REG-Lon.&Assoc.Props PLC: Annual Financial Report <Origin Href="QuoteRef">LAS.L</Origin> - Part 6
28/04/2017 12:05
- Part 6: For the preceding part double click ID:nPRrS2637e
Cost at 1 January 2015 19,536 1,266 17,539 731
Exchange adjustment (4,361) (271) (4,048) (42)
Additions 2,022 – 1,964 58
Disposals (9) – (2) (7)
Cost at 31 December 2015 17,188 995 15,453 740
Accumulated depreciation at 1 January 2015 13,279 1,149 11,705 425
Exchange adjustment (2,963) (256) (2,679) (28)
Charge for the year 1,329 56 1,177 96
Disposals (9) – (2) (7)
Accumulated depreciation at 31 December 2015 11,636 949 10,201 486
Net book value at 31 December 2015 5,552 46 5,252 254
12. Investment in joint venture
Shares in joint venture:
2016 £’000 2015 £’000
At 1 January 325 3,434
Share of profit after tax (Langney) – 71
Dividends received (Langney) – (210)
Loss on reclassification of asset held for sale (Langney) – (276)
Exchange adjustment 130 (359)
Transfer to assets held for sale (Langney) (note 14) – (2,335)
At 31 December 455 325
Results of joint venture:
Ezimbokodweni 49% £’000 2016 £’000 2015 £’000
Turnover – – 344
Loss before tax – – (204)
Loss after taxation – – (204)
Balance sheet
Non-current assets 1,346 1,346 5,467
Current assets 3 3 206
Current liabilities (1,349) (1,349) (989)
Non-current liabilities – – (2,349)
Share of net assets at 31 December – – 2,335
Reconciliation to amounts included in the financial statements:
Group share of: Ezimbokodweni 49.00% £’000 Total 2016 £’000 Total 2015 £’000
Amount invested in excess of net assets 455 455 325
Shares in joint venture 455 455 325
Ezimbokodweni Mining (Pty) Limited (Ezimbokodweni) – unlisted coal
production company. The Group owns, via Bisichi Mining PLC, 49% of the issued
share capital. The company is incorporated in South Africa and its registered
address is Samora Machel Street, Bethal Road, Middelburg, Mpumalanga, 1050. It
has issued share capital of 100 (2015: 100) ordinary shares of ZAR1 each. No
dividends were received during the period. Included in the carrying value of
the net investment in the joint venture assets in note 13 is a loan to
Ezimbokodweni of £1,350,000 (2015: £900,000) and an equity investment of
£455,000 (2015: £325,000). The loan bears interest at the South African
prime overdraft rate plus 1.5%. The loan is unsecured and repayable on demand.
Langney Shopping Centre Unit Trust (Langney) – Prior to 11 March 2016, the
Group owned 25% of the units of Langney Shopping Centre Unit Trust, an
unlisted property unit trust incorporated in Jersey. 25% of the units in the
trust were held by London & Associated Properties PLC and Bisichi Mining PLC
equally and 75% were held by Columbus UK GP limited, a partner acting on
behalf of Columbus UK Real Estate Fund. On the 11 March 2016, the Group
disposed of its investment in Langney Shopping Centre Unit Trust. The net
proceeds from the sale were £2,335,000 which includes £60,000 dividends
repaid post year end. At 31 December 2015, the investment was transferred from
investment in joint ventures to assets held for sale in the balance sheet. At
year end, the share of the net assets of the trust held by the Group were
£nil (2015: £2,335,000) which includes a loss on the reclassification of the
asset to held for sale in the amount of £nil (2015: £276,000).
13. Loan to joint venture
2016 2015 Joint ventures assets £’000
Joint
ventures
assets
£’000
Loan to Ezimbokodweni Mining (Pty) Limited
At 1 January 900 1,040
Exchange adjustment 336 (235)
Additions – interest 114 95
At 31 December 1,350 900
14. ASSETS HELD FOR SALE
2016 £’000 2015 £’000
Investment in Langney Shopping Centre Unit Trust
At 1 January 2,335 –
Transfer from investment in joint venture (note 12) – 2,335
Disposal (2,335) –
At 31 December – 2,335
On the 11 March 2016, the Group disposed of its investment in Langney Shopping
Centre Unit Trust, an unlisted property unit trust incorporated in Jersey. The
Group owned 25% of the units of the trust. The net proceeds from the sale were
£2,335,000 (including dividend). At year end, the Group’s share of the net
assets of the trust was £nil (2015: £2,335,000).
