FOR IMMEDIATE RELEASE
28 APRIL 2017
LONDON & ASSOCIATED PROPERTIES PLC:
RESULTS FOR 12
MONTHS TO 31 DECEMBER 2016
HIGHLIGHTS
LAP:
- Directly owned property values rose to £89.2 million from £88.8
million
- Rental income increased to £6.2 million (2015: £6.1
million)
- Revenue levels maintained at £6.7 million (2015: £6.8
million)
- Voids of just 2.15% by rental income
PROPERTIES:
- Orchard Square:
- Negotiated new 10 year lease with anchor tenant T K Maxx
- Virgin Money completed cutting edge banking offer complete with
bowling alley and cinema
- Brixton:
- Two markets remain fully let and an ever-lengthening waiting
list of retailers
- West Bromwich:
- Continues to benefit from bus station and tram interchange at
centre’s rear
- Centre once again effectively fully occupied
- Harrogate Portfolio:
- All three centres continue to trade well and have high
occupancy levels
GROUP:
- “Continues to make steady progress against continuing backdrop
of uncertainty and transition”
- Substantial reduction in pre-tax losses to £0.97 million from
£2.09 million
- Group net assets of £48.6 million (2015: £49.7 million)
- Final dividend increase of 3% to 0.165p per share
recommended
BISICHI MINING:
- Achieved EBITDA of £2.4 million (2015: £1.4 million) in
challenging market conditions
- Property portfolio performed well:
- Net revenue of £1.06 million (2015: £1.01 million)
- UK investment properties valued at £13.25 million (2015: 12.8
million)
“Another satisfactory year in the property business of LAP
despite a continuing backdrop of uncertainty and transition in the
retailing world,” Sir Michael
Heller, Chairman, and John
Heller, Chief Executive.
Contact:
London & Associated
Properties
PLC
Tel: 020 7415 5000
John Heller, Chief Executive, or
Anil Thapar, Finance Director
Baron Phillips Associates
Tel: 07767 444193
Baron Phillips
LONDON & ASSOCIATED
PROPERTIES
ANNUAL REPORT 2016
Contents
OVERVIEW...........................................................................................................................................................
3
LAP at a
glance....................................................................................................................................................
3
Chairman and Chief Executive’s
statement........................................................................................................
5
STRATEGIC
REPORT.......................................................................................................................................
9
Financial
review....................................................................................................................................................
9
Principal activities, strategy & business
model.................................................................................................
13
Risks and
uncertainties......................................................................................................................................
13
Bisichi risks and
uncertainties...........................................................................................................................
14
Key performance
indicators...............................................................................................................................
14
Corporate
responsibility.....................................................................................................................................
15
GOVERNANCE.................................................................................................................................................
17
Directors &
advisors..........................................................................................................................................
17
Directors’
report.................................................................................................................................................
19
Corporate
Governance.......................................................................................................................................
24
Governance Statement by the Chairman
of The Remuneration
Committee....................................................
26
Annual remuneration
report................................................................................................................................
27
Remuneration policy
summary..........................................................................................................................
32
Remuneration
policy..........................................................................................................................................
34
Audit committee
report.......................................................................................................................................
38
Directors’ responsibilities
statement..................................................................................................................
39
Independent auditor’s
report...............................................................................................................................
40
FINANCIAL
STATEMENTS............................................................................................................................
42
Consolidated income
statement........................................................................................................................
42
Consolidated statement of comprehensive
income..........................................................................................
43
Consolidated balance
sheet...............................................................................................................................
44
Consolidated statement of changes in shareholders’
equity.............................................................................
46
Consolidated cash flow
statement.....................................................................................................................
48
Group accounting
policies..................................................................................................................................
50
Notes to the financial
statements.......................................................................................................................
58
Five year financial
summary..............................................................................................................................
91
Financial calendar
Annual General Meeting
6 June 2017
Announcement of half year results to 30
June 2017
Late August 2017
Announcement of annual results for 2017
Late April 2018
OVERVIEW
LAP at a glance
London & Associated
Properties PLC (“LAP”) is a main market listed group which
invests in UK shopping centres and retail property whilst also
managing property assets for institutional clients. LAP owns and/or
manages £221 million of property investments.
The Group also holds a substantial investment in Bisichi Mining
PLC, which operates coal mines in South Africa and owns UK
property investments. In accordance with IFRS 10 the results of
Bisichi have been consolidated in the group accounts.
Looking to create environments where retailers
can thrive.
Financial highlights
Fully diluted net assets per share
44.83p
2015: 47.26p
IFRS net assets
£48.6m
2015: £49.7m
Portfolio valuation*
£221m
2015: £246m
*Including properties under management
|
KEY PROJECTS |
HIGHLIGHT |
Wholly owned |
• Orchard Square, Sheffield
• Market Row and
Brixton Village Brixton
• King Square,
West Bromwich |
A number of value enhancing lettings at Orchard
Square, Sheffield |
Joint ventures and management |
• Langney Shopping Centre
Eastbourne |
Joint venture with Columbus Capital in Langney.
Investment in joint venture sold in March 2016 |
Investments and management |
• Kingsgate Centre, Dunfermline
• The Rushes Centre, Loughborough
• The Vancouver Quarter Centre
Kings Lynn |
Co-investment with Oaktree Capital Management and
manage three of
their shopping centres |
Coal production |
• In South Africa, Black Wattle
produced 1.26 million metric tonnes
of Run of Mine Coal in 2016 (2015: 1.58 million metric tonnes) |
Chairman and Chief Executive’s statement
We are pleased to report another satisfactory year in the
property business of LAP despite a continuing backdrop of
uncertainty and transition in the retailing world. Our comments
below deal primarily with the LAP property business with
supplementary comments about our investment in Bisichi Mining PLC,
in which we own 41.5%, being based on the comments of the Bisichi
management.
The Referendum in June 2016 for
the United Kingdom’s planned withdrawal from the European Union has
led to a number of retailers delaying their expansion plans as
adverse currency movements and political upheaval combine to create
a much more difficult trading environment. In addition, the ongoing
shift towards online retailing has led to further consolidation
within the occupier market, which, in turn, has led to a greater
surfeit of units. Many retailers have either reduced their estate
or merged. Finally, retailer insolvencies have added further to the
number of vacant units competing for tenants.
Total property assets under management in which we have a
financial interest were valued at £220.7 million as at 31 December 2016 compared to £226.9 million in
2015. This includes those of Bisichi, Dragon Retail Properties (our
joint venture with Bisichi) and Project Harrogate (our joint
venture with Oaktree Capital Management).
Total occupancy of the group property portfolio stands at
97.9%.
For shareholders to get a proper understanding of the accounts,
it is necessary to consider separately the position of LAP and
Bisichi. Although both are consolidated into group accounts (as
required by IFRS 10), they are managed independently.
Consolidated RESULTs
Group net assets at the year-end were £48.63 million (2015:
£49.65 million). Most of this change is attributable to a reduction
of £1.3 million in recoverable deferred tax. It should be noted
that the group has a potential future benefit of £5.4 million in
respect of unrecognised taxation losses available to offset future
profits and gains.
At the same time £0.8 million (2015: £0.6 million) of
liabilities relates to a mark to market of interest rate
derivatives, primarily swaps that were taken out to hedge a loan
from Santander and which expire at the same date. We do not intend
to repay the loan early and therefore these derivative liabilities
are unlikely to crystalise.
The Group loss after valuation movements and before taxation for
the year was £0.97 million (2015: £2.09 million). A full breakdown
of group income and results by sector is included in the financial
review on page 15 and in the segmental analysis in Note 1 to the
accounts.
Over the course of the next 18 months, a legacy debenture of
which £3.75million is outstanding, with a coupon of 11.6% will be
repaid. We are already talking to potential lenders about a
refinancing of the properties held as collateral and are confident
that this will lead to a significant reduction in interest payable.
We will keep shareholders informed as negotiations progress.
LAP property activities
LAP’s rental income actually rose from £6.1 million to
£6.2 million. Once again our intensive management style has enabled
us to maintain our total revenue levels at £6.7 million (2015: £6.8
million). The small drop in total property revenue was due to lower
management income from third party properties of £0.5 million as
compared to £0.7 million in 2015 following the disposal of an
investment.
At the same time, LAP’s direct property costs fell from
£1.5 million to £1.2 million. Much of this drop is attributable to
lower vacancy costs following new lettings but we also worked hard
to reduce expenses and fees.
Shopping centre values generally were affected by deteriorating
market sentiment and we were unable to escape this market shift
altogether. Nevertheless, our directly owned properties were valued
at the year-end at £89.2 million compared to £88.9 million in the
preceding year.
We believe our core property holdings will continue to interest
investors as they are all either part of a major city that will
remain a destination in its own right; a differentiated offer which
forms part of a leisure experience; or they fulfil
a role providing convenient retail facilities.
Orchard Square, Sheffield
Orchard Square continued to trade well in 2016. Currently there
is only one vacant unit within the Square, which arose following
the insolvency of a tenant in the second half of the year. The unit
is being let on a temporary basis, and we are in discussions with a
number of retailers for a permanent lease.
In May 2016, we re-geared our
lease with TK Maxx, the anchor tenant of the Centre which trades
from a 45,000 square feet unit. We now have an unbroken 10 year
lease from March 2016 at an annual
rent of £475,000 compared to £625,000 previously. This rental
adjustment reflects in part market conditions – particularly the
competition we faced from other landlords within Sheffield for this highly regarded retailer –
and partly the lack of a rent free period that such a letting would
normally attract.
We are very pleased that TK Maxx confirmed Orchard Square to be
its favoured location in Sheffield, and believe that this re-gearing
will assist us in attracting new retailers to the scheme as well as
securing lease renewals from our existing tenants.
Elsewhere within the Centre, Virgin Money completed the
development of its cutting-edge banking offer which incorporates a
bowling alley, cinema, reading room and other non-traditional
banking services. The end result is dramatic, and makes for an
exciting experience for visitors to the Centre.
We are also carrying out a number of smaller lettings in the
Centre where existing leases are expiring. These include a nail
bar/beautician and a tattooist, which all form part of the
shopping-as-leisure experience. We have also worked with pop-up
retail operators to put food trucks within our Centre to attract
shoppers. These retailers have been well received by the
public.
Finally, we refurbished the common parts and a floor of offices
over Virgin Money during the course of the year.
As a result, we have signed a new lease with one of the existing
office tenants whose lease was expiring, and we are in discussions
for a new lease on the only vacant office floor.
Brixton
These two markets remain fully let with an ever-lengthening
waiting list of retailers.
Brixton exemplifies successful modern shopping as it combines
independent retail with interesting street food and a non-High
Street feel. This tangible experience cannot be replicated online
and our markets are a destination for shoppers and diners from all
over London and beyond. We expect
this strong trend towards experiential shopping to continue
enhancing the prospects of these markets.
The redevelopment of the land opposite the rear of Brixton
Village is now to commence in 2017 following a number of unforeseen
delays resulting from the need to assemble all
of the land on behalf of the Council. This will see a further
303 apartments being built to the rear of our markets
West Bromwich
This Shopping Centre has, for some years, felt the effect of too
many available shops within the town centre following the 473,000
square feet development of a large Tesco and additional retail
space on the opposite side of the High Street to our own Centre.
Nevertheless, we continue to benefit from the bus station and tram
interchange at the rear of our scheme which has ensured the Centre
remains popular with shoppers.
We have steadily filled the void units caused by aggressive
poaching of our tenants on terms we were unwilling to match by the
adjacent developer, and the Centre is once again approaching full
occupancy. Retailers aiming at value and convenience, trade
extremely well from this location, and we are confident that
trading will continue to be positive here in the future.
Other
The rest of our portfolio continues to trade well and LAP’s
portfolio has a void level of just 2.15% (2015: 2.07%).
Harrogate Portfolio
Kings Lynn
This Centre continues to trade well. During the year, we secured
planning permission and freeholder consent for the redevelopment of
a former Beales department store whose lease had recently expired.
The consent is for 33,000 square feet of retail across five units,
including a 20,000 square feet anchor store, and the headlease was
re-geared to enable us to extend the footprint of the building over
existing walkways. We have agreed a new lease with an anchor
tenant, and will shortly exchange an agreement for lease, enabling
demolition of the existing building and construction of the new
property to commence.
Elsewhere within the scheme, our Sainsbury foodstore sub-let
half its space to B&M Retail. While we do not benefit in rental
terms, this sub-letting has contributed
to increased footfall throughout the Centre
Loughborough
Occupancy at this Centre has remained extremely high throughout
the year, restricting the number of asset management initiatives we
have been able to undertake.
Dunfermline
This Centre has traded well all year and we have been able to
carry out a number of lease extensions to existing retailers as
well as new lettings to various retailers.
Dragon Retail Properties
Dragon’s principal asset is a building in Clifton, Bristol. During the year, the building
remained fully occupied and was valued at £2.6 million (2015: £2.6
million).
MINING ACTIVITIES BY Bisichi Mining Plc
The management of Bisichi report that for the year ended
31 December 2016, the company
achieved earnings before interest, tax, depreciation and
amortisation (EBITDA) of £2.4 million (2015: £1.4 million), a
significant improvement on the previous year despite the impact on
Black Wattle, its direct coal mining subsidiary in South Africa, of both mining challenges and a
sluggish coal market for most of the year.
For the first half of 2016 Black Wattle continued to supplement
production from its own reserves with coal mined at Blue
Nightingale under an agreement to purchase Run of Mine coal.
Unfortunately, the quality of the Blue Nightingale coal
deteriorated as the reserve came to an end and the higher cost per
tonne produced, along with supressed coal prices, impacted on
overall earnings during the first half of the year.
In anticipation of the Blue Nightingale reserve coming to an
end, management plans were already in place to increase production
from Black Wattle’s own reserves. Part of this plan entailed
increasing the production from an existing opencast area at Black
Wattle as well as the development of a new opencast area to replace
the coal purchased from Blue Nightingale.
In these new opencast areas Bisichi has had to deal with stone
contamination issues which have affected both yield and mining
production through the washing plant and have consequently impacted
on their earnings in the second half of the year. Management are
initiating various infrastructure improvements to the coal washing
plant which will be completed by the end of the second quarter of
2017. The new infrastructure will assist in reducing stone
contamination through the plant and will allow Black Wattle to mine
at a higher rate of production at our opencast areas and increase
yield.
As a result of the lower production in the second half of the
year, overall Run of Mine production from Black Wattle decreased in
2016, with total production for the year of 1.26 million metric
tonnes (2015: 1.58 million metric tonnes).
Black Wattle continues to perform well under the
Quattro Programme, which allows junior black-economic empowerment
coal producers direct access to the coal export market via Richards
Bay Coal Terminal.
Looking forward into 2017, coal prices have continued to remain
stable at somewhat higher levels compared to the prior year and
Bisichi continues to see strong demand for coal in both the
domestic and export markets.
Bisichi’s property portfolio is managed by LAP and continues to
perform well. Overall, net Property revenue (excluding joint
ventures) was £1.06 million (2015: £1.01 million). The increase,
compared to the prior year, can mainly be attributed to the
contribution to revenue from a new retail property in Northampton, which was acquired in
October 2015.
The property portfolio was externally valued at 31 December 2016 and the value of UK investment
properties attributable to the group at year end was £13.25 million
(2015: £12.8 million).
Bisichi has decided to hold the dividend at the 2015 level and
will recommend a final dividend of 3p (2015: 3p). LAP’s cash share
of this is £177,000 (2015: £177,000).
Dividend
Your directors are pleased to recommend a dividend of 0.165p, an
increase of 3% over 2015.
Finally, we would like to thank all of our staff and advisors
for their hard work during the course of the year.
Sir Michael
Heller,
John Heller,
Chairman
Chief Executive
27 April 2017
STRATEGIC REPORT
Financial review
The financial statements for 2016 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”), our 50:50 joint
venture with Bisichi is 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 have endeavoured to 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.
LOANS
Long term debt of LAP (excluding Bisichi and Dragon which are
detailed separately below), consists of a £45 million facility
expiring in July 2019 and two
debentures: one of £10 million expiring in August 2022 and another of £3.75 million with
£0.75 million and £3 million repayable in August 2017 and August
2018, respectively. As in previous years, all loans and
debentures are secured on core property and cash deposits and are
covenant compliant.
LAP’s five year £35 million non-recourse loan from Santander, as
senior lender, is supported by a £10 million loan from Europa
Capital Mezzanine Limited, as mezzanine lender. The senior loan
facility is fully hedged and at the year end, 50% of the loan was
swapped at a rate of 2.25% and the remaining 50% was covered by an
interest cap at 2.25%. This gives a blended current interest rate
of 4.71% for the total £45 million debt. In February 2016, an interest cap swaption was
replaced by an interest cap at 2.25%.
Cash flow
The operating cash flow and net cash balances at the year-end
were as follows:
CASH FLOW FROM OPERATIONS |
2016
£’000 |
2015
£’000 |
LAP |
2,623 |
2,380 |
Bisichi |
2,879 |
1,931 |
Dragon |
84 |
64 |
Group total |
5,586 |
4,375 |
Note: The figures exclude inter-company transactions.
NET CASH BALANCES |
2016
£’000 |
2015
£’000 |
LAP |
3,706 |
3,192 |
Bisichi |
(890) |
(626) |
Dragon |
115 |
9 |
Group total |
2,931 |
2,575 |
Our investment with Oaktree Capital Management (HRGT Shopping
Centres LP), remains profitable and generates management fees
(2016: £0.46 million and 2015: £0.46 million) for our wholly owned
subsidiary (London &
Associated Management Services Limited). We also received £0.1
million (2015: £0.2 million) as a partial repayment of our
loan.
During the year, LAP and Bisichi sold their entire investment
(of 12.5% each) in Langney Shopping Centre Unit Trust for £2.28
million in cash. Additionally £0.2 million was received for
dividends and loan repayment.
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 |
2016
£’000 |
2015
£’000 |
LAP |
(1,070) |
(1,900) |
Bisichi |
(241) |
(431) |
Dragon |
9 |
69 |
Group total |
(1,302) |
(2,262) |
Note: The figures exclude inter-company transactions.
Strenuous efforts to cut costs at LAP are reflected in lower
overheads and property expenses, resulting in an improvement of
£0.8 million in the operating result before revaluations of the
core property business.
Our property portfolio (including Bisichi) of £105.1 million
increased on revaluation by £0.5 million, a 0.5% increase.
As shown below the stable property revenues, reductions in
running costs and increased property valuations, have resulted in
the property business showing a reduction of £0.74 million in the
LAP loss before taxation to £1.15 million (2015: £1.89
million).
(Loss)/profit before taxation |
2016
£’000 |
2015
£’000 |
LAP |
(1,150) |
(1,886) |
Bisichi |
216 |
(217) |
Dragon |
(40) |
10 |
Group loss before taxation |
(974) |
(2,093) |
Note: The figures exclude inter-company transactions.
The LAP Group taxation charge of £1.17 million (2015: credit
£0.05 million) is mainly due to writing off part of the deferred
tax asset, because the current estimate of the amount of
foreseeable taxable profit is insufficient to offset all of the
carrying value.
Balance sheet
Taking account of the changes required by IFRS 10 (see table
below) LAP has group net assets of £48.6 million (2015: £49.7
million). This reduction of £1.1 million in net assets arises from
the loss after taxation of £2.1 million offset by exchange
differences on translation of Bisichi Mining PLC’s foreign
operations (£1.1 million). (see page 59).
Net assets attributable to equity shareholders at the year-end
were 44.83p per share (2015: 47.26p per share).
