FOR IMMEDIATE RELEASE
30 April 2019
LONDON & ASSOCIATES PROPERTIES PLC
(“LAP”):
ANNUAL RESULTS FOR
12 MONTHS TO 31 DECEMBER 2018
HIGHIGHTS
· £37.25 million sale of Brixton
Markets, completed in April 2018,
generating £20.5 million in cash net of debt
· Implementation of new strategy focused
on non-retail investments and development opportunities:
£6.2 million acquisition of fully let
Runcorn industrial portfolio,
before costs, with significant asset management potential
£5.7 million acquisition in joint
venture with Bisichi and Metroprop Limited of a redevelopment site
in West Ealing, London, with
planning for 55 apartments being sought
· Impact of severe retail sector
downturn partly cushioned by value retailing nature of portfolio
but NAV per ordinary share down from 53.74 to 50.83p
· Group profit for the year before
taxation was £1.27 million, including a £2.57 million property
valuation decrease (2017: £11.28 million including a £9.37 million
property valuation increase)
· Asset management initiatives underway
to improve marketability of Orchard Square, Sheffield which had strong lease renewals
during 2018 with rental levels proving relatively resilient
· Repayment of bank loans and debentures
of £19.4 million
· New LAP term loan of £3.9 million
secured
· Refinancing process underway of £28.3
million of non-recourse loans expiring in June 2019
· Bisichi had an excellent year with an
EBITDA of £8.6 million - an increase of almost £5.0 million
· Recommended final dividend up 2.9% to
0.18p per share
“The increasingly difficult retail environment endorses our 2017
decision to sell Brixton Markets for £37.25 million. We
received £20.5 million in cash net of debt in May 2018. This
cash has all been allocated or deployed away from the retail
property sector and into non-retail property with greater potential
for future growth through asset management or development
opportunities.” Sir Michael Heller,
Chairman, and John Heller, Chief
Executive.
Contact:
London & Associated Properties
PLC
Tel: 020 7415 5000
John Heller, CEO or Jonathan Mintz, Finance Director
Baron Phillips
Associates
Tel: 07767
444193
Baron Phillips
Chairman’s statement and Chief Executive’s review 2018
I am pleased to present our accounts
for the 12 months to 31st December
2018.
As shareholders will be aware, 2018 has been a year in which
retailing and the retail property markets have faced unprecedented
change and challenge. The UK’s macroeconomic environment has
affected consumer spending adversely, particularly for higher value
or discretionary goods. At the same time, pressures such as high
business rates and greater online sales, have impacted on the type
and number of stores retailers require.
The proliferation of retail insolvencies witnessed in 2018,
which has continued unabated into 2019, has led to significant
numbers of vacant units and has impacted negatively on rental
levels and increased incentives required by retailers. In turn this
has led, inevitably, to a decline in retail property values across
the board.
The increasingly difficult retail environment endorses our 2017
decision to sell Brixton Markets for £37.25 million. We received
£20.5 million in cash net of debt in April
2018. This cash has all been allocated or deployed away from
the retail property sector and into non-retail property with
greater potential for future growth through asset management or
development opportunities.
CONSOLIDATED RESULTS
Group (including Bisichi and Dragon) net assets at the year-end
were £55.7 million (2017: £56.7 million).
As stated above market sentiment towards retail property is very
negative. Our portfolio, while still generating good returns, has
been marked down further by valuers. This has meant that the total
net assets of LAP Group (including our net interest in Bisichi)
have moved downwards, resulting in the net asset value per share
declining to 50.83p from 53.74p last year.
Total property assets owned by LAP, Bisichi and other companies
in which LAP has a financial interest amounted to £196 million
(2017: £222 million).
Group profit after valuation movements and before taxation for
the year was £1.27 million (2017: £11.28 million). Figures for the
previous year benefited materially from a £9.37 million uplift in
property values due almost entirely to the Brixton sale and
therefore are not directly comparable. A full breakdown of group
income, cash flow and result by sector is included in the financial
review and in the segmental analysis in Note 1 to the financial
statements.
DEBT MANAGEMENT
On 30th June 2019, our five-year
facilities with Santander and Europa Mezzanine expire. The total
outstanding is £28.3 million, secured against Orchard Square in
Sheffield and the Tanyard Shopping
Centre in Wickersley, South
Yorkshire. Shareholders will appreciate that this is a
difficult time to borrow against retail property. However, we have
engaged actively with both lenders who have indicated that they
will work with us, either to refinance the loans or to facilitate a
handover to a new lender. We have started marketing the loans and
feedback to date is reasonably positive. However, there are no
guarantees that we will be able to refinance on terms that enable
us to maintain the current level of net cash flow or at all.
Importantly, both the Santander and Europa loans are
non-recourse to the balance sheet of LAP PLC. These two properties
are included in our balance sheet at an aggregate value of £36.65
million.
We refinanced the remaining £3 million of the Prudential
debenture which expired in August
2018 with a £3.93 million 10-year loan facility (with a
5-year mutual break option) from Metro Bank, a new lender to the
Group.
The loan to value covenant for Metro Bank is 65%, with
amortisation based on a 20-year repayment profile. No hedging was
required, and the new loan will deliver debt service savings of
£0.2 million per annum.
LAP PROPERTY ACTIVITIES
Runcorn
The most significant purchase was the Manor Portfolio in
Runcorn, Cheshire, which was acquired in October 2018 for £6.5 million in cash, including
costs. This portfolio comprises nine industrial/warehousing units,
fully let to eight tenants producing £0.6 million per annum,
located in the heart of Runcorn’s logistics/warehousing area.
We believe our existing skill-set, built up over many years of
managing multi-let retail assets, is just as relevant to multi-let
industrial assets. We were particularly attracted to this property
by the relatively low rents of just over £4 per sq. ft, and I am
pleased to say we have engaged actively with the tenants and remain
confident that we can drive this level upward over the medium term.
It remains fully let with the exception of one third of one unit on
which we negotiated a surrender from the incumbent tenant and is
now under offer at a higher rent.
Ealing
In October 2018 we completed the
£5.7 million acquisition of a mixed-use development site in West
Ealing, London, before acquisition
and subsequent development costs. This acquisition has been
undertaken in a joint venture with Bisichi Mining Plc and Metroprop
Ltd, an established property developer.
LAP and Bisichi have each contributed an initial equity
investment of £1.0 million for a combined 90% stake in the joint
venture. The balance of £3.5 million was provided by Paragon via a
short-term investment loan. The interest rate is 7.0% per annum and
currently the interest is being rolled up. This loan will be
refinanced with a development loan when we are in a position to
develop the site. We do not anticipate that we will need to invest
further equity into the transaction.
The site currently comprises five shops, of which one is vacant,
and a service yard. The four let shops provide £0.14 million per
annum which is sufficient to cover our operating costs as we
prepare our planning application. We are looking to develop 55
flats. Initial responses from the Local Authority have been
positive and we look forward to updating shareholders in due
course.
Orchard Square, Sheffield
In view of market sentiment towards shopping centres and the
size of this asset in relation to our portfolio, we have decided
that it no longer fits our longer-term criteria for an investment
property held to generate capital growth. Accordingly, we have
decided to treat it as realisable inventory in our property dealing
division. We are underway on a series of asset management
initiatives and developments, more fully described below, and it is
our intention to dovetail the sale of this asset with completion of
those projects.
We remain convinced of the enduring strength of Orchard Square.
This has been evidenced by the strong lease renewals we have
achieved over the last 12 months, where rents have proven to be
relatively resilient. Despite market sentiment we are renewing
units let at a previous combined total rent of £0.37 million at new
annual rents of £0.31 million.
We are exploring the opportunities for creating experiential
alternative uses for some units, including restaurants and bars. We
believe that this will increase the marketability of Orchard
Square, by helping to reposition the Centre and make it more
attractive to younger shoppers as well as increasing the amount of
time customers spend there.
During the course of the year River
Island, which pays an annual rent of £0.5 million, exercised
a break clause on its lease. At the time negotiations were already
underway with a third party to take a lease on the entire
store.
We have agreed lease documentation with the new occupier, but
have not yet exchanged contracts. There remains, therefore, a risk
that this unit might become vacant. However, we are confident that
it is one of the best units in the city and will not remain empty
for long even if the current potential occupier were to pull out
for any reason.
Kings Square, West Bromwich
Kings Square achieved full occupancy during the year and
continues to trade strongly for the discount retailers of the town.
We let two units to an independent coffee shop and a restaurant
thus considerably improving the leisure offer. Additionally, lease
renewals at the Centre demonstrate that tenants trade well there.
We believe that this sort of value-orientated shopping centre is
cushioned to a certain extent from the general problems affecting
retailing in the UK.
Other
The rest of our portfolio, which is focused on community and
value retailing, trades well. The LAP Group Portfolio has a void
level of 7.24% (2017: 2.06%). This increase is almost entirely
accounted for by the two properties where tenants did not renew at
lease expiry.
We have bid for a number of properties during the year to
diversify further away from retail. Although we were not successful
on those occasions, we remain determined not to overpay.
Currently, we are in the process of selling a further small
retail asset from our portfolio, and we will report to shareholders
once the deal has completed.
HARROGATE JOINT VENTURE
Our Harrogate joint venture
with Oaktree Capital Management, which owns three shopping centres
in Dunfermline, Kings Lynn and
Loughborough, continues to trade
satisfactorily. We have been able to negotiate a number of new
leases and lease renewals across all three centres and are coming
to the completion of a development of a new 15,000 sq. ft.
store for H&M at Kings
Lynn.
DRAGON RETAIL PROPERTIES LTD
Dragon, a 50:50 joint venture with Bisichi Mining, completed a
lease renewal with Boots, the principal tenant at its shop in
Clifton, Bristol, on a new 10 year
lease with a five-year break clause at £93,000, an increase of
1.1%.
BISICHI MINING PLC
For the year ended 31st December
2018, Bisichi achieved earnings before interest, tax,
depreciation and amortisation (EBITDA) of £8.6million (2017: £3.7
million) and operating profit before depreciation, fair value
adjustments and exchange movements (Adjusted EBITDA) of £9.1
million (2017: £5.8 million).
These results are attributable mainly to the strong performance
from Black Wattle, Bisichi’s South African coal mining operation,
which continued to benefit from the infrastructure improvements to
the coal washing plant that were reported in 2017. These
improvements have enabled the group to wash at consistent levels of
production and achieve an increased overall yield compared to prior
years. In addition, the mine was able to benefit from significantly
improved coal prices achievable for its coal during the year.
Looking forward, although global economic factors have impacted
coal demand in some international markets, the demand for South
African coal has continued to remain strong and Bisichi expects
overall levels of future production from Black Wattle to remain
consistent with 2018. Accordingly, it remains confident about the
ability of its South African coal mining operations to contribute
strongly to Group earnings and cash generation for the foreseeable
future.
At the end of 2018 Black Wattle completed an agreement to
acquire additional coal reserves. The new reserves have an expected
run of mine tonnage of 1.9 million metric tonnes and are contiguous
to Black Wattle’s operations. The acquisition is subject to local
regulatory approval and is in line with the group’s strategy of
actively seeking new opportunities to extend the life of mines
within its existing mining operations.
Bisichi’s UK retail property portfolio, which is managed by
London & Associated Properties
PLC for a fee, continues to perform well, with average rental
yields for the portfolio remaining stable during the year.
DIVIDEND
We are pleased to recommend a final dividend of 0.18p, an
increase of over 2.9% on the 2017 dividend of 0.175p.
Finally, we would like to thank all of
our directors, staff and advisers for their hard work during the
year. The retail property world is very challenging and is likely
to remain so for the foreseeable future. However, we believe LAP is
well placed to meet these challenges and we therefore remain
cautiously optimistic for the year ahead.
Sir Michael Heller,
John Heller,
Chairman
Chief Executive
30 April 2019
STRATEGIC REPORT
Financial and performance review
The financial statements for 2018 have
been prepared to reflect the requirements of IFRS 10. This means
that the accounts of Bisichi Mining PLC (a London Stock Exchange
main market quoted company – BISI) (“Bisichi”), have been
consolidated with those of LAP.
Bisichi continues to operate as a fully independent company and
currently LAP owns only 41.52% of the issued ordinary share
capital. However, because related parties also have shareholdings
in Bisichi and there is a wide disposition of other shareholdings,
LAP is deemed under IFRS 10 to have effective control of Bisichi
for accounting purposes. This treatment means that the income and
net assets of Bisichi are disclosed in full and the value
attributable to the “non-controlling interest” (58.48%) is shown
separately in the equity section as a non-controlling interest.
There is no impact on the net assets attributable to LAP
shareholders.
Dragon Retail Property Limited (“Dragon”) and West Ealing
Projects Limited (West Ealing), are both 50:50 joint ventures with
Bisichi and are also consolidated. Shareholders are aware that LAP
is a property business with a significant investment in a listed
mining company. The effect of consolidating the results, assets and
liabilities of the property business and the mining company make
the figures complex and less transparent. Property company accounts
are already subject to significant volatility as valuations of
property assets as well as derivative liabilities can be subject to
major movements based on market sentiment. Most of these changes,
though, have little or no effect on the cash position and it is, of
course, self-evident that cash flow is the most important factor
influencing the success of a property business. We explain the
factors affecting the property business first, clearly separating
these from factors affecting the mining business which we do not
manage. Comments about Bisichi (the mining business) are based on
information provided by the independent management of that
company.
Revenue recognition restatement – presentation of revenue &
costs
During the review of revenue recognition in South Africa a revenue recognition error was
identified in respect of the treatment of transport and loading
costs to deliver export coal under certain export agreements. The
costs in prior periods, have been recorded as a deduction against
revenue rather than being shown as an operating cost.
Although this impact has been correctly accounted for in the
current year, the equivalent restatement in the prior year is to
increase both revenue and operating costs by £2,891,000. There is
no profit or net assets impact as a result of the prior year
restatement. In prior year figures within the report where there
has been an impact from the restatement, the column is reflected
with the word “Restated”.
LOANS
LAP’s debt (excluding Bisichi, Dragon and West Ealing which are
detailed separately below), consists of a £28.3 million facility
expiring in July 2019, a debenture of
£10 million repayable in August 2022
and a £3.9 million facility expiring in 2028. A debenture of £3
million was repaid in April 2018. As
in previous years, all loans and debentures are secured on core
property and cash deposits and are covenant compliant.
LAP’s five year £21.5 million non-recourse loan from Santander,
as senior lender, is supported by a £6.8 million loan from Europa
Capital Mezzanine Limited, as mezzanine lender. The senior loan
facility is fully hedged and at the year end, 81% of the loan was
swapped at a rate of 2.25% and the remaining 19% was covered by an
interest cap at 2.25%. This gives a blended current interest rate
of 5.33% for the total £28.3 million debt.
Cash flow
The operating cash flow and net cash balances at the year-end
were as follows:
CASH FLOW FROM OPERATIONS |
2018
£’000 |
2017
£’000 |
LAP |
(5,675) |
2,708 |
Bisichi |
7,520 |
7,593 |
Dragon |
76 |
(14) |
Group total |
1,921 |
10,287 |
Note: The figures exclude inter-company transactions.
NET CASH BALANCES |
2018
£’000 |
2017
£’000 |
LAP |
11,345 |
2,109 |
Bisichi |
5,686 |
4,065 |
Dragon |
89 |
92 |
Group total |
17,120 |
6,266 |
Our investment with Oaktree Capital Management (HRGT Shopping
Centres LP), remains profitable and generates management fees
(2018: £0.46 million and 2017: £0.46 million) for our wholly owned
subsidiary (London &
Associated Management Services Limited). We also received £nil
(2017: £0.1 million) as a partial repayment of our loan.
Significant cash income and expenditure for LAP in the year
includes:
• The sale of Brixton Markets for £37.25 million,
before costs, in April 2018
• The repayment of £15.9 million of bank debt
• The replacement of a £3 million 11.6 % fixed
interest debenture with a £3.9 million 10 year term loan at 2.95%
above base rate
• The acquisition of an industrial portfolio for
£6.5 million
Cash balances at 31 December 2018
have been allocated towards future profit generating activities,
including the Group’s continued sector diversification.
Income statement
The segmental analysis in Note 1 to the financial statements
gives more detail but the tables below give a clearer summary of
the Group results.
RESULTS BEFORE REVALUATIONS AND NON-CASH
MOVEMENTS |
2018
£’000 |
2017
£’000 |
LAP |
(2,818) |
(130) |
Bisichi |
6,526 |
3,536 |
Dragon |
29 |
(29) |
Group total |
3,737 |
3,377 |
Note: The figures exclude inter-company transactions.
Bisichi’s improvement of £3.0 million is explained under Bisichi
Mining PLC, in this review.
The Group property portfolio, including assets held for sale and
inventory, decreased from £114.46 million to £88.27 million.
During the year the Group sold Brixton Markets held at a value
of £36.44 million, acquired an industrial property in Runcorn at a cost of £6.54 million and
acquired and commenced a residential development, through its West
Ealing joint venture, at a cost of £6.26 million.
The Group’s property portfolio decreased on revaluation by £2.57
million a 2.8% decrease.
profit/(Loss) before taxation |
2018
£’000 |
2017
£’000 |
LAP |
(4,723) |
9,614 |
Bisichi |
6,142 |
1,696 |
Dragon |
(151) |
(32) |
Group profit before taxation |
1,268 |
11,278 |
Note: The figures exclude inter-company transactions.
Balance sheet
LAP has group net assets of £55.7 million (2017: £56.7 million)
(see table below).
Net assets attributable to equity shareholders of the Company at
the year-end were 50.83p per share (2017: 53.74p per share).
2018 |
LAP
Original
Group
£’000 |
Bisichi
Mining PLC
Group
£’000 |
Dragon
Retail
Properties
£’000 |
LAP
Net assets
£’000 |
Investment properties |
35,011 |
13,230 |
2,450 |
50,691 |
Other fixed assets |
106 |
8,531 |
22 |
8,659 |
Other non current assets |
1,748 |
35 |
- |
1,783 |
Inventory–property |
38,556 |
- |
- |
38,556 |
Assets held for sale |
2,285 |
- |
- |
2,285 |
Other current assets |
13,292 |
17,511 |
272 |
31,075 |
Current liabilities |
(38,180) |
(16,718) |
(73) |
(54,971) |
Non-current liabilities |
(16,666) |
(4,529) |
(1,197) |
(22,392) |
Net assets |
36,152 |
18,060 |
1,474 |
55,686 |
2017 |
|
|
|
|
Investment properties |
65,231 |
13,397 |
2,630 |
81,258 |
Other fixed assets |
116 |
8,613 |
6 |
8,735 |
Other non current assets |
1,748 |
51 |
- |
1,799 |
Assets held for sale |
36,441 |
- |
- |
36,441 |
Other current assets |
4,824 |
11,612 |
122 |
16,558 |
Current liabilities |
(8,588) |
(8,844) |
(123) |
(17,555) |
Non-current liabilities |
(59,377) |
(9,858) |
(1,291) |
(70,526) |
Net assets |
40,395 |
14,971 |
1,344 |
56,710 |
Bisichi mining plc
Although the results of Bisichi Mining PLC have been
consolidated in these financial statements, the Board of LAP has no
direct influence over the management of Bisichi. The comments below
are based on the published accounts of Bisichi.
The Bisichi group results are stated in full in its published
2018 financial statements which are available on its website:
www.bisichi.co.uk.
The Bisichi group increased its EBITDA to £8.6 million (2017:
£3.7 million) mainly due to increased operating profits before
depreciation from the mining activities of £8.2 million (2017: £4.9
million). Depreciation in the year relating to mining activities
increased to £2.1 million (2017: £1.8 million). Profit for the year
after tax was
£6.0 million (2017: £1.5 million). Bisichi has two core revenue
streams – investment in retail property in the UK and coal mining
in South Africa.
The increase in operating profit was mainly attributable to the
higher prices achieved for coal and increased mining production at
Black Wattle offsetting the impact of the higher mining and washing
costs.
The UK retail property portfolio was valued at the year end at
£13.05 million (2017: £13.25 million). The property portfolio is
actively managed by LAP and generated rental income of £1.1 million
in the year (2017: £1.1 million).
A R100million bank overdraft facility, held by a subsidiary of
Bisichi with Absa Bank Limited at the year end, was replaced in
January 2019 by a new structured
trade finance facility for R100million. The new trade facility is
renewable annually at 25 January and is secured against inventory,
debtors and cash that are held in the group’s South African
operations.
In the UK, the Bisichi group signed a £6 million five-year term
loan with Santander in December 2014.
This loan is secured against UK investment property. No covenants
were breached during the year.
Cash flow generated from operating activities decreased compared
to the prior year to £4.8 million (2017: £7.3 million). The
improved operating profit during the year of £6.5 million (2017:
£3.8 million) was offset by an increase in income tax paid of £2.28
million (2017: £0.01 million) both as a result of the high
profitability of Bisichi’s South African mining operations. In
addition, cashflow generation from operating activities was
impacted by a cashflow outflow from trade receivables of £0.9
million (2017: inflow of £0.9 million), as a result of an increase
in the trade receivables balances of South African domestic coal
customers, and a cashflow decrease from inventories of £0.8 million
(2017: increase of £0.9 million), mainly as a result of reduced
export coal sales from our South African mining operations in the
last quarter of 2018 due to temporary weather related issues at
Richards Bay Coal Terminal.
The Bisichi group’s financial position remains strong. Its net
assets at 31st December 2018 were
£20.1 million (2017: £17.7 million). The group expects to continue
achieving significant value in 2019 from its existing mining
operation. In addition, Bisichi seeks to expand its operations in
South Africa through the
acquisition of additional coal reserves.
DRAGON RETAIL PROPERTIES LIMITED
Dragon is a UK property investment company. The company has a
Santander bank loan of £1.16 million secured against its investment
property and is covenant compliant. It paid management fees of
£72,000 (2017: £84,000) split equally to the two joint venture
partners. Its results continue to be near breakeven after taxation.
Dragon has net assets of £1.5 million (2017: £1.4 million).
WEST EALING PROJECTS LIMITED
West Ealing is a 50:50 joint venture between LAP and Bisichi
created with the purpose of delivering a residential development,
through its 90% owned subsidiary. West Ealing is included within
the LAP segment as it is not intended to be a long term
activity.
During the year West Ealing’s subsidiary acquired a property and
has commenced development activities. Costs incurred to
31 December 2018 are £6.26 million
and there is a development loan of £3.46 million, described further
in note 18.
ACCOUNTING JUDGEMENTS AND GOING CONCERN
The most significant judgements made in preparing these accounts
relate to the carrying value of the properties, investments and
interest rate hedges. The hedges have been valued by the hedge
provider. The Group uses external property valuers to determine the
fair value of most of its properties.
Under IFRS10 the Group has included Bisichi Mining PLC in the
consolidated accounts, as it is deemed to be under the effective
control of LAP and has therefore been treated as a subsidiary.
The Directors exercise their commercial judgement when reviewing
the Group’s cash flow forecasts and the underlying assumptions on
which the forecasts are based. The Group’s business activities,
together with the factors likely to affect its future development,
are set out in the Chairman and Chief Executive’s Statement and in
this review. In addition, the Directors consider that Note 20 to
the financial statements sets out the Group’s objectives, policies
and processes for managing its capital; its financial risk
management objectives; details of its financial instruments and
hedging activities; and its exposure to credit risk, liquidity risk
and other risks.
With a quality property portfolio comprising a majority of
tenants with long leases supported by suitable financial
arrangements, the Directors believe the group is well placed to
manage its business risks successfully, despite the continuing
uncertain economic climate. The Directors therefore have a
reasonable expectation that the Group and the Company have adequate
resources to continue in operational existence for the foreseeable
future. Thus, they continue to adopt the going concern basis of
accounting in preparing the annual financial statements.
TAXATION
The LAP Group tax strategy is to account for tax on an accurate
and timely basis. We only structure our affairs based on sound
commercial principles and wish to maintain a low tax risk position.
We do not engage in aggressive tax planning.
The LAP Group (excluding Bisichi and Dragon) has unused tax
losses and deductions with a potential value of £7.2 million (2017:
£10.2 million) of which only £0.9 million (2017: £4.7 million) has
been recognised in the 2018 financial statements. As LAP returns to
profit, these tax losses and deductions should be utilised.
DIVIDENDS AND FUTURE PROSPECTS
The directors are proposing a final dividend of 0.18p per
ordinary share payable in September
2019.
The Group remains cautiously confident about its trading and
future outlook and it continues to look at ways in which it can
further reduce its overhead costs and interest payable, while it
stabilises its property income together with seeking suitable
growth opportunities.
Principal activities, strategy & business model
The LAP Group’s principal business model is the investment in
and management and development of industrial and retail property
through direct investment and joint ventures, where we manage the
property ourselves and on behalf of our partners.
The principal activity of Bisichi Mining PLC is coal mining in
South Africa. Further information
is available in its 2018 Financial Statements which are available
on their web site: www.bisichi.co.uk
STRATEGIC PRIORITIES ARE |
OUR STRATEGY IS |
MAXIMISING INCOME |
By achieving an appropriate tenant mix and
shopping experience we can increase footfall through the centres,
hence increase tenant demand for space and enhance income. |
CREATING QUALITY PROPERTY |
We look to improve the consumer experience at all
our centres by achieving an appropriate tenant mix and a vibrant
trading environment through investment activity, enhancement,
refurbishment and development. |
CAPITAL STRENGTH |
We operate within a prudent and flexible financial
structure. Our gearing policy provides financial stability whilst
giving capacity and flexibility to look for further
investments. |
MAINTAIN THE VALUE OF INVESTMENT IN
BISICHI |
By encouraging the Bisichi management to maximise
sustainable profits and cash distributions. |
Risks and uncertainties
DESCRIPTION OF RISK |
DESCRIPTION OF IMPACT |
MITIGATION |
ASSET MANAGEMENT: |
|
|
TENANT FAILURE |
Financial loss. |
Initial and subsequent assessment of tenant
covenant strength combined with an active credit control
function. |
LEASES NOT RENEWED |
Financial loss. |
Lease expiries regularly reviewed. Experienced
teams with strong tenant and market knowledge who manage
appropriate tenant mix. |
ASSET LIQUIDITY (SIZE AND GEOGRAPHICAL
LOCATION) |
Assets may be illiquid and affect flexing of
balance sheet. |
Regular reporting of current and projected
position to the Board with efficient treasury management. |
PEOPLE: |
|
|
RETENTION AND RECRUITMENT OF STAFF |
Unable to retain and attract the best people for
the key roles. |
Nomination Committee and senior staff review
skills gaps and succession planning. Training and development
offered. |
REPUTATION: |
|
|
BUSINESS INTERRUPTION |
Loss in revenue.
Impact on footfall.
Adverse publicity.
Potential for criminal/
civil proceedings. |
Documented Recovery Plan in
place.
General and terrorism insurance policies in place and risks
monitored by trained security staff.
Health and Safety policies in place.
CCTV in centres. |
FINANCING: |
|
|
FLUCTUATION IN PROPERTY
VALUES |
Impact on covenants and other loan agreement
obligations. |
Secure income flows.
Regular monitoring of LTV and IC covenants and other
obligations.
Focus on quality assets. |
REDUCED AVAILABILITY OF BORROWING
FACILITIES |
Insufficient funds to meet existing debts/interest
payments and operational payments. |
Efficient treasury management.
Loan facilities extended where possible.
Regular reporting of current and projected position to the
Board. |
LOSS OF CASH AND DEPOSITS |
Financial loss. |
Only use a spread of banks and financial
institutions which have a strong credit rating. |
FLUCTUATION OF INTEREST RATES |
Uncertainty of interest rate costs. |
Manage derivative contracts to achieve a balance
between hedging interest rate exposure and minimising potential
cash calls. |
Bisichi risks and uncertainties
Bisichi (although it is consolidated into group accounts as
required by IFRS 10) is managed independently of LAP. The risks
outlined below are an abbreviated summary of the risks reported by
the Directors of Bisichi to the shareholders of that Company. Full
details are available in the published accounts of Bisichi
(www.bisichi.co.uk).
These risks, although critical to Bisichi, are of less
significance to LAP which only has a minority investment of 41.52%
in the company. In the unlikely event that Bisichi was unable to
continue trading, it would not affect the ability of LAP to
continue operating as a going concern.
DESCRIPTION OF RISK |
DESCRIPTION OF IMPACT |
MITIGATION |
COAL PRICES CAN BE IMPACTED MATERIALLY
BY MARKET AND CURRENCY VARIATIONS |
Affects sales value and therefore margins. |
Forward sales contracts are used to manage value
expectations. |
MINING OPERATIONS ARE INHERENTLY RISKY. MINERAL
RESERVES, REGULATIONS, LICENSING, POWER AVAILABILITY, HEALTH AND
SAFETY CAN ALL DAMAGE OPERATIONS |
Loss of production causing loss of revenue. |
Use of geology experts, careful attention to
regulations, health and safety training, employee dialogue to
minimise controllable risks. |
CURRENCY RISK |
Affects realised sales value and therefore
margins. |
Regular monitoring and review of forward currency
situation. |
CASHFLOW VARIATION BECAUSE OF MINING RISKS,
COMMODITY PRICE OR CURRENCY VARIATIONS |
Variations can deliver significant shifts in cash
flow. |
UK property investments used to offset high risk
mining operations. |
Key performance indicators
The Group’s Key Performance Indicators are selected to ensure
clear alignment between its strategy and shareholder interests.
The KPIs are calculated using data from management reporting
systems.
Strategic priority |
KPI |
Performance |
|
MAXIMISING INCOME – LIKE FOR LIKE
PROPERTY INCOME |
|
To increase the like-for-like income from each
property year on year. |
Like-for-like rental income as a percentage of the
prior year rental. |
The like-for-like rental income by
property has remained broadly unchanged.