15. Subsidiary companies
In accordance with Section 409 of the Companies Act 2006 a full list of
subsidiaries, the principal activity, the country of incorporation and the
percentage of equity owned, as at 31 December 2016 is disclosed below:
Entity Activity Percentage of share capital Registered address Country of incorporation
Analytical Investments Limited Dormant 100% 24 Bruton Place, London, W1J 6NE England and Wales
Analytical Portfolios Limited Dormant 100% 24 Bruton Place, London, W1J 6NE England and Wales
Analytical Properties Holdings Limited Property 100% 24 Bruton Place, London, W1J 6NE England and Wales
Analytical Properties Limited Property 100% 24 Bruton Place, London, W1J 6NE England and Wales
Analytical Ventures Limited Property 100% 24 Bruton Place, London, W1J 6NE England and Wales
24 Bruton Place Limited Dormant 100% 24 Bruton Place, London, W1J 6NE England and Wales
24 BPL (Harrogate) Limited Investment 88% 24 Bruton Place, London, W1J 6NE England and Wales
24 BPL (Harrogate ) Two Limited Investment 100% 24 Bruton Place, London, W1J 6NE England and Wales
Brixton Village Limited Property 100% 24 Bruton Place, London, W1J 6NE England and Wales
Market Row Limited Property 100% 24 Bruton Place, London, W1J 6NE England and Wales
Newincco 1243 Limited Property 100% 24 Bruton Place, London, W1J 6NE England and Wales
Newincco 1244 Limited Property 100% 24 Bruton Place, London, W1J 6NE England and Wales
Newincco 1245 Limited Property Management Services 100% 24 Bruton Place, London, W1J 6NE England and Wales
Newincco 1299 Limited Property 100% 24 Bruton Place, London, W1J 6NE England and Wales
Newincco 1300 Limited Property 100% 24 Bruton Place, London, W1J 6NE England and Wales
LAP Ocean Holdings Limited Property 100% 24 Bruton Place, London, W1J 6NE England and Wales
LAP Ocean Two Limited Property 100% 24 Bruton Place, London, W1J 6NE England and Wales
London & Associated Limited Dormant 100% 24 Bruton Place, London, W1J 6NE England and Wales
London & Associated (Rugeley) Limited Dormant 100% 24 Bruton Place, London, W1J 6NE England and Wales
London & Associated Securities Limited Dormant 100% 24 Bruton Place, London, W1J 6NE England and Wales
London & Associated Management Services Limited Property Management Services 100% 24 Bruton Place, London, W1J 6NE England and Wales
London & African Investments Limited Dormant 100% 24 Bruton Place, London, W1J 6NE England and Wales
Orchard Chambers Residential Limited Dormant 100% 24 Bruton Place, London, W1J 6NE England and Wales
Bisichi Mining PLC (note D) Coal mining 41.52% 24 Bruton Place, London, W1J 6NE England and Wales
Mineral Products Limited (note A)(note D) Share dealing 100% 24 Bruton Place, London, W1J 6NE England and Wales
Bisichi (Properties) Limited (note A)(note D) Property 100% 24 Bruton Place, London, W1J 6NE England and Wales
Bisichi Mining (Exploration) Limited (note A)(note D) Holding company 100% 24 Bruton Place, London, W1J 6NE England and Wales
Black Wattle Colliery (Pty) Limited (note A)(note D) Coal mining 62.5% Samora Machel Street, Bethal Road, Middelburg, Mpumalanga, 1050 South Africa
Bisichi Coal Mining (Pty) Limited (note A)(note D) Coal mining 100% Samora Machel Street, Bethal Road, Middelburg, Mpumalanga, 1050 South Africa
Urban First (Northampton) Limited (note A)(note D) Dormant 100% 24 Bruton Place, London, W1J 6NE England and Wales
Bisichi Trustee Limited (note A)(note D) Property 100% 24 Bruton Place, London, W1J 6NE England and Wales
Bisichi Mining Management Services Limited (note A)(note D) Dormant 100% 24 Bruton Place, London, W1J 6NE England and Wales
Ninghi Marketing Limited (note A)(note D) Dormant 90.1% 24 Bruton Place, London, W1J 6NE England and Wales
Bisichi Northampton Limited (note A)(note D) Property 100% 24 Bruton Place, London, W1J 6NE England and Wales
Amandla Ehtu Mineral Resource Development (Pty) Limited (note A)(note D) Dormant 70% Samora Machel Street, Bethal Road, Middelburg, Mpumalanga, 1050 South Africa
Ezimbokodweni Mining (Pty) Limited (note A)(note D) Dormant 49% Samora Machel Street, Bethal Road, Middelburg, Mpumalanga, 1050 South Africa
Black Wattle Klipfontein (Pty) Limited (note A)(note D) Coal mining 62.5% Samora Machel Street, Bethal Road, Middelburg, Mpumalanga, 1050 South Africa
Dragon Retail Properties Limited (note B)(note D) Property 50% 24 Bruton Place, London, W1J 6NE England and Wales
Newincco 1338 Limited (note C) Property 100% 24 Bruton Place, London, W1J 6NE England and Wales
Details on the non–controlling interest in subsidiaries are shown under note
27.