2016 |
LAP
Original
Group
£’000 |
Bisichi
Mining PLC
Group
£’000 |
Dragon
Retail
Properties
£’000 |
Consolidation
adjustments
£’000 |
LAP
Net assets
£’000 |
Investment properties |
93,791 |
13,426 |
2,630 |
- |
109,847 |
Other fixed assets |
112 |
8,520 |
21 |
- |
8,653 |
Investments in Bisichi Mining
PLC |
6,918 |
- |
- |
(6,918) |
- |
Investments and loans in joint
ventures |
866 |
2,671 |
- |
(1,732) |
1,805 |
Other non current assets |
3,008 |
32 |
- |
- |
3,040 |
Current assets |
5,559 |
12,224 |
2,447 |
(4,347) |
15,883 |
Current liabilities |
(9,014) |
(10,326) |
(2,078) |
4,347 |
(17,071) |
Non-current liabilities |
(62,697) |
(9,541) |
(1,288) |
- |
(73,526) |
Net assets |
38,543 |
17,006 |
1,732 |
(8,650) |
48,631 |
2015 |
|
|
|
|
|
Investment properties |
93,510 |
12,994 |
2,668 |
– |
109,172 |
Other fixed assets |
148 |
5,374 |
30 |
– |
5,552 |
Investments in Bisichi Mining
PLC |
6,357 |
– |
– |
(6,357) |
– |
Investments and loans in joint
ventures and assets held for sale |
2,041 |
3,266 |
– |
(1,747) |
3,560 |
Other non current assets |
4,385 |
14 |
– |
– |
4,399 |
Current assets |
5,534 |
9,467 |
2,548 |
(4,531) |
13,018 |
Current liabilities |
(8,605) |
(6,501) |
(2,199) |
4,531 |
(12,774) |
Non-current liabilities |
(62,992) |
(8,983) |
(1,300) |
– |
(73,275) |
Net assets |
40,378 |
15,631 |
1,747 |
(8,104) |
49,652 |
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
2016 financial statements which are available on its website:
www.bisichi.co.uk.
The Bisichi group increased its EBITDA to £2.4 million (2015:
£1.4 million), mainly due to revaluation movements on UK investment
property of £0.6 million (2015: £0.2 million) and exchange rate
gains of £0.4 million (2015: loss £0.5 million). Profit for the
year after tax was £0.3 million (2015: loss £0.1 million). Bisichi
has two core revenue streams – investment in retail property in the
UK and coal mining in South
Africa.
The volatility in South African Rand against UK Sterling,
continued to impact on the earnings during the year. The results of
the year were positively impacted by an exchange rate gain of £0.4
million against an exchange rate loss of £0.5 million during the
prior year. These exchange movements are mainly due to
retranslation of Rand denominated inter-company trade receivable
balances with the group’s South African mining operations that are
held within the UK. Before taking into account of the impact of the
above exchange movements, The Bisichi group’s operating activities
achieved an adjusted EBITDA (Operating profit before depreciation,
fair value adjustments and exchange movements) of £1.5 million
(2015: £1.7 million). This decrease is mainly due to lower Run of
Mine production at Black Wattle offsetting the impact of the higher
coal prices in the last quarter.
The UK retail property portfolio was valued at the year end at
£13.25 million (2015: £12.8 million). The increase is mainly due to
higher valuation of a retail property in Northampton. The property portfolio is
actively managed by LAP and generates rental income of £1.0 million
(2015: £1.0 million).
In South Africa, a subsidiary
of Bisichi signed an increase in the structured trade finance
facility from R60 million to R80 million (South African Rand) in
October 2013 with Absa Bank Limited.
This facility is renewable annually at
30 June and is secured against inventory, debtors and cash that are
held in the Bisichi group’s South African operations.
In the UK, the Bisichi group signed a £6 million five-year term
loan with Santander in December 2014.
£123,300 of this loan was repaid in the year. This loan is secured
against UK investment property.
Overall the Bisichi group achieved a net increase in cash and
cash equivalents of £0.4 million (2015: decrease of £1.7 million).
This increase was mainly attributable to a one off cash receipt
from the sale of its interest in Langney Shopping Centre Unit Trust
for £1.14 million. After taking into account an exchange loss of
£0.7 million on the translation of the Bisichi group’s year end net
cash borrowings that were held in South African Rand, the group’s
net balance owing of cash and cash equivalents (including bank
overdrafts) at year end was £0.9 million (2015: £0.6 million). The
Bisichi group’s cash and cash equivalents (excluding bank
overdrafts) at the year-end were £2.4 million (2015: £1.6
million).
The Bisichi group’s financial position remains strong. Its net
assets at 31 December 2016 were £17
million (2015: £15.6 million).The group expect to continue to
achieve significant value 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 £1.25 million secured against its investment
property and is covenant compliant. It paid management fees of
£72,000 (2015: £84,000) split equally to the two joint venture
partners. Its results continue to be near breakeven after taxation.
Dragon has net assets of
£1.7 million (2015: £1.7 million).
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 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 23 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 company is well placed to
manage its business risks successfully, despite the continuing
uncertain economic climate. The Directors therefore have a
reasonable expectation that the company has 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 £10.18 million of
which only £4.73 million has been recognised in the 2016 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 0.165p
per ordinary share payable in September
2017. This is an increase of 3% compared to the 2015
dividend of 0.16p per ordinary share.
The Group remains confident about its trading and future outlook
and is looking to further reduce its overhead costs and interest
payable; while it stabilises its property income together with
seeking out growth opportunities.
Principal activities, strategy & business model
The Group’s principal business model is the investment in and
management of town centre 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 2016 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, which has been
substantially reduced, 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 in
house 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 the property year on year. |
Like-for-like rental income as a
percentage of the prior year rental. |
The like-for-like rental
income has increased
by £0.18m. |
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 have
stabilised. |
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
fell by 2.43 pence per share
or 5.1%.
The small reduction in NAV
was to be expected as the
assets and liabilities are
re-organised and positioned
for growth. |
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
2016:
• Black Wattle Colliery recorded one Lost Time Injury during
2016 (2015: Two).
• No cases of Occupational Diseases were recorded.
• Zero claims for the Compensation for Occupational Diseases
were submitted.
They continue to adhere 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 2016 Financial
Statements which are available on their web site:
www.bisichi.co.uk
Greenhouse gas reporting
We have reported on all of the emission sources required under
the Companies Act 2006 (Strategic Report and Directors’ Reports)
Regulations 2013 for the reporting period 1st January 2016 to 31st
December 2016. The emissions are detailed in tables 1, 2, 3
and 4 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 that fall within the
footprint boundary. LAP has landlord controlled areas in Kings
Square, Orchard Square, Brewery Street, Shipley and Bridgend.
Excluded from our footprint boundary are: properties that we manage
on behalf of others or are not wholly owned by LAP and emissions
considered non material by the business.
Emissions for landlord controlled areas have been calculated
based on actual consumption information 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.
The Bisichi Group has employed the Operational Control boundary
definition to outline the carbon footprint boundary. Included
within that boundary are Scope 1 & 2 emissions from coal
extraction and onsite mining processes for Black Wattle Colliery.
Excluded from the footprint boundary are emission sources
considered non material by Bisichi Group, including refrigerant use
onsite.
We have used the GHG Protocol Corporate Accounting and Reporting
Standard (revised edition) 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 2016.
As well as reporting Scope 1 and Scope 2 emissions, legislation
requires that at least one intensity ratio is reported for the
given reporting period. The intensity figure represented below
shows the emissions in tCO2e per thousand pounds revenue.
Table1. landlord & tenant controlled areas
|
Emissions Source |
2016 |
2015 |
Scope 1 emissions |
Natural gas (tCO2e) |
234 |
245 |
|
Refrigerants (tCO2e) |
5 |
- |
Scope 2 emissions |
Electricity (tCO2e) |
3,491 |
3,948 |
|
Total tCO2e |
3,730 |
4,193 |
|
Intensity ratio (tCO2e/£thousand) |
0.076 |
0.089 |
Table 2. LAP controlled areas
|
Emissions Source |
2016 |
2015 |
Scope 1 emissions |
Natural gas (tCO2e) |
234 |
245 |
|
Refrigerants (tCO2e) |
5 |
- |
Scope 2 emissions |
Electricity (tCO2e) |
236 |
297 |
|
Total tCO2e |
475 |
542 |
Table 3. Tenant controlled areas
|
Emissions Source |
2016 |
2015 |
Scope 1 emissions |
Natural gas (tCO2e) |
- |
- |
|
Refrigerants (tCO2e) |
- |
- |
Scope 2 emissions |
Electricity (tCO2e) |
3,255 |
3,651 |
|
Total tCO2e |
3,255 |
3,651 |
1. 2015 and 2016 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)
2. 2015 electricity and natural gas consumption figures have
been restated due to an increase of data accuracy.
Table 4. Coal mining carbon footprint
|
2016
CO2e
Tonnes |
2015
CO2e
Tonnes |
Emissions source: |
|
|
Scope 1 Combustion of fuel & operation of facilities |
11,860 |
10,571 |
Scope 1 Emissions from coal mining activities |
22,171 |
27,789 |
Scope 2 Electricity, heat, steam and cooling purchased for own
use |
8,530 |
7,571 |
Total |
42,561 |
45,931 |
Intensity: |
|
|
Intensity 1 Tonnes of CO2 per pound sterling of revenue |
0.0019 |
0.00179 |
Intensity 2 Tonnes of CO2 per pound of coal produced |
0.034 |
0.0291 |
Environment
United Kingdom
The Group’s principal UK activity is property investment, which
involves renting premises to retail 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 of 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.
Director, employees and gender representation
At the year end the company had 6 directors
(6 male, 0 female), 2 senior managers (2 male,
0 female) and 26 employees (13 male, 13 female).
Bisichi Mining PLC
Bisichi Mining PLC’s group at the year end had
6 directors (6 male, 0 female), 7 senior managers (6 male, 1
female) and 187 employees (143 male, 44 female).
Detailed information relating to Bisichi Strategic Report is
available in its 2016 financial statements.
Approved on behalf of the board of directors
Anil Thapar,
Finance Director
27 April 2017
GOVERNANCE
Directors & advisors
EXECUTIVE DIRECTORS
Sir Michael Heller MA FCA*
(Chairman)
John A Heller LLB MBA
(Chief Executive)
Anil K Thapar FCCA
(Finance Director)
NON-EXECUTIVE DIRECTORS
Howard D Goldring BSC (ECON) ACA†
Howard Goldring is Executive
Chairman of Delmore Asset Management 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, including Tesco Pension
Investment Ltd. He has been a member of the LAP Board since
July 1992, and has over 30 years’
experience of the real estate market. From 1997-2003 he was
consultant director on global asset allocation to Liverpool
Victoria Asset Management Limited and was a director of Living
Bridge VCT 2 from 2010-2016. Howard is a regular guest host for
CNBC ‘Squawk Box’.
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
Chairman of BG Training Limited and a director of Jupiter US
Smaller Companies plc. 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 chairman of
private real estate company Property Alliance Group and a senior
advisor to Alvarez & Marsal LLP (“A&M”) and to a
German real estate investment fund manager. He has more than 35
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
# Senior independent director
† Member of the audit, remuneration and nomination committees
SECRETARY & REGISTERED OFFICE
Anil K Thapar FCCA
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
Capita Asset Services
Shareholder Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
UK telephone: 0871 664 0300
International telephone: +44 (0) 20 8639 3399
(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.capitaregistrars.com
Email: shareholderenquiries@capita.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 2016.
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 5 to 31 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 42 per
cent 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% majority interest is
disclosed as a “non-controlling interest”.
Business review
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 14 to 31.
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
retail 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 23 on page 84 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. Details of key estimates that have been adopted are
contained in the accounting policies note on page 63.
• 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
(principally 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 policy
The directors are recommending payment of a final dividend for
2016 of 0.165p per share (2015 0.16p per share).
Subject to shareholder approval, the ordinary final dividend
will be payable on Friday 15 September
2017 to shareholders registered at the close of business on
Friday 18 August 2017.
The company’s ordinary shares held in treasury
At 31 December 2016, 221,061
(2015: 734,816) ordinary shares were held in Treasury with a market
value of £46,422 (2015: £181,867). At the Annual General Meeting
(AGM) in June 2016 members renewed
the authority for the Company to purchase up to 10 per cent of its
issued ordinary shares. The Company will be asking members to renew
this authority at the next AGM to be held on Tuesday
6 June 2017.
Movements in Treasury shares during the year: |
Number of
shares |
Treasury shares held at 1 January 2016 |
734,816 |
Issued for directors’ bonuses (69,225 shares at
24.50p) |
(69,225) |
Issued for staff bonuses (154,073 shares at
24.50p) |
(154,073) |
Issued for Share Incentive Plan (Directors 24,488
shares at 24.50p) |
(24,488) |
Issued for Share Incentive Plan (Staff 36,732
shares at 24.50p) |
(36,732) |
Issued for Share Incentive Plan (1,936 shares at
25p) |
(1,936) |
Issued for directors’ bonuses (224,470 shares at
21.25p) |
(224,470) |
Issued for Share Incentive Plan (2,831 shares at
21.25p) |
(2,831) |
Treasury shares held at 31 December
2016 |
221,061 |
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 2016 by independent professional
firms of chartered surveyors – Allsop LLP, London (85.66 per cent of the portfolio),
Carter Towler, Leeds (12.60 per cent) – and by the Directors
(1.74 per cent). The valuations, which are reflected in the
financial statements, amount to £105.08 million (2015: £104.39
million).
Taking account of prevailing market conditions, the valuation of
the properties at 31 December 2016
resulted in an increase of £0.53 million (2015: decrease of £0.18
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 23 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 2016.
R Priest is retiring by rotation at the Annual General Meeting
in 2017 and offers himself for re-election.
Robin Priest is chairman of
private real estate company Property Alliance Group and a senior
advisor to Alvarez & Marsal LLP (“A&M”) and to a
German real estate investment fund manager. He has more than 35
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. Robin Priest has a contract
of service with the Company determinable upon three months notice.
The board has considered the appointment of Robin Priest and recommends his re-election as
Director. His knowledge of structured finance and experience of
dealing with challenging and complex assets and portfolios is of
significant benefit to the business.
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 44 of the Annual Remuneration Report.
Substantial shareholdings
At 31 December 2016, Sir
Michael Heller and his family had an
interest in 48.08 million shares of the Company, representing 56.35
per cent of the issued share capital net of treasury shares (2015:
47.8 million shares representing 56.4 per cent). Cavendish Asset
Management Limited had an interest in 8,173,875 shares representing
9.58 per cent of the issued share capital of the Company (2015:
8,280,434 shares representing 9.76 per cent). James Hyslop had an interest in 4,456,258 shares
representing 5.22 per cent of the issued share capital of the
Company (2015: 3,856,258 shares representing 4.55 per cent).
The Company does not consider that the Heller family have 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 party has control.
The Company is not aware of any other holdings exceeding 3 per
cent of the issued share capital.
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 re-elected 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 10).
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.
Directors and officers liability insurance
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 (2015: £Nil).
No donations for charitable purposes were made during the
year (2015: £Nil).
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 retail 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 2016 can be found
on pages 28 and 29 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 group’s activities and policies concerning the
employment, training, health and safety and community support and
social development concerning the group’s employees in South Africa.
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 23 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 39 and 40
of the annual report and accounts.
Annual General Meeting
The Annual General Meeting will be held at 24 Bruton Place,
London W1J 6NE on Tuesday
6 June 2017 at 11.00 a.m. Items 1 to 8 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 9 to 11 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 3 – Remuneration Policy
Resolution 3 is to approve the remuneration policy of the
Company for the three year period from the date of this Annual
General Meeting in compliance with section 439A of the Companies
Act 2006. The vote on the remuneration policy is binding and the
company may not 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. If Resolution 3 is passed, the remuneration policy will
take effect from the conclusion of the Annual General Meeting. The
remuneration policy will be put to shareholders again no later than
the Company’s Annual General Meeting in 2020.
Resolution 8 – Authority to allot securities
Paragraph 8.1.1 of Resolution 8 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 21 April 2017 (being the last practicable date
prior to the publication of this Directors’ Report).
In line with guidance issued by the Investment Association
(‘IA’), paragraph 8.1.2 of Resolution 8 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 1/3 (one third) of the ordinary share capital of the
Company in issue (excluding treasury shares) as at 21 April 2017 (being the last practicable date
prior to the publication of this Directors’ Report).
The Directors’ authority will expire on the earlier of
31 August 2018 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 IA
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 9 – 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 2017, 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 institutional investor guidelines, approximately 5 per cent.
of the total ordinary share capital in issue as at 21 April 2017 (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 2018 or the date of next AGM.
Resolution 10 – Purchase of own ordinary shares
The effect of Resolution 10 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 21
April 2017 (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 10 will expire at the conclusion of the
Company’s next annual general meeting to be held in 2018 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 11 – Notice of General Meetings
Resolution 11 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 2016. 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
Anil Thapar
Secretary
27 April 2017
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 34. 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 52. 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 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 42 to 45.
• 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 51. The Chief Executive and
Finance Director are normally invited to attend.
Board and board committee meetings held in 2016
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
1 |
10
1
1 |
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
1 |
10
1
1
1 |
H D Goldring |
Board
Audit committee
Nomination committee
Remuneration committee |
10
2
1
1 |
10
2
1
1 |
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 non-executive
independent Director. Their recommendations are discussed at the
nomination committee prior to proposals for re-election being
recommended to the board. The performance of executive Directors is
discussed and assessed by the remuneration committee. The senior
independent Director meets regularly with the Chairman, 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 Asset Management 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. Alvarez and Marsal Real Estate Advisory Services
(A&M) is a Company in which R Priest is a senior advisor.
A&M provides consultancy and advisory 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 2016. 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 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 2016. The
report is presented in two parts in accordance with the
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
2017.
The current remuneration policy, which details the remuneration
policy for directors, can be found at www.lap.co.uk. The current
remuneration policy was subject to a binding vote which was
approved by shareholders at the AGM in June
2014. The approval will continue to apply for a 3 year
period up to the AGM on 6 June
2017.
The second part details the Remuneration Policy for Directors.
This policy is subject to a binding vote which will be proposed to
shareholders at the AGM in 2017 and if approved will apply for a 3
year period commencing from the conclusion of the AGM.
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
27 April 2017
Annual remuneration report
The following information has been audited
Single total figure of remuneration for the year ended
31 December 2016
|
Salary and fees
£’000 |
BONUSES
£’000 |
BENEFITS
£’000 |
PENSIONS
£’000 |
TOTAL
BEFORE SHARE OPTIONS
£’000 |
SHARE OPTIONS
£’000 |
TOTAL 2016
£’000 |
Executive Directors |
|
|
|
|
|
|
|
Sir Michael Heller* |
7 |
- |
43 |
- |
50 |
n/a |
50 |
Sir Michael Heller - Bisichi |
75 |
- |
- |
- |
75 |
n/a |
75 |
J A Heller |
333 |
166 |
40 |
30 |
569 |
n/a |
569 |
A K Thapar |
152 |
35 |
11 |
15 |
213 |
n/a |
213 |
|
567 |
201 |
94 |
45 |
907 |
- |
907 |
Non-executive Directors |
H D Goldring*+ |
32 |
- |
5 |
- |
37 |
n/a |
37 |
C A Parritt*+ |
38 |
- |
- |
- |
38 |
n/a |
38 |
R Priest* |
51 |
- |
- |
- |
51 |
n/a |
51 |
|
121 |
- |
5 |
- |
126 |
- |
126 |
Total |
688 |
201 |
99 |
45 |
1,033 |
- |
1,033 |
Single total figure of remuneration for the year ended
31 December 2015
|
Salary and fees
£’000 |
BONUSES
£’000 |
BENEFITS
£’000 |
PENSIONS
£’000 |
TOTAL
BEFORE SHARE OPTIONS
£’000 |
SHARE OPTIONS
£’000 |
TOTAL 2015
£’000 |
Executive Directors |
|
|
|
|
|
|
|
Sir Michael Heller* |
7 |
- |
42 |
- |
49 |
n/a |
49 |
Sir Michael Heller - Bisichi |
75 |
- |
- |
- |
75 |
n/a |
75 |
J A Heller |
333 |
366 |
30 |
33 |
762 |
n/a |
762 |
A K Thapar |
130 |
55 |
8 |
40 |
233 |
n/a |
233 |
|
545 |
421 |
80 |
73 |
1,119 |
- |
1,119 |
Non-executive Directors |
H D Goldring*+ |
47 |
- |
5 |
- |
52 |
n/a |
52 |
C A Parritt*+ |
38 |
- |
- |
- |
38 |
n/a |
38 |
R Priest* |
63 |
- |
- |
- |
63 |
n/a |
63 |
|
148 |
- |
5 |
- |
153 |
- |
153 |
Total |
693 |
421 |
85 |
73 |
1,272 |
- |
1,272 |
* Note 28 “Related party transactions”
+ Members of the remuneration committee for years ended
31 December 2015 and 31 December 2016
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 £75,000 (2015: £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 (2015: £300,000). Further details of these services
are set out in Note 28 to the financial statements “Related party
transactions”.