In the continuing difficult trading environment, this is considered
satisfactory.
*Excluding service charges |
|
MAXIMISING INCOME –
OCCUPANCY |
|
|
We aim to maximise the
total
income in our properties by
achieving full occupancy. |
The ERV of the empty units as a percentage of our
total income. |
Void levels increased to 7.24%, in the main due to
development activity in Sheffield, on units that have become
vacant. |
|
|
CAPITAL STRENGTH – GROWTH IN NET
ASSET VALUE PER SHARE |
|
The net assets per share is the principal
measure used by the group for monitoring its performance and is an
indicator of the level of reserves available for distribution by
way of dividend. |
Movement in the net assets
per share. |
The net assets per share reduced by 2.91 pence per
share (5.4%) to 50.83p. |
|
Corporate responsibility
Sustainable Development
Bisichi’s Black Wattle continues to strive to conduct business
in a safe, environmentally and socially responsible manner. Some
highlights of their Health, Safety and Environment performance in
2018:
• Black Wattle Colliery recorded one Lost Time
Injury during 2018.
• No cases of Occupational Diseases were
recorded.
• Zero claims for the Compensation for Occupational
Diseases were submitted.
They continue to be compliant and make
progress in terms of their Social and Labour Plan and their various
BEE initiatives. A fuller explanation of these can be found in
Bisichi’s 2018 Financial Statements which are available on their
web site:
www.bisichi.co.uk
Greenhouse gas reporting
We have reported on all emission sources required under the
Companies Act 2006 (Strategic Report and Directors’ Reports)
Regulations 2013 for the reporting period 1st January 2018 to 31st December 2018. The
emissions are detailed in Tables 1, 2
and 3 below.
We have employed the Financial Control definition to outline our
carbon footprint boundary, reporting Scope 1 & 2 emissions
only. Emissions from both landlord & tenant-controlled areas of
LAP owned shopping centres and facilities fall within the footprint
boundary. LAP has landlord-controlled areas in Kings Square,
Orchard Square, Brewery Street, Shipley and Bridgend. Properties
that we manage on behalf of others or are not wholly owned by LAP
are excluded from our footprint boundary.
Emissions for landlord-controlled areas have been calculated
based on actual consumption data collected from each shopping
centre. Emissions from tenant-controlled areas have been calculated
based on floor area and energy consumption benchmarks for general
retail services in the UK.
We have used the ISO14046-1 Standard (2006) and guidance
provided by UK’s Department of Environment and Rural Affairs
(DEFRA) on voluntary and mandatory carbon reporting. Emission
factors were used from UK Government’s GHG Conversion Factors for
Company Reporting 20181.
As well as reporting Scope 1 and Scope 2 emissions, the
regulations require that at least one intensity ratio is reported
for the given reporting period. The intensity figure below shows
the emissions in tCO2e per thousand pounds revenue.
Table 1. Landlord & tenant controlled areas
|
Emissions Source |
2018 |
2017 |
Scope 1 emissions |
Natural gas (tCO2e) |
169 |
71 |
|
Refrigerants (tCO2e) |
0 |
0 |
Scope 2 emissions |
Electricity (tCO2e) |
2,519 |
2,938 |
|
Total tCO2e |
2,688 |
3,009 |
|
Intensity ratio (tCO2e/£thousand) |
0.514 |
0.467 |
Table 2. LAP controlled areas
|
Emissions Source |
2018 |
2017 |
Scope 1 emissions |
Natural gas (tCO2e) |
169 |
71 |
|
Refrigerants (tCO2e) |
0 |
0 |
Scope 2 emissions |
Electricity (tCO2e) |
134 |
176 |
|
Total tCO2e |
303 |
247 |
Table 3. Tenant controlled areas
|
Emissions Source |
2018 |
2017 |
Scope 1 emissions |
Natural gas (tCO2e) |
0 |
0 |
|
Refrigerants (tCO2e) |
0 |
0 |
Scope 2 emissions |
Electricity (tCO2e) |
2,385 |
2,762 |
|
Total tCO2e |
2,385 |
2,762 |
1. 2018 Guidelines to DEFRA / DECC’s GHG Conversion Factors for
Company Reporting”, Department for Environment, Food and Rural
Affairs (DEFRA) and Department for Energy and Climate Change
(DECC).
Table 4. Coal mining carbon footprint
|
2018
CO2e
Tonnes |
2017
CO2e
Tonnes |
Emissions source: |
|
|
Scope 1 Combustion of fuel & operation of facilities |
21,348 |
15,575 |
Scope 1 Emissions from coal mining activities |
27,428 |
27,004 |
Scope 2 Electricity, heat, steam and cooling purchased for own
use |
12,177 |
11,210 |
Total |
60,953 |
53,778 |
Intensity: |
|
|
Intensity 1 Tonnes of CO2 per pound sterling of revenue |
0.0013 |
0.0014 |
Intensity 2 Tonnes of CO2 per pound of coal produced |
0.0462 |
0.0415 |
Note: Bisichi has recalculated emissions from coal mining
activities using a more up to date methane conversion factor;
because of this, 2017 emissions from coal mining activities have
been restated.
Environment
United Kingdom
The Group’s principal UK activity is property investment, which
involves renting premises to commercial businesses. We seek to
provide those tenants with good quality premises from which they
can operate in an efficient and environmentally friendly manner.
Where possible, improvements, repairs and replacements are made in
an environmentally efficient manner and waste re-cycling
arrangements are in place at all the Company’s locations.
South Africa
The Bisichi group’s principal activity in South Africa is coal mining. Under the terms
of the mine’s Environmental Management Programme approved by the
Department of Mineral Resource (“DMR”), Black Wattle undertakes a
host of environmental protection activities to ensure that the
approved Environmental Management Plan is fully implemented. A
performance assessment audit was conducted to verify compliance to
their Environmental Management Programme and no significant
deviations were found.
EMPLOYEE, SOCIAL, COMMUNITY AND HUMAN RIGHTS
The Group’s policy is to attract staff and motivate employees by
offering competitive terms of employment. The Group provides equal
opportunities to all employees and prospective employees including
those who are disabled and operates in compliance with all relevant
national legislation.
The Group believes that it is in the interest of shareholders to
consider social and human rights issues when conducting business.
Various policies and initiatives implemented by the Group that fall
within these areas are discussed within this report.
ANTI-SLAVERY AND HUMAN TRAFFICKING
The Group is committed to the prevention of the use of forced
labour and has a zero tolerance policy for human trafficking and
slavery. The Group’s policies and initiatives in this area can be
found within the Group’s Anti-slavery and human trafficking
statement found on the Group’s website at www.lap.co.uk.
DIVERSITY AND EQUALITY
The Board recognises the importance of diversity, both in its
membership, and in the Group’s employees. It has a clear policy to
promote diversity across the business. The Board considers that
quotas are not appropriate in determining its composition and has
therefore chosen not to set targets. All aspects of diversity,
including but not limited to gender, are considered at every level
of recruitment. Gender diversity of the Board and the Group is set
out below.
DIRECTORS, EMPLOYEES AND GENDER REPRESENTATION
At the year end the LAP Group (excluding Bisichi and Dragon),
had 6 directors (6 male, 0 female), 2 senior managers (2 male, 0
female) and 23 employees (12 male, 11 female).
BISICHI MINING PLC
Bisichi Mining PLC’s Group at the year end had 7 directors (6
male, 1 female), 7 senior managers (6 male, 1 female) and 246
employees (175 male, 71 female).
Detailed information relating to the Bisichi Strategic Report is
available in its 2018 financial statements.
Approved on behalf of the board of directors
Jonathan Mintz
Finance Director
30 April 2019
Governance
Directors & advisors
EXECUTIVE DIRECTORS
Sir Michael Heller MA
FCA*
(Chairman)
John A Heller LLB MBA
(Chief Executive)
Anil K Thapar FCCA
(Finance Director) resigned 31 December
2018
Jonathan Mintz FCA
(Finance Director) Appointed 11 February
2019
NON-EXECUTIVE DIRECTORS
Howard D Goldring BSC (ECON) ACA?
Howard Goldring is Executive
Chairman of Delmore Holdings Limited which specialises in the
discretionary management of investment portfolios for pension
funds, charities, family trusts and private clients. He also acts
as an advisor providing high level asset allocation advice to
family offices and pension schemes. He has been a member of the LAP
Board since July 1992, and has almost
40 years’ experience of the real estate market. He was a director
of Baronsmead VCT 2 PLC from 2010-2016, and has specialised in
providing many companies with investor relations support.
Clive A Parritt FCA CF FIIA #†
Clive Parritt joined the board on
1 January 2006. He is a chartered
accountant with over 40 years’ experience of providing strategic,
financial and commercial advice to businesses of all sizes. He is a
director of Jupiter US Smaller Companies plc, chairman of BG
Training Limited and a member of the Performance, Audit and Risk
Committee of Arts Council England. Until April 2016 he was Group Finance Director of
Audiotonix Limited (an international manufacturer of audio mixing
consoles). He has chaired and been a director of a number of other
public and private companies. Clive
Parritt was President of the Institute of Chartered
Accountants in England and
Wales in 2011-12. He is Chairman
of the Audit Committee and as Senior Independent Director he chairs
the Nomination and Remuneration Committees.
Robin Priest MA
Robin Priest joined the board on
31 July 2013. He is a senior advisor
to Alvarez & Marsal LLP (“A&M”) and to a major listed
German real estate investment fund manager. He has more than 38
years’ experience in real estate and structured finance. He was
formerly Managing Director of A&M’s real estate practice,
advising private sector and public sector clients on both
operational and financial real estate matters. Prior to joining
A&M, Robin was lead partner for Real Estate Corporate Finance
in London with Deloitte LLP and
before this he founded and ran a property company backed by private
equity. He is also a trustee of London’s Oval House Theatre.
* Member of the nomination committee
? Member of the audit, remuneration and nomination
committees
# Senior independent director
SECRETARY & REGISTERED OFFICE
Jonathan Mintz FCA
24 Bruton Place
London W1J 6NE
AUDITOR
RSM UK Audit LLP
PRINCIPAL BANKERS
Santander UK plc
Abbey National Treasury Services plc
Europa Capital Mezzanine Ltd
SOLICITORS
Olswang LLP
Pinsent Masons LLP
STOCKBROKER
Stockdale Securities Limited
REGISTRARS & TRANSFER OFFICE
Link Asset Services
Shareholder Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
UK telephone: 0871 664 0300
International telephone: +44 371 664 0300
(Calls cost 12p per minute plus your phone company’s access charge.
Calls outside the United
Kingdom will be charged at the applicable international
rate).
Lines are open between 9.00am to
5.30pm, Monday to Friday, excluding public holidays in
England and Wales.
Website: www.linkassetservices.com
Email: enquiries@linkgroup.co.uk
Company registration number
341829 (England and Wales)
WEBSITE
www.lap.co.uk
E-MAIL
admin@lap.co.uk
Directors’ report
The Directors submit their report and
the audited financial statements for the year
ended 31 December 2018.
Strategic report
A comprehensive review and assessment of the Group’s activities
during the year as well as its position at the year end and
prospects for the forthcoming year are included in the Chairman and
Chief Executive’s Statement and the Strategic Report. These reports
can be found on pages 2 to 11 and should be read in conjunction
with this report.
Activities
The principal activities of the Group during the year were
property investment and development, as well as investment in joint
ventures and an associated company. The associated company is
Bisichi Mining PLC (Bisichi) in which the Company holds a 41.52 %
interest. Bisichi is listed on the main market of the London Stock
Exchange and operates in England
and South Africa with subsidiaries
which are involved in overseas mining and mining investment. The
results, together with the assets and liabilities, of Bisichi are
consolidated with those of LAP in accordance with the terms of IFRS
10 even though the Group only has a minority interest – under IFRS
10 the 58.48% majority interest is disclosed as a “non-controlling
interest”.
Business review AND POST BALANCE SHEET EVENTS
Review of the Group’s development and performance
A review of the Group’s development and performance can be found
below and should be read in conjunction with the Strategic Report
on pages 4 to 11.
Details of any post balance sheet events are disclosed in Note
29 to the financial statements.
Future developments
The Group continues to look for new opportunities to acquire
real estate assets where it feels it can increase value by applying
its intensive management skills. At the same time, it seeks to
reduce its interest payments on its loans as they expire or where
opportunities arise to refinance on better terms. We also seek to
improve our existing estate through the continued pursuit of asset
management initiatives.
Property activities
The Group is a long-term investor in property. It acquires
properties, actively manages those assets to improve rental income,
and thus seeks to enhance the value of its properties over time. In
reviewing performance, the principal areas regularly monitored
by the Group include:
• Rental income – the aim of the Group is to
maximise the maintainable income from each property by careful
tenant management supported by sympathetic and revenue enhancing
development. Income may be affected adversely by the inability of
tenants to pay their rent, but careful monitoring of rent
collection and tenant quality helps to mitigate this risk. Risk is
also minimised by a diversified tenant base, which should limit the
impact of the failure of any individual tenant.
• Cash flow – allowing for voids, acquisitions,
development expenditure, disposals and the impact of operating
costs and interest charges, the Group aims to maintain a positive
cash flow over time.
• Financing costs – the exposure of the Group to interest
rate movements is managed partly by the use of swap and cap
arrangements (see Note 20 for full details of the contracts in
place) and also by using loans with fixed terms and interest rates.
These arrangements are designed to ensure that our interest costs
are known in advance and are always covered by anticipated rental
income.
• Property valuations – market sentiment and
economic conditions have a direct effect on property valuations,
which can vary significantly (upwards or downwards) over time.
Bearing in mind the long term nature of the Group’s business,
valuation changes have little direct effect on the ongoing
activities or the income and expenditure of the Group. Tenants
generally have long term leases, so rents are unaffected by short
term valuation changes. Borrowings are secured against property
values and if those values fall very significantly, this could
limit the ability of the Group to develop the business using
external borrowings. The risk is minimised by trying to ensure that
there is adequate cover to allow for fluctuations in value on
a short term basis.
It continues to be the policy of the Group to realise property
assets when the valuation of those assets reaches a level at which
the directors consider that the long-term rental yield has been
reached. The Group also seeks to acquire additional property
investments on an opportunistic basis when the potential rental
yields offer scope for future growth.
Investment activities
The investments in joint ventures and Bisichi are for the long
term.
LAP manages the UK property assets of Bisichi. However, the
principal activity of Bisichi is overseas mining investment (in
South Africa). While IFRS 10
requires the consolidation of Bisichi, the investment is held to
generate income and capital growth over the longer term. It is
managed independently of LAP and should be viewed by shareholders
as an investment and not a subsidiary. The other listed investments
are held as current assets to provide the liquidity needed to
support the property activities while generating income and capital
growth.
Investments in property are made through joint ventures when the
financing alternatives and spreading of risk make such an approach
desirable.
Dividend
The directors are recommending payment of a final dividend for
2018 of 0.18p per share (2017: 0.175p per share).
Subject to shareholder approval, the ordinary final dividend
will be payable on Friday 13 September
2019 to shareholders registered at the close of business on
Friday 16 August 2019.
The company’s ordinary shares held in treasury
At 31 December 2018, 218,197
(2017: 221,061) ordinary shares were held in Treasury with a market
value of £56,731 (2017: £54,160). At the Annual General Meeting
(AGM) in June 2018 members renewed
the authority for the Company to purchase up to 10 per cent of its
issued ordinary shares. The Company will be asking members to renew
this authority at the next AGM to be held on Wednesday 12 June 2019.
Treasury shares held
at 1 January 2018
at 31 December 2018 |
221,061
218,197 |
Treasury shares are not included in issued share capital for the
purposes of calculating earnings per share or net assets per share
and they do not qualify for dividends payable.
Investment properties
The freehold and long leasehold properties of the Company, its
subsidiaries and Bisichi were revalued as at 31 December 2018 by independent professional
firms of chartered surveyors – Allsop LLP, London (69.13 per cent of the portfolio),
Carter Towler, Leeds (27.5 per cent) – and by the Directors
(3.37 per cent). The valuations, which are reflected in the
financial statements, amount to £47.4 million (2017: £78
million).
Property of £2.3 million (2017: £36.4 million) is included under
current assets, as assets held for sale.
Property of £38.6 million (2017: £nil) is included under current
assets, as inventory.
Taking account of prevailing market conditions, the valuation of
the properties at 31 December 2018
resulted in a decrease of £2.6 million (2017: increase of £9.37
million). The proportion of this revaluation attributable to the
Group (net of taxation) is reflected in the consolidated income
statement and the consolidated balance sheet.
Financial instruments
Note 20 to the financial statements sets out the risks in
respect of financial instruments. The board reviews and agrees
overall treasury policies, delegating appropriate authority for
applying these policies to the Chief Executive and Finance
Director. Financial instruments are used to manage the financial
risks facing the Group and speculative transactions are prohibited.
Treasury operations are reported at each board meeting and are
subject to weekly internal reporting. Hedging arrangements are in
place for the Company, its subsidiaries and joint ventures in order
to limit the effect of higher interest rates upon the Group. Where
appropriate, hedging arrangements are covered in the Chairman and
Chief Executive’s Statement and the Financial Review.
Directors
Sir Michael Heller, J A Heller, A
K Thapar, H D Goldring, C A Parritt and R Priest were Directors of
the company for the whole of 2018.
A K Thapar retired as a Director on 31
December 2018.
Sir Michael Heller and H D
Goldring are retiring by rotation at the Annual General Meeting in
2019 and offer themselves for re-election.
J Mintz was appointed as an executive Director on 11 February 2019 and will offer himself for
election at the Annual General Meeting in 2019.
Brief details of the Directors offering themselves for
re-election, are as follows:
Sir Michael Heller is Executive
Chairman and has been a Director since 1971. He has a contract of
service determinable upon six months’ notice. Sir Michael Heller is a chartered accountant and a
member of the nomination committee. He is Executive Chairman of
Bisichi Mining PLC, our associate company. The board has considered
the re-appointment of Sir Michael
Heller and recommends his re-election as a Director.
Howard Goldring has been a
Director since 1992 and has a contract of service determinable upon
three months’ notice. He is an Independent Director and a member of
the audit, nomination and remuneration committees. Howard Goldring is a chartered accountant and
global asset allocation specialist. He is Executive Chairman of
Delmore Holdings Limited. His specialized economic knowledge and
broad commercial experience are of significant benefit to the
business. The board has considered the re-appointment of
Howard Goldring and recommends his
re-election as a Director.
Jonathan Mintz was appointed a
Director on 11 February 2019 and is
also the Company Secretary. He has a contract of employment
determinable upon three months’ notice. Jonathan Mintz is an ACA qualified Finance
Director experienced in real estate, consultancy, and construction
in the UK and internationally. He has worked in the property and
infrastructure sector for the majority of his career, holding
senior positions with listed and private property and construction
businesses. The board has considered the appointment of
Jonathan Mintz and recommends his
election as a Director.
Directors’ interests
The interests of the Directors in the ordinary shares of the
Company, including family and trustee holdings, where appropriate,
can be found on page 22 of the Annual Remuneration Report.
Substantial shareholdings
|
31 Dec 2018 |
31 Dec 2017 |
|
no. |
% |
no. |
% |
Sir Michael Heller
and family |
48,080,511 |
56.35 |
48,080,063 |
56.35 |
Cavendish Asset Management Limited |
8,061,044 |
9.45 |
7,909,464 |
9.27 |
James Hyslop |
4,886,258 |
5.73 |
4,846,258 |
5.68 |
Maland Pension Fund |
2,931,198 |
3.44 |
– |
0.00 |
The Company does not consider that the Heller family has a
controlling share interest irrespective of the number of shares
held as no individual party holds a majority and there is no legal
obligation for shareholders to act in concert. The Directors do not
consider that any single party has control.
The Company is not aware of any other holdings exceeding 3 per
cent of the issued share capital.
share capital and Takeover directive
The Company has one class of share capital, namely ordinary
shares. Each ordinary share carries one vote. All the ordinary
shares rank pari passu. There are no securities issued by the
Company which carry special rights with regard to control of the
Company.
The identity of all significant direct or indirect holders of
securities in the Company and the size and nature of their holdings
is shown in “Substantial Shareholdings” above.
The rights of the ordinary shares to which the HMRC approved
Share Incentive Plan relates are exercisable by the trustees on
behalf of the employees.
There are no restrictions on voting rights or on the transfer of
ordinary shares in the Company, save in respect of treasury shares.
The rules governing the appointment and replacement of Directors,
alteration of the articles of association of the Company and the
powers of the Company’s Directors accord with usual English company
law provisions. Each Director is subject to re-election at least
every three years. The Company has requested authority from
shareholders to buy back its own ordinary shares and there will be
a resolution to renew the authority at this year’s AGM (Resolution
11).
The Company is not party to any significant agreements that take
effect, alter or terminate upon a change of control of the Company
following a takeover bid. The Company is not aware of any
agreements between holders of its ordinary shares that may result
in restrictions on the transfer of its ordinary shares or on voting
rights.
There are no agreements between the Company and its Directors or
employees providing for compensation for loss of office or
employment that occurs because of a takeover bid.
Statement as to disclosure of information to the auditor
The Directors in office at the date of approval of the financial
statements have confirmed that, so far as they are aware, there is
no relevant audit information of which the auditor is unaware. Each
of the Directors has confirmed that they have taken all the steps
that they ought to have taken as a Director in order to make them
aware of any relevant audit information and to establish that it
has been communicated to the auditor.
indemnities and insurance
The Articles of Association of the company provide for it to
indemnify, to the extent permitted by law, directors and officers
(excluding the Auditor) of the company, including officers of
subsidiaries and associated companies, against liabilities arising
from the conduct of the Group’s business. The indemnities are
qualifying third party indemnity provisions of the Companies Act
2006 and each of these qualifying third party indemnities was in
force during the course of the financial year ended 31 December 2018 and as at the date of this
Directors’ report. No amount has been paid under any of these
indemnities during the year.
The Group maintains Directors and officers insurance, which is
reviewed annually and is considered to be adequate by the Company
and its insurance advisers.
Donations
No political donations were made during the year (2017: £Nil).
£2,800 of donations for charitable purposes were made during the
year (2017: £1,000).
CORPORATE RESPONSIBILITY
Environment
The environmental considerations of the group’s South African
coal mining operations are covered in the Bisichi Mining PLC
Strategic Report.
The group’s UK activities are principally property investment
whereby premises are provided for rent to commercial businesses.
The group seeks to provide those tenants with good quality premises
from which they can operate in an efficient and environmentally
efficient manner and waste re-cycling arrangements are in place at
all the company’s locations.
Greenhouse gas emissions
Details of the group’s greenhouse gas emissions for the year
ended 31 December 2018 can be found
on pages 10 and 11 of the Strategic Report.
Employment
The group’s policy is to attract staff and motivate employees by
offering competitive terms of employment. The group provides equal
opportunities to all employees and prospective employees including
those who are disabled. The Bisichi Mining PLC Strategic Report
gives details of the Bisichi group’s activities and policies
concerning the employment, training, health and safety and
community support and social development concerning the Bisichi
group’s employees in South
Africa.
Going concern
The directors have reviewed the cash flow forecasts of the Group
and the underlying assumptions on which they are based. The Group’s
business activities, together with the factors likely to affect its
future development, are set out in the Chairman’s and Chief
Executive’s Statement and Financial Review. In addition, Note 20 to
the financial statements sets out the Group’s objectives, policies
and processes for managing its capital; its financial risk
management objectives; details of its financial instruments and
hedging activities; and its exposure to credit risk and liquidity
risk.
With secured long term banking facilities, sound financial
resources and long term leases in place the Directors believe it
remains appropriate to adopt the going concern basis of accounting
in preparing the annual financial statements.
The Bisichi directors continue to adopt the going concern basis
of accounting in preparing the Bisichi annual financial
statements.
Corporate Governance
The Corporate governance report can be found on pages 17 and 18
of the annual report and accounts.
Annual General Meeting
The Annual General Meeting will be held at 24 Bruton Place,
London, W1J 6NE on Wednesday
12 June 2019 at 10.00 a.m. Items 1 to 9 will be proposed as
ordinary resolutions. More than 50 per cent. of shareholders’ votes
cast at the meeting must be in favour for those ordinary
resolutions to be passed. Items 10 to 12 will be proposed as
special resolutions. At least 75 per cent. of shareholders’ votes
cast at the meeting must be in favour for those special resolutions
to be passed. The Directors consider that all of the resolutions to
be put to the meeting are in the best interests of the Company and
its shareholders as a whole and accordingly the board unanimously
recommends that shareholders vote in favour of all of the
resolutions as the Directors intend to do in respect of their own
beneficial holdings of ordinary shares. Please note that the
following paragraphs are only summaries of certain of the
resolutions to be proposed at the Annual General Meeting and do not
represent the full text of the resolutions. You should therefore
read this section in conjunction with the full text of the
resolutions contained in the notice of Annual General Meeting which
accompanies this Directors’ Report.
Ordinary resolutions
Resolution 9 – Authority to allot securities
Paragraph 9.1.1 of Resolution 9 would give the Directors the
authority to allot shares in the Company and grant rights to
subscribe for or convert any security into shares in the Company up
to an aggregate nominal value of £2,836,478. This represents
approximately 1/3 (one third) of the ordinary share capital of the
Company in issue (excluding treasury shares) as at 26 April 2019 (being the last practicable date
prior to the publication of this Directors’ Report).
In line with guidance issued by the Institutional Voting
Information Service (IVIS), paragraph 9.1.2 of Resolution 9 would
give the directors the authority to allot shares in the Company and
grant rights to subscribe for or convert any security into shares
in the Company up to a further aggregate nominal value of
£2,836,478, in connection with an offer by way of a rights issue.
This amount represents approximately another 1/3 (one third) of the
ordinary share capital of the Company in issue (excluding treasury
shares) as at 26 April 2019 (being
the last practicable date prior to the publication of this
Directors’ Report).
The Directors’ authority will expire on the earlier of
31 August 2020 or the next AGM. The
Directors do not currently intend to make use of this authority.
However, if they do exercise the authority, the Directors intend to
follow best practice as recommended by the IVIS regarding its use
(including as regards the Directors standing for re-election in
certain cases).
SPECIAL RESOLUTIONS
The following special resolutions will be proposed at the Annual
General Meeting:
Resolution 10 – Disapplication of pre-emption rights
Under English company law, when new shares are allotted or
treasury shares are sold for cash (otherwise than pursuant to an
employee share scheme) they must first be offered at the same price
to existing shareholders in proportion to their existing
shareholdings. This special resolution gives the Directors
authority, for the period ending on the date of the next annual
general meeting to be held in 2020, to: (a) allot shares of the
Company and sell treasury shares for cash in connection with a
rights issue or other pre-emptive offer; and (b) otherwise allot
shares of the Company, or sell treasury shares, for cash up to an
aggregate nominal value of £425,472 representing, in accordance
with IVIS guidelines, approximately 5 per cent. of the total
ordinary share capital in issue as at 26
April 2019 (being the last practicable date prior to the
publication of this Directors’ Report) in each case as if the
pre-emption rights in English company law did not apply.
Save in respect of issues of shares in respect of employee share
schemes and share dividend alternatives, the Directors do not
currently intend to make use of these authorities. The board
intends to adhere to the provisions in the Pre-emption Group’s
Statement of Principles not to allot shares for cash on a
non-pre-emptive basis in excess of an amount equal to 7.5 per cent.
of the Company’s ordinary share capital within a rolling three-year
period without prior consultation with shareholders. The Directors’
authority will expire on the earlier of 31
August 2020 or the date of next AGM.
Resolution 11 – Purchase of own ordinary shares
The effect of Resolution 11 would be to renew the Directors’
current authority to make limited market purchases of the Company’s
ordinary shares of 10 pence each. The
power is limited to a maximum aggregate number of 8,509,435
ordinary shares (representing approximately 10 per cent. of the
Company’s issued share capital as at 26
April 2019 (being the latest practicable date prior to
publication of this Directors’ Report)). The minimum price
(exclusive of expenses) which the Company would be authorised to
pay for each ordinary share would be 10
pence (the nominal value of each ordinary share). The
maximum price (again exclusive of expenses) which the Company would
be authorised to pay for an ordinary share is an amount equal to
105 per cent. of the average market price for an ordinary share for
the five business days preceding any such purchase. The authority
conferred by Resolution 11 will expire at the conclusion of the
Company’s next annual general meeting to be held in 2020 or 15
months from the passing of the resolution, whichever is the
earlier. Any purchases of ordinary shares would be made by means of
market purchases through the London Stock Exchange.
If granted, the authority would only be exercised if, in the
opinion of the Directors, to do so would result in an increase in
earnings per share or asset values per share and would be in the
best interests of shareholders generally. In exercising the
authority to purchase ordinary shares, the Directors may treat the
shares that have been bought back as either cancelled or held as
treasury shares (shares held by the Company itself). No dividends
may be paid on shares which are held as treasury shares and no
voting rights are attached to them.
Resolution 12 – Notice of General Meetings
Resolution 12 shall be proposed to allow the Company to call
general meetings (other than an Annual General Meeting) on 14 clear
days’ notice. A resolution in the same terms was passed at the
Annual General Meeting in 2018. The notice period required by the
Companies Act 2006 for general meetings of the Company is 21 days,
unless shareholders approve a shorter notice period, which cannot
however be less than 14 clear days. Annual General Meetings must
always be held on at least 21 clear days’ notice. It is intended
that the flexibility offered by this resolution will only be used
for time-sensitive, non-routine business and where merited in the
interests of shareholders as a whole. The approval will be
effective until the Company’s next Annual General Meeting, when it
is intended that a similar resolution will be proposed.