Note A: these companies are owned by Bisichi and the equity shareholdings
disclosed relate to that company.
Note B: this entity is a joint venture owned 50% by LAP and 50% by Bisichi.
Note C: this company is owned by Dragon and the equity shareholdings disclosed
relate to that company.
Note D: Bisichi and Dragon and their subsidiaries are included in the
consolidated financial statements in accordance with IFRS 10.
16. Inventories
2016 £’000 2015 £’000
Coal
Washed 1,139 778
Run of mine 83 110
Work in progress 458 122
Other 41 39
1,721 1,049
17. Held to maturity investments AND OTHER INVESTMENTS
Held to maturity investments:
2016 Total £000 Unlisted shares £000 Loan stock £000 2015 Total £000 Unlisted shares £000 Loan stock £000
At 1 January 1,995 1 1,994 2,196 1 2,195
Repayments (121) – (121) (201) – (201)
At 31 December 1,874 1 1,873 1,995 1 1,994
The Group owns a 6.95% interest in the equity and loans of HRGT Shopping
Centres LP (HRGT), a limited partnership set up in England to acquire and own
3 shopping centres in Dunfermline, Kings Lynn and Loughborough. 92.10% of the
equity and loans are owned by Oaktree Capital Management and 0.95% by Gooch
Cunliffe Whale LLP. London & Associated Management Services Limited has a
management contract to manage the properties on behalf of HRGT.
Other investments:
2016 £’000 2015 £’000
Net book and market value of investments listed on overseas stock exchange 32 14
32 14
18. Trade and other receivables
2016 £’000 2015 £’000
Trade receivables 4,701 4,129
Other receivables 1,010 1,385
Prepayments and accrued income 1,350 988
7,061 6,502
The directors consider that the carrying amount of trade and other receivables
approximates to their fair value.
19. Investments available for sale and held for trading
2016 £’000 2015 £’000
Market bid value of the listed investment portfolio - available for sale 781 594
Market bid value of the listed investment portfolio - held for trading 19 20
Unrealised gain/(loss) of market value over cost 45 (146)
Listed investment portfolio at cost 755 760
Investments are listed on the London Stock Exchange with the exception of
£60,000 (2015: £26,000) listed outside Great Britain.
The directors have reviewed the individual investments for impairment and do
not consider the investments which are below cost to be impaired.
20 Trade and other payables
2016 £’000 2015 £’000
Trade payables 3,618 2,289
Other taxation and social security costs 739 661
Other payables 2,815 2,687
Accruals and deferred income 5,770 4,860
12,942 10,497
The directors consider that the carrying amount of trade and other payables
approximates to their fair value.
21. Borrowings
2016 £’000 Current 2016 £’000 Non-current 2015 £’000 Current 2015 £’000 Non-current
Other loans (Bisichi) 24 – 33 –
£1.25 million term bank loan (secured) repayable by 2020 (Dragon)* – 1,207 – 1,196
£3.75 million first mortgage debenture stock 2018 at 11.6 per cent 750 3,000 – 3,750
Bank overdrafts (secured) (Bisichi) 3,334 – 2,234 –
Bank loan (secured)(Bisichi) – 66 – 13
£10 million first mortgage debenture stock 2022 at 8.109 per cent* – 9,905 – 9,888
£5.876 million term bank loan (secured) repayable by 2019 (Bisichi)* – 5,810 – 5,927
£34.897 million term bank loan (secured) repayable by 2019* – 34,468 – 34,296
£10.105 million term bank loan (secured) repayable by 2019 at 9.5 per cent* – 9,945 – 9,881
4,108 64,401 2,267 64,951
Borrowings analysis by origin:
2016 £’000 2015 £’000
United Kingdom 65,085 64,938
South Africa 3,424 2,280
68,509 67,218
* The £10 million debenture and bank loans are shown after deduction of
un-amortised issue costs.
