REG-Lon.&Assoc.Props PLC: Annual Financial Report
07/05/2021 07:05
FOR IMMEDIATE RELEASE
7 May 2021
LONDON & ASSOCIATED PROPERTIES PLC “LAP”:
ANNUAL RESULTS FOR 12 MONTHS TO 31 DECEMBER 2020
HIGHLIGHTS
* The successful repositioning and diversification of our portfolio meant that
Group like-for-like rental income held up well at £5.8 million compared to
£6.2 million (including units held for refurbishment)
* Low exposure to fashion-led retail has lessened impact of revaluations, with
portfolio valued at £71.0 million against £74.8 million in 2019
* Occupancy levels stood at 92.2% at year-end (with 4.2% of the voids relating
to units held for refurbishment) – marginally better than the previous year
* A comparatively high level of rent collection achieved during the period. To
date 79% of all rents due in the four quarters to March 2021 have been
collected
* No bonuses awarded, Chief Executive waived 35% of his salary and further
reductions in overhead costs achieved
* At West Ealing planning consent secured for 56 flats and three ground floor
retail units
* Bisichi PLC EBITDA loss of £2.4 million against profit of £5.9 million in
2019
* To conserve cash a final dividend is not being recommended
“The defensive quality of our portfolio and modest rental levels per unit
have held us in good stead. The measures that we have taken to reduce costs
and preserve cash will continue to benefit LAP and we therefore face the
future with a certain level of confidence,” Sir Michael Heller, Chairman,
and John Heller, Chief Executive.
Contact:
London & Associated Properties PLC Tel:
020 7415 5000
John Heller, CEO, or Jonathan Mintz, Finance Director
Baron Phillips
Associates
Tel: 07767 444193
Baron Phillips
OVERVIEW
LAP at a glance
London & Associated Properties PLC (“LAP”) is a main market listed group
which invests in industrial and retail property in the UK while also managing
property assets. LAP owns £71.0 million of property. As a property company we
look to create environments where tenants can thrive.
The Group also holds a substantial investment in Bisichi PLC, which operates
coal mines in South Africa and owns UK property. In accordance with IFRS 10
the results of Bisichi have been consolidated in the group accounts.
Financial highlights
Fully diluted net assets per share IFRS net assets Properties portfolio valuation*
34.99p £39.5m £71.0m
2019: 43.04p 2019: £49.1m 2019: £74.8m *Includes investment properties, head leases assets held for sale and property inventory. Excludes properties under management.
KEY PROJECTS
KEY PROJECTS HIGHLIGHT
Directly owned • Orchard Square, Sheffield • Runcorn Manor Park Industrial Estate • West Ealing development • Kings Square, West Bromwich • Repositioning of property focus continues at Orchard Square, Sheffield • Runcorn Industrial portfolio being actively managed for rental growth • Ealing development property achieved successful planning application.
Coal production • In South Africa, Black Wattle produced 1.18m metric tonnes of Run of Mine Coal in 2020 (2019: 1.27m metric tonnes)
OVERVIEW
Chairman’s statement and Chief Executive’s review 2020
We are pleased to present the Chairman’s and Chief Executive’s review for
2020. Our first priority has remained the welfare of our staff and tenants. We
are pleased to report that while some of our staff have been ill with
COVID-19, all are now well again and available for work.
Clearly the 12 months to 31 December 2020 have been extremely challenging to
the commercial real estate industry, especially for those in the retail
sector. However, through a wide range of initiatives taken by LAP over the
past two years the impact of COVID-19 on our business has not been as dramatic
as many feared.
In the past few years, we have taken some key steps aimed at lessening LAP’s
focus on retailing in general and fashion-led shopping in particular. At the
same time the Board has diversified the portfolio into industrial and
residential property, reduced head office costs and cut gearing levels.
The net result of these actions is that rent collection over the year held up
extremely well which, together with our diversification away from retail,
meant our property portfolio suffered far less dramatic write-downs than has
been witnessed elsewhere in the sector. We are also experiencing a lower rate
of voids within our portfolio than might have been expected.
CONSOLIDATED RESULTS
The last 12 months have been as difficult for owners of retail property as at
any time in living memory. Shopping centres, department stores and larger
fashion-led shops have undergone such structural change that previously prime
assets are being revalued at a fraction of their former worth. Our strategy
has been to reduce our exposure to these types of assets and consequently our
property portfolio has not suffered such severe write-downs. The portfolio was
valued at the year end at £71.0 million (2019: £74.8 million). This
relatively modest reduction should be seen in the context of the wider market,
where write-downs have been much more dramatic.
On a like-for-like basis rental income has held up at £5.8 million compared
to £6.2 million for 2019. We collected more than three-quarters of our rent
roll over the year which we regard as
an excellent achievement considering the climate. This is a pleasing metric
which is also reflected in our occupancy levels, which were 92.2% at the year
end (2019: 91.6%). Two units, both within our industrial property portfolio,
are being refurbished and account
for more than half of the 2020 voids.
Company overheads have been reduced dramatically during the period under
review and now stand at £8.2 million compared to £10.1 million in 2019. This
has been achieved through a number of initiatives, including a significant
reduction in the head office count and associated expenses as we outsourced
all of our property management in September 2019. We have, since the year end,
outsourced our in-house asset management roles which will lead to further
annualised savings of £0.2 million with no impairment to service or
standards.
No head office staff (including the Directors) received a bonus during 2020,
and the Chief Executive accepted only 65% of his salary to reflect the
extremely difficult trading conditions.
DEBT MANAGEMENT
Although no loans were refinanced in 2020, LAP has carefully managed its
relationships with lenders and no banking covenants were breached. In April
and July 2020, at the start of the lockdown, LAP negotiated a waiver to one
element of the income covenant on our loan with Phoenix CRE S.à.r.l which is
secured against Orchard Square in Sheffield. This waiver was at zero cost to
the company, save the legal fees of documenting it, and is no longer required.
This reflects a number of factors: LAP restricting the levels of gearing with
which it is comfortable; relatively high levels of rent collection; and high
levels of occupancy.
LAP PROPERTY ACTIVITIES
Orchard Square, Sheffield
During 2020 we continued to reposition this asset away from a traditional
shopping centre towards an experiential location with a much greater emphasis
on food and beverage. We completed the management agreement on a 4,000 sq ft
former fashion unit to Market Asset Management, one of the UK’s foremost
operators of food halls. The unit is directly below the two new independent
restaurants that took leases at the end of 2019 at Orchard Terrace and will
complement their offering.
Enabling works are underway and will cost a total of £0.3 million. The unit
will house six food stalls, two bars and event space. The new space is to be
called Sheffield Plate and net income to LAP is projected at £0.1 million per
annum. Interest in the units has been encouraging and works are expected to
complete by June 2021.
During 2020, LAP worked closely with Sheffield Council to apply for Future
High Street Funding for the city. The Council was successful and was awarded
£16 million, of which £1.4 million is earmarked for works to Orchard Square.
These works will include the creation of 8 flats at first and second floors,
refurbishment of the Square and the introduction of large sails to
weatherproof the Square. This will enable Sheffield Plate as well as our other
tenants to take advantage of this exciting space in the centre of the UK’s
fifth largest city to host events and allow spill over of their customers.
LAP also carried out two lettings during lockdown with a combined rent of
£0.1 million per annum and the Centre is now fully let with the exception of
the units that are being redeveloped.
Manor Park, Runcorn
We successfully completed the refurbishment of Unit 10, the largest of our
eight industrial units at 38,500 sq ft, towards the end of 2020. It was under
offer for three months but the letting fell through at the beginning of 2021
as the proposed international tenant scaled back its investment in the UK.
Ongoing interest in the unit remains strong and we are at an advanced stage of
negotiation with a new potential tenant.
We took back a 15,000 sq ft unit at the end of 2020 which is about to be
refurbished. Interest in this unit is also strong and we expect to have
pre-let it before the end of the refurbishment.
The remainder of our industrial units are fully let.
West Ealing
We are pleased to report that Broadway Regen Ltd, our joint venture with
Bisichi and Metroprop, obtained planning consent for 56 flats and three ground
floor shops on this development site. We are also at an advanced stage of
negotiating with a Registered Provider for the affordable element.
The joint venture will decide in the next few months whether to sell the
consented land or build out the development, depending on market conditions.
Remainder of portfolio
Our remaining properties continue to operate at a high level of occupancy.
This provides essential cash flow. However, we are always prepared to sell
these assets where we are approached by special buyers to further our
repositioning of the portfolio away from retail. We have agreed the sale of
one property and we are in detailed negotiations on two others and we will
update shareholders following any successful completions.
DRAGON RETAIL PROPERTIES
Dragon owns a property in Clifton, Bristol let partly to Boots the Chemist and
partly to one of Bristol’s longest standing and most well-known nightclubs.
Rent collection has been difficult, particularly as Boots refused to pay
notwithstanding its status as an essential retailer throughout the various
lockdowns. However, agreement has now been reached and payments have resumed.
The nightclub has not been allowed to trade at all since March 2020 yet has
still managed to make some rental payments as the operator has received
grants.
All of this has presented a difficult backdrop to find new funders to replace
Santander, whose loan of £1.2 million expired in September 2020. We have
negotiated an extension during which time the lending market will hopefully
thaw to a level that allows us to refinance. This remains a quality asset with
a very high level of income cover so we remain confident that a solution will
be found.
BISICHI PLC
2020 has been a challenging year for Bisichi due to the impact of the Covid-19
pandemic on all its operations. As a result, for the year ended 31 December
2020, it made a loss before interest, tax, depreciation and amortisation
(EBITDA) of £2.4 million (2019: profit: £5.9 million) and an operating loss
before depreciation, fair value adjustments and exchange movements (Adjusted
EBITDA) of £1.1 million (2019: profit: £7.4 million).
In terms of business continuity, Bisichi’s South African coal mining and
processing operations were designated as essential business operations by the
South African Government, which allowed them to continue during lockdown
periods. In turn, this allowed Black Wattle Colliery, the South African coal
mining operation, to achieve consistent production during the year of 1.18
million metric tonnes of coal by comparison to 1.27 million metric tonnes
achieved in 2019.
However, during the year the reduced global economic activity resulting from
the Covid-19 pandemic had a significant impact on demand for coal in the
international market. In January, the average weekly price of Free on Board
(FOB) Coal from Richard Bay Coal Terminal (API4 price) peaked at US$92. By
mid-April, as global economic activity slowed, the weekly API4 price had
fallen to US$44. Thereafter, coal prices remained largely suppressed until the
end of the year. The impact on Bisichi’s operations was a build-up in coal
stocks during the year and lower overall prices achieved for coal. The overall
decrease in Group revenue, and the consequent financial performance during the
year, can be attributed mainly to this downturn.
Looking forward into 2021, although the overall impact of the Covid-19
pandemic on its South African operations and the coal markets remains
uncertain, to date there has been a significant improvement in coal markets
arising from improvements in global economic activity. Bisichi’s management
will continue to focus on keeping costs low at the South African operations,
in order to take the maximum financial performance advantage of the higher
prices achievable for coal.
In the UK, the Covid-19 pandemic had a significant impact on rental revenue
collections from the Group’s UK retail property portfolio and property
valuations. Although the overall impact of the pandemic on the portfolio
remains uncertain, Bisichi expect much of the portfolio, including rental
collections, to recover as lockdown is eased and tenants resume full
operations.
In light of the uncertainty arising from COVID-19, Bisichi’s Board decided
that it would not be wise to propose a final dividend although they will
review this when there is greater visibility of the ongoing impact of
COVID-19.
OTHER MATTERS
In accordance with current legislation the Company has to change its present
auditors. To meet the timetable, on behalf of the Board, the Audit Committee
invited tenders from prospective audit firms. Following this process, the
Board will propose to shareholders at the forthcoming AGM that Kreston Reeves
LLP are appointed as auditors. The firm is based across London and the South
East with 52 partners and received the 2020 ‘Large Firm of the Year’ award
at the Accounting Excellence Awards.
COVID-19 UPDATE
Certain of our retail tenants were forced to close for approaching half of the
year under review, which has had a significantly detrimental impact on their
businesses. However, we still collected 79% of contracted rents over the 12
month period to 31 March 2021, which we believe to be a strong result in the
circumstances. This reflects the hard work of our managing agents, who have
been in close contact with all tenants to ensure that either payment is made
or that payment plans are in place, while making the tenants aware of all
grants or other government assistance available to them. Total COVID-19
related arrears, including deferrals and payment plans, stand at £750,000 at
the year end and we anticipate collecting at least 75% of this money over the
next 24 months. COVID-19 concessions provided to tenants so far stand at
£100,000. The response of tenants in these difficult and challenging
conditions remains pleasing.
Inevitably, as we have agreed tenant payment plans our cash reserves have
reduced and now stand at £7.2 million (2019: £13.5 million). This reduction
also reflects capital expenditure on our properties of some £0.3 million in
LAP and £3.2 million of plant and equipment capital expenditure in Bisichi.
We have, to date, suffered just one tenant (legally 2 separate companies)
utilising an insolvency procedure and our exposure is limited to two shops
with a combined rent roll of £75,000 per annum. The newly-formed buyers of
these businesses have agreed new leases on both of the shops at rents within
10% of the historic level.
We continue to monitor all of our tenants, although the Government imposed
moratorium on normal rent collection procedures makes pre-emptive action
difficult. However, we have low void rates, we have continued to let shops
throughout the year under review and we have limited exposure to mid-market
fashion retailers. Our agents also report much improved tenant demand since
the reopening of shops was announced.
SUMMARY
The last year has been particularly difficult for many owners with exposure to
the retail property market. However, the defensive quality of our portfolio
and modest rental levels per unit have held us in good stead. The measures
that we have taken to reduce costs and preserve cash will continue to benefit
LAP and we therefore face the future with a certain level of confidence.
Sir Michael Heller, John Heller,
Chairman Chief Executive
6 May 2021
STRATEGIC REPORT
Financial and performance review
The financial statements for 2020 have been prepared to reflect the
requirements of IFRS 10. This means that the accounts of Bisichi PLC (a London
Stock Exchange main market quoted company – BISI) (“Bisichi”), have been
consolidated with those of LAP.
Bisichi continues to operate as a fully independent company and currently LAP
owns only 41.52% of the issued ordinary share capital. However, because
related parties also have shareholdings in Bisichi and there is a wide
disposition of other shareholdings, LAP is deemed under IFRS 10 to have
effective control of Bisichi for accounting purposes. This treatment means
that the income and net assets of Bisichi are disclosed in full and the value
attributable to the “non-controlling interest” (58.48%) is shown
separately in the equity section as a non-controlling interest. There is no
impact on the net assets attributable to LAP shareholders.
Dragon Retail Properties Limited (“Dragon”) and West Ealing Projects
Limited (West Ealing), are both 50:50 joint ventures with Bisichi and are also
consolidated. Shareholders are aware that LAP is a property business with a
significant investment in a listed mining company. The effect of consolidating
the results, assets and liabilities of the property business and the mining
company make the figures complex and less transparent. Property company
accounts are already subject to significant volatility as valuations of
property assets as well as derivative liabilities can be subject to major
movements based on market sentiment. Most of these changes, though, have
little or no effect on the cash position and it is, of course, self-evident
that cash flow is the most important factor influencing the success of a
property business. We explain the factors affecting the property business
first, clearly separating these from factors affecting the mining business
which we do not manage. Comments about Bisichi (the mining business) are based
on information provided by the independent management of that company.
This report comments on the performance of each of the Group’s segments
separately.
LONDON & ASSOCIATED PROPERTIES PLC
LAP’s overarching objectives in 2020 remain to:
• Continue to provide environments in which tenants
can thrive.
• Improve the business’ operating cashflow on an
ongoing basis.
• Reduce exposure to the retail sector.
• Ensure gearing is at an appropriate level.
• Maintain sufficient cash in the business to enable
it to react to opportunities when they arise.
During 2020, management’s attention has been focused on supporting our
tenants through the effects of rolling Covid lockdowns. Where tenants’
income has been affected, we have engaged with them to restructure their
payments to LAP, to match their future expected income.
A number of rent deferment agreements have been reached with tenants and
£100,000 of rent has been forgiven in recognition of tenants’ trading
difficulties at this time.
In spite of the Government imposed moratorium on normal debt enforcement
procedures, the business has received a significant proportion of rents due.
Many of our tenants are owner managed businesses serving their local
community. We do not have a significant exposure to large fashion led
retailers who have been hardest hit by changing customer buying patterns. The
below table outlines the proportion of rent receipts, by quarter billed, at
the time of publication of this report. It should be noted that a number of
tenants have entered into agreed monthly rent payments during lockdown, the
debt recovery of March quarter cannot therefore
be fully assessed until the end of June.
Period % Recovery
Q2 2020 92%
Q3 2020 91%
Q4 2020 78%
Q1 2021 53%
There have been no sales or acquisitions of property during the year. 2020 has
been a time for the protection of cash reserves to enable us to manage
potential worst-case outcomes of Covid on the business. Therefore LAP has not
actively sought to acquire new property and has delayed substantial
development expenditure. Whilst discussions are ongoing with buyers about
acquiring elements of our retail portfolio, to enable our ongoing
diversification, none of these were completed during 2020.
LAP has not required any additional funding from lenders or shareholders to
meet the challenges presented by Covid.
LAP’s earliest debt repayment event is in August 2022 and no refinancing
activities have taken place during 2020, with all loans and debentures
remaining in place throughout the year.
In the three to six months following the announcement of the first Covid
lockdown, and the uncertainty this brought, LAP experienced a reduction in
tenant rent receipts as businesses came to terms with the commercial impact
that restrictions would bring.
Even with the effects of Covid on rent recoveries, LAP has met all
of its debt covenants during 2020 and to date other than the income covenant
on the £14 million term loan with Phoenix CRE S.à.r.l in April and July
2020. Working with the lender and major tenants,
the business secured waivers to the affected covenants with all obligations of
the loan being met in full.
During 2020 LAP finalised its property management outsourcing arrangements,
further reducing overheads.
Development of the largest asset, Orchard Square, Sheffield, reported
previously, has been slowed by Covid restrictions, with the opening of a new
street food hub being put back to early summer 2021.
This is part of the business’ development activities to refocus the use of
the property, reflecting the changing ways in which the public interacts with
the city centre, to prepare the property for sale.
A new development proposal for eight first and second floor apartments at
Orchard Square, Sheffield, in space previously used for property management
activities and not rent producing, received planning permission in 2020 and
has also been allocated capital funding through central government grants to
Sheffield council.
Grants have also been allocated for enhancing the central square at the
property.
As the business moves into 2021, its key objectives remain consistent.
LAP continues to look for investment opportunities, particularly within the
industrial sector and is taking further actions to improve its efficiency and
its operating cashflow. The business continues to develop and refurbish its
properties to provide environments in which tenants can thrive.
Income Statement
BUSINESS ANALYSIS 2020 2019
£’000 £’000
Rental income 4,377 4,813
Service charge income 795 628
Proceeds from sale of trading properties - 9,500
Management income from third party properties 18 607
LAP Revenue 5,190 15,548
Direct property costs (2,192) (1,823)
Impairment of inventory (2,300) (1,750)
Costs of sale of trading properties - (10,491)
Overheads (2,317) (3,230)
Depreciation (258) (215)
Operating loss (1,877) (1,961)
Finance income 5 58
Finance expenses (2,200) (2,552)
Result before valuation movements (4,072) (4,455)
Other segment items
Net decrease on revaluation of investment properties (664) (1,498)
Decrease in value of other investments (20) (1,749)
Adjustment to interest rate derivative (200) 169
Revaluation and other movements (884) (3,078)
LAP loss for the year before taxation (4,956) (7,533)
Note: The figures exclude inter-company transactions.
LAP generates the majority of its income from property rentals, property
management fees and development activities.
Rental income is down £436,000 year on year, with like for like rental income
down by £258,000 (5.3%). Rental income remained consistent year on year for
most properties in the portfolio. The decrease in like for like rental income
arose for two main reasons:
• A vacancy at a large industrial unit, with an
agreed letting falling through just prior to completion.
• An increase in provisions for doubtful debts this
year, based on expected credit losses, in response to uncertainty around
tenant debt recovery for debt that has accumulated during Covid lockdowns.
In July 2019, part of our development property in Sheffield was sold for £9.5
million. No further sales of development properties took place in 2020. The
value of the Sheffield property, which is held as inventory, was reduced by
£2.30 million at 31 December 2020 (2019: reduction of £1.75 million).
Management income from third parties has reduced significantly in 2020,
following the cessation of services provided to the HRGT Shopping Centres
portfolio which was sold in 2019. Overheads relating to the delivery of these
services are no longer being incurred.
Net property costs after taking into account costs recovered through service
charges have increased by £0.2 million to £1.4 million, mostly as a result
of the reclassification of property management costs following the outsourcing
of property management services.
These services were previously carried out in-house and disclosed as overhead
costs.
Overheads have reduced by £0.9 million in the year to £2.3 million. Lower
Directors’ remuneration in LAP of £0.2 million, lower staff and associated
office costs of £0.2 million due to outsourcing and lower legal and
professional fees of £0.2 million due to a reduced level of property
acquisitions and disposals accounted for the majority of this. The reduction
in overheads also reflects the cost of services provided to the HRGT Shopping
Centres portfolio.
Finance expenses have reduced by £0.4 million, due to the reduction of
LAP’s borrowings in September 2019, following the sale of part of the
Orchard Square, Sheffield property.
Investment property revaluation decreases of £0.7 million include a decrease
in retail property values of £1.9 million and an increase in industrial
property values of £1.2 million. Retail property value reductions are driven
by increased yields since 2019, with industrial property value changes being
driven by reduced yields and improving rental values.
Excluding the impairment of trading properties and the loss on sale in 2019,
the adjusted loss before valuation movements was £1.8 million (2019: £1.7
million). This excludes management income and dividends received from Bisichi.
Reducing this loss through the activities described above and generating more
rental income remains a key focus for the business.
BALANCE SHEET
Segment assets 2020 2019
£’000 £’000
- Non-current assets – property 33,383 33,718
- Non-current assets – property, plant & equipment 797 946
Trading assets 25,013 26,915
- Cash & cash equivalents 3,413 5,709
- Current assets – others 978 686
Total assets excluding investment in joint ventures, assets held for sale and trading 63,584 67,974
Segment liabilities
Borrowings (30,889) (30,764)
Current liabilities (5,898) (5,750)
Non-current liabilities (3,526) (3,156)
Total liabilities (40,313) (39,670)
Net assets 23,271 28,304
Note: The figures exclude inter-company transactions.
The reduction in non-current property assets arises from a £0.66 million
investment property revaluation deficit (2019: deficit £1.5 million) and
property improvements of £0.33 million (2019: £nil).
The reduction in property, plant and equipment relates to the net reduction in
value of the rented head office building occupied by the Company. The lease
comes to an end in 2023 at which point the asset will be fully depreciated.
The present value of future rentals of £0.73 million is included within
liabilities.
Trading assets include Sheffield Orchard Square, which is currently being
developed for sale and a residential development property in West Ealing. Both
of these properties are held at the lower of cost and net realisable value.
Borrowings have remained consistent year on year, with the same facilities in
place at the end of the year as were in place at the start of the year. The
slight increase in borrowings is brought about by the amortization of loan
costs.
LAP’s main borrowings consist of a £13.6 million term loan facility
expiring in September 2022, a debenture of £10 million repayable in August
2022 a £3.6 million term loan facility expiring in 2028 and a rolling
development loan relating to West Ealing of £3.7 million expiring in July
2021. As in previous years, all loans and debentures are secured on core
property and are covenant compliant at the year end.
Gearing 2020 2019
£’000 £’000
Total borrowings 30,889 30,764
Less cash and cash equivalents (3,413) (5,709)
Net borrowings 27,476 25,055
Total Equity 23,271 28,340
118.1% 88.5%
The business has not set a target gearing level but monitors its debt and
asset values constantly to maintain an appropriate level, taking into account
market sentiment, the availability and cost of debt and cash flow forecasts.
Cash flow
CASH FLOW FROM OPERATIONS 2020 2019
£’000 £’000
Cash inflows from operating activities 250 9,295
Cash (outflows)/ inflows from investing activities (300) 2,471
Cash outflows from financing activities (2,246) (17,402)
Net decrease in cash and cash equivalents (2,296) (5,636)
Cash and cash equivalents at 1 January 5,709 11,345
Cash and cash equivalents at 31 December 3,413 5,709
Note: The figures within the LAP cashflow include inter-company transactions.
Cash inflows from operating activities in 2019 include net sale proceeds of
£9.3 million from the part sale of the Sheffield development property. There
were no development sales in 2020. Excluding development sales, in 2019, net
cash inflows from operating activities were £0.25 million (2019: outflows
£0.1 million).
Investing activities include expenditure on property of £0.3 million. In 2019
investing activities included the sale of a property for
£2.35 million.
No substantial sales or acquisitions were made in 2020.
Financing activities in 2020 largely related to interest payments for the
servicing of debt, no significant new finance has been put in place this year.
In 2019 there was a refinancing of a debt facility utilising proceeds of part
of the sale of the Sheffield development property.
WEST EALING PROJECTS LIMITED
West Ealing is a 50:50 joint venture between LAP and Bisichi created with the
purpose of delivering a primarily residential development in West Ealing,
London. The joint venture owns 90% of the property which is under development
and on which £7.06 million has been spent to date, West Ealing is disclosed
within LAP in the segmental analysis in note 1 to the financial statements.
There is a linked development loan of £4.03 million, described further in
note 18. During the year planning permission was obtained for the creation of
56 new residential apartments and ground floor shops on the site.
Bisichi plc
Although the results of Bisichi PLC have been consolidated in these financial
statements, the Board of LAP has no direct influence over the management of
Bisichi. The comments below are based on the published accounts of Bisichi.
The Bisichi group results are stated in full in its published 2020 financial
statements which are available on its website www.bisichi.co.uk.
Bisichi has two core revenue streams – investment in retail property in the
UK and coal mining in South Africa.
The Bisichi group’s loss before tax was £4.9 million (2019: profit £3.0
million). The movement compared to the prior year can be attributed mainly to
the operating loss before depreciation from mining activities of £1.8 million
(2019: profit £6.4 million). due to lower prices achieved for coal, lower
coal production and sales from Bisichi’s South African operations and a
weakening in the South African Rand to UK Sterling. This offset the lower
operating costs achieved in 2020.
UK retail property investments were valued at the year end at £10.47 million
(2019: £11.75 million). The property portfolio is actively managed by LAP and
generated rental income of £0.9 million in the year (2019: £1.2 million).
Bisichi has a structured trade finance facility with Absa Bank Limited for R85
million held by Sisonke Coal Processing (Pty) Limited, a 100% subsidiary of
Black Wattle Colliery (Pty) Limited. This facility comprises of an R85 million
revolving facility to cover the working capital requirements of the group’s
South African operations. The facility is renewable annually at 25 January and
is secured against inventory, debtors and cash that are held in the group’s
South African operations.
