REG-Lon.&Assoc.Props PLC: Annual Results
30/04/2019 12:05
FOR IMMEDIATE RELEASE
30 April 2019
LONDON & ASSOCIATES PROPERTIES PLC (“LAP”):
ANNUAL RESULTS FOR 12 MONTHS TO 31 DECEMBER 2018
HIGHIGHTS
· £37.25 million sale of Brixton Markets, completed in April 2018,
generating £20.5 million in cash net of debt
· Implementation of new strategy focused on non-retail investments
and development opportunities:
£6.2 million acquisition of fully let Runcorn industrial
portfolio, before costs, with significant asset management potential
£5.7 million acquisition in joint venture with Bisichi and
Metroprop Limited of a redevelopment site in West Ealing, London, with
planning for 55 apartments being sought
· Impact of severe retail sector downturn partly cushioned by value
retailing nature of portfolio but NAV per ordinary share down from 53.74 to
50.83p
· Group profit for the year before taxation was £1.27 million,
including a £2.57 million property valuation decrease (2017: £11.28 million
including a £9.37 million property valuation increase)
· Asset management initiatives underway to improve marketability of
Orchard Square, Sheffield which had strong lease renewals during 2018 with
rental levels proving relatively resilient
· Repayment of bank loans and debentures of £19.4 million
· New LAP term loan of £3.9 million secured
· Refinancing process underway of £28.3 million of non-recourse
loans expiring in June 2019
· Bisichi had an excellent year with an EBITDA of £8.6 million - an
increase of almost £5.0 million
· Recommended final dividend up 2.9% to 0.18p per share
“The increasingly difficult retail environment endorses our 2017 decision to
sell Brixton Markets for £37.25 million. We received £20.5 million in cash
net of debt in May 2018. This cash has all been allocated or deployed away
from the retail property sector and into non-retail property with greater
potential for future growth through asset management or development
opportunities.” 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
Chairman’s statement and Chief Executive’s review 2018
I am pleased to present our accounts for the 12 months to 31st December 2018.
As shareholders will be aware, 2018 has been a year in which retailing and the
retail property markets have faced unprecedented change and challenge. The
UK’s macroeconomic environment has affected consumer spending adversely,
particularly for higher value or discretionary goods. At the same time,
pressures such as high business rates and greater online sales, have impacted
on the type and number of stores retailers require.
The proliferation of retail insolvencies witnessed in 2018, which has
continued unabated into 2019, has led to significant numbers of vacant units
and has impacted negatively on rental levels and increased incentives required
by retailers. In turn this has led, inevitably, to a decline in retail
property values across the board.
The increasingly difficult retail environment endorses our 2017 decision to
sell Brixton Markets for £37.25 million. We received £20.5 million in cash
net of debt in April 2018. This cash has all been allocated or deployed away
from the retail property sector and into non-retail property with greater
potential for future growth through asset management or development
opportunities.
CONSOLIDATED RESULTS
Group (including Bisichi and Dragon) net assets at the year-end were £55.7
million (2017: £56.7 million).
As stated above market sentiment towards retail property is very negative. Our
portfolio, while still generating good returns, has been marked down further
by valuers. This has meant that the total net assets of LAP Group (including
our net interest in Bisichi) have moved downwards, resulting in the net asset
value per share declining to 50.83p from 53.74p last year.
Total property assets owned by LAP, Bisichi and other companies in which LAP
has a financial interest amounted to £196 million (2017: £222 million).
Group profit after valuation movements and before taxation for the year was
£1.27 million (2017: £11.28 million). Figures for the previous year
benefited materially from a £9.37 million uplift in property values due
almost entirely to the Brixton sale and therefore are not directly comparable.
A full breakdown of group income, cash flow and result by sector is included
in the financial review and in the segmental analysis in Note 1 to the
financial statements.
DEBT MANAGEMENT
On 30th June 2019, our five-year facilities with Santander and Europa
Mezzanine expire. The total outstanding is £28.3 million, secured against
Orchard Square in Sheffield and the Tanyard Shopping Centre in Wickersley,
South Yorkshire. Shareholders will appreciate that this is a difficult time to
borrow against retail property. However, we have engaged actively with both
lenders who have indicated that they will work with us, either to refinance
the loans or to facilitate a handover to a new lender. We have started
marketing the loans and feedback to date is reasonably positive. However,
there are no guarantees that we will be able to refinance on terms that enable
us to maintain the current level of net cash flow or at all.
Importantly, both the Santander and Europa loans are non-recourse to the
balance sheet of LAP PLC. These two properties are included in our balance
sheet at an aggregate value of £36.65 million.
We refinanced the remaining £3 million of the Prudential debenture which
expired in August 2018 with a £3.93 million 10-year loan facility (with a
5-year mutual break option) from Metro Bank, a new lender to the Group.
The loan to value covenant for Metro Bank is 65%, with amortisation based on a
20-year repayment profile. No hedging was required, and the new loan will
deliver debt service savings of £0.2 million per annum.
LAP PROPERTY ACTIVITIES
Runcorn
The most significant purchase was the Manor Portfolio in Runcorn, Cheshire,
which was acquired in October 2018 for £6.5 million in cash, including costs.
This portfolio comprises nine industrial/warehousing units, fully let to eight
tenants producing £0.6 million per annum, located in the heart of Runcorn’s
logistics/warehousing area.
We believe our existing skill-set, built up over many years of managing
multi-let retail assets, is just as relevant to multi-let industrial assets.
We were particularly attracted to this property by the relatively low rents of
just over £4 per sq. ft, and I am pleased to say we have engaged actively
with the tenants and remain confident that we can drive this level upward over
the medium term. It remains fully let with the exception of one third of one
unit on which we negotiated a surrender from the incumbent tenant and is now
under offer at a higher rent.
Ealing
In October 2018 we completed the £5.7 million acquisition of a mixed-use
development site in West Ealing, London, before acquisition and subsequent
development costs. This acquisition has been undertaken in a joint venture
with Bisichi Mining Plc and Metroprop Ltd, an established property developer.
LAP and Bisichi have each contributed an initial equity investment of £1.0
million for a combined 90% stake in the joint venture. The balance of £3.5
million was provided by Paragon via a short-term investment loan. The interest
rate is 7.0% per annum and currently the interest is being rolled up. This
loan will be refinanced with a development loan when we are in a position to
develop the site. We do not anticipate that we will need to invest further
equity into the transaction.
The site currently comprises five shops, of which one is vacant, and a service
yard. The four let shops provide £0.14 million per annum which is sufficient
to cover our operating costs as we prepare our planning application. We are
looking to develop 55 flats. Initial responses from the Local Authority have
been positive and we look forward to updating shareholders in due course.
Orchard Square, Sheffield
In view of market sentiment towards shopping centres and the size of this
asset in relation to our portfolio, we have decided that it no longer fits our
longer-term criteria for an investment property held to generate capital
growth. Accordingly, we have decided to treat it as realisable inventory in
our property dealing division. We are underway on a series of asset management
initiatives and developments, more fully described below, and it is our
intention to dovetail the sale of this asset with completion of those
projects.
We remain convinced of the enduring strength of Orchard Square. This has been
evidenced by the strong lease renewals we have achieved over the last 12
months, where rents have proven to be relatively resilient. Despite market
sentiment we are renewing units let at a previous combined total rent of
£0.37 million at new annual rents of £0.31 million.
We are exploring the opportunities for creating experiential alternative uses
for some units, including restaurants and bars. We believe that this will
increase the marketability of Orchard Square, by helping to reposition the
Centre and make it more attractive to younger shoppers as well as increasing
the amount of time customers spend there.
During the course of the year River Island, which pays an annual rent of £0.5
million, exercised a break clause on its lease. At the time negotiations were
already underway with a third party to take a lease on the entire store.
We have agreed lease documentation with the new occupier, but have not yet
exchanged contracts. There remains, therefore, a risk that this unit might
become vacant. However, we are confident that it is one of the best units in
the city and will not remain empty for long even if the current potential
occupier were to pull out for any reason.
Kings Square, West Bromwich
Kings Square achieved full occupancy during the year and continues to trade
strongly for the discount retailers of the town. We let two units to an
independent coffee shop and a restaurant thus considerably improving the
leisure offer. Additionally, lease renewals at the Centre demonstrate that
tenants trade well there. We believe that this sort of value-orientated
shopping centre is cushioned to a certain extent from the general problems
affecting retailing in the UK.
Other
The rest of our portfolio, which is focused on community and value retailing,
trades well. The LAP Group Portfolio has a void level of 7.24% (2017: 2.06%).
This increase is almost entirely accounted for by the two properties where
tenants did not renew at lease expiry.
We have bid for a number of properties during the year to diversify further
away from retail. Although we were not successful on those occasions, we
remain determined not to overpay.
Currently, we are in the process of selling a further small retail asset from
our portfolio, and we will report to shareholders once the deal
has completed.
HARROGATE JOINT VENTURE
Our Harrogate joint venture with Oaktree Capital Management, which owns three
shopping centres in Dunfermline, Kings Lynn and Loughborough, continues to
trade satisfactorily. We have been able to negotiate a number of new leases
and lease renewals across all three centres and are coming to the completion
of a development of a new 15,000 sq. ft. store for H&M at Kings Lynn.
DRAGON RETAIL PROPERTIES LTD
Dragon, a 50:50 joint venture with Bisichi Mining, completed a lease renewal
with Boots, the principal tenant at its shop in Clifton, Bristol, on a new 10
year lease with a five-year break clause at £93,000, an increase of 1.1%.
BISICHI MINING PLC
For the year ended 31st December 2018, Bisichi achieved earnings before
interest, tax, depreciation and amortisation (EBITDA) of £8.6million (2017:
£3.7 million) and operating profit before depreciation, fair value
adjustments and exchange movements (Adjusted EBITDA) of £9.1 million (2017:
£5.8 million).
These results are attributable mainly to the strong performance from Black
Wattle, Bisichi’s South African coal mining operation, which continued to
benefit from the infrastructure improvements to the coal washing plant that
were reported in 2017. These improvements have enabled the group to wash at
consistent levels of production and achieve an increased overall yield
compared to prior years. In addition, the mine was able to benefit from
significantly improved coal prices achievable for its coal during the year.
Looking forward, although global economic factors have impacted coal demand in
some international markets, the demand for South African coal has continued to
remain strong and Bisichi expects overall levels of future production from
Black Wattle to remain consistent with 2018. Accordingly, it remains confident
about the ability of its South African coal mining operations to contribute
strongly to Group earnings and cash generation for the foreseeable future.
At the end of 2018 Black Wattle completed an agreement to acquire additional
coal reserves. The new reserves have an expected run of mine tonnage of 1.9
million metric tonnes and are contiguous to Black Wattle’s operations. The
acquisition is subject to local regulatory approval and is in line with the
group’s strategy of actively seeking new opportunities to extend the life of
mines within its existing mining operations.
Bisichi’s UK retail property portfolio, which is managed by London &
Associated Properties PLC for a fee, continues to perform well, with average
rental yields for the portfolio remaining stable during the year.
DIVIDEND
We are pleased to recommend a final dividend of 0.18p, an increase of over
2.9% on the 2017 dividend of 0.175p.
Finally, we would like to thank all of our directors, staff and advisers for
their hard work during the year. The retail property world is very challenging
and is likely to remain so for the foreseeable future. However, we believe LAP
is well placed to meet these challenges and we therefore remain cautiously
optimistic for the year ahead.
Sir Michael Heller, John Heller,
Chairman Chief
Executive
30 April 2019
STRATEGIC REPORT
Financial and performance review
The financial statements for 2018 have been prepared to reflect the
requirements of IFRS 10. This means that the accounts of Bisichi Mining 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 Property 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.
Revenue recognition restatement – presentation of revenue & costs
During the review of revenue recognition in South Africa a revenue recognition
error was identified in respect of the treatment of transport and loading
costs to deliver export coal under certain export agreements. The costs in
prior periods, have been recorded as a deduction against revenue rather than
being shown as an operating cost.
Although this impact has been correctly accounted for in the current year, the
equivalent restatement in the prior year is to increase both revenue and
operating costs by £2,891,000. There is no profit or net assets impact as a
result of the prior year restatement. In prior year figures within the report
where there has been an impact from the restatement, the column is reflected
with the word “Restated”.
LOANS
LAP’s debt (excluding Bisichi, Dragon and West Ealing which are detailed
separately below), consists of a £28.3 million facility expiring in July
2019, a debenture of £10 million repayable in August 2022 and a £3.9 million
facility expiring in 2028. A debenture of £3 million was repaid in April
2018. As in previous years, all loans and debentures are secured on core
property and cash deposits and are covenant compliant.
LAP’s five year £21.5 million non-recourse loan from Santander, as senior
lender, is supported by a £6.8 million loan from Europa Capital Mezzanine
Limited, as mezzanine lender. The senior loan facility is fully hedged and at
the year end, 81% of the loan was swapped at a rate of 2.25% and the remaining
19% was covered by an interest cap at 2.25%. This gives a blended current
interest rate of 5.33% for the total £28.3 million debt.
Cash flow
The operating cash flow and net cash balances at the year-end were as follows:
CASH FLOW FROM OPERATIONS 2018 £’000 2017 £’000
LAP (5,675) 2,708
Bisichi 7,520 7,593
Dragon 76 (14)
Group total 1,921 10,287
Note: The figures exclude inter-company transactions.
NET CASH BALANCES 2018 £’000 2017 £’000
LAP 11,345 2,109
Bisichi 5,686 4,065
Dragon 89 92
Group total 17,120 6,266
Our investment with Oaktree Capital Management (HRGT Shopping Centres LP),
remains profitable and generates management fees (2018: £0.46 million and
2017: £0.46 million) for our wholly owned subsidiary (London & Associated
Management Services Limited). We also received £nil (2017: £0.1 million) as
a partial repayment of our loan.
Significant cash income and expenditure for LAP in the year includes:
• The sale of Brixton Markets for £37.25 million, before costs, in
April 2018
• The repayment of £15.9 million of bank debt
• The replacement of a £3 million 11.6 % fixed interest debenture with
a £3.9 million 10 year term loan at 2.95% above base rate
• The acquisition of an industrial portfolio for £6.5 million
Cash balances at 31 December 2018 have been allocated towards future profit
generating activities, including the Group’s continued sector
diversification.
Income statement
The segmental analysis in Note 1 to the financial statements gives more detail
but the tables below give a clearer summary of the Group results.
RESULTS BEFORE REVALUATIONS AND NON-CASH MOVEMENTS 2018 £’000 2017 £’000
LAP (2,818) (130)
Bisichi 6,526 3,536
Dragon 29 (29)
Group total 3,737 3,377
Note: The figures exclude inter-company transactions.
Bisichi’s improvement of £3.0 million is explained under Bisichi Mining
PLC, in this review.
The Group property portfolio, including assets held for sale and inventory,
decreased from £114.46 million to £88.27 million.
During the year the Group sold Brixton Markets held at a value of £36.44
million, acquired an industrial property in Runcorn at a cost of £6.54
million and acquired and commenced a residential development, through its West
Ealing joint venture, at a cost of £6.26 million.
The Group’s property portfolio decreased on revaluation by £2.57 million a
2.8% decrease.
profit/(Loss) before taxation 2018 £’000 2017 £’000
LAP (4,723) 9,614
Bisichi 6,142 1,696
Dragon (151) (32)
Group profit before taxation 1,268 11,278
Note: The figures exclude inter-company transactions.
Balance sheet
LAP has group net assets of £55.7 million (2017: £56.7 million) (see table
below).
Net assets attributable to equity shareholders of the Company at the year-end
were 50.83p per share (2017: 53.74p per share).