Interest payable on the term bank loans is variable being based upon the
London inter–bank offered rate (LIBOR) plus margin.
In 2015, the Group repaid early £1.25 million of the £5 million first
mortgage debenture stock 2018, at an additional cost of £158,000.
First Mortgage Debenture Stocks August 2018 and 2022 and the £34.897 million
and £10.105 million term bank loans repayable in July 2019 are secured by way
of a charge on specific freehold and leasehold properties which are included
in the financial statements at a value of £87.38 million. In addition, £0.53
million of cash deposits are charged as security to debenture stocks. The
£34.897 million bank loan has an interest cost of 2 per cent above LIBOR. An
interest rate swap and cap agreements have been entered into as detailed in
note 23.
The Bisichi United Kingdom bank loans and overdraft are secured by way of a
first charge over the investment properties in the UK which are included in
the financial statements at a value of £13.2 million. During the year,
Bisichi breached a loan to value covenant on the bank loan. Bisichi made a
£123,300 payment against the loan and remedied the covenant breach, leaving a
loan due of £5.876 million. The interest cost of the bank loan is 2.35 per
cent above LIBOR.
The Bisichi South African bank loans are secured by way of a first charge over
specific pieces of mining equipment, inventory and the debtors of the relevant
company which holds the loan which are included in the financial statements at
a value of £6.057 million.
The bank loan of £1.25 million (Dragon) which is repayable in November 2020
is secured by way of a first charge on specific freehold property and which is
included in the financial statements at a value of £2.58 million. The
interest cost of the loan is 2 per cent above LIBOR.
The Group’s objectives when managing capital are:
– To safeguard the Group’s ability to continue as a going concern, so that
it may provide returns for shareholders and benefits for other
stakeholders; and
– To provide adequate returns to shareholders by ensuring returns are
commensurate with the risk.
22. Provisions
2016 £’000 2015 £’000
At 1 January 847 930
Exchange adjustment 311 (162)
Unwinding of discount 78 79
At 31 December 1,236 847
The above provision relates to mine rehabilitation costs in Bisichi.
23. Financial instruments
Total financial assets and liabilities
The Group’s financial assets and liabilities and their fair values are as
follows:
Fair value £’000 2016 Carrying value £’000 Fair value £’000 2015 Carrying value £’000
Cash and cash equivalents 6,265 6,265 4,809 4,809
Assets held for sale – – 2,335 2,335
Investments held to maturity 1,874 1,874 1,995 1,995
Loan to joint venture 1,350 1,350 900 900
Other investments 32 32 14 14
Investments held for trading 19 19 20 20
Available for sale investments 781 781 594 594
Derivative assets 4 4 15 15
Other assets 5,711 5,711 5,514 5,514
Derivative liabilities (793) (793) (587) (587)
Bank overdrafts (3,334) (3,334) (2,234) (2,234)
Bank loans (52,218) (51,520) (52,298) (51,346)
Present value of head leases on properties (4,767) (4,767) (4,784) (4,784)
Other liabilities (12,942) (12,942) (10,497) (10,497)
Total financial liabilities before debentures (58,018) (57,320) (54,204) (53,252)
Fair value of debenture stocks
Fair value of the Group’s debenture liabilities:
Book value £’000 Fair value £’000 2016 Fair value adjustment £’000 2015 Fair value adjustment £’000
Debenture stocks (13,750) (17,276) (3,526) (3,575)
Tax at 20 per cent (2015: 20 per cent) – – 705 715
Post tax fair value adjustment – – (2,821) (2,860)
Post tax fair value adjustment – basic pence per share – – (3.3)p (3.3)p
There is no material difference in respect of other financial liabilities or
any financial assets.
The fair values were calculated by the directors as at 31 December 2016 and
reflect the replacement value of the financial instruments used to manage the
Group’s exposure to adverse rate movements.
The fair values of the debentures are based on the net present value at the
relevant gilt interest rate of the future payments of interest on the
debentures. The bank loans and overdrafts are at variable rates and there is
no material difference between book values and fair values.