OTHER MATTERS
RSM UK Audit LLP has expressed its willingness to continue in
office as auditor. A proposal will be made at the Annual General
Meeting for its reappointment.
By order of the board
Jonathan Mintz
Secretary
30 April 2019
24 Bruton Place
London
W1J 6NE
Corporate Governance
The Company has adopted the Corporate
Governance Code for Small and Mid-Size Quoted Companies (the QCA
Code) published by the Quoted Companies Alliance. The QCA Code
provides governance guidance to small and mid-size quoted
companies. The paragraphs below set out how the Company has applied
this guidance during the year. The Company has complied with the
QCA Code throughout the year.
Principles of corporate governance
The board promotes good corporate governance in the areas of
risk management and accountability as a positive contribution to
business prosperity. The board endeavours to apply corporate
governance principles in a sensible and pragmatic fashion having
regard to the circumstances of the business. The key objective is
to enhance and protect shareholder value.
Board structure
During the year the board comprised the Chairman, the Chief
Executive, one other executive Director and three non-executive
Directors. Their details appear on page 12 The board is responsible
to shareholders for the proper management of the Group.
The Directors’ responsibilities statement in respect of the
accounts is set out on page 27. The non-executive Directors have a
particular responsibility to ensure that the strategies proposed by
the executive Directors are fully considered. To enable the board
to discharge its duties, all Directors have full and timely access
to all relevant information and there is a procedure for all
Directors, in furtherance of their duties, to take independent
professional advice, if necessary, at the expense of the Group. The
board has a formal schedule of matters reserved to it and normally
has eleven regular meetings scheduled each year. Additional
meetings are held for special business when required.
The board is responsible for overall Group strategy, approval of
major capital expenditure and consideration of significant
financial and operational matters.
The board committees, which have written terms of reference,
deal with specific aspects of the Group’s affairs:
• The nomination committee is chaired by C A Parritt
and comprises one other non-executive Director and the executive
Chairman. The committee is responsible for proposing candidates for
appointment to the board, having regard to the balance and
structure of the board. In appropriate cases recruitment
consultants may be used to assist the process. All Directors are
subject to re-election at a maximum of every three years.
• The remuneration committee is responsible for
making recommendations to the board on the Company’s framework of
executive remuneration and its cost. The committee determines the
contract terms, remuneration and other benefits for each of the
executive directors, including performance related bonus schemes,
pension rights, option grants and compensation payments. The board
itself determines the remuneration of the non-executive Directors.
The committee comprises two non-executive Directors and it is
chaired by C A Parritt. The executive Chairman of the board is
normally invited to attend. The Annual Remuneration Report is set
out on pages 20 to 23.
• The audit committee comprises two non-executive
Directors and is chaired by C A Parritt. The audit committee
report, with its terms of reference, is set out on page 26 The
Chief Executive and Finance Director are normally invited to
attend.
Board and board committee meetings held in 2018
The number of regular meetings during the year and attendance
was as follows:
|
|
Meetings
held |
Meetings
attended |
Sir Michael Heller |
Board
Nomination committee
Remuneration committee |
10
1
3 |
10
1
3 |
J A Heller |
Board
Audit committee |
10
2 |
10
2 |
A K Thapar |
Board
Audit committee |
10
2 |
10
2 |
C A Parritt |
Board
Audit committee
Nomination committee
Remuneration committee |
10
2
1
3 |
10
2
1
3 |
H D Goldring |
Board
Audit committee
Nomination committee
Remuneration committee |
10
2
1
3 |
10
2
1
3 |
R Priest |
Board |
10 |
9 |
Performance evaluation – board, board committees and
directors
The performance of the board as a whole, its committees and the
non-executive Directors is assessed by the Chairman and the Chief
Executive and is discussed with the senior independent
non-executive Director. Their recommendations are discussed at the
nomination committee prior to proposals for re-election being
recommended to the board. The performance of executive Directors is
discussed and assessed by the remuneration committee. The senior
independent Director meets regularly with the Chairman, executive
and non-executive Directors individually outside of formal
meetings. The Directors will take outside advice in reviewing
performance but have not found this to be necessary to date.
Independent directors
The senior independent non-executive Director is C A Parritt.
The other independent non-executive Directors are H D Goldring and
R Priest. Delmore Holdings Limited (Delmore) is a Company in which
H D Goldring is the majority shareholder and the Executive
Chairman. Delmore provides consultancy services to the Company on a
fee paying basis. R Priest provides services to the Company on a
fee paying basis. C A Parritt also provides some advisory services
as part of his accounting practice.
The board encourages all three non-executive Directors to act
independently and does not consider that length of service of any
individual non-executive Director, nor any connection with the
above mentioned consultancy and advisory companies, has resulted in
the inability or failure to act independently. In the opinion of
the board the three non-executive Directors continue to fulfil
their roles as independent non-executive Directors.
The independent Directors exchange views regularly between board
meetings and meet when required to discuss corporate governance and
other issues concerning the Group.
Internal control
The Directors are responsible for the Group’s system of internal
control and for reviewing its effectiveness at least annually, and
for the preparation and review of its financial statements. The
board has designed the Group’s system of internal control in order
to provide the Directors with reasonable assurance that assets are
safeguarded, that transactions are authorised and properly recorded
and that material errors and irregularities are either prevented or
would be detected within a timely period. However, no system of
internal control can eliminate the risk of failure to achieve
business objectives or provide absolute assurance against material
misstatement or loss. The key elements of the control system in
operation are:
• The board meets regularly on full notice with a
formal schedule of matters reserved for its decision and has put in
place an organisational structure with clearly defined lines of
responsibility and with appropriate delegation of authority;
• There are established procedures for planning,
approval and monitoring of capital expenditure and information
systems for monitoring the Group’s financial performance against
approved budgets and forecasts;
• The departmental heads are required annually to
undertake a full assessment process to identify and quantify the
risks that face their departments and functions, and assess the
adequacy of the prevention, monitoring and modification practices
in place for those risks. In addition, regular reports about
significant risks and associated control and monitoring procedures
are made to the executive Directors. The process adopted by the
Group accords with the guidance contained in the document “Internal
Control Guidance for Directors on the Combined Code” issued by the
Institute of Chartered Accountants in England and Wales. The audit committee receives reports
from external auditors and from executive Directors of the Group.
During the period the audit committee has reviewed the
effectiveness of the system of internal control as described above.
The board receives periodic reports from all committees.
• There are established procedures for the presentation
and review of the financial statements and the Group has in place
an organisational structure with clearly defined lines of
responsibility and with appropriate delegation of authority.
There are no internal control issues to report in the annual
report and financial statements for the year ended 31 December 2018. Up to the date of approval of
this report and the financial statements, the board has not been
required to deal with any related material internal control issues.
The Directors confirm that the board has reviewed the effectiveness
of the system of internal control as described during the
period.
COMMUNICATION WITH SHAREHOLDERS
Prompt communication with shareholders is given high priority.
Extensive information about the Group and its activities is
provided in the Annual Report. In addition, a half-year report is
produced for each financial year and published on the Company’s
website. The Company’s website www.lap.co.uk is updated promptly
with announcements and Annual Reports upon publication. Copies from
previous years are also available on the website.
The Company’s share price is published daily in the Financial
Times.
The share price history and market information can be found at
http://www.londonstockexchange.com/prices-and-markets/markets/prices.htm.
The company code is LAS.
There is a regular dialogue with the Company’s stockbrokers and
institutional investors. Enquiries from individuals on matters
relating to their shareholdings and the business of the Group are
dealt with promptly and informatively.
The Company’s website is under continuous development to enable
better communication with both existing and potential new
shareholders.
THE BRIBERY ACT 2010
The Company is committed to acting ethically, fairly and with
integrity in all its endeavours and compliance with the Company's
anti–bribery code is monitored closely.
Governance Statement by the Chairman
of The Remuneration Committee
The remuneration committee is pleased
to present its report for the year ended 31
December 2018. The report is presented in two parts in
accordance with the remuneration regulations.
The first part is the Annual Remuneration Report which details
remuneration awarded to Directors and non-executive Directors
during the year. The shareholders will be asked to approve the
Annual Remuneration Report as an ordinary resolution (as in
previous years) at the AGM in June
2019.
The second part is the Remuneration Policy which details the
remuneration policy for Directors. This policy was subject to a
binding vote by shareholders at the AGM in 2017 and was approved
for a 3 year period commencing from then. The committee reviewed
the existing policy and deemed that no changes were necessary to
the current arrangements.
Both of the reports have been prepared in accordance with The
Large and Medium-sized Companies and Groups (Accounts and Reports)
(Amendment) Regulations 2013.
The Company’s auditor, RSM UK Audit LLP is required by law to
audit certain disclosures and where disclosures have been audited
that is indicated.
C A Parritt
Chairman, Remuneration Committee
30 April 2019
Annual remuneration report
The following information has been audited
Single total figure of remuneration for the year ended
31 December 2018
|
Salary and fees
£’000 |
BONUSES
£’000 |
BENEFITS
£’000 |
PENSIONS
£’000 |
TOTAL
BEFORE SHARE OPTIONS
£’000 |
SHARE OPTIONS
£’000 |
TOTAL 2018
£’000 |
Executive Directors |
|
|
|
|
|
|
|
Sir Michael Heller* |
7 |
350 |
55 |
- |
412 |
n/a |
412 |
Sir Michael Heller - Bisichi |
82 |
200 |
2 |
- |
284 |
n/a |
284 |
J A Heller |
533 |
300 |
37 |
- |
870 |
n/a |
870 |
A K Thapar |
161 |
60 |
11 |
10 |
242 |
n/a |
242 |
|
783 |
910 |
105 |
10 |
1,808 |
- |
1,808 |
Non-executive Directors |
|
|
|
|
|
|
|
H D Goldring*+ |
18 |
- |
8 |
- |
26 |
n/a |
26 |
C A Parritt*+ |
40 |
- |
- |
- |
40 |
n/a |
40 |
R Priest* |
35 |
- |
- |
- |
35 |
n/a |
35 |
|
93 |
- |
8 |
- |
101 |
- |
101 |
Total |
876 |
910 |
113 |
10 |
1,909 |
- |
1,909 |
Single total figure of remuneration for the year ended
31 December 2017
|
Salary and fees
£’000 |
BONUSES
£’000 |
BENEFITS
£’000 |
PENSIONS
£’000 |
TOTAL
BEFORE SHARE OPTIONS
£’000 |
SHARE OPTIONS
£’000 |
TOTAL 2017
£’000 |
Executive Directors |
|
|
|
|
|
|
|
Sir Michael Heller* |
7 |
- |
49 |
- |
56 |
n/a |
56 |
Sir Michael Heller - Bisichi |
75 |
- |
- |
- |
75 |
n/a |
75 |
J A Heller |
333 |
100 |
37 |
17 |
487 |
n/a |
487 |
A K Thapar |
157 |
30 |
9 |
10 |
206 |
n/a |
206 |
|
572 |
130 |
95 |
27 |
824 |
- |
824 |
Non-executive Directors |
|
|
|
|
|
|
|
H D Goldring*+ |
17 |
- |
7 |
- |
24 |
n/a |
24 |
C A Parritt*+ |
38 |
- |
- |
- |
38 |
n/a |
38 |
R Priest* |
35 |
- |
- |
- |
35 |
n/a |
35 |
|
90 |
- |
7 |
- |
97 |
- |
97 |
Total |
662 |
130 |
102 |
27 |
921 |
- |
921 |
* Note 25 “Related party transactions”
+ Members of the remuneration committee for years ended
31 December 2017 and 31 December 2018
Benefits include the provision of car, health and other
insurance and subscriptions.
Sir Michael Heller is a director
of Bisichi Mining PLC, (a subsidiary for IFRS 10 purposes) and
received a salary from that company of £82,500 (2017: £75,000) for
services.
Although Sir Michael Heller
receives reduced remuneration in respect of his services to LAP,
the Company does supply office premises, property management,
general management, accounting and administration services for a
number of companies in which Sir Michael
Heller has an interest. The board estimates that the annual
value of these services, if supplied to a third party, would have
been £300,000 (2017: £300,000). Further details of these services
are set out in Note 25 to the financial statements “Related party
transactions”.
J A Heller is a director of Dragon Retail Properties Limited, (a
subsidiary for IFRS 10 purposes) and received benefits from that
company of £6,500 (2017: £10,698) for services. This is included in
the remuneration figures disclosed above.
The remuneration figures disclosed for H D Goldring include fees
paid to his company, Delmore Holdings Limited for consultancy
services provided to the Group. This is detailed in Note 25 to the
financial statements.
The remuneration figures for C A Parritt include fees paid to
his accountancy practice for consultancy services provided to the
Group. This is detailed in Note 25 to the financial statements.
R Priest provides consultancy services to the Group. This is
detailed in Note 25 to the financial statements.
Summary of directors’ terms
|
Date of contract |
Unexpired term |
Notice period |
Executive Directors |
|
|
|
Sir Michael Heller |
1 January 1971 |
Continuous |
6 months |
John Heller |
1 May 2003 |
Continuous |
12 months |
Anil Thapar |
1 January 2015 |
Continuous |
3 months |
Non-executive Directors |
|
|
|
H D Goldring |
1 July 1992 |
Continuous |
3 months |
C A Parritt |
1 January 2006 |
Continuous |
3 months |
R Priest |
31 July 2013 |
Continuous |
3 months |
Total pension entitlements
One director had benefits under money purchase schemes. Under
his contract of employment, he was entitled to a regular employer
contribution (currently £10,000 a year). There are no final salary
schemes in operation. No pension costs are incurred on behalf of
non-executive Directors.
Share Incentive Plan (SIP)
In 2006 the Directors set up an HMRC approved share incentive
plan (SIP). The purpose of the plan, which is open to all eligible
LAP executive Directors and head office based staff, is to enable
them to acquire shares in the Company and give them a continuing
stake in the Group. The SIP comprises four types of share – (1)
free shares under which the Company may award shares of up to the
value of £3,000 each year, (2) partnership shares, under which
members may save up to £1,500 per annum to acquire shares, (3)
matching shares, through which the Company may award up to two
shares for each share acquired as a partnership share, and (4)
dividend shares, acquired from dividends paid on shares within the
SIP.
1. Free shares: No free shares were issued for 2018 bonuses or
for 2017 bonuses.
2. Partnership shares: No partnership shares were issued between
November 2017 and October 2018.
3. Matching shares: The partnership share agreements for the
year to 31 October 2018 provide for
two matching shares to be awarded free of charge for each
partnership share acquired. No partnership shares were acquired in
2018 (2017: nil). Matching shares will usually be forfeited if a
member leaves employment in the Group within five years of their
grant.
4. Dividend shares: Dividends on shares acquired under the SIP
will be utilised to acquire additional shares. Accumulated
dividends received on shares in the SIP to 31 December 2018 amounted to £Nil (2017:
Nil).
Dividend shares issued:
|
Number of members |
Number of shares |
Value of shares |
|
2018 |
2017 |
2018 |
2017 |
2018
£ |
2017
£ |
Directors:
J A Heller |
1 |
- |
448 |
- |
125 |
- |
A K Thapar |
1 |
- |
579 |
- |
161 |
- |
Staff |
- |
- |
- |
- |
- |
- |
Total at 31 December |
2 |
- |
1,027 |
- |
286 |
- |
The SIP is set up as an employee benefit trust. The trustee is
London & Associated Securities
Limited, a wholly owned subsidiary of LAP, and all shares and
dividends acquired under the SIP will be held by the trustee until
transferred to members in accordance with the rules of the SIP.
Share Option Schemes
The Company has an HMRC approved scheme (Approved Scheme). It
was set up in 1986 in accordance with HMRC rules to gain HMRC
approved status which gave the members certain tax advantages.
There are no performance criteria for the exercise of options under
the Approved Scheme, as this was set up before such requirements
were considered to be necessary. No Director has any options
outstanding under the Approved Scheme nor were any options granted
under the Approved Scheme for the year ended 31 December 2018.
A share option scheme known as the “Non-approved Executive Share
Option Scheme” (Unapproved Scheme) which does not have HMRC
approval was set up during 2000. At 31
December 2018 there were no options to subscribe for
ordinary shares outstanding. The exercise of options under the
Unapproved Scheme is subject to the satisfaction of objective
performance conditions specified by the remuneration committee
which conforms to institutional shareholder guidelines and best
practice provisions. Further details of this scheme are set out in
Note 23 “Share Capital” to the financial statements.
Payments to past directors
No payments were made to past Directors in the year ended
31 December 2018.
Payments for loss of office
No payments for loss of office were made in the year ended
31 December 2018.
Statement of directors’ shareholding and share interest
Directors’ interests
The interests of the Directors in the ordinary shares of the
Company, including family and trustee holdings, where appropriate,
were as follows:
|
Beneficial
interests |
Non-beneficial
interests |
|
31 Dec 18 |
1 Jan 18 |
31 Dec 18 |
1 Jan 18 |
Sir Michael Heller |
5,753,541 |
5,753,541 |
19,277,931 |
19,277,931 |
H D Goldring |
19,819 |
19,819 |
- |
- |
J A Heller |
1,867,841 |
1,867,393 |
†14,073,485 |
†14,073,485 |
C A Parritt |
36,168 |
36,168 |
- |
- |
R Priest |
- |
- |
- |
- |
A K Thapar |
121,074 |
120,495 |
- |
- |
?These non-beneficial holdings are duplicated with those of Sir
Michael Heller.
The beneficial holdings of Directors shown above include their
interests in the Share Incentive Plan.
The following information is unaudited:
The graph illustrates the Company’s performance as compared with
a broad equity market index over a five year period. Performance is
measured by total shareholder return. The directors have chosen the
FTSE All Share – Total Return Index as a suitable index for this
comparison as it gives an indication of performance against a large
spread of quoted companies.
The middle market price of London & Associated Properties PLC
ordinary shares at 31 December 2018
was 26p (2017: 24.50p). During the year the share middle market
price ranged between 22p and 31p.
Total Shareholder Return
Remuneration of the Chief Executive over the last ten years
Year |
CEO |
Chief Executive Single
total figure of
remuneration
£’000 |
Annual bonus payment
against maximum opportunity*
% |
Long-term incentive vesting rates
against maximum opportunity*
% |
2018 |
J A Heller |
870 |
20% |
n/a |
2017 |
J A Heller |
487 |
11% |
n/a |
2016 |
J A Heller |
569 |
18% |
n/a |
2015 |
J A Heller |
762 |
41% |
n/a |
2014 |
J A Heller |
835 |
49% |
n/a |
2013 |
J A Heller |
716 |
n/a |
n/a |
2012 |
J A Heller |
417 |
n/a |
n/a |
2011 |
J A Heller |
671 |
n/a |
n/a |
2010 |
J A Heller |
577 |
n/a |
n/a |
2009 |
J A Heller |
982 |
n/a |
n/a |
2008 |
J A Heller |
688 |
n/a |
n/a |
*There were no formal criteria or conditions to apply in
determining the amount of bonus payable or the number of shares to
be issued prior to 2014.
Percentage change in Chief Executive’s Remuneration
(audited)
The table below shows the percentage change in Chief Executive
remuneration for the prior year compared to the average percentage
change for all other Head Office based employees. To provide a
meaningful comparison, the same group of employees (although not
necessarily the same individuals) appears in the 2017 and 2018
group. The remuneration committee chose head office based employees
as the comparator group as this group forms the closest comparator
group.
|
Chief Executive
£’000 |
Head Office
Employees
£’000 |
|
2018 |
2017 |
% change |
2018 |
2017 |
% change |
Base salary and allowances |
533 |
333 |
60.1% |
675 |
643 |
5% |
Taxable benefits |
37 |
37 |
0% |
93 |
81 |
14.8% |
Annual bonus |
300 |
100 |
200% |
460 |
80 |
475% |
Total |
870 |
470 |
85.1% |
1,228 |
804 |
52.7% |
Relative importance of spend on pay
The total expenditure of the Group on remuneration to all
employees (Note 26 refers) is shown below:
|
2018
£’000 |
2017
£’000 |
Employee Remuneration |
9,889 |
8,113 |
Distributions to shareholders |
256 |
141 |
Statement of implementation of remuneration policy
The policy was approved at the AGM in June 2017 and was effective from 6 June 2017. The vote on the remuneration policy
is binding in nature. The Company may not then make a remuneration
payment or payment for loss of office to a person who is, is to be,
or has been a director of the Company unless that payment is
consistent with the approved remuneration policy, or has otherwise
been approved by a resolution of members. It is to be presented for
approval at the 2020 AGM.
Consideration by the directors of matters relating to directors’
remuneration
The Remuneration Committee considered the executive Directors’
remuneration and the Board considered the non-executive Directors’
remuneration in the year ended 31 December
2018. The balance between bonuses and basic remuneration
payable to the Chief Executive was varied to better reflect market
conditions.
Shareholder voting
At the Annual General Meeting on 19 June
2018, there was an advisory vote on the resolution to
approve the Remuneration Report, other than the part containing the
remuneration policy.
In addition, on 6 June 2017, there
was a binding vote on the resolution to approve the Remuneration
Policy. The results are detailed below:
|
% of votes
for |
% of votes
against |
Number of votes
withheld |
Resolution to approve the Remuneration Report (19
June 2018) |
73.95 |
26.05 |
2,173,594 |
Resolution to approve the Remuneration Policy (6
June 2017) |
83.14 |
16.69 |
89,602 |
Remuneration policy
INTRODUCTION
Set out below is the LAP Group policy
on directors’ remuneration (excluding Bisichi). This policy was
approved at the 2017 AGM and it is effective from 6 June 2017. Unless changed it will be presented
next for approval at the AGM in 2020.
A copy of the full policy can be found at www.lap.co.uk.
In setting the policy, the Remuneration Committee has taken
the following into account:
• The need to attract, retain and motivate
individuals of a calibre who will ensure successful leadership and
management of the company
• The LAP Group’s general aim of seeking to reward
all employees fairly according to the nature of their role and
their performance
• Remuneration packages offered to similar companies within the
same sector
• The need to align the interests of shareholders as a whole
with the long-term growth of the Group; and
• The need to be flexible and adjust with operational changes
throughout the term of this policy
The remuneration of non-executive directors is determined by the
board, and takes into account additional remuneration for services
outside the scope of the ordinary duties of non-executive
directors.
Future policy table
Element |
Purpose |
Policy |
|
Operation |
Opportunity and performance conditions |
Executive directors |
|
|
|
|
Base salary |
To recognise:
Skills
Responsibility
Accountability
Experience
Value |
Considered by remuneration committee
on appointment
Set at a level considered appropriate to attract, retain, motivate
and reward the right individuals |
|
Reviewed annually whenever there is a
change
of role or operational responsibility
Paid monthly in cash |
There is no prescribed maximum salary
or maximum rate of increase
No individual director will be awarded a base salary in excess of
£700,000 a year
No specific performance conditions are attached to base
salaries |
Pension |
To provide competitive retirement benefits |
Company contribution offered at up to 10% of base
salary as part of overall remuneration package |
|
The contribution payable by the
Company is included in the director’s contract of employment
Paid into money purchase schemes |
Company contribution offered at up to
10% of base salary as part of overall remuneration package
No specific performance conditions are attached to pension
contributions |
Benefits |
To provide a competitive benefits package |
Contractual benefits include:
Car or car allowance
Group health cover
Death in service cover
Permanent health insurance |
|
The committee retains the discretion to approve
changes in contractual benefits in exceptional circumstances or
where factors outside the control of the Group lead to increased
costs
(e.g. medical inflation) |
The costs associated with benefits
offered are closely controlled and reviewed on an annual basis
No director will receive benefits of a value in excess of 30% of
their base salary
No specific performance conditions are attached to contractual
benefits |
Annual
bonus |
To reward and incentivise |
In assessing the performance of the executive
team, and in particular to determine whether bonuses are merited
the remuneration committee takes into account the overall
performance of the business, as well as
individual contribution to the business in the period |
|
The remuneration committee determines
the level of bonus on an annual basis
In assessing performance consideration is given to the level of net
rental income, cash flow, voids, realised development gains and
income from managing joint ventures. Achieved results are then
compared with expectation taking account of market conditions
Bonuses are generally offered in cash or shares |
The current maximum bonus will not
exceed 200% of base salary in any one year but the remuneration
committee reserves the power to award up to 300% in an exceptional
year
Performance conditions will be assessed on an annual basis
The performance measures applied may be financial, non-financial,
corporate, divisional or individual and in such proportion as the
remuneration committee considers appropriate |
Share
options |
To provide executive directors with
a long-term interest in the company |
Share options may be granted under
existing schemes (see page 21)
Where it is necessary to attract, retain, motivate and reward the
right individuals, the directors may establish new schemes to
replace any expired schemes |
|
Offered at appropriate times by the
remuneration committee |
Entitlements to share options granted
under the Approved Option scheme are not subject to performance
criteria. Share Options granted under the Unapproved Scheme are
subject to the performance criteria specified in the Scheme
rules
The aggregate number of shares over which options may be granted
under all of the company’s option schemes (including any options
and awards granted under the company’s employee share plans) in any
period of ten years, will not exceed, at the time of grant, 10 % of
the ordinary share capital of the company from time to time
Share options will be offered by the remuneration committee as
appropriate |
Share incentive plan (SIP) |
To offer a shorter term incentive in the company
and to give directors a stake
in the group |
Offered to executive directors and head office
staff |
|
Maximum participation levels are set by HMRC |
Of any bonus awarded, Directors may opt to have
maximum of £3,000 per year paid in ‘Free Shares’ under the SIP
scheme rules |
Non-executive directors |
|
|
|
|
Base salary |
To recognise:
Skills
Responsibility
Experience
Risk
Value |
Considered by the board on
appointment
Set at a level considered appropriate to attract, retain and
motivate the individual
Experience and time required for the role are considered on
appointment |
|
Reviewed annually |
No individual non-executive director
will be awarded a base salary in excess of £40,000 a year
No performance conditions are attached to base salaries |
Pension |
|
No pension offered |
|
|
|
Benefits |
|
No benefits offered except to one non-executive
director who is eligible for health cover (see annual remuneration
report page 20) |
|
The committee retains the discretion to approve
changes in contractual benefits in exceptional circumstances or
where factors outside the control of the Group lead to
increased costs
(e.g. medical inflation) |
The costs associated with benefits
offered are closely controlled and reviewed on an annual basis
No non-executive director will receive benefits in excess of
£10,000 a year
No specific performance conditions are attached to contractual
benefits |
Share
options |
|
Non-executive directors do not participate in the
share option schemes |
|
|
|
Notes to the Remuneration Policy
The remuneration committee considers the performance measures
outlined in the table above to be appropriate measures of
performance and that the KPIs chosen align the interests of the
directors and shareholders.
Audit committee report
The committee’s terms of reference
have been approved by the board and follow published guidelines,
which are available on request from the company secretary.
At the year end the audit committee comprised two of the
non-executive directors – H D Goldring and C A Parritt, both of
whom are Chartered Accountants.
The audit committee’s primary tasks are to:
• review the scope of external audit, to receive
regular reports from RSM UK Audit LLP and to review the half-yearly
and annual accounts before they are presented to the board,
focusing in particular on accounting policies and areas of
management judgement and estimation;
• monitor the controls which are in force to ensure
the integrity
of the information reported to the shareholders;
• act as a forum for discussion of internal control
issues and contribute to the board’s review of the effectiveness of
the Group’s internal control and risk management systems and
processes;
• to review the risk assessments made by management,
consider key risks with action taken to mitigate these and to act
as a forum for discussion of risk issues and contribute to the
board’s review of the effectiveness of the Group’s risk management
control and processes;
• consider once a year the need for an internal
audit function;
• advise the board on the appointment of the
external auditors,
the rotation of the audit partner every five years and on their
remuneration for both audit and non-audit work; discuss the nature
and scope of their audit work and undertake a formal assessment of
their independence each year, which includes:
i) a review of non-audit services provided to the Group and
related fees;
ii) discussion with the auditors of their written report
detailing
all relationships with the Company and any other parties that could
affect independence or the perception of independence;
iii) a review of the auditors’ own procedures for ensuring the
independence of the audit firm and partners and staff involved in
the audit, including the regular rotation of the audit partner;
and
iv) obtaining a written confirmation from the auditors that, in
their professional judgement, they are independent.
Meetings
The committee meets at least twice prior to the publication of
the annual results and discusses and considers the half year
results prior to their approval by the board. The audit committee
meetings are attended by the external audit partner, chief
executive, finance director and company secretary. During the year
the members of the committee also meet on an informal basis to
discuss any relevant matters which may have arisen. Additional
formal meetings may be held as necessary.
During the past year the committee:
• met with the external auditors, and discussed
their reports to the audit committee;
• approved the publication of annual and half year
financial results;
• considered and approved the annual review of
internal controls;
• decided that there was no current need for an
internal audit function;
• agreed the independence of the auditors and
approved their fees for both audit and non-audit services as set
out in Note 2 to the financial statements; and
• the chairman of the audit committee has also had
separate meetings and discussions with the external audit
partner.
FINANCIAL REPORTING
As part of its role, the Audit Committee assessed the audit
findings that were considered most significant to the financial
statements, including those areas requiring significant judgement
and/or estimation. When assessing the identified financial
reporting matters, the committee assessed quantitative materiality
primarily by reference to the carrying value of the group’s total
assets, given
that the group operates a principally asset based business. When
determining quantitative materiality, the Board also gave
consideration to the value of revenues generated by the group and
net asset value, given that they are key trading and business KPIs.
The qualitative aspects of any financial reporting matters
identified during the audit process were also considered when
assessing their materiality. Based on the considerations set out
above we have considered quantitative errors individually or in
aggregate in excess of approximately £1.5 million in relation to
the consolidated balance sheet and £0.4 million for underlying
profitability and £0.3 million for the Bisichi group to be
material.