2018 LAP Original Group £’000 Bisichi Mining PLC Group £’000 Dragon Retail Properties £’000 LAP Net assets £’000
Investment properties 35,011 13,230 2,450 50,691
Other fixed assets 106 8,531 22 8,659
Other non current assets 1,748 35 - 1,783
Inventory–property 38,556 - - 38,556
Assets held for sale 2,285 - - 2,285
Other current assets 13,292 17,511 272 31,075
Current liabilities (38,180) (16,718) (73) (54,971)
Non-current liabilities (16,666) (4,529) (1,197) (22,392)
Net assets 36,152 18,060 1,474 55,686
2017
Investment properties 65,231 13,397 2,630 81,258
Other fixed assets 116 8,613 6 8,735
Other non current assets 1,748 51 - 1,799
Assets held for sale 36,441 - - 36,441
Other current assets 4,824 11,612 122 16,558
Current liabilities (8,588) (8,844) (123) (17,555)
Non-current liabilities (59,377) (9,858) (1,291) (70,526)
Net assets 40,395 14,971 1,344 56,710
Bisichi mining plc
Although the results of Bisichi Mining 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 2018 financial
statements which are available on its website: www.bisichi.co.uk.
The Bisichi group increased its EBITDA to £8.6 million (2017: £3.7 million)
mainly due to increased operating profits before depreciation from the mining
activities of £8.2 million (2017: £4.9 million). Depreciation in the year
relating to mining activities increased to £2.1 million (2017: £1.8
million). Profit for the year after tax was
£6.0 million (2017: £1.5 million). Bisichi has two core revenue streams –
investment in retail property in the UK and coal mining in South Africa.
The increase in operating profit was mainly attributable to the higher prices
achieved for coal and increased mining production at Black Wattle offsetting
the impact of the higher mining and washing costs.
The UK retail property portfolio was valued at the year end at £13.05 million
(2017: £13.25 million). The property portfolio is actively managed by LAP and
generated rental income of £1.1 million in the year (2017: £1.1 million).
A R100million bank overdraft facility, held by a subsidiary of Bisichi with
Absa Bank Limited at the year end, was replaced in January 2019 by a new
structured trade finance facility for R100million. The new trade 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.
In the UK, the Bisichi group signed a £6 million five-year term loan with
Santander in December 2014. This loan is secured against UK investment
property. No covenants were breached during the year.
Cash flow generated from operating activities decreased compared to the prior
year to £4.8 million (2017: £7.3 million). The improved operating profit
during the year of £6.5 million (2017: £3.8 million) was offset by an
increase in income tax paid of £2.28 million (2017: £0.01 million) both as a
result of the high profitability of Bisichi’s South African mining
operations. In addition, cashflow generation from operating activities was
impacted by a cashflow outflow from trade receivables of £0.9 million (2017:
inflow of £0.9 million), as a result of an increase in the trade receivables
balances of South African domestic coal customers, and a cashflow decrease
from inventories of £0.8 million (2017: increase of £0.9 million), mainly as
a result of reduced export coal sales from our South African mining operations
in the last quarter of 2018 due to temporary weather related issues at
Richards Bay Coal Terminal.
The Bisichi group’s financial position remains strong. Its net assets at
31st December 2018 were £20.1 million (2017: £17.7 million). The group
expects to continue achieving significant value in 2019 from its existing
mining operation. In addition, Bisichi seeks to expand its operations in South
Africa through the acquisition of additional coal reserves.
DRAGON RETAIL PROPERTIES LIMITED
Dragon is a UK property investment company. The company has a Santander bank
loan of £1.16 million secured against its investment property and is covenant
compliant. It paid management fees of £72,000 (2017: £84,000) split equally
to the two joint venture partners. Its results continue to be near breakeven
after taxation. Dragon has net assets of £1.5 million (2017: £1.4 million).
WEST EALING PROJECTS LIMITED
West Ealing is a 50:50 joint venture between LAP and Bisichi created with the
purpose of delivering a residential development, through its 90% owned
subsidiary. West Ealing is included within the LAP segment as it is not
intended to be a long term activity.
During the year West Ealing’s subsidiary acquired a property and has
commenced development activities. Costs incurred to 31 December 2018 are
£6.26 million and there is a development loan of £3.46 million, described
further in note 18.
ACCOUNTING JUDGEMENTS AND GOING CONCERN
The most significant judgements made in preparing these accounts relate to the
carrying value of the properties, investments and interest rate hedges. The
hedges have been valued by the hedge provider. The Group uses external
property valuers to determine the fair value of most of its properties.
Under IFRS10 the Group has included Bisichi Mining 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 and Chief
Executive’s Statement and in this review. In addition, the Directors
consider that Note 20 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.
With a quality property portfolio comprising a majority of tenants with long
leases supported by suitable financial arrangements, the Directors believe the
group is well placed to manage its business risks successfully, despite the
continuing uncertain economic climate. 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 £7.2 million (2017: £10.2 million) of
which only £0.9 million (2017: £4.7 million) has been recognised in the 2018
financial statements. As LAP returns to profit, these tax losses and
deductions should be utilised.
DIVIDENDS AND FUTURE PROSPECTS
The directors are proposing a final dividend of 0.18p per ordinary share
payable in September 2019.
The Group remains cautiously confident about its trading and future outlook
and it continues to look at ways in which it can further reduce its overhead
costs and interest payable, while it stabilises its property income together
with seeking suitable growth opportunities.
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, where we manage the property ourselves and on behalf of
our partners.
The principal activity of Bisichi Mining PLC is coal mining in South Africa.
Further information is available in its 2018 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
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.
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
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.
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 remained broadly unchanged. In the continuing difficult trading environment, this is considered satisfactory. *Excluding service charges
MAXIMISING INCOME – OCCUPANCY
We aim to maximise the total income in our properties by achieving full occupancy. The ERV of the empty units as a percentage of our total income. Void levels increased to 7.24%, in the main due to development activity in Sheffield, on units that have become vacant.
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 2.91 pence per share (5.4%) to 50.83p.
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 2018:
• Black Wattle Colliery recorded one Lost Time Injury during 2018.
• 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 2018 Financial Statements which are available on
their web site:
www.bisichi.co.uk
Greenhouse gas reporting
We have reported on all emission sources required under the Companies Act 2006
(Strategic Report and Directors’ Reports) Regulations 2013 for the reporting
period 1st January 2018 to 31st December 2018. 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. Emissions from both
landlord & tenant-controlled areas of LAP owned shopping centres and
facilities fall within the footprint boundary. 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.
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 ISO14046-1 Standard (2006) and guidance provided by UK’s
Department of Environment and Rural Affairs (DEFRA) on voluntary and mandatory
carbon reporting. Emission factors were used from UK Government’s GHG
Conversion Factors for Company Reporting 20181.
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 the emissions in tCO2e per thousand pounds
revenue.
Table 1. Landlord & tenant controlled areas
Emissions Source 2018 2017
Scope 1 emissions Natural gas (tCO2e) 169 71
Refrigerants (tCO2e) 0 0
Scope 2 emissions Electricity (tCO2e) 2,519 2,938
Total tCO2e 2,688 3,009
Intensity ratio (tCO2e/£thousand) 0.514 0.467
Table 2. LAP controlled areas
Emissions Source 2018 2017
Scope 1 emissions Natural gas (tCO2e) 169 71
Refrigerants (tCO2e) 0 0
Scope 2 emissions Electricity (tCO2e) 134 176
Total tCO2e 303 247
Table 3. Tenant controlled areas
Emissions Source 2018 2017
Scope 1 emissions Natural gas (tCO2e) 0 0
Refrigerants (tCO2e) 0 0
Scope 2 emissions Electricity (tCO2e) 2,385 2,762
Total tCO2e 2,385 2,762
1. 2018 Guidelines to DEFRA / DECC’s GHG Conversion Factors for Company
Reporting”, Department for Environment, Food and Rural Affairs (DEFRA) and
Department for Energy and Climate Change (DECC).
Table 4. Coal mining carbon footprint
2018 CO2e Tonnes 2017 CO2e Tonnes
Emissions source:
Scope 1 Combustion of fuel & operation of facilities 21,348 15,575
Scope 1 Emissions from coal mining activities 27,428 27,004
Scope 2 Electricity, heat, steam and cooling purchased for own use 12,177 11,210
Total 60,953 53,778
Intensity:
Intensity 1 Tonnes of CO2 per pound sterling of revenue 0.0013 0.0014
Intensity 2 Tonnes of CO2 per pound of coal produced 0.0462 0.0415
Note: Bisichi has recalculated emissions from coal mining activities using a
more up to date methane conversion factor; because of this, 2017 emissions
from coal mining activities have been restated.
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 23 employees (12
male, 11 female).
BISICHI MINING PLC
Bisichi Mining PLC’s Group at the year end had 7 directors (6 male,
1 female), 7 senior managers (6 male, 1 female) and 246 employees (175 male,
71 female).
Detailed information relating to the Bisichi Strategic Report is available in
its 2018 financial statements.
Approved on behalf of the board of directors
Jonathan Mintz
Finance Director
30 April 2019
Governance
Directors & advisors
EXECUTIVE DIRECTORS
Sir Michael Heller MA FCA*
(Chairman)
John A Heller LLB MBA
(Chief Executive)
Anil K Thapar FCCA
(Finance Director) resigned 31 December 2018
Jonathan Mintz FCA
(Finance Director) Appointed 11 February 2019
NON-EXECUTIVE DIRECTORS
Howard D Goldring BSC (ECON) ACA?
Howard Goldring is Executive Chairman of Delmore 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, chairman of BG Training Limited 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
Santander UK plc
Abbey National Treasury Services plc
Europa Capital Mezzanine Ltd
SOLICITORS
Olswang LLP
Pinsent Masons LLP
STOCKBROKER
Stockdale Securities Limited
REGISTRARS & TRANSFER OFFICE
Link Asset Services
Shareholder Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
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
Directors’ report
The Directors submit their report and the audited financial statements for the
year ended 31 December 2018.
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 and Chief Executive’s Statement and the
Strategic Report. These reports can be found on pages 2 to 11 and should be
read in conjunction with this report.
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 Mining 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 11.
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.
• 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
20 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
The directors are recommending payment of a final dividend for 2018 of 0.18p
per share (2017: 0.175p per share).
Subject to shareholder approval, the ordinary final dividend will be payable
on Friday 13 September 2019 to shareholders registered at the close of
business on Friday 16 August 2019.
The company’s ordinary shares held in treasury
At 31 December 2018, 218,197 (2017: 221,061) ordinary shares were held in
Treasury with a market value of £56,731 (2017: £54,160). At the Annual
General Meeting (AGM) in June 2018 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 Wednesday 12 June 2019.
Treasury shares held at 1 January 2018 221,061
at 31 December 2018 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 2018 by independent professional
firms of chartered surveyors – Allsop LLP, London (69.13 per cent of the
portfolio), Carter Towler, Leeds (27.5 per cent) – and by the Directors
(3.37 per cent). The valuations, which are reflected in the financial
statements, amount to £47.4 million (2017: £78 million).
Property of £2.3 million (2017: £36.4 million) is included under current
assets, as assets held for sale.
Property of £38.6 million (2017: £nil) is included under current assets, as
inventory.
Taking account of prevailing market conditions, the valuation of the
properties at 31 December 2018 resulted in a decrease of £2.6 million (2017:
increase of £9.37 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 20 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, A K Thapar, H D Goldring, C A Parritt and R
Priest were Directors of the company for the whole of 2018.
A K Thapar retired as a Director on 31 December 2018.
Sir Michael Heller and H D Goldring are retiring by rotation at the Annual
General Meeting in 2019 and offer themselves for re-election.
J Mintz was appointed as an executive Director on 11 February 2019 and will
offer himself for election at the Annual General Meeting in 2019.
Brief details of the Directors offering themselves for re-election, are as
follows:
Sir Michael Heller is Executive Chairman and has been a Director since 1971.
He has a contract of service determinable upon six months’ notice. Sir
Michael Heller is a chartered accountant and a member of the nomination
committee. He is Executive Chairman of Bisichi Mining PLC, our associate
company. The board has considered the re-appointment of Sir Michael Heller and
recommends his re-election as a Director.
Howard Goldring has been a Director since 1992 and has a contract of service
determinable upon three months’ notice. He is an Independent Director and a
member of the audit, nomination and remuneration committees. Howard Goldring
is a chartered accountant and global asset allocation specialist. He is
Executive Chairman of Delmore Holdings Limited. His specialized economic
knowledge and broad commercial experience are of significant benefit to the
business. The board has considered the re-appointment of Howard Goldring and
recommends his re-election as a Director.
Jonathan Mintz was appointed a Director on 11 February 2019 and is also the
Company Secretary. He has a contract of employment determinable upon three
months’ notice. Jonathan Mintz is an ACA qualified Finance Director
experienced in real estate, consultancy, and construction in the UK and
internationally. He has worked in the property and infrastructure sector for
the majority of his career, holding senior positions with listed and private
property and construction businesses. The board has considered the appointment
of Jonathan Mintz and recommends his 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
22 of the Annual Remuneration Report.
Substantial shareholdings
31 Dec 2018 31 Dec 2017
no. % no. %
Sir Michael Heller and family 48,080,511 56.35 48,080,063 56.35
Cavendish Asset Management Limited 8,061,044 9.45 7,909,464 9.27
James Hyslop 4,886,258 5.73 4,846,258 5.68
Maland Pension Fund 2,931,198 3.44 – 0.00
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 has requested authority
from shareholders to buy back its own ordinary shares and there will be a
resolution to renew the authority at this year’s AGM (Resolution 11).
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.
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 2018 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 (2017: £Nil). £2,800 of
donations for charitable purposes were made during the year (2017: £1,000).
CORPORATE RESPONSIBILITY
Environment
The environmental considerations of the group’s South African coal mining
operations are covered in the Bisichi Mining 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 2018 can be found on pages 10 and 11 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 Mining 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 Group’s business
activities, together with the factors likely to affect its future development,
are set out in the Chairman’s and Chief Executive’s Statement and
Financial Review. In addition, Note 20 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 17 and 18 of the annual
report and accounts.
Annual General Meeting
The Annual General Meeting will be held at 24 Bruton Place, London, W1J 6NE on
Wednesday 12 June 2019 at 10.00 a.m. Items 1 to 9 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. Items
10 to 12 will be proposed as special resolutions. At least 75 per cent. of
shareholders’ votes cast at the meeting must be in favour for those special
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 9 – Authority to allot securities
Paragraph 9.1.1 of Resolution 9 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 26
April 2019 (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 9.1.2 of Resolution 9 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 26
April 2019 (being the last practicable date prior to the publication of this
Directors’ Report).
The Directors’ authority will expire on the earlier of 31 August 2020 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).
SPECIAL RESOLUTIONS
The following special resolutions will be proposed at the Annual General
Meeting:
Resolution 10 – Disapplication of pre-emption rights
Under English company law, when new shares are allotted or treasury shares are
sold for cash (otherwise than pursuant to an employee share scheme) they must
first be offered at the same price to existing shareholders in proportion to
their existing shareholdings. This special resolution gives the Directors
authority, for the period ending on the date of the next annual general
meeting to be held in 2020, to: (a) allot shares of the Company and sell
treasury shares for cash in connection with a rights issue or other
pre-emptive offer; and (b) otherwise allot shares of the Company, or sell
treasury shares, for cash up to an aggregate nominal value of £425,472
representing, in accordance with IVIS guidelines, approximately 5 per cent. of
the total ordinary share capital in issue as at 26 April 2019 (being the last
practicable date prior to the publication of this Directors’ Report) in each
case as if the pre-emption rights in English company law did not apply.
Save in respect of issues of shares in respect of employee share schemes and
share dividend alternatives, the Directors do not currently intend to make use
of these authorities. The board intends to adhere to the provisions in the
Pre-emption Group’s Statement of Principles not to allot shares for cash on
a non-pre-emptive basis in excess of an amount equal to 7.5 per cent. of the
Company’s ordinary share capital within a rolling three-year period without
prior consultation with shareholders. The Directors’ authority will expire
on the earlier of 31 August 2020 or the date of next AGM.