Bisichi holds a 5 year term facility of £3.9 million with Julian Hodge Bank
Limited at an initial LTV of 40%, with the loan being secured against the
company’s UK retail property portfolio. The amount repayable on the loan at
year end was £3.8 million. The debt package has a five-year term and is
repayable at the end of the term in December 2024. The interest cost of the
loan is 4.00% above LIBOR. The loan is 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 £10.47 million. No banking covenants were breached
by the group during the year.
Bisichi’s cash and cash equivalents decreased during the year by £4.1
million (2019: £2.86 million). After taking into account an exchange gain of
£0.2 million (2019: £0.03 million) on the translation of the group’s year
end net balance of cash and cash equivalents that were held in South African
Rands, the group’s net balance of cash and cash equivalents (including bank
overdrafts) at year end was a cash negative amount of £1.1 million (2019:
cash positive of £2.8 million).
Bisichi has considerable financial resources available at short notice
including cash and cash equivalents (excluding bank overdrafts) of £3.8
million (2019: £7.7 million) and listed investments of £2.6 million (2019:
£1.4 million) as at year end. The above financial resources total £6.4
million (2019: £9.1 million).
Bisichi’s net assets at 31st December 2020 were £14.9 million (2019: £19.2
million), with a loss after tax of £3.8 million and exchange losses of £0.5
million.
Bisichi continues to seek to expand its operations in South Africa through the
acquisition of additional coal reserves. In the UK, Bisichi is looking forward
to progressing its development in West Ealing and is currently investigating
other major investment opportunities in the domestic property sector. This is
in line with Bisichi’s overall strategy of balancing the high risk of mining
operations with a dependable cash flow and capital appreciation from UK
property investment operations.
DRAGON RETAIL PROPERTIES LIMITED
Dragon is a UK property investment company. The company has a Santander bank
loan of £1.2 million secured against its investment property, see note 18. In
November 2020 Dragon was not able to meet its historical income cover loan
covenant, due to non-payment of rent by tenants. All payment abligations of
the loan were met and all subsequent covenants have been compliant.
The loan expired in January 2021 and is currently being rolled over pending
approval of an offer of extension from Santander.
It paid management fees of £72,000 (2019: £88,000) split equally between the
two joint venture partners. Dragon has net assets of £1.3 million (2019:
£1.6 million), following a £0.3 million reduction in the valuation of its
main property asset. Otherwise, it continues to trade at near breakeven after
tax.
ACCOUNTING JUDGEMENTS AND GOING CONCERN
The most significant judgements made in preparing these accounts relate to the
carrying value of the properties and investments. The Group uses external
property valuers to determine the fair value of most of its properties.
Under IFRS10 the Group has included Bisichi PLC in the consolidated accounts,
as it is deemed to be under the effective control of LAP and has therefore
been treated as a subsidiary.
The Directors exercise their commercial judgement when reviewing the Group’s
cash flow forecasts and the underlying assumptions on which the forecasts are
based. The Group’s business activities, together with the factors likely to
affect its future development, are set out in the Chairman’s Statement and
Chief Executive’s Review and in this Report. Further disclosure of specific
factors affecting going concern are discussed in more detail in the going
concern section of the group accounting policies section of the financial
statements. In addition, the Directors consider that Note 21 to the financial
statements sets out the Group’s objectives, policies and processes for
managing its capital; its financial risk management objectives; details of its
financial instruments and hedging activities; and its exposure to credit risk,
liquidity risk and other risks.
STATEMENT REGARDING SECTION 172 OF THE UK COMPANIES ACT
Section 172 of the UK Companies Act requires the Board to report on how the
directors have had regard to the matters outlined below in performing their
duties. During the year, the Directors consider that they have acted in a way,
and have made decisions that would most likely promote the success of the
Group for the benefit of its members as a whole as outlined in the matters
below:
• The likely consequences of any decision in the
long term: see Principal Activity, Strategy & Business Model and Risks and
Uncertainties on pages 10 to 11;
• The interests of the Group’s employees; ethics
and compliance; fostering of the Company’s business relationships with
suppliers, customers and others; and the impact of the Group’s operations on
the community and environment: see Corporate Responsibility and Sustainability
reports on pages 13 to 14;
• The need to act fairly between members of the
Company: see the Corporate Responsibility section on pages 13 to 14;
• The desirability of maintaining a reputation for
high standards of business conduct: see the Corporate Governance section on
pages 19 to 20.
Covid-19 and going concern update
LAP
At this time, our main priority is the health and safety of our staff, tenants
and the public. For that reason properties have been closed in line with
government guidance, as described further in the Chairman’s statement and
Chief Executive’s review.
Up to the date of this report LAP has received 53% of all rent in relation to
the first quarter of 2021 and 79% of rent for last quarter of 2020 and
continues to make progress on receiving historic arrears arising during covid
restrictions, when some tenants were not trading. Understandings have been
reached with a number of tenants who are paying monthly in arrears against
quarterly billings, which means that recovery of the first quarters rent
cannot be fully assessed until June. We expect to recover most of the excess
arrears that have built up during this period which at 31 December 2020.
amounted to about £750,000 excluding VAT. An appropriate provision, of
£524,000, has been created to reflect our assessment of the credit risk.
LAP has unencumbered cash of £3.4 million at 31 December 2020, all of which
is held in UK bank accounts. There are no barriers, taxes or other costs to be
paid in accessing this cash. The cash is available to meet any shortfalls
brought about by the impacts on the business of COVID -19. These may include:
• Delayed tenant payments
• Unpaid debt due to tenant insolvencies or trading
difficulties
• Additional costs to ensure our properties are safe
for use
We are working with our tenants to enable them to pay their obligations to us
when they are financially able. Many tenants have been and are eligible for
the various Government schemes set up in the wake of the Coronavirus pandemic
and we are supporting them in accessing these, including:
• Coronavirus Job Retention Scheme
• Business Rates Relief
• Business Support Grant Funds
• Coronavirus Business Interruption Loan Scheme
• Coronavirus Bounce Back Loan
• Coronavirus Recovery Loan
• Deferral of VAT payments
LAP has conducted a range of cashflow scenario tests and believes that its
existing available cash resources are sufficient to meet its obligations, even
in what the Directors consider is the worst case scenario. The Directors are
of the opinion that LAP does not require additional funding to meet the cash
impact of COVID-19 on the business.
LAP has no overdraft facility or undrawn credit lines and has three existing
borrowing arrangements all of which are secured against its properties. All
current banking covenants are being met. The Directors see no impediment to
LAP continuing to meet its obligations to lenders in the future.
LAP currently has £5.0 million of unencumbered properties, as valued at 31
December 2020.
To mitigate the cash impact of COVID-19 on the business, LAP is managing its
expenditure until such time as the Directors consider the risks to have
subsided sufficiently.
• The Directors are not recommending a final
dividend for the current financial year.
• A number of staff located at our properties have
been furloughed during the year.
• VAT payments have been deferred in line with the
amended rules
• All uncommitted development capital expenditure
was suspended during 2020 and projects placed on hold. There was no material
additional cost to the business of doing this. As Covid restrictions are
lifted during 2021, we are cautiously restarting developments.
• We have actively reduced spending where possible
following the cessation of trading at our properties.
• Material property acquisitions remain on hold.
The Directors have produced a cashflow forecast to June 2022, with varying
scenarios examining the sensitivity of LAP’s liquidity to the following
variables:
• Duration of COVID-19’s impact on the business
• Value of delayed receipts from tenants over that
period
• Duration of delay in recovering rents from tenants
• Loss in cash receipts from tenants who never
settle their lease obligations
• Volume of tenants going into insolvency or
administration and the length of time expected to re-let the property
• Value and timing of recovery of tenant debt
arising as a result of Covid restrictions.
The Directors have taken into consideration our experiences of tenant payments
to date, information received directly from tenants about their financial
position and expectations of our tenants’ future trading. The Directors
anticipate that the effects of the closure of some of our properties will have
a permanent effect on the results of the business in 2021 although are unable
to estimate the quantum at this stage.
LAP has three principal loans, as described in note 18, with the below
maturity dates:
• £10 million Debenture August 2022
• £14 million term loan September 2022
• £3.9 million term loan September 2028 (Bank
break September 2023)
The £10 million debenture and £3.9 million term loan were covenant compliant
during 2020 and to date and are anticipated to remain compliant based on the
scenario forecasting.
The £14 million term loan was compliant during 2020 other than in April and
July 2020. Due to lower tenant receipts following the COVID-19 lockdown there
was insufficient cash in the subsidiary for it to meet its obligation to the
lender. The Board agreed with the lender that the LAP Group would fund its
subsidiary’s obligations under the loan agreement and the bank waived its
remedies under the agreement. The loan has been covenant compliant since July
2020 and the subsidiary has repaid the bulk of the bridging loan from LAP
Group.
The Directors are satisfied that LAP has sufficient liquidity to meet its
obligations under any of the scenarios examined and is committed to doing so.
The Board continues to monitor the situation and our modelling is updated
continually.
Bisichi
During this difficult period, Bisichi has consulted with the Government
authorities and its stakeholders in South Africa to determine and agree the
appropriate measures to be taken across its South African mining and
processing operations. Such measures have been focused on the health and
safety of our employees, assisting in the continuing provision of coal as an
essential raw material, the security and integrity of the assets, and the
ability to maintain operations at levels of activity that are aligned with
Government interests and the broader economic interests of South Africa.
Bisichi continues to monitor and adhere to all of the South African
Government’s Covid-19 related guidelines and regulations including all
updates and advice from the National Department of Health, the Department of
Minerals Resources and Energy and the Office of
the President.
These measures include:
• Regular communications with employees on all
guidelines, Government restrictions and best practice hygiene and health
recommendations;
• Conducting various issue-based hazard
identification and risk assessments;
• Temperature screening of those entering certain of
our offices
and sites;
• Working from home (in both the UK and South
Africa), where possible or required;
• Social distancing measures at operating sites;
• Restrictions on non-essential visits to operating
sites; and
• Intensified cleaning and hygiene at offices and
sites;
In particular Bisichi has endeavoured to follow the guidelines of the 10-point
plan developed by the Department of Minerals Resources and Energy in line with
the guidelines of the Department of Health and the National Institute of
Communicable Diseases (NICD) as follows:
• Educate employees on the virus, symptoms and
prevention.
• Follow guidelines from the NICD, educate health
workers on how to manage Covid-19. Consider alternate arrangements for supply
of chronic medication to reduce crowds.
• Ensure that all health workers have access to
protective clothing, gloves, masks, cleaning materials and pharmaceutical
agents.
• Vaccinate employees for seasonal influenza.
• All employees are encouraged to know their status,
get onto ARVs if positive for HIV.
• Manage suspected cases or contacts of cases using
guidelines from the NICD.
• Liaise with the NICD on procedure to be followed
for suspected and confirmed cases.
• Only essential travel to areas with Covid-19
should be undertaken.
• All suspected and confirmed cases in the mining
industry should be reported to the NICD.
• Monitor and stay aware of the latest information
on the Covid-19 pandemic.
Bisichi’s South African coal mining and processing operations have been
designated essential business operations as they fall within the supply chains
of other essential businesses, as defined by the South African Government.
Since late March 2020, Bisichi’s South African operations have continued,
although with a reduced or socially distanced workforce to safeguard the
health and safety of employees.
Overall Position
With a quality property portfolio comprising a majority of tenants with long
leases supported by suitable financial arrangements, the Directors believe
that the group property operations (including Bisichi and Dragon) are well
placed to address the current business risks successfully, despite the
continuing uncertain economic climate. The mining operations too, as a key
industry in South Africa, have a positive future despite the pandemic risks.
It is also relevant that LAP would be able to continue as a viable business if
Bisichi were to face unexpected problems as there are no cross guarantees and
LAP is not dependent on the income from Bisichi.
The Directors therefore have a reasonable expectation that the Group and the
Company have adequate resources to continue in operational existence for the
foreseeable future. Thus, they continue to adopt the going concern basis of
accounting in preparing the annual financial statements.
TAXATION
The LAP Group tax strategy is to account for tax on an accurate and timely
basis. We only structure our affairs based on sound commercial principles and
wish to maintain a low tax risk position. We do not engage in aggressive tax
planning.
The LAP Group (excluding Bisichi and Dragon) has unused tax losses and
deductions with a potential value of £8.0 million (2019: £7.9 million). As
LAP returns to profit, these tax losses and deductions should be utilised.
DIVIDENDS AND FUTURE PROSPECTS
Due to the current economic uncertainties, the LAP Board has agreed that it
will not be recommending a dividend for the financial year ending 31 December
2020 (2019: £nil).
The Group remains reasonably optimistic about our ability to weather the
COVID-19 pandemic. We have strong relations with our tenants, many of whom are
owner managed businesses, and we have maintained good rent collections during
2020.
Looking forwards to medium term trading, we intend to pursue our previously
stated strategies. These include further reducing the Group’s reliance on
retail property although we feel that our value-orientated properties with low
reliance on fashion retailers have inbuilt defensive qualities. We do not need
to fire-sell assets therefore, but we are prepared to enter into negotiations
with parties that have approached us to explore disposals or joint ventures to
redevelop certain assets within our portfolio. A number of these negotiations
are ongoing although we are not yet able to say if any will come to fruition.
We will also pursue our policy of investing in other asset classes, including
industrial property where we have enjoyed early success and in further joint
ventures to undertake residential development. Our development in Ealing has
received planning consent and options for either building out the development
or seeking to sell our shares in the joint venture are being considered
currently.
We continue to progress the development of the Sheffield shopping centre.
Planning permission has been granted for 8 apartments above ground floor level
to be built in a space previously used for property management activities and
not income producing. We are designing a development of the central square to
enable year-round activities to further support all of the tenants at the
property. Both of these developments have been allocated funding by the local
council through the Future High Street Fund. The development of a new street
food concept is underway for a planned summer 2021 opening.
STRATEGIC REPORT
Principal activities, strategy & business model
The LAP Group’s principal business model is the investment in and management
and development of industrial and retail property through direct investment
and joint ventures.
The principal activity of Bisichi PLC is coal mining in South Africa. Further
information is available in its 2020 Financial Statements which are available
on their web site: www.bisichi.co.uk
STRATEGIC PRIORITIES ARE OUR STRATEGY IS
Maximising income By achieving an appropriate tenant mix and shopping experience we can increase footfall through the centres, hence increase tenant demand for space and enhance income.
Creating quality property We look to improve the consumer experience at all our centres by achieving an appropriate tenant mix and a vibrant trading environment through investment activity, enhancement, refurbishment and development.
Capital strength We operate within a prudent and flexible financial structure. Our gearing policy provides financial stability whilst giving capacity and flexibility to look for further investments.
Maintain the value of investment in Bisichi By encouraging the Bisichi management to maximise sustainable profits and cash distributions.
Risks and uncertainties
DESCRIPTION OF RISK DESCRIPTION OF IMPACT MITIGATION
COVID-19 risk Health and safety of employees and stakeholders. Risks related to business interruption and tenant failures as outlined below. Strategies for mitigating the risks have been defined and specific measures for achieving these are already underway. These include the measures outlined in the Chairman’s Statement and Financial & Performance Review sections of this report.
ASSET MANAGEMENT:
Tenant failure Financial loss. Initial and subsequent assessment of tenant covenant strength combined with an active credit control function.
Leases not renewed Financial loss. Lease expiries regularly reviewed. Experienced teams with strong tenant and market knowledge who manage appropriate tenant mix.
Asset liquidity (size and geographical location) Assets may be illiquid and affect flexing of balance sheet. Regular reporting of current and projected position to the Board with efficient treasury management.
PEOPLE:
Retention and recruitment of staff Unable to retain and attract the best people for the key roles. Nomination Committee and senior staff review skills gaps and succession planning. Training and development offered.
REPUTATION:
Business interruption Loss in revenue. Impact on footfall. Adverse publicity. Potential for criminal/civil proceedings. Documented Recovery Plan in place. General and terrorism insurance policies in place and risks monitored by trained security staff. Health and Safety policies in place. CCTV in centres.
FINANCING:
Fluctuation in property values Impact on covenants and other loan agreement obligations. Secure income flows. Regular monitoring of LTV and IC covenants and other obligations. Focus on quality assets.
Reduced availability of borrowing facilities Insufficient funds to meet existing debts/interest payments and operational payments. Efficient treasury management. Loan facilities extended where possible. Regular reporting of current and projected position to the Board.
Loss of cash and deposits Financial loss. Only use a spread of banks and financial institutions which have a strong credit rating.
Fluctuation of interest rates Uncertainty of interest rate costs. Manage derivative contracts to achieve a balance between hedging interest rate exposure and minimising potential cash calls.
STRATEGIC REPORT
Bisichi risks and uncertainties
Bisichi (although it is consolidated into group accounts as required by IFRS
10) is managed independently of LAP. The risks outlined below are an
abbreviated summary of the risks reported by the Directors of Bisichi to the
shareholders of that Company. Full details are available in the published
accounts of Bisichi (www.bisichi.co.uk).
These risks, although critical to Bisichi, are of less significance to LAP
which only has a minority investment of 41.52% in the company. In the unlikely
event that Bisichi was unable to continue trading, it would not affect the
ability of LAP to continue operating as a going concern.
DESCRIPTION OF RISK DESCRIPTION OF IMPACT MITIGATION
COVID-19 risk Health and safety of employees and stakeholders and risks related to coal prices and demand and the value of UK property. Strategies for mitigating the risks have been defined and specific measures for achieving these are already underway. These include the measures outlined in the Chairman’s Statement and Financial & Performance Review sections of this report.
Coal prices can be impacted materially by market and currency variations Affects sales value and therefore margins. Forward sales contracts are used to manage value expectations.
Mining operations are inherently risky. Mineral reserves, regulations, licensing, power availability, health and safety can all damage operations Loss of production causing loss of revenue. Use of geology experts, careful attention to regulations, health and safety training, employee dialogue to minimise controllable risks.
Currency risk Affects realised sales value and therefore margins. Regular monitoring and review of forward currency situation.
Cashflow variation because of mining risks, commodity price or currency variations Variations can deliver significant shifts in cash flow. UK property investments used to offset high risk mining operations.
There has been no change in the risks faced by either LAP or Bisichi.
STRATEGIC REPORT
Key performance indicators
The Group’s Key Performance Indicators are selected to ensure clear
alignment between its strategy and shareholder interests.
The KPIs are calculated using data from management reporting systems.
Strategic priority KPI Performance
MAXIMISING INCOME – LIKE FOR LIKE PROPERTY INCOME
To increase the like-for-like income from each property year on year. Like-for-like rental income as a percentage of the prior year rental. The like-for-like rental income by property has decreased by £258,000 (5.3%) (2019: increase of £13,000 and 0.3%), with a larger industrial unit in Runcorn being refurbished for let. In the continuing difficult trading environment,
this is considered satisfactory.
MAXIMISING INCOME – OCCUPANCY
We aim to maximise the total income in our properties by achieving full occupancy. The estimated rental value ("ERV") of the empty units as a percentage of our total income. Void levels decreased to 7.85% (2019: 8.38%). As 4.2% of the voids are attributable to refurbishment activities, this is considered satisfactory.
CAPITAL STRENGTH – GROWTH IN NET ASSET VALUE PER SHARE
The net assets per share is the principal measure used by the group for monitoring its performance and is an indicator of the level of reserves available for distribution by way of dividend. Movement in the net assets per share. The net assets per share reduced by 8.05 pence per share (18.7%) to 34.99p (2019: 43.04p). This is disappointing but the impact of Covid-19 has had a material and adverse impact on the business.
STRATEGIC REPORT
Corporate responsibility
Sustainable Development
Bisichi’s Black Wattle continues to strive to conduct business in a safe,
environmentally and socially responsible manner. Some highlights of their
Health, Safety and Environment performance in 2020:
• Black Wattle Colliery recorded one Lost Time
Injury during 2020.
• No machines operating at Black Wattle exceeded the
regulatory noise level.
• No cases of Occupational Diseases were recorded.
• Zero claims for the Compensation for Occupational
Diseases were submitted.
They continue to be compliant and make progress in terms of their Social and
Labour Plan and their various BEE initiatives. A fuller explanation of these
can be found in Bisichi’s 2020 Financial Statements which are available on
their web site: www.bisichi.co.uk
Greenhouse gas reporting
As a quoted organisation incorporated in the UK, we have reported on all
emission sources required under the Companies (Directors’ Report) and
Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 for
the period 1st January 2020 to 31st December 2020.
The emissions are detailed in Tables 1, 2 and 3 below.
We have employed the Financial Control definition to outline our carbon
footprint boundary, reporting Scope 1 & 2 emissions only for both landlord &
tenant-controlled areas of LAP owned shopping centres and facilities.
LAP has landlord-controlled areas in Kings Square, Orchard Square, Brewery
Street, Shipley, and Bridgend. Properties that we manage on behalf of others
or are not wholly owned by LAP are excluded from our footprint boundary. An
estimate of the emissions associated with the LAP offices on Bruton Place has
been included in this year’s calculations.
Emissions for landlord-controlled areas have been calculated based on actual
consumption data collected from each shopping centre. Emissions from
tenant-controlled areas have been calculated based on floor area and energy
consumption benchmarks for general retail services in the UK.
We have used the main requirements of the ISO14064-11 standard and HM
Government Environmental Reporting Guidelines (2019) including streamlined
energy and carbon reporting guidance. Emission factors were from the UK
Government’s GHG Conversion Factors for Company Reporting 2020.
As well as reporting Scope 1 and Scope 2 emissions, the regulations require
that at least one intensity ratio is reported for the given reporting period.
The intensity figure below shows emissions in tCO2e per thousand pounds
revenue.
Energy efficiency
Due to the impacts of the Covid-19 pandemic, LAP have not implemented any
energy efficiency programs or specific measures during the 2020 year.
1 ISO14064-1:2018 - Greenhouse gases - Part 1: Specification with guidance at
the organization level for quantification and reporting of greenhouse gas
emissions and removals
Table 1. Landlord & tenant controlled areas
Emissions Source 2020 2019
Scope 1 emissions Natural gas (tCO2e) 38 53
Refrigerants (tCO2e) 0 0
Scope 2 emissions Electricity (tCO2e) 1,523 1,354
Total tCO2e 1,561 1,407
Intensity ratio (tCO2e/£thousand) 0.299 0.296
Energy Consumption used to calculate above emissions /KWh 6,737,030 5,649,144
Table 2. LAP controlled areas
Emissions Source 2020 2019
Scope 1 emissions Natural gas (tCO2e) 38 53
Refrigerants (tCO2e) 0 0
Scope 2 emissions Electricity (tCO2e) 64 104
Total tCO2e 1012 157
2 Totals differ due to rounding
Table 3. Tenant controlled areas
Emissions Source 2020 2019
Scope 1 emissions Natural gas (tCO2e) 0 0
Refrigerants (tCO2e) 0 0
Scope 2 emissions Electricity (tCO2e) 1,459 1,250
Total tCO2e 1,459 1,250
Environment
United Kingdom
The Group’s principal UK activity is property investment, which involves
renting premises to commercial businesses. We seek to provide those tenants
with good quality premises from which they can operate in an efficient and
environmentally friendly manner. Where 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.
South Africa
The Bisichi group’s principal activity in South Africa is coal mining. 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. A performance assessment audit was
conducted to verify compliance to their Environmental Management Programme and
no significant deviations were found.
EMPLOYEE, SOCIAL, COMMUNITY AND HUMAN RIGHTS
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 and
operates in compliance with all relevant national legislation.
The Group believes that it is in the interest of shareholders to consider
social and human rights issues when conducting business. Various policies and
initiatives implemented by the Group that fall within these areas are
discussed within this report.
ANTI-SLAVERY AND HUMAN TRAFFICKING
The Group is committed to the prevention of the use of forced labour and has a
zero tolerance policy for human trafficking and slavery.
The Group’s policies and initiatives in this area can be found within the
Group’s Anti-slavery and human trafficking statement found on the Group’s
website at www.lap.co.uk.
DIVERSITY AND EQUALITY
The Board recognises the importance of diversity, both in its membership, and
in the Group’s employees. It has a clear policy to promote diversity across
the business. The Board considers that quotas are not appropriate in
determining its composition and has therefore chosen not to set targets. All
aspects of diversity, including but not limited to gender, are considered at
every level of recruitment. Gender diversity of the Board and the Group is set
out below.
DIRECTORS, EMPLOYEES AND GENDER REPRESENTATION
At the year end the LAP Group (excluding Bisichi and Dragon), had 6 directors
(6 male, 0 female), 2 senior managers (2 male, 0 female) and 11 employees (6
male, 5 female).
BISICHI PLC
Bisichi PLC’s Group at the year end had 9 directors (8 male, 1 female), 6
senior managers (5 male, 1 female) and 236 employees (163 male, 73 female).
Detailed information relating to the Bisichi Strategic Report is available in
its 2020 financial statements.
Approved on behalf of the board of directors
Jonathan Mintz
Finance Director
6 May 2021
Table 4. Coal mining carbon footprint
2020 2019
CO2e CO2e
Tonnes Tonnes
Emissions source:
Emissions from the combustion of fuel or the operation of any facility including fugitive emissions from refrigerants use 46,162 49,061
Emissions resulting from the purchase of electricity, heat, steam or cooling by the company for its own use (location based) 12,482 13,153
Total gross emissions 58,644 62,213
Intensity:
Intensity 1 Tonnes of CO2 per pound sterling of revenue 0.0020 0.0013
Intensity 2 Tonnes of CO2 per pound of coal produced 0.0497 0.0486
kWh kWh
Energy consumption used to calculate above emissions 99,450,585 N/A
Of which UK 5,571 N/A
GOVERNANCE
Directors & advisors
EXECUTIVE DIRECTORS
Sir Michael Heller MA FCA*
(Chairman)
John A Heller LLB MBA
(Chief Executive)
Jonathan Mintz FCA
(Finance Director)
NON-EXECUTIVE DIRECTORS
Howard D Goldring BSC (ECON) ACA†
Howard Goldring is Executive Chairman of Alberon Holdings Limited which
specialises in the discretionary management of investment portfolios for
pension funds, charities, family trusts and private clients. He also acts as
an advisor providing high level asset allocation advice to family offices and
pension schemes. He has been a member of the LAP Board since July 1992, and
has almost 40 years’ experience of the real estate market. He was a director
of Baronsmead VCT 2 PLC from 2010-2016, and has specialised in providing many
companies with investor relations support.
Clive A Parritt FCA CF FIIA #†
Clive Parritt joined the board on 1 January 2006. He is a chartered accountant
with over 40 years’ experience of providing strategic, financial and
commercial advice to businesses of all sizes. He is a director of Jupiter US
Smaller Companies plc and a member of the Performance, Audit and Risk
Committee of Arts Council England. Until April 2016 he was Group Finance
Director of Audiotonix Limited (an international manufacturer of audio mixing
consoles). He has chaired and been a director of a number of other public and
private companies. Clive Parritt was President of the Institute of Chartered
Accountants in England and Wales in 2011-12. He is Chairman of the Audit
Committee and as Senior Independent Director he chairs the Nomination and
Remuneration Committees.