J A Heller is a director of Dragon Retail Properties Limited, (a
subsidiary for IFRS 10 purposes) and received benefits from that
company of £11,336 (2015: £7,250) 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 28 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 28 to the financial statements.
Until 31 July 2016 R Priest was a
managing director of Alvarez & Marsal Real Estate Advisory
Services who provide consultancy services to the Group. The figure
of disclosed remuneration for Mr Priest includes the value of these
services up to 31 July 2016. This is
detailed in Note 28 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 |
6 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
Two directors had benefits under money purchase schemes. Under
their contracts of employment, they were entitled to a regular
employer contribution (currently £30,000 and £15,000 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 2016 bonuses.
61,220 shares were awarded in January
2016 relating to 2015 bonuses and these are shown below as
2015.
Free shares awarded:
|
Number of members |
Number of shares |
Value of shares |
|
2016 |
2015 |
2016 |
2015 |
2016
£ |
2015
£ |
Directors:
J A Heller |
- |
1 |
- |
12,244 |
- |
3,000 |
A K Thapar |
- |
1 |
- |
12,244 |
- |
3,000 |
Staff |
- |
3 |
- |
36,732 |
- |
9,000 |
Total at 31 December |
- |
5 |
- |
61,220 |
- |
15,000 |
2. Partnership shares: No partnership shares were issued between
November 2015 and October 2016.
3. Matching shares: The partnership share agreements for the
year to 31 October 2016 provide for
two matching shares to be awarded free of charge for each
partnership share acquired. No partnership shares were acquired in
2016 (2015: nil). Matching shares will usually be forfeited if a
member leaves employment in the Group within 5 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 2016 amounted to £602 (2015:
£484).
Dividend shares issued:
|
Number of members |
Number of shares |
Value of shares |
|
2016 |
2015 |
2016 |
2015 |
2016
£ |
2015
£ |
Directors:
J A Heller |
1 |
1 |
402 |
255 |
85 |
64 |
A K Thapar |
1 |
1 |
495 |
331 |
105 |
83 |
Staff |
6 |
8 |
1,934 |
1,350 |
412 |
337 |
Total at 31 December |
8 |
10 |
2,831 |
1,936 |
602 |
484 |
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 2016.
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 2016 there were no options to subscribe for
ordinary shares outstanding. The exercise of options under the
Unapproved Scheme is subject to the satisfaction of objective
performance conditions specified by the remuneration committee
which conforms to institutional shareholder guidelines and best
practice provisions. Further details of this scheme are set out in
Note 26 “Share Capital” to the financial statements.
Payments to past directors
No payments were made to past Directors in the year ended
31 December 2016.
Payments for loss of office
No payments for loss of office were made in the year ended
31 December 2016.
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 16 |
1 Jan 16 |
31 Dec 16 |
1 Jan 16 |
Sir Michael Heller |
6,053,541 |
6,353,541 |
19,277,931 |
19,277,931 |
H D Goldring |
19,819 |
19,819 |
- |
- |
J A Heller |
1,867,393 |
1,630,022 |
†14,073,485 |
†14,073,485 |
C A Parritt |
36,168 |
36,168 |
- |
- |
R Priest |
- |
- |
- |
- |
A K Thapar |
120,495 |
150,047 |
- |
- |
†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 2016
was 21p (2015: 25p). During the year the share middle market price
ranged between 19p and 28.38p.
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*
% |
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 |
2007 |
J A Heller |
1,032 |
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 2015 and 2016
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 |
|
2016 |
2015 |
% change |
2016 |
2015 |
% change |
Base salary and allowances |
333 |
333 |
0% |
692 |
691 |
0% |
Taxable benefits |
40 |
30 |
33% |
77 |
67 |
15% |
Annual bonus |
166 |
366 |
(55%) |
97 |
126 |
(23%) |
Total |
539 |
729 |
(26%) |
866 |
884 |
(2%) |
Relative importance of spend on pay
The total expenditure of the Group on remuneration to all
employees (Note 29 refers) is shown below:
|
2016
£’000 |
2015
£’000 |
Employee Remuneration |
7,173 |
7,219 |
Distributions to shareholders |
136 |
133 |
Statement of implementation of remuneration policy
The policy was approved at the AGM in June 2014 and was effective from 10 June 2014. 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 forthcoming 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
2016. No increases were awarded and no external advice was
taken in reaching this decision.
Shareholder voting
At the Annual General Meeting on 9 June
2016, there was an advisory vote on the resolution to
approve the Remuneration Report, other than the part containing the
remuneration policy.
In addition, on 10 June 2014,
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 (9
June 2016) |
83.78 |
1.27 |
8,541,374 |
Resolution to approve the Remuneration Policy (10
June 2014) |
99.12 |
0.67 |
66,918 |
Remuneration policy summary
The remuneration policy summary below is an extract of the
group’s current remuneration policy on directors’ remuneration,
which was approved by a binding vote at the 2014 AGM. The approved
policy took effect from 10 June
2014.
A copy of the full policy can be found at www.lap.co.uk.
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 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 specific performance conditions are attached to contractual
benefits
The value of benefits for each Director for the year ended 31
December 2016 is shown in the table on page 42 |
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
Bonuses are generally offered in cash or shares |
|
The remuneration committee determines the level of
bonus on an annual basis applying such performance conditions
and performance measures as it considers appropriate |
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 |
Granted under existing schemes (see page 44) |
|
Offered at appropriate times by the remuneration
committee |
Entitlement 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
Share options will be offered by the remuneration committee as
appropriate
There are no maximum levels for share options offered |
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 of per year paid in ‘Free
Shares’ under the SIP scheme rules
Full detail of the SIP can be found on page 43 |
NON-EXECUTIVE DIRECTORS |
Base salary |
To recognise:
Skills
Experience
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 |
There is no prescribed maximum salary
or maximum rate of increase
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 42) |
|
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 specific performance conditions are attached to contractual
benefits |
Share Options |
|
Non-executive Directors do not participate in the
share option schemes |
|
|
|
The remuneration committee consider the performance measures
outlined in the table above to be appropriate measures of
performance
and that the KPI’s chosen align the interests of the directors and
shareholders.
Remuneration policy
Introduction
Set out below is the LAP Group policy on directors’ remuneration
(excluding Bisichi). This will be proposed for a binding vote at
the 2017 AGM. If approved the policy will take effect from
6 June 2017.
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
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 44)
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 42) |
|
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
In order to ensure that shareholders have sufficient clarity
over director remuneration levels, the company has, where possible,
specified a maximum that may be paid to a director in respect of
each component of remuneration. There have been no other
significant changes made to the future remuneration policy from the
previous remuneration policy.
• 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.
The remuneration committee considers the performance measures
outlined in the table above to be appropriate measures of
performance and that the KPI’s chosen align the interests of the
directors and shareholders.
For details of remuneration of other company employees please
see page 45.
Remuneration scenarios
An indication of the possible level of remuneration that would
be received by each Executive director in the 12 months commencing
6 June 2017 in accordance with the
director’s remuneration policy is shown below.
The base salary level for Sir Michael
Heller for the purpose of these graphs (and bonus
calculations) is £300k as per note on page 42.
Assumptions
Minimum
Consists of base salary, benefits and pension. Base salary,
benefits and pension for 2017 are assumed at the levels included in
the single total figure remuneration table for the year ended
31 December 2016.
On target
Based on the minimum, enhanced by a bonus calculated as the
average percentage bonus awarded to the individual in the three
years ending on 31 December 2016. As
outlined in the policy summary above, the remuneration committee
has discretion to award bonuses of up to 200% of base salary in any
one year (up to 300% in an exceptional year). Base salary, benefits
and pension for 2017 are assumed at the levels included in the
single total figure remuneration table for the year ended
31 December 2016.
Maximum
Based on the minimum, enhanced by the maximum bonus available in
an exceptional year (300% of base salary). Base salary, benefits
and pension for 2017 are assumed at the levels included in the
single total figure remuneration table for the year ended
31 December 2016.
Approach to recruitment remuneration
All appointments to the board are made on merit. The components
of the remuneration package (for a new director who is recruited
within the life of the approved remuneration policy) would comprise
base salary, pension, benefits and an opportunity to earn an annual
bonus and be granted share options as outlined above. The approach
to such appointments is detailed within the policy summary above.
The company will pay remuneration to new directors at a level that
will enable it to attract appropriately skilled and experienced
individuals but which is not, in the opinion of the remuneration
committee excessive.
Service contracts
All executive directors have full-time contracts of employment
with the Company. Non-executive directors have contracts of
service. No director has a contract of employment or contract of
service with the company, its joint venture or associated companies
with a fixed term which exceeds twelve months. Directors notice
periods (see the annual remuneration report) are set in line with
market practice and are of a length considered sufficient to
ensure an effective handover of duties should a director leave the
Company.
All directors’ contracts as amended from time to time, have run
from the date of appointment. Service contracts are kept at the
registered office.
Policy on payment for loss of office
There are no contractual provisions that could impact on a
termination payment. Termination payments will be calculated in
accordance with the existing contract of employment or service
contract. It is the policy of the remuneration committee to issue
employment contracts to executive directors with normal commercial
terms and without extended terms of notice which could give rise to
extraordinary termination payments.
Consideration of employment conditions elsewhere in the
company
In setting this policy for directors’ remuneration the
remuneration committee has been mindful of the Company’s objective
to reward all employees fairly according to their role, performance
and market forces. In setting the policy for Directors’
remuneration the committee has considered the pay and employment
conditions of the other employees within the Group, but no formal
consultation has been undertaken with employees in drawing up the
policy. The committee has not used formal comparison measures.
Consideration of shareholder views
No shareholder views have been taken into account when
formulating this policy. In accordance with the new regulations, an
ordinary resolution for approval of this policy will be put to
shareholders at the AGM in June
2017.
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.
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
27 April 2017
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 and
Transparency Rules
Each of the directors, whose names and functions are listed on
page 34, 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 in the United
Kingdom governing the preparation and dissemination of
financial statements may differ from legislation in other
jurisdictions.
Independent auditor’s report
OPINION ON FINANCIAL STATEMENTS
We have audited the Group and parent Company financial
statements (“the financial statements”) on pages 55 to 99. 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 (United Kingdom Generally Accepted Accounting Practice)
including FRS 101 ‘Reduced Disclosure Framework’.
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 2016 and of the group’s
loss for the year then ended;
• the group financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union;
• the parent company financial statements have been properly
prepared in accordance with United Kingdom Generally Accepted
Accounting Practice; and
• the financial statements have been prepared in accordance with
the requirements of the Companies Act 2006 and, as regards the
group financial statements, Article 4 of the IAS Regulation.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements
is provided on the Financial Reporting Council’s website at
http://www.frc.org.uk/auditscopeukprivate
Opinion on other matters prescribed by the Companies Act
2006
In our opinion:
• the part of the Directors’ Remuneration Report to be audited
has been properly prepared in accordance with the Companies Act
2006; and
• 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
parent company and its environment obtained in the course of the
audit, we have not identified any material misstatements in the
Strategic Report or the Directors’ Report.
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you
if, in our opinion:
• adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been received
from branches not visited by us; or
• the parent company financial statements and the part of the
Directors’ Remuneration Report to be audited are not in agreement
with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by
law are not made; or
• we have not received all the information and explanations we
require for our audit.
Respective responsibilities of directors and auditor
As more fully explained in the Directors’ Responsibilities
Statement set out on page 52 the Directors are responsible for the
preparation of the financial statements and for being satisfied
that they give a true and fair view. Our responsibility is to audit
and express an opinion on the financial statements in accordance
with applicable law and International Standards on Auditing (UK and
Ireland). Those standards require
us to comply with the Auditing Practices Board’s (APB’s) Ethical
Standards for Auditors.
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 BA FCA (Senior Statutory Auditor)
For and on behalf of
RSM UK AUDIT LLP
Statutory Auditor
Chartered Accountants
25 Farringdon Street
London EC4A 4AB
28 April 2017
FINANCIAL STATEMENTS
Consolidated income statement
for the year ended 31 December
2016
|
Notes |
2016
£’000 |
2015
£’000 |
Group revenue |
1 |
29,704 |
32,666 |
Operating costs |
|
(26,860) |
(30,675) |
Income from listed investments held for
trading |
3 |
2 |
3 |
Operating profit |
|
2,846 |
1,994 |
Finance income |
5 |
144 |
123 |
Finance expenses |
5 |
(4,292) |
(4,221) |
Debenture break cost |
23 |
– |
(158) |
Result before revaluation and other
movements |
|
(1,302) |
(2,262) |
|
|
|
|
Non–cash changes in valuation of assets and
liabilities and other movements |
|
|
|
Increase/(decrease) in value of investment
properties |
|
532 |
(185) |
Loss on disposal of investment properties |
|
– |
(32) |
Increase/(decrease) in trading investments |
|
1 |
(1) |
Increase/(decrease) in value of other
investments |
|
12 |
(11) |
Adjustment to interest rate derivative |
23 |
(217) |
84 |
Share of profit of joint ventures, net of tax |
12 |
– |
71 |
Loss on reclassification of asset as held for
sale |
12 |
– |
(276) |
Result including revaluation and other
movements |
|
(974) |
(2,612) |
Profit from discontinued operations |
7 |
– |
519 |
Loss for the year before taxation |
2 |
(974) |
(2,093) |
Income tax (charge)/credit |
6 |
(1,175) |
47 |
Loss for the year |
|
(2,149) |
(2,046) |
|
|
|
|
Attributable to: |
|
|
|
Equity holders of the Company |
|
(2,357) |
(1,899) |
Non–controlling interest |
27 |
208 |
(147) |
Loss for the year |
|
(2,149) |
(2,046) |
|
|
|
|
Earnings per share |
|
|
|
Loss per share – basic and diluted – continuing
operations |
9 |
(2.77)p |
(2.85)p |
Profit per share – basic and diluted –
discontinued operations |
9 |
– |
0.61p |
Total |
9 |
(2.77)p |
(2.24)p |
Consolidated statement of comprehensive income
for the year ended 31 December
2016
|
2016
£’000 |
2015
£’000 |
Loss for the year |
(2,149) |
(2,046) |
Other comprehensive income/(expense): |
|
|
Items that may be subsequently recycled to the
income statement: |
|
|
Exchange differences on translation of Bisichi
Mining PLC foreign operations |
1,106 |
(1,167) |
Transfer of gain/(loss) on available for sale
investments |
193 |
(201) |
Taxation |
(13) |
41 |
Other comprehensive income/(expense) for the
year net of tax |
1,286 |
(1,327) |
Total comprehensive expense for the year net of
tax |
(863) |
(3,373) |
Attributable to: |
|
|
Equity shareholders |
(1,864) |
(2,414) |
Non–controlling interest |
1,001 |
(959) |
|
(863) |
(3,373) |
Consolidated balance sheet
at 31 December 2016
|
Notes |
2016
£’000 |
2015
£’000 |
Non–current assets |
|
|
|
Market value of properties attributable to
Group |
10 |
105,080 |
104,388 |
Present value of head leases |
31 |
4,767 |
4,784 |
Property |
|
109,847 |
109,172 |
Mining reserves, plant and equipment |
11 |
8,653 |
5,552 |
Investments in joint ventures |
12 |
455 |
325 |
Loan to joint venture |
13 |
1,350 |
900 |
Held to maturity investments |
17 |
1,874 |
1,995 |
Other investments |
17 |
32 |
14 |
Deferred tax |
24 |
1,134 |
2,390 |
|
|
123,345 |
120,348 |
Current assets |
|
|
|
Inventories |
16 |
1,721 |
1,049 |
Assets held for sale |
14 |
– |
2,335 |
Trade and other receivables |
18 |
7,061 |
6,502 |
Interest rate derivatives |
23 |
4 |
15 |
Corporation tax recoverable |
|
32 |
29 |
Available for sale investments |
19 |
781 |
594 |
Investments held for trading |
19 |
19 |
20 |
Cash and cash equivalents |
|
6,265 |
4,809 |
|
|
15,883 |
15,353 |
Total assets |
|
139,228 |
135,701 |
Current liabilities |
|
|
|
Trade and other payables |
20 |
(12,942) |
(10,497) |
Borrowings |
21 |
(4,108) |
(2,267) |
Current tax liabilities |
|
(21) |
(10) |
|
|
(17,071) |
(12,774) |
Non–current liabilities |
|
|
|
Borrowings |
21 |
(64,401) |
(64,951) |
Interest rate derivatives |
23 |
(793) |
(587) |
Present value of head leases on properties |
31 |
(4,767) |
(4,784) |
Provisions |
22 |
(1,236) |
(847) |
Deferred tax liabilities |
25 |
(2,329) |
(2,106) |
|
|
(73,526) |
(73,275) |
Total liabilities |
|
(90,597) |
(86,049) |
Net assets |
|
48,631 |
49,652 |
Equity attributable to the owners of the
parent |
|
|
|
Share capital |
26 |
8,554 |
8,554 |
Share premium account |
|
4,866 |
4,866 |
Translation reserve (Bisichi Mining PLC) |
|
(728) |
(1,145) |
Capital redemption reserve |
|
47 |
47 |
Retained earnings (excluding treasury shares) |
|
25,648 |
28,238 |
Treasury shares |
26 |
(145) |
(482) |
Retained earnings |
|
25,503 |
27,756 |
Total equity attributable to equity
shareholders |
|
38,242 |
40,078 |
Non–controlling interest |
27 |
10,389 |
9,574 |
Total equity |
|
48,631 |
49,652 |
Net assets per share |
9 |
44.83p |
47.26p |
Diluted net assets per share |
9 |
44.83p |
47.26p |
These financial statements were approved by the board of
directors and authorised for issue on 27
April 2017 and signed on its behalf by:
Sir Michael
Heller
Anil Thapar
Company Registration No. 341829
Director
Director
Consolidated statement of changes in shareholders’ equity
for the year ended 31 December
2016
|
Share
capital
£’000 |
Share
premium
£’000 |
Translation
reserves
£’000 |
Capital
redemption
reserve
£’000 |
Treasury
shares
£’000 |
Retained
earnings
excluding
treasury
shares
£’000 |
Total
excluding
Non–
Controlling
Interests
£’000 |
Non–
controlling
Interests
£’000 |
Total
equity
£’000 |
Balance at 1 January 2015 |
8,554 |
4,866 |
(696) |
47 |
(883) |
30,659 |
42,547 |
10,826 |
53,373 |
Loss for year |
– |
– |
– |
– |
– |
(1,899) |
(1,899) |
(147) |
(2,046) |
Other comprehensive expense: |
|
|
|
|
|
|
|
|
|
Currency translation |
– |
– |
(449) |
– |
– |
– |
(449) |
(718) |
(1,167) |
Loss on available for sale investments (net of
tax) |
– |
– |
– |
– |
– |
(66) |
(66) |
(94) |
(160) |
Total other comprehensive expense |
– |
– |
(449) |
– |
– |
(66) |
(515) |
(812) |
(1,327) |
Total comprehensive
expense |
– |
– |
(449) |
– |
– |
(1,965) |
(2,414) |
(959) |
(3,373) |
Transactions with owners: |
|
|
|
|
|
|
|
|
|
Share options charge |
– |
– |
– |
– |
– |
13 |
13 |
18 |
31 |
Share options cancelled |
– |
– |
– |
– |
– |
(45) |
(45) |
(64) |
(109) |
Dividends – equity holders |
– |
– |
– |
– |
– |
(133) |
(133) |
– |
(133) |
Dividends – non–controlling interests |
– |
– |
– |
– |
– |
– |
– |
(250) |
(250) |
Change in equity held by LAP |
– |
– |
– |
– |
– |
(5) |
(5) |
3 |
(2) |
Acquisition of own shares |
– |
– |
– |
– |
(111) |
– |
(111) |
– |
(111) |
Disposal of own shares |
– |
– |
– |
– |
226 |
– |
226 |
– |
226 |
Loss on transfer of own shares |
– |
– |
– |
– |
286 |
(286) |
– |
– |
– |
Transactions with owners |
– |
– |
– |
– |
401 |
(456) |
(55) |
(293) |
(348) |
Balance at 31 December 2015 |
8,554 |
4,866 |
(1,145) |
47 |
(482) |
28,238 |
40,078 |
9,574 |
49,652 |
(Loss)/profit for year |
– |
– |
– |
– |
– |
(2,357) |
(2,357) |
208 |
(2,149) |
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
Currency translation |
– |
– |
417 |
– |
– |
– |
417 |
689 |
1,106 |
Gain on available for sale investments (net of
tax) |
– |
– |
– |
– |
– |
76 |
76 |
104 |
180 |
Total other comprehensive income |
– |
– |
417 |
– |
– |
76 |
493 |
793 |
1,286 |
Total comprehensive
income/ (expense) |
– |
– |
417 |
– |
– |
(2,281) |
(1,864) |
1,001 |
(863) |
Transactions with owners: |
|
|
|
|
|
|
|
|
|
Share options charge |
– |
– |
– |
– |
– |
45 |
45 |
64 |
109 |
Dividends – equity holders |
– |
– |
– |
– |
– |
(136) |
(136) |
– |
(136) |
Dividends – non–controlling interests |
– |
– |
– |
– |
– |
– |
– |
(250) |
(250) |
Disposal of own shares |
– |
– |
– |
– |
119 |
– |
119 |
– |
119 |
Loss on transfer of own shares |
– |
– |
– |
– |
218 |
(218) |
– |
– |
– |
Transactions with owners |
– |
– |
– |
– |
337 |
(309) |
28 |
(186) |
(158) |
Balance at 31 December 2016 |
8,554 |
4,866 |
(728) |
47 |
(145) |
25,648 |
38,242 |
10,389 |
48,631 |
Consolidated cash flow statement
for the year ended 31 December
2016
|
2016
£’000 |
2015
£’000 |
Operating activities |
|
|
Loss for the year before taxation |
(974) |
(2,093) |
Finance income |
(144) |
(123) |
Finance expense |
4,292 |
4,221 |
Debenture break cost |
– |
158 |
(Increase)/decrease in value of investment
properties |
(532) |
185 |
Loss on disposal of investment properties |
– |
32 |
(Increase)/decrease in trading investments |
(1) |
1 |
(Increase)/decrease in value of other
investments |
(12) |
11 |
Adjustment to interest rate derivative |
217 |
(84) |
Share of profit of joint ventures, net of tax |
– |
(71) |
Loss on reclassification of asset as held for
sale |
– |
276 |
Profit from discontinued operations |
– |
(511) |
Depreciation |
1,818 |
1,329 |
Profit on disposal of non-current assets |
(32) |
– |
Share based payment expense |
109 |
31 |
Gain on investment held for trading |
4 |
122 |
Exchange adjustments |
(449) |
497 |
Change in inventories |
(258) |
393 |
Change in receivables – continuing operations |
468 |
581 |
Change in receivables – discontinued
operations |
– |
(424) |
Change in payables |
1,080 |
(156) |
Cash generated from operations |
5,586 |
4,375 |
Income tax paid |
(57) |
(1) |
Cash inflows from operating activities |
5,529 |
4,374 |
Investing activities |
|
|
Disposal of shares and loans held to maturity |
121 |
201 |
Disposal of assets held for sale |
2,275 |
– |
Share of profit in joint ventures (assets held for
sale) |
60 |
210 |
Acquisition of investment properties, mining
reserves, plant and equipment |
(3,022) |
(3,339) |
Sale of investment properties, plant and equipment
– continuing operations |
32 |
368 |
Residual receipt from Windsor Shopping Centre
disposal – discontinued operations |
414 |
– |
Interest received –
continuing operations |
133 |
88 |
– discontinued operations |
– |
87 |
Cash inflows/(outflows) from investing
activities |
13 |
(2,385) |
|
2016
£’000 |
2015
£’000 |
Financing activities |
|
|
Purchase of treasury shares |
– |
(111) |
Sale of treasury shares |
119 |
226 |
Interest paid |
(3,943) |
(3,996) |
Interest obligation under finance leases |
(216) |
(247) |
Debenture stock break costs paid |
– |
(158) |
Receipt of bank loan – Bisichi Mining PLC |
37 |
18 |
Repayment of bank loan – Bisichi Mining PLC |
(131) |
(66) |
Receipt of bank loan – Dragon Retail Properties
Ltd |
– |
1,250 |
Repayment of bank loan – Dragon Retail Properties
Ltd |
– |
(1,900) |
Repayment of bank loan |
– |
(201) |
Repayment of debenture stocks |
– |
(1,250) |
Equity dividends paid |
(136) |
(133) |
Equity dividends paid – non-controlling
interests |
(250) |
(250) |
Cancelled share options – Bisichi Mining PLC |
– |
(109) |
Cash outflows from financing
activities |
(4,520) |
(6,927) |
Net increase/(decrease) in cash and cash
equivalents |
1,022 |
(4,938) |
Cash and cash equivalents at beginning of
year |
2,575 |
7,118 |
Exchange adjustment |
(666) |
395 |
Cash and cash equivalents at end of
year |
2,931 |
2,575 |
The cash flows above relate to continuing and discontinued
operations. See Note 7 for information on discontinued
operations.