Resolution 11 – Purchase of own ordinary shares
The effect of Resolution 11 would be to renew the Directors’ current
authority to make limited market purchases of the Company’s ordinary shares
of 10 pence each. The power is limited to a maximum aggregate number of
8,509,435 ordinary shares (representing approximately 10 per cent. of the
Company’s issued share capital as at 26 April 2019 (being the latest
practicable date prior to publication of this Directors’ Report)). The
minimum price (exclusive of expenses) which the Company would be authorised to
pay for each ordinary share would be 10 pence (the nominal value of each
ordinary share). The maximum price (again exclusive of expenses) which the
Company would be authorised to pay for an ordinary share is an amount equal to
105 per cent. of the average market price for an ordinary share for the five
business days preceding any such purchase. The authority conferred by
Resolution 11 will expire at the conclusion of the Company’s next annual
general meeting to be held in 2020 or 15 months from the passing of the
resolution, whichever is the earlier. Any purchases of ordinary shares would
be made by means of market purchases through the London Stock Exchange.
If granted, the authority would only be exercised if, in the opinion of the
Directors, to do so would result in an increase in earnings per share or asset
values per share and would be in the best interests of shareholders generally.
In exercising the authority to purchase ordinary shares, the Directors may
treat the shares that have been bought back as either cancelled or held as
treasury shares (shares held by the Company itself). No dividends may be paid
on shares which are held as treasury shares and no voting rights are attached
to them.
Resolution 12 – Notice of General Meetings
Resolution 12 shall be proposed to allow the Company to call general meetings
(other than an Annual General Meeting) on 14 clear days’ notice. A
resolution in the same terms was passed at the Annual General Meeting in 2018.
The notice period required by the Companies Act 2006 for general meetings of
the Company is 21 days, unless shareholders approve a shorter notice period,
which cannot however be less than 14 clear days. Annual General Meetings must
always be held on at least 21 clear days’ notice. It is intended that the
flexibility offered by this resolution will only be used for time-sensitive,
non-routine business and where merited in the interests of shareholders as a
whole. The approval will be effective until the Company’s next Annual
General Meeting, when it is intended that a similar resolution will be
proposed.
OTHER MATTERS
RSM UK Audit LLP has expressed its willingness to continue in office as
auditor. A proposal will be made at the Annual General Meeting for its
reappointment.
By order of the board
Jonathan Mintz
Secretary
30 April 2019
24 Bruton Place
London
W1J 6NE
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 12 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 27. 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 20 to 23.
• 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 26 The Chief Executive and Finance Director are
normally invited to attend.
Board and board committee meetings held in 2018
The number of regular meetings during the year and attendance was as follows:
Meetings held Meetings attended
Sir Michael Heller Board Nomination committee Remuneration committee 10 1 3 10 1 3
J A Heller Board Audit committee 10 2 10 2
A K Thapar Board Audit committee 10 2 10 2
C A Parritt Board Audit committee Nomination committee Remuneration committee 10 2 1 3 10 2 1 3
H D Goldring Board Audit committee Nomination committee Remuneration committee 10 2 1 3 10 2 1 3
R Priest Board 10 9
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. Delmore
Holdings Limited (Delmore) is a Company in which H D Goldring is the majority
shareholder and the Executive Chairman. Delmore 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.
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 2018. 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 Company’s share price is published daily in the Financial Times.
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 Statement by the Chairman of The Remuneration Committee
The remuneration committee is pleased to present its report for the year ended
31 December 2018. 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 2019.
The second part is the Remuneration Policy which details the remuneration
policy for Directors. This policy was subject to a binding vote by
shareholders at the AGM in 2017 and was approved 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
30 April 2019
Annual remuneration report
The following information has been audited
Single total figure of remuneration for the year ended 31 December 2018
Salary and fees £’000 BONUSES £’000 BENEFITS £’000 PENSIONS £’000 TOTAL BEFORE SHARE OPTIONS £’000 SHARE OPTIONS £’000 TOTAL 2018 £’000
Executive Directors
Sir Michael Heller* 7 350 55 - 412 n/a 412
Sir Michael Heller - Bisichi 82 200 2 - 284 n/a 284
J A Heller 533 300 37 - 870 n/a 870
A K Thapar 161 60 11 10 242 n/a 242
783 910 105 10 1,808 - 1,808
Non-executive Directors
H D Goldring*+ 18 - 8 - 26 n/a 26
C A Parritt*+ 40 - - - 40 n/a 40
R Priest* 35 - - - 35 n/a 35
93 - 8 - 101 - 101
Total 876 910 113 10 1,909 - 1,909
Single total figure of remuneration for the year ended 31 December 2017
Salary and fees £’000 BONUSES £’000 BENEFITS £’000 PENSIONS £’000 TOTAL BEFORE SHARE OPTIONS £’000 SHARE OPTIONS £’000 TOTAL 2017 £’000
Executive Directors
Sir Michael Heller* 7 - 49 - 56 n/a 56
Sir Michael Heller - Bisichi 75 - - - 75 n/a 75
J A Heller 333 100 37 17 487 n/a 487
A K Thapar 157 30 9 10 206 n/a 206
572 130 95 27 824 - 824
Non-executive Directors
H D Goldring*+ 17 - 7 - 24 n/a 24
C A Parritt*+ 38 - - - 38 n/a 38
R Priest* 35 - - - 35 n/a 35
90 - 7 - 97 - 97
Total 662 130 102 27 921 - 921
* Note 25 “Related party transactions”
+ Members of the remuneration committee for years ended 31 December 2017 and
31 December 2018
Benefits include the provision of car, health and other insurance and
subscriptions.
Sir Michael Heller is a director of Bisichi Mining PLC, (a subsidiary for IFRS
10 purposes) and received a salary from that company of £82,500 (2017:
£75,000) for services.
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 (2017: £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 £6,500
(2017: £10,698) 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, Delmore 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
Anil Thapar 1 January 2015 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
£10,000 a year). There are no final salary schemes in operation. No pension
costs are incurred on behalf of non-executive Directors.
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 for 2018 bonuses or for 2017
bonuses.
2. Partnership shares: No partnership shares were issued between November 2017
and October 2018.
3. Matching shares: The partnership share agreements for the year to 31
October 2018 provide for two matching shares to be awarded free of charge for
each partnership share acquired. No partnership shares were acquired in 2018
(2017: 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 2018 amounted to £Nil (2017: Nil).
Dividend shares issued:
Number of members Number of shares Value of shares
2018 2017 2018 2017 2018 £ 2017 £
Directors: J A Heller 1 - 448 - 125 -
A K Thapar 1 - 579 - 161 -
Staff - - - - - -
Total at 31 December 2 - 1,027 - 286 -
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 2018.
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 2018 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 2018.
Payments for loss of office
No payments for loss of office were made in the year ended 31 December 2018.
Statement of directors’ shareholding and share interest
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 18 1 Jan 18 31 Dec 18 1 Jan 18
Sir Michael Heller 5,753,541 5,753,541 19,277,931 19,277,931
H D Goldring 19,819 19,819 - -
J A Heller 1,867,841 1,867,393 †14,073,485 †14,073,485
C A Parritt 36,168 36,168 - -
R Priest - - - -
A K Thapar 121,074 120,495 - -
?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.
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 2018 was 26p (2017: 24.50p). During the year the share middle
market price ranged between 22p and 31p.
Total Shareholder Return
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* %
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
2010 J A Heller 577 n/a n/a
2009 J A Heller 982 n/a n/a
2008 J A Heller 688 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.
Percentage change in Chief Executive’s Remuneration (audited)
The table below shows the percentage change in Chief Executive remuneration
for the prior year compared to the average percentage change for all other
Head Office based employees. To provide a meaningful comparison, the same
group of employees (although not necessarily the same individuals) appears in
the 2017 and 2018 group. The remuneration committee chose head office based
employees as the comparator group as this group forms the closest comparator
group.
Chief Executive £’000 Head Office Employees £’000
2018 2017 % change 2018 2017 % change
Base salary and allowances 533 333 60.1% 675 643 5%
Taxable benefits 37 37 0% 93 81 14.8%
Annual bonus 300 100 200% 460 80 475%
Total 870 470 85.1% 1,228 804 52.7%
Relative importance of spend on pay
The total expenditure of the Group on remuneration to all employees (Note 26
refers) is shown below:
2018 £’000 2017 £’000
Employee Remuneration 9,889 8,113
Distributions to shareholders 256 141
Statement of implementation of remuneration policy
The policy was approved at the AGM in June 2017 and was effective from 6 June
2017. 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. It is to be presented for approval
at the 2020 AGM.
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 2018. The balance between bonuses and basic
remuneration payable to the Chief Executive was varied to better reflect
market conditions.
Shareholder voting
At the Annual General Meeting on 19 June 2018, there was an advisory vote on
the resolution to approve the Remuneration Report, other than the part
containing the remuneration policy.
In addition, on 6 June 2017, 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 (19 June 2018) 73.95 26.05 2,173,594
Resolution to approve the Remuneration Policy (6 June 2017) 83.14 16.69 89,602
Remuneration policy
INTRODUCTION
Set out below is the LAP Group policy on directors’ remuneration (excluding
Bisichi). This policy was approved at the 2017 AGM and it is effective from 6
June 2017. Unless changed it will be presented next for approval at the AGM in
2020.
A copy of the full policy can be found at www.lap.co.uk.
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.
Future 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 Paid monthly in cash There is no prescribed maximum salary or maximum rate of increase No individual
director will be awarded a base salary in excess of £700,000 a year No specific
performance conditions are attached to base salaries
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 employment Paid into money purchase schemes 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
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 exceptional circumstances or where factors outside the control of the Group lead to increased costs (e.g. medical inflation) 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
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 determines the level of bonus on 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. Achieved results are then compared with expectation taking account of market conditions Bonuses are generally offered in cash or shares The current maximum bonus will not exceed 200% of base salary in any one year but the
remuneration committee reserves the power to award up to 300% 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
Share options To provide executive directors with a long-term interest in the company Share options may be granted under existing schemes (see page 21) 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 Entitlements to share options granted under the Approved Option scheme are not
subject to performance criteria. Share Options granted under the Unapproved Scheme
are subject to the performance criteria specified in the Scheme rules 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 as appropriate
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 to one non-executive director who is eligible for health cover (see annual remuneration report page 20) The committee retains the discretion to approve changes in contractual benefits in exceptional circumstances or where factors outside the control of the Group lead to increased costs (e.g. medical inflation) The costs associated with benefits offered are closely controlled and reviewed on an
annual basis No non-executive director will receive benefits in excess of £10,000 a
year No specific performance conditions are attached to contractual benefits
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.
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.
At the year end the audit committee comprised two of the non-executive
directors – H D Goldring and C A Parritt, both of whom are Chartered
Accountants.
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 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; and
• the chairman of the audit committee has also had separate meetings and
discussions with the external audit partner.
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 £1.5 million in relation to the consolidated balance sheet and
£0.4 million for underlying profitability and £0.3 million for the Bisichi
group to be material.
External Auditor
RSM UK Audit LLP held office throughout the period under review. In the United
Kingdom London & Associated Properties PLC provides extensive administration
and accounting services to Bisichi Mining PLC, which has its own audit
committee and employs BDO LLP, a separate and independent firm of registered
auditor.
C A Parritt
Chairman – Audit Committee
30 April 2019
Directors’ responsibilities statement
The 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.
English company law requires the Directors to prepare Group and Company
financial statements for each financial year. The Directors are required under
the Listing Rules of the Financial Conduct Authority to prepare Group
financial statements in accordance with International Financial Reporting
Standards (“IFRS”) as adopted by the European Union (“EU”) and have
elected under English company law to prepare the Company financial statements
in accordance with United Kingdom Generally Accepted Accounting Practice
(United Kingdom Accounting Standards and applicable law) including FRS101
‘Reduced Disclosure Framework’.
The Group financial statements are required by law and IFRS adopted by the EU
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 English 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 IFRS adopted by the EU and for the company financial
statements state whether applicable UK accounting standards have been
followed, subject to any material departures disclosed and explained in the
financial statements; and
d. 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 Regulations. 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 12,
confirms 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 profit 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 and regulations in the United Kingdom governing the preparation
and dissemination of financial statements may differ from legislation and
regulations in other jurisdictions.
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 2018 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 a summary of significant accounting policies. The financial
reporting framework that has been applied in the preparation of the group
financial statements is applicable law and International Financial Reporting
Standards (IFRSs) as adopted by 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 2018 and of
the group’s profit for the year then ended;
• the group financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union;
• the parent company financial statements have been properly prepared in
accordance with United Kingdom Generally Accepted Accounting Practice; and
• the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006 and, as regards the group financial
statements, Article 4 of the IAS Regulation.
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
We have nothing to report in respect of the following matters in relation to
which the ISAs (UK) require us to report to you where:
• the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is not appropriate; or
• the directors have not disclosed in the financial statements any
identified material uncertainties that may cast significant doubt about the
group’s or the parent company’s ability to continue to adopt the going
concern basis of accounting for a period of at least twelve months from the
date when the financial statements are authorised for issue.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were
of most significance in our audit of the group and parent company financial
statements of the current period and include the most significant assessed
risks of material misstatement (whether or not due to fraud) that we
identified. These matters included 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 and parent company financial statements
as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
The valuation and presentation of properties
The group’s properties are accounted for in the financial statements as
investment properties under IAS 40 and held at fair value, or as inventory
where appropriate and held at the lower of cost and net realisable value. The
majority of investment properties are valued by two firms of independent
external valuers and these valuations are adopted in the financial statements.
At 31 December 2018 investment property valued at £47.4 million (note 8) was
disclosed within non-current assets in the financial statements. Separately,
investment property valued at £2.3 million (note 10) was disclosed as assets
held for sale, within current assets, and property inventory was carried at
£38.6 million (note 12).
The directors’ assessment of the value and presentation 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 fair values of the assets, and the subjectivity and complexity of the
valuation process, which involves significant judgements and estimates as
disclosed on page 37 of the financial statements.
The valuations are carried out by two firms of professional external valuers,
together with, in respect of one property, an internal valuer in accordance
with the methodology described in note 8.
Our response to the key audit matter 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 £1.6 million which was
subject to internal valuation;
• agreeing the carrying value (sales price less estimated costs to sell)
of the property included as assets held for sale, to the draft agreement for
sale;
• discussing with management and reviewing the documentation on the
development activities undertaken which resulted in the transfer of the
Sheffield property from investment property to inventory:
• agreeing the cost of properties held as inventory to underlying
records including, for the Sheffield property held at a value of £32.3
million, to the valuation report prepared by third party valuers and used as
the basis of cost for the transfer of that property from investment property
to inventory;
• assessing the qualifications and expertise of the valuers, and
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; 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.
Key observations
• The carrying values of the properties are consistent with the valuation
reports provided for investment properties. Properties held in inventory are
carried at the lower of cost and net realisable value and, in the case of the
asset held for sale, with the agreed selling price less estimated costs to
sell. The presentation of the properties is consistent with management’s
intent
Revenue recognition
As disclosed in note 1, the Group generated revenues from coal sales, rental
income and service charge income. It was considered appropriate, as this is
the first year of application of IFRS 15, to assess the appropriateness of
management’s revenue recognition policies and their application for
compliance with IFRS. In addition, it was considered that there was a risk of
coal sales revenue being recorded in the incorrect period.
As reported under the group accounting policies, during the course of the
audit a material error was identified in respect of the Bisichi sub group’s
accounting treatment of transport costs to deliver export coal to the export
terminal under a specific agreement. Such transport costs were previously
incorrectly recorded as a deduction from revenue. Management has revised the
accounting treatment in 2018 and restated the prior year revenue and operating
costs accordingly.
