks and rewards of ownership have been transferred
to a third party. Export revenue is generally recognised when the product is
delivered to the export terminal location specified by the customer, at which
point the customer assumes risks and rewards under the contract. Domestic coal
revenues are generally recognised on collection by the customer from the mine
when loaded into transport, where the customer pays the transportation costs.
Rental income which excludes services charges recoverable from tenants, is
recognised in the group income statement on a straight-line basis over the term
of the lease. This includes the effect of lease incentives.
Investment properties
Investment properties comprise freehold and long leasehold land and buildings.
Investment properties are carried at fair value in accordance with IAS 40
'Investment Properties'. Properties are recognised as investment properties
when held for long-term rental yields, and after consideration has been given
to a number of factors including length of lease, quality of tenant and
covenant, value of lease, management intention for future use of property,
planning consents and percentage of property leased. Investment properties are
revalued annually by professional external surveyors and included in the
balance sheet at their fair value. Gains or losses arising from changes in the
fair values of assets are recognised in the consolidated income statement in
the period to which they relate. In accordance with IAS 40, investment
properties are not depreciated. The fair value of the head leases is the net
present value of the current head rent payable on leasehold properties until
the expiry of the lease.
Mining reserves, plant and equipment
The cost of property, plant and equipment comprises its purchase price and any
costs directly attributable to bringing the asset to the location and condition
necessary for it to be capable of operating in accordance with agreed
specifications. Freehold land is not depreciated. Other property, plant and
equipment is stated at historical cost less accumulated depreciation.
Provisions
Provisions are recognised when the group has a present obligation as a result
of a past event which it is probable will result in an outflow of economic
benefits that can be reliably estimated.
A provision for rehabilitation of the mine is initially recorded at present
value and the discounting effect is unwound over time as a finance cost.
Changes to the provision as a result of changes in estimates are recorded as an
increase / decrease in the provision and associated decommissioning asset. The
decommissioning asset is depreciated in line with the group's depreciation
policy over the life of mine. The provision includes the restoration of the
underground, opencast, surface operations and de-commissioning of plant and
equipment. The timing and final cost of the rehabilitation is uncertain and
will depend on the duration of the mine life and the quantities of coal
extracted from the reserves.
Mine reserves and development cost
The purpose of mine development is to establish secure working conditions and
infrastructure to allow the safe and efficient extraction of recoverable
reserves. Depreciation on mine development is not charged until production
commences or the assets are put to use. On commencement of full commercial
production, depreciation is charged over the life of the associated mine
reserves extractable using the asset on a unit of production basis. The unit
of production calculation is based on tonnes mined as a ratio to proven and
probable reserves and also includes future forecast capital expenditure.
Other assets and depreciation
The cost, less estimated residual value, of other property, plant and equipment
is written off on a straight-line basis over the asset's expected useful life.
This includes the washing plant and other key surface infrastructure. Residual
values and useful lives are reviewed, and adjusted if appropriate, at each
balance sheet date. Changes to the estimated residual values or useful lives
are accounted for prospectively. Heavy surface mining and other plant and
equipment is depreciated at varying rates depending upon its expected usage.
The depreciation rates generally applied are:
Mining 5-10 per cent per annum, but shorter of its useful life or the life of
equipment the mine
Motor vehicles 25 - 33 per cent per annum
Office 10 - 33 per cent per annum
equipment
POST PRODUCTION STRIPPING
In surface mining operations, the group may find it necessary to remove waste
materials to gain access to coal reserves prior to and after production
commences. Prior to production commencing, stripping costs are capitalised
until the point where the overburden has been removed and access to the coal
seam commences. Subsequent to production, waste stripping continues as part of
extraction process as a run of mine activity. There are two benefits accruing
to the group from stripping activity during the production phase: extraction of
coal that can be used to produce inventory and improved access to further
quantities of material that will be mined in future periods. Economic coal
extracted is accounted for as inventory. The production stripping costs
relating to improved access to further quantities in future periods are
capitalised as a stripping activity asset, if and only if, all of the following
are met:
* it is probable that the future economic benefit associated with the
stripping activity will flow to the group;
* the group can identify the component of the ore body for which access has
been improved; and
* the costs relating to the stripping activity associated with that component
or components can be measured reliably.
In determining the relevant component of the coal reserve for which access is
improved, the group componentises its mine into geographically distinct
sections or phases to which the stripping activities being undertaken within
that component are allocated. Such phases are determined based on assessment of
factors such as geology and mine planning.
The group depreciates deferred costs capitalised as stripping assets on a unit
of production method, with reference the tons mined and reserve of the relevant
ore body component or phase.