External Auditor
RSM UK Audit LLP held office throughout the period under review.
In the United Kingdom London & Associated Properties PLC
provides extensive administration and accounting services to
Bisichi Mining PLC, which has its own audit committee and employs
BDO LLP, a separate and independent firm of registered auditor.
C A Parritt
Chairman – Audit Committee
30 April 2019
Directors’ responsibilities statement
The Directors are responsible for
preparing the Strategic Report and the Directors’ Report, the
Directors’ Remuneration Report and the financial statements in
accordance with applicable law and regulations.
English company law requires the Directors to prepare Group and
Company financial statements for each financial year. The Directors
are required under the Listing Rules of the Financial Conduct
Authority to prepare Group financial statements in accordance with
International Financial Reporting Standards (“IFRS”) as adopted by
the European Union (“EU”) and have elected under English company
law to prepare the Company financial statements in accordance with
United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards and applicable law) including FRS101
‘Reduced Disclosure Framework’.
The Group financial statements are required by law and IFRS
adopted by the EU to present fairly the financial position and
performance of the Group; the Companies Act 2006 provides in
relation to such financial statements that references in the
relevant part of that Act to financial statements giving a true and
fair view are references to their achieving a fair
presentation.
Under English company law the Directors must not approve the
financial statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Group and the
Company and of the profit or loss of the Group for that period.
In preparing each of the Group and Company financial statements,
the Directors are required to:
a. select suitable accounting policies and then apply them
consistently;
b. make judgements and accounting estimates that are
reasonable and prudent;
c. for the Group financial statements, state whether they
have been prepared in accordance with IFRS adopted by the EU and
for the company financial statements state whether applicable UK
accounting standards have been followed, subject to any material
departures disclosed and explained in the financial statements;
and
d. prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the Group and the
Company will continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group’s and the
Company’s transactions and disclose with reasonable accuracy at
any time the financial position of the Group and the Company and
enable them to ensure that the financial statements and the
Directors’ Remuneration Report comply with the Companies Act 2006
and, as regards the Group financial statements, Article 4 of the
IAS Regulations. They are also responsible for safeguarding the
assets of the Group and the Company and hence for taking reasonable
steps for the prevention and detection of fraud and other
irregularities.
Directors’ statement pursuant to the Disclosure GUIDANCE
and Transparency Rules
Each of the directors, whose names and functions are listed on
page 12, confirms that to the best of each person’s
knowledge:
a. the financial statements, prepared in accordance with
the applicable set of accounting standards, give a true and fair
view of the assets, liabilities, financial position and profit of
the Company and the undertakings included in the consolidation
taken as a whole; and
b. the Strategic Report contained in the Annual Report
includes a fair review of the development and performance of the
business and the position of the Company and the undertakings
included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that they
face.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
London & Associated Properties
PLC website.
Legislation and regulations in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation
and regulations in other jurisdictions.
Independent auditor’s report
TO THE MEMBERS OF LONDON &
ASSOCIATED PROPERTIES PLC
Opinion
We have audited the financial
statements of London &
Associated Properties Plc (the ‘parent company’) and its
subsidiaries (the ‘group’) for the year ended 31 December 2018 which comprise the consolidated
income statement, the consolidated statement of comprehensive
income, the consolidated balance sheet, the consolidated statement
of changes in shareholders’ equity, the consolidated cash flow
statement, the company balance sheet, the company statement of
changes in equity and notes to the financial statements, including
a summary of significant accounting policies. The financial
reporting framework that has been applied in the preparation of the
group financial statements is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European
Union. The financial reporting framework that has been applied in
the preparation of the parent company financial statements is
applicable law and United Kingdom Accounting Standards including
FRS 101 “Reduced Disclosure Framework (United Kingdom Generally
Accepted Accounting Practice).
In our opinion:
• the financial statements give a true and fair view
of the state of the group’s and of the parent company’s affairs as
at 31 December 2018 and of the
group’s profit for the year then ended;
• the group financial statements have been properly
prepared in accordance with IFRSs as adopted by the European
Union;
• the parent company financial statements have been
properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
• the financial statements have been prepared in
accordance with the requirements of the Companies Act 2006 and, as
regards the group financial statements, Article 4 of the IAS
Regulation.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor’s responsibilities for the audit of the financial
statements section of our report. We are independent of the group
and parent company in accordance with the ethical requirements that
are relevant to our audit of the financial statements in the UK,
including the FRC’s Ethical Standard as applied to listed public
interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe
that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in
relation to which the ISAs (UK) require us to report to you
where:
• the directors’ use of the going concern basis of
accounting in the preparation of the financial statements is not
appropriate; or
• the directors have not disclosed in the financial
statements any identified material uncertainties that may cast
significant doubt about the group’s or the parent company’s ability
to continue to adopt the going concern basis of accounting for a
period of at least twelve months from the date when the financial
statements are authorised for issue.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the group and
parent company financial statements of the current period and
include the most significant assessed risks of material
misstatement (whether or not due to fraud) that we identified.
These matters included those which had the greatest effect on: the
overall audit strategy, the allocation of resources in the audit;
and directing the efforts of the engagement team. These matters
were addressed in the context of our audit of the group and parent
company financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these
matters.
The valuation and presentation of properties
The group’s properties are accounted for in the financial
statements as investment properties under IAS 40 and held at fair
value, or as inventory where appropriate and held at the lower of
cost and net realisable value. The majority of investment
properties are valued by two firms of independent external valuers
and these valuations are adopted in the financial statements. At
31 December 2018 investment property
valued at £47.4 million (note 8) was disclosed within non-current
assets in the financial statements. Separately, investment property
valued at £2.3 million (note 10) was disclosed as assets held for
sale, within current assets, and property inventory was carried at
£38.6 million (note 12).
The directors’ assessment of the value and presentation of
properties is considered a key audit matter due to the relative
importance of these assets to the group’s financial statements, the
potential impact of movements in the fair values of the assets, and
the subjectivity and complexity of the valuation process, which
involves significant judgements and estimates as disclosed on page
37 of the financial statements.
The valuations are carried out by two firms of professional
external valuers, together with, in respect of one property, an
internal valuer in accordance with the methodology described in
note 8.
Our response to the key audit matter included:
• agreeing the valuations of all properties recorded
in the financial statements and subject to the external valuation
process to the valuation reports prepared by the valuers. These
reports covered all of the value of investment properties, except
one property valued at £1.6 million which was subject to internal
valuation;
• agreeing the carrying value (sales price less
estimated costs to sell) of the property included as assets held
for sale, to the draft agreement for sale;
• discussing with management and reviewing the
documentation on the development activities undertaken which
resulted in the transfer of the Sheffield property from investment property to
inventory:
• agreeing the cost of properties held as inventory
to underlying records including, for the Sheffield property held at a value of £32.3
million, to the valuation report prepared by third party valuers
and used as the basis of cost for the transfer of that property
from investment property to inventory;
• assessing the qualifications and expertise of the
valuers, and considering their objectivity and any threats to their
independence. We concluded that there was no threat which might
impair the valuers’ independence and objectivity;
• meeting the valuers, both external and internal,
to discuss and challenge the assumptions used and the movements in
valuations observed in the year; and
• comparing the key inputs to the valuation model to
the underlying records of the leases and records of rents received
and against our knowledge of market yields.
Key observations
• The carrying values of the properties are consistent with the
valuation reports provided for investment properties. Properties
held in inventory are carried at the lower of cost and net
realisable value and, in the case of the asset held for sale, with
the agreed selling price less estimated costs to sell. The
presentation of the properties is consistent with management’s
intent
Revenue recognition
As disclosed in note 1, the Group generated revenues from coal
sales, rental income and service charge income. It was considered
appropriate, as this is the first year of application of IFRS 15,
to assess the appropriateness of management’s revenue recognition
policies and their application for compliance with IFRS. In
addition, it was considered that there was a risk of coal
sales revenue being recorded in the incorrect period.
As reported under the group accounting policies, during the
course of the audit a material error was identified in respect of
the Bisichi sub group’s accounting treatment of transport costs to
deliver export coal to the export terminal under a specific
agreement. Such transport costs were previously incorrectly
recorded as a deduction from revenue. Management has revised the
accounting treatment in 2018 and restated the prior year revenue
and operating costs accordingly.
The impact is to increase revenue and operating costs by £3.1m
for the year ended 31 December 2018.
The impact of the prior year restatement was to increase revenue
and operating costs by £2.9m. There is no profit or net assets
effect of the restatement.
The responses to the key audit matter included:
• management’s revenue recognition policy for
domestic and export coal sales was assessed for compliance with the
relevant accounting standard. In doing so, sales contracts and
terms with material customers were reviewed;
• controls over domestic coal sales were tested,
focused on the authorisation and recording of revenue. Tests of
detail, verifying a sample of domestic revenue to supporting
documentation, were performed;
• third party confirmations were obtained which were
agreed to amounts recorded in the ledgers for export sales and a
sample of sales was confirmed to contract terms;
• the recording of revenue around the year end was
tested and the revenue recognition point was assessed for
consistency with the group’s revenue recognition policy, customer
terms and supporting documents regarding despatch/delivery as
applicable;
• credit notes around the year end were reviewed for
indications that revenue had been inappropriately recorded;
• in respect of the change in accounting treatment
for transport costs and associated restatement of the prior year
revenues and operating costs, the relevant contract was reviewed
and the appropriateness of the accounting treatment under relevant
accounting standards for the current and prior period was assessed.
In doing so, financial reporting technical experts were
consulted;
• a sample of the costs was agreed to supporting
documentation and the general ledgers were reviewed in detail to
check the completeness and accuracy of the adjustments in the
current and prior period.
Key observations
The Group’s revenue recognition policies were found to be
compliant with IFRS and, subsequent to the restatement and
adjustment, revenue is recorded in line with the group’s stated
policies. Service charge income of £0.9 million is now included
gross in revenue, whereas in prior years such income had been
netted off expenses, as disclosed in note 1.
There are no key audit matters in relation to the parent
company.
Our application of materiality
When establishing our overall audit strategy, we set certain
thresholds which help us to determine the nature, timing and extent
of our audit procedures. When evaluating whether the effects of
misstatements, both individually and on the financial statements as
a whole, could reasonably influence the economic decisions of the
users we take into account the qualitative nature and the size of
the misstatements.
During planning materiality for the group statements as a whole
was calculated as £1.5 million, which was not significantly changed
during the course of our audit. Materiality for the parent company
financial statements as a whole was calculated as £0.4 million,
which was revised to £0.65 million as the audit progressed.
The London & Associated
Properties plc group consists of two distinct components: a UK
based property investment group, and a fully listed mining group
carrying out mining operations in South
Africa with a relatively small investment property
portfolio.
Our materiality levels in respect of these components were
determined at:
• for the London
& Associated Properties plc property investment sub group
balance sheet, £1.2 million and to underlying profitability £0.4
million; and
• for the Bisichi Mining plc coal mining and
property investment sub group, £0.3 million.
We agreed with the audit committee that we would report to them
all unadjusted differences in excess of £15,000 for both components
of the group. We also agreed to report other differences below that
threshold which, in our view, warranted reporting on qualitative
grounds.
An overview of the scope of our audit
The group comprises 30 trading, or active holding, companies and
12 dormant companies. Full scope audits, using component
materiality, were performed on 25 of the active entities with the
other five entities subjected to desktop review. Six of the full
scope audits and four of the desktop reviews were performed by
component auditors whose work we evaluated and reviewed for the
purpose of the group audit.
This resulted in coverage of 100% of total revenues and profit
before tax of the group, and 100% of total gross assets of the
group.
Other information
The other information comprises the information included in the
annual report, other than the financial statements and our
auditor’s report thereon. The directors are responsible for the
other information.
Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated
in our report, we do not express any form of assurance conclusion
thereon. In connection with our audit of the financial statements,
our responsibility is to read the other information and, in doing
so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge
obtained in the audit or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent
material misstatements, we are required to determine whether there
is a material misstatement in the financial statements or a
material misstatement of the other information. If, based on the
work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report
that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act
2006
In our opinion, the part of the directors’ remuneration report
to be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of
the audit:
• the information given in the strategic report and
the directors’ report for the financial year for which the
financial statements are prepared is consistent with the financial
statements; and
• the strategic report and the directors’ report
have been prepared in accordance with applicable legal
requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and
the parent company and their environment obtained in the course of
the audit, we have not identified material misstatements in the
strategic report or the directors’ report.
We have nothing to report in respect of the following matters in
relation to which the Companies Act 2006 requires us to report to
you if, in our opinion:
• adequate accounting records have not been kept by
the parent company, or returns adequate for our audit have not been
received from branches not visited by us; or
• the parent company financial statements and the
part of the directors’ remuneration report required to be audited
are not in agreement with the accounting records and returns;
or
• certain disclosures of directors’ remuneration
specified by law are not made; or
• we have not received all the information and
explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors’ responsibilities
statement set out on page 27, the directors are responsible for the
preparation of the financial statements and for being satisfied
that they give a true and fair view, and for such internal control
as the directors determine is necessary to enable the preparation
of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the group’s and the parent company’s
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the
group or the parent company or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
As part of our audit, we will consider the susceptibility of the
group and parent company to fraud and other irregularities, taking
account of the business and control environment established and
maintained by the directors, as well as the nature of transactions,
assets and liabilities recorded in the accounting records. Owing to
the inherent limitations of an audit, there is an unavoidable risk
that some material misstatements of the financial statements may
not be detected, even though the audit is properly planned and
performed in accordance with the ISAs. However, the principal
responsibility for ensuring that the financial statements are free
from material misstatement, whether caused by fraud or error, rests
with management who should not rely on the audit to discharge those
functions.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council’s website at:
http://www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditor’s report.
Other matters which we are required to address
Following the recommendation of the audit committee, we were
appointed by the Board of Directors on 27
July 1987 to audit the financial statements for the year
ended 31 December 1987 and subsequent
financial periods. The period of total uninterrupted engagement is
32 years, covering the years ending 31
December 1987 to 31 December
2018.
The non-audit services prohibited by the FRC’s Ethical Standard
were not provided to the group or the parent company and we remain
independent of the group and the parent company in conducting our
audit.
During the period under review agreed upon procedures were
completed in respect of a number of the group’s service charge
accounts.
Our audit opinion is consistent with the additional report to
the audit committee.
Use of our report
This report is made solely to the company’s members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
company’s members those matters we are required to state to them in
an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the company and the company’s members as a body,
for our audit work, for this report, or for the opinions we
have formed.
Geoff Wightwick (Senior
Statutory Auditor)
For and on behalf of RSM UK Audit LLP, Statutory Auditor
Chartered Accountants
25 Farringdon Street
London
EC4A 4AB
30 April 2019
FINANCIAL STATEMENTS
Consolidated income statement
for the year ended 31 December
2018
|
Notes |
2018
£’000 |
2017
£’000
Restated |
Group revenue |
1 |
56,651 |
47,870 |
Operating costs |
|
(49,293) |
(40,319) |
Gain on disposal of other investments |
|
– |
3 |
Operating profit |
|
7,358 |
7,554 |
Finance income |
4 |
61 |
105 |
Finance expenses |
4 |
(3,682) |
(4,268) |
Debenture break cost |
20 |
– |
(14) |
Result before revaluation and other
movements |
|
3,737 |
3,377 |
Non–cash changes in valuation of assets and
liabilities and other movements |
|
|
|
(Decrease)/increase in value of investment
properties |
8 |
(2,565) |
9,373 |
Write off investment in joint venture |
|
– |
(1,827) |
Decrease in value of trading investments |
|
(169) |
– |
Adjustment to interest rate derivative |
20 |
265 |
355 |
Profit for the year before taxation |
2 |
1,268 |
11,278 |
Income tax charge |
5 |
(675) |
(2,982) |
Profit for the year |
|
593 |
8,296 |
Attributable to: |
|
|
|
Equity holders of the Company |
|
(2,082) |
7,686 |
Non–controlling interest |
24 |
2,675 |
610 |
Profit for the year |
|
593 |
8,296 |
Earnings per share |
|
|
|
Profit/(loss) per share – basic and
diluted |
7 |
(2.44)p |
9.01p |
A revenue recognition error was identified in respect of Bisichi’s
prior year. An amount of £2,891,000 had been incorrectly recorded
as a deduction against revenue rather than shown as an operating
cost. The above comparatives have been restated accordingly.
Consolidated statement of comprehensive income
for the year ended 31 December
2018
|
2018
£’000 |
2017
£’000 |
Profit for the year |
593 |
8,296 |
Other comprehensive income/(expense): |
|
|
Items that may be subsequently recycled to the
income statement: |
|
|
Exchange differences on translation of Bisichi
Mining PLC foreign operations |
(430) |
91 |
Transfer of gain on available for sale
investments |
– |
103 |
Taxation |
– |
(20) |
Other comprehensive (expense)/income for the
year net of tax |
(430) |
174 |
Total comprehensive (expense)/income for the
year net of tax |
163 |
8,470 |
Attributable to: |
|
|
Equity shareholders |
(2,239) |
7,753 |
Non–controlling interest |
2,402 |
717 |
|
163 |
8,470 |
Consolidated balance sheet
at 31 December 2018
|
Notes |
2018
£’000 |
2017
£’000 |
Non–current assets |
|
|
|
Market value of properties
attributable to Group |
8 |
47,430 |
78,025 |
Present value of head leases |
28 |
3,261 |
3,233 |
Property |
|
50,691 |
81,258 |
Mining reserves, plant and
equipment |
9 |
8,659 |
8,735 |
Investments |
14 |
1,783 |
1,799 |
Deferred tax |
21 |
– |
– |
|
|
61,133 |
91,792 |
Current assets |
|
|
|
Inventories–property |
12 |
38,556 |
– |
Inventories–mining |
13 |
1,511 |
828 |
Assets held for sale |
10 |
2,285 |
36,441 |
Trade and other receivables |
15 |
8,022 |
7,132 |
Interest rate derivatives |
20 |
– |
1 |
Investments |
16 |
887 |
1,069 |
Cash and cash equivalents |
|
20,655 |
7,528 |
|
|
71,916 |
52,999 |
Total assets |
|
133,049 |
144,791 |
Current liabilities |
|
|
|
Trade and other payables |
17 |
(13,341) |
(12,909) |
Borrowings |
18 |
(41,388) |
(4,288) |
Interest rate derivatives |
|
(169) |
– |
Current tax liabilities |
|
(73) |
(358) |
|
|
(54,971) |
(17,555) |
Non–current liabilities |
|
|
|
Borrowings |
18 |
(15,255) |
(61,661) |
Interest rate derivatives |
20 |
– |
(435) |
Present value of head leases on
properties |
29 |
(3,261) |
(3,233) |
Provisions |
19 |
(1,571) |
(1,349) |
Deferred tax liabilities |
22 |
(2,305) |
(3,848) |
|
|
(22,392) |
(70,526) |
Total liabilities |
|
(77,363) |
(88,081) |
Net assets |
|
55,686 |
56,710 |
Equity attributable to the owners
of the parent |
|
|
|
Share capital |
23 |
8,554 |
8,554 |
Share premium account |
|
4,866 |
4,866 |
Translation reserve (Bisichi Mining
PLC) |
|
(852) |
(695) |
Capital redemption reserve |
|
47 |
47 |
Retained earnings (excluding treasury shares) |
|
30,906 |
33,227 |
Treasury shares |
23 |
(144) |
(145) |
Retained earnings |
|
30,762 |
33,082 |
Total equity attributable to
equity shareholders |
|
43,377 |
45,854 |
Non–controlling interest |
24 |
12,309 |
10,856 |
Total equity |
|
55,686 |
56,710 |
Net assets per share |
7 |
50.83p |
53.74p |
Diluted net assets per
share |
7 |
50.83p |
53.74p |
These financial statements were approved by the board of directors
and authorised for issue on 30 April
2019 and signed on its behalf by:
Sir Michael
Heller
Jonathan
Mintz
Company Registration No. 341829
Director
Director
Consolidated statement of changes in shareholders’ equity
for the year ended 31 December
2018
|
Share
capital
£’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 2017 |
8,554 |
4,866 |
(728) |
47 |
(145) |
25,648 |
38,242 |
10,389 |
48,631 |
Profit for year |
– |
– |
– |
– |
– |
7,686 |
7,686 |
610 |
8,296 |
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
Currency translation |
– |
– |
33 |
– |
– |
– |
33 |
58 |
91 |
Gain on available for sale investments (net of
tax) |
– |
– |
– |
– |
– |
34 |
34 |
49 |
83 |
Total other comprehensive income |
– |
– |
33 |
– |
– |
34 |
67 |
107 |
174 |
Total comprehensive income |
– |
– |
33 |
– |
– |
7,720 |
7,753 |
717 |
8,470 |
Transactions with owners: |
|
|
|
|
|
|
|
|
|
Dividends – equity holders |
– |
– |
– |
– |
– |
(141) |
(141) |
– |
(141) |
Dividends – non–controlling interests |
– |
– |
– |
– |
– |
– |
– |
(250) |
(250) |
Transactions with owners |
– |
– |
– |
– |
– |
(141) |
(141) |
(250) |
(391) |
Balance at 31 December 2017 |
8,554 |
4,866 |
(695) |
47 |
(145) |
33,227 |
45,854 |
10,856 |
56,710 |
Profit for year |
– |
– |
– |
– |
– |
(2,082) |
(2,082) |
2,675 |
593 |
Other comprehensive expense: |
|
|
|
|
|
|
|
|
|
Currency translation |
– |
– |
(157) |
– |
– |
– |
(157) |
(273) |
(430) |
Total other comprehensive expense |
– |
– |
(157) |
– |
– |
– |
(157) |
(273) |
(430) |
Total comprehensive income/(expense) |
– |
– |
(157) |
– |
– |
(2,082) |
(2,239) |
2,402 |
163 |
Transactions with owners: |
|
|
|
|
|
|
|
|
|
Share options charge |
– |
– |
– |
– |
– |
17 |
17 |
7 |
24 |
Dividends – equity holders |
– |
– |
– |
– |
– |
(256) |
(256) |
– |
(256) |
Dividends – non–controlling interests |
– |
– |
– |
– |
– |
– |
– |
(956) |
(956) |
Disposal of own shares |
– |
– |
– |
– |
1 |
– |
1 |
– |
1 |
Transactions with owners |
– |
– |
– |
– |
1 |
(240) |
(239) |
(948) |
(1,187) |
Balance at 31 December 2018 |
8,554 |
4,866 |
(852) |
47 |
(144) |
30,906 |
43,377 |
12,309 |
55,686 |
Consolidated cash flow statement
for the year ended 31 December
2018
|
2018
£’000 |
2017
£’000 |
Operating activities |
|
|
Profit for the year before taxation |
1,268 |
11,278 |
Finance income |
(61) |
(105) |
Finance expense |
3,682 |
4,268 |
Debenture break cost |
– |
14 |
Realised gain on disposal of other
investments |
– |
(3) |
(Increase)/decrease in value of investment
properties |
2,565 |
(9,373) |
Write off investment in joint venture |
– |
1,827 |
Increase in trading investments |
169 |
– |
Adjustment to interest rate derivative |
(265) |
(355) |
Depreciation |
2,122 |
1,804 |
Profit on disposal of non-current assets |
– |
(3) |
Share based payment expense |
18 |
– |
Exchange adjustments |
65 |
258 |
Development expenditure on inventories |
(6,256) |
– |
Change in inventories |
(797) |
896 |
Change in receivables |
(235) |
196 |
Change in payables |
(354) |
(415) |
Cash generated from operations |
1,921 |
10,287 |
Income tax paid |
(2,281) |
(14) |
Cash inflows from operating activities |
(360) |
10,273 |
Investing activities |
|
|
Disposal of assets held for sale |
36,474 |
(56) |
Acquisition of investment properties, mining
reserves, plant and equipment |
(9,438) |
(1,771) |
Sale of plant and equipment |
1 |
29 |
Interest received |
199 |
137 |
Cash (outflows)/inflows from investing
activities |
27,236 |
(1,661) |
Financing activities |
|
|
Interest paid |
(3,711) |
(3,963) |
Interest obligation under finance leases |
(178) |
(178) |
Debenture stock break costs paid |
– |
(14) |
Receipt of bank loan - Bisichi Mining PLC |
753 |
23 |
Repayment of bank loan - Bisichi Mining PLC |
(19) |
(25) |
Repayment of bank loan - Dragon Retail Properties
Ltd |
(65) |
– |
Receipt of bank loan |
7,202 |
– |
Repayment of bank loan |
(16,438) |
– |
Short term loan from joint ventures and related
parties |
(30) |
(30) |
Repayment of debenture stocks |
(3,000) |
(750) |
Equity dividends paid |
(255) |
(141) |
Equity dividends paid - non-controlling
interests |
(309) |
(250) |
Cash outflows from financing
activities |
(16,050) |
(5,328) |
Net increase in cash and cash
equivalents |
10,826 |
3,284 |
Cash and cash equivalents at beginning of
year |
6,266 |
2,931 |
Exchange adjustment |
28 |
51 |
Cash and cash equivalents at end of
year |
17,120 |
6,266 |
Cash and cash equivalents
For the purpose of the cash flow statement, cash and cash
equivalents comprise the following balance sheet amounts:
|
2018
£’000 |
2017
£’000 |
Cash and cash equivalents (before bank
overdrafts) |
20,655 |
7,528 |
Bank overdrafts |
(3,535) |
(1,262) |
Cash and cash equivalents at end of year |
17,120 |
6,266 |
£340,000 of cash deposits at 31 December
2018 were charged as security to debenture stocks (2017:
£120,000).
£500,000 of cash deposits at 31 December
2018 were charged as security to bank loans (2017: nil).
Group accounting policies
The following are the principal Group
accounting policies:
Basis of accounting
The Group financial statements are prepared in accordance with
International Financial Reporting Standards (IFRS), as adopted by
the European Union and with those parts of the Companies Act 2006
applicable to companies reporting under IFRS.
The Company has elected to prepare the parent company’s
financial statements in accordance with Financial Reporting
Standard 101 ’Reduced Disclosure Framework’ (FRS 101) and Companies
Act 2006 and these are presented in Note 30. The financial
statements are prepared under the historical cost convention,
except for the revaluation of freehold and leasehold properties and
financial assets at fair value through profit and loss as well as
fair value of interest derivatives.
The Group financial statements are presented in Pounds Sterling
and all values are rounded to the nearest thousand pounds (£’000)
except when otherwise stated.
The functional currency for each entity in the Group is the
currency of the country in which the entity has been incorporated.
Details of the country in which each entity has been incorporated
can be found in note 11.
The exchange rates used in the accounts were as follows:
|
£1 Sterling:
Rand |
£1 Sterling:
Dollar |
|
2018 |
2017 |
2018 |
2017 |
Year-end rate |
18.3723 |
16.6686 |
1.2690 |
1.35028 |
Annual average |
17.5205 |
17.1540 |
1.3096 |
1.29174 |
London & Associated Properties
PLC (“LAP”), the parent company, is a listed public company
incorporated and domiciled in England and quoted on the London Stock
Exchange. The Company registration number is 341829. LAP and its
subsidiaries (“the Group”) consists of LAP, all of its subsidiary
undertakings, including Bisichi Mining PLC (“Bisichi”) and Dragon
Retail Properties Limited (“Dragon”). The Group without Bisichi and
Dragon is referred to as LAP Group.
Revenue recognition restatement
During the review of revenue recognition in South Africa a revenue recognition error was
identified in respect of the treatment of transport and loading
costs to deliver export coal under certain export agreements. The
costs in prior periods, had been incorrectly recorded as a
deduction against revenue rather than shown as an operating cost.
In the current year such costs have been recorded in operating
costs and the comparatives restated accordingly.
The impact on the current year is to increase both revenue and
operating costs by £3,101,000 and the prior year requires an
equivalent restatement totalling £2,891,000. There is no profit or
net assets impact as a result of the prior year restatement.
Going concern
In reviewing going concern it is necessary to consider
separately the position of LAP Group and Bisichi. Although both are
consolidated into group accounts (as required by IFRS 10), they are
managed independently and in the unlikely event that Bisichi was
unable to continue trading this would not affect the ability of LAP
Group to continue operating as a going concern. The same would be
true for Bisichi in reverse.
The directors have reviewed the cash flow forecasts of the LAP
Group and the underlying assumptions on which they are based. The
LAP Group’s business activities, together with the factors likely
to affect its future development, are set out in the Chairman and
Chief Executive’s Statement and Financial Review. In addition, Note
20 to the financial statements sets out the Group’s objectives,
policies and processes for managing its capital; its financial risk
management objectives; details of its financial instruments and
hedging activities; and its exposure to credit risk and liquidity
risk.
The directors believe that the LAP Group has adequate resources
to continue in operational existence for the foreseeable future and
that the LAP Group is well placed to manage its business risks.
Thus they continue to adopt the going concern basis of accounting
in preparing the annual financial statements.
The Bisichi directors continue to adopt the going concern basis
of accounting in preparing the Bisichi annual financial
statements.
International Financial Reporting
Standards (IFRS)
The Group has adopted all of the new and revised Standards and
Interpretations issued by the International Accounting Standards
Board (“IASB”) that are relevant to its operations and effective
for accounting periods beginning 1 January
2018.
IFRS 15 ‘Revenue from Contracts with Customers’ was
issued by the IASB in May 2014. It is
effective for accounting periods beginning on or after 1 January 2018. The new standard replaces the
existing accounting standards, and provides enhanced detail on the
principle of recognising revenue to reflect the transfer of goods
and services to customers at a value which the company expects to
be entitled to receive. The standard also updates revenue
disclosure requirements. The standard was endorsed by the EU on
22 September 2017. The new standard
has not caused any material impacts on the financial statements for
the year ended 31 December 2018.