The impact is to increase revenue and operating costs by £3.1m for the year
ended 31 December 2018. The impact of the prior year restatement was to
increase revenue and operating costs by £2.9m. There is no profit or net
assets effect of the restatement.
The responses to the key audit matter included:
• management’s revenue recognition policy for domestic and export coal
sales was assessed for compliance with the relevant accounting standard. In
doing so, sales contracts and terms with material customers were reviewed;
• controls over domestic coal sales were tested, focused on the
authorisation and recording of revenue. Tests of detail, verifying a sample
of domestic revenue to supporting documentation, were performed;
• third party confirmations were obtained which were agreed to amounts
recorded in the ledgers for export sales and a sample of sales was confirmed
to contract terms;
• the recording of revenue around the year end was tested and the
revenue recognition point was assessed for consistency with the group’s
revenue recognition policy, customer terms and supporting documents regarding
despatch/delivery as applicable;
• credit notes around the year end were reviewed for indications that
revenue had been inappropriately recorded;
• in respect of the change in accounting treatment for transport costs
and associated restatement of the prior year revenues and operating costs, the
relevant contract was reviewed and the appropriateness of the accounting
treatment under relevant accounting standards for the current and prior period
was assessed. In doing so, financial reporting technical experts were
consulted;
• a sample of the costs was agreed to supporting documentation and the
general ledgers were reviewed in detail to check the completeness and accuracy
of the adjustments in the current and prior period.
Key observations
The Group’s revenue recognition policies were found to be compliant with
IFRS and, subsequent to the restatement and adjustment, revenue is recorded in
line with the group’s stated policies. Service charge income of £0.9
million is now included gross in revenue, whereas in prior years such income
had been netted off expenses, as disclosed in note 1.
There are no key audit matters in relation to the parent company.
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.
During planning materiality for the group statements as a whole was calculated
as £1.5 million, which was not significantly changed during the course of our
audit. Materiality for the parent company financial statements as a whole was
calculated as £0.4 million, which was revised to £0.65 million as the audit
progressed.
The London & Associated Properties plc group consists of two distinct
components: a UK based property investment group, and a fully listed mining
group carrying out mining operations in South Africa with a relatively small
investment property portfolio.
Our materiality levels in respect of these components were determined at:
• for the London & Associated Properties plc property investment sub
group balance sheet, £1.2 million and to underlying profitability £0.4
million; and
• for the Bisichi Mining plc coal mining and property investment
sub group, £0.3 million.
We agreed with the audit committee that we would report to them all unadjusted
differences in excess of £15,000 for both components of the group. We also
agreed to report other differences below that threshold which, in our view,
warranted reporting on qualitative grounds.
An overview of the scope of our audit
The group comprises 30 trading, or active holding, companies and 12 dormant
companies. Full scope audits, using component materiality, were performed on
25 of the active entities with the other five entities subjected to desktop
review. Six of the full scope audits and four of the desktop reviews were
performed by component auditors whose work we evaluated and reviewed for the
purpose of the group audit.
This resulted in coverage of 100% of total revenues and profit before tax of
the group, and 100% of total gross assets of the group.
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.
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. In connection with our audit
of the financial statements, 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 audit or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material misstatements, we
are required to determine whether there is a material misstatement in the
financial statements or a material misstatement of the other information. 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
In 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 required 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 27, 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.
As part of our audit, we will consider the susceptibility of the group and
parent company to fraud and other irregularities, taking account of the
business and control environment established and maintained by the directors,
as well as the nature of transactions, assets and liabilities recorded in the
accounting records. Owing to the inherent limitations of an audit, there is an
unavoidable risk that some material misstatements of the financial statements
may not be detected, even though the audit is properly planned and performed
in accordance with the ISAs. However, the principal responsibility for
ensuring that the financial statements are free from material misstatement,
whether caused by fraud or error, rests with management who should not rely on
the audit to discharge those functions.
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 ended 31 December 1987 and subsequent financial periods. The period of
total uninterrupted engagement is 32 years, covering the years ending 31
December 1987 to 31 December 2018.
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
30 April 2019
FINANCIAL STATEMENTS
Consolidated income statement
for the year ended 31 December 2018
Notes 2018 £’000 2017 £’000 Restated
Group revenue 1 56,651 47,870
Operating costs (49,293) (40,319)
Gain on disposal of other investments – 3
Operating profit 7,358 7,554
Finance income 4 61 105
Finance expenses 4 (3,682) (4,268)
Debenture break cost 20 – (14)
Result before revaluation and other movements 3,737 3,377
Non–cash changes in valuation of assets and liabilities and other movements
(Decrease)/increase in value of investment properties 8 (2,565) 9,373
Write off investment in joint venture – (1,827)
Decrease in value of trading investments (169) –
Adjustment to interest rate derivative 20 265 355
Profit for the year before taxation 2 1,268 11,278
Income tax charge 5 (675) (2,982)
Profit for the year 593 8,296
Attributable to:
Equity holders of the Company (2,082) 7,686
Non–controlling interest 24 2,675 610
Profit for the year 593 8,296
Earnings per share
Profit/(loss) per share – basic and diluted 7 (2.44)p 9.01p
A revenue recognition error was identified in respect of Bisichi’s prior
year. An amount of £2,891,000 had been incorrectly recorded as a deduction
against revenue rather than shown as an operating cost. The above comparatives
have been restated accordingly.
Consolidated statement of comprehensive income
for the year ended 31 December 2018
2018 £’000 2017 £’000
Profit for the year 593 8,296
Other comprehensive income/(expense):
Items that may be subsequently recycled to the income statement:
Exchange differences on translation of Bisichi Mining PLC foreign operations (430) 91
Transfer of gain on available for sale investments – 103
Taxation – (20)
Other comprehensive (expense)/income for the year net of tax (430) 174
Total comprehensive (expense)/income for the year net of tax 163 8,470
Attributable to:
Equity shareholders (2,239) 7,753
Non–controlling interest 2,402 717
163 8,470
Consolidated balance sheet
at 31 December 2018
Notes 2018 £’000 2017 £’000
Non–current assets
Market value of properties attributable to Group 8 47,430 78,025
Present value of head leases 28 3,261 3,233
Property 50,691 81,258
Mining reserves, plant and equipment 9 8,659 8,735
Investments 14 1,783 1,799
Deferred tax 21 – –
61,133 91,792
Current assets
Inventories–property 12 38,556 –
Inventories–mining 13 1,511 828
Assets held for sale 10 2,285 36,441
Trade and other receivables 15 8,022 7,132
Interest rate derivatives 20 – 1
Investments 16 887 1,069
Cash and cash equivalents 20,655 7,528
71,916 52,999
Total assets 133,049 144,791
Current liabilities
Trade and other payables 17 (13,341) (12,909)
Borrowings 18 (41,388) (4,288)
Interest rate derivatives (169) –
Current tax liabilities (73) (358)
(54,971) (17,555)
Non–current liabilities
Borrowings 18 (15,255) (61,661)
Interest rate derivatives 20 – (435)
Present value of head leases on properties 29 (3,261) (3,233)
Provisions 19 (1,571) (1,349)
Deferred tax liabilities 22 (2,305) (3,848)
(22,392) (70,526)
Total liabilities (77,363) (88,081)
Net assets 55,686 56,710
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 Mining PLC) (852) (695)
Capital redemption reserve 47 47
Retained earnings (excluding treasury shares) 30,906 33,227
Treasury shares 23 (144) (145)
Retained earnings 30,762 33,082
Total equity attributable to equity shareholders 43,377 45,854
Non–controlling interest 24 12,309 10,856
Total equity 55,686 56,710
Net assets per share 7 50.83p 53.74p
Diluted net assets per share 7 50.83p 53.74p
These financial statements were approved by the board of directors and
authorised for issue on 30 April 2019 and signed on its behalf by:
Sir Michael
Heller Jonathan
Mintz
Company Registration No. 341829
Director
Director
Consolidated statement of changes in shareholders’ equity
for the year ended 31 December 2018
Share capital Share premium Translation reserves Capital redemption Treasury shares Retained earnings Total excluding Non– controlling Total equity
£’000 £’000 £’000 reserve £’000 excluding Non– Interests £’000
£’000 treasury Controlling £’000
shares Interests
£’000 £’000
Balance at 1 January 2017 8,554 4,866 (728) 47 (145) 25,648 38,242 10,389 48,631
Profit for year – – – – – 7,686 7,686 610 8,296
Other comprehensive income:
Currency translation – – 33 – – – 33 58 91
Gain on available for sale investments (net of tax) – – – – – 34 34 49 83
Total other comprehensive income – – 33 – – 34 67 107 174
Total comprehensive income – – 33 – – 7,720 7,753 717 8,470
Transactions with owners:
Dividends – equity holders – – – – – (141) (141) – (141)
Dividends – non–controlling interests – – – – – – – (250) (250)
Transactions with owners – – – – – (141) (141) (250) (391)
Balance at 31 December 2017 8,554 4,866 (695) 47 (145) 33,227 45,854 10,856 56,710
Profit for year – – – – – (2,082) (2,082) 2,675 593
Other comprehensive expense:
Currency translation – – (157) – – – (157) (273) (430)
Total other comprehensive expense – – (157) – – – (157) (273) (430)
Total comprehensive income/(expense) – – (157) – – (2,082) (2,239) 2,402 163
Transactions with owners:
Share options charge – – – – – 17 17 7 24
Dividends – equity holders – – – – – (256) (256) – (256)
Dividends – non–controlling interests – – – – – – – (956) (956)
Disposal of own shares – – – – 1 – 1 – 1
Transactions with owners – – – – 1 (240) (239) (948) (1,187)
Balance at 31 December 2018 8,554 4,866 (852) 47 (144) 30,906 43,377 12,309 55,686
Consolidated cash flow statement
for the year ended 31 December 2018
2018 £’000 2017 £’000
Operating activities
Profit for the year before taxation 1,268 11,278
Finance income (61) (105)
Finance expense 3,682 4,268
Debenture break cost – 14
Realised gain on disposal of other investments – (3)
(Increase)/decrease in value of investment properties 2,565 (9,373)
Write off investment in joint venture – 1,827
Increase in trading investments 169 –
Adjustment to interest rate derivative (265) (355)
Depreciation 2,122 1,804
Profit on disposal of non-current assets – (3)
Share based payment expense 18 –
Exchange adjustments 65 258
Development expenditure on inventories (6,256) –
Change in inventories (797) 896
Change in receivables (235) 196
Change in payables (354) (415)
Cash generated from operations 1,921 10,287
Income tax paid (2,281) (14)
Cash inflows from operating activities (360) 10,273
Investing activities
Disposal of assets held for sale 36,474 (56)
Acquisition of investment properties, mining reserves, plant and equipment (9,438) (1,771)
Sale of plant and equipment 1 29
Interest received 199 137
Cash (outflows)/inflows from investing activities 27,236 (1,661)
Financing activities
Interest paid (3,711) (3,963)
Interest obligation under finance leases (178) (178)
Debenture stock break costs paid – (14)
Receipt of bank loan - Bisichi Mining PLC 753 23
Repayment of bank loan - Bisichi Mining PLC (19) (25)
Repayment of bank loan - Dragon Retail Properties Ltd (65) –
Receipt of bank loan 7,202 –
Repayment of bank loan (16,438) –
Short term loan from joint ventures and related parties (30) (30)
Repayment of debenture stocks (3,000) (750)
Equity dividends paid (255) (141)
Equity dividends paid - non-controlling interests (309) (250)
Cash outflows from financing activities (16,050) (5,328)
Net increase in cash and cash equivalents 10,826 3,284
Cash and cash equivalents at beginning of year 6,266 2,931
Exchange adjustment 28 51
Cash and cash equivalents at end of year 17,120 6,266
Cash and cash equivalents
For the purpose of the cash flow statement, cash and cash equivalents comprise
the following balance sheet amounts:
2018 £’000 2017 £’000
Cash and cash equivalents (before bank overdrafts) 20,655 7,528
Bank overdrafts (3,535) (1,262)
Cash and cash equivalents at end of year 17,120 6,266
£340,000 of cash deposits at 31 December 2018 were charged as security to
debenture stocks (2017: £120,000).
£500,000 of cash deposits at 31 December 2018 were charged as security to
bank loans (2017: nil).
Group accounting policies
The following are the principal Group accounting policies:
Basis of accounting
The Group financial statements are prepared in accordance with International
Financial Reporting Standards (IFRS), as adopted by the European Union and
with those parts of the Companies Act 2006 applicable to companies reporting
under IFRS.
The Company has elected to prepare the parent company’s financial statements
in accordance with Financial Reporting Standard 101 ’Reduced Disclosure
Framework’ (FRS 101) and Companies Act 2006 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 derivatives.
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
2018 2017 2018 2017
Year-end rate 18.3723 16.6686 1.2690 1.35028
Annual average 17.5205 17.1540 1.3096 1.29174
London & Associated Properties PLC (“LAP”), the parent company, is a
listed public 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”) consists of LAP, all of its subsidiary
undertakings, including Bisichi Mining PLC (“Bisichi”) and Dragon Retail
Properties Limited (“Dragon”). The Group without Bisichi and Dragon is
referred to as LAP Group.
Revenue recognition restatement
During the review of revenue recognition in South Africa a revenue recognition
error was identified in respect of the treatment of transport and loading
costs to deliver export coal under certain export agreements. The costs in
prior periods, had been incorrectly recorded as a deduction against revenue
rather than shown as an operating cost. In the current year such costs have
been recorded in operating costs and the comparatives restated accordingly.
The impact on the current year is to increase both revenue and operating costs
by £3,101,000 and the prior year requires an equivalent restatement totalling
£2,891,000. There is no profit or net assets impact as a result of the prior
year restatement.
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. The LAP Group’s business
activities, together with the factors likely to affect its future development,
are set out in the Chairman and Chief Executive’s Statement and Financial
Review. In addition, Note 20 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.
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 2018.
IFRS 15 ‘Revenue from Contracts with Customers’ was issued by the IASB in
May 2014. It is effective for accounting periods beginning on or after 1
January 2018. The new standard replaces the existing accounting standards, and
provides enhanced detail on the principle of recognising revenue to reflect
the transfer of goods and services to customers at a value which the company
expects to be entitled to receive. The standard also updates revenue
disclosure requirements. The standard was endorsed by the EU on 22 September
2017. The new standard has not caused any material impacts on the financial
statements for the year ended 31 December 2018.
IFRS 9 was published in July 2014 and is effective for the group from
1 January 2018. The standard was endorsed by the EU on 22 November 2017. IFRS
9 supersedes IAS 39 “Financial Instruments: Recognition and Measurement”
and is applicable to financial assets and financial liabilities, and covers
the classification, measurement, impairment and de-recognition of financial
assets and financial liabilities together with a new hedge accounting model.
The adoption of IFRS 9 has resulted in changes in the Group’s accounting
policies for the recognition, classification and measurement of financial
assets and financial liabilities and impairment of financial assets. IFRS 9
modifies the classification and measurement of certain classes of financial
assets and liabilities and required the Group to reassess classification of
financial assets into three primary categories (amortised cost, fair value
through profit and loss, fair value through other comprehensive income),
reflecting the business model in which assets are managed and their cash flow
characteristics. Financial liabilities continue to be measured at either fair
value through profit and loss or amortised cost. In addition, IFRS 9
introduced an expected credit loss (“ECL”) impairment model, which means
that anticipated as opposed to incurred credit losses are recognised which may
result in earlier recognition of impairments. Application of IFRS 9 has not
had a significant impact on the Group’s reported results or its credit risk
management policies.