Employee benefits
Share based remuneration
The company operates a share option scheme. The fair value of the share option
scheme is determined at the date of grant. This fair value is then expensed on
a straight-line basis over the vesting period, based on an estimate of the
number of shares that will eventually vest. The fair value of options granted
is calculated using a binomial or Black-Scholes-Merton model. Details of the
share options in issue are disclosed in the Directors' Remuneration Report on
page 29 under the heading Share option schemes which is within the audited part
of that report.
Pensions
The group operates a defined contribution pension scheme. The contributions
payable to the scheme are expensed in the period to which they relate.
Foreign currencies
Monetary assets and liabilities are translated at year end exchange rates and
the resulting exchange rate differences are included in the consolidated income
statement within the results of operating activities if arising from trading
activities and within finance cost/income if arising from financing.
For consolidation purposes, income and expense items are included in the
consolidated income statement at average rates, and assets and liabilities are
translated at year end exchange rates. Translation differences arising on
consolidation are recognised in other comprehensive income. Where foreign
operations are disposed of, the cumulative exchange differences of that foreign
operation are recognised in the consolidated income statement when the gain or
loss on disposal is recognised.
Transactions in foreign currencies are translated at the exchange rate ruling
on transaction date.
Financial instruments
The group classifies financial instruments, or their component parts, on
initial recognition as a financial asset, a financial liability or an equity
instrument in accordance with the substance of the contractual arrangement.
Bank loans and overdrafts
Bank loans and overdrafts are included as financial liabilities on the group
balance sheet at the amounts drawn on the particular facilities net of the
unamortised cost of financing. Interest payable on those facilities is expensed
as finance cost in the period to which it relates.
Finance lease liabilities
Finance lease liabilities arise for those investment properties held under a
leasehold interest and accounted for as investment property. The liability is
initially calculated as the present value of the minimum lease payments,
reducing in subsequent reporting periods by the apportionment of payments to
the lessor.
Available for sale investments
Financial assets available for sale are measured at fair value and movements in
fair value are charged/credited to the statement of comprehensive income in the
period.
Trade receivables
Trade receivables do not carry any interest and are stated at their nominal
value as reduced by appropriate allowances for estimated recoverable amounts as
the interest that would be recognised from discounting future cash payments
over the short payment period is not considered to be material.
Trade payables
Trade payables are not interest bearing and are stated at their nominal value,
as the interest that would be recognised from discounting future cash payments
over the short payment period is not considered to be material.
Other financial assets and liabilities
The groups other financial assets and liabilities not disclosed above are
accounted for at amortised cost.
Joint ventures
Investments in joint ventures, being those entities over whose activities the
group has joint control, as established by contractual agreement, are included
at cost together with the group's share of post-acquisition reserves, on an
equity basis. Dividends received are credited against the investment. Joint
control is the contractually agreed sharing of control over an arrangement,
which exists only when decisions about relevant strategic and/or key operating
decisions require unanimous consent of the parties sharing control. Control
over the arrangement is assessed by the group in accordance with the definition
of control under IFRS 10. Loans to joint ventures are classified as
non-current assets when they are not expected to be received in the normal
working capital cycle. Trading receivables and payables to joint jointures are
classified as current assets and liabilities.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost
includes materials, direct labour and overheads relevant to the stage of
production. Net realisable value is based on estimated selling price less all
further costs to completion and all relevant marketing, selling and
distribution costs.
Other investments
Other investments that do not have a quoted market price in an active market
and whose fair value cannot be reliably measured are recognised at cost less
any provision for impairment.
Impairment
Whenever events or changes in circumstance indicate that the carrying amount of
an asset may not be recoverable an asset is reviewed for impairment. A review
involves determining whether the carrying amounts are in excess of their
recoverable amounts. An asset's recoverable amount is determined as the higher
of its fair value less costs of disposal and its value in use. Such reviews are
undertaken on an asset-by-asset basis, except where assets do not generate cash
flows independent of other assets, in which case the review is undertaken on a
cash generating unit basis.
If the carrying amount of an asset exceeds its recoverable amount An asset's
carrying value is written down to its estimated recoverable amount (being the
higher of the fair value less cost to sell and value in use) if that is less
than the asset's carrying amount. Any change in carrying value is recognised in
the comprehensive income statement.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the tax computations, and is
accounted for using the balance sheet liability method. Deferred tax
liabilities are generally recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary
differences can be utilised. In respect of the deferred tax on the revaluation
surplus, this is calculated on the basis of the chargeable gains that would
crystallise on the sale of the investment portfolio as at the reporting date.
The calculation takes account of indexation on the historical cost of the
properties and any available capital losses.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised. Deferred tax is
charged or credited in the group income statement, except when it relates
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