IFRS 9 was published in July
2014 and is effective for the group from 1 January
2018. The standard was endorsed by the EU on 22 November 2017. IFRS 9 supersedes IAS 39
“Financial Instruments: Recognition and Measurement” and is
applicable to financial assets and financial liabilities, and
covers the classification, measurement, impairment and
de-recognition of financial assets and financial liabilities
together with a new hedge accounting model. The adoption of IFRS 9
has resulted in changes in the Group’s accounting policies for the
recognition, classification and measurement of financial assets and
financial liabilities and impairment of financial assets. IFRS 9
modifies the classification and measurement of certain classes of
financial assets and liabilities and required the Group to reassess
classification of financial assets into three primary categories
(amortised cost, fair value through profit and loss, fair value
through other comprehensive income), reflecting the business model
in which assets are managed and their cash flow characteristics.
Financial liabilities continue to be measured at either fair value
through profit and loss or amortised cost. In addition, IFRS 9
introduced an expected credit loss (“ECL”) impairment model, which
means that anticipated as opposed to incurred credit losses are
recognised which may result in earlier recognition of impairments.
Application of IFRS 9 has not had a significant impact on the
Group’s reported results or its credit risk management
policies.
The Group has not adopted any Standards or Interpretations in
advance of the required implementation dates. The following new and
revised IFRS standards, which are applicable to the group, were
issued but are not yet effective:
IFRS 16 ‘Leases’ – IFRS 16 ‘Leases’ was issued by the
IASB in January 2017 and is effective
for accounting periods beginning on or after 1 January 2019. The new standard will replace IAS
17 ‘Leases’ and will eliminate the classification of leases as
either operating leases or finance leases and, instead, introduce a
single lessee accounting model. The standard, which has been
endorsed by the EU, provides a single lessee accounting model,
specifying how leases are recognised, measured, presented and
disclosed. The Directors are currently evaluating the financial and
operational impact of this standard including the application to
the Bisichi group’s service contracts at the mine containing
leases. The review of the impact of IFRS 16 will require an
assessment of all leases and the impact of adopting this standard
cannot be reliably estimated until this work is substantially
complete.
The Directors do not anticipate that the adoption of the other
standards and interpretations not listed above will have a material
impact on the accounts. Certain of these standards and
interpretations will, when adopted, require addition to or
amendment of disclosures in the accounts.
We are committed to improving disclosure and transparency and
will continue to work with our different stakeholders to ensure
they understand the detail of these accounting changes. We continue
to remain committed to a robust financial policy.
Key judgements and estimates
The preparation of the financial statements requires management
to make assumptions and estimates that may affect the reported
amounts of assets and liabilities and the reported income and
expenses, further details of which are set out below. Although
management believes that the assumptions and estimates used are
reasonable, the actual results may differ from those estimates.
Further details of the estimates and judgements which may have a
material impact on next year’s financial statements are contained
in the Directors’ Report.
Property operations
Fair value measurements of investment properties and
investments
An assessment of the fair value of certain assets and
liabilities, in particular investment properties, is required to be
performed. In such instances, fair value measurements are estimated
based on the amounts for which the assets and liabilities could be
exchanged between market participants. To the extent possible, the
assumptions and inputs used take into account externally verifiable
inputs. However, such information is by nature subject to
uncertainty.
Inventory
When the Group begins to redevelop an existing investment
property with a view to sell, the property is transferred to
inventory and held as a current asset. The property is re-measured
to fair value as at the date of the transfer with any gain or loss
being taken to the income statement. The re-measured amount becomes
the deemed cost at which the property is then carried in trading
properties. The Board have decided that Orchard Square,
Sheffield no longer fits our
longer-term criteria for an investment property held to generate
capital growth. Accordingly, it has been transferred to inventory.
A series of asset management initiatives and developments are
underway, and it is our intention to sell this asset on completion
of those projects.
Mining operations
Life of mine and reserves
The directors consider their judgements and estimates
surrounding the life of the mine and its reserves to have
significant effect on the amounts recognised in the financial
statements and to be an area where the financial statements are at
most risk of a significant estimation uncertainty. The life of the
mine remaining is currently estimated at 4 years. This life of mine
is based on the Groups existing coal reserves and excludes future
coal purchases and coal reserve acquisitions. The Group’s estimates
of proven and probable reserves are prepared and subject to
assessment by an independent Competent Person experienced in the
field of coal geology and specifically opencast and pillar coal
extraction. Estimates of coal reserves impact assessments of the
carrying value of property, plant and equipment, depreciation
calculations and rehabilitation and decommissioning provisions.
There are numerous uncertainties inherent in estimating coal
reserves and changes to these assumptions may result in restatement
of reserves. These assumptions include geotechnical factors as well
as economic factors such as commodity prices, production costs and
yield.
Depreciation, amortisation of mineral rights, mining development
costs and plant & equipment
The annual depreciation/amortisation charge is dependent on
estimates, including coal reserves and the related life of the
mine, expected development expenditure for probable reserves, the
allocation of certain assets to relevant ore reserves and estimates
of residual values of the processing plant. The charge can
fluctuate when there are significant changes in any of the factors
or assumptions used, such as estimating mineral reserves which in
turn affects the life of mine or the expected life of reserves.
Estimates of proven and probable reserves are prepared by an
independent Competent Person. Assessments of
depreciation/amortisation rates against the estimated reserve base
are performed regularly. Details of the depreciation/amortisation
charge can be found in note 9.
Provision for mining rehabilitation including restoration and
de-commissioning costs
A provision for future rehabilitation including restoration and
decommissioning costs requires estimates and assumptions to be made
around the relevant regulatory framework, the timing, extent and
costs of the rehabilitation activities and of the risk free rates
used to determine the present value of the future cash outflows.
The provisions, including the estimates and assumptions contained
therein, are reviewed regularly by management. The Group engages an
independent expert to assess the cost of restoration and
decommissioning annually as part of management’s assessment of the
provision. Details of the provision for mining rehabilitation can
be found in note 19.
Mining impairment
Property, plant and equipment representing the Group’s mining
assets in South Africa are
reviewed for impairment at each reporting date. The impairment test
is performed using the approved Life of Mine plan and those future
cash flow estimates are discounted using asset specific discount
rates and are based on expectations about future operations. The
impairment test requires estimates about production and sales
volumes, commodity prices, proven and probable reserves (as
assessed by the Competent Person), operating costs and capital
expenditures necessary to extract reserves in the approved Life of
Mine plan. Changes in such estimates could impact recoverable
values of these assets. Details of the carrying value of property,
plant and equipment can be found in note 9.
The impairment test indicated significant headroom as at
31 December 2018 and therefore no
impairment is considered appropriate. The key assumptions include:
coal prices, including domestic coal prices based on recent pricing
and assessment of market forecasts for export coal; production
based on proven and probable reserves assessed by the independent
Competent Person and yields associated with mining areas based on
assessments by the Competent Person and empirical data. A 15%
reduction in average forecast coal prices or a 17% reduction in
yield would give rise to a breakeven scenario. However, the Bisichi
directors consider the forecasted yield levels and pricing to be
achievable.
Basis of consolidation
The Group accounts incorporate the accounts of LAP and all of
its subsidiary undertakings, together with the Group’s share of the
results and net assets of its joint ventures.
Non–controlling interests in subsidiaries are presented
separately from the equity attributable to equity owners of the
parent company. When changes in ownership in a subsidiary do not
result in a loss of control, the non–controlling shareholders’
interests are initially measured at the non–controlling interests’
proportionate share of the subsidiaries’ net assets. Subsequent to
this, the carrying amount of non–controlling interests is the
amount of those interests at initial recognition plus the
non–controlling interests’ share of subsequent changes in equity.
Total comprehensive income is attributed to non–controlling
interests even if this results in the non–controlling interests
having a deficit balance.
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group
controls an entity when it is exposed to, or has rights to,
variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity.
Subsidiaries acquired during the year are consolidated using the
acquisition method. Their results are incorporated from the date
that control passes.
All intra Group transactions, balances, income and expenses are
eliminated on consolidation. Details of the Group’s trading
subsidiary companies are set out in Note 11.
The directors are required to consider the implications of IFRS
10 on the LAP investment in Bisichi Mining PLC (“Bisichi”). Related
parties also have shareholdings in Bisichi. When combined with the
42% held by LAP and, taking account of the wide disposition of
other shareholders, there is potential for LAP and these related
parties to exercise voting control over Bisichi. IFRS 10 makes it
clear that possible voting control is of more significance than
actual management control.
For this reason the directors have concluded that there is a
requirement to consolidate Bisichi with LAP. While, in theory, they
could achieve control, in practice they do not get involved in the
day to day operations of Bisichi. The directors have presented
consolidated accounts using the published accounts of Bisichi but
it is important to note that any figures, risks and assumptions
attributable to that company are the responsibility of the Bisichi
Board of directors who are independent from LAP.
As a result of treating Bisichi as a subsidiary, Dragon Retail
Properties Limited and West Ealing Properties Limited are also
subsidiaries for accounting purposes, as LAP and Bisichi each own
50% of these joint venture businesses.
Goodwill
Goodwill arising on acquisition is recognised as an intangible
asset and initially measured at cost, being the excess of the cost
of the acquired entity over the Group’s interest in the fair value
of the assets and liabilities acquired. Goodwill is carried at cost
less accumulated impairment losses. Goodwill arising from the
difference in the calculation of deferred tax for accounting
purposes and fair value in negotiations is judged not to be an
asset and is accordingly impaired on completion of the relevant
acquisition.
Revenue
Revenue comprises sales of coal, property rental income and
property management fees.
Rental income
Rental income arises from operating leases granted to tenants.
An operating lease is a lease other than a finance lease. A finance
lease is one whereby substantially all the risks and rewards of
ownership are passed to the lessee. Rental income is recognised in
the Group income statement on a straight–line basis over the term
of the lease. This includes the effect of lease incentives to
tenants, which are normally in the form of rent free periods.
Contingent rents, being the difference between the rent currently
receivable and the minimum lease payments, are recognised in
property income in the periods in which they are receivable. Rent
reviews are recognised when such reviews have been agreed with
tenants.
Service charge income
Service charge income and management fees are recorded as income
in the period in which they are earned.
Reverse surrender premiums
Payments received from tenants to surrender their lease
obligations are recognised immediately in the income statement.
Dilapidations
Dilapidations monies received from tenants in respect of their
lease obligations are recognised immediately in the income
statement.
Other revenue
Revenue in respect of listed investments held for trading
represents investment dividends received and profit or loss
recognised on realisation. Dividends are recognised in the income
statement when the dividend is received.
Property operating expenses
Operating expenses are expensed as incurred and any property
operating expenditure not recovered from tenants through service
charges is charged to the income statement.
Employee benefits
Share based remuneration
The Company operates a long–term incentive plan and two share
option schemes. The fair value of the conditional awards on shares
granted under the long–term incentive plan and the options granted
under the share option scheme is determined at the date of grant.
This fair value is then expensed on a straight–line basis over the
vesting period, based on an estimate of the number of shares that
will eventually vest. At each reporting date, the fair value of the
non–market based performance criteria of the long–term incentive
plan is recalculated and the expense is revised. In respect of the
share option scheme, the fair value of options granted is
calculated using a binomial method.
Pensions
The Company operates a defined contribution pension scheme. The
contributions payable to the scheme are expensed in the period to
which they relate.
Foreign currencies
Monetary assets and liabilities are translated at year end
exchange rates and the resulting exchange rate differences are
included in the consolidated income statement within the results of
operating activities if arising from trading activities, including
inter-company trading balances and within finance cost / income if
arising from financing.
For consolidation purposes, income and expense items are
included in the consolidated income statement at average rates, and
assets and liabilities are translated at year end exchange rates.
Translation differences arising on consolidation are recognised in
other comprehensive income. Foreign exchange differences on
intercompany loans are recorded in other comprehensive income when
the loans are not considered trading balances and are not expected
to be repaid in the foreseeable future. Where foreign operations
are sold or closed, the cumulative exchange differences
attributable to that foreign operation are recognised in the
consolidated income statement when the gain or loss on disposal is
recognised.
Transactions in foreign currencies are translated at the
exchange rate ruling on transaction date.
FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are recognised in the
Group’s consolidated statement of financial position when the group
becomes a party to the contractual provisions of the
instrument.
Financial assets
Financial assets are classified as either financial assets at
amortised cost, at fair value through other comprehensive income
(“FVTOCI”) or at fair value through profit or loss (“FVPL”)
depending upon the business model for managing the financial assets
and the nature of the contractual cash flow characteristics of the
financial asset.
A loss allowance for expected credit losses is determined for
all financial assets, other than those at FVPL, at the end of each
reporting period. The Group applies a simplified approach to
measure the credit loss allowance for trade receivables using the
lifetime expected credit loss provision. The lifetime expected
credit loss is evaluated for each trade receivable taking into
account payment history, payments made subsequent to year end and
prior to reporting, past default experience and the impact of any
other relevant and current observable data. The group applies a
general approach on all other receivables classified as financial
assets. The general approach recognises lifetime expected credit
losses when there has been a significant increase in credit risk
since initial recognition.
The Group derecognises a financial asset when the contractual
rights to the cash flows from the asset expire, or when it
transfers the financial asset and substantially all the risks and
rewards of ownership of the asset to another party. The Group
derecognises financial liabilities when the Group’s obligations are
discharged, cancelled or have expired.
Investments
Investments comprise of (a) a loan to a limited property
partnership, included in non-current investments, and (b)
investments in shares of listed companies. Current and non-current
Investments are initially measured at fair value and are
subsequently measured at fair value through profit and loss, based
on both the business model within which such assets are held and
the contractual cash flow characteristics of the financial asset.
Fair value movements are recognised in profit or loss.
Financial assets are derecognised when the rights to receive
cash flows have expired or have been transferred and the Group has
transferred substantially all the risks and rewards of ownership.
When there is no reasonable expectation of recovering part or all
of a financial asset, its carrying value is written off.
Trade and other receivables
Trade receivables are accounted for at amortised cost. Trade
receivables do not carry any interest and are stated at their
nominal value as reduced by appropriate expected credit loss
allowances for estimated recoverable amounts as the interest that
would be recognised from discounting future cash payments over the
short payment period is not considered to be material.
Trade and other payables
Trade and other payables are non-interest bearing and are stated
at their nominal value, as the interest that would be recognised
from discounting future cash payments over the short payment period
is not considered to be material.
Bank loans and overdrafts
Bank loans and overdrafts are included as financial liabilities
on the Group balance sheet net of the unamortised discount and
costs of issue. The cost of issue is recognised in the Group income
Statement over the life of the bank loan. Interest payable on those
facilities is expensed as a finance cost in the period to which it
relates.
Debenture loans
The debenture loan is included as a financial liability on the
balance sheet net of the unamortised costs on issue. The cost of
issue is recognised in the Group income statement over the life of
the debenture. Interest payable to debenture holders is expensed in
the period to which it relates.
Finance lease liabilities
Finance lease liabilities arise for those investment properties
held under a leasehold interest and accounted for as investment
property. The liability is calculated as the present value of the
minimum lease payments, reducing in subsequent reporting periods by
the apportionment of payments to the lessor. Lease payments are
allocated between the liability and finance charges so as to
achieve a constant financing rate. Contingent rents payable, such
as rent reviews or those related to rental income, are charged as
an expense in the period in which they are incurred.
Interest rate derivatives
The Group uses derivative financial instruments to hedge the
interest rate risk associated with the financing of the Group’s
business. No trading in such financial instruments is undertaken.
At each reporting date, these interest rate derivatives are
recognised at their fair value to the business, being the Net
Present Value of the difference between the hedged rate of interest
and the market rate of interest for the remaining period of the
hedge.
Ordinary shares
Shares are classified as equity when there is no obligation to
transfer cash or other assets. Incremental costs directly
attributable to the issue of new shares are shown in equity as a
deduction, net of tax, from the proceeds.
Treasury shares
When the Group’s own equity instruments are repurchased,
consideration paid is deducted from equity as treasury shares until
they are cancelled. When such shares are subsequently sold or
reissued, any consideration received is included in equity.
Investment properties
Valuation
Investment properties are those that are held either to earn
rental income or for capital appreciation or both, including those
that are undergoing redevelopment for future use as an investment
property. They are reported on the Group balance sheet at fair
value, being the amount for which an investment property could be
exchanged between knowledgeable and willing parties in an arm’s
length transaction. The directors’ property valuation is at fair
value.
The external valuation of properties is undertaken by
independent valuers who hold recognised and relevant professional
qualifications and have recent experience in the locations and
categories of properties being valued. Surpluses or deficits
resulting from changes in the fair value of investment property are
reported in the Group income statement in the period in which they
arise.
Capital expenditure
Investment properties are measured initially at cost, including
related transaction costs. Additions to capital expenditure, being
costs of a capital nature, directly attributable to the
redevelopment or refurbishment of an investment property held for
future use as an investment property, up to the point of it being
completed for its intended use, are capitalised in the carrying
value of that property. Where there is a change of use, such as
commencement of development with a view to sell, the property is
transferred to inventory at deemed cost, which is its fair value on
the date of the change in use. Capitalised interest is calculated
with reference to the actual rate payable on borrowings for
development purposes, or for that part of the development costs
financed out of borrowings the capitalised interest is calculated
on the basis of the average rate of interest paid on the relevant
debt outstanding.
Disposal
The disposal of investment properties is recorded on completion
of the contract. On disposal, any gain or loss is calculated as the
difference between the net disposal proceeds and the valuation at
the last year end plus subsequent capitalised expenditure in the
period.
Depreciation and amortisation
In applying the fair value model to the measurement of
investment properties, depreciation and amortisation are not
provided in respect of investment properties.
Other assets and depreciation
The cost, less estimated residual value, of other property,
plant and equipment is written off on a straight–line basis over
the asset’s expected useful life. Residual values and useful lives
are reviewed, and adjusted if appropriate, at each balance sheet
date. Changes to the estimated residual values or useful lives are
accounted for prospectively. The depreciation rates generally
applied are:
Motor vehicles |
25–33 per cent per annum |
Office equipment |
10–33 per cent per annum |
Assets held for sale
Non-current assets, or disposal groups comprising assets and
liabilities, are classified as held-for-sale if it is highly
probable that they will be recovered primarily through sale rather
through continuing use. Such assets, or disposal groups, are
generally measured at the lower of their carrying amount and fair
value less costs of sale. Any impairment loss on a disposal group
is allocated first to goodwill and then to the remaining assets and
liabilities on a pro rata basis, except that no loss is allocated
to inventories, financial assets, deferred tax assets, employee
benefit assets, or investment property which continues to be
measured in accordance with the Group’s other accounting policies.
Impairment losses on initial classification as assets held-for-sale
and subsequent gains and losses on remeasurement are recognised in
profit or loss. Once classified as held-for-sale, intangible assets
and property, plant and equipment are no longer amortised or
depreciated, and any equity-accounted investment is no longer
equity accounted.
Inventories–property
Those properties held as trading inventory which are being
developed with a view to sell. Inventories are recorded at the
lower of cost and net realisable value. The net realisable value of
inventory is determined by a professional external valuer at each
reporting date. If the net realisable value of inventory is lower
than its carrying value, an impairment loss is recorded in the
income statement. If, in subsequent periods, the net realisable
value of inventory that was previously impaired increases above its
carrying value, the impairment is reversed to align the carrying
value of the property with the net realisable value. Inventory are
presented on the balance sheet within current assets.
Income taxes
The charge for current taxation is based on the results for the
year as adjusted for disallowed or non–assessable items. Tax
payable upon realisation of revaluation gains recognised in prior
periods is recorded as a current tax charge with a release of the
associated deferred tax. Deferred tax is the tax expected to be
payable or recoverable on differences between the carrying amounts
of assets and liabilities in the financial statements and the
corresponding tax bases used in the tax computations and is
recorded using the balance sheet liability method. Deferred tax
liabilities are generally recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent
that it is probable that taxable profits will be available against
which deductible temporary differences can be utilised. In respect
of the deferred tax on the revaluation surplus, this is calculated
on the basis of the chargeable gains that would crystallise on the
sale of the investment portfolio as at the reporting date. The
calculation takes account of indexation on the historic cost of
properties and any available capital losses. Deferred tax is
calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised.
Deferred tax is charged or credited in the Group income statement,
except when it relates to items charged or credited directly to
equity, in which case it is also dealt with in equity.
Dividends
Dividends payable on the ordinary share capital are recognised
as a liability in the period in which they are approved.
Cash and cash equivalents
Cash comprises cash in hand and on-demand deposits. Cash and
cash equivalents comprises short-term, highly liquid investments
that are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value and original
maturities of three months or less.
The cash and cash equivalents shown in the cashflow statement
are stated net of bank overdrafts that are repayable on demand as
per IAS 7. This includes the structured trade finance facility held
in South Africa as detailed in
note 20. These facilities are considered to form an integral part
of the treasury management of the Group and can fluctuate from
positive to negative balances during the period.
Bisichi Mining PLC
Mining revenue
Revenue is recognised when the customer has a legally binding
obligation to settle under the terms of the contract when the
performance obligations has been satisfied, which is once control
of the goods and/or services have transferred to the buyer. Revenue
is measured based on consideration specified in the contract with a
customer on a per metric tonne basis.
Mining costs
Expenditure is recognised in respect of goods and services
received. Where coal is purchased from third parties at point of
extraction the expenditure is only recognised when the coal is
extracted and all of the significant risks and rewards of ownership
have been transferred.
Mining reserves, plant and equipment
The cost of property, plant and equipment comprises its purchase
price and any costs directly attributable to bringing the asset to
the location and condition necessary for it to be capable of
operating in accordance with agreed specifications. Freehold land
is not depreciated. Other property, plant and equipment is stated
at historical cost less accumulated depreciation. The cost
recognised includes the recognition of any decommissioning assets
related to property, plant and equipment.
Heavy surface mining and other plant and equipment is
depreciated at varying rates depending upon its expected usage. The
depreciation rates generally applied are between 5-10 per cent per
annum, but limited to the shorter of its useful life or the life of
the mine.
Other non–current assets, comprising motor vehicles and office
equipment, are depreciated at a rate of between 10% and 33% per
annum which is calculated to write off the cost, less estimated
residual value of the assets, on a straight line basis over their
expected useful lives.
Mine inventories
Inventories are stated at the lower of cost and net realisable
value. Cost includes materials, direct labour and overheads
relevant to the stage of production. Cost is determined using the
weighted average method. Net realisable value is based on estimated
selling price less all further costs to completion and all relevant
marketing, selling and distribution costs.
Mine provisions
Provisions are recognised when the Group has a present
obligation as a result of a past event which it is probable
will result in an outflow of economic benefits that can be reliably
estimated.
A provision for rehabilitation of the mine is initially recorded
at present value and the discounting effect is unwound over time as
a finance cost. Changes to the provision as a result of changes in
estimates are recorded as an increase/decrease in the provision and
associated decommissioning asset. The decommissioning asset is
depreciated in line with the Group’s depreciation policy over the
life of mine. The provision includes the restoration of the
underground, opencast, surface operations and de-commissioning of
plant and equipment. The timing and final cost of the
rehabilitation is uncertain and will depend on the duration of the
mine life and the quantities of coal extracted from the
reserves.
Mine impairment
Whenever events or changes in circumstance indicate that the
carrying amount of an asset may not be recoverable that asset is
reviewed for impairment. This includes mining reserves, plant and
equipment and net investments in joint ventures. A review involves
determining whether the carrying amounts are in excess of the
recoverable amounts.
An asset’s recoverable amount is determined as the higher of its
fair value less costs of disposal and its value in use. Such
reviews are undertaken on an asset-by-asset basis, except where
assets do not generate cash flows independent of other assets, in
which case the review is undertaken on a company or Group
level.
If the carrying amount of an asset exceeds its recoverable
amount an asset’s carrying value is written down to its estimated
recoverable amount (being the higher of the fair value less cost to
sell and value in use). Any change in carrying value is recognised
in the comprehensive income statement.
Mine reserves and development cost
The purpose of mine development is to establish secure working
conditions and infrastructure to allow the safe and efficient
extraction of recoverable reserves. Depreciation on mine
development is not charged until production commences or the assets
are put to use. On commencement of full commercial production,
depreciation is charged over the life of the associated mine
reserves extractable using the asset on a unit of production basis.
The unit of production calculation is based on tonnes mined as a
ratio to proven and probable reserves and also includes future
forecast capital expenditure. The cost recognised includes the
recognition of any decommissioning assets related to mine
development.
Post production stripping
In surface mining operations, the Group may find it necessary to
remove waste materials to gain access to coal reserves prior to and
after production commences. Prior to production commencing,
stripping costs are capitalised until the point where the
overburden has been removed and access to the coal seam commences.
Subsequent to production, waste stripping continues as part of the
extraction process as a run of mine activity. There are two
benefits accruing to the Group from stripping activity during the
production phase: extraction of coal that can be used to produce
inventory and improved access to further quantities of material
that will be mined in future periods. Economic coal extracted is
accounted for as inventory. The production stripping costs relating
to improved access to further quantities in future periods are
capitalised as a stripping activity asset, if and only if, all of
the following are met:
• it is probable that the future
economic benefit associated with the stripping activity will flow
to the Group;
• the Group can identify the component
of the ore body for which access has been improved; and
• the costs relating to the stripping
activity associated with that component or components can be
measured reliably.
In determining the relevant component of the coal reserve for
which access is improved, the Group componentises its mine into
geographically distinct sections or phases to which the stripping
activities being undertaken within that component are allocated.
Such phases are determined based on assessment of factors such as
geology and mine planning.
The Group depreciates deferred costs capitalised as stripping
assets on a unit of production method, with reference to the tons
mined and reserve of the relevant ore body component or phase.
Segmental reporting
For management reporting purposes, the Group is organised into
business segments distinguishable by economic activity. The Group’s
business segments are LAP operations, Bisichi operations and Dragon
operations. These business segments are subject to risks and
returns that are different from those of other business segments
and are the primary basis on which the Group reports its segmental
information. This is consistent with the way the Group is managed
and with the format of the Group’s internal financial reporting.
Significant revenue from transactions with any individual customer,
which makes up 10 per cent or more of the total revenue of the
Group, is separately disclosed within each segment. All coal
exports are sales to coal traders at Richard Bay’s terminal in
South Africa with the risks and
rewards passing to the coal trader at the terminal. Whilst the coal
traders will ultimately sell the coal on the international markets
the Group has no visibility over the ultimate destination of the
coal. Accordingly, the export sales are recorded as South Africa revenue.
Notes to the financial statements
for the year ended 31 December
2018
1. Results for the year and segmental
analysis
Operating Segments are based on the internal reporting and
operational management of the Group. LAP is focused primarily on
property activities (which generate trading income), but it also
holds and manages investments. IFRS 10 requires the Group to treat
Bisichi as a subsidiary and therefore it is consolidated, rather
than being included in the accounts as an associate using the
equity method. The Group has also consolidated Dragon, a
company which the Company jointly controls with Bisichi; Bisichi is
a coal mining company with operations in South Africa and also holds investment
property in the United Kingdom and
derives income from property rentals. Dragon is a property
investment company and derives its income from property rentals.
These operating segments (LAP, Bisichi and Dragon) are each viewed
separately and have been so reported below.
Business segments
BUSINESS ANALYSIS |
LAP
£’000 |
BISICHI
£’000 |
DRAGON
£’000 |
2018
TOTAL
£’000 |
Rental income |
5,049 |
1,065 |
167 |
6,281 |
Service charge income |
802 |
137 |
– |
939 |
Management income from third party properties |
718 |
– |
– |
718 |
Mining |
– |
48,713 |
– |
48,713 |
Group Revenue |
6,569 |
49,915 |
167 |
56,651 |
Direct property costs |
(2,269) |
(340) |
– |
(2,609) |
Direct mining costs |
– |
(34,309) |
– |
(34,309) |
Overheads |
(4,035) |
(6,050) |
(105) |
(10,190) |
Exchange losses |
– |
(63) |
– |
(63) |
Depreciation |
(9) |
(2,113) |
– |
(2,122) |
Operating profit |
256 |
7,040 |
62 |
7,358 |
Finance income |
37 |
24 |
– |
61 |
Finance expenses |
(3,111) |
(538) |
(33) |
(3,682) |
Result before valuation movements |
(2,818) |
6,526 |
29 |
3,737 |
Other segment items |
|
|
|
|
Net decrease on revaluation of investment
properties |
(2,170) |
(215) |
(180) |
(2,565) |
Net decrease on revaluation of investments held
for trading |
– |
(169) |
– |
(169) |
Adjustment to interest rate derivative |
265 |
– |
– |
265 |
Revaluation and other movements |
(1,905) |
(384) |
(180) |
(2,469) |
(Loss)/profit for the year before
taxation |
(4,723) |
6,142 |
(151) |
1,268 |
Segment assets |
|
|
|
|
- Non-current assets - property |
35,011 |
13,230 |
2,450 |
50,691 |
- Non-current assets - plant & equipment |
106 |
8,531 |
22 |
8,659 |
- Cash & cash equivalents |
11,345 |
9,221 |
89 |
20,655 |
- Non-current assets - other |
1,748 |
35 |
– |
1,783 |
- Current assets - others |
1,947 |
8,290 |
183 |
10,420 |
Total assets excluding investment in joint
ventures, assets held for sale and property
inventories |
50,157 |
39,307 |
2,744 |
92,208 |
Segment liabilities |
|
|
|
|
Borrowings |
(45,352) |
(10,127) |
(1,164) |
(56,643) |
Current liabilities |
(6,372) |
(7,158) |
(73) |
(13,603) |
Non-current liabilities |
(3,122) |
(3,962) |
(33) |
(7,117) |
Total liabilities |
(54,846) |
(21,247) |
(1,270) |
(77,363) |
Net (liabilities)/assets |
(4,689) |
18,060 |
1,474 |
14,845 |
Assets held for sale |
2,285 |
– |
– |
2,285 |
Inventories–property |
38,556 |
– |
– |
38,556 |
Net assets as per balance sheet |
|
|
|
55,686 |
Major customers |
|
|
|
|
Customer A |
– |
34,112 |
– |
34,112 |
Customer B |
– |
11,557 |
– |
11,557 |
These customers are for mining revenue in South Africa.