Investments held for trading and available for sale fall under level 1 of the
fair value hierarchy into which fair value measurements are recognised in
accordance with the levels set out in IFRS 7. Held to maturity investments are
held at cost and other investments are held at fair value. The directors are
of the opinion that the difference in value between cost and fair value of
other investments is not significant or material. The comparative figures for
2015 fall under the same category of financial instrument as 2016.
The carrying amount of short term (less than 12 months) trade receivable and
other liabilities approximates its fair values. The fair value of non-current
borrowings in note 21 approximates its carrying value and was determined under
level 2 of the fair value hierarchy and is estimated by discounting the future
contractual cash flows at the current market interest rates for UK borrowings
and for the South African overdraft facility. The fair value of the finance
lease liabilities in note 31 approximates its carrying value was determined
under level 2 of the fair value hierarchy and is estimated by discounting the
future contractual cash flows at the current market interest rates.
Treasury policy
The Group enters into derivative transactions such as interest rate swaps and
forward exchange contracts in order to help manage the financial risks arising
from the Group’s activities. The main risks arising from the Group’s
financing structure are interest rate risk, liquidity risk and market price
risk, credit risk, commodity price risk and foreign exchange risk. The
policies for managing each of these risks and the principal effects of these
policies on the results are summarised below.
Sensitivity analysis
LAP and Dragon have variable interest term debts which are covered by
derivatives. Additionally, LAP has variable interest term debt covered by
interest caps. At 31 December 2016, with other variables unchanged, a 1%
increase in interest rates would change the profit/loss for the year by
£173,000 (2015: £173,000). Bisichi has variable loans and a 1% increase in
interest rates would change the profit/loss for the year by £56,000 (2015:
£67,000).
Interest rate risk
Treasury activities take place under procedures and policies approved and
monitored by the Board to minimise the financial risk faced by the Group. The
£34.897 million bank loan and Bisichi United Kingdom bank loans and overdraft
are secured by way of a first charge on certain fixed assets. The rates of
interest vary based on LIBOR in the UK.
The £10.105 million term bank loan is secured by way of a second charge on
certain fixed assets. This loan is based on a fixed interest rate.
The Bisichi South African bank loans are secured by way of a first charge over
specific pieces of mining equipment, inventory and the debtors of the relevant
company which holds the loan. The rates of interest vary based on PRIME in
South Africa.
The £1.25 million bank loan (Dragon) is secured by way of a first charge on
specific freehold property. The rate of interest varies based on LIBOR in the
UK.
Liquidity risk
The Group’s policy is to minimise refinancing risk by balancing its exposure
to interest risk and to refinancing risk. In effect the Group seeks to borrow
for as long as possible at the lowest acceptable cost. Efficient treasury
management and strict credit control minimise the costs and risks associated
with this policy which ensures that funds are available to meet commitments as
they fall due. Cash and cash equivalents earn interest at rates based on LIBOR
in the UK. These facilities are considered adequate to meet the Group’s
anticipated cash flow requirements for the foreseeable future.
In South Africa, an increase in the structured trade facility from R60 million
(South African Rand) to R80 million was signed by Black Wattle Colliery (Pty)
Limited 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 by Black Wattle Colliery (Pty)
Limited.
The table below analyses the Group’s financial liabilities (excluding
interest rate derivatives) into maturity Groupings and also provides details
of the liabilities that bear interest at fixed, floating and non–interest
bearing rates.
2016 Total £’000 Less than 1 year £’000 2-5 years £’000 Over 5 years £’000
Bank overdrafts (floating) 3,334 3,334 – –
Debentures (fixed) 13,655 750 3,000 9,905
Bank loans (fixed) 9,945 – 9,945 –
Bank loans (floating)* 41,575 24 41,551 –
Trade and other payables (non–interest) 12,942 12,942 – –
81,451 17,050 54,496 9,905
2015 Total £’000 Less than 1 year £’000 2-5 years £’000 Over 5 years £’000
Bank overdrafts (floating) 2,234 2,234 – –
Debentures (fixed) 13,638 – 3,750 9,888
Bank loans (fixed) 9,881 – 9,881 –
Bank loans (floating)* 41,465 33 41,432 –
Trade and other payables (non–interest) 11,506 10,636 737 133
78,724 12,903 55,800 10,021
The Group would normally expect that sufficient cash is generated in the
operating cycle to meet the contractual cash flows as disclosed above through
effective cash management.