The Group has not adopted any Standards or Interpretations in advance of the
required implementation dates. The following new and revised IFRS standards,
which are applicable to the group, were issued but are not yet effective:
IFRS 16 ‘Leases’ – IFRS 16 ‘Leases’ was issued by the IASB in
January 2017 and is effective for accounting periods beginning on or after 1
January 2019. The new standard will replace IAS 17 ‘Leases’ and will
eliminate the classification of leases as either operating leases or finance
leases and, instead, introduce a single lessee accounting model. The standard,
which has been endorsed by the EU, provides a single lessee accounting model,
specifying how leases are recognised, measured, presented and disclosed. The
Directors are currently evaluating the financial and operational impact of
this standard including the application to the Bisichi group’s service
contracts at the mine containing leases. The review of the impact of IFRS 16
will require an assessment of all leases and the impact of adopting this
standard cannot be reliably estimated until this work is substantially
complete.
The Directors do not anticipate that the adoption of the other standards and
interpretations not listed above will have a material impact on the accounts.
Certain of these standards and interpretations will, when adopted, require
addition to or amendment of disclosures in the accounts.
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 and investments
An assessment of the fair value of certain assets and liabilities, in
particular investment properties, is required to be performed. In such
instances, fair value measurements are estimated based on the amounts for
which the assets and liabilities could be exchanged between market
participants. To the extent possible, the assumptions and inputs used take
into account externally verifiable inputs. However, such information is by
nature subject to uncertainty.
Inventory
When the Group begins to redevelop an existing investment property with a view
to sell, 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 in trading
properties. The Board have decided that Orchard Square, Sheffield no longer
fits our longer-term criteria for an investment property held to generate
capital growth. Accordingly, it has been transferred to inventory. A series of
asset management initiatives and developments are underway, and it is our
intention to sell this asset on completion of those projects.
Mining operations
Life of mine and reserves
The directors 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 at most risk of a significant estimation uncertainty. The life of the mine
remaining is currently estimated at 4 years. This life of mine is based on the
Groups existing coal reserves and excludes future coal purchases and coal
reserve acquisitions. The Group’s estimates of proven and probable reserves
are prepared and 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 19.
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 2018 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. A 15% reduction in average forecast coal prices or a 17%
reduction in yield would give rise to a breakeven scenario. However, the
Bisichi directors consider the forecasted yield levels and pricing to be
achievable.
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 Mining 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, property rental income and property
management fees.
Rental income
Rental income arises from operating leases granted to tenants. An operating
lease is a lease other than a finance lease. A finance lease is one whereby
substantially all the risks and rewards of ownership are passed to the lessee.
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 a
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 derecognises 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 derecognises financial liabilities when the Group’s
obligations are discharged, cancelled or have expired.
Investments
Investments comprise of (a) a loan to a limited property partnership, included
in non-current investments, and (b) investments in shares of listed companies.
Current and non-current Investments are initially measured at fair value and
are subsequently measured at fair value through profit and loss, based on both
the business model within which such assets are held and the contractual cash
flow characteristics of the financial asset. Fair value movements are
recognised in profit or loss.
Financial assets are derecognised when the rights to receive cash flows have
expired or have been transferred and the Group has transferred substantially
all the risks and rewards of ownership. When there is no reasonable
expectation of recovering part or all of a financial asset, its carrying value
is written off.
Trade and other receivables
Trade receivables are accounted for at amortised cost. Trade receivables do
not carry any interest and are stated at their nominal value as reduced by
appropriate expected credit loss allowances for estimated recoverable amounts
as the interest that would be recognised from discounting future cash payments
over the short payment period is not considered to be material.
Trade 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 discount and 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.
Finance lease liabilities
Finance lease liabilities arise for those investment properties held under a
leasehold interest and accounted for as investment property. The liability is
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 so as
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.
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
property 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. Additions to capital expenditure, being costs 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, are capitalised in the
carrying value of that property. Where there is a change of use, such as
commencement of development with a view to sell, 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 in respect of investment
properties.
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
Assets held for sale
Non-current assets, or disposal groups comprising assets and liabilities, 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,
or disposal groups, are generally measured at the lower of their carrying
amount and fair value less costs of sale. Any impairment loss on a disposal
group is allocated first to goodwill and then to the remaining assets and
liabilities on a pro rata basis, except that no loss is allocated to
inventories, financial assets, deferred tax assets, employee benefit assets,
or investment property which continues to be measured in accordance with the
Group’s other accounting policies. 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
Those properties held as trading inventory which are being developed with a
view to sell. Inventories are recorded at the lower of cost and net realisable
value. The net realisable value of inventory is determined by a professional
external valuer at each reporting date. 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 are presented on the balance sheet within
current assets.
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
comprises 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 as per IAS 7. This includes
the structured trade finance facility held in South Africa as detailed in note
20. 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 Mining 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 has
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.
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 an asset’s
carrying value is written down to its estimated recoverable amount (being the
higher of the fair value less cost to sell and value in use). 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 componentises its mine into geographically distinct
sections or phases to which the stripping activities being undertaken within
that component are allocated. Such phases are determined based on assessment
of factors such as geology and mine planning.
The Group depreciates deferred costs capitalised as stripping assets on a unit
of production method, with reference 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.
Notes to the financial statements
for the year ended 31 December 2018
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 2018 TOTAL £’000
Rental income 5,049 1,065 167 6,281
Service charge income 802 137 – 939
Management income from third party properties 718 – – 718
Mining – 48,713 – 48,713
Group Revenue 6,569 49,915 167 56,651
Direct property costs (2,269) (340) – (2,609)
Direct mining costs – (34,309) – (34,309)
Overheads (4,035) (6,050) (105) (10,190)
Exchange losses – (63) – (63)
Depreciation (9) (2,113) – (2,122)
Operating profit 256 7,040 62 7,358
Finance income 37 24 – 61
Finance expenses (3,111) (538) (33) (3,682)
Result before valuation movements (2,818) 6,526 29 3,737
Other segment items
Net decrease on revaluation of investment properties (2,170) (215) (180) (2,565)
Net decrease on revaluation of investments held for trading – (169) – (169)
Adjustment to interest rate derivative 265 – – 265
Revaluation and other movements (1,905) (384) (180) (2,469)
(Loss)/profit for the year before taxation (4,723) 6,142 (151) 1,268
Segment assets
- Non-current assets - property 35,011 13,230 2,450 50,691
- Non-current assets - plant & equipment 106 8,531 22 8,659
- Cash & cash equivalents 11,345 9,221 89 20,655
- Non-current assets - other 1,748 35 – 1,783
- Current assets - others 1,947 8,290 183 10,420
Total assets excluding investment in joint ventures, assets held for sale and property inventories 50,157 39,307 2,744 92,208
Segment liabilities
Borrowings (45,352) (10,127) (1,164) (56,643)
Current liabilities (6,372) (7,158) (73) (13,603)
Non-current liabilities (3,122) (3,962) (33) (7,117)
Total liabilities (54,846) (21,247) (1,270) (77,363)
Net (liabilities)/assets (4,689) 18,060 1,474 14,845
Assets held for sale 2,285 – – 2,285
Inventories–property 38,556 – – 38,556
Net assets as per balance sheet 55,686
Major customers
Customer A – 34,112 – 34,112
Customer B – 11,557 – 11,557
These customers are for mining revenue in South Africa.
Geographic analysis United Kingdom £’000 South Africa £’000 2018 Total £’000
Revenue 8,015 48,636 56,651
Operating profit 1,274 6,084 7,358
Non-current assets excluding investments 50,820 8,530 59,350
Total net assets 51,118 4,568 55,686
Capital expenditure 6,574 2,864 9,438
BUSINESS ANALYSIS LAP £’000 BISICHI £’000 Restated DRAGON £’000 2017 TOTAL £’000 Restated
Rental income 6,825 1,112 166 8,103
Management income from third party properties 542 – – 542
Mining – 39,225 – 39,225
Group Revenue 7,367 40,337 166 47,870
Direct property costs (926) (152) (1) (1,079)
Direct mining costs – (28,555) – (28,555)
Overheads (2,869) (5,589) (164) (8,622)
Exchange gains – (256) – (256)
Depreciation (13) (1,790) (1) (1,804)
Operating profit 3,559 3,995 - 7,554
Finance income 38 67 - 105
Finance expenses (3,706) (526) (29) (4,268)
Debenture break costs (14) - - (14)
Result before valuation movements (130) 3,536 (29) 3,377
Other segment items
Net increase/(decrease) on revaluation of investment properties 9,386 (13) – 9,373
Write off investment in joint venture – (1,827) – (1,827)
Adjustment to interest rate derivative 358 – (3) 355
Revaluation and other movements 9,744 (1,840) (3) 7,901
Profit/(loss) for the year before taxation 9,614 1,696 (32) 11,278
Segment assets
- Non-current assets - property 65,231 13,397 2,630 81,258
- Non-current assets - plant & equipment 116 8,613 6 8,735
- Cash & cash equivalents 2,109 5,327 92 7,528
- Non-current assets - other 1,748 51 – 1,799
- Current assets - others 2,715 6,285 30 9,030
Total assets excluding investment in joint ventures and assets held for sale 71,919 33,673 2,758 108,350
Segment liabilities
Borrowings (57,571) (7,160) (1,218) (65,949)
Current liabilities (5,588) (7,556) (123) (13,267)
Non-current liabilities (4,806) (3,986) (73) (8,865)
Total liabilities (67,965) (18,702) (1,414) (88,081)
Net assets 3,954 14,971 1,344 20,269
Assets held for sale 36,441 – – 36,441
Net assets as per balance sheet 56,710
Major customers
Customer A – 27,528 – 27,528
Customer B – 7,226 – 7,226
These customers are for mining revenue in South Africa.
Geographic analysis United Kingdom £’000 South Africa £’000 2017 Total £’000
Revenue 8,692 39,178 47,870
Operating profit 4,645 2,909 7,554
Non-current assets excluding investments 81,383 8,610 89,993
Total net assets 52,452 4,258 56,710
Capital expenditure 30 1,741 1,771
Group revenue is external to the Group and the directors consider that inter
segmental revenues are not material. Revenue includes the reversal of
contingent rents of £0.1 million (2017: contingent rents of £0.7 million).
The directors have disclosed service charge income separately as a component
of revenue in 2018, with a corresponding grossing up of direct property costs.
In 2017 and prior years, service charges were shown netted against direct
property costs. Management considers the approach adopted in 2018 is more
informative and intends to continue with this approach in future years. The
revised disclosure does not change operating profit. For 2017 the amount of
service charge income received by the Group was £836,000. Accordingly, the
change in presentation is not considered to be sufficiently material to
warrant amending prior periods’ disclosures.
Segmental property revenue is derived from rental income and service charges
recoverable from tenants. This is consistent with the revenue information
disclosed for each reportable segment (see note 1). Rental income is
recognised on a straight-line basis over the term of the lease. Service
charges recoverable from tenants are recognised over time as the service is
rendered. Segmental mining revenue is derived principally from coal sales and
is recognised once the control of the goods has transferred from the group to
the buyer. Revenue is measured based on the consideration specified in the
contract with the customer or tenant.
2. Profit before taxation
2018 £’000 2017 £’000
Profit before taxation is stated after charging/(crediting):
Staff costs (see note 26) 9,889 8,113
Depreciation on tangible fixed assets - owned assets 2,123 1,804
Operating lease rentals - land and buildings 454 411
Exchange loss 63 256
Profit on disposal of motor vehicles and office equipment 6 (3)
Amounts payable to the auditor in respect of both audit and non-audit services
Audit services
Statutory - Company and consolidation 83 83
Subsidiaries - audited by RSM 17 17
Subsidiaries - audited by other auditors 78 51
Further assurance services 4 4
Other services 9 5
191 160
Staff costs are included in overheads.
3. Directors’ emoluments
2018 £’000 2017 £’000
Emoluments 1,899 894
Defined contribution pension scheme contributions 10 27
1,909 921
Sir Michael Heller received £284,000 (2017: £75,000) as a Director of
Bisichi Mining PLC.
Details of directors’ emoluments and share options are set out in the
remuneration report.
4. Finance income and expenses
2018 £’000 2017 £’000
Finance income 61 105
Finance expenses
Interest on bank loans and overdrafts (2,034) (2,223)
Unwinding of discount (Bisichi) (43) (92)
Other loans (1,169) (1,414)
Interest on derivatives (269) (337)
Interest on obligations under finance leases (167) (202)
Total finance expenses (3,682) (4,268)
5. Income tax
2018 £’000 2017 £’000
Current tax
Corporation tax on profit of the period 2,017 369
Corporation tax on profit of previous periods 33 (5)
Total current tax 2,050 364
Deferred tax
Loss utilised 3,740 –
Origination of timing differences (57) (35)
Revaluation of investment properties (5,056) 2,348
Accelerated capital allowances (120) 235
Fair value of interest derivatives 51 68
Adjustment in respect of prior years 67 2
Total deferred tax (notes 21 and 22) (1,375) 2,618
Tax on profit on ordinary activities 675 2,982
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 19.00 per cent
(2017: 19.25 per cent). The differences are explained below:
2018 £’000 2017 £’000
Profit for the year before taxation 1,268 11,278
Taxation at 19 per cent (2017: 19.25 per cent) 241 2,171
Effects of:
Capital gains / (losses) on disposal (1,799) 1,792
Other differences 2,058 (785)
Adjustment in respect of prior years (33) (3)
Deferred tax rate adjustment 208 (193)
Income tax charge for the year 675 2,982
Other differences include foreign tax £618,000 (2017: £175,000), deferred
tax not recognised on losses £421,000 (2017: nil).
Analysis of United Kingdom and overseas tax:
United Kingdom tax included in above:
2018 £’000 2017 £’000
Corporation tax (10) 233
Adjustment in respect of prior years 33 (5)
Current tax 23 228
Deferred tax (1,458) 2,219
(1,435) 2,447
Overseas tax included above:
2018 £’000 2017 £’000
Corporation tax 2,026 136
Current tax 2,026 136
Deferred tax 84 397
Adjustment in respect of prior years - 2
Deferred tax 84 399
2,110 535
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 Bill 2016 was substantively enacted on 7 September 2016. This
includes a reduction in the rate of Corporation tax from 19% effective from 1
April 2017 to 17% from 1 April 2020.
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.
6. Dividend
2018 2017
Per share £’000 Per share £’000
Dividends paid during the year relating to the prior period 0.300p 256 0.165p 141
Dividends to be paid:
Proposed final dividend for the year 0.180p 154 0.175p 149
Proposed special dividend for the year – – 0.125p 107
7. (Loss)/profit per share and net assets per share
(Loss)/profit per share has been calculated as follows:
2018 2017
(Loss)/profit for the year for the purposes of basic and diluted profit/(loss) per share (£’000) (2,082) 7,686
Weighted average number of ordinary shares in issue for the purpose of basic (loss)/profit per share (’000) 85,325 85,322
Basic (loss)/profit per share (2.44)p 9.01p
Weighted average number of ordinary shares in issue for the purpose of diluted (loss)/profit per share (’000) 85,325 85,322
Fully diluted (loss)/profit per share (2.44)p 9.01p
Weighted average number of shares in issue is calculated after excluding
treasury shares of 218,197 (2017: 221,061).