Cash and cash equivalents
For the purpose of the cash flow statement, cash and cash
equivalents comprise the following balance sheet amounts:
|
2016
£’000 |
2015
£’000 |
Cash and cash equivalents (before bank
overdrafts) |
6,265 |
4,809 |
Bank overdrafts |
(3,334) |
(2,234) |
Cash and cash equivalents at end of year |
2,931 |
2,575 |
£530,000 of cash deposits at 31 December
2016 were charged as security to debenture stocks.
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 33. The financial
statements are prepared under the historical cost convention,
except for the revaluation of freehold and leasehold properties and
financial assets held for trading 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, and for
joint arrangements, is the currency of the country in which the
entity has been incorporated. Details of which country each entity
has been incorporated in can be found in note 15 for subsidiaries
and Note 12 for joint arrangements.
The exchange rates used in the accounts were as follows:
|
£1 Sterling:
Rand |
£1 Sterling:
Dollar |
|
2016 |
2015 |
2016 |
2015 |
Year-end rate |
16.9472 |
22.9067 |
1.23321 |
1.47634 |
Annual average |
19.9269 |
19.5017 |
1.35477 |
1.51750 |
London & Associated
Properties PLC, 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.
Going concern
In reviewing going concern it is necessary to consider
separately the position of LAP 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
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
23 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 Accounting Standards (IAS/IFRS)
The financial statements are prepared in accordance with
International Financial Reporting Standards and Interpretations in
force at the reporting date. These are prepared under the historic
cost basis as modified by the revaluation of investment properties
and held for trading and available for sale investments and
interest rate derivatives.
The following Amendments were mandatory for the accounting
period:
• Amendments to IAS 1, Presentation of Financial Statements
(“IAS 1”)
• Amendments to IAS 16 and IAS 38, Clarification of Acceptable
Methods of Depreciation and Amortisation
• Amendments to IFRS 10, IFRS 12 and IAS 28, Investment
Entities: Applying the Consolidation Exception
• Amendments to IFRS 11, Accounting for Acquisition of Interest
in Joint Operations
• Amendments to IAS 27, Separate financial statements
• Annual Improvements to IFRSs 2012-2014 Cycle
The application of these amendments has had no effect on the
Group’s financial statements.
The Group has not adopted any standards or interpretations in
advance of the required implementation dates. The following new or
revised standards that are applicable to the Group were issued but
not yet effective:
• Annual Improvements to IFRS Standards 2014-2016 Cycle
• IFRIC Interpretation 22 Foreign Currency Transactions and
Advance Consideration
• Amendments to IAS 7 – Statement of Cash Flows
• Amendments to IAS 12 – Recognition of Deferred Tax Assets for
Unrealized Losses
• Amendments to IFRS 2 – Classification and Measurement of
Share-based Payment Transactions
• Amendments to IAS 40: Transfers of Investment Property
It is not expected that adoption of any standards or
interpretations above, which have been issued by the International
Accounting Standards Board but have not been adopted will have a
material impact on the financial statements.
The directors are currently evaluating the financial and
operational impact of the following new or revised standards and
the impact of adopting these standards cannot be reliably measured
until this work is substantially complete.
• 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 will replace
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 2016.
• IFRS 9 was published in July
2014 and will be effective for the Group from 1 January 2018. The standard was endorsed by the
EU on 22 November 2016 It 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.
• IFRS 16 ‘Leases’ – IFRS 16 ‘Leases’ was issued by the IASB in
January 2016 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 provides a single lessee accounting
model, specifying how leases are recognised, measured, presented
and disclosed. The standard has yet to be endorsed by the EU.
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.
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. The directors note that the fair value measurement of
the investment properties may be considered to be less judgemental
where external valuers have been used and as a result of the nature
of the underlying assets.
Mining operations
Life of mine and reserves
The directors consider the judgements and estimates surrounding
the life of the mine and its reserves have the most significant
effect on the amounts recognised in the financial statements and to
be the area where the financial statements are at most risk of a
material adjustment due to estimation uncertainty. The remaining
life of the mine is currently estimated at 5 years. This life of
mine is based on the group’s existing coal reserves and excludes
future run of mine coal purchases and coal reserve acquisitions.
The Group’s coal reserves are subject to assessment by an
independent Competent Person and impact assessments are made of the
carrying value of property, plant and equipment, depreciation
calculations and rehabilitation and decommissioning provisions.
There are numerous uncertainties inherent in estimating coal
reserves and changes to these assumptions may result in restatement
of reserves. These assumptions include factors such as commodity
prices, production costs and yield.
Depreciation, amortisation of mineral rights, mining development
costs and plant & equipment
The annual depreciation/amortisation charge is dependent on
estimates, including coal reserves and the related life of 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 11.
Provision for mining rehabilitation including restoration and
de-commissioning costs
A provision for future rehabilitation including restoration and
decommissioning costs requires estimates and assumptions to be made
around the relevant regulatory framework, the timing, extent and
costs of the rehabilitation activities and of the risk free rates
used to determine the present value of the future cash outflows.
The provisions, including the estimates and assumptions contained
therein, are reviewed regularly by management. The Group engages an
independent expert to assess the cost of restoration and
decommissioning annually as part of management’s assessment of the
provision. Details of the provision for mining rehabilitation can
be found in note 22.
Mining impairment
Property, plant and equipment representing the Group’s mining
assets in South Africa are
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying value may not be fully recoverable. The
impairment test is performed using the approved Life of Mine plan
and those future cash flow estimates are discounted using asset
specific discount rates and are based on expectations about future
operations. The impairment test requires estimates about production
and sales volumes, commodity prices, proven and probable reserves
(as assessed by the Competent Person), operating costs and capital
expenditures necessary to extract reserves in the approved Life of
Mine plan. Changes in such estimates could impact recoverable
values of these assets. Details of the carrying value of property,
plant and equipment can be found in note 11.
The impairment test indicated significant headroom as at
31 December 2016 and therefore no
impairment is considered appropriate. The key assumptions include:
coal prices, including domestic coal prices based on recent pricing
and assessment of market forecasts for export coal; production
based on proven and probable reserves assessed by the independent
Competent Person and an increase in yield of 8% associated with new
mining areas based on assessments by the Competent Person and
empirical data. If export coal prices reduce by 10% a 5.25%
decrease in yield below expectation would be required to create
breakeven scenario. However, the Bisichi directors consider the
forecasted yield levels to be achievable.
Carrying value of Ezimbokodweni joint venture
The Group holds a £1.8 million (2015: £1.2 million) net
investment in Ezimbokodweni Mining (Pty) Limited (“Ezimbokodweni”),
made up of a £1.35 million loan (2015: £0.9 million) and a £0.45
million (2015: £0.3 million) joint venture investment, as in note
12 and 13. The carrying value of the investment is dependent upon
the completion of the acquisition of the Pegasus coal project (“the
project”) in South Africa.
Although the South African Department of Mineral Resources
(“DMR”) has previously approved the transfer of legal title for the
reserve to Ezimbokodweni, a proposed sale and purchase agreement
negotiated and a deposit paid for the project, the conclusion of
the transaction has been delayed pending the commercial transfer of
the prospecting right from the current owners of the project to
Ezimbokodweni. Previous negotiations to complete the commercial
acquisition of the project have been beset by various delays
outside the control of the Bisichi Group. More recently,
Ezimbokodweni has indicated to the current owners of the project
their ability to fund and complete the transaction via a consortium
of newly proposed shareholders of Ezimbokodweni. The proposed
consortium includes Anglo American PLC, Butsunani Energy Investment
Holdings, Vunani Limited, our BEE partner in Black Wattle, and
Bisichi Mining PLC. The consortium meets the Black Economic
Empowerment requirements as required for the transaction as per the
DMR. The current owners of the project have very recently notified
Ezimbokodweni that they do not wish to divest the project at this
stage and, accordingly, the Bisichi Board have considered the
likelihood of the acquisition ultimately completing in due course
as part of its assessment of the carrying value of the investment
in Ezimbokodweni. The Bisichi Board remain committed to engaging
with the current owners, the DMR and relevant stakeholders in order
to conclude the transaction and plan further discussions with these
parties in the near future.
In light of the previously approved legal transfer from the DMR,
our understanding of the potential concerns the DMR may have if
current owners do not ultimately divest of the asset and the
support expressed for the transaction by the DMR as an important
stakeholder, the Bisichi Board remain confident of the transaction
completing in due course. The Bisichi Board has exercised
significant judgement in forming its assessment that the
transaction will ultimately complete. We will continue to evaluate
the status of our investment on an ongoing basis as the planned
engagement with the relevant stakeholders is undertaken. However,
at present, we believe the Bisichi Group is still able to achieve
significant value from the project in excess of its carrying
value.
The carrying value of the net investment in the joint venture
was tested for impairment based on the economic model for the
project and no impairment indicators were considered to exist in
terms of the underlying value of the asset. The carrying value of
the underlying project is supported by its coal reserves and life
of mine plan and is considered appropriate given the underlying
economic value of the project.
Deferred tax
The calculation of deferred tax involves the exercise of
judgement in relation to the amount of income and gains which will
be realised in future to support the recognition of a deferred tax
asset in respect of unrelieved losses.
Interest rate hedges
All interest rate hedges are held at fair value as valued by the
hedge provider.
Further detail is provided in notes 21 and 23.
Basis of consolidation
The Group accounts incorporate the accounts of London & Associated Properties PLC 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 15.
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 is also a subsidiary for accounting purposes, as
LAP and Bisichi each own 50% of that joint venture business.
Joint ventures
Investments in joint ventures, being those entities over whose
activities the Group has joint control, as established by
contractual agreement, include the appropriate share of the results
and net assets of those undertakings.
Loans to joint ventures are classified as non-current assets
when they are not expected to be received in the normal working
capital cycle. The loan to Ezimbokodweni is included in joint
ventures as a part of net investment in joint venture as it is not
expected to be repaid in the foreseeable future, as the
recoverability is dependent upon the acquisition of the Pegasus
coal project in South Africa and
development over the life of mine. Trading receivables and payables
to joint ventures are classified as current assets and
liabilities.
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.
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
Investments
Held to maturity investments are stated at amortised cost using
the effective interest rate method.
Investments held for trading are included in current assets at
fair value. For listed investments, fair value is the bid market
listed value at the balance sheet date. Realised and unrealised
gains or losses arising from changes in fair value are included in
the income statement of the period in which they arise.
Trade and other receivables
Trade and other receivables are recognised initially at fair
value. A provision for impairment of trade receivables is made when
there is evidence that the Group will not be able to collect all
amounts due. Trade receivables do not carry any interest, as any
interest that would be recognised from discounting future cash
payments over the short 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 loans are 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. 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, up to the
point of it being completed for its intended use, are capitalised
in the carrying value of that property. The redevelopment of an
existing investment property will remain an investment property
measured at fair value and is not reclassified. 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, investment property which continue to be
measured in accordance with the Group’s other accounting policies.
Impairment losses on initial classification as 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.
Available for sale assets
Financial assets available for sale are measured at fair value.
Any changes in fair value above cost are recognised in other
comprehensive income and accumulated in the available-for-sale
reserve. For any changes in fair value below cost a provision for
impairment is recognised in the profit or loss account.
Other investments classified as non-current available for sale
investments comprise shares in listed companies and are carried at
fair value.
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, net of bank
overdrafts. Cash equivalents comprise short–term, highly liquid
investments that are readily convertible to known amounts of cash
and which are subject to an insignificant risk of changes in value
and original maturities of three months or less.
Bisichi mining PLC
Mining revenue
Revenue is recognised when the customer has a legally binding
obligation to settle under the terms of the contract and has
assumed all significant risks and rewards of ownership.
Revenue is only recognised on individual sales of coal when all
of the significant risks and rewards of ownership have been
transferred to a third party. Export revenue is generally
recognised when the product is delivered to the export terminal
location specified by the customer, at which point the customer
assumes risks and rewards under the contract. Domestic coal
revenues are generally recognised on collection by the customer
from the mine when loaded into transport, where the customer pays
the transportation costs.
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. 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 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
2016
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 |
2016
Total
£000 |
Rental income |
6,241 |
1,060 |
171 |
7,472 |
Management income from third party properties |
501 |
– |
– |
501 |
Mining |
– |
21,731 |
– |
21,731 |
Group Revenue |
6,742 |
22,791 |
171 |
29,704 |
Direct property costs |
(1,168) |
(187) |
5 |
(1,350) |
Direct mining costs |
– |
(16,184) |
– |
(16,184) |
Overheads |
(2,926) |
(4,903) |
(128) |
(7,957) |
Exchange gains |
– |
449 |
– |
449 |
Depreciation |
(25) |
(1,785) |
(8) |
(1,818) |
Operating profit before listed investments held
for trading |
2,623 |
181 |
40 |
2,844 |
Listed investments held for trading |
2 |
– |
– |
2 |
Operating profit |
2,625 |
181 |
40 |
2,846 |
Finance income |
11 |
132 |
1 |
144 |
Finance expenses |
(3,706) |
(554) |
(32) |
(4,292) |
Result before valuation movements |
(1,070) |
(241) |
9 |
(1,302) |
Other segment items |
|
|
|
|
Net increase/(decrease) on revaluation of
investment properties |
125 |
445 |
(38) |
532 |
Increase in value of other investments |
– |
12 |
– |
12 |
Net increase on revaluation of investments held
for trading |
1 |
– |
– |
1 |
Adjustment to interest rate derivative |
(206) |
– |
(11) |
(217) |
Revaluation and other movements |
(80) |
457 |
(49) |
328 |
(Loss)/profit for the year before
taxation |
(1,150) |
216 |
(40) |
(974) |
Segment assets |
|
|
|
|
- Non-current assets – property |
93,791 |
13,426 |
2,630 |
109,847 |
- Non-current assets – plant & equipment |
112 |
8,520 |
21 |
8,653 |
- Cash & cash equivalents |
3,706 |
2,444 |
115 |
6,265 |
- Non-current assets – other |
1,874 |
32 |
– |
1,906 |
- Non-current assets – deferred tax asset |
1,134 |
– |
– |
1,134 |
- Current assets – others |
1,853 |
7,745 |
20 |
9,618 |
Total assets excluding investment in joint
ventures and assets held for sale |
102,470 |
32,167 |
2,786 |
137,423 |
Segment liabilities |
|
|
|
|
Borrowings |
(58,068) |
(9,234) |
(1,207) |
(68,509) |
Current liabilities |
(6,074) |
(6,811) |
(78) |
(12,963) |
Non-current liabilities |
(5,379) |
(3,665) |
(81) |
(9,125) |
Total liabilities |
(69,521) |
(19,710) |
(1,366) |
(90,597) |
Net assets |
32,949 |
12,457 |
1,420 |
46,826 |
Investment in joint ventures non segmental |
|
|
|
1,805 |
Net assets as per balance sheet |
|
|
|
48,631 |
Major customers: Customer A |
– |
14,543 |
– |
14,543 |
This customer is for mining revenue in South Africa.