*Certain bank loans are fully hedged with appropriate interest derivatives.
Details of all hedges are shown below.
Market price risk
The Group is exposed to market price risk through interest rate and currency
fluctuations.
Credit risk
At the balance sheet date there were no significant concentrations of credit
risk. The maximum exposure to credit risk is represented by the carrying
amount of each financial asset in the balance sheet. The Group only deposits
surplus cash with well–established financial institutions of high quality
credit standing.
Foreign exchange risk
Only Bisichi is subject to this risk. All trading is undertaken in the local
currencies except for certain export sales that commenced during 2016 which
are invoiced in US Dollars. It is not the Bisichi Group’s policy to obtain
forward contracts to mitigate foreign exchange risk on these contracts as
payment terms are within 15 days of invoice or earlier. Funding is also in
local currencies other than inter-company investments and loans and it is also
not the Bisichi Group’s policy to obtain forward contracts to mitigate
foreign exchange risk on these amounts. During 2016 and 2015 the Bisichi Group
did not hedge its exposure of foreign investments held in foreign currencies.
The Bisichi directors consider there to be no significant risk from exchange
rate movements of foreign currencies against the functional currencies of the
reporting companies within the Bisichi Group, excluding inter-company
balances. The principle currency risk to which the Bisichi Group is exposed in
regard to inter-company balances is the exchange rate between Pounds sterling
and South African Rand. It arises as a result of the retranslation of Rand
denominated inter-company trade receivable balances held within the UK which
are payable by South African Rand functional currency subsidiaries.
Based on the Bisichi Group’s net financial assets and liabilities as at 31
December 2016, a 25% strengthening of Sterling against the South African Rand,
with all other variables held constant, would decrease the Bisichi Group’s
profit after taxation by £435,000 (2015: £344,000). A 25% weakening of
Sterling against the South African Rand, with all other variables held
constant would increase the Bisichi Group’s profit after taxation by
£725,000 (2015: £573,000).
The 25% sensitivity has been determined based on the average historic
volatility of the exchange rate for 2015 and 2016.
The table below shows the Bisichi currency profiles of cash and cash
equivalents:
2016 £’000 2015 £’000
Sterling 1,717 1,135
South African Rand 725 470
US Dollar 2 3
2,444 1,608
Cash and cash equivalents earn interest at rates based on LIBOR in Sterling
and Prime in Rand.
The tables below shows the Bisichi currency profiles of net monetary assets
and liabilities by functional currency:
2016: UK £’000 South Africa £’000
Sterling (2,522) –
South African Rand 36 (2,262)
US Dollar 35 –
(2,451) (2,262)
2015: UK £’000 South Africa £’000
Sterling (3,221) –
South African Rand 89 (136)
US Dollar 13 –
(3,119) (136)
Borrowing facilities
At 31 December 2016 the Group was within its bank borrowing facilities and was
not in breach of any of the covenants. Term loan repayments are as set out
below. Details of other financial liabilities are shown in Notes 20 and 21.
Interest rate and hedge profile
2016 £’000 2015 £’000
Fixed rate borrowings 23,855 23,855
Floating rate borrowings
– Subject to interest rate swap 36,147 36,148
– Other borrowings 9,300 8,280
69,302 68,283
Average fixed interest rate 9.24% 9.24%
Weighted average swapped interest rate 3.3% 3.41%
Weighted average cost of debt on overdrafts, bank loans and debentures 5.8% 5.71%
Average period for which borrowing rate is fixed 3.8 years 4.8 years
Average period for which borrowing rate is swapped 2.5 years 3.5 years
The Group’s floating rate debt bears interest based on LIBOR for the term
bank loans and bank base rate for the overdraft.
At 31 December 2016 the Group had hedges totaling £34.897 million to cover
the £34.9 million bank loan. These consisted of a 5 year swap for £17.5
million, taken out in July 2014 at 2.25% and a £17.5 million cap agreement
taken out in July 2014 at 2.25% until 29 January 2016 and a swaption at 2.25%
on the capped portion from 29 January 2016 to 1 July 2019. During the year the
swaption was not exercised and was replaced in January 2016 with a £17.397
million cap agreement to 1 July 2019.
At the year end the fair value liability in the accounts was £793,000 (2015:
£587,000) as valued by the hedge provider.