Net assets per share have been calculated as follows:
2018 2017
Net assets (£’000) 43,377 45,854
Shares in issue (’000) 85,322 85,322
Basic net assets per share 50.83p 53.74p
Net assets diluted (£’000) 43,377 45,854
Shares in issue (’000) 85,322 85,322
Diluted net assets per share 50.83p 53.74p
8. Investment properties
Total £’000 Freehold £’000 Leasehold over 50 years £’000 Leasehold under 50 years £’000
Cost or valuation at 1 January 2018 81,258 62,425 16,856 1,977
(Decrease)/increase on revaluation (2,565) (2,075) (575) 85
Transfer to assets held for sale (note 10) (2,285) (2,285) – –
Transfer to inventory (note 12) (32,300) (32,300) – –
Acquisition of property 6,553 6,553 – –
Increase/(decrease) in present value of head leases 30 – 33 (3)
At 31 December 2018 50,691 32,318 16,314 2,059
Representing assets stated at:
Valuation 47,430 32,318 13,996 1,116
Present value of head leases 3,261 – 2,318 943
50,691 32,318 16,314 2,059
Total £’000 Freehold £’000 Leasehold over 50 years £’000 Leasehold under 50 years £’000
Cost or valuation at 1 January 2017 109,847 88,585 19,620 1,642
Transfer to assets held for sale (note 10) (36,441) (36,441) – –
Additions in year 13 13 – –
(Decrease)/increase in present value of head leases (1,534) – (1,839) 305
Increase/(decrease) on revaluation 9,373 10,268 (925) 30
At 31 December 2017 81,258 62,425 16,856 1,977
Representing assets stated at:
Valuation 78,025 62,425 14,570 1,030
Present value of head leases 3,233 – 2,286 947
81,258 62,425 16,856 1,977
The leasehold and freehold properties, excluding the present value of head
leases and directors’ valuations, were valued as at 31 December 2018 by
professional firms of chartered surveyors. The valuations were made at fair
value. The directors’ property valuations were made at fair value.
2018 £’000 2017 £’000
Allsop LLP 32,785 62,955
Carter Towler 13,045 13,245
Directors’ valuations 1,600 1,825
47,430 78,025
Add: present value of headleases 3,261 3,233
50,691 81,258
The historical cost of investment properties, including total capitalised
interest of £1,161,000 (2017: £1,161,000) was as follows:
2018 2017
Freehold £’000 Leasehold Over 50 years £’000 Leasehold under 50 years £’000 Freehold £’000 Leasehold Over 50 years £’000 Leasehold under 50 years £’000
Cost at 1 January 67,702 17,653 1,939 72,711 17,653 1,939
Transfer to assets held for sale (note 10) (202) – – (5,022) – –
Transfer to inventory (note 12) (38,902) – – – – –
Additions 6,553 – – 13 – –
Cost at 31 December 35,151 17,653 1,939 67,702 17,653 1,939
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
qualified 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 2018 £’000 Carrying/ Fair value 2017 £’000 Valuation technique Key unobservable inputs Range (weighted average) 2018 Range (weighted average) 2017
Freehold – external valuation 30,720 60,600 Income capitalisation Estimated Rental Value Per sq ft p.a Equivalent Yield £4 – £39 (£16) 5.3% – 12.9% (9.7%) £5 – £39 (£19) 4.9% – 12.9% (8.4%)
Leasehold over 50 years – external valuation 13,995 14,570 Income capitalisation Estimated Rental Value Per sq ft p.a Equivalent Yield £5 – £10 (£9) 5.8% – 19.9% (12.9%) £5 – £10 (£9) 5.8% – 17.6% (9%)
Leasehold under 50 years – external valuation 1,115 1,030 Income capitalisation Estimated Rental Value Per sq ft p.a Equivalent Yield £4 – £5 (£5) 22.9% – 25.8% (23.5%) £4 – £5 (£5) 25.4% – 25.8% (25.5%)
Freehold – Directors’ valuation 1,600 1,825 Income capitalisation Estimated Rental Value Per sq ft p.a Equivalent Yield £5 – £5 (£5) 7.0% – 7.0% (7.0%) £5 – £5 (£5) 6.1% – 6.1% (6.1%)
At 31 December 47,430 78,025
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)
2018 £’000 2017 £’000 2018 £’000 2017 £’000
Freehold – external valuation 3,067/(3,067) 6,055/(6,055) 948/(891) 2,095/(1,956)
Leasehold over 50 years – external valuation 1,400/(1,400) 1,457/(1,457) 337/(320) 355/(338)
Leasehold under 50 years – external valuation 112/(112) 103/(103) 12/(12) 10/(10)
Freehold – Directors’ valuation 160/(160) 183/(183) 59/(55) 78/(71)
9. Mining reserves, plant and equipment
Total £’000 Mining reserves £’000 Mining equipment £’000 Office equipment and motor vehicles £’000
Cost at 1 January 2018 27,996 1,366 25,902 728
Exchange adjustment (2,688) (126) (2,531) (31)
Additions 2,883 – 2,777 106
Disposals (18) – – (18)
At 31 December 2018 28,173 1,240 26,148 785
Accumulated depreciation at 1 January 2018 19,261 1,308 17,441 512
Exchange adjustment (1,853) (121) (1,712) (20)
Charge for the year 2,123 26 2,048 49
Disposals in year (17) – – (17)
Accumulated depreciation at 31 December 2018 19,514 1,213 17,777 524
Net book value at 31 December 2018 8,659 27 8,371 261
Cost at 1 January 2017 25,817 1,344 23,724 749
Exchange adjustment 474 22 447 5
Additions 1,758 – 1,731 27
Disposals (53) – – (53)
Cost at 31 December 2017 27,996 1,366 25,902 728
Accumulated depreciation at 1 January 2017 17,164 1,287 15,370 507
Exchange adjustment 332 21 308 3
Charge for the year 1,804 1 1,763 40
Disposals (39) (1) – (38)
Accumulated depreciation at 31 December 2017 19,261 1,308 17,441 512
Net book value at 31 December 2017 8,735 58 8,461 216
10. ASSETS HELD FOR SALE
2018 £’000 2017 £’000
At 1 January 36,441 –
Transfer from investment properties (note 8) 2,285 36,441
Disposal (36,441) –
At 31 December 2,285 36,441
In April 2018 the sale of both Brixton markets was completed for a combined
price of £37.25 million. The properties were held at a valuation of £36.441
million. This value equated to the net sale proceeds and there was no profit
on sale.
At December 2018 the Group’s remaining property in Brixton is under offer
and it is anticipated that the sale will complete in May 2019. The property is
held at a valuation of £2.285 million, equating to the expected net sales
proceeds. The revaluation gain of £1.035 million is recognised in these
accounts. The property was held at a valuation of £1.25 million at 31
December 2017.
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 2018 is disclosed below:
Entity Activity Percentage of share capital Registered address Country of incorporation
Analytical Investments Limited Dormant 100% 24 Bruton Place, London, W1J 6NE England and Wales
Analytical Portfolios Limited Dormant 100% 24 Bruton Place, London, W1J 6NE England and Wales
Analytical Properties Holdings Limited Property 100% 24 Bruton Place, London, W1J 6NE England and Wales
Analytical Properties Limited Property 100% 24 Bruton Place, London, W1J 6NE England and Wales
Analytical Ventures Limited Property 100% 24 Bruton Place, London, W1J 6NE England and Wales
24 Bruton Place Limited Dormant 100% 24 Bruton Place, London, W1J 6NE England and Wales
24 BPL (Harrogate) Limited Investment 88% 24 Bruton Place, London, W1J 6NE England and Wales
24 BPL (Harrogate ) Two Limited Investment 100% 24 Bruton Place, London, W1J 6NE England and Wales
Brixton Village Limited Property 100% 24 Bruton Place, London, W1J 6NE England and Wales
Market Row Limited Property 100% 24 Bruton Place, London, W1J 6NE England and Wales
Newincco 1243 Limited Property 100% 24 Bruton Place, London, W1J 6NE England and Wales
Newincco 1244 Limited Property 100% 24 Bruton Place, London, W1J 6NE England and Wales
Newincco 1245 Limited Property Management Services 100% 24 Bruton Place, London, W1J 6NE England and Wales
Newincco 1299 Limited Property 100% 24 Bruton Place, London, W1J 6NE England and Wales
Newincco 1300 Limited Property 100% 24 Bruton Place, London, W1J 6NE England and Wales
LAP Ocean Holdings Limited Property 100% 24 Bruton Place, London, W1J 6NE England and Wales
LAP Ocean Two Limited Property 100% 24 Bruton Place, London, W1J 6NE England and Wales
London & Associated Limited Dormant 100% 24 Bruton Place, London, W1J 6NE England and Wales
London & Associated (Rugeley) Limited Dormant 100% 24 Bruton Place, London, W1J 6NE England and Wales
London & Associated Securities Limited Dormant 100% 24 Bruton Place, London, W1J 6NE England and Wales
London & Associated Management Services Limited Property Management Services 100% 24 Bruton Place, London, W1J 6NE England and Wales
London & African Investments Limited Dormant 100% 24 Bruton Place, London, W1J 6NE England and Wales
Orchard Chambers Residential Limited Dormant 100% 24 Bruton Place, London, W1J 6NE England and Wales
Bisichi Mining PLC (note D) Coal mining 41.52% 24 Bruton Place, London, W1J 6NE England and Wales
Mineral Products Limited (note A)(note D) Share dealing 100% 24 Bruton Place, London, W1J 6NE England and Wales
Bisichi (Properties) Limited (note A)(note D) Property 100% 24 Bruton Place, London, W1J 6NE England and Wales
Bisichi Mining (Exploration) Limited (note A)(note D) Holding company 100% 24 Bruton Place, London, W1J 6NE England and Wales
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
24.
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 land and buildings:
2018 £’000 2017 £’000
At 1 January – –
Development expenditure 6,196 –
Interest on development expenditure 60 –
Transfer from investment property (note 8) 32,300 –
At 31 December 38,556 –
During the year 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 £6.256 million and is currently being developed for sale.
During the year the Group decided that Orchard Square, Sheffield no longer
fitted our long-term criteria for investment property held to generate growth.
It was therefore transferred at market value of £32.3 million into the
property dealing division and is now held as inventory.
13. Inventories–mining
2018 £’000 2017 £’000
Coal
Washed 777 301
Mining production 316 286
Work in progress 378 227
Other 40 14
1,511 828
14. NON-CURRENT ASSET INVESTMENTS
2018 £’000 2017 £’000
Unlisted equity and debt investments 1,748 1,748
Overseas listed equity securities 35 51
1,783 1,799
The Group owns a 3.17% (2017: 3.17%) interest in the equity and loans of HRGT
Shopping Centres LP (HRGT), a limited partnership set up in England to acquire
and own 3 shopping centres in Dunfermline, Kings Lynn and Loughborough. 96.40%
(2017: 96.40%) of the equity and loans are owned by Oaktree Capital Management
and 0.43% (2017: 0.43%) by Gooch Cunliffe Whale LLP. London & Associated
Management Services Limited has a management contract to manage the properties
on behalf of HRGT.
No fair value gain or loss was recognised in the year on the unlisted equity
and debt investments.
A fair value loss of £15,000 was recognised on the overseas listed equity
securities, and an exchange adjustment of £1,000 was also recognised.
The adoption of IFRS 9 has resulted in the reclassification of the Group’s
non-current investments. In the prior year the non-current investments were
treated as held to maturity and movements were recognised as fair value gains
or losses thorough other comprehensive income. In the current year these have
been reclassified to investments held at fair value with gains or losses taken
through profit and loss. No restatement of prior periods has been made, as
permitted by IFRS 9.
15. Trade and other receivables
2018 £’000 2017 £’000
Trade receivables 6,055 4,920
Other receivables 949 736
Prepayments and accrued income 1,018 1,476
8,022 7,132
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 doubtful debts provided against trade receivables was £277,000 (2017:
£284,000). There was no additional loss allowance or impairment required
during the year as a result of the implementation of IFRS 9.
16. Current asset Investments (PREVIOUSLY CLASSIFIED AS available
for sale INVESTMENTS)
Listed equity securities 2018 £’000 2017 £’000
At 1 January 1,069 800
Additions - 186
Disposals (25) -
Fair value (loss)/gain (157) 83
887 1,069
Investments are listed on the London Stock Exchange with the exception of
£40,000 (2017: £47,000) listed outside Great Britain.
The adoption of IFRS 9 has resulted in the reclassification of the groups
Investments in listed securities. In the prior year the investments were
classified as available for sale investments measured at fair value with
movements taken through other comprehensive income and available for sale
reserves. In the current year the investments were reclassified as Investments
in Listed securities held at fair value with movements taken through profit
and loss and retained earnings. The Group has not restated prior periods as
allowed by the transition provisions of IFRS 9.
17. Trade and other payables
2018 £’000 2017 £’000
Trade payables 4,637 3,937
Other taxation and social security costs 411 629
Other payables 3,372 2,842
Accruals and deferred income 4,921 5,501
13,341 12,909
The directors consider that the carrying amount of trade and other payables
approximates to their fair value.
18. Borrowings
Other loans (Bisichi) 2018 £’000 2018 £’000 2017 £’000 2017 £’000
Current Non-current Current Non-current
Other loans (Bisichi) 205 547 26 –
£1.25 million term bank loan (secured) repayable by 2020 (Dragon)* – 1,164 – 1,218
£3.75 million first mortgage debenture stock 2018 at 11.6 per cent – – 3,000 –
Bank overdrafts (secured) (Bisichi) 3,535 – 1,262 –
£10 million first mortgage debenture stock 2022 at 8.109 per cent* – 9,939 – 9,922
£5.876 million term bank loan (secured) repayable by 2019 (Bisichi)* 5,840 – – 5,872
£3.584 million term loan (secured) - repayable by 2019 (Broadway Regen) 3,461 – – –
£34.897 million term bank loan (secured) repayable by 2019* 21,403 – – 34,640
£10.105 million term bank loan (secured) repayable by 2019 at 9.5 per cent* 6,808 – – 10,009
£3.932 million term loan (secured) repayable by 2028 136 3,605 – –
41,388 15,255 4,288 61,661
Borrowings analysis by origin:
2018 £’000 2017 £’000
United Kingdom 52,356 64,621
South Africa 4,287 1,328
56,643 65,949
* The £10 million debenture and bank loans are shown after deduction
of un-amortised issue costs.
Interest payable on the term bank loans is variable being based upon the
London inter–bank offered rate (LIBOR) plus margin.
In July 2018, the Group repaid the remaining £3.0 million of the £3.75
million first mortgage debenture stock 2018.
Following the sale of Brixton Markets in April 2018, £12.8 million of the
£34.897 million Santander bank loan was repaid and £3.1 million of the
£10.105 million Europa bank loan was repaid.
The First Mortgage Debenture Stock August 2022 and the Santander and Europa
term bank loans repayable in July 2019 are secured by way of a charge on
specific freehold and leasehold properties which are included in the financial
statements at a value of £51.32 million. In addition, £0.34 million of cash
deposits are charged as security to debenture stocks and £0.5 million to
Santander and Europa bank loans. The Santander bank loan has an interest cost
of 2 per cent above LIBOR. An interest rate swap and cap agreements are in
place as detailed in note 20.
In September 2018 a new 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 £7.15
million. The interest cost of the loan is 2.95 per cent above the bank’s
base rate and the loan is amortised over 20 years.
In South Africa, as part of a restructuring and sale of the washing plant
facilities from Black Wattle Colliery (Pty) Limited (“Black Wattle”) to
its wholly owned subsidiary Sisonke Coal Processing (Pty) Limited (“Sisonke
Coal Processing”), the R100million bank overdraft facility held by Black
Wattle with Absa Bank Limited at the year end (“old trade facility”) was
replaced in January 2019 by a new structured trade finance facility for
R100million held by Sisonke Coal Processing (“new trade facility”). The
South African bank loans are secured by way of a first charge over specific
pieces of mining equipment, inventory and the debtors of the relevant company
which holds the loan which are included in the financial statements at a value
of £8,640,000.
The Bisichi United Kingdom bank loans and overdraft are secured by way of a
first charge over the investment properties in the UK which are included in
the financial statements at a value of £13,045,000. During the year the group
reduced its UK loan by £14,000 in order to rectify a breach of one of its UK
loan banking covenants. No other banking covenants were breached by the group
during the year.
The bank loan of £1.25 million (Dragon) which is repayable in November 2020
is secured by way of a first charge on specific freehold property which is
included in the financial statements at a value of £2.45 million. The
interest cost of the loan is 2 per cent above LIBOR.