Robin Priest MA
Robin Priest joined the board on 31 July 2013. He is a senior advisor to
Alvarez & Marsal LLP (“A&M”) and to a major listed German real estate
investment fund manager. He has more than 38 years’ experience in real
estate and structured finance. He was formerly Managing Director of A&M’s
real estate practice, advising private sector and public sector clients on
both operational and financial real estate matters. Prior to joining A&M,
Robin was lead partner for Real Estate Corporate Finance in London with
Deloitte LLP and before this he founded and ran a property company backed by
private equity. He is also a trustee of London’s Oval House Theatre.
* Member of the nomination committee
† Member of the audit, remuneration and nomination
committees
# Senior independent director
SECRETARY & REGISTERED OFFICE
Jonathan Mintz FCA
24 Bruton Place
London W1J 6NE
AUDITOR
RSM UK Audit LLP
PRINCIPAL BANKERS
Phoenix CRE Sàrl
Santander UK plc
Metro Bank plc
SOLICITORS
Pinsent Masons LLP
Wake Smith Solicitors Limited
STOCKBROKER
Shore Capital Markets Limited
REGISTRARS & TRANSFER OFFICE
Link Group
Shareholder Services
The Registry
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
UK telephone: 0871 664 0300
International telephone: +44 371 664 0300
(Calls cost 12p per minute plus your phone company’s access charge.
Calls outside the United Kingdom will be charged at the applicable
international rate).
Lines are open between 9.00am to 5.30pm, Monday to Friday, excluding public
holidays in England and Wales.
Website: www.linkassetservices.com
Email: enquiries@linkgroup.co.uk
Company registration number
341829 (England and Wales)
WEBSITE
www.lap.co.uk
E-MAIL
admin@lap.co.uk
GOVERNANCE
Directors’ report
The Directors submit their report and the audited financial statements for the
year ended 31 December 2020.
Strategic report
A comprehensive review and assessment of the Group’s activities during the
year as well as its position at the year end and prospects for the forthcoming
year are included in the Chairman’s Statement and Chief Executive’s Review
and the Strategic Report. These reports can be found on pages 2 to 14 and
should be read in conjunction with this report.
Principal Activities
The principal activities of the Group during the year were property investment
and development, as well as investment in joint ventures and an associated
company. The associated company is Bisichi PLC (Bisichi) in which the Company
holds a 41.52 % interest. Bisichi is listed on the main market of the London
Stock Exchange and operates in England and South Africa with subsidiaries
which are involved in overseas mining and mining investment. The results,
together with the assets and liabilities, of Bisichi are consolidated with
those of LAP in accordance with the terms of IFRS 10 even though the Group
only has a minority interest – under IFRS 10 the 58.48% majority interest is
disclosed as a “non-controlling interest”.
Business review and post balance sheet events
Review of the Group’s development and performance
A review of the Group’s development and performance can be found below and
should be read in conjunction with the Strategic Report on pages 4 to 14.
Details of any post balance sheet events are disclosed in Note 29 to the
financial statements.
Future developments
The Group continues to look for new opportunities to acquire real estate
assets where it feels it can increase value by applying its intensive
management skills. At the same time, it seeks to reduce its interest payments
on its loans as they expire or where opportunities arise to refinance on
better terms. We also seek to improve our existing estate through the
continued pursuit of asset management initiatives.
Property activities
The Group is a long-term investor in property. It acquires properties,
actively manages those assets to improve rental income, and thus seeks to
enhance the value of its properties over time. In reviewing performance, the
principal areas regularly monitored by the Group include:
• Rental income – the aim of the Group is to
maximise the maintainable income from each property by careful tenant
management supported by sympathetic and revenue enhancing development. Income
may be affected adversely by the inability of tenants to pay their rent, but
careful monitoring of rent collection and tenant quality helps to mitigate
this risk. Risk is also minimised by a diversified tenant base, which should
limit the impact of the failure of any individual tenant.
• Developments – the Group develops
customer-focused spaces to generate returns and portfolio income growth above
that available from standing investments alone.
• Cash flow – allowing for voids, acquisitions,
development expenditure, disposals and the impact of operating costs and
interest charges, the Group aims to maintain a positive cash flow over time.
• Financing costs – the exposure of the Group to
interest rate movements is managed partly by the use of swap and cap
arrangements (see Note 21 for full details of the contracts in place) and also
by using loans with fixed terms and interest rates. These arrangements are
designed to ensure that our interest costs are known in advance and are always
covered by anticipated rental income.
• Property valuations – market sentiment and
economic conditions have a direct effect on property valuations, which can
vary significantly (upwards or downwards) over time. Bearing in mind the long
term nature of the Group’s business, valuation changes have little direct
effect on the ongoing activities or the income and expenditure of the Group.
Tenants generally have long term leases, so rents are unaffected by short term
valuation changes. Borrowings are secured against property values and if those
values fall very significantly, this could limit the ability of the Group to
develop the business using external borrowings. The risk is minimised by
trying to ensure that there is adequate cover to allow for fluctuations in
value on a short term basis.
It continues to be the policy of the Group to realise property assets when the
valuation of those assets reaches a level at which the directors consider that
the long-term rental yield has been reached. The Group also seeks to acquire
additional property investments on an opportunistic basis when the potential
rental yields offer scope for future growth.
Investment activities
The investments in joint ventures and Bisichi are for the long term.
LAP manages the UK property assets of Bisichi. However, the principal activity
of Bisichi is overseas mining investment (in South Africa). While IFRS 10
requires the consolidation of Bisichi, the investment is held to generate
income and capital growth over the longer term. It is managed independently of
LAP and should be viewed by shareholders as an investment and not a
subsidiary. The other listed investments are held as current assets to provide
the liquidity needed to support the property activities while generating
income and capital growth.
Investments in property are made through joint ventures when the financing
alternatives and spreading of risk make such an approach desirable.
Dividend
In the light of the current uncertain economic environment, the directors are
not recommending payment of a final dividend for 2020 (2019: Nil per share).
The company’s ordinary shares held in treasury
At 31 December 2020, 218,197 (2019: 218,197) ordinary shares were held in
Treasury with a market value of £17,456 (2019: £47,349). At the Annual
General Meeting (AGM) in July 2020 members renewed the authority for the
Company to purchase up to 10 per cent of its issued ordinary shares. The
Company will be asking members to renew this authority at the next AGM to be
held on Tuesday 15 June 2021.
Treasury shares held at 1 January 2020 and at 31 December 2020 218,197
Treasury shares are not included in issued share capital for the purposes of
calculating earnings per share or net assets per share and they do not qualify
for dividends payable.
Investment properties
The freehold and long leasehold properties of the Company, its subsidiaries
and Bisichi were revalued as at 31 December 2020 by independent professional
firms of chartered surveyors – Allsop LLP, London (74.2 per cent of the
portfolio), Carter Towler, Leeds (24.1 per cent) – and by the Directors (1.7
per cent). The valuations, which are reflected in the financial statements,
amount to £42.6 million (2019: £44.6 million).
Property of £25.0 million (2019: £26.9 million) is included under current
assets, as inventory, at the lower of cost or net realisable value.
Taking account of prevailing market conditions, the valuation of the
properties at 31 December 2020 resulted in a decrease of £2.3 million (2019:
decrease of £3.0 million). The proportion of this revaluation attributable to
the Group (net of taxation) is reflected in the consolidated income statement
and the consolidated balance sheet.
Financial instruments
Note 21 to the financial statements sets out the risks in respect of financial
instruments. The board reviews and agrees overall treasury policies,
delegating appropriate authority for applying these policies to the Chief
Executive and Finance Director. Financial instruments are used to manage the
financial risks facing the Group and speculative transactions are prohibited.
Treasury operations are reported at each board meeting and are subject to
weekly internal reporting. Hedging arrangements are in place for the Company,
its subsidiaries and joint ventures in order to limit the effect of higher
interest rates upon the Group. Where appropriate, hedging arrangements are
covered in the Chairman and Chief Executive’s Statement and the Financial
Review.
Directors
Sir Michael Heller, J A Heller, J Mintz, H D Goldring, C A Parritt and R
Priest were Directors of the company for the whole of 2020.
C A Parritt and J A Heller are retiring by rotation at the Annual General
Meeting in 2021 and offer themselves for re-election.
Clive Parritt has been a director since January 2006 and has a contract of
service determinable upon three months’ notice and is the senior independent
director and chairman of the audit, nomination and remuneration committees. He
is a chartered accountant with over 40 years’ experience in providing
strategic, financial and commercial advice to business. His financial
knowledge and broad commercial experience are of significant benefit to the
business. The board has considered the re-appointment of Clive Parritt and
recommends his re-election as a director.
John Heller has been a director since 1998 and was appointed chief executive
in September 2001. He has a contract of employment determinable upon twelve
months’ notice. The board has considered the re-appointment of John Heller
and recommends his re-election as a director.
Directors’ interests
The interests of the Directors in the ordinary shares of the Company,
including family and trustee holdings, where appropriate, can be found on page
25 in the Annual Remuneration Report. There has been no change to the
Directors’ interests in the ordinary shares of the Company in the year, or
since the year end.
Substantial shareholdings
31 Dec 2020 31 Dec 2019
no. % no. %
Sir Michael Heller and family 48,080,511 56.35 48,080,511 56.35
Cavendish Asset Management Limited 0 0 8,211,044 9.62
James Hyslop 4,886,258 5.73 4,886,258 5.73
Maland Pension Fund 3,515,472 4.12 3,323,383 3.89
Stonehage Fleming Investment Management Ltd 7,663,214 8.98 0 0
The Company does not consider that the Heller family has a controlling share
interest irrespective of the number of shares held as no individual party
holds a majority and there is no legal obligation for shareholders to act in
concert. The Directors do not consider that any single party has control.
The Company is not aware of any other holdings exceeding 3 per cent of the
issued share capital.
Share Capital and Takeover Directive
The Company has one class of share capital, namely ordinary shares. Each
ordinary share carries one vote. All the ordinary shares rank pari passu.
There are no securities issued by the Company which carry special rights with
regard to control of the Company.
The identity of all significant direct or indirect holders of securities in
the Company and the size and nature of their holdings is shown in
“Substantial Shareholdings” above.
The rights of the ordinary shares to which the HMRC approved Share Incentive
Plan relates are exercisable by the trustees on behalf of the employees.
There are no restrictions on voting rights or on the transfer of ordinary
shares in the Company, save in respect of treasury shares. The rules governing
the appointment and replacement of Directors, alteration of the articles of
association of the Company and the powers of the Company’s Directors accord
with usual English company law provisions. Each Director is subject to
re-election at least every three years.
The Company is not party to any significant agreements that take effect, alter
or terminate upon a change of control of the Company following a takeover bid.
The Company is not aware of any agreements between holders of its ordinary
shares that may result in restrictions on the transfer of its ordinary shares
or on voting rights.
There are no agreements between the Company and its Directors or employees
providing for compensation for loss of office or employment that occurs
because of a takeover bid.
Statement as to disclosure of information to the auditor
The Directors in office at the date of approval of the financial statements
have confirmed that, so far as they are aware, there is no relevant audit
information of which the auditor is unaware. Each of the Directors has
confirmed that they have taken all the steps that they ought to have taken as
a Director in order to make them aware of any relevant audit information and
to establish that it has been communicated to the auditor.
GOVERNANCE Directors’ report
indemnities and insurance
The Articles of Association of the company provide for it to indemnify, to the
extent permitted by law, directors and officers (excluding the Auditor) of the
company, including officers of subsidiaries and associated companies, against
liabilities arising from the conduct of the Group’s business. The
indemnities are qualifying third party indemnity provisions of the Companies
Act 2006 and each of these qualifying third party indemnities was in force
during the course of the financial year ended 31 December 2020 and as at the
date of this Directors’ report. No amount has been paid under any of these
indemnities during the year.
The Group maintains Directors and Officers insurance, which is reviewed
annually and is considered to be adequate by the Company and its insurance
advisers.
Donations
No political donations were made during the year (2019: £Nil). No donations
for charitable purposes were made during the year (2019: £2,250).
CORPORATE RESPONSIBILITY
Environment
The environmental considerations of the group’s South African coal mining
operations are covered in the Bisichi PLC Strategic Report.
The group’s UK activities are principally property investment whereby
premises are provided for rent to commercial businesses. The group seeks to
provide those tenants with good quality premises from which they can operate
in an efficient and 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 2020 can be found on pages 13 and 14 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
Bisichi PLC Strategic Report gives details of the Bisichi group’s activities
and policies concerning the employment, training, health and safety and
community support and social development concerning the Bisichi group’s
employees in South Africa.
Going concern
The directors have reviewed the cash flow forecasts of the Group and the
underlying assumptions on which they are based. The directors have also
reviewed the COVID-19 scenario forecasts and the underlying assumptions on
which they are based, which are described in more detail in the COVID-19
section of the Strategic Report. The Group’s business activities, together
with the factors likely to affect its future development, are set out in the
Chairman’s Statement and Chief Executive’s Review and in the Financial and
Performance Review. In addition, Note 21 to the financial statements sets out
the Group’s objectives, policies and processes for managing its capital; its
financial risk management objectives; details of its financial instruments and
hedging activities; and its exposure to credit risk and liquidity risk.
With secured long term banking facilities, sound financial resources and long
term leases in place the Directors believe it remains appropriate to adopt the
going concern basis of accounting in preparing the annual financial
statements.
The Bisichi directors continue to adopt the going concern basis of accounting
in preparing the Bisichi annual financial statements.
Corporate Governance
The Corporate governance report can be found on pages 19 and 20 of the annual
report and accounts.
Annual General Meeting
The Annual General Meeting will be held at 24 Bruton Place, London, W1J 6NE on
Tuesday 15 June 2021 at 10.30 a.m. Items 1 to 7 will be proposed as ordinary
resolutions. More than 50 per cent. of shareholders’ votes cast at the
meeting must be in favour for those ordinary resolutions to be passed. The
Directors consider that all of the resolutions to be put to the meeting are in
the best interests of the Company and its shareholders as a whole and
accordingly the board unanimously recommends that shareholders vote in favour
of all of the resolutions as the Directors intend to do in respect of their
own beneficial holdings of ordinary shares. Please note that the following
paragraphs are only summaries of certain of the resolutions to be proposed at
the Annual General Meeting and do not represent the full text of the
resolutions. You should therefore read this section in conjunction with the
full text of the resolutions contained in the notice of Annual General Meeting
which accompanies this Directors’ Report.
Ordinary resolutions
Resolution 7 – Authority to allot securities
Paragraph 7.1.1 of Resolution 7 would give the Directors the authority to
allot shares in the Company and grant rights to subscribe for or convert any
security into shares in the Company up to an aggregate nominal value of
£2,836,478. This represents approximately 1/3 (one third) of the ordinary
share capital of the Company in issue (excluding treasury shares) as at 4 May
2021 (being the last practicable date prior to the publication of this
Directors’ Report).
In line with guidance issued by the Institutional Voting Information Service
(IVIS), paragraph 7.1.2 of Resolution 7 would give the directors the authority
to allot shares in the Company and grant rights to subscribe for or convert
any security into shares in the Company up to a further aggregate nominal
value of £2,836,478, in connection with an offer by way of a rights issue.
This amount represents approximately another 1/3 (one third) of the ordinary
share capital of the Company in issue (excluding treasury shares) as at 4 May
2021 (being the last practicable date prior to the publication of this
Directors’ Report).
The Directors’ authority will expire on the earlier of 31 August 2022 or the
next AGM. The Directors do not currently intend to make use of this authority.
However, if they do exercise the authority, the Directors intend to follow
best practice as recommended by the IVIS regarding its use (including as
regards the Directors standing for re-election in certain cases).
OTHER MATTERS
RSM UK Audit LLP has acted as auditor throughout the year and will retire due
to the regulatory rules regarding rotation. A proposal will be made at the
Annual General Meeting for the appointment of a new auditor.
By order of the board
Jonathan Mintz
Secretary
For and on behalf of London & Associated Properties PLC
6 May 2021
24 Bruton Place
London
W1J 6NE
GOVERNANCE
Corporate Governance
The Company has adopted the Corporate Governance Code for Small and Mid-Size
Quoted Companies (the QCA Code) published by the Quoted Companies Alliance.
The QCA Code provides governance guidance to small and mid-size quoted
companies. The paragraphs below set out how the Company has applied this
guidance during the year. The Company has complied with the QCA Code
throughout the year.
Principles of corporate governance
The board promotes good corporate governance in the areas of risk management
and accountability 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 business. The key
objective is to enhance and protect shareholder value.
Board structure
During the year the board comprised the Chairman, the Chief Executive, one
other executive Director and three non-executive Directors. Their details
appear on page 15. 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 29. 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 normally has eleven regular
meetings scheduled each year. Additional meetings are held for special
business when required.
The board is responsible for overall Group strategy, approval of major capital
expenditure and consideration of significant financial and operational
matters.
The board committees, which have written terms of reference, deal with
specific aspects of the Group’s affairs:
• The nomination committee is chaired by C A Parritt
and comprises one other non-executive Director 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 may be used to assist the process. All Directors
are subject to re-election at a maximum of 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 contract terms,
remuneration and other benefits for each of the executive directors, including
performance related bonus schemes, pension rights, option grants and
compensation payments. The board itself determines the remuneration of the
non-executive Directors. The committee comprises two non-executive Directors
and it is chaired by C A Parritt. The executive Chairman of the board is
normally invited to attend. The Annual Remuneration Report is set out on pages
22 to 25.
• The audit committee comprises two non-executive
Directors and is chaired by C A Parritt. The audit committee report, with its
terms of reference, is set out on page 28. The Chief Executive and Finance
Director are normally invited to attend.
Board and board committee meetings held in 2020
The number of regular meetings during the year and attendance was as follows:
Meetings Meetings
held attended
Sir Michael Heller Board Nomination committee Remuneration committee 10 1 1 10 1 1
J A Heller* Board Audit committee 10 2 10 2
J Mintz* Board Audit committee 10 2 10 2
C A Parritt Board Audit committee Nomination committee Remuneration committee 10 2 1 1 10 2 1 1
H D Goldring Board Audit committee Nomination committee Remuneration committee 10 2 1 1 9 2 1 1
R Priest Board 10 10
*Attended audit committee by invitation.
Performance evaluation – board, board committees and directors
The performance of the board as a whole, its committees and the non-executive
Directors is assessed by the Chairman and the Chief Executive and is discussed
with the senior independent non-executive 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, executive and non-executive Directors
individually outside of formal meetings. The Directors will take outside
advice in reviewing performance but have not found this to be necessary to
date.
Independent directors
The senior independent non-executive Director is C A Parritt. The other
independent non-executive Directors are H D Goldring and R Priest. Alberon
Holdings Limited (Alberon) is a Company in which H D Goldring is the majority
shareholder and the Executive Chairman. Alberon provides consultancy services
to the Company on a fee paying basis. R Priest provides services to the
Company on a fee paying basis. C A Parritt also provides some advisory
services as part of his accounting practice.
The board encourages all three non-executive Directors to act independently
and does not consider that length of service of any individual non-executive
Director, nor any connection with the above mentioned consultancy and advisory
companies, has resulted in the inability or failure to act independently. In
the opinion of the board the three non-executive Directors continue to fulfil
their roles as independent non-executive Directors. Their background and
skills are set out on page 15.
The independent Directors exchange views regularly between board meetings and
meet when required to discuss corporate governance and other issues concerning
the Group.
Internal control
The Directors are responsible for the Group’s system of internal control and
for reviewing its effectiveness at least annually, and for the preparation and
review of its financial statements. The board has designed the Group’s
system of internal control in order to provide the Directors with reasonable
assurance that 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 on full notice with a
formal schedule of matters reserved for its 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;
• The departmental heads are required annually to
undertake a full assessment process to identify and quantify the risks that
face their departments and functions, and assess the adequacy of the
prevention, monitoring and modification practices in place for those risks. In
addition, regular reports about significant risks and associated control and
monitoring procedures are made to the executive Directors. The process adopted
by the Group accords with the guidance contained in the document “Internal
Control Guidance for Directors on the Combined Code” issued by the Institute
of Chartered Accountants in England and Wales. The audit committee receives
reports from external auditors and from executive Directors of the Group.
During the period the audit committee has reviewed the effectiveness of the
system of internal control as described above. The board receives periodic
reports from all committees.
• There are established procedures for the
presentation and review of the financial statements and the Group has in place
an organisational structure with clearly defined lines of responsibility and
with appropriate delegation of authority.
There are no internal control issues to report in the annual report and
financial statements for the year ended 31 December 2020. Up to the date of
approval of this report and the financial statements, the board has not been
required to deal with any related material internal control issues. The
Directors confirm that the board has reviewed the effectiveness of the system
of internal control as described during the period.
COMMUNICATION WITH SHAREHOLDERS
Prompt communication with shareholders is given high priority. Extensive
information about the Group and its activities is provided in the Annual
Report. In addition, a half-year report is produced for each financial year
and published on the Company’s website. The Company’s website
www.lap.co.uk is updated promptly with announcements and Annual Reports upon
publication. Copies from previous years are also available on the website.
The share price history and market information can be found at
http://www.londonstockexchange.com/prices-and-markets/markets/prices.htm. The
company code is LAS.
There is a regular dialogue with the Company’s stockbrokers and
institutional investors. Enquiries from individuals on matters relating to
their shareholdings and the business of the Group are dealt with promptly and
informatively.
The Company’s website is under continuous development to enable better
communication with both existing and potential new shareholders.
THE BRIBERY ACT 2010
The Company is committed to acting ethically, fairly and with integrity in all
its endeavours and compliance with the Company’s anti–bribery code is
monitored closely.
GOVERNANCE
Governance statement by the Chairman of the remuneration committee
The remuneration committee is pleased to present its report for the year ended
31 December 2020. The report is presented in two parts in accordance with the
remuneration regulations.
The first part is the Annual Remuneration Report which details remuneration
awarded to Directors and non-executive Directors during the year. The
shareholders will be asked to approve the Annual Remuneration Report as an
ordinary resolution (as in previous years) at the AGM in June 2021.
The second part is the Remuneration Policy which details the remuneration
policy for Directors, can be found at www.lap.co.uk. The current remuneration
policy was subject to a binding vote which was approved by shareholders at the
AGM in July 2020. The approval will continue to apply for a 3 year period
commencing from then. The committee reviewed the existing policy and deemed
that no changes were necessary to the current arrangements.
Both of the reports have been prepared in accordance with The Large and
Medium-sized Companies and Groups (Accounts and Reports) (Amendment)
Regulations 2013.
The Company’s auditor, RSM UK Audit LLP is required by law to audit certain
disclosures and where disclosures have been audited that is indicated.
C A Parritt
Chairman, Remuneration Committee
6 May 2021
GOVERNANCE
Annual remuneration report
The following information has been audited
Single total figure of remuneration for the year ended 31 December 2020
Salary and fees £’000 BONUSES £’000 BENEFITS £’000 Long Term Incentive Awards £’000 PENSIONS £’000 Total 2020 £’000 Total Fixed Remuneration £’000 Total
Variable Remuneration £’000
Executive Directors
Sir Michael Heller* 7 - 62 - - 69 69 -
Sir Michael Heller - Bisichi 83 - - - - 83 83 -
J A Heller 348 - 40 - 30 418 418 -
J Mintz 160 - 4 - 15 179 179 -
598 - 106 - 45 749 749 -
Non-executive Directors
H D Goldring*+ 18 - 11 - - 29 29 -
C A Parritt*+ 37 - - - - 37 37 -
R Priest* 35 - - - - 35 35 -
90 - 11 - - 101 101 -
Total 688 - 117 - 45 850 850 -
J A Heller has an entitlement to an employer pension contribution of £30,000
for 2020 (2019: £72,000). He has elected for these not to be paid at this
time.
Single total figure of remuneration for the year ended 31 December 2019
Salary and fees £’000 BONUSES £’000 BENEFITS £’000 Long Term Incentives Awards £’000 PENSIONS £’000 Total 2019 £’000 Total Fixed Remuneration £’000 Total Variable Remuneration £’000
Executive Directors
Sir Michael Heller* 7 - 59 - - 66 66 -
Sir Michael Heller - Bisichi 82 200 - - - 282 82 200
J A Heller 533 - 43 - 72 648 648 -
J Mintz 143 50 - - 12 205 155 50
765 250 102 - 84 1,201 951 250
Non-executive Directors
H D Goldring*+ 18 - 9 - - 27 27 -
C A Parritt*+ 37 - - - - 37 37 -
R Priest* 35 - - - - 35 25 -
90 - 9 - - 99 99 -
Total 855 250 111 - 84 1,300 1,050 250
* Note 25 “Related party transactions”
+ Members of the remuneration committee for years ended
31 December 2019 and 31 December 2020. C A Parritt was the chair of the
remuneration committee throughout both years.
Benefits include the provision of car, health and other insurance and
subscriptions.
Sir Michael Heller is a director of Bisichi PLC, (a subsidiary for IFRS 10
purposes) and received a salary from that company of £82,500 (2019: £82,500)
for services. He did not receive a bonus in 2020 (2019: £200,000).
Although Sir Michael Heller receives reduced remuneration in respect of his
services to LAP, the Company does supply office premises, property management,
general management, accounting and administration services for a number of
companies in which Sir Michael Heller has an interest. The board estimates
that the annual value of these services, if supplied to a third party, would
have been £300,000 (2019: £300,000). Further details of these services are
set out in Note 25 to the financial statements “Related party
transactions”.
J A Heller is a director of Dragon Retail Properties Limited, (a subsidiary
for IFRS 10 purposes) and received benefits from that company of £11,132
(2019: £9,632) for services. This is included in the remuneration figures
disclosed above.
The remuneration figures disclosed for H D Goldring include fees paid to his
company, Alberon Holdings Limited for consultancy services provided to the
Group. This is detailed in Note 25 to the financial statements.
The remuneration figures for C A Parritt include fees paid to his accountancy
practice for consultancy services provided to the Group. This is detailed in
Note 25 to the financial statements.
R Priest provides consultancy services to the Group. This is detailed in Note
25 to the financial statements.
Summary of directors’ terms
Date of contract Unexpired term Notice period
Executive Directors
Sir Michael Heller 1 January 1971 Continuous 6 months
John Heller 1 May 2003 Continuous 12 months
Jonathan Mintz 11 February 2019 Continuous 3 months
Non-executive Directors
H D Goldring 1 July 1992 Continuous 3 months
C A Parritt 1 January 2006 Continuous 3 months
R Priest 31 July 2013 Continuous 3 months
Total pension entitlements
One director had benefits under money purchase schemes. Under his contract of
employment, he was entitled to a regular employer contribution (currently
£15,000 a year). One other director had benefits under money purchase
schemes. Under his contract of employment he was entitled to a regular
employer contribution (currently £30,000 a year) but has elected not to
receive it. There are no final salary schemes in operation. No pension costs
are incurred on behalf of non-executive Directors. There are no additional
benefits payable to any Director in the event of early retirement.