Geographic analysis |
United
Kingdom
£’000 |
South
Africa
£’000 |
2016
Total
£’000 |
Revenue |
8,025 |
21,679 |
29,704 |
Operating profit/(loss) |
3,441 |
(595) |
2,846 |
Non-current assets excluding investments |
111,117 |
8,517 |
119,634 |
Total net assets |
43,916 |
4,715 |
48,631 |
Capital expenditure |
164 |
2,858 |
3,022 |
BUSINESS ANALYSIS |
LAP
£000 |
BISICHI
£000 |
DRAGON
£000 |
2015
TOTAL
£000 |
Rental income |
6,129 |
1,014 |
187 |
7,330 |
Management income from third party properties |
696 |
– |
– |
696 |
Mining |
– |
24,640 |
– |
24,640 |
Group Revenue |
6,825 |
25,654 |
187 |
32,666 |
Direct property costs |
(1,530) |
(110) |
(13) |
(1,653) |
Direct mining costs |
– |
(19,177) |
– |
(19,177) |
Overheads |
(3,301) |
(4,651) |
(67) |
(8,019) |
Exchange losses |
– |
(497) |
– |
(497) |
Depreciation |
(39) |
(1,284) |
(6) |
(1,329) |
Operating profit/(loss) before listed investments
held for trading |
1,955 |
(65) |
101 |
1,991 |
Listed investments held for trading |
1 |
– |
2 |
3 |
Operating profit/(loss) |
1,956 |
(65) |
103 |
1,994 |
Finance income |
16 |
107 |
– |
123 |
Finance expenses |
(3,714) |
(473) |
(34) |
(4,221) |
Debenture break costs |
(158) |
– |
– |
(158) |
Result before valuation movements |
(1,900) |
(431) |
69 |
(2,262) |
Other segment items |
|
|
|
|
Net (decrease)/increase on revaluation of
investment properties |
(368) |
225 |
(42) |
(185) |
Decrease in value of other investments |
– |
(11) |
– |
(11) |
Net decrease on revaluation of investments held
for trading |
(1) |
– |
– |
(1) |
Loss on sale of investment property |
– |
– |
(32) |
(32) |
Adjustment to interest rate derivative |
69 |
– |
15 |
84 |
Share of (loss)/profit of joint ventures, net of
tax |
(67) |
138 |
– |
71 |
Loss on reclassification of asset as held for
sale |
(138) |
(138) |
– |
(276) |
Revaluation and other movements |
(505) |
214 |
(59) |
(350) |
Profit from discontinued operations |
519 |
– |
– |
519 |
(Loss)/profit for the year before
taxation |
(1,886) |
(217) |
10 |
(2,093) |
Segment assets |
|
|
|
|
- Non – current assets – property |
93,510 |
12,994 |
2,668 |
109,172 |
- Non – current assets – plant and equipment |
148 |
5,374 |
30 |
5,552 |
- Cash and cash equivalents |
3,192 |
1,608 |
9 |
4,809 |
- Non – current assets – other |
1,995 |
14 |
– |
2,009 |
- Non – current assets – deferred tax asset |
2,390 |
– |
– |
2,390 |
- Current assets – others |
2,355 |
5,794 |
60 |
8,209 |
Total assets excluding investment in joint
ventures and assets held for sale |
103,590 |
25,784 |
2,767 |
132,141 |
Segment liabilities |
|
|
|
|
Borrowings |
(57,815) |
(8,207) |
(1,196) |
(67,218) |
Current liabilities |
(6,390) |
(3,918) |
(199) |
(10,507) |
Non-current liabilities |
(5,177) |
(3,043) |
(104) |
(8,324) |
Total liabilities |
(69,382) |
(15,168) |
(1,499) |
(86,049) |
Net assets |
34,208 |
10,616 |
1,268 |
46,092 |
Investment in joint ventures non segmental |
– |
– |
– |
1,225 |
Assets held for sale |
– |
– |
– |
2,335 |
Net assets as per balance sheet |
– |
– |
– |
49,652 |
Major customers: Customer A |
– |
14,126 |
– |
14,126 |
This customer is for mining revenue in South Africa.
Geographic analysis |
United
Kingdom
£’000 |
South
Africa
£’000 |
2015
Total
£’000 |
Revenue |
8,058 |
24,608 |
32,666 |
Operating profit/(loss) |
2,779 |
(785) |
1,994 |
Non–current assets excluding investments |
111,759 |
5,355 |
117,114 |
Total net assets |
46,293 |
3,359 |
49,652 |
Capital expenditure |
1,349 |
1,990 |
3,339 |
Group revenue is external to the Group and the directors
consider that inter segmental revenues are not material. Revenue
includes contingent rents of £0.2 million (2015: £0.3 million).
2. Loss before taxation
|
2016
£’000 |
2015
£’000 |
Loss before taxation is stated after
charging/(crediting): |
|
|
Staff costs (see note 29) |
7,173 |
7,219 |
Depreciation on tangible fixed assets - owned
assets |
1,818 |
1,329 |
Operating lease rentals - land and buildings |
442 |
422 |
Exchange (gain)/loss |
(449) |
497 |
Profit on disposal of motor vehicles and office
equipment |
(32) |
– |
Amounts payable to the auditor in respect of both
audit and non-audit services |
|
|
Audit services |
|
|
Statutory - Company and consolidation |
88 |
115 |
Subsidiaries - audited by RSM |
20 |
22 |
Subsidiaries - audited by other auditors |
50 |
39 |
Further assurance services |
4 |
13 |
Other services |
32 |
2 |
|
194 |
191 |
Staff costs are included in overheads.
Gain on revaluation of investment properties
|
2016
£’000 |
2015
£’000 |
Investment surplus/(deficit) |
549 |
(181) |
Loss on valuation movement in respect of head
lease payments |
(17) |
(4) |
|
532 |
(185) |
3. Listed investments held for trading
|
2016
£’000 |
2015
£’000 |
Dealing loss |
– |
(6) |
Dividends receivable |
2 |
9 |
Net profit from listed investments |
2 |
3 |
4. Directors’ emoluments
|
2016
£’000 |
2015
£’000 |
Emoluments |
988 |
1,199 |
Defined contribution pension scheme
contributions |
45 |
73 |
|
1,033 |
1,272 |
Sir Michael Heller received
£75,000 (2015: £75,000) as a Director of Bisichi Mining PLC.
Details of directors’ emoluments and share options are set out
in the remuneration report.
5. Finance income and expenses
|
2016
£’000 |
2015
£’000 |
Finance income |
144 |
123 |
Finance expenses |
|
|
Interest on bank loans and overdrafts |
(2,243) |
(2,258) |
Unwinding of discount (Bisichi) |
(78) |
(79) |
Other loans |
(1,420) |
(1,359) |
Interest on derivatives |
(302) |
(295) |
Interest on obligations under finance leases |
(249) |
(230) |
Total finance expenses |
(4,292) |
(4,221) |
|
(4,148) |
(4,098) |
6. Income tax
|
2016
£’000 |
2015
£’000 |
Current tax |
|
|
Corporation tax on profit of the period |
73 |
10 |
Corporation tax on profit of previous periods |
– |
(20) |
Total current tax |
73 |
(10) |
Deferred tax |
|
|
Origination of timing differences |
874 |
864 |
Revaluation of investment properties |
472 |
(1,035) |
Accelerated capital allowances |
(48) |
(97) |
Fair value of interest derivatives |
(40) |
22 |
Adjustment in respect of prior years |
(156) |
209 |
Total deferred tax (notes 24 and 25) |
1,102 |
(37) |
Tax on profit on ordinary activities |
1,175 |
(47) |
The 2016 deferred tax recognised in income of £1,102,000
includes a credit of £168,000 arising in the Bisichi Group on the
correction of an error in the calculation of deferred tax in 2015
related to the accounting of a deferred tax liability incorrectly
recognised in respect of management fees. The Group has adjusted
the effect of this error in its 2016 financial statements by
reducing the tax charge for the year by £168,000 and reducing the
associated deferred tax liability as it is not considered to be
material to the current or prior year financial statements.
Factors affecting tax charge/(credit) 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 20 per cent
(2015: 20.25 per cent). The differences are explained below:
|
2016
£’000 |
2015
£’000 |
Loss for the year before taxation |
(974) |
(2,093) |
Taxation at 20 per cent (2015: 20.25 per
cent) |
(195) |
(424) |
|
|
|
Effects of: |
|
|
Other differences |
1,306 |
(607) |
Adjustment in respect of prior years |
(157) |
189 |
Deferred tax rate adjustment |
221 |
795 |
Income tax charge/(credit) for the year |
1,175 |
(47) |
The main component of other differences in the reconciliation
relates to capital gains of £0.8 million (2015: losses £1.1
million) and indexation allowances of £nil (2015: (£0.1 million)),
and others £0.5 million (2015: £0.3 million).
Analysis of United Kingdom and
overseas tax:
United Kingdom tax included in
above:
|
2016
£’000 |
2015
£’000 |
Corporation tax |
13 |
10 |
Adjustment in respect of prior years |
– |
(23) |
Current tax |
13 |
(13) |
Deferred tax |
1,241 |
(153) |
|
1,254 |
(166) |
Overseas tax included above:
|
2016
£’000 |
2015
£’000 |
Corporation tax |
60 |
– |
Adjustment in respect of prior years |
– |
3 |
Current tax |
60 |
3 |
Deferred tax |
(139) |
116 |
|
(79) |
119 |
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. At present it is not envisaged that any tax
will become payable in the foreseeable future.
The Finance Bill 2016 was substantively enacted on 7 September 2016. This includes a reduction in
the rate of Corporation tax from 19% effective 1 April 2017 to 17% from 1
April 2020.
7. Discontinued operations
As part of the Group’s strategy to focus on core assets, the
Group disposed of King Edward Court,
Windsor in 2013. The profits and
losses arising from this disposal were classified as discontinued
operations. Contracts for the sale of King Edward Court had been exchanged in 2013 and
completion took place in January
2014. Following the settlement of a dispute additional
proceeds of £414,000 were received by the Group in 2016.
8. Dividend
|
2016
Per share |
£’000 |
2015
Per share |
£’000 |
Dividends paid during the year relating to the
prior period |
0.16p |
136 |
0.156p |
133 |
Dividends to be paid: |
|
|
|
|
Proposed final dividend for the year |
0.165p |
141 |
0.16p |
136 |
9. (Loss)/profit per share and net assets per share
(Loss)/profit per share has been calculated as follows:
|
2016 |
2015 |
Loss for the year for the purposes of basic and
diluted profit per share (£’000) |
(2,357) |
(1,899) |
Weighted average number of ordinary shares in
issue for the purpose of basic profit per share (’000) |
85,107 |
84,951 |
Basic loss per share |
(2.77)p |
(2.24)p |
Weighted average number of ordinary shares in
issue for the purpose of diluted profit per share (’000) |
85,107 |
84,951 |
Fully diluted loss per share |
(2.77)p |
(2.24)p |
Weighted average number of shares in issue is calculated after
excluding treasury shares of 221,061 (2015: 734,816).
The loss for continuing operations was £2,357,000 (2015:
£2,418,000) and the profit for discontinued operations was £nil
(2015: £519,000).
Net assets per share have been calculated as follows:
|
2016 |
2015 |
Net assets (£’000) |
38,242 |
40,078 |
Shares in issue (’000) |
85,322 |
84,808 |
Basic net assets per share |
44.83p |
47.26p |
Net assets diluted (£’000) |
38,242 |
40,078 |
Shares in issue (’000) |
85,322 |
84,808 |
Diluted net assets per share |
44.83p |
47.26p |
10. Investment
properties
|
Total
£000 |
Freehold
£000 |
Leasehold
over 50
years
£000 |
Leasehold
under 50 years
£000 |
Cost or valuation at 1 January 2016 |
109,172 |
86,468 |
21,060 |
1,644 |
Additions in year |
160 |
160 |
– |
– |
Decrease in present value of head leases |
(17) |
– |
(15) |
(2) |
Increase/(decrease) on revaluation |
532 |
1,957 |
(1,425) |
– |
At 31 December 2016 |
109,847 |
88,585 |
19,620 |
1,642 |
|
|
|
|
|
Representing assets stated at: |
|
|
|
|
Valuation |
105,080 |
88,585 |
15,495 |
1,000 |
Present value of head leases |
4,767 |
– |
4,125 |
642 |
|
109,847 |
88,585 |
19,620 |
1,642 |
|
|
|
|
|
At 31 December 2016 |
109,847 |
88,585 |
19,620 |
1,642 |
At 31 December 2015 |
109,172 |
86,468 |
21,060 |
1,644 |
|
Total
£’000 |
Freehold
£’000 |
Leasehold
over
50 years
£’000 |
Leasehold
under
50 years
£’000 |
Cost or valuation at 1 January 2015 |
108,443 |
85,080 |
21,591 |
1,772 |
Acquisition of property |
960 |
960 |
- |
- |
Additions in year |
357 |
210 |
147 |
- |
Disposals |
(400) |
(400) |
- |
- |
Decrease in present value of head leases |
(3) |
- |
- |
(3) |
Increase/(decrease) on revaluation |
(185) |
618 |
(678) |
(125) |
At 31 December 2015 |
109,172 |
86,468 |
21,060 |
1,644 |
Representing assets stated at: |
|
|
|
|
Valuation |
104,388 |
86,468 |
16,920 |
1,000 |
Present value of head leases |
4,784 |
- |
4,140 |
644 |
|
109,172 |
86,468 |
21,060 |
1,644 |
|
|
|
|
|
At 31 December 2015 |
109,172 |
86,468 |
21,060 |
1,644 |
At 31 December 2014 |
108,443 |
85,080 |
21,591 |
1,772 |
The leasehold and freehold properties, excluding the present
value of head leases and directors’ valuations, were valued as at
31 December 2016 by professional
firms of chartered surveyors. The valuations were made at fair
value. The directors’ property valuations were made at fair
value.
|
2016
£’000 |
2015
£’000 |
Allsop LLP |
90,010 |
87,095 |
Carter Towler |
13,245 |
12,800 |
Directors’ valuations |
1,825 |
4,493 |
|
105,080 |
104,388 |
Add: present value of headleases |
4,767 |
4,784 |
|
109,847 |
109,172 |
The historical cost of investment properties, including total
capitalised interest of £1,161,000 (2015: £1,161,000) was as
follows:
|
|
2016 |
|
|
2015 |
|
|
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 |
72,551 |
17,653 |
1,939 |
71,601 |
17,506 |
1,939 |
Acquisition of property |
– |
– |
– |
960 |
– |
– |
Additions |
160 |
– |
– |
210 |
147 |
– |
Disposals |
– |
– |
– |
(220) |
– |
– |
Cost at 31 December |
72,711 |
17,653 |
1,939 |
72,551 |
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 inputs to valuations are
not based on observable market data.
Class of property
Level 3 |
Carrying /
Fair value
2016
£’000 |
Carrying/ Fair value 2015
£’000 |
Valuation
technique |
Key unobservable
inputs |
Range (weighted average)
2016 |
Range (weighted average) 2015 |
Freehold – external valuation |
86,760 |
81,975 |
Income capitalisation |
Estimated Rental
Value
Per sq ft p.a
Equivalent Yield |
£5 – £37
(£19)
5% – 14%
(8%) |
£5 – £37
(£18)
5% – 15%
(8%) |
Leasehold over 50 years –
external valuation |
15,495 |
16,920 |
Income capitalisation |
Estimated Rental
Value
Per sq ft p.a
Equivalent Yield |
£5 – £11
(£9)
7% – 18%
(11%) |
£5 – £11
(£10)
7% –18%
(11%) |
Leasehold under 50 years – external valuation |
1,000 |
1,000 |
Income capitalisation |
Estimated Rental
Value
Per sq ft p.a
Equivalent Yield |
£3 – £5
(£4)
18% – 23%
(19%) |
£4 – £5
(£4)
23% – 26%
(25%) |
Freehold – Directors’ valuation |
1,825 |
4,493 |
Income capitalisation |
Estimated Rental
Value
Per sq ft p.a
Equivalent Yield |
£5 – £5
(£5)
6% – 6%
(6%) |
£5 – £24
(£16)
6% – 6%
(6%) |
At 31 December |
105,080 |
104,388 |
|
|
|
|
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) |
|
2016
£’000 |
2015
£’000 |
2016
£’000 |
2015
£’000 |
Freehold – external valuation |
8,671/(8,671) |
8,064/(8,064) |
3,585/(3,298) |
3,288/(3,027) |
Leasehold over 50 years – external
valuation |
1,545/(1,545) |
1,692/(1,692) |
394/(375) |
440/(418) |
Leasehold under 50 years – external
valuation |
100/(100) |
100/(100) |
13/(13) |
10/(10) |
Freehold – Directors’ valuation |
183/(183) |
443/(443) |
78/(72) |
183/(169) |
11. Mining reserves, plant
and equipment
|
Total
£’000 |
Mining
reserves
£’000 |
Mining
equipment
£’000 |
Office
equipment
and motor
vehicles
£’000 |
Cost at 1 January 2016 |
17,188 |
995 |
15,453 |
740 |
Exchange adjustment |
6,273 |
349 |
5,858 |
66 |
Additions |
2,862 |
– |
2,814 |
48 |
Disposals |
(506) |
– |
(401) |
(105) |
At 31 December 2016 |
25,817 |
1,344 |
23,724 |
749 |
Accumulated depreciation at 1 January 2016 |
11,636 |
949 |
10,201 |
486 |
Exchange adjustment |
4,202 |
336 |
3,824 |
42 |
Charge for the year |
1,818 |
2 |
1,746 |
70 |
Disposals in year |
(492) |
– |
(401) |
(91) |
Accumulated depreciation at 31 December
2016 |
17,164 |
1,287 |
15,370 |
507 |
Net book value at 31 December 2016 |
8,653 |
57 |
8,354 |
242 |
|
|
|
|
|
Cost at 1 January 2015 |
19,536 |
1,266 |
17,539 |
731 |
Exchange adjustment |
(4,361) |
(271) |
(4,048) |
(42) |
Additions |
2,022 |
– |
1,964 |
58 |
Disposals |
(9) |
– |
(2) |
(7) |
Cost at 31 December 2015 |
17,188 |
995 |
15,453 |
740 |
Accumulated depreciation at 1 January 2015 |
13,279 |
1,149 |
11,705 |
425 |
Exchange adjustment |
(2,963) |
(256) |
(2,679) |
(28) |
Charge for the year |
1,329 |
56 |
1,177 |
96 |
Disposals |
(9) |
– |
(2) |
(7) |
Accumulated depreciation at 31 December 2015 |
11,636 |
949 |
10,201 |
486 |
Net book value at 31 December 2015 |
5,552 |
46 |
5,252 |
254 |
12. Investment in joint
venture
Shares in joint venture:
|
2016
£’000 |
2015
£’000 |
At 1 January |
325 |
3,434 |
Share of profit after tax (Langney) |
– |
71 |
Dividends received (Langney) |
– |
(210) |
Loss on reclassification of asset held for sale
(Langney) |
– |
(276) |
Exchange adjustment |
130 |
(359) |
Transfer to assets held for sale (Langney) (note
14) |
– |
(2,335) |
At 31 December |
455 |
325 |
Results of joint venture:
|
Ezimbokodweni
49%
£’000 |
2016
£’000 |
2015
£’000 |
Turnover |
– |
– |
344 |
Loss before tax |
– |
– |
(204) |
Loss after taxation |
– |
– |
(204) |
Balance sheet |
|
|
|
Non-current assets |
1,346 |
1,346 |
5,467 |
Current assets |
3 |
3 |
206 |
Current liabilities |
(1,349) |
(1,349) |
(989) |
Non-current liabilities |
– |
– |
(2,349) |
Share of net assets at 31 December |
– |
– |
2,335 |
Reconciliation to amounts included in the financial
statements:
Group share of: |
Ezimbokodweni
49.00%
£’000 |
Total
2016
£’000 |
Total
2015
£’000 |
Amount invested in excess of net assets |
455 |
455 |
325 |
Shares in joint venture |
455 |
455 |
325 |
Ezimbokodweni Mining (Pty) Limited (Ezimbokodweni) – unlisted
coal production company. The Group owns, via Bisichi Mining PLC,
49% of the issued share capital. The company is incorporated in
South Africa and its registered
address is Samora Machel Street,
Bethal Road, Middelburg, Mpumalanga, 1050. It has issued share
capital of 100 (2015: 100) ordinary shares of ZAR1 each. No dividends were received during the
period. Included in the carrying value of the net investment in the
joint venture assets in note 13 is a loan to Ezimbokodweni of
£1,350,000 (2015: £900,000) and an equity investment of £455,000
(2015: £325,000). The loan bears interest at the South African
prime overdraft rate plus 1.5%. The loan is unsecured and repayable
on demand.