The bank loan of £3.584 million (Broadway Regen) which is repayable in July
2019 is secured by way of a first charge on a specific freehold development
property, which is included in the financial statements at £6.256 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:
2018 £’000 Bank borrowings 2018 £’000 Finance leases 2017 £’000 Bank borrowings 2017 £’000 Finance leases
Balance at 1 January 65,949 3,233 68,509 4,767
Exchange adjustments (273) – (4) –
Cash movements excluding exchange adjustments (9,044) – (2,820) –
Valuation movements 11 28 264 (1,534)
Balance at 31 December 56,643 3,261 65,949 3,233
19. Provisions
2018 £’000 2017 £’000
At 1 January 1,349 1,236
Exchange adjustment (150) 21
Increase in provision 329 –
Unwinding of discount 43 92
At 31 December 1,571 1,349
The above provision relates to mine rehabilitation costs in Bisichi.
20. Financial instruments
Total financial assets and liabilities
The Group’s financial assets and liabilities and their fair values are as
follows:
2018 2017
Fair value £’000 Carrying value £’000 Fair value £’000 Carrying value £’000
Cash and cash equivalents 20,655 20,655 7,528 7,528
Investments–non-current assets 1,783 1,783 1,799 1,799
Investments–current assets 887 887 1,069 1,069
Derivative assets – – 1 1
Other assets 7,004 7,004 5,656 5,656
Derivative liabilities (169) (169) (435) (435)
Bank overdrafts (3,535) (3,535) (1,262) (1,262)
Bank loans (43,521) (43,169) (52,218) (51,765)
Present value of head leases on properties (3,261) (3,261) (3,233) (3,233)
Other liabilities (8,008) (8,008) (6,779) (6,779)
Total financial assets/(liabilities) before debentures (28,165) (27,813) (47,874) (47,421)
Fair value of debenture stocks
Fair value of the Group’s debenture liabilities:
2018 2018 2017
Book value £’000 Fair value £’000 Fair value adjustment £’000 Fair value adjustment £’000
Debenture stocks (10,000) (11,977) (1,977) (2,686)
Tax at 19 per cent (2017: 19.25 per cent) – – 376 517
Post tax fair value adjustment – – (1,601) (2,169)
Post tax fair value adjustment – basic pence per share – – (1.88)p (2.54)p
There is no material difference in respect of other financial liabilities or
any financial assets.
The fair values were calculated by the directors as at 31 December 2018 and
reflect the replacement value of the financial instruments used to manage the
Group’s exposure to adverse interest rate movements.
The fair values of the debentures are based on the net present value at the
relevant gilt interest rate of the future payments of interest on the
debentures. The bank loans and overdrafts are at variable rates and there is
no material difference between book values and fair values.
Investments in listed securities held at fair value through profit and loss
(previously classified as Available for sale investments) fall under level 1
of the fair value hierarchy into which fair value measurements are recognised
in accordance with the levels set out in IFRS 7. The comparative figures for
2017 fall under the same category of financial instrument as 2018.
The carrying amount of short term (less than 12 months) trade receivables and
other liabilities approximates their fair values. The fair value of
non-current borrowings in note 18 approximates to its carrying value and was
determined under level 2 of the fair value hierarchy and is estimated by
discounting the future contractual cash flows at the current market interest
rates for UK borrowings and for the South African overdraft facility. The fair
value of the finance lease liabilities in note 28 approximates its carrying
value and was determined under level 2 of the fair value hierarchy and is
estimated by discounting the future contractual cash flows at the current
market interest rates.
Treasury policy
The Group enters into derivative transactions such as interest rate swaps and
forward exchange contracts in order to help manage the financial risks arising
from the Group’s activities. The main risks arising from the Group’s
financing structure are interest rate risk, liquidity risk and market price
risk, credit risk, commodity price risk and foreign exchange risk. The
policies for managing each of these risks and the principal effects of these
policies on the results are summarised below.
Sensitivity analysis
LAP and Dragon have variable interest term debts which are covered by
derivatives. Additionally, LAP has variable interest term debt covered by
interest caps. At 31 December 2018, with other variables unchanged, a 1%
increase in interest rates would change the profit/loss for the year by
£91,000 (2017: £175,000). Bisichi has variable loans and a 1% increase in
interest rates would change the profit/loss for the year by £101,000 (2017:
£82,000).
Interest rate risk
Treasury activities take place under procedures and policies approved and
monitored by the Board to minimise the financial risk faced by the Group. The
£34.897 million bank loan and Bisichi United Kingdom bank loans and
overdrafts are secured by way of a first charge on certain fixed assets. The
rates of interest vary based on LIBOR in the UK.
The £10.105 million term bank loan is secured by way of a second charge on
certain fixed assets. This loan is based on a fixed interest rate.
The £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
banks base rate.
The Bisichi South African bank loans are secured by way of a first charge over
specific pieces of mining equipment, inventory and the debtors of the relevant
company which holds the loan. The rates of interest vary based on PRIME in
South Africa.
The £1.25 million bank loan (Dragon) is secured by way of a first charge on
specific freehold property. The rate of interest varies based on LIBOR in the
UK.
The £3.584 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.
Liquidity risk
The Group’s policy is to minimise refinancing risk by balancing its exposure
to interest risk and to refinancing risk. In effect the Group seeks to borrow
for as long as possible at the lowest acceptable cost. Efficient treasury
management and strict credit control minimise the costs and risks associated
with this policy which ensures that funds are available to meet commitments as
they fall due. Cash and cash equivalents earn interest at rates based on LIBOR
in the UK. These facilities are considered adequate to meet the Group’s
anticipated cash flow requirements for the foreseeable future.
In South Africa, as part of the restructuring and sale of the washing plant
facilities from Black Wattle Colliery (Pty) Limited (“Black Wattle”) to
its wholly owned subsidiary Sisonke Coal Processing (Pty) Limited (“Sisonke
Coal Processing”), the R100million facility held by Black Wattle with Absa
Bank Limited at the year end (“old trade facility”) was replaced in
January 2019 by a new structured trade finance facility for R100million held
by Sisonke Coal Processing (“new trade facility”).
The new trade facility comprises of a R100million revolving facility to cover
the working capital requirements of the group’s South African operations.
The interest cost of the loan is at the South African prime lending rate. The
new trade 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)
The old trade facility, which was also repayable on demand, is included in
cash and cash equivalents within the cashflow statement.
In December 2014, Bisichi signed a £6 million term loan facility with
Santander. 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 2019. The interest cost of the loan is 2.35% above
LIBOR. Bisichi’s intention is to enter into a new facility agreement prior
to the termination of the existing facility agreement. Nonetheless there are
adequate financial resources to repay the existing facility should a new
facility not be finalised prior to December 2019.
The LAP Group’s £34.897 million term bank loan and the £10.105 million
bank loan are repayable in July 2019. In April 2018 £12.8 million and £3.1
million of these loans were repaid respectively. The loans are non-recourse
and the remaining loans of £21.403 million and £6.808 million are secured by
way of a first and second charge on freehold properties, which are included in
the financial statements at £36.65 million. The Group’s intention is to
enter into a new facility agreement prior to the termination of the existing
facility. The lenders have indicated that they will work with us, either to
refinance the loans or to facilitate a handover to a new lender.
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.
2018 Total £’000 Less than 1 year £’000 2-5 years £’000 Over 5 years £’000
Bank overdrafts (floating) 3,535 3,535 – –
Debentures (fixed) 9,939 – 9,939 –
Bank loans (fixed) 11,433 10,269 1,164 –
Bank loans (floating)* 31,736 27,584 1,156 2,996
Trade and other payables (non–interest) 12,930 12,930 – –
69,573 54,318 12,259 2,996
2017 Total £’000 Less than 1 year £’000 2-5 years £’000 Over 5 years £’000
Bank overdrafts (floating) 1,262 1,262 – –
Debentures (fixed) 12,922 3,000 9,922 –
Bank loans (fixed) 10,009 – 10,009 –
Bank loans (floating)* 41,756 26 41,730 –
Trade and other payables (non–interest) 12,280 12,280 – –
78,229 16,568 61,661 –
The Group would normally expect that sufficient cash is generated in the
operating cycle to meet the contractual cash flows as disclosed above through
effective cash management.
*Certain bank loans are fully hedged with appropriate interest derivatives.
Details of all hedges are shown below.
Market price risk
The Group is exposed to market price risk through interest rate and currency
fluctuations.
Credit risk
The group is mainly exposed to credit risk on its cash and cash equivalents,
trade and other receivables and amounts owed by joint ventures as per the
balance sheet. 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 £30,329,000 (2017: £16,053,000).
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.
Trade debtor’s 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 allowance for doubtful debts provided against trade receivables
was £277,000 (2017: £284,000).
The Group exposure to credit risk on its loans to joint ventures and 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 2018 and 2017 the Bisichi Group did not hedge its exposure of
foreign investments held in foreign currencies.
The Bisichi directors consider there to be no significant risk from exchange
rate movements of foreign currencies against the functional currencies of the
reporting companies within the Bisichi Group, excluding inter-company
balances. The 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 2018, 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 £130,000 (2017: £34,000). 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
£216,000 (2017: £56,000).
The 25% sensitivity has been determined based on the average historic
volatility of the exchange rate for 2017 and 2018.
The table below shows the Bisichi currency profiles of cash and cash
equivalents:
2018 £’000 2017 £’000
Sterling 6,897 3,402
South African Rand 2,322 1,923
US Dollar 2 2
9,221 5,327
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:
2018: UK £’000 South Africa £’000
Sterling 1,042 -
South African Rand 37 (1,974)
US Dollar 13 -
1,092 (1,974)
2017: UK £’000 South Africa £’000
Sterling (832) –
South African Rand 54 (1,304)
US Dollar 13 –
(765) (1,304)
Borrowing facilities
At 31 December 2018 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 and 18.
Interest rate and hedge profile
2018 £’000 2017 £’000
Fixed rate borrowings 20,224 23,105
Floating rate borrowings
– Subject to interest rate swap 18,685 36,147
– Other borrowings 18,048 7,160
56,957 66,412
Average fixed interest rate 8.39% 9.17%
Weighted average swapped interest rate 4.16% 3.32%
Weighted average cost of debt on overdrafts, bank loans and debentures 5.92% 5.45%
Average period for which borrowing rate is fixed 2.1 years 2.9 years
Average period for which borrowing rate is swapped 0.6 years 1.5 years
The Group’s floating rate debt bears interest based on LIBOR for the term
bank loans and bank base rate for the overdraft.
At 31 December 2018 the Group had hedges totalling £21.489 million to cover
the £21.5 million bank loan. These consisted of a 5 year swap for £17.5
million, at 2.25% and a £3.989 million cap agreement at 2.25% to July 2019.
At the year end the fair value liability in the accounts was £169,000 (2017:
£435,000) as valued by the hedge provider.
At 31 December 2018, Dragon had hedges of £1.25 million to cover the £1.25
million bank loan. This consists of a 5 year £1.25 million cap agreement
taken out in November 2016 at 2.5%. At the year end, the fair value asset in
the accounts was nil (2017: £1,000), as valued by the hedge provider.
Fair value of financial instruments
Fair value estimation
The Group has adopted the amendment to IFRS 7 for financial instruments that
are measured in the balance sheet at fair value. This requires the methods of
fair value measurement to be classified into a hierarchy based on the
reliability of the information used to determine the valuation, as follows:
– Quoted prices (unadjusted) in active markets for identical assets or
liabilities (level 1).
– Inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly (that is, as prices)
or indirectly (that is, derived from prices) (level 2).
– Inputs for the asset or liability that are not based on observable
market data (that is unobservable inputs) (level 3).
Level 1 £’000 Level 2 £’000 Level 3 £’000 Total £’000 2018 Gain/(loss) to income statement £’000
Financial assets
Quoted equities 887 – – 887 -
Interest rate swaps – - – - (1)
Financial liabilities
Interest rate swaps – 169 – 169 266
Level 1 £’000 Level 2 £’000 Level 3 £’000 Total £’000 2017 Gain/(loss) to income statement £’000
Financial assets
Quoted equities 1,069 – – 1,069 -
Interest rate swaps – 1 – 1 (3)
Financial liabilities
Interest rate swaps – 435 – 435 358
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:
2018 £’000 2017 £’000
Total debt 56,643 65,949
Less cash and cash equivalents (20,655) (7,528)
Net debt 35,988 58,421
Total equity 55,487 56,710
64.9% 103.0%
The Group does not have any externally imposed capital requirements.
Financial assets
The Group’s principal financial assets are bank balances and cash, trade and
other receivables, 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.
2018 £’000 2017 £’000
Cash at bank and in hand 20,655 7,528
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
2018 £’000 2017 £’000
Bank loans and overdrafts:
Repayable on demand or within one year 41,388 1,288
Repayable between two and five years 2,320 51,739
Repayable after five years 2,996 -
46,704 53,027
Debentures:
Repayable within one year - 3,000
Repayable between two and five years 9,939 9,922
56,643 65,949
Certain borrowing agreements contain financial and other conditions that if
contravened by the Group, could alter the repayment profile.
21. Deferred tax asset
2018 £’000 2017 £’000
Balance at 1 January – 1,134
Transferred to consolidated income statement – (1,134)
Balance at 31 December – –
22. Deferred tax liabilitIES
2018 £’000 2017 £’000
Balance at 1 January 3,848 2,329
Transferred (to)/from consolidated income statement (1,375) 1,484
Exchange adjustment (168) 35
Balance at 31 December 2,305 3,848
The deferred tax balance comprises the following:
Revaluation of properties 726 5,836
Accelerated capital allowances 2,166 2,522
Short-term timing differences 139 144
Unredeemed capital deductions (32) (83)
Losses and other deductions (694) (4,571)
Deferred tax liability provision at end of year: 2,305 3,848
The directors consider the temporary differences arising in connection with
the interests in joint ventures are insignificant. There is no time limit in
respect of the Group tax loss relief.
In addition, the Group has unused losses and reliefs with a potential value of
£6,310,000 (2017: £5,427,000), 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 2018 Number of ordinary 10p shares 2017 2018 £’000 2017 £’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) (221,061) (22) (22)
“Issued share capital” for reporting purposes 85,324,514 85,321,650 8,532 8,532
Treasury shares
Number of ordinary 10p shares Cost /issue value
2018 2017 2018 £’000 2017 £’000
Shares held in Treasury at 1 January 221,061 221,061 145 145
Issued for share incentive plan -dividends investment (Jan 2016 - 25p) (2,864) – (1) –
Shares held in Treasury at 31 December 218,197 221,061 144 145
Share Option Schemes
Employees’ share option scheme (Approved scheme)
At 31 December 2018 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 2018 is as follows:
Changes during the year
At 1 January 2018 Options Exercised Options granted Options lapsed At 31 December 2018
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 2018 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 2018 is as follows:
Changes during the year
At 1 January 2018 Options Exercised Options granted Options lapsed At 31 December 2018
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 Mining 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 2017 Number of share options issued/exercised/ (cancelled) during year Number of shares for which options outstanding at 31 December 2018
2010 202.5p Aug 2013 – Aug 2020 80,000 (80,000) –
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.
On the 5 February 2018 Bisichi entered into an agreement with G.Casey to
surrender the 80,000 options which were granted in 2010. The aggregate
consideration paid by the Group to effect the cancellation was £1. There are
no performance or service conditions attached to 2015 options which are
outstanding at 31 December 2018 which vested in 2015.
On 6 February 2018 Bisichi granted additional options to the following
directors:
• A.Heller 150,000 options at an exercise price of 73.50p per share.
• G.Casey 230,000 options at an exercise price of 73.50p per share.