Share Incentive Plan (SIP)
In 2006 the Directors set up an HMRC approved share incentive plan (SIP). The
purpose of the plan, which is open to all eligible LAP executive Directors and
head office based staff, is to enable them to acquire shares in the Company
and give them a continuing stake in the Group.
The SIP comprises four types of share – (1) free shares under which the
Company may award shares of up to the value of £3,000 each year, (2)
partnership shares, under which members may save up to £1,500 per annum to
acquire shares, (3) matching shares, through which the Company may award up to
two shares for each share acquired as a partnership share, and (4) dividend
shares, acquired from dividends paid on shares within the SIP.
1. Free shares: No free shares were issued in 2019 or
2020.
2. Partnership shares: No partnership shares were issued
in 2019 or 2020.
3. Matching shares: The partnership share agreements for
the year to 31 October 2020 provide for two matching shares to be awarded free
of charge for each partnership share acquired. No partnership shares were
acquired in 2020 (2019: nil). Matching shares will usually be forfeited if a
member leaves employment in the Group within five years of their grant.
4. Dividend shares: Dividends on shares acquired under
the SIP will be utilised to acquire additional shares. Accumulated dividends
received on shares in the SIP to 31 December 2020 amounted to £Nil (2019:
£Nil).
The SIP is set up as an employee benefit trust. The trustee is London &
Associated Securities Limited, a wholly owned subsidiary of LAP, and all
shares and dividends acquired under the SIP will be held by the trustee until
transferred to members in accordance with the rules of the SIP.
Share Option Schemes
The Company has an HMRC approved scheme (Approved Scheme). It was set up in
1986 in accordance with HMRC rules to gain HMRC approved status which gave the
members certain tax advantages. 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. No Director has any options
outstanding under the Approved Scheme nor were any options granted under the
Approved Scheme for the year ended 31 December 2020.
A share option scheme known as the “Non-approved Executive Share Option
Scheme” (Unapproved Scheme) which does not have HMRC approval was set up
during 2000. At 31 December 2020 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 conforms to institutional
shareholder guidelines and best practice provisions. Further details of this
scheme are set out in Note 23 “Share Capital” to the financial statements.
Payments to past directors
No payments were made to past Directors in the year ended 31 December 2020
(2019: none).
Payments for loss of office
No payments for loss of office were made in the year ended 31 December 2020
(2019: none).
Statement of directors’ shareholdings and share interests
Directors’ interests
The interests of the Directors in the ordinary shares of the Company,
including family and trustee holdings, where appropriate, were as follows:
Beneficial interests Non-beneficial interests
31 Dec 20 1 Jan 20 31 Dec 20 1 Jan 20
Sir Michael Heller 5,749,341 5,749,341 19,277,931 19,277,931
H D Goldring 19,819 19,819 - -
J A Heller 1,872,041 1,872,041 †14,073,485 †14,073,485
C A Parritt 36,168 36,168 - -
R Priest - - - -
J Mintz - - - -
† These non-beneficial holdings are duplicated with those of Sir Michael
Heller.
The beneficial holdings of Directors shown above include their interests in
the Share Incentive Plan.
No share awards were made to the Directors in the year, and accordingly no
discretion was exercised in determining any award or bonus payment as a result
of any share price appreciation.
There are no requirements or guidelines for any Director to own shares in the
Company.
The following information is unaudited:
The graph illustrates the Company’s performance as compared with a broad
equity market index over a five year period. Performance is measured by total
shareholder return. The directors have chosen the FTSE All Share – Total
Return Index as a suitable index for this comparison as it gives an indication
of performance against a large spread of quoted companies.
The middle market price of London & Associated Properties PLC ordinary shares
at 31 December 2020 was 8.0p (2019: 21.7p). During the year the share middle
market price ranged between 21.7p and 8.0p.
Remuneration of the Chief Executive over the last ten years
Year CEO Chief Executive Single total figure of remuneration £’000 Annual bonus payment against maximum opportunity* % Long-term incentive vesting rates against maximum opportunity* %
2020 J A Heller 418 0% n/a
2019 J A Heller 648 0% n/a
2018 J A Heller 870 20% n/a
2017 J A Heller 487 11% n/a
2016 J A Heller 569 18% n/a
2015 J A Heller 762 41% n/a
2014 J A Heller 835 49% n/a
2013 J A Heller 716 n/a n/a
2012 J A Heller 417 n/a n/a
2011 J A Heller 671 n/a n/a
*There were no formal criteria or conditions to apply in determining the
amount of bonus payable or the number of shares to be issued prior to 2014.
In light of the current economic situation the Chief Executive did not draw
£185,000 (35%) of his salary for the year.
Percentage change in Executive and non-executive director Remuneration
(audited)
The table below shows the percentage change in remuneration of the Directors
undertaking the role of Chief Executive Officer, Finance Director and
Non-Executive Directors and the average of Company’s colleagues in London &
Associated Properties PLC on a full-time equivalent basis.
Director Base Salary % Change 2020 V 2019 Benefits % Change 2020 V 2019 Bonuses % Change 2020 V 2019
Executive:
Sir Michael Heller 0% 5% -100%
J A Heller -35% -7% 0%
J Mintz 12% N/A -100%
Non-Executive:
H D Goldring 0% 22% 0%
C A Parritt 0% 0% 0%
R Priest 0% 0% 0%
Colleague pay 6% 1% -100%
Relative importance of spend on pay
The total expenditure of the Group on remuneration to all employees (Note 26
refers) is shown below:
2020 £’000 2019 £’000
Employee Remuneration 7,289 9,614
Distributions to shareholders 0 0
Statement of implementation of remuneration policy
The policy was approved at the AGM in July 2020 and was effective from 1
August 2020. The vote on the remuneration policy is binding in nature. The
Company may not then make a remuneration payment or payment for loss of office
to a person who is, is to be, or has been a director of the Company unless
that payment is consistent with the approved remuneration policy, or has
otherwise been approved by
a resolution of members. During the year there were no deviations from the
procedure for the implementation of the remuneration policy as set out in the
policy.
Consideration by the directors of matters relating to directors’
remuneration
The Remuneration Committee considered the executive Directors’ remuneration
and the Board considered the non-executive Directors’ remuneration in the
year ended 31 December 2020. No increases were awarded and no external advice
was taken in reaching this decision. The Company did not engage any
consultants to provide advice or services to materinally assist the
remuneration committee’s considerations.
Shareholder voting
At the Annual General Meeting on 30 July 2020, there was an advisory vote on
the resolution to approve the Remuneration Report, other than the part
containing the remuneration policy.
In addition, on 30 July 2020, there was a binding vote on the resolution to
approve the Remuneration Policy. The results are detailed below:
% of votes for % of votes against Number of votes withheld
Resolution to approve the Remuneration Report (30 July 2020) 80.74 19.26 0
Resolution to approve the Remuneration Policy (30 July 2020) 80.73 19.27 27,265
Although a number of shareholders voted against the approval of the
remuneration report at the 2020 AGM, the Remuneration Committee and the Board
believe that the current remuneration policy (approved by shareholders in
2020) is still appropriate. They have noted that a number of shareholders
voted against the remuneration report. However, they believe that it is
essential to reward executive directors at a commercial rate and that the
payments are in accordance with the agreed Policy.
GOVERNANCE
Remuneration policy summary
The remuneration policy summary below is an extract of the group’s current
remuneration policy on directors’ remuneration (excluding Bisichi PLC),
which was approved by a binding vote at the 2020 AGM. The approved policy
took effect from 1 August 2020.
policy table
Element Purpose Policy Operation Opportunity and performance conditions
Executive directors
Base salary To recognise: Skills Responsibility Accountability Experience Value Considered by remuneration committee on appointment Set at a level considered appropriate to attract, retain, motivate and reward the right individuals Reviewed annually whenever there is a change of role or operational responsibility There is no prescribed maximum salary or maximum rate of increase, although any increase in excess of inflation is unlikely, unless there are changes in responsibility No individual director will be awarded a base salary in excess of £575,000 a year No specific performance conditions are attached to base salaries
Paid monthly in cash
Pension To provide competitive retirement benefits Company contribution offered at up to 10% of base salary as part of overall remuneration package The contribution payable by the Company is included in the director’s contract of Company contribution offered at up to 10% of base salary as part of overall remuneration package No specific performance conditions are attached to pension contributions
employment Paid into money purchase schemes
Benefits To provide a competitive benefits package Contractual benefits include: Car or car allowance Group health cover Death in service cover Permanent health insurance The committee retains the discretion to approve changes in contractual benefits in The costs associated with benefits offered are closely controlled and reviewed on an annual basis No director will receive benefits of a value in excess of 30% of their base salary No specific performance conditions are attached to contractual benefits
exceptional circumstances or where factors outside the control of the Group lead to
increased costs (e.g. medical inflation)
Annual bonus To reward and incentivise In assessing the performance of the executive team, and in particular to determine whether bonuses are merited the remuneration committee takes into account the overall performance of the business, as well as individual contribution to the business in the period The remuneration committee is using its discretion to determine the level of bonus on The current maximum bonus will not exceed 80% of base salary in any one year but the remuneration committee reserves the power to award up to 150% in an exceptional year Performance conditions will be assessed on an annual basis The performance measures applied may be financial, non-financial, corporate, divisional or individual and in such proportion as the remuneration committee considers appropriate
an annual basis In assessing performance consideration is given to the level of net
rental income, cash flow, voids, realised development gains and income from managing
joint ventures, as well as NAV changes. Achieved results are then compared with
expectation taking account of market conditions Bonuses are generally offered in cash
or shares
Share options To provide executive directors with a long-term interest in the company Where it is necessary to attract, retain, motivate and reward the right individuals, the directors may establish new schemes to replace any expired schemes Offered at appropriate times by the remuneration committee The aggregate number of shares over which options may be granted under all of the company’s option schemes (including any options and awards granted under the company’s employee share plans) in any period of ten years, will not exceed, at the time of grant, 10% of the ordinary share capital of the company from time to time Share options will be offered by the remuneration committee at their discretion and will be subject to
appropriate performance criteria at the time.
Share incentive plan (SIP) To offer a shorter term incentive in the company and to give directors a stake in the group Offered to executive directors and head office staff Maximum participation levels are set by HMRC Of any bonus awarded, Directors may opt to have maximum of £3,000 per year paid in ‘Free Shares’ under the SIP scheme rules
Non-executive directors
Base salary To recognise: Skills Responsibility Experience Risk Value Considered by the board on appointment Set at a level considered appropriate to attract, retain and motivate the individual Experience and time required for the role are considered on appointment Reviewed annually No individual non-executive director will be awarded a base salary in excess of £40,000 a year No performance conditions are attached to base salaries
Pension No pension offered
Benefits No benefits offered except in exchange for sacrificing fees.
Share options Non-executive directors do not participate in the share option schemes
Notes to the Remuneration Policy
The remuneration committee considers the performance measures outlined in the
table above to be appropriate measures of performance and that the KPIs chosen
align the interests of the directors and shareholders.
In setting the policy, the Remuneration Committee has taken the following into
account:
• The need to attract, retain and motivate
individuals of a calibre who will ensure successful leadership and management
of the company
• The LAP Group’s general aim of seeking to reward
all employees fairly according to the nature of their role and their
performance
• Remuneration packages offered to similar companies
within the same sector
• The need to align the interests of shareholders as
a whole with the long-term growth of the Group; and
• The need to be flexible and adjust with
operational changes throughout the term of this policy
The remuneration of non-executive directors is determined by the board, and
takes into account additional remuneration for services outside the scope of
the ordinary duties of non-executive directors.
For details of remuneration of other company employees please see page 25
A copy of the full policy can be found at www.lap.co.uk.
GOVERNANCE
Audit committee report
The committee’s terms of reference have been approved by the board and
follow published guidelines, which are available on request from the company
secretary.
The audit committee’s primary tasks are to:
• review the scope of external audit, to receive
regular reports from RSM UK Audit LLP 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 judgement and estimation;
• monitor the controls which are in force to ensure
the integrity
of the information reported to the shareholders;
• act as a forum for discussion of internal control
issues and contribute to the board’s review of the effectiveness of the
Group’s internal control and risk management systems and processes;
• to review the risk assessments made by management,
consider key risks with action taken to mitigate these and to act as a forum
for discussion of risk issues and contribute to the board’s review of the
effectiveness of the Group’s risk management control and processes;
• consider once a year the need for an internal
audit function;
• advise the board on the appointment of the
external auditors,
the rotation of the audit partner every five years and on their remuneration
for both audit and non-audit work; discuss the nature and scope of their audit
work and undertake a formal assessment of their independence each year, which
includes:
i) a review of non-audit
services provided to the Group and related fees;
ii) discussion with the
auditors of their written report detailing
all relationships with the Company and any other parties that could affect
independence or the perception of independence;
iii) 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
iv) obtaining a written
confirmation from the auditors that,
in their professional judgement, they are independent.
Meetings
The committee meets at least twice a year prior to the publication
of the annual results and discusses and considers the half year results prior
to their approval by the board. The audit committee meetings are attended by
the external audit partner, chief executive, finance director and company
secretary. During the year the members of the committee also meet on an
informal basis to discuss any relevant matters which may have arisen.
Additional formal meetings may be held as necessary.
During the past year the committee:
• met with the external auditors, and discussed
their reports to
the audit committee;
• approved the publication of annual and half year
financial results;
• considered and approved the annual review of
internal controls;
• decided that there was no current need for an
internal audit function;
• agreed the independence of the auditors and
approved their fees for both audit and non-audit services as set out in Note 2
to the financial statements;
• noted the revised procedures applied by the
auditors following the FRC comments on the 2018 audit, concluded in March
2020;
• the chairman of the audit committee has also had
separate meetings and discussions with the external audit partner; and
• conducted a tender process to identify a successor
auditor to RSM UK Audit LLP.
FINANCIAL REPORTING
As part of its role, the Audit Committee assessed the audit findings that were
considered most significant to the financial statements, including those areas
requiring significant judgement and/or estimation. When assessing the
identified financial reporting matters, the committee assessed quantitative
materiality primarily by reference to the carrying value of the group’s
total assets, given that the group operates a principally asset based
business. When determining quantitative materiality, the Board also gave
consideration to the value of revenues generated by the group and net asset
value, given that they are key trading and business KPIs. The qualitative
aspects of any financial reporting matters identified during the audit process
were also considered when assessing their materiality. Based on the
considerations set out above we have considered quantitative errors
individually or in aggregate in excess of approximately £1.25 million in
relation to the Group and £0.65 million in relation to the parent company and
£0.3 million for the Bisichi group to be material.
External Auditor
The 2020 financial year is the final year in which RSM UK Audit LLP is able to
act as auditor to London & Associated Properties PLC under the mandatory audit
firm rotation rules. There is also a rotation requirement that audit partners
rotate after five years. The audit partner, Geoff Wightwick, had completed
five years’ audits after the 2019 financial year audit. The audit committee,
having regard to the FRC, FCA and PRA’s Covid-19 Joint Statement of 26 March
2020, considered that his rotation and replacement with a new RSM UK Audit LLP
partner for this final year’s audit would not be in the best interests of
audit quality during coronavirus and agreed that Mr Wightwick should serve an
additional year. Additional safeguards were applied by the audit firm to
ensure auditor independence was not compromised.
In the United Kingdom London & Associated Properties PLC provides extensive
administration and accounting services to Bisichi PLC, which has its own audit
committee and employs BDO LLP, a separate and independent firm of registered
auditor.
In accordance with current legislation both London & Associated Properties PLC
and Bisichi PLC have to change their current auditors.Proposals to appoint
Kreston Reeves LLP will be put forward at the 2021 AGM of both companies.
C A Parritt
Chairman – Audit Committee
6 May 2021
GOVERNANCE
Directors’ responsibilities statement
Directors are responsible for preparing the Strategic Report and the
Directors’ Report, the Directors’ Remuneration Report and the financial
statements in accordance with applicable law and regulations.
Company law requires the directors to prepare group and company financial
statements for each financial year. The directors have elected under company
law to prepare group financial statements in accordance with international
accounting standards in conformity with the requirements of the Companies Act
2006 and are additionally required under the Disclosure Guidance and
Transparency Rules of the Financial Conduct Authority to prepare the group
financial statements in accordance with international financial reporting
standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in
the European Union. The directors have elected under company law to prepare
the company financial statements in accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom Accounting Standards and
applicable law).
The group financial statements are required by law and international
accounting standards in conformity with the requirements of the Companies Act
2006 and international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union to present
fairly the financial position and performance of the group; the Companies Act
2006 provides in relation to such financial statements that references in the
relevant part of that Act to financial statements giving a true and fair view
are references to their achieving a fair presentation.
Under company law the directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the group and the company and of the profit or loss of the group
for that period.
In preparing each of the group and company financial statements, the directors
are required to:
a. select suitable accounting policies and then apply
them consistently;
b. make judgements and accounting estimates that are
reasonable and prudent;
c. for the group financial statements, state whether
they have been prepared in accordance with international accounting standards
in conformity with the requirements of the Companies Act 2006 and
international financial reporting standards adopted pursuant to Regulation
(EC) No 1606/2002 as it applies in the European Union.
d. for the company financial statements, state whether
applicable UK accounting standards have been followed, subject to any material
departures disclosed and explained in the company financial statements;
e. prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the group and the company
will continue in business.
The directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the group’s and the company’s transactions
and disclose with reasonable accuracy at any time the financial position of
the group and the company and enable them to ensure that the financial
statements and the Directors’ Remuneration Report comply with the Companies
Act 2006 and, as regards the group financial statements, Article 4 of the IAS
Regulation.. They are also responsible for safeguarding the assets of the
group and the company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
Directors’ statement pursuant to the Disclosure Guidance and Transparency
Rules
Each of the directors, whose names and functions are listed on page 15 confirm
that, to the best of each person’s knowledge:
a. the financial statements, prepared in accordance with
the applicable set of accounting standards, give a true and fair view of the
assets, liabilities, financial position and loss of the company and the
undertakings included in the consolidation taken as a whole; and
b. the Strategic Report contained in the Annual Report
includes a fair review of the development and performance of the business and
the position of the company and the undertakings included in the consolidation
taken as a whole, together with a description of the principal risks and
uncertainties that they face.
The directors are responsible for the maintenance and integrity of the
corporate and financial information included on the London & Associated
Properties PLC website.
Legislation in the United Kingdom governing the preparation and dissemination
of financial statements may differ from legislation in other jurisdictions.
GOVERNANCE
Independent auditor’s report
TO THE MEMBERS OF LONDON & ASSOCIATED PROPERTIES PLC
Opinion
We have audited the financial statements of London & Associated Properties PLC
(the ‘parent company’) and its subsidiaries (the ‘group’) for the year
ended 31 December 2020 which comprise the consolidated income statement, the
consolidated statement of comprehensive income, the consolidated balance
sheet, the consolidated statement of changes in shareholders’ equity, the
consolidated cash flow statement, the company balance sheet, the company
statement of changes in equity and notes to the financial statements,
including significant accounting policies. The financial reporting framework
that has been applied in the preparation of the group financial statements is
applicable law and International Accounting Standards in conformity with the
requirements of the Companies Act 2006 and international financial reporting
standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in
the European Union. The financial reporting framework that has been applied in
the preparation of the parent company financial statements is applicable law
and United Kingdom Accounting Standards including FRS 101 “Reduced
Disclosure Framework” (United Kingdom Generally Accepted Accounting
Practice).
In our opinion:
• the financial statements give a true and fair view
of the state of the group’s and of the parent company’s affairs as at 31
December 2020 and of the group’s loss for the year then ended;
• the group financial statements have been properly
prepared in accordance with International Accounting Standards in conformity
with the requirements of the Companies Act 2006 and international financial
reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in 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 regulations.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor’s responsibilities for the
audit of the financial statements section of our report. We are independent of
the group and parent company in accordance with the ethical requirements that
are relevant to our audit of the financial statements in the UK, including the
FRC’s Ethical Standard as applied to listed public interest entities and we
have fulfilled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’
use of the going concern basis of accounting in the preparation of the
financial statements is appropriate. For an explanation of how we evaluated
management’s assessment of the group’s and parent company’s ability to
continue to adopt the going concern basis of accounting and our key
observations arising in respect to that evaluation, please see the going
concern key audit matter.
Based on the work we have performed, we have not identified any material
uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the group’s or the parent
company’s ability to continue as a going concern for a period of at least
twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to
going concern are described in the relevant sections of this report.
Summary of our audit approach
Key audit matters Group • Valuation of investment properties and inventory • Going concern and impact of COVID-19 Parent Company • None
Materiality Group • Overall materiality: £1.25 million (2019: £1.50 million) • Performance materiality: £0.97 million (2019: £1.13 million) Parent Company • Overall materiality: £0.65 million (2019: £0.65 million) • Performance materiality: £0.49 million (2019: £0.49 million)
Scope Our audit procedures covered 100% of revenue, net assets and loss before tax.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were
of most significance in our audit of the group financial statements of the
current period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including those
which had the greatest effect on the overall audit strategy, the allocation of
resources in the audit and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the group
financial statements as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters.
We have determined the matters described below to be the key audit matters to
be communicated in our report.
Valuation of investment properties and inventory
Key audit matter description The group owns freehold and leasehold investment property held at fair value and development property held as inventory and valued at the lower of cost and net realisable value. The majority of investment properties are valued by two firms of external
independent valuers and these valuations have been adopted in the financial statements. One investment property is valued by an internal valuer. At 31 December 2020 the carrying value of investment property (excluding head leases) was £42.64 million (note
8). The carrying value of development property held as inventory at the same date was £25.01 million (note 12). The assessment of the value of properties is considered a key audit matter due to the relative importance of these assets to the group’s
financial statements, the potential impact of movements in the value of these assets, particularly in light of the impact of Covid-19 on the real estate market, and the subjectivity and complexity of the valuation process which involves significant
judgements and estimates, as disclosed on page 40 of the financial statements.
How the matter was addressed in the audit Investment properties Our response included: • agreeing the valuations of all properties recorded in the financial statements and subject to the external valuation process to the valuation reports prepared by the valuers. These reports covered all of the
value of investment properties, except one property valued at £0.75 million which was subject to internal valuation; • assessing the qualifications and expertise of management’s valuers, considering their objectivity and any threats to their independence.
We concluded that there was no threat which might impair the valuers’ independence and objectivity; • meeting the valuers, both external and internal, to discuss and challenge the assumptions used and the movements in valuations observed in the year; •
consulting an independent auditor’s expert on the valuation of certain properties in the portfolio whose values fell outside our expectations; and • comparing the key inputs to the valuation model to the underlying records of the leases and records of
rents received and against our knowledge of market yields, including by comparison to publicly available market reports produced by independent third parties. Development properties Our response included: • agreeing the cost of properties held as inventory
to underlying records; • for the Sheffield property, held at a value of £17.95 million, assessing the value of the related development project by o reviewing and challenging the assumptions made by management in respect of anticipated sales prices and
development costs, and the forecast profit margin on the project; o consulting an independent auditor’s expert in respect of these assumptions; and o considering the adequacy of the impairment charge made in the year.
Key observations The carrying values of the properties are consistent with the valuation reports provided for the investment properties. We noted that the independent auditor’s expert considered the valuations were generally at the higher end of the range of expected
valuations for those properties reviewed by them. We also noted that management’s valuer had visited all the properties and has an in depth knowledge of the properties and the tenants which supports the assumptions made in their valuations. Properties held
in inventory are carried at the lower of cost and net realisable value.
Going concern and impact of COVID-19
Key audit matter description Covid-19 was declared a global pandemic in the first quarter of the year and continues to have a significant and unprecedented impact on all sections of the global economy, and in particular the real estate sector. The potential risks to the Group include:
• tenants defaulting on, or deferring, rent payments resulting in cash flow difficulties for the Group; • reductions in asset values in the property market, which may cause the Group to breach loan to value covenants; and • tightening of lending conditions
including covenants. The financial statements are prepared on the going concern basis of accounting, and the above factors have an impact on the assessment of the Group’s ability to continue as a going concern. There is a risk, therefore, that the
judgements involved in assessing going concern in the current climate are inappropriate, resulting in a material misstatement. There is also a risk that the disclosures made, including of whether there is a material uncertainty in relation to going
concern, are inadequate or incomplete. Group management has set out its disclosures in relation to going concern and the impact of Covid-19 on pages 18 and 39.
How the matter was addressed in the audit We discussed with management the process they undertook to assess going concern, including the impact of Covid-19. We audited the Group’s assessment of going concern, including cash flow projections and forecast covenant compliance based on normal trading
conditions, which was then sensitised to enable management to assess the potential impact of non payment of rents by tenants under various scenarios. The audit work included: • reviewing the board paper prepared on going concern • comparing the prior
period forecasts to the actual outturn for 2020; • reviewing the base case forecasts in detail for the period to June 2022. We checked the mathematical accuracy of the model, and compared revenues and costs to the actual results for 2020, taking account of
known and reasonably foreseeable changes; • considering the reasonableness of assumptions made in the forecasts and the sensitivity analysis prepared by management; • checking projected covenant compliance to the model under both the base case and
management’s worst case scenario, and against the loan agreements; • applying further sensitivity analysis to management’s model, which included a reduction in certain anticipated cash inflows in the forecast period; • considering the likelihood and
reasonableness of possible mitigating actions proposed by management, including the provision of additional security to cure possible loan to value covenant breaches, and alternative financing plans; • reviewing the component auditor’s assessment of going
concern for Bisichi plc, and discussing it with them. We considered the impact of Bisichi plc’s going concern status on the ability of the LAP group to continue operating as a going concern; and • reviewing the disclosures made in the financial statements
in respect of going concern.
Key observations The conclusions in relation to going concern are set out in the “Conclusions relating to going concern” paragraph above.
Our application of materiality
When establishing our overall audit strategy, we set certain thresholds which
help us to determine the nature, timing and extent of our audit procedures.
When evaluating whether the effects of misstatements, both individually and on
the financial statements as a whole, could reasonably influence the economic
decisions of the users we take into account the qualitative nature and the
size of the misstatements. Based on our professional judgement, we determined
materiality as follows:
Group Parent company
Overall materiality £1.25 million (2019: £1.50 million) £0.65 million (2019: £0.65 million)
Basis for determining overall materiality 3.2% of net assets 3.3% of net assets
Rationale for benchmark applied Net assets are the key criteria on which the performance of the group is measured, and the group regularly reports net asset value per share as a metric to shareholders.