Langney Shopping Centre Unit Trust (Langney) – Prior to
11 March 2016, the Group owned 25% of
the units of Langney Shopping Centre Unit Trust, an unlisted
property unit trust incorporated in Jersey. 25% of the units in the
trust were held by London &
Associated Properties PLC and Bisichi Mining PLC equally and 75%
were held by Columbus UK GP limited, a partner acting on behalf of
Columbus UK Real Estate Fund. On the 11
March 2016, the Group disposed of its investment in Langney
Shopping Centre Unit Trust. The net proceeds from the sale were
£2,335,000 which includes £60,000 dividends repaid post year end.
At 31 December 2015, the investment
was transferred from investment in joint ventures to assets held
for sale in the balance sheet. At year end, the share of the net
assets of the trust held by the Group were £nil (2015: £2,335,000)
which includes a loss on the reclassification of the asset to held
for sale in the amount of £nil (2015: £276,000).
13. Loan to joint
venture
|
2016
Joint
ventures
assets
£’000 |
2015
Joint
ventures
assets
£’000 |
Loan to Ezimbokodweni Mining (Pty) Limited |
|
|
At 1 January |
900 |
1,040 |
Exchange adjustment |
336 |
(235) |
Additions – interest |
114 |
95 |
At 31 December |
1,350 |
900 |
14. ASSETS HELD FOR SALE
|
2016
£’000 |
2015
£’000 |
Investment in Langney Shopping Centre Unit
Trust |
|
|
At 1 January |
2,335 |
– |
Transfer from investment in joint venture (note
12) |
– |
2,335 |
Disposal |
(2,335) |
– |
At 31 December |
– |
2,335 |
On the 11 March 2016, the Group
disposed of its investment in Langney Shopping Centre Unit Trust,
an unlisted property unit trust incorporated in Jersey. The Group
owned 25% of the units of the trust. The net proceeds from the sale
were £2,335,000 (including dividend). At year end, the Group’s
share of the net assets of the trust was £nil (2015:
£2,335,000).
15. Subsidiary companies
In accordance with Section 409 of the Companies Act 2006 a full
list of subsidiaries, the principal activity, the country of
incorporation and the percentage of equity owned, as at
31 December 2016 is disclosed
below:
Entity |
Activity |
Percentage of share capital |
Registered address |
Country of
incorporation |
Analytical Investments Limited |
Dormant |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Analytical Portfolios Limited |
Dormant |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Analytical Properties Holdings Limited |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Analytical Properties Limited |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Analytical Ventures Limited |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
24 Bruton Place Limited |
Dormant |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
24 BPL (Harrogate) Limited |
Investment |
88% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
24 BPL (Harrogate ) Two Limited |
Investment |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Brixton Village Limited |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Market Row Limited |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Newincco 1243 Limited |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Newincco 1244 Limited |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Newincco 1245 Limited |
Property Management Services |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Newincco 1299 Limited |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Newincco 1300 Limited |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
LAP Ocean Holdings Limited |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
LAP Ocean Two Limited |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
London & Associated Limited |
Dormant |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
London & Associated (Rugeley) Limited |
Dormant |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
London & Associated Securities Limited |
Dormant |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
London & Associated Management Services
Limited |
Property Management Services |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
London & African Investments Limited |
Dormant |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Orchard Chambers Residential Limited |
Dormant |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Bisichi Mining PLC (note D) |
Coal mining |
41.52% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Mineral Products Limited (note A)(note D) |
Share dealing |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Bisichi (Properties) Limited (note A)(note D) |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Bisichi Mining (Exploration) Limited (note A)(note
D) |
Holding company |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Black Wattle Colliery (Pty) Limited (note A)(note
D) |
Coal mining |
62.5% |
Samora Machel Street, Bethal Road, Middelburg,
Mpumalanga, 1050 |
South Africa |
Bisichi Coal Mining (Pty) Limited (note A)(note
D) |
Coal mining |
100% |
Samora Machel Street, Bethal Road, Middelburg,
Mpumalanga, 1050 |
South Africa |
Urban First (Northampton) Limited (note A)(note
D) |
Dormant |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Bisichi Trustee Limited (note A)(note D) |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Bisichi Mining Management Services Limited (note
A)(note D) |
Dormant |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Ninghi Marketing Limited (note A)(note D) |
Dormant |
90.1% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Bisichi Northampton Limited (note A)(note D) |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Amandla Ehtu Mineral Resource Development (Pty)
Limited (note A)(note D) |
Dormant |
70% |
Samora Machel Street, Bethal Road, Middelburg,
Mpumalanga, 1050 |
South Africa |
Ezimbokodweni Mining (Pty) Limited (note A)(note
D) |
Dormant |
49% |
Samora Machel Street, Bethal Road, Middelburg,
Mpumalanga, 1050 |
South Africa |
Black Wattle Klipfontein (Pty) Limited (note
A)(note D) |
Coal mining |
62.5% |
Samora Machel Street, Bethal Road, Middelburg,
Mpumalanga, 1050 |
South Africa |
Dragon Retail Properties Limited (note B)(note
D) |
Property |
50% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Newincco 1338 Limited (note C) |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Details on the non–controlling interest in subsidiaries are
shown under note 27.
Note A: these companies are owned by Bisichi and the equity
shareholdings disclosed relate to that company.
Note B: this entity is a joint venture owned 50% by LAP and 50%
by Bisichi.
Note C: this company is owned by Dragon and the equity
shareholdings disclosed relate to that company.
Note D: Bisichi and Dragon and their subsidiaries are included
in the consolidated financial statements in accordance with IFRS
10.
16. Inventories
|
2016
£’000 |
2015
£’000 |
Coal |
|
|
Washed |
1,139 |
778 |
Run of mine |
83 |
110 |
Work in progress |
458 |
122 |
Other |
41 |
39 |
|
1,721 |
1,049 |
17. Held to maturity
investments AND OTHER INVESTMENTS
Held to maturity investments:
|
2016
Total
£000 |
Unlisted
shares
£000 |
Loan
stock
£000 |
2015
Total
£000 |
Unlisted
shares
£000 |
Loan
stock
£000 |
At 1 January |
1,995 |
1 |
1,994 |
2,196 |
1 |
2,195 |
Repayments |
(121) |
– |
(121) |
(201) |
– |
(201) |
At 31 December |
1,874 |
1 |
1,873 |
1,995 |
1 |
1,994 |
The Group owns a 6.95% interest in the equity and loans of HRGT
Shopping Centres LP (HRGT), a limited partnership set up in
England to acquire and own 3
shopping centres in Dunfermline, Kings
Lynn and Loughborough.
92.10% of the equity and loans are owned by Oaktree Capital
Management and 0.95% by Gooch Cunliffe Whale LLP. London & Associated Management Services
Limited has a management contract to manage the properties on
behalf of HRGT.
Other investments:
|
2016
£’000 |
2015
£’000 |
Net book and market value of investments listed on
overseas stock exchange |
32 |
14 |
|
32 |
14 |
18. Trade and other
receivables
|
2016
£’000 |
2015
£’000 |
Trade receivables |
4,701 |
4,129 |
Other receivables |
1,010 |
1,385 |
Prepayments and accrued income |
1,350 |
988 |
|
7,061 |
6,502 |
The directors consider that the carrying amount of trade and
other receivables approximates to their fair value.
19. Investments available
for sale and held for trading
|
2016
£’000 |
2015
£’000 |
Market bid value of the listed investment
portfolio - available for sale |
781 |
594 |
Market bid value of the listed investment
portfolio - held for trading |
19 |
20 |
Unrealised gain/(loss) of market value over
cost |
45 |
(146) |
Listed investment portfolio at cost |
755 |
760 |
Investments are listed on the London Stock Exchange with the
exception of £60,000 (2015: £26,000) listed outside Great Britain.
The directors have reviewed the individual investments for
impairment and do not consider the investments which are below cost
to be impaired.
20 Trade and other payables
|
2016
£’000 |
2015
£’000 |
Trade payables |
3,618 |
2,289 |
Other taxation and social security costs |
739 |
661 |
Other payables |
2,815 |
2,687 |
Accruals and deferred income |
5,770 |
4,860 |
|
12,942 |
10,497 |
The directors consider that the carrying amount of trade and
other payables approximates to their fair value.
21. Borrowings
|
2016
£’000
Current |
2016
£’000
Non-current |
2015
£’000
Current |
2015
£’000
Non-current |
Other loans (Bisichi) |
24 |
– |
33 |
– |
£1.25 million term bank loan (secured) repayable
by 2020 (Dragon)* |
– |
1,207 |
– |
1,196 |
£3.75 million first mortgage debenture stock 2018
at 11.6 per cent |
750 |
3,000 |
– |
3,750 |
Bank overdrafts (secured) (Bisichi) |
3,334 |
– |
2,234 |
– |
Bank loan (secured)(Bisichi) |
– |
66 |
– |
13 |
£10 million first mortgage debenture stock 2022 at
8.109 per cent* |
– |
9,905 |
– |
9,888 |
£5.876 million term bank loan (secured) repayable
by 2019 (Bisichi)* |
– |
5,810 |
– |
5,927 |
£34.897 million term bank loan (secured) repayable
by 2019* |
– |
34,468 |
– |
34,296 |
£10.105 million term bank loan (secured) repayable
by 2019 at 9.5 per cent* |
– |
9,945 |
– |
9,881 |
|
4,108 |
64,401 |
2,267 |
64,951 |
Borrowings analysis by origin:
|
2016
£’000 |
2015
£’000 |
United Kingdom |
65,085 |
64,938 |
South Africa |
3,424 |
2,280 |
|
68,509 |
67,218 |
* The £10 million debenture and bank loans are shown after
deduction of un-amortised issue costs.
Interest payable on the term bank loans is variable being based
upon the London inter–bank offered
rate (LIBOR) plus margin.
In 2015, the Group repaid early £1.25 million of the £5 million
first mortgage debenture stock 2018, at an additional cost of
£158,000.
First Mortgage Debenture Stocks August
2018 and 2022 and the £34.897 million and £10.105 million
term bank loans repayable in July
2019 are secured by way of a charge on specific freehold and
leasehold properties which are included in the financial statements
at a value of £87.38 million. In addition, £0.53 million of cash
deposits are charged as security to debenture stocks. The £34.897
million bank loan has an interest cost of 2 per cent above LIBOR.
An interest rate swap and cap agreements have been entered into as
detailed in note 23.
The Bisichi United Kingdom bank loans and overdraft are secured
by way of a first charge over the investment properties in the UK
which are included in the financial statements at a value of £13.2
million. During the year, Bisichi breached a loan to value covenant
on the bank loan. Bisichi made a £123,300 payment against the loan
and remedied the covenant breach, leaving a loan due of £5.876
million. The interest cost of the bank loan is 2.35 per cent above
LIBOR.
The Bisichi South African bank loans are secured by way of a
first charge over specific pieces of mining equipment, inventory
and the debtors of the relevant company which holds the loan which
are included in the financial statements at a value of £6.057
million.
The bank loan of £1.25 million (Dragon) which is repayable in
November 2020 is secured by way of a
first charge on specific freehold property and which is included in
the financial statements at a value of £2.58 million. The interest
cost of the loan is 2 per cent above LIBOR.
The Group’s objectives when managing capital are:
– To safeguard the Group’s ability to continue as a going
concern, so that it may provide returns for shareholders and
benefits for other stakeholders; and
– To provide adequate returns to shareholders by ensuring
returns are commensurate with the risk.
22. Provisions
|
2016
£’000 |
2015
£’000 |
At 1 January |
847 |
930 |
Exchange adjustment |
311 |
(162) |
Unwinding of discount |
78 |
79 |
At 31 December |
1,236 |
847 |
The above provision relates to mine rehabilitation costs in
Bisichi.
23. Financial
instruments
Total financial assets and liabilities
The Group’s financial assets and liabilities and their fair
values are as follows:
|
Fair
value
£’000 |
2016
Carrying
value
£’000 |
Fair
value
£’000 |
2015
Carrying
value
£’000 |
Cash and cash equivalents |
6,265 |
6,265 |
4,809 |
4,809 |
Assets held for sale |
– |
– |
2,335 |
2,335 |
Investments held to maturity |
1,874 |
1,874 |
1,995 |
1,995 |
Loan to joint venture |
1,350 |
1,350 |
900 |
900 |
Other investments |
32 |
32 |
14 |
14 |
Investments held for trading |
19 |
19 |
20 |
20 |
Available for sale investments |
781 |
781 |
594 |
594 |
Derivative assets |
4 |
4 |
15 |
15 |
Other assets |
5,711 |
5,711 |
5,514 |
5,514 |
Derivative liabilities |
(793) |
(793) |
(587) |
(587) |
Bank overdrafts |
(3,334) |
(3,334) |
(2,234) |
(2,234) |
Bank loans |
(52,218) |
(51,520) |
(52,298) |
(51,346) |
Present value of head leases on properties |
(4,767) |
(4,767) |
(4,784) |
(4,784) |
Other liabilities |
(12,942) |
(12,942) |
(10,497) |
(10,497) |
Total financial liabilities before
debentures |
(58,018) |
(57,320) |
(54,204) |
(53,252) |
Fair value of debenture stocks
Fair value of the Group’s debenture liabilities:
|
Book
value
£’000 |
Fair
value
£’000 |
2016
Fair value
adjustment
£’000 |
2015
Fair value
adjustment
£’000 |
Debenture stocks |
(13,750) |
(17,276) |
(3,526) |
(3,575) |
Tax at 20 per cent (2015: 20 per cent) |
– |
– |
705 |
715 |
Post tax fair value adjustment |
– |
– |
(2,821) |
(2,860) |
Post tax fair value adjustment – basic pence per
share |
– |
– |
(3.3)p |
(3.3)p |
There is no material difference in respect of other financial
liabilities or any financial assets.
The fair values were calculated by the directors as at
31 December 2016 and reflect the
replacement value of the financial instruments used to manage the
Group’s exposure to adverse rate movements.
The fair values of the debentures are based on the net present
value at the relevant gilt interest rate of the future payments of
interest on the debentures. The bank loans and overdrafts are at
variable rates and there is no material difference between book
values and fair values.
Investments held for trading and available for sale fall under
level 1 of the fair value hierarchy into which fair value
measurements are recognised in accordance with the levels set out
in IFRS 7. Held to maturity investments are held at cost and other
investments are held at fair value. The directors are of the
opinion that the difference in value between cost and fair value of
other investments is not significant or material. The comparative
figures for 2015 fall under the same category of financial
instrument as 2016.
The carrying amount of short term (less than 12 months) trade
receivable and other liabilities approximates its fair values. The
fair value of non-current borrowings in note 21 approximates its
carrying value and was determined under level 2 of the fair value
hierarchy and is estimated by discounting the future contractual
cash flows at the current market interest rates for UK borrowings
and for the South African overdraft facility. The fair value of the
finance lease liabilities in note 31 approximates its carrying
value was determined under level 2 of the fair value hierarchy and
is estimated by discounting the future contractual cash flows at
the current market interest rates.
Treasury policy
The Group enters into derivative transactions such as interest
rate swaps and forward exchange contracts in order to help manage
the financial risks arising from the Group’s activities. The main
risks arising from the Group’s financing structure are interest
rate risk, liquidity risk and market price risk, credit risk,
commodity price risk and foreign exchange risk. The policies for
managing each of these risks and the principal effects of these
policies on the results are summarised below.
Sensitivity analysis
LAP and Dragon have variable interest term debts which are
covered by derivatives. Additionally, LAP has variable interest
term debt covered by interest caps. At 31
December 2016, with other variables unchanged, a 1% increase
in interest rates would change the profit/loss for the year by
£173,000 (2015: £173,000). Bisichi has variable loans and a 1%
increase in interest rates would change the profit/loss for the
year by £56,000 (2015: £67,000).
Interest rate risk
Treasury activities take place under procedures and policies
approved and monitored by the Board to minimise the financial risk
faced by the Group. The £34.897 million bank loan and Bisichi
United Kingdom bank loans and overdraft are secured by way of a
first charge on certain fixed assets. The rates of interest vary
based on LIBOR in the UK.
The £10.105 million term bank loan is secured by way of a second
charge on certain fixed assets. This loan is based on a fixed
interest rate.
The Bisichi South African bank loans are secured by way of a
first charge over specific pieces of mining equipment, inventory
and the debtors of the relevant company which holds the loan. The
rates of interest vary based on PRIME in South Africa.
The £1.25 million bank loan (Dragon) is secured by way of a
first charge on specific freehold property. The rate of interest
varies based on LIBOR in the UK.
Liquidity risk
The Group’s policy is to minimise refinancing risk by balancing
its exposure to interest risk and to refinancing risk. In effect
the Group seeks to borrow for as long as possible at the lowest
acceptable cost. Efficient treasury management and strict credit
control minimise the costs and risks associated with this policy
which ensures that funds are available to meet commitments as they
fall due. Cash and cash equivalents earn interest at rates based on
LIBOR in the UK. These facilities are considered adequate to meet
the Group’s anticipated cash flow requirements for the foreseeable
future.
In South Africa, an increase in
the structured trade facility from R60 million (South African Rand)
to R80 million was signed by Black Wattle Colliery (Pty) Limited
with Absa Bank Limited, a South African subsidiary of Barclays Bank
PLC. The facility is renewable annually at 30 June and is secured
against inventory, debtors and cash that are held by Black Wattle
Colliery (Pty) Limited.
The table below analyses the Group’s financial liabilities
(excluding interest rate derivatives) into maturity Groupings and
also provides details of the liabilities that bear interest at
fixed, floating and non–interest bearing rates.
|
2016
Total
£’000 |
Less than
1 year
£’000 |
2-5 years
£’000 |
Over
5 years
£’000 |
Bank overdrafts (floating) |
3,334 |
3,334 |
– |
– |
Debentures (fixed) |
13,655 |
750 |
3,000 |
9,905 |
Bank loans (fixed) |
9,945 |
– |
9,945 |
– |
Bank loans (floating)* |
41,575 |
24 |
41,551 |
– |
Trade and other payables (non–interest) |
12,942 |
12,942 |
– |
– |
|
81,451 |
17,050 |
54,496 |
9,905 |
|
2015
Total
£’000 |
Less than
1 year
£’000 |
2-5 years
£’000 |
Over
5 years
£’000 |
Bank overdrafts (floating) |
2,234 |
2,234 |
– |
– |
Debentures (fixed) |
13,638 |
– |
3,750 |
9,888 |
Bank loans (fixed) |
9,881 |
– |
9,881 |
– |
Bank loans (floating)* |
41,465 |
33 |
41,432 |
– |
Trade and other payables (non–interest) |
11,506 |
10,636 |
737 |
133 |
|
78,724 |
12,903 |
55,800 |
10,021 |
The Group would normally expect that sufficient cash is
generated in the operating cycle to meet the contractual cash flows
as disclosed above through effective cash management.