Geographic analysis |
United
Kingdom
£’000 |
South
Africa
£’000 |
2018
Total
£’000 |
Revenue |
8,015 |
48,636 |
56,651 |
Operating profit |
1,274 |
6,084 |
7,358 |
Non-current assets excluding investments |
50,820 |
8,530 |
59,350 |
Total net assets |
51,118 |
4,568 |
55,686 |
Capital expenditure |
6,574 |
2,864 |
9,438 |
BUSINESS ANALYSIS |
LAP
£’000 |
BISICHI
£’000
Restated |
DRAGON
£’000 |
2017
TOTAL
£’000
Restated |
Rental income |
6,825 |
1,112 |
166 |
8,103 |
Management income from third party properties |
542 |
– |
– |
542 |
Mining |
– |
39,225 |
– |
39,225 |
Group Revenue |
7,367 |
40,337 |
166 |
47,870 |
Direct property costs |
(926) |
(152) |
(1) |
(1,079) |
Direct mining costs |
– |
(28,555) |
– |
(28,555) |
Overheads |
(2,869) |
(5,589) |
(164) |
(8,622) |
Exchange gains |
– |
(256) |
– |
(256) |
Depreciation |
(13) |
(1,790) |
(1) |
(1,804) |
Operating profit |
3,559 |
3,995 |
- |
7,554 |
Finance income |
38 |
67 |
- |
105 |
Finance expenses |
(3,706) |
(526) |
(29) |
(4,268) |
Debenture break costs |
(14) |
- |
- |
(14) |
Result before valuation movements |
(130) |
3,536 |
(29) |
3,377 |
Other segment items |
|
|
|
|
Net increase/(decrease) on revaluation of
investment properties |
9,386 |
(13) |
– |
9,373 |
Write off investment in joint venture |
– |
(1,827) |
– |
(1,827) |
Adjustment to interest rate derivative |
358 |
– |
(3) |
355 |
Revaluation and other movements |
9,744 |
(1,840) |
(3) |
7,901 |
Profit/(loss) for the year before
taxation |
9,614 |
1,696 |
(32) |
11,278 |
Segment assets |
|
|
|
|
- Non-current assets - property |
65,231 |
13,397 |
2,630 |
81,258 |
- Non-current assets - plant & equipment |
116 |
8,613 |
6 |
8,735 |
- Cash & cash equivalents |
2,109 |
5,327 |
92 |
7,528 |
- Non-current assets - other |
1,748 |
51 |
– |
1,799 |
- Current assets - others |
2,715 |
6,285 |
30 |
9,030 |
Total assets excluding investment in joint
ventures and assets held for sale |
71,919 |
33,673 |
2,758 |
108,350 |
Segment liabilities |
|
|
|
|
Borrowings |
(57,571) |
(7,160) |
(1,218) |
(65,949) |
Current liabilities |
(5,588) |
(7,556) |
(123) |
(13,267) |
Non-current liabilities |
(4,806) |
(3,986) |
(73) |
(8,865) |
Total liabilities |
(67,965) |
(18,702) |
(1,414) |
(88,081) |
Net assets |
3,954 |
14,971 |
1,344 |
20,269 |
Assets held for sale |
36,441 |
– |
– |
36,441 |
Net assets as per balance sheet |
|
|
|
56,710 |
Major customers |
|
|
|
|
Customer A |
– |
27,528 |
– |
27,528 |
Customer B |
– |
7,226 |
– |
7,226 |
These customers are for mining revenue in South
Africa. |
|
|
|
|
Geographic analysis |
|
United
Kingdom
£’000 |
South
Africa
£’000 |
2017
Total
£’000 |
Revenue |
|
8,692 |
39,178 |
47,870 |
Operating profit |
|
4,645 |
2,909 |
7,554 |
Non-current assets excluding investments |
|
81,383 |
8,610 |
89,993 |
Total net assets |
|
52,452 |
4,258 |
56,710 |
Capital expenditure |
|
30 |
1,741 |
1,771 |
Group revenue is external to the Group and the directors consider
that inter segmental revenues are not material. Revenue includes
the reversal of contingent rents of £0.1 million (2017: contingent
rents of £0.7 million).
The directors have disclosed service charge income separately as
a component of revenue in 2018, with a corresponding grossing up of
direct property costs. In 2017 and prior years, service charges
were shown netted against direct property costs. Management
considers the approach adopted in 2018 is more informative and
intends to continue with this approach in future years. The revised
disclosure does not change operating profit. For 2017 the amount of
service charge income received by the Group was £836,000.
Accordingly, the change in presentation is not considered to be
sufficiently material to warrant amending prior periods’
disclosures.
Segmental property revenue is derived from rental income and
service charges recoverable from tenants. This is consistent with
the revenue information disclosed for each reportable segment (see
note 1). Rental income is recognised on a straight-line basis over
the term of the lease. Service charges recoverable from tenants are
recognised over time as the service is rendered. Segmental mining
revenue is derived principally from coal sales and is recognised
once the control of the goods has transferred from the group to the
buyer. Revenue is measured based on the consideration specified in
the contract with the customer or tenant.
2. Profit before taxation
|
2018
£’000 |
2017
£’000 |
Profit before taxation is stated after
charging/(crediting): |
|
|
Staff costs (see note 26) |
9,889 |
8,113 |
Depreciation on tangible fixed assets - owned
assets |
2,123 |
1,804 |
Operating lease rentals - land and buildings |
454 |
411 |
Exchange loss |
63 |
256 |
Profit on disposal of motor vehicles and office
equipment |
6 |
(3) |
Amounts payable to the auditor in respect of both
audit and non-audit services |
|
|
Audit services |
|
|
Statutory - Company and consolidation |
83 |
83 |
Subsidiaries - audited by RSM |
17 |
17 |
Subsidiaries - audited by other auditors |
78 |
51 |
Further assurance services |
4 |
4 |
Other services |
9 |
5 |
|
191 |
160 |
Staff costs are included in overheads.
3. Directors’ emoluments
|
2018
£’000 |
2017
£’000 |
Emoluments |
1,899 |
894 |
Defined contribution pension scheme
contributions |
10 |
27 |
|
1,909 |
921 |
Sir Michael Heller received £284,000
(2017: £75,000) as a Director of Bisichi Mining PLC.
Details of directors’ emoluments and share options are set out
in the remuneration report.
4. Finance income and
expenses
|
2018
£’000 |
2017
£’000 |
Finance income |
61 |
105 |
Finance expenses |
|
|
Interest on bank loans and overdrafts |
(2,034) |
(2,223) |
Unwinding of discount (Bisichi) |
(43) |
(92) |
Other loans |
(1,169) |
(1,414) |
Interest on derivatives |
(269) |
(337) |
Interest on obligations under finance leases |
(167) |
(202) |
Total finance expenses |
(3,682) |
(4,268) |
5. Income tax
|
2018
£’000 |
2017
£’000 |
Current tax |
|
|
Corporation tax on profit of the period |
2,017 |
369 |
Corporation tax on profit of previous periods |
33 |
(5) |
Total current tax |
2,050 |
364 |
Deferred tax |
|
|
Loss utilised |
3,740 |
– |
Origination of timing differences |
(57) |
(35) |
Revaluation of investment properties |
(5,056) |
2,348 |
Accelerated capital allowances |
(120) |
235 |
Fair value of interest derivatives |
51 |
68 |
Adjustment in respect of prior years |
67 |
2 |
Total deferred tax (notes 21 and 22) |
(1,375) |
2,618 |
Tax on profit on ordinary activities |
675 |
2,982 |
Factors affecting tax charge for the year
The corporation tax assessed for the year is different from that
at the effective rate of corporation tax in the United Kingdom of 19.00 per cent
(2017: 19.25 per cent). The differences are explained below:
|
2018
£’000 |
2017
£’000 |
Profit for the year before taxation |
1,268 |
11,278 |
Taxation at 19 per cent (2017: 19.25 per
cent) |
241 |
2,171 |
Effects of: |
|
|
Capital gains / (losses) on disposal |
(1,799) |
1,792 |
Other differences |
2,058 |
(785) |
Adjustment in respect of prior years |
(33) |
(3) |
Deferred tax rate adjustment |
208 |
(193) |
Income tax charge for the year |
675 |
2,982 |
Other differences include foreign tax £618,000 (2017: £175,000),
deferred tax not recognised on losses £421,000 (2017: nil).
Analysis of United Kingdom and
overseas tax:
United Kingdom tax included in
above:
|
2018
£’000 |
2017
£’000 |
Corporation tax |
(10) |
233 |
Adjustment in respect of prior years |
33 |
(5) |
Current tax |
23 |
228 |
Deferred tax |
(1,458) |
2,219 |
|
(1,435) |
2,447 |
Overseas tax included above:
|
2018
£’000 |
2017
£’000 |
Corporation tax |
2,026 |
136 |
Current tax |
2,026 |
136 |
Deferred tax |
84 |
397 |
Adjustment in respect of prior years |
- |
2 |
Deferred tax |
84 |
399 |
|
2,110 |
535 |
Factors that may affect future tax charges:
Based on current capital expenditure plans, the Group expects to
continue to be able to claim capital allowances in excess of
depreciation in future years, but at a slightly lower level than in
the current year.
A deferred tax provision has been made for gains on revaluing
investment properties.
The Finance Bill 2016 was substantively enacted on 7 September 2016. This includes a reduction in
the rate of Corporation tax from 19% effective from 1 April 2017 to 17% from 1
April 2020.
The Finance (no. 2) Act 2017 was substantively enacted on
16 November 2017. This includes a
restriction on the utilisation of brought forward tax losses and
corporate interest in certain circumstances effective from
1 April 2017.
6. Dividend
|
2018 |
2017 |
|
Per share |
£’000 |
Per share |
£’000 |
Dividends paid during the year relating to the
prior period |
0.300p |
256 |
0.165p |
141 |
Dividends to be paid: |
|
|
|
|
Proposed final dividend for the year |
0.180p |
154 |
0.175p |
149 |
Proposed special dividend for the year |
– |
– |
0.125p |
107 |
7. (Loss)/profit per share and
net assets per share
(Loss)/profit per share has been calculated as follows:
|
2018 |
2017 |
(Loss)/profit for the year for the purposes of
basic and diluted profit/(loss) per share (£’000) |
(2,082) |
7,686 |
Weighted average number of ordinary shares in
issue for the purpose of basic (loss)/profit per share (’000) |
85,325 |
85,322 |
Basic (loss)/profit per share |
(2.44)p |
9.01p |
Weighted average number of ordinary shares in
issue for the purpose of diluted (loss)/profit per share
(’000) |
85,325 |
85,322 |
Fully diluted (loss)/profit per share |
(2.44)p |
9.01p |
Weighted average number of shares in issue is calculated after
excluding treasury shares of 218,197 (2017: 221,061).
Net assets per share have been calculated as follows:
|
2018 |
2017 |
Net assets (£’000) |
43,377 |
45,854 |
Shares in issue (’000) |
85,322 |
85,322 |
Basic net assets per share |
50.83p |
53.74p |
Net assets diluted (£’000) |
43,377 |
45,854 |
Shares in issue (’000) |
85,322 |
85,322 |
Diluted net assets per share |
50.83p |
53.74p |
8. Investment properties
|
Total
£’000 |
Freehold
£’000 |
Leasehold over 50 years
£’000 |
Leasehold under 50 years
£’000 |
Cost or valuation at 1 January 2018 |
81,258 |
62,425 |
16,856 |
1,977 |
(Decrease)/increase on revaluation |
(2,565) |
(2,075) |
(575) |
85 |
Transfer to assets held for sale (note 10) |
(2,285) |
(2,285) |
– |
– |
Transfer to inventory (note 12) |
(32,300) |
(32,300) |
– |
– |
Acquisition of property |
6,553 |
6,553 |
– |
– |
Increase/(decrease) in present value of head
leases |
30 |
– |
33 |
(3) |
At 31 December 2018 |
50,691 |
32,318 |
16,314 |
2,059 |
Representing assets stated at: |
|
|
|
|
Valuation |
47,430 |
32,318 |
13,996 |
1,116 |
Present value of head leases |
3,261 |
– |
2,318 |
943 |
|
50,691 |
32,318 |
16,314 |
2,059 |
|
Total
£’000 |
Freehold
£’000 |
Leasehold
over
50 years
£’000 |
Leasehold
under
50 years
£’000 |
Cost or valuation at 1 January 2017 |
109,847 |
88,585 |
19,620 |
1,642 |
Transfer to assets held for sale (note 10) |
(36,441) |
(36,441) |
– |
– |
Additions in year |
13 |
13 |
– |
– |
(Decrease)/increase in present value of head
leases |
(1,534) |
– |
(1,839) |
305 |
Increase/(decrease) on revaluation |
9,373 |
10,268 |
(925) |
30 |
At 31 December 2017 |
81,258 |
62,425 |
16,856 |
1,977 |
Representing assets stated at: |
|
|
|
|
Valuation |
78,025 |
62,425 |
14,570 |
1,030 |
Present value of head leases |
3,233 |
– |
2,286 |
947 |
|
81,258 |
62,425 |
16,856 |
1,977 |
The leasehold and freehold properties, excluding the present value
of head leases and directors’ valuations, were valued as at
31 December 2018 by professional
firms of chartered surveyors. The valuations were made at fair
value. The directors’ property valuations were made at fair
value.
|
2018
£’000 |
2017
£’000 |
Allsop LLP |
32,785 |
62,955 |
Carter Towler |
13,045 |
13,245 |
Directors’ valuations |
1,600 |
1,825 |
|
47,430 |
78,025 |
Add: present value of headleases |
3,261 |
3,233 |
|
50,691 |
81,258 |
The historical cost of investment properties, including total
capitalised interest of £1,161,000 (2017: £1,161,000) was as
follows:
|
2018 |
2017 |
|
Freehold
£’000 |
Leasehold
Over 50
years
£’000 |
Leasehold
under 50
years
£’000 |
Freehold
£’000 |
Leasehold
Over 50
years
£’000 |
Leasehold
under 50
years
£’000 |
Cost at 1 January |
67,702 |
17,653 |
1,939 |
72,711 |
17,653 |
1,939 |
Transfer to assets held for sale (note 10) |
(202) |
– |
– |
(5,022) |
– |
– |
Transfer to inventory (note 12) |
(38,902) |
– |
– |
– |
– |
– |
Additions |
6,553 |
– |
– |
13 |
– |
– |
Cost at 31 December |
35,151 |
17,653 |
1,939 |
67,702 |
17,653 |
1,939 |
Each year external valuers are appointed by the executive directors
on behalf of the Board. The valuers are selected based upon their
knowledge, independence and reputation for valuing assets such as
those held by the Group.
Valuations are performed annually and are performed consistently
across all properties in the Group’s portfolio. At each reporting
date appropriately qualified employees of the Group verify all
significant inputs and review the computational outputs. Valuers
submit their report to the Board on the outcome of each
valuation.
Valuations take into account tenure, lease terms and structural
condition. The inputs underlying the valuations include market rent
or business profitability, likely incentives offered to tenants,
forecast growth rates, yields, EBITDA, discount rates, construction
costs including any specific site costs (for example section 106),
professional fees, developer’s profit including contingencies,
planning and construction timelines, lease regear costs, planning
risk and sales prices based on known market transactions for
similar properties to those being valued.
Valuations are based on what is determined to be the highest and
best use. When considering the highest and best use the valuer will
consider, on a property by property basis, its actual and potential
uses which are physically, legally and financially viable. Where
the highest and best use differs from the existing use, the valuer
will consider the cost and likelihood of achieving and implementing
this change in arriving at the valuation.
There are often restrictions on Freehold and Leasehold property
which could have a material impact on the realisation of these
assets. The most significant of these occur when planning
permission or lease extension and renegotiation of use are required
or when a credit facility is in place. These restrictions are
factored into the property’s valuation by the external valuer.
The methods of fair value measurement are classified into a
hierarchy based on the reliability of the information used to
determine the valuation, as follows:
Level 1: valuation based on inputs on quoted market
prices in active markets.
Level 2: valuation based on inputs other than quoted
prices included within level 1 that maximise the use of observable
data directly or from market prices or indirectly derived from
market prices.
Level 3: where one or more significant inputs to
valuations are not based on observable market data.
Class of property
Level 3 |
Carrying /
Fair value
2018
£’000 |
Carrying/ Fair value 2017
£’000 |
Valuation technique |
Key
unobservable
inputs |
Range (weighted average)
2018 |
Range (weighted average) 2017 |
Freehold – external valuation |
30,720 |
60,600 |
Income capitalisation |
Estimated Rental
Value
Per sq ft p.a
Equivalent Yield |
£4 – £39
(£16)
5.3% – 12.9%
(9.7%) |
£5 – £39
(£19)
4.9% – 12.9%
(8.4%) |
Leasehold over 50 years –
external valuation |
13,995 |
14,570 |
Income capitalisation |
Estimated Rental
Value
Per sq ft p.a
Equivalent Yield |
£5 – £10
(£9)
5.8% – 19.9%
(12.9%) |
£5 – £10
(£9)
5.8% – 17.6%
(9%) |
Leasehold under 50 years – external valuation |
1,115 |
1,030 |
Income capitalisation |
Estimated Rental
Value
Per sq ft p.a
Equivalent Yield |
£4 – £5
(£5)
22.9% – 25.8%
(23.5%) |
£4 – £5
(£5)
25.4% – 25.8%
(25.5%) |
Freehold – Directors’ valuation |
1,600 |
1,825 |
Income capitalisation |
Estimated Rental
Value
Per sq ft p.a
Equivalent Yield |
£5 – £5
(£5)
7.0% – 7.0%
(7.0%) |
£5 – £5
(£5)
6.1% – 6.1%
(6.1%) |
At 31 December |
47,430 |
78,025 |
|
|
|
|
There are interrelationships between all these inputs as they
are determined by market conditions. The existence of an increase
in more than one input would be to magnify the input on the
valuation. The impact on the valuation will be mitigated by the
interrelationship of two inputs in opposite directions, for
example, an increase in rent may be offset by an increase in
yield.
The table below illustrates the impact of changes in key
unobservable inputs on the carrying / fair value of the Group’s
properties.
|
Estimated rental
value
10% increase or (decrease) |
Equivalent
yield
25 basis point contraction
or (expansion) |
|
2018
£’000 |
2017
£’000 |
2018
£’000 |
2017
£’000 |
Freehold – external valuation |
3,067/(3,067) |
6,055/(6,055) |
948/(891) |
2,095/(1,956) |
Leasehold over 50 years – external valuation |
1,400/(1,400) |
1,457/(1,457) |
337/(320) |
355/(338) |
Leasehold under 50 years – external valuation |
112/(112) |
103/(103) |
12/(12) |
10/(10) |
Freehold – Directors’ valuation |
160/(160) |
183/(183) |
59/(55) |
78/(71) |
9. Mining reserves, plant and
equipment
|
Total
£’000 |
Mining
reserves
£’000 |
Mining
equipment
£’000 |
Office
equipment
and motor
vehicles
£’000 |
Cost at 1 January 2018 |
27,996 |
1,366 |
25,902 |
728 |
Exchange adjustment |
(2,688) |
(126) |
(2,531) |
(31) |
Additions |
2,883 |
– |
2,777 |
106 |
Disposals |
(18) |
– |
– |
(18) |
At 31 December 2018 |
28,173 |
1,240 |
26,148 |
785 |
Accumulated depreciation at 1 January 2018 |
19,261 |
1,308 |
17,441 |
512 |
Exchange adjustment |
(1,853) |
(121) |
(1,712) |
(20) |
Charge for the year |
2,123 |
26 |
2,048 |
49 |
Disposals in year |
(17) |
– |
– |
(17) |
Accumulated depreciation at 31 December
2018 |
19,514 |
1,213 |
17,777 |
524 |
Net book value at 31 December 2018 |
8,659 |
27 |
8,371 |
261 |
Cost at 1 January 2017 |
25,817 |
1,344 |
23,724 |
749 |
Exchange adjustment |
474 |
22 |
447 |
5 |
Additions |
1,758 |
– |
1,731 |
27 |
Disposals |
(53) |
– |
– |
(53) |
Cost at 31 December 2017 |
27,996 |
1,366 |
25,902 |
728 |
Accumulated depreciation at 1 January 2017 |
17,164 |
1,287 |
15,370 |
507 |
Exchange adjustment |
332 |
21 |
308 |
3 |
Charge for the year |
1,804 |
1 |
1,763 |
40 |
Disposals |
(39) |
(1) |
– |
(38) |
Accumulated depreciation at 31 December 2017 |
19,261 |
1,308 |
17,441 |
512 |
Net book value at 31 December 2017 |
8,735 |
58 |
8,461 |
216 |
10. ASSETS HELD FOR SALE
|
2018
£’000 |
2017
£’000 |
At 1 January |
36,441 |
– |
Transfer from investment properties (note 8) |
2,285 |
36,441 |
Disposal |
(36,441) |
– |
At 31 December |
2,285 |
36,441 |
In April 2018 the sale of both
Brixton markets was completed for a combined price of £37.25
million. The properties were held at a valuation of £36.441
million. This value equated to the net sale proceeds and there was
no profit on sale.
At December 2018 the Group’s
remaining property in Brixton is under offer and it is anticipated
that the sale will complete in May
2019. The property is held at a valuation of £2.285 million,
equating to the expected net sales proceeds. The revaluation gain
of £1.035 million is recognised in these accounts. The property was
held at a valuation of £1.25 million at 31
December 2017.
11. Subsidiary companies
In accordance with Section 409 of the Companies Act 2006 a full
list of subsidiaries, the principal activity, the country of
incorporation and the percentage of equity owned, as at
31 December 2018 is disclosed
below:
Entity |
Activity |
Percentage of share capital |
Registered address |
Country of
incorporation |
Analytical Investments Limited |
Dormant |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Analytical Portfolios Limited |
Dormant |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Analytical Properties Holdings Limited |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Analytical Properties Limited |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Analytical Ventures Limited |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
24 Bruton Place Limited |
Dormant |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
24 BPL (Harrogate) Limited |
Investment |
88% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
24 BPL (Harrogate ) Two Limited |
Investment |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Brixton Village Limited |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Market Row Limited |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Newincco 1243 Limited |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Newincco 1244 Limited |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Newincco 1245 Limited |
Property Management Services |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Newincco 1299 Limited |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Newincco 1300 Limited |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
LAP Ocean Holdings Limited |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
LAP Ocean Two Limited |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
London & Associated Limited |
Dormant |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
London & Associated (Rugeley) Limited |
Dormant |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
London & Associated Securities Limited |
Dormant |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
London & Associated Management Services
Limited |
Property Management Services |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
London & African Investments Limited |
Dormant |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Orchard Chambers Residential Limited |
Dormant |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Bisichi Mining PLC (note D) |
Coal mining |
41.52% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Mineral Products Limited (note A)(note D) |
Share dealing |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Bisichi (Properties) Limited (note A)(note D) |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Bisichi Mining (Exploration) Limited (note A)(note
D) |
Holding company |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Sisonke Coal Processing (Pty) Limited |
Coal processing |
62.5% |
Samora Machel Street, Bethal Road, Middelburg,
Mpumalanga, 1050 |
South Africa |
Black Wattle Colliery (Pty) Limited (note A)(note
D) |
Coal mining |
62.5% |
Samora Machel Street, Bethal Road, Middelburg,
Mpumalanga, 1050 |
South Africa |
Bisichi Coal Mining (Pty) Limited (note A)(note
D) |
Coal mining |
100% |
Samora Machel Street, Bethal Road, Middelburg,
Mpumalanga, 1050 |
South Africa |
Urban First (Northampton) Limited (note A)(note
D) |
Dormant |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Bisichi Trustee Limited (note A)(note D) |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Bisichi Mining Management Services Limited (note
A) (note D) |
Dormant |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Ninghi Marketing Limited (note A)(note D) |
Dormant |
90.1% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Bisichi Northampton Limited (note A)(note D) |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Amandla Ehtu Mineral Resource Development (Pty)
Limited (note A)(note D) |
Dormant |
70% |
Samora Machel Street, Bethal Road, Middelburg,
Mpumalanga, 1050 |
South Africa |
Black Wattle Klipfontein (Pty) Limited (note
A)(note D) |
Coal mining |
62.5% |
Samora Machel Street, Bethal Road, Middelburg,
Mpumalanga, 1050 |
South Africa |
Dragon Retail Properties Limited (note B)(note
D) |
Property |
50% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Newincco 1338 Limited (note C) |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
West Ealing Projects Limited (note B)(note D) |
Property |
50% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Broadway Regen Limited (note E) |
Property |
90% |
73 Cornhill, London, EC3V 3QQ |
England and Wales |
Details on the non–controlling interest in subsidiaries are shown
under note 24.
Note A: these companies are owned by Bisichi
and the equity shareholdings disclosed relate to that company.
Note B: this entity is a joint venture owned
50% by LAP and 50% by Bisichi.
Note C: this company is owned by Dragon and
the equity shareholdings disclosed relate to that company.
Note D: Bisichi, Dragon and West Ealing
Projects and their subsidiaries are included in the consolidated
financial statements in accordance with IFRS 10.
Note E: This company is 90% owned by
West Ealing Projects and the equity shareholdings disclosed relate
to that company.
12. inventories–property
Development land and buildings:
|
2018
£’000 |
2017
£’000 |
At 1 January |
– |
– |
Development expenditure |
6,196 |
– |
Interest on development expenditure |
60 |
– |
Transfer from investment property (note 8) |
32,300 |
– |
At 31 December |
38,556 |
– |
During the year the Group acquired a development property through
West Ealing Projects Limited, a 50:50 joint venture with Bisichi.
This property is held at cost of £6.256 million and is currently
being developed for sale.
During the year the Group decided that Orchard Square,
Sheffield no longer fitted our
long-term criteria for investment property held to generate growth.
It was therefore transferred at market value of £32.3 million into
the property dealing division and is now held as inventory.
13. Inventories–mining
|
2018
£’000 |
2017
£’000 |
Coal |
|
|
Washed |
777 |
301 |
Mining production |
316 |
286 |
Work in progress |
378 |
227 |
Other |
40 |
14 |
|
1,511 |
828 |
14. NON-CURRENT ASSET
INVESTMENTS
|
2018
£’000 |
2017
£’000 |
Unlisted equity and debt investments |
1,748 |
1,748 |
Overseas listed equity securities |
35 |
51 |
|
1,783 |
1,799 |
The Group owns a 3.17% (2017: 3.17%) interest in the equity and
loans of HRGT Shopping Centres LP (HRGT), a limited partnership set
up in England to acquire and own 3
shopping centres in Dunfermline, Kings
Lynn and Loughborough.
96.40% (2017: 96.40%) of the equity and loans are owned by Oaktree
Capital Management and 0.43% (2017: 0.43%) by Gooch Cunliffe Whale
LLP. London & Associated
Management Services Limited has a management contract to manage the
properties on behalf of HRGT.
No fair value gain or loss was recognised in the year on the
unlisted equity and debt investments.
A fair value loss of £15,000 was recognised on the overseas
listed equity securities, and an exchange adjustment of £1,000 was
also recognised.
The adoption of IFRS 9 has resulted in the reclassification of
the Group’s non-current investments. In the prior year the
non-current investments were treated as held to maturity and
movements were recognised as fair value gains or losses thorough
other comprehensive income. In the current year these have been
reclassified to investments held at fair value with gains or losses
taken through profit and loss. No restatement of prior periods has
been made, as permitted by IFRS 9.
15. Trade and other
receivables
|
2018
£’000 |
2017
£’000 |
Trade receivables |
6,055 |
4,920 |
Other receivables |
949 |
736 |
Prepayments and accrued income |
1,018 |
1,476 |
|
8,022 |
7,132 |
Financial assets falling due within one year are held at amortised
cost. The fair value of trade and other receivables approximates
their carrying amounts. The Group applies a simplified approach to
measure the credit loss allowance for trade receivables using the
lifetime expected credit loss provision. The lifetime expected
credit loss is evaluated for each trade receivable taking into
account payment history, payments made subsequent to year end and
prior to reporting, past default experience and the impact of any
other relevant and current observable data. The group applies a
general approach on all other receivables classified as financial
assets. At year end, the group allowance for doubtful debts
provided against trade receivables was £277,000 (2017: £284,000).
There was no additional loss allowance or impairment required
during the year as a result of the implementation of IFRS 9.
16. Current asset Investments
(PREVIOUSLY CLASSIFIED AS available for sale INVESTMENTS)
Listed equity securities |
2018
£’000 |
2017
£’000 |
At 1 January |
1,069 |
800 |
Additions |
- |
186 |
Disposals |
(25) |
- |
Fair value (loss)/gain |
(157) |
83 |
|
887 |
1,069 |
Investments are listed on the London Stock Exchange with the
exception of £40,000 (2017: £47,000) listed outside Great Britain.
The adoption of IFRS 9 has resulted in the reclassification of
the groups Investments in listed securities. In the prior year the
investments were classified as available for sale investments
measured at fair value with movements taken through other
comprehensive income and available for sale reserves. In the
current year the investments were reclassified as Investments in
Listed securities held at fair value with movements taken through
profit and loss and retained earnings. The Group has not restated
prior periods as allowed by the transition provisions of IFRS
9.