Performance materiality £0.97 million (2019: £1.13 million) £0.49 million (2019: £0.49 million)
Basis for determining performance materiality 75% of overall materiality 75% of overall materiality
Reporting of misstatements to the Audit Committee Misstatements in excess of £63,000 and misstatements below that threshold that, in our view, warranted reporting on qualitative grounds. Misstatements in excess of £33,000 and misstatements below that threshold that, in our view, warranted reporting on qualitative grounds.
An overview of the scope of our audit
The group consists of 31 components. 27 of those are based in the UK with the
other four based in South Africa.
The coverage achieved by our audit procedures was:
Number of components Revenue Net assets Loss before tax
Full scope audit 28 99.5% 99.6% 99.0%
Specific audit procedures 1 0.5% 0.4% 1.0%
Total 29 100.0% 100.0% 100.0%
Analytical procedures at group level were performed for the remaining two
components.
Of the above, full scope audits for 8 components were undertaken by component
auditors.
One component was considered significant as it contained material amounts of
inventory, the recognition of which is a key audit matter for the group. This
component was subject to specific audit procedures in respect of development
properties.
Other information
The other information comprises the information included in the annual report
other than the financial statements and our auditor’s report thereon. The
directors are responsible for the other information contained within the annal
report. Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the course of the audit or otherwise
appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to
determine whether this gives rise to a material misstatement in the financial
statements themselves. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we are
required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
IIn our opinion, the part of the directors’ remuneration report to be
audited has been properly prepared in accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the Strategic Report and
the Directors’ Report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
• the Strategic Report and the Directors’ Report
have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent
company and their environment obtained in the course of the audit, we have not
identified material misstatements in the Strategic Report or the Directors’
Report.
We have nothing to report in respect of the following matters in relation to
which the Companies Act 2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept 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.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out
on page 29, the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and
for such internal control as the directors determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for
assessing the group’s and the parent company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors either intend
to liquidate the group or the parent company or to cease operations, or have
no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
The extent to which the audit was considered capable of detecting
irregularities, including fraud
Irregularities are instances of non-compliance with laws and regulations. The
objectives of our audit are to obtain sufficient appropriate audit evidence
regarding compliance with laws and regulations that have a direct effect on
the determination of material amounts and disclosures in the financial
statements, to perform audit procedures to help identify instances of
non-compliance with other laws and regulations that may have a material effect
on the financial statements, and to respond appropriately to identified or
suspected non-compliance with laws and regulations identified during the
audit.
In relation to fraud, the objectives of our audit are to identify and assess
the risk of material misstatement of the financial statements due to fraud, to
obtain sufficient appropriate audit evidence regarding the assessed risks of
material misstatement due to fraud through designing and implementing
appropriate responses and to respond appropriately to fraud or suspected fraud
identified during the audit.
However, it is the primary responsibility of management, with the oversight of
those charged with governance, to ensure that the entity’s operations are
conducted in accordance with the provisions of laws and regulations and for
the prevention and detection of fraud.
In identifying and assessing risks of material misstatement in respect of
irregularities, including fraud, the group audit engagement team and component
auditors:
• obtained an understanding of the nature of the
industries and sectors, including the legal and regulatory frameworks that the
group and parent company operate in and how the group and parent company are
complying with the legal and regulatory frameworks;
• inquired of management, and those charged with
governance, about their own identification and assessment of the risks of
irregularities, including any known actual, suspected or alleged instances of
fraud;
• discussed matters about non-compliance with laws
and regulations and how fraud might occur including assessment of how and
where the financial statements may be susceptible to fraud.
All relevant laws and regulations identified at a Group level and areas
susceptible to fraud that could have a material effect on the financial
statements were communicated to component auditors. Any instances of
non-compliance with laws and regulations identified and communicated by a
component auditor were considered in our audit approach.
The most significant laws and regulations were determined as follows:
LEGISLATION / REGULATION ADDITIONAL AUDIT PROCEDURES PERFORMED BY THE GROUP AUDIT ENGAGEMENT TEAM AND COMPONENT AUDITORS INCLUDED:
IFRS, FRS 101 and Companies Act 2006 Review of the financial statement disclosures and testing to supporting documentation; and completion of disclosure checklists to identify areas of non-compliance.
Tax compliance regulations Inspection of advice received from external tax advisors.
Mining laws and regulations Obtaining an understanding of the control environment in monitoring compliance with laws and regulations in Bisichi plc, which included consideration of the South African Mining Charter.
The areas that we identified as being susceptible to material misstatement due
to fraud were:
RISK Audit procedures performed by the audit engagement team and component auditors:
Revenue recognition in coal sales Verification of the recognition point of coal sales compared to the revenue recognition policy, terms of contract and dispatch/delivery documents for items pre and post year end.
Management override of controls Testing the appropriateness of journal entries and other adjustments; assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business.
A further description of our responsibilities for the audit of the financial
statements is located on the Financial Reporting Council’s website at:
http://www.frc.org.uk/auditorsresponsibilities. This description forms part of
our auditor’s report.
Other matters which we are required to address
Following the recommendation of the audit committee, we were appointed by the
Board of Directors on 27 July 1987 to audit the financial statements for the
year ending 31 December 1987 and subsequent financial periods.
The period of total uninterrupted consecutive appointments is 34 years,
covering the years ended 31 December 1987 to 31 December 2020.
The non-audit services prohibited by the FRC’s Ethical Standard were not
provided to the group or the parent company and we remain independent of the
group and the parent company in conducting our audit.
During the period under review agreed upon procedures were completed in
respect of a number of the group’s service charge accounts.
Our audit opinion is consistent with the additional report to the audit
committee.
Use of our report
This report is made solely to the company’s members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work
has been undertaken so that we might state to the company’s members those
matters we are required to state to them in an auditor’s report and for no
other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company and the company’s
members as a body, for our audit work, for this report, or for the opinions we
have formed.
Geoff Wightwick (Senior Statutory Auditor)
For and on behalf of RSM UK Audit LLP, Statutory Auditor
Chartered Accountants
25 Farringdon Street
London
EC4A 4AB
6 May 2021
financial statements
Consolidated income statement
for the year ended 31 December 2020
Notes 2020 £’000 2019 £’000
Group revenue 1 35,018 63,966
Operating costs (39,942) (60,766)
Operating (loss)/profit (4,924) 3,200
Finance income 4 30 86
Finance expenses 4 (2,869) (3,252)
Result before revaluation and other movements (7,763) 34
Non–cash changes in valuation of assets and liabilities and other movements
Exchange gains 39 –
Decrease in value of investment properties 8 (2,269) (2,988)
Increase/(decrease) in value of trading investments 67 (6)
Decrease in value of other investments (20) (1,749)
Adjustment to interest rate derivative 21 (200) 169
Loss for the year before taxation 2 (10,146) (4,540)
Income tax credit/(charge) 5 1,086 (951)
Loss for the year (9,060) (5,491)
Attributable to:
Equity holders of the Company (6,704) (6,477)
Non-controlling interest 24 (2,356) 986
Loss for the year (9,060) (5,491)
Earnings per share
Loss per share - basic and diluted 7 (7.86)p (7.59)p
Consolidated statement of comprehensive income
for the year ended 31 December 2020
2020 £’000 2019 £’000
Loss for the year (9,060) (5,491)
Other comprehensive expense:
Items that may be subsequently recycled to the income statement:
Exchange differences on translation of Bisichi PLC foreign operations (464) (49)
Other comprehensive expense for the year net of tax (464) (49)
Total comprehensive expense for the year net of tax (9,524) (5,540)
Attributable to:
Equity shareholders (6,866) (6,493)
Non–controlling interest (2,658) 953
Total comprehensive expense for the year net of tax (9,524) (5,540)
financial statements
Consolidated balance sheet
at 31 December 2020
Notes 2020 £’000 2019 £’000
Non–current assets
Market value of properties attributable to Group 8 42,640 44,580
Present value of head leases 8 3,344 3,326
Property 45,984 47,906
Mining reserves, property, plant and equipment 9 10,986 10,472
Investments 14 1,746 287
58,716 58,665
Current assets
Inventories - Property 12 25,013 26,915
Inventories - Mining 13 3,445 2,432
Trade and other receivables 15 8,190 8,399
Corporation tax recoverable – 19
Investments 16 833 1,119
Cash and cash equivalents 7,194 13,533
44,675 52,417
Total assets 103,391 111,082
Current liabilities
Trade and other payables 17 (16,133) (12,835)
Borrowings 18 (10,274) (10,120)
Lease liabilities 19 (514) (424)
Current tax liabilities (209) (457)
(27,130) (23,836)
Non–current liabilities
Borrowings 18 (30,853) (31,063)
Interest rate derivatives 21 (200) –
Lease liabilities 19 (3,865) (3,842)
Provisions 20 (1,442) (1,554)
Deferred tax liabilities 22 (355) (1,654)
(36,715) (38,113)
Total liabilities (63,845) (61,949)
Net assets 39,546 49,133
Equity attributable to the owners of the parent
Share capital 23 8,554 8,554
Share premium account 4,866 4,866
Translation reserve (Bisichi PLC) (1,030) (868)
Capital redemption reserve 47 47
Retained earnings (excluding treasury shares) 17,567 24,271
Treasury shares 23 (144) (144)
Retained earnings 17,423 24,127
Total equity attributable to equity shareholders 29,860 36,726
Non–controlling interest 24 9,686 12,407
Total equity 39,546 49,133
Net assets per share 7 34.99p 43.04p
These financial statements were approved by the board of directors and
authorised for issue on 6 May 2021 and signed on its behalf by:
Sir Michael Heller
Jonathan Mintz Company Registration No. 341829
Director
Director
financial statements
Consolidated statement of changes in shareholders’ equity
for the year ended 31 December 2020
Share Share Translation Capital Treasury Retained Total Non– Total
capital premium reserves redemption shares earnings excluding controlling equity
£’000 £’000 £’000 reserve £’000 excluding Non– Interests £’000
£’000 treasury Controlling £’000
shares Interests
£’000 £’000
Balance at 1 January 2019 8,554 4,866 (852) 47 (144) 30,906 43,377 12,309 55,686
(Loss)/profit for year – – – – – (6,477) (6,477) 986 (5,491)
Other comprehensive expense:
Currency translation – – (16) – – – (16) (33) (49)
Total other comprehensive expense – – (16) – – – (16) (33) (49)
Total comprehensive expense – – (16) – – (6,477) (6,493) 953 (5,540)
Transactions with owners:
Dividends – equity holders – – – – – (158) (158) – (158)
Dividends – non–controlling interests – – – – – – – (855) (855)
Transactions with owners – – – – – (158) (158) (855) (1,013)
Balance at 31 December 2019 8,554 4,866 (868) 47 (144) 24,271 36,726 12,407 49,133
Loss for year – – – – – (6,704) (6,704) (2,356) (9,060)
Other comprehensive expense:
Currency translation – – (162) – – – (162) (302) (464)
Total other comprehensive expense – – (162) – – – (162) (302) (464)
Total comprehensive expense – – (162) – – (6,704) (6,866) (2,658) (9,524)
Transactions with owners:
Dividends – non–controlling interests – – – – – – – (63) (63)
Transactions with owners – – – – – – – (63) (63)
Balance at 31 December 2020 8,554 4,866 (1,030) 47 (144) 17,567 29,860 9,686 39,546
financial statements
Consolidated cash flow statement
for the year ended 31 December 2020
2020 2019 £’000
£’000
Operating activities
Loss for the year before taxation (10,146) (4,540)
Finance income (30) (86)
Finance expense 2,869 3,252
Decrease in value of investment properties 2,269 2,988
(Increase)/decrease in trading investments (47) 1,755
Adjustment to interest rate derivative 200 (169)
Loss on sale of inventory - property – 991
Depreciation 2,455 2,407
Development expenditure on inventories (398) (409)
Sale of inventory - property – 9,309
Exchange adjustments (39) 123
Change in inventories 1,173 805
Change in receivables (380) (448)
Change in payables 3,717 (994)
Cash generated from operations 1,643 14,984
Income tax paid (198) (1,199)
Cash inflows from operating activities 1,445 13,785
Investing activities
Disposal of assets held for sale – 2,285
Acquisition of investment properties, mining reserves, plant and equipment (3,515) (3,350)
Disposal of other investments 253 –
Acquisition of other investments (1,379) (490)
Interest received 30 86
Cash outflows from investing activities (4,611) (1,469)
Financing activities
Interest paid (2,675) (2,932)
Interest obligation under finance leases (178) (259)
Repayment of lease liabilities (231) (193)
Receipt of bank loan - Bisichi PLC 61 3,908
Repayment of bank loan - Bisichi PLC (200) (6,011)
Receipt of bank loan - London & Associated Properties PLC 105 13,725
Repayment of bank loan - London & Associated Properties PLC (169) (28,482)
Equity dividends paid – (154)
Equity dividends paid - non-controlling interests (63) (375)
Cash outflows from financing activities (3,350) (20,773)
Net decrease in cash and cash equivalents (6,516) (8,457)
Cash and cash equivalents at beginning of year 8,691 17,120
Exchange adjustment 173 28
Cash and cash equivalents at end of year 2,348 8,691
The cash flows above relate to continuing operations.
Cash and cash equivalents
For the purpose of the cash flow statement, cash and cash equivalents comprise
the following balance sheet amounts:
2020 £’000 2019 £’000
Cash and cash equivalents (before bank overdrafts) 7,194 13,533
Bank overdrafts (4,846) (4,842)
Cash and cash equivalents at end of year 2,348 8,691
£nil of cash deposits at 31 December 2020 were charged as security to
debenture stocks (2019: £340,000).
£nil of cash deposits at 31 December 2020 were charged as security to bank
loans (2019: £2,271,000).
financial statements
Group accounting policies
The following are the principal Group accounting policies:
Basis of accounting
The Group financial statements are prepared in accordance with international
accounting standards in conformity with the requirements of the Companies Act
2006 and are additionally required under the Disclosure Guidance and
Transparency Rules of the Financial Conduct Authority to prepare the group
financial statements in accordance with international financial reporting
standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in
the European Union. The directors have elected under company law to prepare
the company financial statements in accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom Accounting Standards and
applicable law) and these are presented in Note 30.
The financial statements are prepared under the historical cost convention,
except for the revaluation of freehold and leasehold properties and financial
assets at fair value through profit and loss as well as fair value of interest
rate derivatives at fair value.
The Group financial statements are presented in Pounds 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 is the currency of the
country in which the entity has been incorporated. Details of the country in
which each entity has been incorporated can be found in note 11.
The exchange rates used in the accounts were as follows:
£1 Sterling: Rand £1 Sterling: Dollar
2020 2019 2020 2019
Year-end rate 20.0145 18.5759 1.3663 1.3254
Annual average 21.0936 18.4326 1.2833 1.2781
London & Associated Properties PLC (“LAP”), the parent company, is a
public limited company incorporated and domiciled in England and quoted on the
London Stock Exchange. The Company registration number is 341829. LAP and its
subsidiaries (“the Group”) consist of LAP, all of its subsidiary
undertakings, including Bisichi PLC (“Bisichi”) and Dragon Retail
Properties Limited (“Dragon”). The Group without Bisichi and Dragon is
referred to as LAP Group.
Going concern
In reviewing going concern it is necessary to consider separately the position
of LAP Group and Bisichi. Although both are consolidated into group accounts
(as required by IFRS 10), they are managed independently and in the unlikely
event that Bisichi was unable to continue trading this would not affect the
ability of LAP Group to continue operating as a going concern. The same would
be true for Bisichi in reverse.
The directors have reviewed the cash flow forecasts of the LAP Group and the
underlying assumptions on which they are based for the period to 30 June 2022.
The LAP Group’s business activities, together with the factors likely to
affect its future development, are set out in the Chairman's Statement
and Chief Executive’s Review and Financial and Performance Review, including
separate sections discussing the potential impact of COVID-19 on the LAP
Group. In addition, Note 21 to the financial statements sets out the Group’s
objectives, policies and processes for managing its capital; its financial
risk management objectives; details of its financial instruments and hedging
activities; and its exposure to credit risk and liquidity risk.
Given the significant impact of Covid-19 on the macro-economic conditions in
which LAP is operating, additional stress-testing has been carried out on
LAP’s ability to continue in operation under extremely unfavourable
operating conditions, including a scenario in which the Group is unable to
collect a significant proportion of its rent for an extended period of time.
While the assumptions applied in these scenarios are possible, they do not
represent the Group’s view of the likely outturn. However, the results of
these tests help to inform the directors’ assessment of the viability of
LAP. The Group has assessed the impact of these assumptions on the key
financial metrics over a four year period, including the net cash position and
debt covenants. The majority of our properties serve local communities with
convenience retail and tenants therefore tend to be sole traders, rather than
large fashion retailers. Sole traders rely on their property to serve the
local community and are less affected by the structural disruptions seen in
the wider retail environment. The group has over two hundred tenants and is
not reliant on any single large tenant.
Cash position
The worst-case scenario, which management consider a remote possibility,
assumes that for a period of nine months after the date of these accounts:
• 60% of tenants delay payments by nine months
• rent accruing from 20% of tenants who remain in
occupation is never received
• rent accruing from a further 20% of tenants is
never received as they become insolvent
• empty units remain void for a period of 6 months
before reletting
• No dividend is received from Bisichi for the
duration of the forecast
• 75% of tenant arears built up from March 2020 to
date, above normal levels, are never recovered
In the event of the above worst-case assumptions, in December 2021 LAP’s
cash balances would fall to their lowest level of £1.0 million. These
estimates include discretionary spending that could be delayed or stopped
entirely and assume that no additional sources of funding are sought, other
than refinancing of existing debts at their end dates.
group accounting policies
Debt Covenants
The Group has examined potential falls in valuations across all properties and
assessed the effect on existing debt covenants. In all cases we have the
option to paydown the loans to cure Loan to Value covenants.
A reduction in property valuations would require LAP to repay loans in order
to meet Loan to Value covenants. This could be met from a combination of
existing cash reserves, by providing currently unencumbered properties, valued
at £5.0 million, as additional security or by selling or leveraging other
investments and assets. In 2020 there was a reduction in investment property
values of £2,269,000 (4.7%)
Some, but not all, loans are non-recourse to the group. The Group’s largest
loan, of £14 million with Phoenix CRE S.à r.l, is non-recourse and could be
called without a material impact on the wider group in the short and medium
term. Should properties secured against London & Associated Properties PLC’s
£10 million debenture with Aviva suffer a fall in value, either currently
unencumbered properties or cash could be added to the existing security. The
property mix of the current security is 68% community retail and 32%
industrial; values of the latter are widely considered to be more resilient in
the current climate.
Loan debt service covenants react more immediately to short term delays in
rent payments than property values. For all loans, the group is able, at its
discretion, to provide assistance to match any shortfall in rents received.
Debt Refinancing
Dragon has a £1.2 million loan that expired in January 2021 and is currently
rolling over. The lender has offered terms for a nine-month extension to
October 2021 to enable a longer term refinancing, following the delays caused
by COVID. Dragon is considering this offer and is exploring options for longer
term refinancing of this loan. The LTV on this loan is 56% based on the
lender's last valuation and the security is considered attractive.
Broadway Regen has a development loan of £3.67 million (2019: £3.61 million)
expiring in July 2021. This is a residential development which is expected to
have strong returns. We expect that the lender will continue to roll over this
loan until such time as we dispose of the project.
Both these loans are ring-fenced within the group’s joint venture vehicles,
where the major partner is Bisichi PLC. Although in both cases we are
confident that refinancing can be achieved satisfactorily, we note that, were
the loans to be called, there are sufficient assets available to settle the
obligations and their disposal would not affect the ability of the group to
continue to operate as a going concern.
In the longer term, the Group's £14 million loan with Phoenix CRE
S.a.r.l and its £10 million debenture with Aviva are due for repayment in
August and September of 2022 respectively. The Board will be looking at
options to refinance these loans closer to their expiry.
Bisichi PLC
The directors note the consideration of going concern by the Bisichi board,
but also note that any failure of Bisichi would not itself impact on the going
concern status of the LAP group for the reasons set out on page 8 of the
financial statements.
The directors believe that the LAP Group has adequate resources to continue in
operational existence for the foreseeable future and that the LAP 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.
The Bisichi directors continue to adopt the going concern basis of accounting
in preparing the Bisichi annual financial statements.
International Financial Reporting Standards (IFRS)
The Group has adopted all of the new and revised Standards and Interpretations
issued by the International Accounting Standards Board (“IASB”) that are
relevant to its operations and effective for accounting periods beginning 1
January 2020.
The Group has not adopted any Standards or Interpretations in advance of the
required implementation dates.
We are committed to improving disclosure and transparency and will continue to
work with our different stakeholders to ensure they understand the detail of
these accounting changes. We continue to remain committed to a robust
financial policy.
Key judgements and estimates
The preparation of the financial statements requires management to make
assumptions and estimates that may affect the reported amounts of assets and
liabilities and the reported income and expenses, further details of which are
set out below. Although management believes that the assumptions and estimates
used are reasonable, the actual results may differ from those estimates.
Further details of the estimates and judgements which may have a material
impact on next year’s financial statements are contained in the Directors’
Report.
Property operations
Fair value measurements of investment properties
An assessment of the fair value of these assets is undertaken annually. The
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 and is discussed further in the Directors’ Report and shown in
note 8.
Inventories - Property
When the Group begins to redevelop an existing investment property with a view
to sale or when more management time is spent on development activities with a
view to recovering value through the disposal of the property rather than
managing it to generate/receive rent.
The property is transferred to inventory and held as a current asset. The
property is re-measured to fair value as at the date of the transfer with any
gain or loss being taken to the income statement. The re-measured amount
becomes the deemed cost at which the property is then carried at within
Inventories - property, plus any costs for asset management initiatives or
development in preparation for sale and subject to any provision required to
reduce cost to net realisable value.
In assessing the net realisable value of a property development, the directors
make significant estimates and judgements regarding, inter alia, forecast
sales and costs per square foot, gross internal area, affordable housing
allocations and appropriate rates of financing. The degree to which these
variables can be accurately forecast will depend on the stage of development
of the particular project and the impact of changes in these assumptions to
the net realisable value could be material. Further detail is included in note
12.
Mining operations
Life of mine and reserves
The directors of Bisichi consider their judgements and estimates surrounding
the life of the mine and its reserves to have significant effect on the
amounts recognised in the financial statements and to be an area where the
financial statements are subject to significant estimation uncertainty. The
life of mine remaining is currently estimated at 4 years. This life of mine is
based on the group’s existing coal reserves including reserves acquired but
subject to regulatory approval. The life of mine excludes future coal
purchases and coal reserve acquisitions. The group’s estimates of proven and
probable reserves are prepared utilising the South African code for the
reporting of exploration results, mineral resources and mineral reserves (the
SAMREC code) and are subject to assessment by an independent Competent Person
experienced in the field of coal geology and specifically opencast and pillar
coal extraction. Estimates of coal reserves impact assessments of the carrying
value of property, plant and equipment, depreciation calculations and
rehabilitation and decommissioning provisions. There are numerous
uncertainties inherent in estimating coal reserves and changes to these
assumptions may result in restatement of reserves. These assumptions include
geotechnical factors as well as economic factors such as commodity prices,
production costs and yield.
Depreciation, amortisation of mineral rights, mining development costs and
plant & equipment
The annual depreciation/amortisation charge is dependent on estimates,
including coal reserves and the related life of the 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 9.
Provision for mining rehabilitation including restoration and de-commissioning
costs
A provision for future rehabilitation including restoration and
decommissioning costs requires estimates and assumptions to be made around the
relevant regulatory framework, the timing, extent and costs of the
rehabilitation activities and of the risk free rates used to determine the
present value of the future cash outflows. The provisions, including the
estimates and assumptions contained therein, are reviewed regularly by
management. The Group engages an independent expert to assess the cost of
restoration and decommissioning annually as part of management’s assessment
of the provision. Details of the provision for mining rehabilitation can be
found in note 20.
Mining impairment
Property, plant and equipment representing the Group’s mining assets in
South Africa are reviewed for impairment at each reporting date. The
impairment test is performed using the approved Life of Mine plan and those
future cash flow estimates are discounted using asset specific discount rates
and are based on expectations about future operations. The impairment test
requires estimates about production and sales volumes, commodity prices,
proven and probable reserves (as assessed by the Competent Person), operating
costs and capital expenditures necessary to extract reserves in the approved
Life of Mine plan. Changes in such estimates could impact recoverable values
of these assets. Details of the carrying value of property, plant and
equipment can be found in note 9.
The impairment test indicated significant headroom as at 31 December 2020 and
therefore no impairment is considered appropriate. The key assumptions
include: coal prices, including domestic coal prices based on recent pricing
and assessment of market forecasts for export coal; production based on proven
and probable reserves assessed by the independent Competent Person and yields
associated with mining areas based on assessments by the Competent Person and
empirical data. An 8% reduction in average forecast coal prices or a 10%
reduction in yield would give rise to a breakeven scenario. However, the
Bisichi directors consider the forecasted yield levels and pricing to be
appropriate and supportable best estimates.
Basis of consolidation
The Group accounts incorporate the accounts of LAP and all of its subsidiary
undertakings, together with the Group’s share of the results and net assets
of its joint ventures.
Non–controlling interests in subsidiaries are presented separately from the
equity attributable to equity owners of the parent company. When changes in
ownership in a subsidiary do not result in a loss of control, the
non–controlling shareholders’ interests are initially measured at the
non–controlling interests’ proportionate share of the subsidiaries’ net
assets. Subsequent to this, 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. Total
comprehensive income is attributed to non–controlling interests even if this
results in the non–controlling interests having a deficit balance.
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an
entity when it is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns
through its power over the entity. Subsidiaries acquired during the year are
consolidated using the acquisition method. Their results are incorporated from
the date that control passes.
All intra Group transactions, balances, income and expenses are eliminated on
consolidation. Details of the Group’s trading subsidiary companies are set
out in Note 11.
The directors are required to consider the implications of IFRS 10 on the LAP
investment in Bisichi PLC (“Bisichi”). Related parties also have
shareholdings in Bisichi. When combined with the 42% held by LAP and, taking
account of the wide disposition of other shareholders, there is potential for
LAP and these related parties to exercise voting control over Bisichi. IFRS 10
makes it clear that possible voting control is of more significance than
actual management control.
For this reason the directors have concluded that there is a requirement to
consolidate Bisichi with LAP. While, in theory, they could achieve control, in
practice they do not get involved in the day to day operations of Bisichi. The
directors have presented consolidated accounts using the published accounts of
Bisichi but it is important to note that any figures, risks and assumptions
attributable to that company are the responsibility of the Bisichi Board of
directors who are independent from LAP.
As a result of treating Bisichi as a subsidiary, Dragon Retail Properties
Limited and West Ealing Properties Limited are also subsidiaries for
accounting purposes, as LAP and Bisichi each own 50% of these joint venture
businesses.