The above options vest on date of grant and are exercisable within a period of
10 years from date of grant. There are no performance or service conditions
attached to the options. The options were valued at £24,000 at date of grant
using the Black-Scholes-Merton model with the following assumptions:
Expected volatility 23.90%
Expected life 4 years
Risk free rate 0.785%
Expected dividends 6.71%
Expected volatility was determined by reference to the historical volatility
of the share price over a period commensurate with the option’s expected
life. The expected life used in the model is used on the risk-averse balance
likely to be required by the option holders.
2018 Number 2018 Weighted average exercise price 2017 Number 2017 Weighted average exercise price
Outstanding at 1 January 380,000 111.3p 380,000 111.3p
Issued during year 380,000 73.5p – –
Lapsed/surrended during year (80,000) 202.5p – –
Outstanding at 31 December 680,000 79.5p 380,000 111.3p
Exercisable at 31 December 680,000 79.5p 380,000 111.3p
24. Non–controlling interest (“NCI”)
2018 £’000 2017 £’000
As at 1 January 10,856 10,389
Share of profit for the year 2,675 610
Share of gain on available for sale investments – 49
Dividends received (957) (250)
Shares issued 8 –
Exchange movement (273) 58
As at 31 December 12,309 10,856
The following subsidiaries had material NCI:
Bisichi Mining 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 MINING PLC 2018 £’000 2017 £’000
Revenue 49,945 40,350
Profit for the year attributable to owners of the parent 3,314 749
Profit/(loss) for the year attributable to NCI 729 172
Profit for the year 4,043 921
Other comprehensive income attributable to owners of the parent (377) 163
Other comprehensive income attributable to NCI (53) 11
Other comprehensive income for the year (430) 174
Balance sheet
Non–current assets 23,118 22,935
Current assets 18,475 13,622
Total assets 41,593 36,557
Current liabilities (16,929) (9,025)
Non–current liabilities (4,529) (9,858)
Total liabilities (21,458) (18,883)
Net current assets at 31 December 20,135 17,674
Cash flows
From operating activities 4,767 7,270
From investing activities (3,373) (1,936)
From financing activities 200 (429)
Net cash flows 1,594 4,905
The non–controlling interest comprises 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”) 2018 £’000 2017 £’000 restated
Revenue 48,666 39,191
Expenses (43,801) (38,041)
Profit for the year 4,865 1,150
Total comprehensive income for the year 4,865 1,150
Balance sheet
Non–current assets 8,532 8,613
Current assets 9,587 6,747
Current liabilities (10,540) (8,652)
Non–current liabilities (3,800) (3,155)
Net assets at 31 December 3,779 3,553
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 shares 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
Mining 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) 1 –
H D Goldring (Delmore Holdings Limited) (15) (ii) – –
C A Parritt (20) (ii) – –
R Priest (35) (ii) (8) –
Totals at 31 December 2018 (115) (707) –
Totals at 31 December 2017 (71) (679) (84)
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 (2017: £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 (2017: £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.
Delmore Holdings Limited (Delmore) is a Company in which H D Goldring is a
majority shareholder and director. Delmore 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 of £116,000 was made by Bisichi to one of the Bisichi
directors - A R Heller. The loan amount outstanding at the year end was
£41,000 (2017: £56,000) and a repayment of £15,000 (2017: £15,000) was
made during the year. Interest is payable on the loan at a rate of 6.14
percent. There is no fixed repayment date for the loan.
The directors are considered to be the only key management personnel and their
remuneration including employer’s national insurance for the year was
£1,838,000 (2017: £949,000). 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:
2018 2017
Production 231 192
Administration 46 45
277 237
Staff costs during the year were as follows:
2018 £’000 2017 £’000
Salaries and other costs 8,994 7,426
Social security costs 494 327
Pension costs 377 360
Share based payments 24 0
9,889 8,113
27. Capital Commitments
2018 £’000 2017 £’000
Commitments for capital expenditure approved and contracted for at the year end 751 –
Share of commitment of capital expenditure in joint venture – –
All the above relates to Bisichi Mining PLC.
28. Operating and finance leases
Operating leases on land and buildings
At 31 December 2018 the Group had commitments under non–cancellable
operating leases on land and buildings expiring as follows:
2018 £’000 2017 £’000
Within one year 240 240
Second to fifth year 960 960
After five years – 240
Operating lease payments represent rentals payable by the Group for its office
premises.
The leases are for an average term of ten years at inception and rentals are
fixed for an average of five years.
Present value of head leases on properties
Minimum lease payments Present value of minimum
lease payments
2018 £’000 2017 £’000 2018 £’000 2017 £’000
Within one year 213 211 213 211
Second to fifth year 849 841 783 776
After five years 16,725 16,682 2,265 2,246
17,787 17,734 3,261 3,233
Future finance charges on finance leases (14,526) (14,501) – –
Present value of finance lease liabilities 3,261 3,233 3,261 3,233
Finance lease liabilities are in respect of leased investment property. Many
leases provide for contingent rent in addition to the rents above, usually a
proportion of rental income.
Finance lease liabilities are effectively secured as the rights to the leased
asset revert to the lessor in the event of default.
Future aggregate minimum 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:
2018 £’000 2017 £’000
Within one year 5,379 5,088
Second to fifth year 16,002 14,597
After five years 19,531 18,519
40,912 38,204
29. Contingent liabilities and events AFTER THE REPORTING PERIOD
There were no contingent liabilities at 31 December 2018 (2017: £Nil), except
as disclosed in Note 20.
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:
2018 £’000 2017 £’000
Rail siding & transportation 54 64
Rehabilitation of mining land 1,259 1,387
Water & electricity 52 58
1,365 1,509
30. Company financial statements
Company balance sheet at 31 December 2018
Notes 2018 £’000 2017 £’000
Fixed assets
Tangible assets 30.3 23,872 25,397
Other investments:
Associated company – Bisichi Mining PLC 30.4 489 489
Subsidiaries and others including Dragon Retail Properties Limited 30.4 42,598 42,598
43,087 43,087
66,959 68,484
Current assets
Debtors 30.5 3,764 1,025
Deferred tax due after more than one year 30.9 – 2,059
Investments 30.6 – 19
Bank balances 9,887 1,233
13,651 4,336
Creditors
Amounts falling due within one year 30.7 (54,664) (35,540)
Deferred tax falling due after more than one year 30.9 (744) –
Borrowings 30.8 – (3,000)
Net current liabilities (41,757) (34,204)
Total assets less current liabilities 25,202 34,280
Creditors
Amounts falling due after more than one year 30.8 (10,985) (13,003)
Net assets 14,217 21,277
Capital and reserves
Share capital 30.10 8,554 8,554
Share premium account 4,866 4,866
Capital redemption reserve 47 47
Treasury shares 30.10 (144) (145)
Retained earnings 894 7,955
Shareholders’ funds 14,217 21,277
The loss for the financial year, before dividends was £6,805,000 (2017:
profit of £1,771,000).
These financial statements were approved by the board of directors and
authorised for issue on 30 April 2019 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 2018
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 2017 8,554 4,866 47 (145) 9,867 23,189
Profit for the year – – – – (1,771) (1,771)
Total comprehensive income – – – – (1,771) (1,771)
Transactions with owners:
Dividends – equity holders – – – – (141) (141)
Transactions with owners – – – – (141) (141)
Balance at 31 December 2017 8,554 4,866 47 (145) 7,955 21,277
Loss for the year – – – – (6,805) (6,805)
Total comprehensive expense – – – – (6,805) (6,805)
Transaction with owners:
Dividends – equity holders – – – – (256) (256)
Disposal of own shares – – – 1 – 1
Transactions with owners – – – 1 (256) (255)
Balance at 31 December 2018 8,554 4,866 47 (144) 894 14,217
£0.2 million (2017: £6.5 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 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.
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 36 to 41 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 £6,805,000 (2017: loss of
£1,771,000). 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 equipment and motor vehicles £’000
Total £’000 Freehold £’000 Leasehold over 50 years £’000 Leasehold under 50 years £’000
Cost or valuation at 1 January 2018 25,645 9,295 14,039 1,947 364
Reclassification – – (30) 30 –
Additions 6,540 6,540 – – –
Disposals to group companies (7,258) (1,050) (4,469) (1,721) (18)
(Decrease)/increase on revaluation (815) (815) – – –
Cost or valuation at 31 December 2018 24,112 13,970 9,540 256 346
Representing assets stated at:
Valuation 23,766 13,970 9,540 256 –
Cost 346 – – – 346
24,112 13,970 9,540 256 346
Depreciation at 1 January 2018 248 – – – 248
Charge for the year 9 – – – 9
Disposals (17) – – – (17)
Depreciation at 31 December 2018 240 – – – 240
Net book value at 1 January 2018 25,397 9,295 14,039 1,947 116
Net book value at 31 December 2018 23,872 13,970 9,540 256 106
The freehold and leasehold properties, excluding the present value of head
leases and directors’ valuations, were valued as at 31 December 2018 by
professional firms of chartered surveyors. The valuations were made at fair
value. The directors’ property valuations were made at fair value.
2018 £’000 2017 £’000
Allsop LLP 21,120 20,375
Directors’ valuation 1,600 1,825
22,720 22,200
Add: Present value of headleases 1,046 3,081
23,766 25,281
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 2018 4,889 13,966 1,939
Additions 6,540 – –
Disposals to group companies (1,201) (4,633) (1,154)
Cost at 31 December 2018 10,228 9,333 785
Long leasehold properties are held on leases with an unexpired term of more
than fifty years at the balance sheet date.
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 2018 43,087 42,434 164 489
Impairment provision – – – –
At 31 December 2018 43,087 42,434 164 489
Subsidiary companies
Details of the Company’s subsidiaries are set out in Note 11. Under IFRS 10
Bisichi Mining 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.
In the opinion of the directors the value of the investment in subsidiaries is
not less than the amount shown in these financial statements.
30.5. Debtors
2018 £’000 2017 £’000
Trade debtors 351 366
Amounts due from associate and joint ventures 755 33
Amounts due from subsidiary companies 2,127 100
Other debtors 82 118
Prepayments and accrued income 449 408
3,764 1,025
30.6. Investments
2018 £’000 2017 £’000
Market value of the listed investment portfolio – 19
Unrealised gain of market value over cost – 1
Listed investment portfolio at cost – 18
The remaining investment portfolio was sold in the year.
30.7. Creditors: amounts falling due within one year
2018 £’000 2017 £’000
Amounts owed to subsidiary companies 50,874 29,775
Amounts owed to joint ventures 156 2,214
Other taxation and social security costs 200 278
Other creditors 1,442 1,400
Accruals and deferred income 1,992 1,873
54,664 35,540
30.8. Creditors: amounts falling due after more than one year
2018 £’000 2017 £’000
Present value of head leases on properties 1,046 3,081
Term Debenture stocks:
£10 million First Mortgage Debenture Stock 2022 at 8.109 per cent* 9,939 9,922
9,939 9,922
10,985 13,003
*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.
Repayment of borrowings: 2018 £’000 2017 £’000
Debentures:
Repayable within one year - 3,000
Repayable between two and five years 9,939 9,922
Repayable in more than five years – -
9,939 12,922
30.9. deferred tax
2018 £’000 2017 £’000
Deferred Taxation
Balance at 1 January 2,059 2,082
Transfer to profit and loss account (2,803) (23)
Balance at 31 December (744) 2,059
The deferred tax balance comprises the following:
Accelerated capital allowances (795) (833)
Short–term timing differences (124) (124)
Revaluation of investment properties 175 66
Loss relief – 2,950
Deferred tax (liability)/asset at year end (744) 2,059
30.10. Share capital
Details of share capital, treasury shares and share options are set out in
Note 23.
30.11. 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) –
Loan account (103) – 2,000
Bisichi Mining PLC
Current account 153 (ii) 3 –
Simon Heller Charitable Trust
Current account (63) – –
Loan account – (700) –
Directors and key management
M A Heller and J A Heller 18 (i) 1 –
H D Goldring (Delmore Holdings Limited) (15) (iii) – –
C A Parritt (20) (iii) – –
R Priest (35) (iii) (8) –
Totals at 31 December 2018 (29) (860) 2,000
Totals at 31 December 2017 (73) (2,884) –
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 Mining PLC. During 2013 Dragon lent the company £2
million at 6.875 per cent annual interest. This loan was repaid in full during
the year.
Bisichi Mining PLC – The company has 41.52 per cent ownership of
‘Bisichi’.
Other details of related party transactions are given in note 25.
30.12. EMPLOYEES
The average weekly number of employees of the company during the year were as follows: 2018 £’000 2017 £’000
Directors & Administration 24 24
Staff costs during the year were as follows: 2018 £’000 2017 £’000
Salaries 2,184 1,375
Social Security costs 263 163
Pension costs 107 119
2,554 1,657
30.13. Capital commitments
There were no capital commitments at 31 December 2018 (2017: £Nil).
30.14. OPERATING AND FINANCE LEASES
At 31 December 2018 the Company had commitments under non–cancellable
operating leases on land and buildings as follows:
2018 £’000 2017 £’000
Expiring in two to five years 1,200 -
Expiring in more than five years - 1,440
In addition, the Company has an annual commitment to pay ground rents on its
leasehold investment properties which amount to £201,000 (2017: £201,000).
Present value of head leases on properties
Minimum lease payments Present value of minimum
lease payments
2018 £’000 2017 £’000 2018 £’000 2017 £’000
Within one year 66 201 66 201
Second to fifth year 266 803 247 746
After five years 8,066 15,483 733 2,134
8,398 16,487 1,046 3,081
Future finance charges on finance leases (7,352) (13,406) – –
Present value of finance lease liabilities 1,046 3,081 1,046 3,081
Finance lease liabilities are in respect of leased investment property. A few
leases provide for contingent rent in addition to the rents above, usually a
proportion of rental income.
Finance lease liabilities are effectively secured as the rights to the leased
asset revert to the lessor in the event of default.
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:
30.15. Contingent liabilities and post balance sheet events
There were no contingent liabilities at 31 December 2018 (2017: £Nil).
Five year financial summary
2018 £M 2017 £M 2016 £M 2015 £M 2014 £M
Portfolio size
Investment properties–LAP^ 32 62 89 89 89
Investment properties–joint ventures – – – 19 20
Investment properties–Dragon Retail Properties 2 3 3 3 3
Investment properties–Bisichi Mining^ 13 13 13 13 12
Assets held for sale–LAP 2 36 – 2 –
Inventories–LAP 39 – – – –
88 114 105 126 124
Portfolio activity £M £M £M £M £M
Acquisitions 6.55 – – 1.00 0.68
Disposals (36.44) – – (0.40) –
Capital Expenditure 6.26 – 0.16 0.36 –
(23.63) – 0.16 0.96 0.68
Consolidated income statement £M £M Restated £M Restated £M Restated £M Restated
Group income 56.65 47.87 31.81 34.61 35.74
Profit/(loss) before tax 1.27 11.28 (0.97) (2.09) (2.69)
Taxation (0.68) (2.98) (1.18) 0.04 (3.70)
Profit/(loss) attributable to shareholders (2.08) 7.69 (2.36) (1.90) (7.14)
Earnings/(loss) per share – basic and diluted (2.44)p 9.01p (2.77)p (2.24)p (8.45)p
Dividend per share 0.180p 0.300p 0.165p 0.160p 0.156p
Consolidated balance sheet £M £M £M £M £M
Shareholders' funds attributable to equity shareholders 43.38 45.86 38.24 40.08 42.55
Net borrowings 35.99 58.42 62.22 62.39 59.71
Net assets per share – basic 50.83 53.74p 44.83p 47.26p 50.35p
– fully diluted 50.83 53.74p 44.83p 47.26p 50.35p
Consolidated cash flow statement £M £M £M £M
Cash generated from operations 1.92 10.29 5.59 4.37 2.96
Capital investment and financial investment 20.78 (1.80) (0.18) (2.77) 100.42
Notes:
^ Excluding the present value of head leases
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