17. Trade and other
payables
|
2018
£’000 |
2017
£’000 |
Trade payables |
4,637 |
3,937 |
Other taxation and social security costs |
411 |
629 |
Other payables |
3,372 |
2,842 |
Accruals and deferred income |
4,921 |
5,501 |
|
13,341 |
12,909 |
The directors consider that the carrying amount of trade and other
payables approximates to their fair value.
18. Borrowings
Other loans (Bisichi) |
2018
£’000 |
2018
£’000 |
2017
£’000 |
2017
£’000 |
|
Current |
Non-current |
Current |
Non-current |
Other loans (Bisichi) |
205 |
547 |
26 |
– |
£1.25 million term bank loan (secured) repayable
by 2020 (Dragon)* |
– |
1,164 |
– |
1,218 |
£3.75 million first mortgage debenture stock 2018
at 11.6 per cent |
– |
– |
3,000 |
– |
Bank overdrafts (secured) (Bisichi) |
3,535 |
– |
1,262 |
– |
£10 million first mortgage debenture stock 2022 at
8.109 per cent* |
– |
9,939 |
– |
9,922 |
£5.876 million term bank loan (secured) repayable
by 2019 (Bisichi)* |
5,840 |
– |
– |
5,872 |
£3.584 million term loan (secured) - repayable by
2019 (Broadway Regen) |
3,461 |
– |
– |
– |
£34.897 million term bank loan (secured) repayable
by 2019* |
21,403 |
– |
– |
34,640 |
£10.105 million term bank loan (secured) repayable
by 2019 at 9.5 per cent* |
6,808 |
– |
– |
10,009 |
£3.932 million term loan (secured) repayable by
2028 |
136 |
3,605 |
– |
– |
|
41,388 |
15,255 |
4,288 |
61,661 |
Borrowings analysis by origin:
|
2018
£’000 |
2017
£’000 |
United Kingdom |
52,356 |
64,621 |
South Africa |
4,287 |
1,328 |
|
56,643 |
65,949 |
* The £10 million debenture and bank loans
are shown after deduction of un-amortised issue costs.
Interest payable on the term bank loans is variable being based
upon the London inter–bank offered
rate (LIBOR) plus margin.
In July 2018, the Group repaid the
remaining £3.0 million of the £3.75 million first mortgage
debenture stock 2018.
Following the sale of Brixton Markets in April 2018, £12.8 million of the £34.897 million
Santander bank loan was repaid and £3.1 million of the £10.105
million Europa bank loan was repaid.
The First Mortgage Debenture Stock August
2022 and the Santander and Europa term bank loans repayable
in July 2019 are secured by way of a
charge on specific freehold and leasehold properties which are
included in the financial statements at a value of £51.32 million.
In addition, £0.34 million of cash deposits are charged as security
to debenture stocks and £0.5 million to Santander and Europa bank
loans. The Santander bank loan has an interest cost of 2 per cent
above LIBOR. An interest rate swap and cap agreements are in place
as detailed in note 20.
In September 2018 a new 10 year
term, loan of £3.932 million was taken out with Metro Bank secured
by way of a charge on freehold and leasehold properties which are
included in the financial statements at a value of £7.15 million.
The interest cost of the loan is 2.95 per cent above the bank’s
base rate and the loan is amortised over 20 years.
In South Africa, as part of a
restructuring and sale of the washing plant facilities from Black
Wattle Colliery (Pty) Limited (“Black Wattle”) to its wholly owned
subsidiary Sisonke Coal Processing (Pty) Limited (“Sisonke Coal
Processing”), the R100million bank overdraft facility held by Black
Wattle with Absa Bank Limited at the year end (“old trade
facility”) was replaced in January
2019 by a new structured trade finance facility for
R100million held by Sisonke Coal Processing (“new trade facility”).
The South African bank loans are secured by way of a first charge
over specific pieces of mining equipment, inventory and the debtors
of the relevant company which holds the loan which are included in
the financial statements at a value of £8,640,000.
The Bisichi United Kingdom bank loans and overdraft are secured
by way of a first charge over the investment properties in the UK
which are included in the financial statements at a value of
£13,045,000. During the year the group reduced its UK loan by
£14,000 in order to rectify a breach of one of its UK loan banking
covenants. No other banking covenants were breached by the group
during the year.
The bank loan of £1.25 million (Dragon) which is repayable in
November 2020 is secured by way of a
first charge on specific freehold property which is included in the
financial statements at a value of £2.45 million. The interest cost
of the loan is 2 per cent above LIBOR.
The bank loan of £3.584 million (Broadway Regen) which is
repayable in July 2019 is secured by
way of a first charge on a specific freehold development property,
which is included in the financial statements at £6.256 million.
The interest cost of the loan is fixed at 7.0% per annum.
The Group’s objectives when managing capital are:
– To safeguard the Group’s ability to continue as a
going concern, so that it may provide returns for shareholders and
benefits for other stakeholders; and
– To provide adequate returns to shareholders
by ensuring returns are commensurate with the risk.
Analysis of the changes in liabilities arising from financing
activities:
|
2018
£’000
Bank
borrowings |
2018
£’000
Finance leases |
2017
£’000
Bank
borrowings |
2017
£’000
Finance leases |
Balance at 1 January |
65,949 |
3,233 |
68,509 |
4,767 |
Exchange adjustments |
(273) |
– |
(4) |
– |
Cash movements excluding exchange adjustments |
(9,044) |
– |
(2,820) |
– |
Valuation movements |
11 |
28 |
264 |
(1,534) |
Balance at 31 December |
56,643 |
3,261 |
65,949 |
3,233 |
19. Provisions
|
2018
£’000 |
2017
£’000 |
At 1 January |
1,349 |
1,236 |
Exchange adjustment |
(150) |
21 |
Increase in provision |
329 |
– |
Unwinding of discount |
43 |
92 |
At 31 December |
1,571 |
1,349 |
The above provision relates to mine rehabilitation costs in
Bisichi.
20. Financial instruments
Total financial assets and liabilities
The Group’s financial assets and liabilities and their fair
values are as follows:
|
2018 |
2017 |
|
Fair
value
£’000 |
Carrying
value
£’000 |
Fair
value
£’000 |
Carrying
value
£’000 |
Cash and cash equivalents |
20,655 |
20,655 |
7,528 |
7,528 |
Investments–non-current assets |
1,783 |
1,783 |
1,799 |
1,799 |
Investments–current assets |
887 |
887 |
1,069 |
1,069 |
Derivative assets |
– |
– |
1 |
1 |
Other assets |
7,004 |
7,004 |
5,656 |
5,656 |
Derivative liabilities |
(169) |
(169) |
(435) |
(435) |
Bank overdrafts |
(3,535) |
(3,535) |
(1,262) |
(1,262) |
Bank loans |
(43,521) |
(43,169) |
(52,218) |
(51,765) |
Present value of head leases on properties |
(3,261) |
(3,261) |
(3,233) |
(3,233) |
Other liabilities |
(8,008) |
(8,008) |
(6,779) |
(6,779) |
Total financial assets/(liabilities) before
debentures |
(28,165) |
(27,813) |
(47,874) |
(47,421) |
Fair value of debenture stocks
Fair value of the Group’s debenture liabilities:
|
2018 |
2018 |
2017 |
|
Book
value
£’000 |
Fair
value
£’000 |
Fair value
adjustment
£’000 |
Fair value
adjustment
£’000 |
Debenture stocks |
(10,000) |
(11,977) |
(1,977) |
(2,686) |
Tax at 19 per cent (2017: 19.25 per cent) |
– |
– |
376 |
517 |
Post tax fair value adjustment |
– |
– |
(1,601) |
(2,169) |
Post tax fair value adjustment – basic pence per
share |
– |
– |
(1.88)p |
(2.54)p |
There is no material difference in respect of other financial
liabilities or any financial assets.
The fair values were calculated by the directors as at
31 December 2018 and reflect the
replacement value of the financial instruments used to manage the
Group’s exposure to adverse interest rate movements.
The fair values of the debentures are based on the net present
value at the relevant gilt interest rate of the future payments of
interest on the debentures. The bank loans and overdrafts are at
variable rates and there is no material difference between book
values and fair values.
Investments in listed securities held at fair value through
profit and loss (previously classified as Available for sale
investments) fall under level 1 of the fair value hierarchy into
which fair value measurements are recognised in accordance with the
levels set out in IFRS 7. The comparative figures for 2017 fall
under the same category of financial instrument as 2018.
The carrying amount of short term (less than 12 months) trade
receivables and other liabilities approximates their fair values.
The fair value of non-current borrowings in note 18 approximates to
its carrying value and was determined under level 2 of the fair
value hierarchy and is estimated by discounting the future
contractual cash flows at the current market interest rates for UK
borrowings and for the South African overdraft facility. The fair
value of the finance lease liabilities in note 28 approximates its
carrying value and was determined under level 2 of the fair value
hierarchy and is estimated by discounting the future contractual
cash flows at the current market interest rates.
Treasury policy
The Group enters into derivative transactions such as interest
rate swaps and forward exchange contracts in order to help manage
the financial risks arising from the Group’s activities. The main
risks arising from the Group’s financing structure are interest
rate risk, liquidity risk and market price risk, credit risk,
commodity price risk and foreign exchange risk. The policies for
managing each of these risks and the principal effects of these
policies on the results are summarised below.
Sensitivity analysis
LAP and Dragon have variable interest term debts which are
covered by derivatives. Additionally, LAP has variable interest
term debt covered by interest caps. At 31
December 2018, with other variables unchanged, a 1% increase
in interest rates would change the profit/loss for the year by
£91,000 (2017: £175,000). Bisichi has variable loans and a 1%
increase in interest rates would change the profit/loss for the
year by £101,000 (2017: £82,000).
Interest rate risk
Treasury activities take place under procedures and policies
approved and monitored by the Board to minimise the financial risk
faced by the Group. The £34.897 million bank loan and Bisichi
United Kingdom bank loans and overdrafts are secured by way of a
first charge on certain fixed assets. The rates of interest vary
based on LIBOR in the UK.
The £10.105 million term bank loan is secured by way of a second
charge on certain fixed assets. This loan is based on a fixed
interest rate.
The £3.932 million bank loan is secured by way of a first charge
on specific freehold and leasehold property. The rate of interest
varies based on the banks base rate.
The Bisichi South African bank loans are secured by way of a
first charge over specific pieces of mining equipment, inventory
and the debtors of the relevant company which holds the loan. The
rates of interest vary based on PRIME in South Africa.
The £1.25 million bank loan (Dragon) is secured by way of a
first charge on specific freehold property. The rate of interest
varies based on LIBOR in the UK.
The £3.584 million bank loan (Broadway Regen) is secured by way
of first charge on a specific freehold development property. This
loan is based on a fixed interest rate.
Liquidity risk
The Group’s policy is to minimise refinancing risk by balancing
its exposure to interest risk and to refinancing risk. In effect
the Group seeks to borrow for as long as possible at the lowest
acceptable cost. Efficient treasury management and strict credit
control minimise the costs and risks associated with this policy
which ensures that funds are available to meet commitments as they
fall due. Cash and cash equivalents earn interest at rates based on
LIBOR in the UK. These facilities are considered adequate to meet
the Group’s anticipated cash flow requirements for the foreseeable
future.
In South Africa, as part of the
restructuring and sale of the washing plant facilities from Black
Wattle Colliery (Pty) Limited (“Black Wattle”) to its wholly owned
subsidiary Sisonke Coal Processing (Pty) Limited (“Sisonke Coal
Processing”), the R100million facility held by Black Wattle with
Absa Bank Limited at the year end (“old trade facility”) was
replaced in January 2019 by a new
structured trade finance facility for R100million held by Sisonke
Coal Processing (“new trade facility”).
The new trade facility comprises of a R100million revolving
facility to cover the working capital requirements of the group’s
South African operations. The interest cost of the loan is at the
South African prime lending rate. The new trade facility is
renewable annually each January, is repayable on demand and is
secured against inventory, debtors and cash that are held by
Sisonke Coal Processing (Pty)
The old trade facility, which was also repayable on demand, is
included in cash and cash equivalents within the cashflow
statement.
In December 2014, Bisichi signed a
£6 million term loan facility with Santander. The loan is secured
against the group’s UK retail property portfolio. The debt package
has a five year term and is repayable at the end of the term in
December 2019. The interest cost of
the loan is 2.35% above LIBOR. Bisichi’s intention is to enter into
a new facility agreement prior to the termination of the existing
facility agreement. Nonetheless there are adequate financial
resources to repay the existing facility should a new facility not
be finalised prior to December
2019.
The LAP Group’s £34.897 million term bank loan and the £10.105
million bank loan are repayable in July
2019. In April 2018 £12.8
million and £3.1 million of these loans were repaid respectively.
The loans are non-recourse and the remaining loans of £21.403
million and £6.808 million are secured by way of a first and second
charge on freehold properties, which are included in the financial
statements at £36.65 million. The Group’s intention is to enter
into a new facility agreement prior to the termination of the
existing facility. The lenders have indicated that they will work
with us, either to refinance the loans or to facilitate a handover
to a new lender.
The table below analyses the Group’s financial liabilities
(excluding interest rate derivatives) into maturity groupings and
also provides details of the liabilities that bear interest at
fixed, floating and non–interest bearing rates.
|
2018
Total
£’000 |
Less than
1 year
£’000 |
2-5 years
£’000 |
Over
5 years
£’000 |
Bank overdrafts (floating) |
3,535 |
3,535 |
– |
– |
Debentures (fixed) |
9,939 |
– |
9,939 |
– |
Bank loans (fixed) |
11,433 |
10,269 |
1,164 |
– |
Bank loans (floating)* |
31,736 |
27,584 |
1,156 |
2,996 |
Trade and other payables (non–interest) |
12,930 |
12,930 |
– |
– |
|
69,573 |
54,318 |
12,259 |
2,996 |
|
2017
Total
£’000 |
Less than
1 year
£’000 |
2-5 years
£’000 |
Over
5 years
£’000 |
Bank overdrafts (floating) |
1,262 |
1,262 |
– |
– |
Debentures (fixed) |
12,922 |
3,000 |
9,922 |
– |
Bank loans (fixed) |
10,009 |
– |
10,009 |
– |
Bank loans (floating)* |
41,756 |
26 |
41,730 |
– |
Trade and other payables (non–interest) |
12,280 |
12,280 |
– |
– |
|
78,229 |
16,568 |
61,661 |
– |
The Group would normally expect that sufficient cash is generated
in the operating cycle to meet the contractual cash flows as
disclosed above through effective cash management.
*Certain bank loans are fully hedged with appropriate interest
derivatives. Details of all hedges are shown below.
Market price risk
The Group is exposed to market price risk through interest rate
and currency fluctuations.
Credit risk
The group is mainly exposed to credit risk on its cash and cash
equivalents, trade and other receivables and amounts owed by joint
ventures as per the balance sheet. The maximum exposure to credit
risk is represented by the carrying amount of each financial asset
in the balance sheet which at year end amounted to £30,329,000
(2017: £16,053,000).
To mitigate risk on its cash and cash equivalents, the group
only deposits surplus cash with well-established financial
institutions of high quality credit standing.
The group’s credit risk is primarily attributable to its trade
receivables. Trade debtor’s credit ratings are reviewed regularly.
The Group’s review includes measures such as the use of external
ratings and establishing purchase limits for each customer. The
Group’s approach to measure the credit loss allowance for trade
receivables is outlined in note 15. At year end, the group
allowance for doubtful debts provided against trade receivables was
£277,000 (2017: £284,000).
The Group exposure to credit risk on its loans to joint ventures
and other receivables is mitigated through ongoing review of the
underlying performance and resources of the counterparty including
evaluation of different scenarios of probability of default and
expected loss applicable to each of the underlying balances
Foreign exchange risk
Only Bisichi is subject to this risk. All trading is undertaken
in the local currencies except for certain export sales which are
invoiced in US Dollars. It is not the Bisichi Group’s policy to
obtain forward contracts to mitigate foreign exchange risk on these
contracts as payment terms are within 15 days of invoice or
earlier. Funding is also in local currencies other than
inter-company investments and loans and it is also not the Bisichi
Group’s policy to obtain forward contracts to mitigate foreign
exchange risk on these amounts. During 2018 and 2017 the Bisichi
Group did not hedge its exposure of foreign investments held in
foreign currencies.
The Bisichi directors consider there to be no significant risk
from exchange rate movements of foreign currencies against the
functional currencies of the reporting companies within the Bisichi
Group, excluding inter-company balances. The principal currency
risk to which the Bisichi Group is exposed in regard to
inter-company balances is the exchange rate between Pounds Sterling
and South African Rand. It arises as a result of the retranslation
of Rand denominated inter-company trade receivable balances held
within the UK which are payable by South African Rand functional
currency subsidiaries.
Based on the Bisichi Group’s net financial assets and
liabilities as at 31 December 2018, a
25% strengthening of Sterling against the South African Rand, with
all other variables held constant, would decrease the Bisichi
Group’s profit after taxation by £130,000 (2017: £34,000). A 25%
weakening of Sterling against the South African Rand, with all
other variables held constant would increase the Bisichi Group’s
profit after taxation by £216,000 (2017: £56,000).
The 25% sensitivity has been determined based on the average
historic volatility of the exchange rate for 2017 and 2018.
The table below shows the Bisichi currency profiles of cash and
cash equivalents:
|
2018
£’000 |
2017
£’000 |
Sterling |
6,897 |
3,402 |
South African Rand |
2,322 |
1,923 |
US Dollar |
2 |
2 |
|
9,221 |
5,327 |
Cash and cash equivalents earn interest at rates based on LIBOR in
Sterling and Prime in Rand.
The tables below shows the Bisichi currency profiles of net
monetary assets and liabilities by functional currency:
2018: |
UK
£’000 |
South Africa
£’000 |
Sterling |
1,042 |
- |
South African Rand |
37 |
(1,974) |
US Dollar |
13 |
- |
|
1,092 |
(1,974) |
2017: |
UK
£’000 |
South Africa
£’000 |
Sterling |
(832) |
– |
South African Rand |
54 |
(1,304) |
US Dollar |
13 |
– |
|
(765) |
(1,304) |
Borrowing facilities
At 31 December 2018 the Group was
within its bank borrowing facilities and was not in breach of any
of the covenants. Term loan repayments are as set out at the end of
this note. Details of other financial liabilities are shown in
Notes 17 and 18.
Interest rate and hedge profile
|
2018
£’000 |
2017
£’000 |
Fixed rate borrowings |
20,224 |
23,105 |
Floating rate borrowings |
|
|
– Subject to interest rate swap |
18,685 |
36,147 |
– Other borrowings |
18,048 |
7,160 |
|
56,957 |
66,412 |
|
|
|
Average fixed interest rate |
8.39% |
9.17% |
Weighted average swapped interest rate |
4.16% |
3.32% |
Weighted average cost of debt on overdrafts, bank
loans and debentures |
5.92% |
5.45% |
Average period for which borrowing rate is
fixed |
2.1 years |
2.9 years |
Average period for which borrowing rate is
swapped |
0.6 years |
1.5 years |
The Group’s floating rate debt bears interest based on LIBOR for
the term bank loans and bank base rate for the overdraft.
At 31 December 2018 the Group had
hedges totalling £21.489 million to cover the £21.5 million bank
loan. These consisted of a 5 year swap for £17.5 million, at 2.25%
and a £3.989 million cap agreement at 2.25% to July 2019.
At the year end the fair value liability in the accounts was
£169,000 (2017: £435,000) as valued by the hedge provider.
At 31 December 2018, Dragon had
hedges of £1.25 million to cover the £1.25 million bank loan. This
consists of a 5 year £1.25 million cap agreement taken out in
November 2016 at 2.5%. At the year
end, the fair value asset in the accounts was nil (2017: £1,000),
as valued by the hedge provider.
Fair value of financial instruments
Fair value estimation
The Group has adopted the amendment to IFRS 7 for financial
instruments that are measured in the balance sheet at fair value.
This requires the methods of fair value measurement to be
classified into a hierarchy based on the reliability of the
information used to determine the valuation, as follows:
– Quoted prices (unadjusted) in active markets
for identical assets or liabilities (level 1).
– Inputs other than quoted prices included
within level 1 that are observable for the asset or liability,
either directly (that is, as prices) or indirectly (that is,
derived from prices) (level 2).
– Inputs for the asset or liability that are
not based on observable market data (that is unobservable inputs)
(level 3).
|
Level 1
£’000 |
Level 2
£’000 |
Level 3
£’000 |
Total
£’000 |
2018
Gain/(loss)
to income
statement
£’000 |
Financial assets |
|
|
|
|
|
Quoted equities |
887 |
– |
– |
887 |
- |
Interest rate swaps |
– |
- |
– |
- |
(1) |
Financial liabilities |
|
|
|
|
|
Interest rate swaps |
– |
169 |
– |
169 |
266 |
|
Level 1
£’000 |
Level 2
£’000 |
Level 3
£’000 |
Total
£’000 |
2017
Gain/(loss)
to income
statement
£’000 |
Financial assets |
|
|
|
|
|
Quoted equities |
1,069 |
– |
– |
1,069 |
- |
Interest rate swaps |
– |
1 |
– |
1 |
(3) |
Financial liabilities |
|
|
|
|
|
Interest rate swaps |
– |
435 |
– |
435 |
358 |
Capital structure
The Group sets the amount of capital in proportion to risk. It
ensures that the capital structure is commensurate to the economic
conditions and risk characteristics of the underlying assets. In
order to maintain or adjust the capital structure, the Group may
vary the amount of dividends paid to shareholders, return capital
to shareholders, issue new shares or sell assets to reduce
debt.
The Group considers its capital to include share capital, share
premium, capital redemption reserve, translation reserve and
retained earnings, but excluding the interest rate derivatives.
Consistent with others in the industry, the Group monitors its
capital by its debt to equity ratio (gearing levels). This is
calculated as the net debt (loans less cash and cash equivalents)
as a percentage of the equity calculated as follows:
|
2018
£’000 |
2017
£’000 |
Total debt |
56,643 |
65,949 |
Less cash and cash equivalents |
(20,655) |
(7,528) |
Net debt |
35,988 |
58,421 |
Total equity |
55,487 |
56,710 |
|
64.9% |
103.0% |
The Group does not have any externally imposed capital
requirements.
Financial assets
The Group’s principal financial assets are bank balances and
cash, trade and other receivables, investments and assets held for
sale. The Group has no significant concentration of credit risk as
exposure is spread over a large number of counterparties and
customers. The credit risk in liquid funds and derivative financial
instruments is limited because the counterparties are banks with
high credit ratings assigned by international credit–rating
agencies. The Group’s credit risk is primarily attributable to its
trade receivables. The amounts presented in the balance sheet are
net of allowances for doubtful receivables, estimated by the
Group’s management based on prior experience and the current
economic environment.
Financial assets maturity
Cash and cash equivalents all have a maturity of less than three
months.
|
2018
£’000 |
2017
£’000 |
Cash at bank and in hand |
20,655 |
7,528 |
These funds are primarily invested in short term bank deposits
maturing within one year bearing interest at the bank’s variable
rates.
Financial liabilities maturity
The following table sets out the maturity profile of contractual
undiscounted cashflows of financial liabilities as at 31
December:
Repayment of borrowings
|
2018
£’000 |
2017
£’000 |
Bank loans and overdrafts: |
|
|
Repayable on demand or within one year |
41,388 |
1,288 |
Repayable between two and five years |
2,320 |
51,739 |
Repayable after five years |
2,996 |
- |
|
46,704 |
53,027 |
Debentures: |
|
|
Repayable within one year |
- |
3,000 |
Repayable between two and five years |
9,939 |
9,922 |
|
56,643 |
65,949 |
Certain borrowing agreements contain financial and other
conditions that if contravened by the Group, could alter the
repayment profile.
21. Deferred tax asset
|
2018
£’000 |
2017
£’000 |
Balance at 1 January |
– |
1,134 |
Transferred to consolidated income statement |
– |
(1,134) |
Balance at 31 December |
– |
– |
22. Deferred tax
liabilitIES
|
2018
£’000 |
2017
£’000 |
Balance at 1 January |
3,848 |
2,329 |
Transferred (to)/from consolidated income
statement |
(1,375) |
1,484 |
Exchange adjustment |
(168) |
35 |
Balance at 31 December |
2,305 |
3,848 |
|
|
|
The deferred tax balance comprises the
following: |
|
|
Revaluation of properties |
726 |
5,836 |
Accelerated capital allowances |
2,166 |
2,522 |
Short-term timing differences |
139 |
144 |
Unredeemed capital deductions |
(32) |
(83) |
Losses and other deductions |
(694) |
(4,571) |
Deferred tax liability provision at end of
year: |
2,305 |
3,848 |
The directors consider the temporary differences arising in
connection with the interests in joint ventures are insignificant.
There is no time limit in respect of the Group tax loss
relief.
In addition, the Group has unused losses and reliefs with a
potential value of £6,310,000 (2017: £5,427,000), which have not
been recognised as a deferred tax asset. As the Group returns to
profit, these losses and reliefs can be utilised.
23. Share capital
The Company has one class of ordinary shares which carry no
right to fixed income.
|
Number of
ordinary 10p shares
2018 |
Number of
ordinary 10p shares
2017 |
2018
£’000 |
2017
£’000 |
Authorised: ordinary shares of 10p each |
110,000,000 |
110,000,000 |
11,000 |
11,000 |
Allotted, issued and fully paid share capital |
85,542,711 |
85,542,711 |
8,554 |
8,554 |
Less: held in Treasury (see below) |
(218,197) |
(221,061) |
(22) |
(22) |
“Issued share capital” for reporting purposes |
85,324,514 |
85,321,650 |
8,532 |
8,532 |
Treasury shares
|
Number of
ordinary
10p shares |
Cost /issue
value |
|
2018 |
2017 |
2018
£’000 |
2017
£’000 |
Shares held in Treasury at 1 January |
221,061 |
221,061 |
145 |
145 |
Issued for share incentive plan -dividends
investment (Jan 2016 - 25p) |
(2,864) |
– |
(1) |
– |
Shares held in Treasury at 31 December |
218,197 |
221,061 |
144 |
145 |
Share Option Schemes
Employees’ share option scheme (Approved scheme)
At 31 December 2018 there were no
options to subscribe for ordinary shares outstanding, issued under
the terms of the Employees’ Share Option Scheme.
This share option scheme was approved by members in 1986, and
has been approved by Her Majesty’s Revenue and Customs (HMRC).
There are no performance criteria for the exercise of options
under the Approved scheme, as this was set up before such
requirements were considered to be necessary.
A summary of the shares allocated and options issued under the
scheme up to 31 December 2018 is as
follows:
|
|
Changes during the
year |
|
|
At 1
January
2018 |
Options
Exercised |
Options
granted |
Options
lapsed |
At 31
December
2018 |
Shares issued to date |
2,367,604 |
– |
– |
– |
2,367,604 |
Shares allocated over which options have not been
granted |
1,549,955 |
– |
– |
– |
1,549,955 |
Total shares allocated for issue to employees
under the scheme |
3,917,559 |
– |
– |
– |
3,917,559 |
Non–approved Executive Share Option Scheme (Unapproved scheme)
A share option scheme known as the “Non–approved Executive Share
Option Scheme” which does not have HMRC approval was set up during
2000. At 31 December 2018 there were
no options to subscribe for ordinary shares outstanding.
The exercise of options under the Unapproved scheme is subject
to the satisfaction of objective performance conditions specified
by the remuneration committee which confirms to institutional
shareholder guidelines and best practice provisions.
A summary of the shares allocated and options issued under the
scheme up to 31 December 2018 is as
follows:
|
|
Changes during the
year |
|
|
At 1
January
2018 |
Options
Exercised |
Options
granted |
Options
lapsed |
At 31
December
2018 |
Shares issued to date |
450,000 |
– |
– |
– |
450,000 |
Shares allocated over which options have not yet
been granted |
550,000 |
– |
– |
– |
550,000 |
Total shares allocated for issue to employees
under the scheme |
1,000,000 |
– |
– |
– |
1,000,000 |
The Bisichi Mining PLC Unapproved Option Schemes
Details of the share option schemes in Bisichi are as
follows:
Year of grant |
Subscription
price per share |
Period within
which options
exercisable |
Number of shares
for which options
outstanding at
31 December 2017 |
Number of
share options
issued/exercised/
(cancelled)
during year |
Number of shares
for which options
outstanding at
31 December 2018 |
2010 |
202.5p |
Aug 2013 – Aug 2020 |
80,000 |
(80,000) |
– |
2015 |
87.0p |
Sep 2015 – Sep 2025 |
300,000 |
– |
300,000 |
2018 |
73.5p |
Feb 2018 - Feb 2028 |
– |
380,000 |
380,000 |
The exercise of options under the Unapproved Share Option Schemes,
for certain option issues, is subject to the satisfaction of the
objective performance conditions specified by the remuneration
committee, which will conform to institutional shareholder
guidelines and best practice provisions in force from time to
time.
On the 5 February 2018 Bisichi
entered into an agreement with G.Casey to surrender the 80,000
options which were granted in 2010. The aggregate consideration
paid by the Group to effect the cancellation was £1. There are no
performance or service conditions attached to 2015 options which
are outstanding at 31 December 2018
which vested in 2015.
On 6 February 2018 Bisichi granted
additional options to the following directors:
• A.Heller 150,000 options at an
exercise price of 73.50p per share.
• G.Casey 230,000 options at an exercise
price of 73.50p per share.