*Certain bank loans are fully hedged with appropriate interest
derivatives. Details of all hedges are shown below.
Market price risk
The Group is exposed to market price risk through interest rate
and currency fluctuations.
Credit risk
At the balance sheet date there were no significant
concentrations of credit risk. The maximum exposure to credit risk
is represented by the carrying amount of each financial asset in
the balance sheet. The Group only deposits surplus cash with
well–established financial institutions of high quality credit
standing.
Foreign exchange risk
Only Bisichi is subject to this risk. All trading is undertaken
in the local currencies except for certain export sales that
commenced during 2016 which are invoiced in US Dollars. It is not
the Bisichi Group’s policy to obtain forward contracts to mitigate
foreign exchange risk on these contracts as payment terms are
within 15 days of invoice or earlier. Funding is also in local
currencies other than inter-company investments and loans and it is
also not the Bisichi Group’s policy to obtain forward contracts to
mitigate foreign exchange risk on these amounts. During 2016 and
2015 the Bisichi Group did not hedge its exposure of foreign
investments held in foreign currencies.
The Bisichi directors consider there to be no significant risk
from exchange rate movements of foreign currencies against the
functional currencies of the reporting companies within the Bisichi
Group, excluding inter-company balances. The principle currency
risk to which the Bisichi Group is exposed in regard to
inter-company balances is the exchange rate between Pounds sterling
and South African Rand. It arises as a result of the retranslation
of Rand denominated inter-company trade receivable balances held
within the UK which are payable by South African Rand functional
currency subsidiaries.
Based on the Bisichi Group’s net financial assets and
liabilities as at 31 December 2016, a
25% strengthening of Sterling against the South African Rand, with
all other variables held constant, would decrease the Bisichi
Group’s profit after taxation by £435,000 (2015: £344,000). A 25%
weakening of Sterling against the South African Rand, with all
other variables held constant would increase the Bisichi Group’s
profit after taxation by £725,000 (2015: £573,000).
The 25% sensitivity has been determined based on the average
historic volatility of the exchange rate for 2015 and 2016.
The table below shows the Bisichi currency profiles of cash and
cash equivalents:
|
2016
£’000 |
2015
£’000 |
Sterling |
1,717 |
1,135 |
South African Rand |
725 |
470 |
US Dollar |
2 |
3 |
|
2,444 |
1,608 |
Cash and cash equivalents earn interest at rates based on LIBOR
in Sterling and Prime in Rand.
The tables below shows the Bisichi currency profiles of net
monetary assets and liabilities by functional currency:
2016: |
UK
£’000 |
South Africa
£’000 |
Sterling |
(2,522) |
– |
South African Rand |
36 |
(2,262) |
US Dollar |
35 |
– |
|
(2,451) |
(2,262) |
2015: |
UK
£’000 |
South Africa
£’000 |
Sterling |
(3,221) |
– |
South African Rand |
89 |
(136) |
US Dollar |
13 |
– |
|
(3,119) |
(136) |
Borrowing facilities
At 31 December 2016 the Group was
within its bank borrowing facilities and was not in breach of any
of the covenants. Term loan repayments are as set out below.
Details of other financial liabilities are shown in Notes 20 and
21.
Interest rate and hedge profile
|
2016
£’000 |
2015
£’000 |
Fixed rate borrowings |
23,855 |
23,855 |
Floating rate borrowings |
|
|
– Subject to interest rate swap |
36,147 |
36,148 |
– Other borrowings |
9,300 |
8,280 |
|
69,302 |
68,283 |
Average fixed interest rate |
9.24% |
9.24% |
Weighted average swapped interest rate |
3.3% |
3.41% |
Weighted average cost of debt on overdrafts, bank
loans and debentures |
5.8% |
5.71% |
Average period for which borrowing rate is
fixed |
3.8 years |
4.8 years |
Average period for which borrowing rate is
swapped |
2.5 years |
3.5 years |
The Group’s floating rate debt bears interest based on LIBOR for
the term bank loans and bank base rate for the overdraft.
At 31 December 2016 the Group had
hedges totaling £34.897 million to cover the £34.9 million bank
loan. These consisted of a 5 year swap for £17.5 million, taken out
in July 2014 at 2.25% and a £17.5
million cap agreement taken out in July
2014 at 2.25% until 29 January
2016 and a swaption at 2.25% on the capped portion from
29 January 2016 to 1 July 2019. During the year the swaption was not
exercised and was replaced in January
2016 with a £17.397 million cap agreement to 1 July 2019.
At the year end the fair value liability in the accounts was
£793,000 (2015: £587,000) as valued by the hedge provider.
At 31 December 2016, Dragon had
hedges of £1.25 million to cover the £1.25 million bank loan. This
consists of a 5 year £1.25 million cap agreement taken out in
November 2015 at 2.5%. At the year
end, the fair value asset in the accounts was £4,000, as valued by
the hedge provider.
Fair value of financial instruments
Fair value estimation
The Group has adopted the amendment to IFRS 7 for financial
instruments that are measured in the balance sheet at fair value.
This requires the methods of fair value measurement to be
classified into a hierarchy based on the reliability of the
information used to determine the valuation, as follows:
– Quoted prices (unadjusted) in active markets for identical
assets or liabilities (level 1).
– Inputs other than quoted prices included within level 1 that
are observable for the asset or liability, either directly (that
is, as prices) or indirectly (that is, derived from prices)
(level 2).
– Inputs for the asset or liability that are not based on
observable market data (that is unobservable inputs) (level 3).
|
Level 1
£’000 |
Level 2
£’000 |
Level 3
£’000 |
Total
£’000 |
2016
Gain/(loss)
to income
statement
£’000 |
Financial assets |
|
|
|
|
|
Other financial assets held for trading and
available for sale |
|
|
|
|
|
Quoted equities |
832 |
– |
– |
832 |
13 |
Derivative financial instruments |
|
|
|
|
|
Interest rate swaps |
– |
4 |
– |
4 |
(11) |
Financial liabilities |
|
|
|
|
|
Derivative financial instruments |
|
|
|
|
|
Interest rate swaps |
– |
793 |
– |
793 |
(206) |
|
Level 1
£’000 |
Level 2
£’000 |
Level 3
£’000 |
Total
£’000 |
2015
Gain/(loss)
to income
statement
£’000 |
Financial assets |
|
|
|
|
|
Other financial assets held for trading and
available for sale |
|
|
|
|
|
Quoted equities |
614 |
– |
– |
614 |
(12) |
Derivative financial instruments |
|
|
|
|
|
Interest rate swaps |
– |
15 |
– |
15 |
– |
Financial liabilities |
|
|
|
|
|
Derivative financial instruments |
|
|
|
|
|
Interest rate swaps |
– |
587 |
– |
587 |
84 |
Capital structure
The Group sets the amount of capital in proportion to risk. It
ensures that the capital structure is commensurate to the economic
conditions and risk characteristics of the underlying assets. In
order to maintain or adjust the capital structure, the Group may
vary the amount of dividends paid to shareholders, return capital
to shareholders, issue new shares or sell assets to reduce
debt.
The Group considers its capital to include share capital, share
premium, capital redemption reserve, translation reserve and
retained earnings, but excluding the interest rate derivatives.
Consistent with others in the industry, the Group monitors its
capital by its debt to equity ratio (gearing levels). This is
calculated as the net debt (loans less cash and cash equivalents)
as a percentage of the equity calculated as follows:
|
2016
£’000 |
2015
£’000 |
Total debt |
68,509 |
67,218 |
Less cash and cash equivalents |
(6,265) |
(4,809) |
Net debt |
62,244 |
62,409 |
Total equity |
48,631 |
49,652 |
|
128.0% |
125.7% |
The Group does not have any externally imposed capital
requirements.
Financial assets
The Group’s principal financial assets are bank balances and
cash, trade and other receivables and investments. The Group has no
significant concentration of credit risk as exposure is spread over
a large number of counterparties and customers. The credit risk in
liquid funds and derivative financial instruments is limited
because the counterparties are banks with high credit ratings
assigned by international credit–rating agencies. The Group’s
credit risk is primarily attributable to its trade receivables. The
amounts presented in the balance sheet are net of allowances for
doubtful receivables, estimated by the Group’s management based on
prior experience and the current economic environment.
Financial assets maturity
Cash and cash equivalents all have a maturity of less than three
months.
|
2016
£’000 |
2015
£’000 |
Cash at bank and in hand |
6,265 |
4,809 |
These funds are primarily invested in short term bank deposits
maturing within one year bearing interest at the bank’s variable
rates.
Financial liabilities maturity
Repayment of borrowings
|
2016
£’000 |
2015
£’000 |
|
|
|
Bank loans and overdrafts: |
|
|
Repayable on demand or within one year |
3,358 |
2,267 |
Repayable between two and five years |
51,496 |
51,313 |
|
54,854 |
53,580 |
|
|
|
Debentures: |
|
|
Repayable within one year |
750 |
– |
Repayable between two and five years |
3,000 |
3,750 |
Repayable in more than five years |
9,905 |
9,888 |
|
68,509 |
67,218 |
Certain borrowing agreements contain financial and other
conditions that if contravened by the Group, could alter the
repayment profile.
24. Deferred tax asset
|
2016
£’000 |
2015
£’000 |
Balance at 1 January |
2,390 |
2,324 |
Transferred to consolidated income statement |
(1,256) |
66 |
Balance at 31 December |
1,134 |
2,390 |
|
|
|
The deferred tax balance comprises the
following: |
|
|
Revaluation of properties |
(2,719) |
(2,226) |
Accelerated capital allowances |
(904) |
(952) |
Fair value of interest derivatives |
151 |
111 |
Short-term timing differences |
(124) |
(131) |
Loss relief |
4,730 |
5,588 |
Deferred tax asset at end of year: |
1,134 |
2,390 |
The directors consider the temporary differences arising in
connection with the interests in joint ventures are insignificant.
There is no time limit in respect of the Group tax loss
relief.
Included within short term timing differences recognised in
income during the year is an adjustment of £168,000 related to an
over provision of short term timing differences in the prior
year.
In addition, the Group has unused losses and reliefs with a
potential value of £5,455,000 (2015: £4,945,000), which have not
been recognised as a deferred tax asset. As the Group returns to
profit, these losses and reliefs can be utilised.
25. Deferred tax
liabilitIES
|
2016
£’000 |
2015
£’000 |
Balance at 1 January |
2,106 |
2,410 |
Transferred to consolidated income statement |
(154) |
29 |
Transferred to other comprehensive income |
13 |
(41) |
Exchange adjustment |
364 |
(292) |
Balance at 31 December |
2,329 |
2,106 |
|
|
|
The deferred tax balance comprises the
following: |
|
|
Revaluation of properties |
793 |
724 |
Accelerated capital allowances |
1,347 |
1,490 |
Short-term timing differences |
191 |
(111) |
Fair value of interest derivatives |
– |
3 |
Unredeemed capital deductions |
(642) |
– |
Losses and other deductions |
640 |
– |
Deferred tax liability provision at end of
year: |
2,329 |
2,106 |
26. Share capital
The Company has one class of ordinary shares which carry no
right to fixed income.
|
Number of
ordinary 10p
shares
2016 |
Number of
ordinary 10p
shares
2015 |
2016
£’000 |
2015
£’000 |
|
|
|
|
|
Authorised: ordinary shares of 10p each |
110,000,000 |
110,000,000 |
11,000 |
11,000 |
Allotted, issued and fully paid share capital |
85,542,711 |
85,542,711 |
8,554 |
8,554 |
Less: held in Treasury (see below) |
(221,061) |
(734,816) |
(22) |
(73) |
“Issued share capital” for reporting purposes |
85,321,650 |
84,807,895 |
8,532 |
8,481 |
Treasury shares
|
Number of
ordinary
10p shares |
Cost/issue value |
|
2016 |
2015 |
2016
£’000 |
2015
£’000 |
Shares held in Treasury at 1 January |
734,816 |
1,032,991 |
482 |
883 |
Issued for share incentive plan -dividends
investment (Jan 2016 - 25p) |
(1,936) |
– |
(1) |
– |
Issued to meet directors bonuses (Jan 2016 -
24.50p) (Jan 2015 - 37.75p) |
(69,225) |
(431,476) |
(45) |
(369) |
Issued to meet staff bonuses (Jan 2016 - 24.50p)
(Jan 2015 - 37.75p) |
(154,073) |
(111,678) |
(101) |
(95) |
Issued for new directors share incentive plan (Jan
2016 - 24.50p) (Jan 2015 - 37.75p) |
(24,488) |
(7,947) |
(16) |
(7) |
Issued for new staff share incentive plan (Jan
2016 - 24.50p) (Jan 2015 - 37.75p) |
(36,732) |
(47,271) |
(24) |
(40) |
Purchase of shares (Jun 2015 - 37.69p) |
– |
133,333 |
– |
50 |
Purchase of shares (Oct 2015 - 36.18p) |
– |
166,864 |
– |
60 |
Issued for share incentive plan -dividends
investment (Nov 2016 - 21.25p) |
(2,831) |
– |
(2) |
– |
Issue for new staff share incentive plan (Nov 2016
- 21.25p) |
(224,470) |
– |
(148) |
– |
Shares held in Treasury at 31 December |
221,061 |
734,816 |
145 |
482 |
Share Option Schemes
Employees’ share option scheme (Approved scheme)
At 31 December 2016 there were no
options to subscribe for ordinary shares outstanding, issued under
the terms of the Employees’ Share Option Scheme.
This share option scheme was approved by members in 1986, and
has been approved by Her Majesty’s Revenue and Customs (HMRC).
There are no performance criteria for the exercise of options
under the Approved scheme, as this was set up before such
requirements were considered to be necessary.
A summary of the shares allocated and options issued under the
scheme up to 31 December 2016 is as
follows:
|
Changes during
the year |
|
|
At 1
January
2016 |
Options
Exercised |
Options
granted |
Options
lapsed |
At 31
December
2016 |
Shares issued to date |
2,367,604 |
– |
– |
– |
2,367,604 |
Shares allocated over which options have not been
granted |
1,549,955 |
– |
– |
– |
1,549,955 |
Total shares allocated for issue to employees
under the scheme |
3,917,559 |
– |
– |
– |
3,917,559 |
Non–approved Executive Share Option Scheme (Unapproved
scheme)
A share option scheme known as the “Non–approved Executive Share
Option Scheme” which does not have HMRC approval was set up during
2000. At 31 December 2016 there were
no options to subscribe for ordinary shares outstanding.
The exercise of options under the Unapproved scheme is subject
to the satisfaction of objective performance conditions specified
by the remuneration committee which confirms to institutional
shareholder guidelines and best practice provisions.
A summary of the shares allocated and options issued under the
scheme up to 31 December 2016 is as
follows:
|
Changes during
the year |
|
|
At 1
January
2016 |
Options
Exercised |
Options
granted |
Options
lapsed |
At 31
December
2016 |
Shares issued to date |
450,000 |
– |
– |
– |
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 2015 |
Number of
share options
issued/exercised/
(cancelled)
during year |
Number of shares
for which options
outstanding at
31 December 2016 |
2006 |
237.5p |
Oct 2009 – Oct
2016 |
325,000 |
(325,000) |
– |
2010 |
202.5p |
Aug 2013 – Aug
2020 |
80,000 |
– |
80,000 |
2015 |
87.0p |
Sep 2015 – Sep 2025 |
300,000 |
– |
300,000 |
The exercise of options under the Unapproved Share Option
Schemes, for certain option issues, is subject to the satisfaction
of 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.
The performance conditions for the 2010 scheme, agreed by members
on 31 August 2010 respectively,
requires growth in net assets over a three year period to exceed
the growth of the retail prices index by a scale of percentages.
There are no performance or service conditions attached to 2015
options which are outstanding at 31 December
2016 which vested in 2015.
|
2016
Number |
2016
Weighted
average
exercise price |
2015
Number |
2015
Weighted
average
exercise price |
Outstanding at 1 January |
705,000 |
133.1p |
598,000 |
167.1p |
Granted during year |
– |
– |
300,000 |
87.0p |
Lapsed during the year |
(325,000) |
237.5p |
(193,000) |
34.0p |
Outstanding at 31 December |
380,000 |
111.5p |
705,000 |
133.1p |
Exercisable at 31 December |
380,000 |
111.5p |
705,000 |
133.1p |
The 2016 share based payment charge of £109,000 relates to the
remaining grant date fair value in respect of the 300,000 share
options granted to A R Heller and G J Casey in 2015, with a
corresponding entry to the share based payment reserve. There were
no vesting conditions attached to these share options and therefore
they should have been fully expensed in 2015, rather than spread
over the estimated life of the options. As the error is not
considered to be material to the current or prior year financial
statements it has been corrected in the current period.
27. Non–controlling interest
(“NCI”)
|
2016
£’000 |
2015
£’000 |
As at 1 January |
9,574 |
10,826 |
Share of profit/(loss) for the year |
208 |
(147) |
Share of gain/(loss) on available for sale
investments |
104 |
(94) |
Dividends received |
(250) |
(250) |
Shares issued |
64 |
18 |
Shares cancelled |
– |
(64) |
Exchange movement |
689 |
(718) |
Other changes in equity |
– |
3 |
As at 31 December |
10,389 |
9,574 |
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 |
2016
£’000 |
2015
£’000 |
Revenue |
22,791 |
25,654 |
Profit/(loss) for the year attributable to owners
of the parent |
479 |
(259) |
(Loss)/profit for the year attributable to
NCI |
(72) |
4 |
Profit/(loss) for the year |
407 |
(255) |
Other comprehensive income/(expense) attributable
to owners of the parent |
1,186 |
(1,241) |
Other comprehensive income/(expense) attributable
to NCI |
100 |
(87) |
Other comprehensive income/(expense) for the
year |
1,286 |
(1,328) |
Balance sheet |
|
|
Non–current assets |
24,649 |
20,480 |
Current assets |
12,224 |
10,635 |
Total assets |
36,873 |
31,115 |
Current liabilities |
(10,326) |
(6,501) |
Non–current liabilities |
(9,541) |
(8,983) |
Total liabilities |
(19,867) |
(15,484) |
Net current assets at 31 December |
17,006 |
15,631 |
Cash flows |
|
|
From operating activities |
2,941 |
1,979 |
From investing activities |
(1,570) |
(2,773) |
From financing activities |
(969) |
(947) |
Net cash flows |
402 |
(1,741) |
The non–controlling interest comprises of a 37.5% shareholding
in Black Wattle Colliery (Pty) Ltd, a coal mining company
incorporated in South Africa.
Summarised financial information reflecting 100% of the
underlying subsidiary’s relevant figures, is set out below.
Black Wattle Colliery (Pty) Limited (“Black
Wattle”) |
2016
£’000 |
2015
£’000 |
Revenue |
21,703 |
24,608 |
Expenses |
(22,185) |
(24,582) |
(Loss)/profit for the year |
(482) |
26 |
Total comprehensive (expense)/income for the
year |
(482) |
26 |
Balance sheet |
|
|
Non–current assets |
8,516 |
5,355 |
Current assets |
8,600 |
5,932 |
Current liabilities |
(12,151) |
(7,156) |
Non–current liabilities |
(2,635) |
(1,988) |
Net assets at 31 December |
2,330 |
2,143 |
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 675 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.
28. 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: |
|
|
|
|
Langney Shopping Centre Unit Trust |
|
|
|
|
Current account |
19 |
(i) |
– |
– |
Loan account |
– |
|
– |
(128) |
Simon Heller Charitable Trust |
|
|
|
|
Current account |
(63) |
|
– |
– |
Loan account |
– |
|
(700) |
– |
Directors and key management |
|
|
|
|
M A Heller and J A Heller |
6 |
(i) |
6 |
– |
H D Goldring (Delmore Asset Management Limited) |
(30) |
(ii) |
(15) |
– |
C A Parritt |
(19) |
(ii) |
(18) |
– |
R Priest (A & M Europe LLP) |
(34) |
(ii) |
(34) |
– |
Ezimbokodweni Mining (pty) Limited |
114 |
|
1,350 |
– |
Totals at 31 December 2016 |
(7) |
|
589 |
(128) |
Totals at 31 December 2015 |
53 |
|
340 |
(208) |
Nature of costs recharged – (i) Property management fees (ii)
Consultancy fees.