At 31 December 2016, Dragon had hedges of £1.25 million to cover the £1.25
million bank loan. This consists of a 5 year £1.25 million cap agreement
taken out in November 2015 at 2.5%. At the year end, the fair value asset in
the accounts was £4,000, as valued by the hedge provider.
Fair value of financial instruments
Fair value estimation
The Group has adopted the amendment to IFRS 7 for financial instruments that
are measured in the balance sheet at fair value. This requires the methods of
fair value measurement to be classified into a hierarchy based on the
reliability of the information used to determine the valuation, as follows:
– Quoted prices (unadjusted) in active markets for identical assets or
liabilities (level 1).
– Inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly (that is, as prices)
or indirectly (that is, derived from prices) (level 2).
– Inputs for the asset or liability that are not based on observable market
data (that is unobservable inputs) (level 3).
Level 1 £’000 Level 2 £’000 Level 3 £’000 Total £’000 2016 Gain/(loss) to income statement £’000
Financial assets
Other financial assets held for trading and available for sale
Quoted equities 832 – – 832 13
Derivative financial instruments
Interest rate swaps – 4 – 4 (11)
Financial liabilities
Derivative financial instruments
Interest rate swaps – 793 – 793 (206)
Level 1 £’000 Level 2 £’000 Level 3 £’000 Total £’000 2015 Gain/(loss) to income statement £’000
Financial assets
Other financial assets held for trading and available for sale
Quoted equities 614 – – 614 (12)
Derivative financial instruments
Interest rate swaps – 15 – 15 –
Financial liabilities
Derivative financial instruments
Interest rate swaps – 587 – 587 84
Capital structure
The Group sets the amount of capital in proportion to risk. It ensures that
the capital structure is commensurate to the economic conditions and risk
characteristics of the underlying assets. In order to maintain or adjust the
capital structure, the Group may vary the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or sell assets
to reduce debt.
The Group considers its capital to include share capital, share premium,
capital redemption reserve, translation reserve and retained earnings, but
excluding the interest rate derivatives.
Consistent with others in the industry, the Group monitors its capital by its
debt to equity ratio (gearing levels). This is calculated as the net debt
(loans less cash and cash equivalents) as a percentage of the equity
calculated as follows:
2016 £’000 2015 £’000
Total debt 68,509 67,218
Less cash and cash equivalents (6,265) (4,809)
Net debt 62,244 62,409
Total equity 48,631 49,652
128.0% 125.7%
The Group does not have any externally imposed capital requirements.
Financial assets
The Group’s principal financial assets are bank balances and cash, trade and
other receivables and investments. The Group has no significant concentration
of credit risk as exposure is spread over a large number of counterparties and
customers. The credit risk in liquid funds and derivative financial
instruments is limited because the counterparties are banks with high credit
ratings assigned by international credit–rating agencies. The Group’s
credit risk is primarily attributable to its trade receivables. The amounts
presented in the balance sheet are net of allowances for doubtful receivables,
estimated by the Group’s management based on prior experience and the
current economic environment.
Financial assets maturity
Cash and cash equivalents all have a maturity of less than three months.
2016 £’000 2015 £’000
Cash at bank and in hand 6,265 4,809
These funds are primarily invested in short term bank deposits maturing within
one year bearing interest at the bank’s variable rates.
Financial liabilities maturity
Repayment of borrowings
2016 £’000 2015 £’000
Bank loans and overdrafts:
Repayable on demand or within one year 3,358 2,267
Repayable between two and five years 51,496 51,313
54,854 53,580
Debentures:
Repayable within one year 750 –
Repayable between two and five years 3,000 3,750
Repayable in more than five years 9,905 9,888
68,509 67,218
Certain borrowing agreements contain financial and other conditions that if
contravened by the Group, could alter the repayment profile.
24. Deferred tax asset
2016 £’000 2015 £’000
Balance at 1 January 2,390 2,324
Transferred to consolidated income statement (1,256) 66
Balance at 31 December 1,134 2,390
The deferred tax balance comprises the following:
Revaluation of properties (2,719) (2,226)
Accelerated capital allowances (904) (952)
Fair value of interest derivatives 151 111
Short-term timing differences (124) (131)
Loss relief 4,730 5,588
Deferred tax asset at end of year: 1,134 2,390
The directors consider the temporary differences arising in connection with
the interests in joint ventures are insignificant. There is no time limit in
respect of the Group tax loss relief.