The above options vest on date of grant and are exercisable
within a period of 10 years from date of grant. There are no
performance or service conditions attached to the options. The
options were valued at £24,000 at date of grant using the
Black-Scholes-Merton model with the following assumptions:
Expected volatility |
|
23.90% |
Expected life |
|
4 years |
Risk free rate |
|
0.785% |
Expected dividends |
|
6.71% |
Expected volatility was determined by reference to the historical
volatility of the share price over a period commensurate with the
option’s expected life. The expected life used in the model is used
on the risk-averse balance likely to be required by the option
holders.
|
2018
Number |
2018
Weighted
average
exercise price |
2017
Number |
2017
Weighted
average
exercise price |
Outstanding at 1 January |
380,000 |
111.3p |
380,000 |
111.3p |
Issued during year |
380,000 |
73.5p |
– |
– |
Lapsed/surrended during year |
(80,000) |
202.5p |
– |
– |
Outstanding at 31 December |
680,000 |
79.5p |
380,000 |
111.3p |
Exercisable at 31 December |
680,000 |
79.5p |
380,000 |
111.3p |
24. Non–controlling interest
(“NCI”)
|
2018
£’000 |
2017
£’000 |
As at 1 January |
10,856 |
10,389 |
Share of profit for the year |
2,675 |
610 |
Share of gain on available for sale
investments |
– |
49 |
Dividends received |
(957) |
(250) |
Shares issued |
8 |
– |
Exchange movement |
(273) |
58 |
As at 31 December |
12,309 |
10,856 |
The following subsidiaries had material NCI:
Bisichi Mining PLC
Black Wattle Colliery (Pty) Ltd
Summarised financial information for these subsidiaries is set
out below. The information is before inter–company eliminations
with other companies in the Group.
BISICHI MINING PLC |
2018
£’000 |
2017
£’000 |
Revenue |
49,945 |
40,350 |
Profit for the year attributable to owners of the
parent |
3,314 |
749 |
Profit/(loss) for the year attributable to
NCI |
729 |
172 |
Profit for the year |
4,043 |
921 |
Other comprehensive income attributable to owners
of the parent |
(377) |
163 |
Other comprehensive income attributable to
NCI |
(53) |
11 |
Other comprehensive income for the year |
(430) |
174 |
Balance sheet |
|
|
Non–current assets |
23,118 |
22,935 |
Current assets |
18,475 |
13,622 |
Total assets |
41,593 |
36,557 |
Current liabilities |
(16,929) |
(9,025) |
Non–current liabilities |
(4,529) |
(9,858) |
Total liabilities |
(21,458) |
(18,883) |
Net current assets at 31 December |
20,135 |
17,674 |
Cash flows |
|
|
From operating activities |
4,767 |
7,270 |
From investing activities |
(3,373) |
(1,936) |
From financing activities |
200 |
(429) |
Net cash flows |
1,594 |
4,905 |
The non–controlling interest comprises a 37.5% shareholding in
Black Wattle Colliery (Pty) Ltd, a coal mining company incorporated
in South Africa.
Summarised financial information reflecting 100% of the
underlying subsidiary’s relevant figures, is set out below.
Black Wattle Colliery (Pty) Limited (“Black Wattle”) |
2018
£’000 |
2017
£’000
restated |
Revenue |
48,666 |
39,191 |
Expenses |
(43,801) |
(38,041) |
Profit for the year |
4,865 |
1,150 |
Total comprehensive income for the year |
4,865 |
1,150 |
Balance sheet |
|
|
Non–current assets |
8,532 |
8,613 |
Current assets |
9,587 |
6,747 |
Current liabilities |
(10,540) |
(8,652) |
Non–current liabilities |
(3,800) |
(3,155) |
Net assets at 31 December |
3,779 |
3,553 |
The non–controlling interest relates to the disposal of a 37.5%
shareholding in Black Wattle in 2010. The total issued share
capital in Black Wattle Colliery (Pty) Ltd was increased from 136
shares to 1,000 shares at par of ZAR1
(South African Rand) through the following shares issue:
– a subscription for 489 ordinary shares at
par by Bisichi Mining (Exploration) Limited increasing the number
of shares held from 136 ordinary shares to a total of 625 ordinary
shares;
– a subscription for 110 ordinary shares at
par by Vunani Mining (Pty) Ltd;
– a subscription for 265 “A” shares at par by
Vunani Mining (Pty) Ltd
Bisichi Mining (Exploration) Limited is a wholly owned
subsidiary of Bisichi Mining PLC incorporated in England and Wales.
Vunani Mining (Pty) Ltd is a South African Black Economic
Empowerment company and minority shareholder in Black Wattle.
The “A” shares rank pari passu with the ordinary shares save
that they will have no dividend rights until such time as the
dividends paid by Black Wattle Colliery (Pty) Ltd on the ordinary
shares subsequent to 30 October 2008
will equate to ZAR832,075,000.
A non–controlling interest of 15% in Black Wattle is recognised
for all profits distributable to the 110 ordinary shares held by
Vunani Mining (Pty) Ltd from the date of issue of the shares
(18 October 2010). An additional
non–controlling interest will be recognised for all profits
distributable to the 265 “A” shares held by Vunani Mining (Pty) Ltd
after such time as the profits available for distribution, in Black
Wattle Colliery (Pty) Ltd, before any payment of dividends after
30 October 2008, exceeds ZAR832,075,000.
25. Related party transactions
|
Cost recharged
to (by)
related
party
£’000 |
|
Amounts owed
by (to)
related
party
£’000 |
Advanced to
(by) related
party
£’000 |
Related party: |
|
|
|
|
Simon Heller Charitable Trust |
|
|
|
|
Current
account |
(63) |
|
– |
– |
Loan account |
– |
|
(700) |
– |
Directors and key management |
|
|
|
|
M A Heller and J A
Heller |
18 |
(i) |
1 |
– |
H D Goldring
(Delmore Holdings Limited) |
(15) |
(ii) |
– |
– |
C A Parritt |
(20) |
(ii) |
– |
– |
R Priest |
(35) |
(ii) |
(8) |
– |
Totals at 31 December 2018 |
(115) |
|
(707) |
– |
Totals at 31 December 2017 |
(71) |
|
(679) |
(84) |
Nature of costs recharged – (i) Property management fees (ii)
Consultancy fees.
Directors
London & Associated
Properties PLC provides office premises, property management,
general management, accounting and administration services for a
number of private property companies in which Sir Michael Heller and J A Heller have an interest.
Under an agreement with Sir Michael
Heller no charge is made for these services on the basis
that he reduces by an equivalent amount the charge for his services
to London & Associated
Properties PLC. The board estimates that the value of these
services, if supplied to a third party, would have been £300,000
for the year (2017: £300,000).
The companies for which services are provided are: Barmik
Properties Limited, Cawgate Limited, Clerewell Limited, Cloathgate
Limited, Ken–Crav Investments Limited, London & South Yorkshire Securities
Limited, Metroc Limited, Penrith Retail Limited, Shop.com Limited,
South Yorkshire Property Trust Limited, Wasdon Investments
Limited, Wasdon (Dover) Limited, and Wasdon (Leeds) Limited.
In addition the Company received management fees of £10,000
(2017: £10,000) for work done for two charitable foundations, the
Michael & Morven Heller Charitable Foundation and the
Simon Heller Charitable Trust.
The Simon Heller Trust has placed on deposit with LAP £700,000
at an interest rate of 9% which is refundable on demand.
Delmore Holdings Limited (Delmore) is a Company in which H D
Goldring is a majority shareholder and director. Delmore provides
consultancy services to the Company on an invoiced fee basis.
R Priest provided consultancy services to the Company on an
invoiced fee basis.
In 2012 a loan of £116,000 was made by Bisichi to one of the
Bisichi directors - A R Heller. The loan amount outstanding at the
year end was £41,000 (2017: £56,000) and a repayment of £15,000
(2017: £15,000) was made during the year. Interest is payable on
the loan at a rate of 6.14 percent. There is no fixed repayment
date for the loan.
The directors are considered to be the only key management
personnel and their remuneration including employer’s national
insurance for the year was £1,838,000 (2017: £949,000). All other
disclosures required, including interest in share options in
respect of those directors, are included within the remuneration
report.
26. Employees
The average number of employees, including directors, of the
Group during the year was as follows:
|
2018 |
2017 |
Production |
231 |
192 |
Administration |
46 |
45 |
|
277 |
237 |
Staff costs during the year were as follows:
|
2018
£’000 |
2017
£’000 |
Salaries and other costs |
8,994 |
7,426 |
Social security costs |
494 |
327 |
Pension costs |
377 |
360 |
Share based payments |
24 |
0 |
|
9,889 |
8,113 |
27. Capital Commitments
|
2018
£’000 |
2017
£’000 |
Commitments for capital expenditure approved and
contracted for at the year end |
751 |
– |
Share of commitment of capital expenditure in
joint venture |
– |
– |
All the above relates to Bisichi Mining PLC.
28. Operating and finance leases
Operating leases on land and buildings
At 31 December 2018 the Group had
commitments under non–cancellable operating leases on land and
buildings expiring as follows:
|
2018
£’000 |
2017
£’000 |
Within one year |
240 |
240 |
Second to fifth year |
960 |
960 |
After five years |
– |
240 |
Operating lease payments represent rentals payable by the Group
for its office premises.
The leases are for an average term of ten years at inception and
rentals are fixed for an average of five years.
Present value of head leases on properties
|
Minimum lease
payments |
Present value of
minimum
lease payments |
|
2018
£’000 |
2017
£’000 |
2018
£’000 |
2017
£’000 |
Within one year |
213 |
211 |
213 |
211 |
Second to fifth year |
849 |
841 |
783 |
776 |
After five years |
16,725 |
16,682 |
2,265 |
2,246 |
|
17,787 |
17,734 |
3,261 |
3,233 |
Future finance charges on finance leases |
(14,526) |
(14,501) |
– |
– |
Present value of finance lease liabilities |
3,261 |
3,233 |
3,261 |
3,233 |
Finance lease liabilities are in respect of leased investment
property. Many leases provide for contingent rent in addition to
the rents above, usually a proportion of rental income.
Finance lease liabilities are effectively secured as the rights
to the leased asset revert to the lessor in the event of
default.
Future aggregate minimum rentals receivable
The Group leases out its investment properties to tenants under
operating leases. The future aggregate minimum rentals receivable
under non–cancellable operating leases are as follows:
|
2018
£’000 |
2017
£’000 |
Within one year |
5,379 |
5,088 |
Second to fifth year |
16,002 |
14,597 |
After five years |
19,531 |
18,519 |
|
40,912 |
38,204 |
29. Contingent liabilities and events
AFTER THE REPORTING PERIOD
There were no contingent liabilities at 31 December 2018 (2017: £Nil), except as
disclosed in Note 20.
Bank guarantees have been issued by the bankers of Black Wattle
Colliery (Pty) Limited on behalf of the company to third parties.
The guarantees are secured against the assets of the company and
have been issued in respect of the following:
|
2018
£’000 |
2017
£’000 |
Rail siding & transportation |
54 |
64 |
Rehabilitation of mining land |
1,259 |
1,387 |
Water & electricity |
52 |
58 |
|
1,365 |
1,509 |
30. Company financial
statements
Company balance sheet at 31 December
2018
|
Notes |
2018
£’000 |
2017
£’000 |
Fixed assets |
|
|
|
Tangible assets |
30.3 |
23,872 |
25,397 |
Other investments: |
|
|
|
Associated company – Bisichi Mining PLC |
30.4 |
489 |
489 |
Subsidiaries and others including Dragon Retail
Properties Limited |
30.4 |
42,598 |
42,598 |
|
|
43,087 |
43,087 |
|
|
66,959 |
68,484 |
Current assets |
|
|
|
Debtors |
30.5 |
3,764 |
1,025 |
Deferred tax due after more than one year |
30.9 |
– |
2,059 |
Investments |
30.6 |
– |
19 |
Bank balances |
|
9,887 |
1,233 |
|
|
13,651 |
4,336 |
Creditors |
|
|
|
Amounts falling due within one year |
30.7 |
(54,664) |
(35,540) |
Deferred tax falling due after more than one
year |
30.9 |
(744) |
– |
Borrowings |
30.8 |
– |
(3,000) |
Net current liabilities |
|
(41,757) |
(34,204) |
Total assets less current liabilities |
|
25,202 |
34,280 |
Creditors |
|
|
|
Amounts falling due after more than one year |
30.8 |
(10,985) |
(13,003) |
Net assets |
|
14,217 |
21,277 |
Capital and reserves |
|
|
|
Share capital |
30.10 |
8,554 |
8,554 |
Share premium account |
|
4,866 |
4,866 |
Capital redemption reserve |
|
47 |
47 |
Treasury shares |
30.10 |
(144) |
(145) |
Retained earnings |
|
894 |
7,955 |
Shareholders’ funds |
|
14,217 |
21,277 |
The loss for the financial year, before dividends was £6,805,000
(2017: profit of £1,771,000).
These financial statements were approved by the board of
directors and authorised for issue on 30
April 2019 and signed on its behalf by:
Sir Michael
Heller
Jonathan Mintz
Company Registration No. 341829
Director
Director
Company statement of changes in equity for the year ended
31 December 2018
|
Share
capital
£’000 |
Share
premium
£’000 |
Capital
redemption
reserve
£’000 |
Treasury
shares
£’000 |
Retained
earnings
excluding
treasury
shares
£’000 |
Total
equity
£’000 |
Balance at 1 January 2017 |
8,554 |
4,866 |
47 |
(145) |
9,867 |
23,189 |
Profit for the year |
– |
– |
– |
– |
(1,771) |
(1,771) |
Total comprehensive income |
– |
– |
– |
– |
(1,771) |
(1,771) |
Transactions with owners: |
|
|
|
|
|
|
Dividends – equity holders |
– |
– |
– |
– |
(141) |
(141) |
Transactions with owners |
– |
– |
– |
– |
(141) |
(141) |
Balance at 31 December 2017 |
8,554 |
4,866 |
47 |
(145) |
7,955 |
21,277 |
Loss for the year |
– |
– |
– |
– |
(6,805) |
(6,805) |
Total comprehensive expense |
– |
– |
– |
– |
(6,805) |
(6,805) |
Transaction with owners: |
|
|
|
|
|
|
Dividends – equity holders |
– |
– |
– |
– |
(256) |
(256) |
Disposal of own shares |
– |
– |
– |
1 |
– |
1 |
Transactions with owners |
– |
– |
– |
1 |
(256) |
(255) |
Balance at 31 December 2018 |
8,554 |
4,866 |
47 |
(144) |
894 |
14,217 |
£0.2 million (2017: £6.5 million) of retained earnings (excluding
treasury shares) is distributable.
30.1. COMPANY
Accounting policies
The following are the main accounting policies of the
Company:
Basis of preparation
The financial statements have been prepared on a going concern
basis and in accordance with Financial Reporting Standard 101
’Reduced Disclosure Framework’ (FRS 101) and Companies Act 2006.
The financial statements are prepared under the historical cost
convention as modified to include the revaluation of freehold and
leasehold properties and fair value adjustments in respect of
current asset investments and interest rate hedges.
The results of the Company are included in the consolidated
financial statements. No profit or loss is presented by the Company
as permitted by Section 408 of the Companies Act 2006.
In these financial statements, the company has applied the
exemptions available under FRS 101 in respect of the following
disclosures:
• Cash Flow Statement and related
notes;
• Comparative period reconciliations for
share capital, tangible fixed assets and intangible assets;
• Disclosures in respect of transactions
with wholly owned subsidiaries;
• Disclosures in respect of capital
management;
• The effects of new but not yet
effective IFRSs;
• Disclosures in respect of the
compensation of Key Management Personnel.
As the consolidated financial statements include the equivalent
disclosures, the Company has also taken the exemptions under FRS
101 available in respect of the following disclosures:
• IFRS 2 Share Based Payments in respect
of Group settled share based payments;
• The disclosures required by IFRS 7 and
IFRS 13 regarding financial instrument disclosures have not been
provided apart from those which are relevant for the financial
instruments which are held at fair value and are not either held as
part of trading portfolio or derivatives.
Key judgements and estimates
The preparation of the financial statements requires management
to make assumptions and estimates that may affect the reported
amounts of assets and liabilities and the reported income and
expenses, further details of which are set out below. Although
management believes that the assumptions and estimates used are
reasonable, the actual results may differ from those estimates.
Further details of the estimates are contained in the Directors’
Report and in the Group accounting policies.
Investments in subsidiaries, associated undertakings and joint
ventures
Investments in subsidiaries, associated undertakings and joint
ventures are held at cost less accumulated impairment losses.
Fair value measurements of investment properties and
investments
An assessment of the fair value of certain assets and
liabilities, in particular investment properties, is required. In
such instances, fair value measurements are estimated based on the
amounts for which the assets and liabilities could be exchanged
between market participants. To the extent possible, the
assumptions and inputs used take into account externally verifiable
inputs. However, such information is by nature subject to
uncertainty. The fair value measurement of the investment
properties may be considered to be less judgemental where external
valuers have been used as is the case with the Company.
The following accounting policies are consistent with those of
the Group and are disclosed on page 36 to 41 of the Group financial
statements.
•
Revenue
• Property operating expenses
• Employee benefits
• Financial instruments
• Investment properties
• Other assets and depreciation
• Assets held for sale
• Income taxes
• Leases
30.2. RESULT for the financial
year
The Company’s result for the year was a loss of £6,805,000
(2017: loss of £1,771,000). In accordance with the exemption
conferred by Section 408 of the Companies Act 2006, the Company has
not presented its own profit and loss account.
30.3. Tangible
assets
|
Investment
Properties |
Office
equipment
and motor
vehicles
£’000 |
|
Total
£’000 |
Freehold
£’000 |
Leasehold
over 50 years
£’000 |
Leasehold
under 50 years
£’000 |
Cost or valuation at 1 January 2018 |
25,645 |
9,295 |
14,039 |
1,947 |
364 |
Reclassification |
– |
– |
(30) |
30 |
– |
Additions |
6,540 |
6,540 |
– |
– |
– |
Disposals to group companies |
(7,258) |
(1,050) |
(4,469) |
(1,721) |
(18) |
(Decrease)/increase on revaluation |
(815) |
(815) |
– |
– |
– |
Cost or valuation at 31 December 2018 |
24,112 |
13,970 |
9,540 |
256 |
346 |
|
|
|
|
|
|
Representing assets stated at: |
|
|
|
|
|
Valuation |
23,766 |
13,970 |
9,540 |
256 |
– |
Cost |
346 |
– |
– |
– |
346 |
|
24,112 |
13,970 |
9,540 |
256 |
346 |
|
|
|
|
|
|
Depreciation at 1 January 2018 |
248 |
– |
– |
– |
248 |
Charge for the year |
9 |
– |
– |
– |
9 |
Disposals |
(17) |
– |
– |
– |
(17) |
Depreciation at 31 December 2018 |
240 |
– |
– |
– |
240 |
Net book value at 1 January 2018 |
25,397 |
9,295 |
14,039 |
1,947 |
116 |
Net book value at 31 December 2018 |
23,872 |
13,970 |
9,540 |
256 |
106 |
The freehold and leasehold properties, excluding the present value
of head leases and directors’ valuations, were valued as at
31 December 2018 by professional
firms of chartered surveyors. The valuations were made at fair
value. The directors’ property valuations were made at fair
value.
|
2018
£’000 |
2017
£’000 |
Allsop LLP |
21,120 |
20,375 |
Directors’ valuation |
1,600 |
1,825 |
|
22,720 |
22,200 |
Add: Present value of headleases |
1,046 |
3,081 |
|
23,766 |
25,281 |
The historical cost of investment properties was as follows:
|
Freehold
£’000 |
Leasehold
over 50 years
£’000 |
Leasehold
under 50 years
£’000 |
Cost at 1 January 2018 |
4,889 |
13,966 |
1,939 |
Additions |
6,540 |
– |
– |
Disposals to group companies |
(1,201) |
(4,633) |
(1,154) |
Cost at 31 December 2018 |
10,228 |
9,333 |
785 |
Long leasehold properties are held on leases with an unexpired term
of more than fifty years at the balance sheet date.
30.4. Other investments
Cost or valuation |
Total
£’000 |
Shares in
subsidiary
companies
£’000 |
Shares in
joint
ventures
£’000 |
Shares in
associate
£’000 |
At 1 January 2018 |
43,087 |
42,434 |
164 |
489 |
Impairment provision |
– |
– |
– |
– |
At 31 December 2018 |
43,087 |
42,434 |
164 |
489 |
Subsidiary companies
Details of the Company’s subsidiaries are set out in Note 11.
Under IFRS 10 Bisichi Mining Plc and its subsidiaries, West Ealing
Projects Limited and its subsidiary and Dragon Retail Properties
Limited are treated in the financial statements as subsidiaries of
the Company.
In the opinion of the directors the value of the investment in
subsidiaries is not less than the amount shown in these financial
statements.
30.5. Debtors
|
2018
£’000 |
2017
£’000 |
Trade debtors |
351 |
366 |
Amounts due from associate and joint ventures |
755 |
33 |
Amounts due from subsidiary companies |
2,127 |
100 |
Other debtors |
82 |
118 |
Prepayments and accrued income |
449 |
408 |
|
3,764 |
1,025 |
30.6. Investments
|
2018
£’000 |
2017
£’000 |
Market value of the listed investment
portfolio |
– |
19 |
Unrealised gain of market value over cost |
– |
1 |
Listed investment portfolio at cost |
– |
18 |
The remaining investment portfolio was sold in the year.
30.7. Creditors: amounts falling due
within one year
|
2018
£’000 |
2017
£’000 |
Amounts owed to subsidiary companies |
50,874 |
29,775 |
Amounts owed to joint ventures |
156 |
2,214 |
Other taxation and social security costs |
200 |
278 |
Other creditors |
1,442 |
1,400 |
Accruals and deferred income |
1,992 |
1,873 |
|
54,664 |
35,540 |
30.8. Creditors: amounts falling due
after more than one year
|
2018
£’000 |
2017
£’000 |
Present value of head leases on properties |
1,046 |
3,081 |
Term Debenture stocks: |
|
|
£10 million First Mortgage Debenture Stock 2022 at
8.109 per cent* |
9,939 |
9,922 |
|
9,939 |
9,922 |
|
10,985 |
13,003 |
*The £10 million debenture is shown after deduction of un–amortised
issue costs.
Details of terms and security of overdrafts, loans and loan renewal
and debentures are set out in note 18.
Repayment of borrowings: |
2018
£’000 |
2017
£’000 |
Debentures: |
|
|
Repayable within one year |
- |
3,000 |
Repayable between two and five years |
9,939 |
9,922 |
Repayable in more than five years |
– |
- |
|
9,939 |
12,922 |
30.9. deferred tax
|
2018
£’000 |
2017
£’000 |
Deferred Taxation |
|
|
Balance at 1 January |
2,059 |
2,082 |
Transfer to profit and loss account |
(2,803) |
(23) |
Balance at 31 December |
(744) |
2,059 |
The deferred tax balance comprises the
following: |
|
|
Accelerated capital allowances |
(795) |
(833) |
Short–term timing differences |
(124) |
(124) |
Revaluation of investment properties |
175 |
66 |
Loss relief |
– |
2,950 |
Deferred tax (liability)/asset at year
end |
(744) |
2,059 |
30.10. Share capital
Details of share capital, treasury shares and share options are
set out in Note 23.
30.11. Related party transactions
|
Cost recharged
to (by) related
party
£’000 |
|
Amounts owed
by (to) related
party
£’000 |
Advanced to
(by) related
party
£’000 |
Related party: |
|
|
|
|
Dragon Retail Properties Limited |
|
|
|
|
Current
account |
36 |
(i) |
(156) |
– |
Loan account |
(103) |
|
– |
2,000 |
Bisichi Mining PLC |
|
|
|
|
Current
account |
153 |
(ii) |
3 |
– |
Simon Heller Charitable Trust |
|
|
|
|
Current
account |
(63) |
|
– |
– |
Loan account |
– |
|
(700) |
– |
Directors and key management |
|
|
|
|
M A Heller and J A
Heller |
18 |
(i) |
1 |
– |
H D Goldring
(Delmore Holdings Limited) |
(15) |
(iii) |
– |
– |
C A Parritt |
(20) |
(iii) |
– |
– |
R Priest |
(35) |
(iii) |
(8) |
– |
Totals at 31 December 2018 |
(29) |
|
(860) |
2,000 |
Totals at 31 December 2017 |
(73) |
|
(2,884) |
– |
Nature of costs recharged – (i) Management fees (ii) Property
management fees (iii) Consultancy fees
During the period, the Company entered into transactions, in the
ordinary course of business, with other related parties. The
company has taken advantage of the exemption under paragraph 8(k)
of FRS101 not to disclose transactions with wholly owned
subsidiaries.
Dragon Retail Properties Limited – ‘Dragon’ is owned equally by
the Company and Bisichi Mining PLC. During 2013 Dragon lent the
company £2 million at 6.875 per cent annual interest. This loan was
repaid in full during the year.
Bisichi Mining PLC – The company has 41.52 per cent ownership of
‘Bisichi’.
Other details of related party transactions are given in note
25.
30.12. EMPLOYEES
The average weekly number of employees of the company during the
year were as follows: |
2018
£’000 |
2017
£’000 |
Directors & Administration |
24 |
24 |
Staff costs during the year were as
follows: |
2018
£’000 |
2017
£’000 |
Salaries |
2,184 |
1,375 |
Social Security costs |
263 |
163 |
Pension costs |
107 |
119 |
|
2,554 |
1,657 |
30.13. Capital commitments
There were no capital commitments at 31
December 2018 (2017: £Nil).
30.14. OPERATING AND FINANCE
LEASES
At 31 December 2018 the Company
had commitments under non–cancellable operating leases on land and
buildings as follows:
|
2018
£’000 |
2017
£’000 |
Expiring in two to five years |
1,200 |
- |
Expiring in more than five years |
- |
1,440 |
In addition, the Company has an annual commitment to pay ground
rents on its leasehold investment properties which amount to
£201,000 (2017: £201,000).
Present value of head leases on properties
|
Minimum lease
payments |
Present value of
minimum
lease payments |
|
2018
£’000 |
2017
£’000 |
2018
£’000 |
2017
£’000 |
Within one year |
66 |
201 |
66 |
201 |
Second to fifth year |
266 |
803 |
247 |
746 |
After five years |
8,066 |
15,483 |
733 |
2,134 |
|
8,398 |
16,487 |
1,046 |
3,081 |
Future finance charges on finance leases |
(7,352) |
(13,406) |
– |
– |
Present value of finance lease liabilities |
1,046 |
3,081 |
1,046 |
3,081 |
Finance lease liabilities are in respect of leased investment
property. A few leases provide for contingent rent in addition to
the rents above, usually a proportion of rental income.
Finance lease liabilities are effectively secured as the rights
to the leased asset revert to the lessor in the event of
default.
Future aggregate minimum rentals receivable
The Company leases out its investment properties to tenants
under operating leases. The future aggregate minimum rentals
receivable under non–cancellable operating leases are as
follows:
30.15. Contingent liabilities and post
balance sheet events
There were no contingent liabilities at 31 December 2018 (2017: £Nil).
Five year financial summary
|
2018
£M |
2017
£M |
2016
£M |
2015
£M |
2014
£M |
Portfolio size |
|
|
|
|
|
Investment properties–LAP^ |
32 |
62 |
89 |
89 |
89 |
Investment properties–joint ventures |
– |
– |
– |
19 |
20 |
Investment properties–Dragon Retail
Properties |
2 |
3 |
3 |
3 |
3 |
Investment properties–Bisichi Mining^ |
13 |
13 |
13 |
13 |
12 |
Assets held for sale–LAP |
2 |
36 |
– |
2 |
– |
Inventories–LAP |
39 |
– |
– |
– |
– |
|
88 |
114 |
105 |
126 |
124 |
Portfolio activity |
£M |
£M |
£M |
£M |
£M |
Acquisitions |
6.55 |
– |
– |
1.00 |
0.68 |
Disposals |
(36.44) |
– |
– |
(0.40) |
– |
Capital Expenditure |
6.26 |
– |
0.16 |
0.36 |
– |
|
(23.63) |
– |
0.16 |
0.96 |
0.68 |
Consolidated income statement |
£M |
£M
Restated |
£M
Restated |
£M
Restated |
£M
Restated |
Group income |
56.65 |
47.87 |
31.81 |
34.61 |
35.74 |
Profit/(loss) before tax |
1.27 |
11.28 |
(0.97) |
(2.09) |
(2.69) |
Taxation |
(0.68) |
(2.98) |
(1.18) |
0.04 |
(3.70) |
Profit/(loss) attributable to shareholders |
(2.08) |
7.69 |
(2.36) |
(1.90) |
(7.14) |
Earnings/(loss) per share – basic and diluted |
(2.44)p |
9.01p |
(2.77)p |
(2.24)p |
(8.45)p |
Dividend per share |
0.180p |
0.300p |
0.165p |
0.160p |
0.156p |
Consolidated balance sheet |
£M |
£M |
£M |
£M |
£M |
Shareholders' funds attributable to
equity shareholders |
43.38 |
45.86 |
38.24 |
40.08 |
42.55 |
Net borrowings |
35.99 |
58.42 |
62.22 |
62.39 |
59.71 |
Net assets per share – basic |
50.83 |
53.74p |
44.83p |
47.26p |
50.35p |
– fully diluted |
50.83 |
53.74p |
44.83p |
47.26p |
50.35p |
Consolidated cash flow statement |
|
£M |
£M |
£M |
£M |
Cash generated from operations |
1.92 |
10.29 |
5.59 |
4.37 |
2.96 |
Capital investment and financial investment |
20.78 |
(1.80) |
(0.18) |
(2.77) |
100.42 |
Notes:
^ Excluding the present value of head leases