Goodwill
Goodwill arising on acquisition is recognised as an intangible asset and
initially measured at cost, being the excess of the cost of the acquired
entity over the Group’s interest in the fair value of the assets and
liabilities acquired. Goodwill is carried at cost less accumulated impairment
losses. Goodwill arising from the difference in the calculation of deferred
tax for accounting purposes and fair value in negotiations is judged not to be
an asset and is accordingly impaired on completion of the relevant
acquisition.
Revenue
Revenue comprises sales of coal and property rental and service charge.
Rental income
Rental income arises from properties where leases have granted tenants a right
of occupation and use of the properties. Rental income 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 to tenants, which are normally in
the form of rent free periods. Contingent rents, being the difference between
the rent currently receivable and the minimum lease payments, are recognised
in property income in the periods in which they are receivable. Rent reviews
are recognised when such reviews have been agreed with tenants.
Service charge income
Service charge income and management fees are recorded as income in the period
in which they are earned.
Reverse surrender premiums
Payments received from tenants to surrender their lease obligations are
recognised immediately in the income statement.
Dilapidations
Dilapidations monies received from tenants in respect of their lease
obligations are recognised immediately in the income statement.
Other revenue
Revenue in respect of listed investments held for trading represents
investment dividends received and profit or loss recognised on realisation.
Dividends are recognised in the income statement when the dividend
is received.
Property operating expenses
Operating expenses are expensed as incurred and any property operating
expenditure not recovered from tenants through service charges is charged to
the income statement.
Employee benefits
Share based remuneration
The Company operates a long–term incentive plan and two share option
schemes. The fair value of the conditional awards on shares granted under the
long–term incentive plan and the options granted under 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. At each reporting date, the fair
value of the non–market based performance criteria of the long–term
incentive plan is recalculated and the expense is revised. In respect of the
share option scheme, the fair value of options granted is calculated using the
binomial method.
Pensions
The Company operates a defined contribution pension scheme. The contributions
payable to the scheme are expensed in the period to which they relate.
Foreign currencies
Monetary assets and liabilities are translated at year end exchange rates and
the resulting exchange rate differences are included in the consolidated
income statement within the results of operating activities if arising from
trading activities, including inter-company trading balances and within
finance cost / income if arising from financing.
For consolidation purposes, income and expense items are included in the
consolidated income statement at average rates, and assets and liabilities are
translated at year end exchange rates. Translation differences arising on
consolidation are recognised in other comprehensive income. Foreign exchange
differences on intercompany loans are recorded in other comprehensive income
when the loans are not considered trading balances and are not expected to be
repaid in the foreseeable future. Where foreign operations are sold or closed,
the cumulative exchange differences attributable to 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
Financial assets and financial liabilities are recognised in the Group’s
consolidated statement of financial position when the group becomes a party to
the contractual provisions of the instrument.
Financial assets
Financial assets are classified as either financial assets at amortised cost,
at fair value through other comprehensive income (“FVTOCI”) or at fair
value through profit or loss (“FVPL”) depending upon the business model
for managing the financial assets and the nature of the contractual cash flow
characteristics of the financial asset.
A loss allowance for expected credit losses is determined for all financial
assets, other than those at FVPL, at the end of each reporting period. The
Group applies a simplified approach to measure the credit loss allowance for
trade receivables using the lifetime expected credit loss provision. The
lifetime expected credit loss is evaluated for each trade receivable taking
into account payment history, payments made subsequent to year end and prior
to reporting, past default experience and the impact of any other relevant and
current observable data. The group applies a general approach on all other
receivables classified as financial assets. The general approach recognises
lifetime expected credit losses when there has been a significant increase in
credit risk since initial recognition.
The Group no longer recognises a financial asset when the contractual rights
to the cash flows from the asset expire, or when it transfers the financial
asset and substantially all the risks and rewards of ownership of the asset to
another party. The Group does not recognise financial liabilities when the
Group’s obligations are discharged, cancelled, or have expired.
Investments
Current financial asset investments and other investments classified as
non-current (“The investments”) comprise of shares in listed companies.
The investments are measured at fair value. Any changes in fair value are
measured at fair value through profit or loss account and accumulated in
retained earnings.
Trade and other receivables
Trade receivables are recorded at amortised cost. As the interest that would
be recognised from discounting future cash payments over the short payment
period is not considered to be material, trade receivables which do not carry
any interest are stated at their nominal value as reduced by credit loss
allowances for estimated recoverable amounts.
Trade and other payables
Trade and other payables are non-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.
Bank loans and overdrafts
Bank loans and overdrafts are included as financial liabilities on the Group
balance sheet net of the unamortised costs of issue. The cost of issue is
recognised in the Group income Statement over the life of the bank loan.
Interest payable on those facilities is expensed as a finance cost in the
period to which it relates.
Debenture loans
The debenture loan is included as a financial liability on the balance sheet
net of the unamortised costs on issue. The cost of issue is recognised in the
Group income statement over the life of the debenture. Interest payable to
debenture holders is expensed in the period to which it relates.
Leases
At inception, the Group assesses whether a contract is or contains a lease.
This assessment involves the exercise of judgement about whether the Group
obtains substantially all the economic benefits from the use of that asset,
and whether the Group has the right to direct the use of the asset. The Group
recognises a right-of-use (“ROU”) asset and the lease liability at the
commencement date of the lease.
Lease liabilities include the present value of payments which generally
include fixed payments and variable payments that depend on an index (such as
an inflation index). Each lease payment is allocated between the liability and
finance cost. The lease payments are discounted using the interest rate
implicit in the lease if that rate can be readily determined or if not, the
incremental borrowing rate is used. The finance cost is charged to profit or
loss over the lease period so as to produce a constant rate of interest on the
remaining balance of the liability for each period. In the cashflow statement
the principal and interest portions of the lease payments are classified
within financing activities.
The ROU asset is measured at a cost based on the amount of the initial
measurement of the lease liability, plus initial direct costs and the cost of
obligations to refurbish the asset, less any incentives received. The ROU
asset (other than the ROU assets that relate to land or property that meets
the definition of investment property under IAS 40) is depreciated over the
shorter of the lease term or the useful life of the underlying asset. The ROU
asset is subject to testing for impairment if there is an indicator of
impairment. ROU assets are included in the heading Property, plant and
equipment, and the lease liability is included in the headings current and
non-current lease labilities on the Balance Sheet
Lease liabilities arise for those investment properties held under a leasehold
interest and recorded as investment property. The liability is calculated as
the present value of the minimum lease payments, reducing in subsequent
reporting periods by the apportionment of payments to the lessor. Lease
payments are allocated between the liability and finance charges to achieve a
constant financing rate. Contingent rents payable, such as rent reviews or
those related to rental income, are charged as an expense in the period in
which they are incurred.
The Group has elected not to recognise ROU assets and liabilities for leases
where the total lease term is less than or equal to 12 months, or for low
value leases. The payments for such leases are recognised in the Income
Statement on a straight-line basis over the lease term.
Interest rate derivatives
The Group uses derivative financial instruments to hedge the interest rate
risk associated with the financing of the Group’s business. No trading in
such financial instruments is undertaken. At each reporting date, these
interest rate derivatives are recognised at their fair value to the business,
being the Net Present Value of the difference between the hedged rate of
interest and the market rate of interest for the remaining period of the
hedge.
Ordinary shares
Shares are classified as equity when there is no obligation to transfer cash
or other assets. Incremental costs directly attributable to the issue of new
shares are shown in equity as a deduction, net of tax, from the proceeds.
Treasury shares
When the Group’s own equity instruments are repurchased, consideration paid
is deducted from equity as treasury shares until they are cancelled. When such
shares are subsequently sold or reissued, any consideration received is
included in equity.
Investment properties
Valuation
Investment properties are those that are held either to earn rental income or
for capital appreciation or both, including those that are undergoing
redevelopment for future use as an investment property. They are reported on
the Group balance sheet at fair value, being the amount for which an
investment property could be exchanged between knowledgeable and willing
parties in an arm’s length transaction. The directors’ property valuation
is at fair value.
The external valuation of properties is undertaken by independent valuers who
hold recognised and relevant professional qualifications and have recent
experience in the locations and categories of properties being valued.
Surpluses or deficits resulting from changes in the fair value of investment
properties are reported in the Group income statement in the period in which
they arise.
Capital expenditure
Investment properties are measured initially at cost, including related
transaction costs. Additional expenditure of a capital nature, directly
attributable to the redevelopment or refurbishment of an investment property
held for future use as an investment property, up to the point of it being
completed for its intended use, is capitalised in the carrying value of that
property. Where there is a change of use, such as commencement of development
with a view to sale, the property is transferred to inventory at deemed cost,
which is its fair value on the date of the change in use. Capitalised interest
is calculated with reference to the actual rate payable on borrowings for
development purposes, or for that part of the development costs financed out
of borrowings the capitalised interest is calculated on the basis of the
average rate of interest paid on the relevant debt outstanding.
Disposal
The disposal of investment properties is recorded on completion of the
contract. On disposal, any gain or loss is calculated as the difference
between the net disposal proceeds and the valuation at the last year end plus
subsequent capitalised expenditure in the period.
Depreciation and amortisation
In applying the fair value model to the measurement of investment properties,
depreciation and amortisation are not provided.
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. 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. The
depreciation rates generally applied are:
Motor vehicles 25–33 per cent per annum
Office equipment 10–33 per cent per annum
Right of use assets Over term of lease
Assets held for sale
Non-current assets are classified as held-for-sale if it is highly probable
that they will be recovered primarily through sale rather through continuing
use. Such assets are generally measured at the lower of their carrying amount
and fair value less costs of sale. Impairment losses on initial classification
as assets held-for-sale and subsequent gains and losses on remeasurement are
recognised in profit or loss. Once classified as held-for-sale, intangible
assets and property, plant and equipment are no longer amortised or
depreciated, and any equity-accounted investment is no longer equity
accounted.
Inventories–property
Properties held as trading inventory are those which are being developed with
a view to sale. Inventories are recorded at the lower of cost and net
realisable value. If the net realisable value of inventory is lower than its
carrying value, an impairment loss is recorded in the income statement. If, in
subsequent periods, the net realisable value of inventory that was previously
impaired increases above its carrying value, the impairment is reversed to
align the carrying value of the property with the net realisable value.
Inventory is presented on the balance sheet within current assets.
The Company's properties held as inventory may take longer than one year
to convert to cash, but are shown as current assets as they will be converted
to cash within the Company's operating cycle.
Income taxes
The charge for current taxation is based on the results for the year as
adjusted for disallowed or non–assessable items. Tax payable upon
realisation of revaluation gains recognised in prior periods is recorded as a
current tax charge with a release of the associated 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 recorded 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 historic cost of properties and any available capital
losses. Deferred tax is calculated at the tax rates that are expected to apply
in the period when the liability is settled or the asset is realised. Deferred
tax is charged or credited in the Group income statement, except when it
relates to items charged or credited directly to equity, in which case it is
also dealt with in equity.
Dividends
Dividends payable on the ordinary share capital are recognised as a liability
in the period in which they are approved.
Cash and cash equivalents
Cash comprises cash in hand and on-demand deposits. Cash and cash equivalents
comprise short-term, highly liquid investments that are readily convertible to
known amounts of cash and which are subject to an insignificant risk of
changes in value and original maturities of three months or less.
The cash and cash equivalents shown in the cashflow statement are stated net
of bank overdrafts that are repayable on demand in accordance with IAS 7. This
includes the structured trade finance facility held in South Africa as
detailed in note 21. These facilities are considered to form an integral part
of the treasury management of the Group and can fluctuate from positive to
negative balances during the period.
Bisichi PLC
Mining revenue
Revenue is recognised when the customer has a legally binding obligation to
settle under the terms of the contract when the performance obligations have
been satisfied, which is once control of the goods and/or services have
transferred to the buyer. Revenue is measured based on consideration specified
in the contract with a customer on a per metric tonne basis.
Export revenue is generally recognised when the product is delivered to the
export terminal location specified in the customer contract, at which point
control of the goods have been transferred to the customer. Domestic coal
revenues are generally recognised on collection by the customer from the mine
or when loaded into transport from the mine’s rail sidings, where the
customer pays the transportation costs. Fulfilment costs to satisfy the
performance obligations of coal revenues such as transport and loading costs
borne by the group from the mine to the delivery point are recoded in
operating costs.
Mining costs
Expenditure is recognised in respect of goods and services received. Where
coal is purchased from third parties at point of extraction the expenditure is
only recognised when the coal is extracted and all of the significant risks
and rewards of ownership have been transferred.
Mining reserves, plant and equipment
The cost of property, plant and equipment comprises its purchase price and any
costs directly attributable to bringing the asset to the location and
condition necessary for it to be capable of operating in accordance with
agreed specifications. Freehold land is not depreciated. Other property, plant
and equipment is stated at historical cost less accumulated depreciation. The
cost recognised includes the recognition of any decommissioning assets related
to property, plant and equipment.
Heavy surface mining and other plant and equipment is depreciated at varying
rates depending upon its expected usage. The depreciation rates generally
applied are between 5-10 per cent per annum, but limited to the shorter of its
useful life or the life of the mine.
Other non–current assets, comprising motor vehicles and office equipment,
are depreciated at a rate of between 10% and 33% per annum which is calculated
to write off the cost, less estimated residual value of the assets, on a
straight line basis over their expected useful lives.
Mine inventories
Inventories are stated at the lower of cost and net realisable value. Cost
includes materials, direct labour and overheads relevant to the stage of
production. Cost is determined using the weighted average method. Net
realisable value is based on estimated selling price less all further costs to
completion and all relevant marketing, selling and distribution costs.
Mine 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 impairment
Whenever events or changes in circumstance indicate that the carrying amount
of an asset may not be recoverable that asset is reviewed for impairment. This
includes mining reserves, plant and equipment and net investments in joint
ventures. A review involves determining whether the carrying amounts are in
excess of the 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
company or Group level.
If the carrying amount of an asset exceeds its recoverable amount the 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). Any change in carrying
value is recognised in the comprehensive income statement.
Mine reserves and development cost
The purpose of mine development is to establish secure working conditions and
infrastructure to allow the safe and efficient extraction of recoverable
reserves. Depreciation on mine development is not charged until production
commences or the assets are put to use. On commencement of full commercial
production, depreciation is charged over the life of the associated mine
reserves extractable using the asset on a unit of production basis. The unit
of production calculation is based on tonnes mined as a ratio to proven and
probable reserves and also includes future forecast capital expenditure. The
cost recognised includes the recognition of any decommissioning assets related
to mine development.
Post production stripping
In surface mining operations, the Group may find it necessary to remove waste
materials to gain access to coal reserves prior to and after production
commences. Prior to production commencing, stripping costs are capitalised
until the point where the overburden has been removed and access to the coal
seam commences. Subsequent to production, waste stripping continues as part of
the 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 separates 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 to the tons mined and reserve of the
relevant ore body component or phase.
Segmental reporting
For management reporting purposes, the Group is organised into business
segments distinguishable by economic activity. The Group’s business segments
are LAP operations, Bisichi operations and Dragon operations. These business
segments are subject to risks and returns that are different from those of
other business segments and are the primary basis on which the Group reports
its segmental information. This is consistent with the way the Group is
managed and with the format of the Group’s internal financial reporting.
Significant revenue from transactions with any individual customer, which
makes up 10 per cent or more of the total revenue of the Group, is separately
disclosed within each segment. All coal exports are sales to coal traders at
Richard Bay’s terminal in South Africa with the risks and rewards passing to
the coal trader at the terminal. Whilst the coal traders will ultimately sell
the coal on the international markets the Group has no visibility over the
ultimate destination of the coal. Accordingly, the export sales are recorded
as South Africa revenue.
financial statements
Notes to the financial statements
for the year ended 31 December 2020
1. Results for the year and segmental analysis
Operating Segments are based on the internal reporting and operational
management of the Group. LAP is focused primarily on property activities
(which generate trading income), but it also holds and manages investments.
IFRS 10 requires the Group to treat Bisichi as a subsidiary and therefore it
is consolidated, rather than being included in the accounts as an associate
using the equity method. The Group has also consolidated Dragon, a company
which the Company jointly controls with Bisichi; Bisichi is a coal mining
company with operations in South Africa and also holds investment property in
the United Kingdom and derives income from property rentals. Dragon is a
property investment company and derives its income from property rentals.
These operating segments (LAP, Bisichi and Dragon) are each viewed separately
and have been so reported below.
Business segments
BUSINESS ANALYSIS LAP £’000 BISICHI £’000 DRAGON £’000 2020 TOTAL £’000
Rental income 4,377 919 108 5,404
Service charge income 795 156 21 972
Management income from third party properties 18 – – 18
Mining – 28,624 – 28,624
Group Revenue 5,190 29,699 129 35,018
Direct property costs (2,192) (142) (5) (2,339)
Impairment of inventory - property (2,300) – – (2,300)
Direct mining costs – (24,645) – (24,645)
Overheads (2,317) (5,820) (28) (8,165)
Exchange losses – (38) – (38)
Depreciation (258) (2,193) (4) (2,455)
Operating (loss)/profit (1,877) (3,139) 92 (4,924)
Finance income 5 25 – 30
Finance expenses (2,200) (641) (28) (2,869)
Result before valuation movements (4,072) (3,755) 64 (7,763)
Other segment items
Net decrease on revaluation of investment properties (664) (1,295) (310) (2,269)
(Decrease)/increase in value of other investments (20) 39 – 19
Net increase on revaluation of investments held for trading – 67 – 67
Adjustment to interest rate derivative (200) – – (200)
Revaluation and other movements (884) (1,189) (310) (2,383)
Loss for the year before taxation (4,956) (4,944) (246) (10,146)
Segment assets
- Non-current assets - property 33,383 10,471 2,130 45,984
- Non-current assets - plant & equipment 797 10,174 15 10,986
- Cash & cash equivalents 3,413 3,768 13 7,194
- Inventories - property 25,013 – – 25,013
- Non-current assets - other – 1,746 – 1,746
- Current assets - others 978 11,037 453 12,468
Total assets excluding investment in joint ventures, assets held for sale and trading 63,584 37,196 2,611 103,391
Segment liabilities
Borrowings (30,889) (9,053) (1,185) (41,127)
Current liabilities (5,898) (10,866) (92) (16,856)
Non-current liabilities (3,526) (2,343) 7 (5,862)
Total liabilities (40,313) (22,262) (1,270) (63,845)
Net assets 23,271 14,934 1,341 39,546
Major customers
Customer A – 9,042 – 9,042
Customer B – 7,588 – 7,588
Customer C – 6,291 – 6,291
These customers are for mining revenue in South Africa.
Geographic analysis United Kingdom £’000 South Africa £’000 2020 Total £’000
Revenue 6,521 28,497 35,018
Operating loss (1,323) (3,601) (4,924)
Non-current assets excluding investments 46,842 10,128 56,970
Total net assets 36,636 2,910 39,546
Capital expenditure 365 3,435 3,800
BUSINESS ANALYSIS LAP £’000 BISICHI £’000 DRAGON £’000 2019 TOTAL £’000
Rental income 4,813 1,249 172 6,234
Service charge income 628 181 – 809
Proceeds from sale of trading properties 9,500 – – 9,500
Management income from third party properties 607 – – 607
Mining – 46,816 – 46,816
Group Revenue 15,548 48,246 172 63,966
Direct property costs (1,823) (572) – (2,395)
Impairment of inventory (1,750) – – (1,750)
Cost of sale of trading properties (10,491) – – (10,491)
Direct mining costs – (33,484) – (33,484)
Overheads (3,230) (6,745) (143) (10,118)
Exchange losses – (123) – (123)
Depreciation (215) (2,190) – (2,405)
Operating profit/(loss) (1,961) 5,132 29 3,200
Finance income 58 28 – 86
Finance expenses (2,552) (667) (33) (3,252)
Result before valuation movements (4,455) 4,493 (4) 34
Other segment items
Net decrease on revaluation of investment properties (1,498) (1,480) (10) (2,988)
Decrease in value of other investments (1,749) – – (1,749)
Net decrease on revaluation of investments held for trading – (6) – (6)
Adjustment to interest rate derivative 169 – – 169
Revaluation and other movements (3,078) (1,486) (10) (4,574)
(Loss)/profit for the year before taxation (7,533) 3,007 (14) (4,540)
Segment assets
- Non-current assets - property 33,718 11,748 2,440 47,906
- Non-current assets - plant & equipment 946 9,508 18 10,472
- Cash & cash equivalents 5,709 7,720 104 13,533
- Non-current assets - other – 287 – 287
- Inventories - property 26,915 – – 26,915
- Current assets - others 686 10,940 343 11,969
Total assets excluding investment in joint ventures, assets held for sale and property inventories 67,974 40,203 2,905 111,082
Segment liabilities
Borrowings (30,764) (9,244) (1,175) (41,183)
Current liabilities (5,750) (7,887) (79) (13,716)
Non-current liabilities (3,156) (3,857) (37) (7,050)
Total liabilities (39,670) (20,988) (1,291) (61,949)
Net assets 28,304 19,215 1,614 49,133
Major customers
Customer A – 32,424 – 32,424
Customer B – 10,985 – 10,985
Customer C – 989 – 989
These customers are for mining revenue in South Africa.
Geographic analysis United Kingdom £’000 South Africa £’000 2019 Total £’000
Revenue 17,303 46,663 63,966
Operating profit/(loss) (1,074) 4,274 3,200
Non-current assets excluding investments 48,901 9,477 58,378
Total net assets 44,081 5,052 49,133
Capital expenditure 582 3,177 3,759
Group revenue is external to the Group and the directors consider that inter
segmental revenues are not material.
2. LOSS before taxation
2020 £’000 2019 £’000
Loss before taxation is stated after charging/(crediting):
Staff costs (see note 26) 7,289 9,614
Depreciation on tangible fixed assets - owned assets 2,200 2,185
Depreciation on tangible fixed assets - right of use 255 224
Exchange loss 39 123
Amounts payable to the auditor in respect of both audit and non-audit services
Audit services
Statutory - Company and consolidation 88 88
Subsidiaries - audited by RSM 19 19
Subsidiaries - audited by other auditors 110 89
Further assurance services 4 4
Other services 9 11
230 211
Staff costs are included in overheads.
3. Directors’ emoluments
2020 £’000 2019 £’000
Emoluments 805 1,216
Defined contribution pension scheme contributions 45 84
850 1,300
Sir Michael Heller received £83,000 (2019: £283,000) as a Director of
Bisichi PLC.
Details of directors’ emoluments and share options are set out in the
remuneration report.
4. Finance income and expenses
2020 £’000 2019 £’000
Finance income 30 86
Finance expenses
Interest on bank loans and overdrafts (1,615) (1,963)
Other loans (968) (915)
Interest on derivatives – (122)
Interest on lease obligations (286) (252)
Total finance expenses (2,869) (3,252)
Interest of £282,000 (2019: £282,000) has been capitalised in relation to
the Broadway Regen loan, interest accrues at a rate of 7% (2019: 7%) per annum
5. Income tax
2020 £’000 2019 £’000
Current tax
Corporation tax on profit of the period 30 1,584
Corporation tax on profit of previous periods 2 (2)
Total current tax 32 1,582
Deferred tax
Loss relief 109 44
Origination of timing differences 117 75
Revaluation of investment properties (201) (412)
Accelerated capital allowances (1,143) (370)
Fair value of interest derivatives – 32
Total deferred tax (note 22) (1,118) (631)
Tax on profit on ordinary activities (1,086) 951
Factors affecting tax charge for the year
The corporation tax assessed for the year is different from that at the
effective rate of corporation tax in the United Kingdom of 19 per cent (2019:
19 per cent). The differences are explained below:
2020 £’000 2019 £’000
Loss for the year before taxation (10,146) (4,540)
Taxation at 19 per cent (2019: 19 per cent) (1,927) (863)
Effects of:
Capital gains / (losses) on disposal – 54
Other differences 334 386
Losses not recognised 973 913
Adjustment in respect of prior years 2 (2)
Deferred tax rate adjustment (468) 463
Income tax charge for the year (1,086) 951
Analysis of United Kingdom and overseas tax:
United Kingdom tax included in above:
2020 £’000 2019 £’000
Corporation tax 18 14
Adjustment in respect of prior years - -
Current tax 18 14
Deferred tax (14) (671)
4 (657)
Overseas tax included above:
2020 £’000 2019 £’000
Corporation tax 12 1,570
Adjustments in respect of prior years 2 (2)
Current tax 14 1,568
Deferred tax (1,104) 40
(1,090) 1,608
Factors that may affect future tax charges:
Based on current capital expenditure plans, the Group expects to continue to
be able to claim capital allowances in excess of depreciation in future years,
but at a slightly lower level than in the current year.
A deferred tax provision has been made for gains on revaluing investment
properties.
The Finance (no. 2) Act 2017 was substantively enacted on 16 November 2017.
This includes a restriction on the utilisation of brought forward tax losses
and corporate interest in certain circumstances effective from 1 April 2017.
Following the year end, in the Budget of 3 March 2021, the Chancellor
announced an increase in the rate of corporation tax to 25% from April 2023.
The impact of this increase in the Corporation Tax rate, which will be
recognised in 2023, is likely to be negligible.
6. Dividend
2020 Per share 2020 £’000 2019 Per share 2019 £’000
Dividends paid during the year relating to the prior period 0.000p – 0.180p 154
Dividends to be paid:
Proposed final dividend for the year 0.000p – 0.000p –
The Directors are not recommending a final dividend for 2020, because of the
uncertain state of the global economy.
7. Loss per share and net assets per share
Basic and diluted loss per share has been calculated as follows:
2020 2019
Loss for the year (£’000) (6,704) (6,477)
Weighted average number of ordinary shares in issue (’000) 85,325 85,325
Loss per share (7.86)p (7.59)p
Weighted average number of shares in issue is calculated after excluding
treasury shares of 218,197 (2019: 218,197).
Basic and diluted net assets per share have been calculated as follows:
2020 2019
Net assets (£’000) 29,860 36,726
Shares in issue (’000) 85,325 85,325
Net assets per share 34.99p 43.04p
8. Investment properties
Total £’000 Freehold £’000 Leasehold Leasehold under 50 years £’000
over 50 years £’000
Cost or valuation at 1 January 2020 47,906 30,658 17,041 207
Acquisition of property 329 329 – –
Increase in present value of head leases 18 – 18 –
Decrease on revaluation (2,269) (1,034) (1,225) (10)
At 31 December 2020 45,984 29,953 15,834 197
Representing assets stated at:
Valuation 42,640 29,953 12,497 190
Present value of head leases 3,344 – 3,337 7
At 31 December 2020 45,984 29,953 15,834 197
Total £’000 Freehold £’000 Leasehold over 50 years £’000 Leasehold under 50 years £’000
Cost or valuation at 1 January 2019 50,691 32,318 16,314 2,059
Reclassification – – 1,802 (1,802)
Decrease on revaluation (2,988) (1,722) (1,216) (50)
Acquisition of property 138 62 76 –
Increase in present value of head leases 65 – 65 –
At 31 December 2019 47,906 30,658 17,041 207
Representing assets stated at:
Valuation 44,580 30,658 13,722 200
Present value of head leases 3,326 – 3,319 7
At 31 December 2019 47,906 30,658 17,041 207
The leasehold and freehold properties, excluding the present value of head
leases and directors’ valuations, were valued as at 31 December 2020 by
professional firms of chartered surveyors. The valuations were made at fair
value. The directors’ property valuations were made at fair value.