Included within short term timing differences recognised in income during the
year is an adjustment of £168,000 related to an over provision of short term
timing differences in the prior year.
In addition, the Group has unused losses and reliefs with a potential value of
£5,455,000 (2015: £4,945,000), which have not been recognised as a deferred
tax asset. As the Group returns to profit, these losses and reliefs can be
utilised.
25. Deferred tax liabilitIES
2016 £’000 2015 £’000
Balance at 1 January 2,106 2,410
Transferred to consolidated income statement (154) 29
Transferred to other comprehensive income 13 (41)
Exchange adjustment 364 (292)
Balance at 31 December 2,329 2,106
The deferred tax balance comprises the following:
Revaluation of properties 793 724
Accelerated capital allowances 1,347 1,490
Short-term timing differences 191 (111)
Fair value of interest derivatives – 3
Unredeemed capital deductions (642) –
Losses and other deductions 640 –
Deferred tax liability provision at end of year: 2,329 2,106
26. Share capital
The Company has one class of ordinary shares which carry no right to fixed
income.
Number of ordinary 10p shares 2016 Number of ordinary 10p shares 2015 2016 £’000 2015 £’000
Authorised: ordinary shares of 10p each 110,000,000 110,000,000 11,000 11,000
Allotted, issued and fully paid share capital 85,542,711 85,542,711 8,554 8,554
Less: held in Treasury (see below) (221,061) (734,816) (22) (73)
“Issued share capital” for reporting purposes 85,321,650 84,807,895 8,532 8,481
Treasury shares
Number of ordinary Cost/issue value
10p shares
2016 2015 2016 £’000 2015 £’000
Shares held in Treasury at 1 January 734,816 1,032,991 482 883
Issued for share incentive plan -dividends investment (Jan 2016 - 25p) (1,936) – (1) –
Issued to meet directors bonuses (Jan 2016 - 24.50p) (Jan 2015 - 37.75p) (69,225) (431,476) (45) (369)
Issued to meet staff bonuses (Jan 2016 - 24.50p) (Jan 2015 - 37.75p) (154,073) (111,678) (101) (95)
Issued for new directors share incentive plan (Jan 2016 - 24.50p) (Jan 2015 - 37.75p) (24,488) (7,947) (16) (7)
Issued for new staff share incentive plan (Jan 2016 - 24.50p) (Jan 2015 - 37.75p) (36,732) (47,271) (24) (40)
Purchase of shares (Jun 2015 - 37.69p) – 133,333 – 50
Purchase of shares (Oct 2015 - 36.18p) – 166,864 – 60
Issued for share incentive plan -dividends investment (Nov 2016 - 21.25p) (2,831) – (2) –
Issue for new staff share incentive plan (Nov 2016 - 21.25p) (224,470) – (148) –
Shares held in Treasury at 31 December 221,061 734,816 145 482
Share Option Schemes
Employees’ share option scheme (Approved scheme)
At 31 December 2016 there were no options to subscribe for ordinary shares
outstanding, issued under the terms of the Employees’ Share Option Scheme.
This share option scheme was approved by members in 1986, and has been
approved by Her Majesty’s Revenue and Customs (HMRC).
There are no performance criteria for the exercise of options under the
Approved scheme, as this was set up before such requirements were considered
to be necessary.
A summary of the shares allocated and options issued under the scheme up to 31
December 2016 is as follows:
Changes during the year
At 1 January 2016 Options Exercised Options granted Options lapsed At 31 December 2016
Shares issued to date 2,367,604 – – – 2,367,604
Shares allocated over which options have not been granted 1,549,955 – – – 1,549,955
Total shares allocated for issue to employees under the scheme 3,917,559 – – – 3,917,559
Non–approved Executive Share Option Scheme (Unapproved scheme)
A share option scheme known as the “Non–approved Executive Share Option
Scheme” which does not have HMRC approval was set up during 2000. At 31
December 2016 there were no options to subscribe for ordinary shares
outstanding.
The exercise of options under the Unapproved scheme is subject to the
satisfaction of objective performance conditions specified by the remuneration
committee which confirms to institutional shareholder guidelines and best
practice provisions.
A summary of the shares allocated and options issued under the scheme up to 31
December 2016 is as follows:
Changes during the year
At 1 January 2016 Options Exercised Options granted Options lapsed At 31 December 2016
Shares issued to date 450,000
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