Langney Shopping Centre Unit Trust (joint venture)
Langney Shopping Centre Unit Trust (Langney) was owned 12.5 per
cent by the Company and 12.5 per cent by Bisichi Mining PLC. The
remaining 75 per cent is owned by Columbus Capital Management LLP.
This investment was sold in March
2016.
The Company provided property management services to
Langney.
Ezimbokodweni Mining (PTY) Limited (Joint Venture)
Ezimbokodweni Mining is a Bisichi joint venture and is treated
as a non-current asset investment. It is a prospective coal
production company based in South
Africa. Ezimbokodweni Mining (Pty) Limited is a joint
venture and a loan to the joint venture is treated as part of the
net investment in the joint venture. Further details on the net
investment in Ezimbokodweni can be found in note 12.
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 (2015: £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
(2015: £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.
Alvarez & Marsal Real Estate Advisory Services LLP (A&M)
is a company in which R Priest was a director. A&M 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 £71,000 (2015: £86,000) and a repayment of £15,000
(2015: £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 were £1,103,000 (2015: £1,341,000). All
other disclosures required including interest in share options in
respect of those directors are included within the remuneration
report.
29. Employees
The average number of employees, including directors, of the
Group during the year was as follows:
|
2016 |
2015 |
Production |
185 |
191 |
Administration |
46 |
44 |
|
231 |
235 |
Staff costs during the year were as follows:
|
2016
£’000 |
2015
£’000 |
Salaries and other costs |
6,396 |
6,459 |
Social security costs |
332 |
361 |
Pension costs |
335 |
368 |
Share based payments |
110 |
31 |
|
7,173 |
7,219 |
30. Capital Commitments
|
2016
£’000 |
2015
£’000 |
Commitments for capital expenditure approved but
for which contracts have not been placed at the year end |
– |
306 |
Commitments for capital expenditure approved and
contracted for at the year end |
762 |
– |
Share of commitment of capital expenditure in
joint venture |
1,489 |
1,102 |
All the above relates to Bisichi Mining PLC.
31. Operating and finance
leases
Operating leases on land and buildings
At 31 December 2016 the Group had
commitments under non–cancellable operating leases on land and
buildings expiring as follows:
|
2016
£’000 |
2015
£’000 |
After five years |
1,680 |
1,920 |
Operating lease payments represent rentals payable by the Group
for its office premises.
The leases are for an average term of ten years 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 |
|
2016
£’000 |
2015
£’000 |
2016
£’000 |
2015
£’000 |
Within one year |
305 |
306 |
305 |
306 |
Second to fifth year |
1,222 |
1,225 |
1,130 |
1,139 |
After five years |
29,734 |
30,142 |
3,332 |
3,339 |
|
31,261 |
31,673 |
4,767 |
4,784 |
Future finance charges on finance leases |
(26,494) |
(26,889) |
– |
– |
Present value of finance lease liabilities |
4,767 |
4,784 |
4,767 |
4,784 |
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:
|
2016
£’000 |
2015
£’000 |
Within one year |
6,684 |
6,491 |
Second to fifth year |
20,104 |
20,207 |
After five years |
36,736 |
35,622 |
|
63,524 |
62,320 |
32. Contingent liabilities
and events after the reporting period
There were no contingent liabilities at 31 December 2016 (2015: £Nil), except as
disclosed in Note 23.
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:
|
2016
£’000 |
2015
£’000 |
Rail siding &
transportation |
63 |
47 |
Rehabilitation of
mining land |
1,364 |
1,009 |
Water &
electricity |
57 |
42 |
|
1,484 |
1,098 |
33. Company financial
statements
Company balance sheet at 31 December
2016
|
Notes |
2016
£’000 |
2015
£’000 |
Fixed assets |
|
|
|
Tangible assets |
33.3 |
27,383 |
28,468 |
Other investments: |
|
|
|
Associated company – Bisichi Mining PLC |
33.4 |
489 |
489 |
Subsidiaries and others including Dragon Retail
Properties Limited |
33.4 |
42,492 |
57,472 |
|
|
42,981 |
57,961 |
|
|
70,364 |
86,429 |
|
|
|
|
Current assets |
|
|
|
Assets held for sale |
33.5 |
– |
964 |
Debtors |
33.6 |
1,130 |
1,084 |
Deferred tax due after more than one year |
33.10 |
2,082 |
3,055 |
Investments |
33.7 |
19 |
20 |
Bank balances |
|
2,625 |
2,233 |
|
|
5,856 |
7,356 |
|
|
|
|
Creditors |
|
|
|
Amounts falling due within one year |
33.8 |
(34,790) |
(53,769) |
Borrowings |
33.9 |
(750) |
– |
Net current liabilities |
|
(29,684) |
(46,413) |
Total assets less current liabilities |
|
40,680 |
40,016 |
|
|
|
|
Creditors |
|
|
|
Amounts falling due after more than one year |
33.9 |
(17,491) |
(18,228) |
Net assets |
|
23,189 |
21,788 |
|
|
|
|
Capital and reserves |
|
|
|
Share capital |
33.11 |
8,554 |
8,554 |
Share premium account |
|
4,866 |
4,866 |
Capital redemption reserve |
|
47 |
47 |
Treasury shares |
33.11 |
(145) |
(482) |
Retained earnings |
|
9,867 |
8,803 |
Shareholders’ funds |
|
23,189 |
21,788 |
These financial statements were approved by the board of
directors and authorised for issue on 27
April 2017 and signed on its behalf by:
Sir Michael
Heller
Anil
Thapar
Company Registration No. 341829
Director
Director
Company statement of changes in equity for the year ended
31 December 2016
|
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 2015 |
8,554 |
4,866 |
47 |
(883) |
13,366 |
25,950 |
Loss for year |
– |
– |
– |
– |
(4,144) |
(4,144) |
Total comprehensive income |
– |
– |
– |
– |
(4,144) |
(4,144) |
Transactions with owners: |
|
|
|
|
|
|
Dividends – equity holders |
– |
– |
– |
– |
(133) |
(133) |
Acquisition of own shares |
– |
– |
– |
(111) |
– |
(111) |
Disposal of own shares |
– |
– |
– |
226 |
– |
226 |
Loss on transfer of own shares |
– |
– |
– |
286 |
(286) |
– |
Transactions with owners |
– |
– |
– |
401 |
(419) |
(18) |
Balance at 31 December 2015 |
8,554 |
4,866 |
47 |
(482) |
8,803 |
21,788 |
Profit for year |
– |
– |
– |
– |
1,418 |
1,418 |
Total comprehensive income |
– |
– |
– |
– |
1,418 |
1,418 |
Transaction with owners: |
|
|
|
|
|
|
Dividends – equity holders |
– |
– |
– |
– |
(136) |
(136) |
Disposal of own shares |
– |
– |
– |
119 |
– |
119 |
Loss on transfer of own shares |
– |
– |
– |
218 |
(218) |
– |
Transactions with owners |
– |
– |
– |
337 |
(354) |
(17) |
Balance at 31 December 2016 |
8,554 |
4,866 |
47 |
(145) |
9,867 |
23,189 |
£7.9 million (2015: £5.7 million) of retained earnings
(excluding treasury shares) is distributable.
33.1. 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 to be
performed. In such instances, fair value measurements are estimated
based on the amounts for which the assets and liabilities could be
exchanged between market participants. To the extent possible, the
assumptions and inputs used take into account externally verifiable
inputs. However, such information is by nature subject to
uncertainty. The directors note that the fair value measurement of
the investment properties may be considered to be less judgemental
where external valuers have been used and as a result of the nature
of the underlying assets.
The following accounting policies are consistent with those of
the Group and are disclosed on page 62 to 68 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
33.2. RESULT FOR THE FINANCIAL YEAR
The Company’s result for the year was a profit of £1,418,000
(2015 loss: £4,144,000). 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.
33.3. Tangible assets
|
Investment
Properties |
Office |
|
Total
£’000 |
Freehold
£’000 |
Leasehold
over 50 years
£’000 |
Leasehold
under 50 years
£’000 |
equipment
and motor
vehicles
£’000 |
Cost or valuation at 1 January 2016 |
28,769 |
8,460 |
18,216 |
1,644 |
449 |
Additions |
31 |
28 |
– |
– |
3 |
Disposals |
(105) |
– |
– |
– |
(105) |
Decrease in present value of head leases |
(4) |
– |
(2) |
(2) |
– |
(Decrease)/increase on revaluation |
(1,073) |
397 |
(1,470) |
– |
– |
Cost or valuation at 31 December 2016 |
27,618 |
8,885 |
16,744 |
1,642 |
347 |
|
|
|
|
|
|
Representing assets stated at: |
|
|
|
|
|
Valuation |
27,271 |
8,885 |
16,744 |
1,642 |
– |
Cost |
347 |
– |
– |
– |
347 |
|
27,618 |
8,885 |
16,744 |
1,642 |
347 |
|
|
|
|
|
|
Depreciation at 1 January 2016 |
301 |
– |
– |
– |
301 |
Charge for the year |
25 |
– |
– |
– |
25 |
Disposals |
(91) |
– |
– |
– |
(91) |
Depreciation at 31 December 2016 |
235 |
– |
– |
– |
235 |
Net book value at 1 January 2016 |
28,468 |
8,460 |
18,216 |
1,644 |
148 |
Net book value at 31 December 2016 |
27,383 |
8,885 |
16,744 |
1,642 |
112 |
The freehold and leasehold properties, excluding the present
value of head leases and directors’ valuations, were valued as at
31 December 2016 by professional
firms of chartered surveyors. The valuations were made at fair
value. The directors’ property valuations were made at fair
value.
|
2016
£’000 |
2015
£’000 |
Allsop LLP |
20,860 |
21,905 |
Directors’ valuation |
1,825 |
1,825 |
|
22,685 |
23,730 |
Add: Present value of headleases |
4,586 |
4,590 |
|
27,271 |
28,320 |
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 2016 |
4,861 |
13,966 |
1,939 |
Additions |
28 |
– |
– |
Cost at 31 December 2016 |
4,889 |
13,966 |
1,939 |
Long leasehold properties are held on leases with an unexpired
term of more than fifty years at the balance sheet date.
33.4. Other investments
Cost |
Total
£’000 |
Shares in
subsidiary
companies
£’000 |
Shares in
joint
ventures
£’000 |
Shares in
associate
£’000 |
At 1 January 2016 |
57,961 |
57,308 |
164 |
489 |
Impairment provision |
(14,980) |
(14,980) |
– |
– |
At 31 December 2016 |
42,981 |
42,328 |
164 |
489 |
Subsidiary companies
Details of the Company’s subsidiaries are set out in Note 15. As
stated on page 78, under IFRS 10 Bisichi Mining Plc and its
subsidiaries and Dragon Retail Properties Limited are accounted for
as subsidiaries of the Company.
Impairment reflects reduction in value of investment due to
receipt of dividend of £15 million from a subsidiary.
In the opinion of the directors the value of the investment in
subsidiaries is not less than the amount shown in these financial
statements.
Details of the joint ventures are set out in Notes 12 and
13.
33.5. ASSETS HELD FOR SALE
|
2016
£’000 |
2015
£’000 |
Investment in Langney Shopping Centre Unit
Trust |
|
|
At 1 January |
964 |
– |
Transfer from investment in joint venture (note
12) |
– |
964 |
Disposal |
(964) |
– |
At 31 December |
– |
964 |
On 11 March 2016, the Company
disposed of its investment in Langney Shopping Centre Unit Trust,
an unlisted property unit trust incorporated in Jersey. The company
owned 12.5% of the units of the trust. The net proceeds from the
sale were £1,168,000 (including dividend).
33.6. Debtors
|
2016
£’000 |
2015
£’000 |
|
|
|
Trade debtors |
343 |
315 |
Amounts due from associate and joint ventures |
35 |
123 |
Amounts due from associate and joint ventures |
150 |
– |
Other debtors |
173 |
159 |
Prepayments and accrued income |
429 |
487 |
|
1,130 |
1,084 |
33.7. Investments
|
2016
£’000 |
2015
£’000 |
Market value of the listed investment
portfolio |
19 |
20 |
Unrealised gain/(deficit) of market value over
cost |
1 |
(3) |
Listed investment portfolio at cost |
18 |
23 |
All investments are listed on the London Stock Exchange.
33.8. Creditors: amounts falling due within one year
|
2016
£’000 |
2015
£’000 |
Amounts owed to subsidiary companies |
28,750 |
47,511 |
Amounts owed to joint ventures |
2,190 |
2,215 |
Other taxation and social security costs |
388 |
314 |
Other creditors |
1,323 |
1,364 |
Accruals and deferred income |
2,139 |
2,365 |
|
34,790 |
53,769 |
33.9. Creditors: amounts falling due after more than one
year
|
2016
£’000 |
2015
£’000 |
Present value of head leases on properties |
4,586 |
4,590 |
Term Debenture stocks: |
|
|
£3.75 million First Mortgage Debenture Stock 2018
at 11.6 per cent |
3,000 |
3,750 |
£10 million First Mortgage Debenture Stock 2022 at
8.109 per cent* |
9,905 |
9,888 |
|
12,905 |
13,638 |
|
17,491 |
18,228 |
*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 21.
Repayment of borrowings: |
|
|
Debentures: |
|
|
Repayable within one year |
750 |
– |
Repayable between two and five years |
3,000 |
3,750 |
Repayable in more than five years |
9,905 |
9,888 |
|
13,655 |
13,638 |
33.10. deferred tax ASSET
|
2016
£’000 |
2015
£’000 |
Deferred Taxation |
|
|
Balance at 1 January |
3,055 |
4,699 |
Transfer to profit and loss account |
(973) |
(1,644) |
Balance at 31 December |
2,082 |
3,055 |
The deferred tax balance comprises the following:
Accelerated capital allowances |
(823) |
(868) |
Short–term timing differences |
(124) |
(131) |
Revaluation of investment properties |
100 |
217 |
Loss relief |
2,929 |
3,837 |
Deferred tax asset provision at end of
period |
2,082 |
3,055 |
33.11. Share capital
Details of share capital, treasury shares and share options are
set out in Note 26.
33.12. 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 |
(101) |
(i) |
(190) |
30 |
Loan account |
– |
|
(2,000) |
– |
Langney Shopping Centre Unit Trust |
|
|
|
|
Current account |
19 |
|
– |
– |
Loan account |
– |
|
– |
(64) |
Bisichi Mining PLC |
|
|
|
|
Current account |
138 |
(ii) |
35 |
– |
Simon Heller Charitable Trust |
|
|
|
|
Current account |
(63) |
|
– |
– |
Loan account |
– |
|
(700) |
– |
Directors and key management |
|
|
|
|
M A Heller and J A Heller |
6 |
(i) |
6 |
– |
H D Goldring (Delmore Asset Management Limited) |
(30) |
(iii) |
(15) |
– |
C A Parritt |
(19) |
(iii) |
(18) |
– |
R Priest (A & M Europe LLP) |
(34) |
(iii) |
(34) |
– |
Totals at 31 December 2016 |
(84) |
|
(2,916) |
(34) |
Totals at 31 December 2015 |
(97) |
|
(2,788) |
(22) |
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 2012 Dragon lent the
company £2 million at 6.875 per cent annual interest.
Langney Shopping Centre Unit Trust – ‘Langney’ is an unlisted
property unit trust incorporated in Jersey. It was owned 12.5 per
cent by the Company and 12.5 per cent by Bisichi Mining PLC until
March 2016.
Bisichi Mining PLC – The company has 41.52 per cent ownership of
‘Bisichi’.
Other details of related party transactions are given in note
28.
33.13. Capital commitments
There were no capital commitments at 31
December 2016 (2015: £Nil).
33.14. OPERATING AND FINANCE LEASES
At 31 December 2015 the Company
had commitments under non–cancellable operating leases on land and
buildings as follows:
|
2016
£’000 |
2015
£’000 |
Expiring in more than five years |
1,680 |
1,920 |
In addition, the Company has an annual commitment to pay ground
rents on its leasehold investment properties which amount to
£246,000 (2015: £246,000).
Present value of head leases on properties
|
Minimum
lease
payments |
Present
value
of minimum
lease payments |
|
2016
£’000 |
2015
£’000 |
2016
£’000 |
2015
£’000 |
Within one year |
294 |
294 |
294 |
294 |
Second to fifth year |
1,177 |
1,177 |
1,094 |
1,094 |
After five years |
28,298 |
28,593 |
3,198 |
3,202 |
|
29,769 |
30,064 |
4,586 |
4,590 |
Future finance charges on finance leases |
(25,183) |
(25,474) |
– |
– |
Present value of finance lease liabilities |
4,586 |
4,590 |
4,586 |
4,590 |
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:
|
2016
£’000 |
2015
£’000 |
Within one year |
1,661 |
1,603 |
Second to fifth year |
4,446 |
3,961 |
After five years |
2,393 |
2,316 |
|
8,500 |
7,880 |
33.15. Contingent liabilities and post balance sheet events
There were no contingent liabilities at 31 December 2016 (2015: £Nil).
Five year financial summary
|
2016
£m |
2015
£m |
2014
£m |
2013
£m |
2012*
£m |
Portfolio size |
|
|
|
|
|
Investment properties–LAP^ |
89 |
89 |
89 |
87 |
205 |
Investment properties–joint ventures |
– |
19 |
20 |
16 |
27 |
Investment properties–Dragon Retail
Properties |
3 |
3 |
3 |
3 |
– |
Investment properties–Bisichi Mining^ |
13 |
13 |
12 |
12 |
12 |
|
105 |
124 |
124 |
118 |
244 |
|
|
|
|
|
|
Portfolio activity |
£M |
£M |
£M |
£M |
£M |
Acquisitions |
– |
1.00 |
0.68 |
– |
– |
Disposals |
– |
(0.40) |
– |
(9.47) |
– |
Capital Expenditure |
0.16 |
0.36 |
– |
– |
0.97 |
|
0.16 |
0.96 |
0.68 |
(9.47) |
0.97 |
|
|
|
|
|
|
Consolidated income statement |
£m |
£m |
£m |
£m |
£m |
Group income |
29.70 |
32.67 |
33.53 |
43.29 |
15.17 |
(Loss)/profit before tax |
(0.97) |
(2.09) |
(2.69) |
1.14 |
7.62 |
Taxation |
(1.18) |
0.04 |
(3.70) |
2.55 |
(0.35) |
(Loss)/profit attributable to shareholders |
(2.36) |
(1.90) |
(7.14) |
3.47 |
7.27 |
Earnings/(loss) per share – basic and diluted |
(2.77)p |
(2.24)p |
(8.45)p |
4.12p |
8.65p |
Dividend per share |
0.165p |
0.160p |
0.156p |
0.125p |
– |
|
|
|
|
|
|
Consolidated balance sheet |
£m |
£m |
£m |
£m |
£m |
Shareholders’ funds attributable to equity
shareholders |
38.24 |
40.08 |
42.55 |
49.73 |
46.46 |
Net borrowings |
62.22 |
62.39 |
59.71 |
53.96 |
131.27 |
Net assets per share – basic |
44.83p |
47.26p |
50.35p |
59.00p |
55.30p |
– fully diluted |
44.83p |
47.26p |
50.35p |
59.00p |
55.29p |
|
|
|
|
|
|
Consolidated cash flow statement |
£m |
£m |
£m |
£m |
£m |
Cash generated from operations |
5.59 |
4.37 |
2.96 |
12.23 |
12.72 |
Capital investment and financial investment |
(0.18) |
(2.77) |
100.42 |
4.35 |
(0.87) |
Notes:
* Original LAP group – pre IFRS 10 amendments
^ Excluding the present value of head leases