2020 £’000 2019 £’000
Allsop LLP 31,620 31,715
Carter Towler 10,270 11,565
Directors’ valuations 750 1,300
42,640 44,580
Add: present value of headleases 3,344 3,326
45,984 47,906
Head leases on investment property represent the right-of-use asset on certain
investment property that has a head lease interest. In the current year total
cash outflow for head leases and other lease liabilities is £0.2 million
(2019: £0.2 million). A number of these leases provide for payment of
contingent rent, usually a proportion of net rental income, in addition to
fixed rents.
The historical cost of investment properties, including total capitalised
interest of £1,161,000 (2019: £1,161,000) was as follows:
Freehold £’000 2020 Leasehold Over 50 years £’000 Leasehold under 50 years £’000 Freehold £’000 2019 Leasehold Over 50 years £’000 Leasehold under 50 years £’000
Cost at 1 January 35,213 18,883 785 35,151 17,653 1,939
Reclassification – – – – 1,154 (1,154)
Additions 329 – – 62 76 –
Cost at 31 December 35,542 18,883 785 35,213 18,883 785
Each year external valuers are appointed by the executive directors on behalf
of the Board. The valuers are selected based upon their knowledge,
independence and reputation for valuing assets such as those held by the
Group.
Valuations are performed annually and are performed consistently across all
properties in the Group’s portfolio. At each reporting date appropriately
experienced employees of the Group verify all significant inputs and review
the computational outputs. Valuers submit their report to the Board on the
outcome of each valuation.
Valuations take into account tenure, lease terms and structural condition. The
inputs underlying the valuations include market rent or business
profitability, likely incentives offered to tenants, forecast growth rates,
yields, EBITDA, discount rates, construction costs including any specific site
costs (for example section 106), professional fees, developer’s profit
including contingencies, planning and construction timelines, lease regear
costs, planning risk and sales prices based on known market transactions for
similar properties to those being valued.
Valuations are based on what is determined to be the highest and best use.
When considering the highest and best use the valuer will consider, on a
property by property basis, its actual and potential uses which are
physically, legally and financially viable. Where the highest and best use
differs from the existing use, the valuer will consider the cost and
likelihood of achieving and implementing this change in arriving at the
valuation.
There are often restrictions on Freehold and Leasehold property which could
have a material impact on the realisation of these assets. The most
significant of these occur when planning permission or lease extension and
renegotiation of use are required or when a credit facility is in place. These
restrictions are factored into the property’s valuation by the external
valuer.
The methods of fair value measurement are classified into a hierarchy based on
the reliability of the information used to determine the valuation,
as follows:
Level 1: valuation based on inputs on quoted market prices in active markets.
Level 2: valuation based on inputs other than quoted prices included within
level 1 that maximise the use of observable data directly or from market
prices or indirectly derived from market prices.
Level 3: where one or more significant inputs to valuations are not based on
observable market data.
Class of property Level 3 Carrying / Fair value 2020 £’000 Carrying/ Fair value 2019 £’000 Valuation Key unobservable inputs Range (weighted average) 2020 Range (weighted average) 2019
technique
Freehold – external valuation 29,203 29,358 Income capitalisation Estimated Rental Value Per sq ft p.a Equivalent Yield £5 – £33 (£15) 5.5% – 16.7% (10.3%) £3 – £37 (£15) 5.5% – 13.3% (9.8%)
Leasehold over 50 years – external valuation 12,497 13,722 Income capitalisation Estimated Rental Value Per sq ft p.a Equivalent Yield £5 – £10 (£7) 5.8% – 22.7% (15.6%) £4 – £10 (£8) 5.8% – 21.4% (14.9%)
Leasehold under 50 years – external valuation 190 200 Income capitalisation Estimated Rental Value Per sq ft p.a Equivalent Yield £5 – £5 (£5) 31.6% – 31.6% (31.6%) £5 – £5 (£5) 30.5% – 30.5% (30.5%)
Freehold – Directors’ valuation 750 1,300 Income capitalisation Estimated Rental Value Per sq ft p.a Equivalent Yield £4 – £4 (£4) 12.1% – 12.1% (12.1%) £4 – £4 (£4) 7.0% – 7.0% (7.0%)
At 31 December 42,640 44,580
There are interrelationships between all these inputs as they are determined
by market conditions. The existence of an increase in more than one input
would be to magnify the input on the valuation. The impact on the valuation
will be mitigated by the interrelationship of two inputs in opposite
directions, for example, an increase in rent may be offset by an increase in
yield.
The table below illustrates the impact of changes in key unobservable inputs
on the carrying / fair value of the Group’s properties.
Estimated rental value 10% increase or (decrease) Equivalent yield 25 basis point contraction or (expansion)
2020 £’000 2019 £’000 2020 £’000 2019 £’000
Freehold – external valuation 2,918/(2,918) 2,932/(2,932) 859/(809) 884/(831)
Leasehold over 50 years – external valuation 1,250/(1,250) 1,372/(1,372) 255/(244) 302/(289)
Leasehold under 50 years – external valuation 19/(19) 20/(20) 2/(1) 2/(2)
Freehold – Directors’ valuation 75/(75) 130/(130) 16/(15) 48/(45)
9. Mining reserves, plant and equipment
Total £’000 Mining reserves £’000 Mining equipment £’000 Office building £’000 Office equipment and motor vehicles £’000
Cost at 1 January 2020 29,860 1,226 26,674 1,054 906
Exchange adjustment (1,852) (88) (1,733) – (31)
Valuation increase 110 – – 110 –
Additions 3,471 – 3,430 – 41
At 31 December 2020 31,589 1,138 28,371 1,164 916
Accumulated depreciation at 1 January 2020 19,388 1,212 17,405 211 560
Exchange adjustment (1,240) (89) (1,136) – (15)
Charge for the year 2,455 – 2,130 255 70
Accumulated depreciation at 31 December 2020 20,603 1,123 18,399 466 615
Net book value at 31 December 2020 10,986 15 9,972 698 301
Cost at 1 January 2019 28,173 1,240 26,148 – 785
Exchange adjustment (310) (14) (293) – (3)
IFRS 16 reclassification 1,111 – 57 1,054 –
Additions 3,212 – 3,074 – 138
Disposals (2,326) – (2,312) – (14)
Cost at 31 December 2019 29,860 1,226 26,674 1,054 906
Accumulated depreciation at 1 January 2019 19,514 1,213 17,777 – 524
Exchange adjustment (209) (14) (193) – (2)
Charge for the year 2,409 13 2,133 211 52
Disposals (2,326) – (2,312) – (14)
Accumulated depreciation at 31 December 2019 19,388 1,212 17,405 211 560
Net book value at 31 December 2019 10,472 14 9,269 843 346
Included in the above line items are right-of-use assets over the following:
Total £’000 Mining equipment £’000 Office building £’000 Office equipment and motor vehicles £’000
Net book value at 1 January 2020 924 52 843 29
Revaluation 109 - 109 -
Additions 284 248 - 36
Exchange adjustment (18) (18) - -
Depreciation (293) (19) (254) (20)
Net book value at 31 December 2020 1,006 263 698 45
10. ASSETS HELD FOR SALE
2020 £’000 2019 £’000
At 1 January – 2,285
Disposal – (2,285)
At 31 December – –
11. 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 2020 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
Orchard Square Limited Property 100% 24 Bruton Place, London, W1J 6NE England and Wales
Bisichi 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
Sisonke Coal Processing (pty) Limited Coal processing 62.5% Samora Machel Street, Bethal Road, Middelburg, Mpumalanga, 1050 South Africa
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
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
West Ealing Projects Limited (note B)(note D) Property 50% 24 Bruton Place, London, W1J 6NE England and Wales
Broadway Regen Limited (note E) Property 90% 73 Cornhill, London, EC3V 3QQ England and Wales
Details on the non–controlling interest in subsidiaries are shown under note
25.
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, Dragon and West Ealing Projects and their subsidiaries are
included in the consolidated financial statements in accordance with IFRS 10.
Note E: This company is 90% owned by West Ealing Projects and the equity
shareholdings disclosed relate to that company.
12. Inventories - Property
Development property and infrastructure:
2020 £’000 2019 £’000
At 1 January 26,915 38,556
Capitalised expenditure 116 127
Capitalised interest 282 282
Sales – (10,300)
Impairments (2,300) (1,750)
At 31 December 25,013 26,915
The net realisable value of developments is assessed by the directors and is
subject to key estimates made in respect of future sales prices and build
costs. Variations in these assumptions can have significant effects on the net
realisable value of developments.
In 2018 the Group acquired a development property through West Ealing Projects
Limited a 50:50 joint venture with Bisichi. This property is held at cost of
£7.056 million (2019: £6.665 million) and is currently being developed for
sale.
In 2018 the Group decided to develop for sale Orchard Square, Sheffield and
transferred the asset to inventory. In 2019 part of this property was sold.
The remainder of the property is held at a value of £17.95 million, being
cost of £22 million less an impairment provision of £4.05 million, and is
being developed for sale. A 5% movement in the estimated sales price of this
development would have an effect of £2.4 million (2019: £2.6 million) on its
net realisable value. A 5% movement in the estimated build costs of this
development would have an effect of £1.8 million (2019: £1.8 million) on its
net realisable value. The uncertainties in the assumptions used to calculate
the net realisable value of this development will reduce over time, but will
not resolve within the next 12 months due to the duration of this project.
£25,013,000 (2019: £26,915,000) of the inventory is expected to be recovered
after more than 12 months.
13. Inventories - Mining
2020 £’000 2019 £’000
Coal
Washed 2,924 2,037
Mining production 394 135
Work in progress 111 215
Other 16 45
3,445 2,432
14. Non-current asset investments
2020 Total £’000 Listed shares £’000 Unlisted shares £’000 2019 Total £’000 Listed shares £’000 Unlisted shares £’000 Loan stock £’000
At 1 January 287 287 – 1,783 35 1 1,747
Additions 1,379 1,359 20 255 255 – –
Gain / loss 201 201 – – – – –
Disposals (101) (101) – – – – –
Impairments (20) – (20) (1,751) (3) (1) (1,747)
At 31 December 1,746 1,746 – 287 287 – –
The listed shares are all listed on overseas stock exchanges (Level 1
hierarchy).
15. Trade and other receivables
2020 £’000 2019 £’000
Trade receivables 6,610 6,609
Other receivables 940 1,143
Prepayments and accrued income 640 647
8,190 8,399
Financial assets falling due within one year are held at amortised cost. The
fair value of trade and other receivables approximates their carrying amounts.
The Group applies a simplified approach to measure the credit loss allowance
for trade receivables using the lifetime expected credit loss provision. The
lifetime expected credit loss is evaluated for each trade receivable taking
into account payment history, payments made subsequent to year end and prior
to reporting, past default experience and the impact of any other relevant and
current observable data. The group applies a general approach on all other
receivables classified as financial assets. At year end, the group allowance
for impairment of trade receivables was £658,000 (2019: £301,000), with the
increase being attributable to increased credit risk on property trade
receivables arising due to Covid.
16. Investments in listed securities held at FVPL
2020 £’000 2019 £’000
Market value of listed Investments:
Listed in Great Britain 567 863
Listed outside Great Britain 266 256
833 1,119
Original cost of listed investments 1,098 1,150
Unrealised surplus / deficit of market value versus cost (265) (31)
The market value of listed investments is derived from their quoted share
price on public markets (Level 1 hierarchy).
17. Trade and other payables
2020 £’000 2019 £’000
Trade payables 7,191 3,996
Other taxation and social security costs 618 427
Other payables 3,570 3,894
Accruals and deferred income 4,754 4,518
16,133 12,835
The directors consider that the carrying amount of trade and other payables
approximates to their fair value.
18. Borrowings
2020 £’000 Current 2020 £’000 Non-current 2019 £’000 Current 2019 £’000 Non-current
Other loans (Bisichi) 264 144 261 382
£1.25 million term bank loan (secured) repayable by 2021 (Dragon)* 1,185 – 1,175 –
Bank overdrafts (secured) (Bisichi) 4,846 – 4,842 –
£14 million term bank loan (secured) repayable by 2022 at 6.95 per cent* 193 13,449 96 13,502
£0.04 million term loan (unsecured) repayable by 2026 at 2.5 per cent 4 36 – –
£10 million first mortgage debenture stock 2022 at 8.109 per cent* – 9,973 – 9,956
£3.96 million term bank loan (secured) repayable by 2024 (Bisichi)* – 3,799 – 3,759
£4.026 million term loan (secured) - repayable by 2021 (Broadway Regen) 3,670 – 3,605 –
£3.932 million term loan (secured) repayable by 2028* 112 3,452 141 3,464
10,274 30,853 10,120 31,063
Borrowings analysis by origin:
2020 £’000 2019 £’000
United Kingdom 35,873 35,698
South Africa 5,254 5,485
41,127 41,183
* 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.
No banking covenants were breached by the group during the year, although some
temporary waivers were obtained as described below.
The £14 million term loan taken out in September 2019, with Phoenix CRE S.à
r.l., is secured by way of a charge on a single freehold property, included in
the financial statements as inventory at a value of £17.95 million. This loan
has an interest rate of 5.95% above LIBOR, where LIBOR has a minimum and
maximum rate of 1.0% and 1.5%, respectively. Certain banking covenants were
breached during the year due to the cashflow effects of the first Covid
lockdown on rent receipts from tenants. The breaches were waived by the lender
and all payment obligations to the lender were met by the Group. No banking
covenants have been breached since July 2020.
The Aviva First Mortgage Debenture Stock August 2022 is secured by way of a
charge on specific freehold and leasehold properties which are included in the
financial statements at a value of £17.72 million.
In September 2018 a 10 year term loan of £3.932 million was taken out with
Metro Bank secured by way of a charge on freehold and leasehold properties
which are included in the financial statements at a value of £7.5 million.
The interest cost of the loan is 2.95 per cent above the bank’s base rate
and the loan is amortised over a 20 year repayment profile, with a final
bullet payment after 10 years. An amortisation holiday of 1 year from May 2020
was arranged in the year.
In South Africa, an R85million trade facility is held with Absa Bank Limited
by Sisonke Coal Processing (Pty) Limited (“Sisonke Coal Processing”) in
order to cover the working capital requirements of Bisichi’s South African
operations. The interest cost of the loan is at the South African prime
lending rate plus 3.8% The facility is renewable annually each January, is
repayable on demand and is 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 £11,25 million. All banking covenants were either adhered to or waived by
Absa Bank Limited during the year.
Bisichi holds a £3.96million term loan facility with Julian Hodge Bank
Limited. The loan is secured against Bisichi’s UK retail property portfolio.
The debt package has a five year term and is repayable at the end of the term
in December 2024. The interest cost of the loan is 4.00% above LIBOR. The loan
is 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 £10.27 million.
No banking covenants were breached during the year.
The bank loan of £1.25 million (Dragon) which was repayable in January 2021
is secured by way of a first charge on specific freehold property which is
included in the financial statements at a value of £2.13 million. The
interest cost of the loan is 2 per cent above LIBOR. A refinancing of this
loan is currently underway. An extension of the existing loan is available, if
required, to allow time for refinancing discussions to be concluded.
The bank loan of £4.026 million (Broadway Regen) which is repayable in July
2021, following an extension of the facility, is secured by way of a first
charge on a specific freehold development property, which is included in the
financial statements at £7.1 million. The interest cost of the loan is fixed
at 7.0% per annum.
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.
Analysis of the changes in liabilities arising from financing activities:
2020 £’000 Bank borrowings 2020 £’000 Lease obligations 2019 £’000 Bank borrowings 2019 £’000 Lease obligations
Balance at 1 January 41,183 4,266 56,643 3,261
Exchange adjustments (386) (18) (57) –
Cash movements excluding exchange adjustments 131 (329) (15,583) (456)
Valuation movements 199 460 180 1,461
Balance at 31 December 41,127 4,379 41,183 4,266
19. LEASE LIABILITIES
2020 Total £’000 2020 2020 2020 Other £’000 2019 Total £’000
Head leases on investment property £’000 Office £’000
Minimum lease payments fall due:
Within one year 550 214 265 71 476
Second to fifth year 1,569 853 530 186 1,639
After five years 20,233 20,101 - 132 20,105
22,352 21,168 795 389 22,220
Future finance charges on lease liabilities (17,973) (17,824) (67) (82) (17,954)
Present value of lease liabilities 4,379 3,344 728 307 4,266
Present value of lease liabilities:
Within one year 514 214 232 68 424
Second to fifth year 1,438 786 496 156 1,511
After five years 2,427 2,344 - 83 2,331
4,379 3,344 728 307 4,266
Lease liabilities greater than one year are £3,865,000 (2019: £3,842,000).
Many head leases on investment properties provide for contingent rent in
addition to the rents above, usually a proportion of rental income.
Lease liabilities are effectively secured as the rights to the leased asset
revert to the lessor in the event of default.
20. Provisions
2020 £’000 2019 £’000
At 1 January 1,554 1,571
Exchange adjustment (112) (17)
At 31 December 1,442 1,554
The above provision relates to mine rehabilitation costs in Bisichi.
21. Financial instruments
Total financial assets and liabilities
The Group’s financial assets and liabilities and their fair values are as
follows:
2020 2019
Fair value £’000 Carrying value £’000 Fair value £’000 Carrying value £’000
Cash and cash equivalents 7,194 7,194 13,533 13,533
Investments - non-current assets 1,746 1,746 287 287
Investments - current assets 833 833 1,119 1,119
Other assets 7,550 7,550 7,793 7,793
Derivative liabilities (200) (200) – –
Bank overdrafts (4,846) (4,846) (4,842) (4,842)
Bank loans (26,308) (26,308) (26,385) (26,385)
Lease liabilities (4,379) (4,379) (4,266) (4,266)
Other liabilities (11,262) (11,262) (7,923) (7,923)
Total financial liabilities before debentures (29,672) (29,672) (20,684) (20,684)
Fair value of debenture stocks
Fair value of the Group’s debenture liabilities:
NOMINAL value £’000 Fair value £’000 2020 Fair value adjustment £’000 2019 Fair value adjustment £’000
Debenture stocks (10,000) (10,315) (315) (497)
Tax at 19 per cent (2019: 19 per cent) – – 60 94
Post tax fair value adjustment – – (255) (403)
Post tax fair value adjustment – basic pence per share – – (0.30p) (0.47p)
Except for debenture stocks there is no material difference between the
carrying value and fair value of financial liabilities or financial assets.
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.
Treasury policy
The Group enters derivative transactions such as interest rate swaps, interest
rate collars 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
The LAP Group has a variable interest term debt with minimum and maximum
rates. At 31 December 2020, with other variables unchanged, a 1% increase in
interest rates would change the profit/loss for the year by £155,000 (2019:
£119,000). Bisichi has variable loans and a 1% increase in interest rates
would change the profit/loss for the year by £37,000 (2019: £107,000).
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 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 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 £3.932 million bank loan is secured by way of a first charge on specific
freehold and leasehold property. The rate of interest varies based on the
bank’s base rate.
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.
The £4.026 million bank loan (Broadway Regen) is secured by way of first
charge on a specific freehold development property. This loan is based on a
fixed interest rate of 7.0%.
The £14 million bank loan is secured by way of first charge on a specific
freehold development property held in inventory. The rates of interest vary
based on LIBOR in the UK, with a minimum LIBOR of 1% and a maximum LIBOR of
1.5%.
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. The cash resources and funding facilities together are considered
adequate to meet the Group’s anticipated cash flow requirements for the
foreseeable future.
In South Africa, an R85million trade facility is held with Absa Bank Limited
by Sisonke Coal Processing (Pty) Limited (“Sisonke Coal Processing”) in
order to cover the working capital requirements of Bisichi’s South African
operations. The interest cost of the loan is at the South African prime
lending rate plus 3.8% The facility is renewable annually each January, is
repayable on demand and is secured against inventory, debtors and cash that
are held by Sisonke Coal Processing (Pty) Limited. The facility is included in
cash and cash equivalents within the cashflow statement.
In the UK, Bisichi holds a £3.96million term loan facility with Julian Hodge
Bank Limited. The loan is secured against the group’s UK retail property
portfolio. The debt package has a five year term and is repayable at the end
of the term in December 2024. The interest cost of the loan is 4.00% above
LIBOR.
The £14 million term loan with Pheonix CRE S.à r.l. is secured on a single
freehold property and is repayable in September 2022. The interest cost is
5.95% above LIBOR, where LIBOR has a minimum and maximum rate of 1.0% and
1.5%, respectively.
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. The amounts below relate to gross contractual undiscounted
cashflows.
2020 Total £’000 Less than 1 year £’000 2-5 years £’000 Over 5 years £’000 Carrying values £’000
Bank overdrafts (floating) 4,846 4,846 – – 4,846
Debentures (fixed) 10,000 – 10,000 – 9,973
Bank loans (fixed) 3,710 3,674 36 – 3,710
Bank loans (floating)* 23,108 1,754 18,619 2,735 22,598
Lease liabilities 22,352 550 1,569 20,233 4,379
Trade and other payables (non-interest) 16,016 16,016 – – 16,016
80,032 26,840 30,224 22,968 61,522
2019 Total £’000 Less than 1 year £’000 2-5 years £’000 Over 5 years £’000 Carrying values £’000
Bank overdrafts (floating) 4,842 4,842 – – 4,842
Debentures (fixed) 10,000 – 10,000 – 9,956
Bank loans (fixed) 3,605 3,605 – – 3,605
Bank loans (floating)* 23,558 1,673 19,047 2,838 22,780
Lease liabilities 22,220 476 1,639 20,105 4,266
Trade and other payables (non-interest) 12,408 12,408 – – 12,408
76,633 23,004 30,686 22,943 57,857
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.
* Details of all hedges are shown on the next page.
Market price risk
The Group is exposed to market price risk through interest rate and currency
fluctuations.
Credit risk
The Group is mainly exposed to credit risk on its cash and cash equivalents,
trade and other receivables. The maximum exposure to credit risk is
represented by the carrying amount of each financial asset in the balance
sheet which at year end amounted to £17,323,000 (2019: £22,691,000).
To mitigate risk on its cash and cash equivalents, the group only deposits
surplus cash with well-established financial institutions of high quality
credit standing.
The Group’s credit risk is primarily attributable to its trade receivables.
Customers’ credit ratings are reviewed regularly. The Group’s review
includes measures such as the use of external ratings and establishing
purchase limits for each customer. The Group’s approach to measure the
credit loss allowance for trade receivables is outlined in note 15. At year
end, the group impairment provision for expected credit losses provided
against trade receivables was £658,000 (2019: £301,000).
The Group exposure to credit risk on its other receivables is mitigated
through ongoing review of the underlying performance and resources of the
counterparty including evaluation of different scenarios of probability of
default and expected loss applicable to each of the underlying balances.
Foreign exchange risk
Only Bisichi is subject to this risk. All trading is undertaken in the local
currencies except for certain export sales 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 2020 and 2019 the Bisichi Group did not hedge its exposure of
foreign investments held in foreign currencies.
The principal 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 2020, 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 £360,000 (2019: £176,000). 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
£601,000 (2019: £294,000).
The 25% sensitivity has been determined based on the average historic
volatility of the exchange rate for 2019 and 2020.
The table below shows the Bisichi currency profiles of cash and cash
equivalents:
2020 £’000 2019 £’000
Sterling 1,641 4,741
South African Rand 809 1,672
US Dollar 1,318 1,307
3,768 7,720
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:
2020: UK £’000 South Africa £’000
Sterling (70) -
South African Rand 39 (8,878)
US Dollar 1,736 -
1,705 (8,878)
2019: UK £’000 South Africa £’000
Sterling 1,151 -
South African Rand 40 (3,510)
US Dollar 1,582 -
2,773 (3,510)
Borrowing facilities
At 31 December 2020 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 at
the end of this note. Details of other financial liabilities are shown in
Notes 17, 18 and 19.
Interest rate and hedge profile
2020 £’000 2019 £’000
Fixed rate borrowings 13,683 13,561
Floating rate borrowings
– Subject to interest rate collar 13,642 14,773
– Other borrowings 13,802 12,849
41,127 41,183
Average fixed interest rate 7.80% 7.82%
Weighted average collared interest rate 6.95% 6.63%
Weighted average cost of debt on overdrafts, bank loans and debentures 7.04% 7.06%
Average period for which borrowing rate is fixed 2.1 years 2.1 years
Average period for which borrowing rate is swapped 1.7 years 2.6 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 2020 the Group had a £14 million floating rate loan to
September 2022, where LIBOR has a minimum and maximum rate of 1.0% and 1.5%,
respectively. At the year end the fair value liability of this interest rate
collar in the accounts was £200,000 (2019: £nil), as valued by Group.
Dragon had an interest rate hedge of £1.25 million to cover the £1.25
million bank loan. This consisted of a 5 year £1.25 million cap agreement
taken out in November 2015 at 2.5%, which expired in October 2020.
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 2020 Gain/(loss) to income statement £’000
Financial assets
Quoted equities – non-current assets 1,746 – – 1,746 201
Quoted equities – current assets 833 – – 833 (135)
Financial liabilities
Interest rate collar – 200 – 200 (200)
Level 1 £’000 Level 2 £’000 Level 3 £’000 Total £’000 2019 Gain/(loss) to income statement £’000
Financial assets
Quoted equities – non-current assets 287 – – 287 (3)
Quoted equities – current assets 1,119 – – 1,119 (2)
Financial liabilities
Interest rate swaps – – – – 169
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:
2020 £’000 2019 £’000
Total debt 45,506 45,449
Less cash and cash equivalents (7,194) (13,533)
Net debt 38,312 31,916
Total equity 39,748 49,133
96.4% 65.0%
The Group does not have any externally imposed capital requirements.
Following the introduction of IFRS 16 total debt now includes lease
liabilities.
Financial assets
The Group’s principal financial assets are bank balances and cash, trade and
other receivables, investments and assets held for sale. 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.
2020 £’000 2019 £’000
Cash at bank and in hand 7,194 13,533
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
The following table sets out the maturity profile of contractual undiscounted
cashflows of financial liabilities as at 31 December:
Repayment of borrowings
2020 £’000 2019 £’000
Bank loans and overdrafts:
Repayable on demand or within one year 10,274 10,120
Repayable between two and five years 18,145 18,269
Repayable after five years 2,735 2,838
31,154 31,227
Debentures:
Repayable between two and five years 9,973 9,956
41,127 41,183
Certain borrowing agreements contain financial and other conditions that if
contravened by the Group, could alter the repayment profile.
22. Deferred tax liabilities
2020 £’000 2019 £’000
Balance at 1 January 1,654 2,305
Transferred to consolidated income statement (1,118) (631)
Exchange adjustment (181) (20)
Balance at 31 December 355 1,654
The deferred tax balance comprises the following:
Revaluation of properties 113 314
Accelerated capital allowances 2,916 2,810
Short-term timing differences (486) (532)
Unredeemed capital deductions (645) –
Losses and other deductions (1,543) (938)
Deferred tax liability provision at end of year: 355 1,654
There is no time limit in respect of the Group tax loss relief.
In addition, the Group has unused losses and reliefs with a potential value of
£8,022,000 (2019: £7,339,000), which have not been recognised as a deferred
tax asset. As the Group returns to profit, these losses and reliefs can be
utilised.
23. Share capital
The Company has one class of ordinary shares which carry no right to fixed
income.
Number of ordinary 10p shares 2020 Number of ordinary 10p shares 2019 2020 £’000 2019 £’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) (218,197) (218,197) (22) (22)
“Issued share capital” for reporting purposes 85,324,514 85,324,514 8,532 8,532
Treasury shares
Number of ordinary Cost /issue value
10p shares
2020 2019 2020 £’000 2019 £’000
Shares held in Treasury at 1 January 218,197 218,197 144 144
Shares held in Treasury at 31 December 218,197 218,197 144 144
Share Option Schemes
Employees’ share option scheme (Approved scheme)
At 31 December 2020 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 2020 is as follows:
Changes during the year
At 1 January 2020 Options Exercised Options granted Options lapsed At 31 December 2020
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 2020 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 2020 is as follows:
Changes during the year
At 1 January 2020 Options Exercised Options granted Options lapsed At 31 December 2020
Shares issued to date 450,000 – – – 450,000
Shares allocated over which options have not yet been granted 550,000 – – – 550,000
Total shares allocated for issue to employees under the scheme 1,000,000 – – – 1,000,000
The Bisichi PLC Unapproved Option Schemes
Details of the share option schemes in Bisichi are as follows:
Year of grant Subscription price per share Period within which options exercisable Number of shares for which options outstanding at 31 December 2019 Number of share options issued/exercised/ (cancelled) during year Number of shares for which options outstanding at 31 December 2020
2015 87.0p Sep 2015 – Sep 2025 300,000 – 300,000
2018 73.5p Feb 2018 - Feb 2028 380,000 – 380,000
The exercise of options under the Unapproved Share Option Schemes, for certain
option issues, is subject to the satisfaction of the objective performance
conditions specified by the remuneration committee, which will conform to
institutional shareholder guidelines and best practice provisions in force
from time to time.
There are no performance or service conditions attached to 2015 and 2018
options which are outstanding at 31 December 2019.
2020 Number 2020 Weighted average exercise price 2019 Number 2019 Weighted average exercise price
Outstanding at 1 January 680,000 79.5p 680,000 79.5p
Outstanding at 31 December 680,000 79.5p 680,000 79.5p
Exercisable at 31 December 680,000 79.5p 680,000 79.5p
24. Non–controlling interest (“NCI”)
2020 £’000 2019 £’000
As at 1 January 12,407 12,309
Share of (loss)/profit for the year (2,356) 986
Dividends received (63) (858)
Exchange movement (302) (30)
As at 31 December 9,686 12,407
The following subsidiaries had material NCI:
Bisichi PLC
Black Wattle Colliery (Pty) Ltd
Summarised financial information for these subsidiaries is set out below. The
information is before inter–company eliminations with other companies in the
Group.
BISICHI PLC 2020 £’000 2019 £’000
Revenue 29,805 48,274
(Loss)/profitfor the year attributable to owners of the parent (3,354) 1,046
(Loss)/profit for the year attributable to NCI (440) 549
(Loss)/profit for the year (3,794) 1,595
Other comprehensive expense attributable to owners of the parent (395) (42)
Other comprehensive expense attributable to NCI (69) (7)
Other comprehensive expense for the year (464) (49)
Balance sheet
Non–current assets 23,646 22,885
Current assets 15,004 18,849
Total assets 38,650 41,734
Current liabilities (16,175) (13,179)
Non–current liabilities (6,286) (7,998)
Total liabilities (22,461) (21,177)
Net assets at 31 December 16,189 20,557
Cash flows
From operating activities 1,065 4,305
From investing activities (4,267) (3,730)
From financing activities (926) (3,411)
Net cash flows (4,128) (2,836)
The non–controlling interest comprises of a 37.5% shareholding in Black
Wattle Colliery (Pty) Ltd, a coal mining company incorporated in South Africa.
Summarised financial information reflecting 100% of the underlying
subsidiary’s relevant figures, is set out below.
Black Wattle Colliery (Pty) Limited (“Black Wattle”) 2020 £’000 2019 £’000
Revenue 28,555 46,706
Expenses (31,498) (43,040)
(Loss)/profit for the year (2,943) 3,666
Other comprehensive income – –
Total comprehensive income for the year (2,943) 3,666
Balance sheet
Non–current assets 10,130 9,480
Current assets 9,781 10,462
Current liabilities (16,915) (12,087)
Non–current liabilities (2,224) (3,682)
Net assets at 31 December 772 4,173
The non–controlling interest relates to the disposal of a 37.5% shareholding
in Black Wattle in 2010. The total issued share capital in Black Wattle
Colliery (Pty) Ltd was increased from 136 shares to 1,000 shares at par of
ZAR1 (South African Rand) through the following share issue:
– a subscription for 489 ordinary shares at par by
Bisichi Mining (Exploration) Limited increasing the number of shares held from
136 ordinary shares to a total of 625 ordinary shares;
– a subscription for 110 ordinary shares at par by
Vunani Mining (Pty) Ltd;
– a subscription for 265 “A” shares at par by
Vunani Mining (Pty) Ltd
Bisichi Mining (Exploration) Limited is a wholly owned subsidiary of Bisichi
PLC incorporated in England and Wales.
Vunani Mining (Pty) Ltd is a South African Black Economic Empowerment company
and minority shareholder in Black Wattle.
The “A” shares rank pari passu with the ordinary shares save that they
will have no dividend rights until such time as the dividends paid by Black
Wattle Colliery (Pty) Ltd on the ordinary shares subsequent to 30 October 2008
will equate to ZAR832,075,000.
A non–controlling interest of 15% in Black Wattle is recognised for all
profits distributable to the 110 ordinary shares held by Vunani Mining (Pty)
Ltd from the date of issue of the shares (18 October 2010). An additional
non–controlling interest will be recognised for all profits distributable to
the 265 “A” shares held by Vunani Mining (Pty) Ltd after such time as the
profits available for distribution, in Black Wattle Colliery (Pty) Ltd, before
any payment of dividends after 30 October 2008, exceeds ZAR832,075,000.
25. Related party transactions
Cost recharged to (by) related party £’000 Amounts owed by (to) related party £’000 Advanced to (by) related party £’000
Related party:
Simon Heller Charitable Trust
Current account (63) – –
Loan account – (700) –
Directors and key management
M A Heller and J A Heller 18 (i) – –
H D Goldring (Alberon Holdings Limited) (10) (ii) – –
C A Parritt (18) (ii) – –
R Priest (35) (ii) (9) –
Totals at 31 December 2020 (108) (709) –
Totals at 31 December 2019 (115) (707) –
Nature of costs recharged – (i) Property management fees (ii) Consultancy
fees.
Directors
London & Associated Properties PLC provides office premises, property
management, general management, accounting and administration services for a
number of private property companies in which Sir Michael Heller and J A
Heller have an interest. Under an agreement with Sir Michael Heller no charge
is made for these services on the basis that he reduces by an equivalent
amount the charge for his services to London & Associated Properties PLC. The
board estimates that the value of these services, if supplied to a third
party, would have been £300,000 for the year (2019: £300,000).
The companies for which services are provided are: Barmik Properties Limited,
Cawgate Limited, Clerewell Limited, Cloathgate Limited, Ken–Crav Investments
Limited, London & South Yorkshire Securities Limited, Metroc Limited, Penrith
Retail Limited, Shop.com Limited, South Yorkshire Property Trust Limited,
Wasdon Investments Limited, Wasdon (Dover) Limited, and Wasdon (Leeds)
Limited.
In addition the Company received management fees of £10,000 (2019: £10,000)
for work done for two charitable foundations, the Michael & Morven Heller
Charitable Foundation and the Simon Heller Charitable Trust.
The Simon Heller Trust has placed on deposit with LAP £700,000 at an interest
rate of 9% which is refundable on demand.
Alberon Holdings Limited (Alberon) is a Company in which H D Goldring is a
majority shareholder and director. Alberon provides consultancy services to
the Company on an invoiced fee basis.
R Priest provided consultancy services to the Company on an invoiced fee
basis.
In 2012 a loan was made by Bisichi to one of the Bisichi directors, Mr A R
Heller, for £116,000. Interest is payable on the director’s loan at a rate
of 6.14 per cent. There is no fixed repayment date for the director’s Loan.
The loan amount outstanding at year end was £41,000 (2019: £41,000) and no
repayment (2019: £nil) was made during the year.
The directors are considered to be the only key management personnel and their
remuneration including employer’s national insurance for the year was
£920,000 (2019: £1,464,000). All other disclosures required, including
interest in share options in respect of those directors, are included within
the remuneration report.
26. Employees
The average number of employees, including directors, of the Group during the
year was as follows:
2020 2019
Production 221 204
Administration 34 44
255 248
Staff costs during the year were as follows:
2020 £’000 2019 £’000
Salaries and other costs 6,651 8,741
Social security costs 236 386
Pension costs 402 487
7,289 9,614
27. Capital Commitments
2020 £’000 2019 £’000
Commitments for capital expenditure approved and contracted for at the year end 485 –
All the above relates to Bisichi PLC.
28. Lease rentals receivable
The Group leases out its investment properties to tenants under operating
leases. The future aggregate minimum rentals receivable under
non–cancellable operating leases are as follows:
2020 £’000 2019 £’000
2021 5,013 4,997
2022 4,418 4,247
2023 3,637 3,583
2024 2,829 2,854
2025 + 18,553 18,327
34,450 34,008
29. Contingent liabilities and events after the reporting period
There were no contingent liabilities at 31 December 2020 (2019: £Nil), except
as disclosed in Note 21.
COVID-19 and the consequent lockdown of many of our tenants’ businesses will
have had a short and medium term effect on asset values as tenants’ ability
to meet their obligations to landlords has been affected in some cases. In the
longer term asset values may be affected if there is a more permanent
deterioration in our tenants’ trading due to a wider slowdown in the
economy. The directors are unable to give guidance on how this might affect
asset values due to the level of uncertainty at this time. This is discussed
further in the COVID-19 update in the Strategic Report on page 8 and in the
Going Concern section of the Group Accounting Policies on page 39.
Bank guarantees have been issued by the bankers of Black Wattle Colliery (Pty)
Limited on behalf of the Company to third parties. The guarantees are secured
against the assets of the Company and have been issued in respect of the
following:
2020 £’000 2019 £’000
Rail siding & transportation 50 54
Rehabilitation of mining land 1,441 1,553
Water & electricity 48 52
1,539 1,659
The interpretation of laws and regulations in South Africa where Bisichi
operates can be complex and can lead to challenges from or disputes with
regulatory authorities. Such situations often take significant time to
resolve. Where there is a dispute and where a reliable estimate of the
potential liability cannot be made, or where Bisichi, based on legal advice,
considers that it is improbable that there will be an outflow of economic
resources, no provision is recognised.
Black Wattle Colliery (Pty) Ltd is currently involved in a tax dispute in
South Africa related to VAT. The dispute arose during the year and is related
to events which occurred during and prior to the years ended 31 December 2019.
As at the date of this report, Bisichi has been advised that it has a strong
legal case, that it has complied fully with the legislation and, therefore, no
economic outflow is expected to occur. Because of the nature and complexity of
the dispute, the possible financial effect of a negative decision cannot be
measured reliably. Accordingly, no provision has been booked at the year end.
At this stage, Bisichi believes that the dispute will be resolved in its
favour.
30. Company financial statements
Company balance sheet at 31 December 2020
Notes 2020 £’000 2019 £’000
Fixed assets
Tangible assets 30.3 24,582 23,341
Other investments:
Associated company – Bisichi PLC 30.4 489 489
Subsidiaries and others including Dragon Retail Properties Limited 30.4 45,459 47,922
45,948 48,411
70,530 71,752
Current assets
Debtors 30.5 6,170 5,848
Cash and cash equivalents 2,557 2,359
8,727 8,207
Current liabilities
Amounts falling due within one year 30.6 (47,592) (44,043)
Net current liabilities (38,865) (36,181)
Total assets less current liabilities 31,665 35,571
Non-current liabilities
Amounts falling due after more than one year 30.7 (11,448) (11,604)
Deferred tax falling due after more than one year (671) (345)
Net assets 19,546 23,967
Capital and reserves
Share capital 30.9 8,554 8,554
Share premium account 4,866 4,866
Capital redemption reserve 47 47
Treasury shares 30.9 (144) (144)
Retained earnings 6,223 10,644
Shareholders’ funds 19,546 23,967
The loss for the financial year, before dividends was £4,421,000 (2019:
profit of £9,904,000)
These financial statements were approved by the board of directors and
authorised for issue on 6 May 2021 and signed on its behalf by:
Sir Michael Heller
Jonathan Mintz Company Registration No. 341829
Director
Director
COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2020
Share capital £’000 Share premium £’000 Capital redemption reserve £’000 Treasury shares £’000 Retained earnings excluding treasury shares £’000 Total equity £’000
Balance at 1 January 2019 8,554 4,866 47 (144) 894 14,217
Profit for the year – – – – 9,904 9,904
Total comprehensive income – – – – 9,904 9,904
Transactions with owners:
Dividends – equity holders – – – – (154) (154)
Transactions with owners – – – – (154) (154)
Balance at 31 December 2019 8,554 4,866 47 (144) 10,644 23,967
Loss for the year – – – – (4,421) (4,421)
Total comprehensive expense – – – – (4,421) (4,421)
Balance at 31 December 2020 8,554 4,866 47 (144) 6,223 19,546
£6.8 million (2019: £11.3 million) of retained earnings (excluding treasury
shares) is distributable.
30.1. COMPANY
Accounting policies
The following are the main accounting policies of the Company:
Basis of preparation
The financial statements have been prepared on a going concern basis and in
accordance with Financial Reporting Standard 101 ’Reduced Disclosure
Framework’ (FRS 101) and Companies Act 2006. The financial statements are
prepared under the historical cost convention as modified to include the
revaluation of freehold and leasehold properties and fair value adjustments in
respect of current asset investments and interest rate hedges.
The results of the Company are included in the consolidated financial
statements. No profit or loss is presented by the Company as permitted by
Section 408 of the Companies Act 2006.
In these financial statements, the company has applied the exemptions
available under FRS 101 in respect of the following disclosures:
• Cash Flow Statement and related notes;
• Comparative period reconciliations for share
capital, tangible fixed assets and intangible assets;
• Disclosures in respect of transactions with wholly
owned subsidiaries;
• Disclosures in respect of capital management;
• The effects of new but not yet effective IFRSs;
• Disclosures in respect of the compensation of Key
Management Personnel.
As the consolidated financial statements include the equivalent disclosures,
the Company has also taken the exemptions under FRS 101 available in respect
of the following disclosures:
• IFRS 2 Share Based Payments in respect of Group
settled share based payments;
• The disclosures required by IFRS 7 and IFRS 13
regarding financial instrument disclosures have not been provided apart from
those which are relevant for the financial instruments which are held at fair
value and are not either held as part of the trading portfolio or derivatives.
Key judgements and estimates
The preparation of the financial statements requires management to make
assumptions and estimates that may affect the reported amounts of assets and
liabilities and the reported income and expenses, further details of which are
set out below. Although management believes that the assumptions and estimates
used are reasonable, the actual results may differ from those estimates.
Further details of the estimates are contained in the Directors’ Report and
in the Group accounting policies.
Investments in subsidiaries, associated undertakings and joint ventures
Investments in subsidiaries, associated undertakings and joint ventures are
held at cost less accumulated impairment losses.
Management undertake an annual impairment assessment of the company's
investment in subsidiary undertakings. In making their assessment management
are required to make a number of estimates and assumptions regarding the
future performance of the Group and in particular the valuation of its
property portfolio. Further detail on the valuation of the group's
investment properties is contained in note 8. The impairment assessment
therefore includes a significant degree of management estimation and
judgement.
Fair value measurements of investment properties and investments
An assessment of the fair value of certain assets and liabilities, in
particular investment properties, is required. 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 fair value measurement of the investment properties may be
considered to be less judgemental where external valuers have been used as is
the case with the Company.
The following accounting policies are consistent with those of the Group and
are disclosed on page 39 to 45 of the Group financial statements.
• Revenue
• Property operating expenses
• Employee benefits
• Financial instruments
• Investment properties
• Other assets and depreciation
• Assets held for sale
• Income taxes
• Leases
30.2. Result for the financial year
The Company’s result for the year was a loss of £4,421,000 (2019: profit of
£9,904,000). In accordance with the exemption conferred by Section 408 of the
Companies Act 2006, the Company has not presented its own profit and loss
account.
30.3. Tangible assets
Investment Properties Office
Total £’000 Freehold £’000 Leasehold over 50 years £’000 Leasehold under 50 years £’000 equipment and motor vehicles £’000 Office Building £’000
Cost or valuation at 1 January 2020 23,796 13,650 8,539 206 347 1,054
Additions in the year 1,435 1,325 – – – 110
Increase/(decrease) on revaluation 65 1,075 (1,000) (10) – –
Cost or valuation at 31 December 2020 25,296 16,050 7,539 196 347 1,164
Representing assets stated at:
Valuation 23,785 16,050 7,539 196 – –
Cost 1,511 – – – 347 1,164
25,296 16,050 7,539 196 347 1,164
Depreciation at 1 January 2020 455 – – – 244 211
Charge for the year 259 – – – 4 255
Depreciation at 31 December 2020 714 – – – 248 466
Net book value at 1 January 2020 23,341 13,650 8,539 206 103 843
Net book value at 31 December 2020 24,582 16,050 7,539 196 99 698
The freehold and leasehold properties, excluding the present value of head
leases and directors’ valuations, were valued as at 31 December 2020 by
professional firms of chartered surveyors. The valuations were made at fair
value. The directors’ property valuations were made at fair value.
2020 £’000 2019 £’000
Allsop LLP 21,990 20,050
Directors’ valuation 750 1,300
22,740 21,350
Add: Present value of headleases 1,045 1,045
23,785 22,395
The historical cost of investment properties was as follows:
Freehold £’000 Leasehold over 50 years £’000 Leasehold under 50 years £’000
Cost at 1 January 2020 10,228 9,333 785
Additions 1,325 – –
Cost at 31 December 2020 11,553 9,333 785
Head leases on investment property represent the value attributed to the right
of the Company to occupy and use investment property that has a head lease
interest. In the current year total cash outflow for head leases is £0.1
million (2019: £0.1 million). A number of these leases provide for payment of
contingent rent, usually a proportion of net rental income, in addition to
fixed rents.
Office building represents the value attributed under IFRS 16 to the right of
the Company to occupy its sole office building. In the current year total cash
outflow for the office lease liability is £0.2 million (2019: £0.2 million).
30.4. Other investments
Cost or valuation Total £’000 Shares in subsidiary companies £’000 Shares in joint ventures £’000 Shares in associate £’000
At 1 January 2020 48,411 47,758 164 489
Impairment provision (2,463) (2,463) – –
At 31 December 2020 45,948 45,295 164 489
Subsidiary companies
Details of the Company’s subsidiaries are set out in Note 11. Under IFRS 10
Bisichi PLC and its subsidiaries, West Ealing Projects Limited and its
subsidiary and Dragon Retail Properties Limited are treated in the financial
statements as subsidiaries of the Company.
During the year the Company impaired its investment in Orchard Square Limited
by £2,463,000 (2019: impairment of £1,761,000), following a reduction in the
carrying value of the Orchard Square, Sheffield development property.
30.5. Debtors
2020 £’000 2019 £’000
Trade debtors 598 352
Amounts due from associate and joint ventures 995 872
Amounts due from subsidiary companies 4,154 4,049
Other debtors 102 139
Prepayments and accrued income 321 436
6,170 5,848
30.6. Creditors: amounts falling due within one year
2020 £’000 2019 £’000
Trade payables 48 -
Amounts owed to subsidiary companies 43,632 40,223
Amounts owed to joint ventures 156 156
Other taxation and social security costs 117 267
Lease liabilities 298 258
Other creditors 1,397 1,393
Accruals and deferred income 1,944 1,746
47,592 44,043
30.7. Creditors: amounts falling due after more than one year
2020 £’000 2019 £’000
Lease liabilities 1,475 1,648
Term Debenture stocks:
£10 million First Mortgage Debenture Stock 2022 at 8.109 per cent* 9,973 9,956
11,448 11,604
*The £10 million debenture is shown after deduction of un–amortised issue
costs.
Details of terms and security of overdrafts, loans and loan renewal and
debentures are set out in note 18.
30.7. Creditors: amounts falling due after more than one year continued
Repayment of borrowings: 2020 £’000 2019 £’000
Debentures:
Repayable within one year - -
Repayable between two and five years 9,973 9,956
Repayable in more than five years – –
9,973 9,956
LEASE LIABILITIES 2020 Total £’000 2020 Head leases on investment property £’000 2020 Office £’000 2019 Total £’000
Minimum lease payments fall due:
Within one year 331 66 265 306
Second to fifth year 796 266 530 986
After five years 7,933 7,933 - 8,000
9,060 8,265 795 9,292
Future finance charges on lease liabilities (7,287) (7,220) (67) (7,386)
Present value of lease liabilities 1,773 1,045 728 1,906
Present value of lease liabilities:
Within one year 298 66 232 258
Second to fifth year 743 247 496 916
After five years 732 732 - 732
1,773 1,045 728 1,906
Lease liabilities are effectively secured as the rights to the leased asset
revert to the lessor in the event of default.
Many head leases on investment properties provide for contingent rent in
addition to the rents above, usually a proportion of rental income.
30.8. Deferred tax liability
2020 £’000 2019 £’000
Deferred Taxation
Balance at 1 January (345) (744)
Transfer to profit and loss account (326) 399
Balance at 31 December (671) (345)
The deferred tax balance comprises the following:
Accelerated capital allowances (438) (391)
Short–term timing differences (208) (181)
Revaluation of investment properties (25) 227
Deferred tax asset at year end (671) (345)
30.9. Share capital
Details of share capital, treasury shares and share options are set out in
Note 24.
30.10. Related party transactions
Cost recharged to (by) related party £’000 Amounts owed by (to) related party £’000 Advanced to (by) related party £’000
Related party:
Dragon Retail Properties Limited
Current account 36 (i) (156) –
Bisichi PLC
Current account 200 (ii) 43 –
Simon Heller Charitable Trust
Current account (63) – –
Loan account – (700) –
Directors and key management
M A Heller and J A Heller 18 (i) – –
H D Goldring (Alberon Holdings Limited) (10) (iii) – –
C A Parritt (18) (iii) – –
R Priest (35) (iii) (9) –
Totals at 31 December 2020 128 (822) –
Totals at 31 December 2019 129 (838) –
Nature of costs recharged – (i) Management fees (ii) Property management
fees (iii) Consultancy fees
During the period, the Company entered into transactions, in the ordinary
course of business, with other related parties. The company has taken
advantage of the exemption under paragraph 8(k) of FRS101 not to disclose
transactions with wholly owned subsidiaries.
Dragon Retail Properties Limited – ‘Dragon’ is owned equally by the
Company and Bisichi PLC.
Bisichi PLC – The company has 41.52 per cent ownership of ‘Bisichi’.
Other details of related party transactions are given in note 25.
30.11. EMPLOYEES
The average weekly number of employees of the company during the year were as follows: 2020 £’000 2019 £’000
Directors & Administration 19 22
Staff costs during the year were as follows: 2020 £’000 2019 £’000
Salaries 1,139 1,490
Social Security costs 139 163
Pension costs 121 178
1,399 1,831
30.12. Capital commitments
There were no capital commitments at 31 December 2020 (2019: £Nil).
30.13. FUTURE AGGREGATE MINIMUM RENTALS RECEIVABLE
The Company leases out its investment properties to tenants under operating
leases. The future aggregate minimum rentals receivable under
non–cancellable operating leases are as follows:
2020 £’000 2019 £’000
2021 1,623 1,524
2022 1,372 1,155
2023 1,115 896
2024 878 666
2025 + 2,737 1,680
7,725 5,921
30.14. Contingent liabilities and post balance sheet events
There were no contingent liabilities at 31 December 2020 (2019: £Nil).
COVID-19 and the subsequent lockdown of many of our tenants’ businesses will
have had a short and medium term effect on asset values as tenants’ ability
to meet their obligations to landlords has been affected in some cases. In the
longer term asset values may be affected if there is a more permanent
deterioration in our tenants’ trading due to a wider slowdown in the
economy. The Directors are unable to give guidance on how this might affect
asset values due to the level of uncertainty at this time.
financial statements
Five year financial summary
2020 2019 £M 2018 £M 2017 £M 2016 £M
£M
Portfolio size
Investment properties–LAP^ 31 31 32 62 89
Investment properties–joint ventures - - – – –
Investment properties–Dragon Retail Properties 2 2 2 3 3
Investment properties–Bisichi ^ 10 12 13 13 13
Assets held for sale-LAP - - 2 36 -
Inventories-LAP 25 27 39 - -
68 72 88 114 105
Portfolio activity £M £M £M £M £M
Acquisitions 0.33 0.14 6.55 – –
Disposals – (12.59) (36.44) – –
Additions to inventory at cost 0.39 0.41 6.26 – 0.16
0.72 0.14 (23.63 – 0.16
Consolidated income statement £M £M £M £M £M
Group income 35.02 63.97 56.65 47.87 31.81
(Loss)/profit before tax (10.15) (4.54) 1.27 11.28 (0.97)
Taxation 1.09 (0.95) (0.68) (2.98) (1.18)
(Loss)/profit attributable to shareholders (6.70) (6.48) (2.08) 7.69 (2.36)
(Loss)/earnings per share – basic and diluted (7.86)p (7.59)p (2.44)p 9.01p (2.77)p
Dividend per share 0.00p 0.00p 0.18p 0.300p 0.165p
Consolidated balance sheet £M £M £M £M £M
Shareholders’ funds attributable to equity shareholders 29.86 36.73 43.38 45.86 38.24
Net borrowings, excluding lease obligations 33.93 27.65 35.99 58.42 62.22
Net assets per share – basic 34.99p 43.04p 50.83p 53.74p 44.83p
– fully diluted 34.99p 43.04p 50.83p 53.74p 44.83p
Consolidated cash flow statement £M £M £M £M £M
Cash generated from operations 1.64 14.98 1.92 10.29 5.59
Notes:
^ Excluding the present value of head leases
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