TIDMLAS
30 April 2018
LONDON & ASSOCIATED PROPERTIES PLC ("LAP"):
ANNUAL RESULTS FOR 12 MONTHS TO 31 DECEMBER 2017
HIGHLIGHTS
* Brixton Markets sale completed post year end at �?37.25
million
+ A significant increase on historic professional valuation
+ Revaluation to selling price contributed to a GBP10.76 million
improvement in LAP Group pre-tax profit
+ Sale generated GBP20.5 million of cash for future investment
* Rental income stable despite challenging market
* Voids remain minimal at 2%
* Net assets attributable to ordinary shareholders up 20% to GBP45.85 million
* NAV per ordinary share up 20% to 53.74p from 44.83p
* Bisichi had an excellent year although impacted by exceptional loss on a
joint venture
* Dividends increased
+ Final dividend increase of 6% to 0.175p recommended
+ Special one-off dividend of 0.125p also recommended following
completion of Brixton Markets sale
+ Total dividend for the year 0.30p
"We believe our portfolio is relatively well protected from online shopping as
our core property holdings are either part of a major city that will remain a
destination in its own right with a differentiated offer, which forms part of a
leisure experience; or, they fulfil a role providing convenience retail
facilities. We believe these sections of the retail world will continue to be
relevant for the foreseeable future", said Sir Michael Heller, Chairman, and
John Heller, CEO.
Contact:
London & Associated Properties PLC
Tel: 020 7415 5000
John Heller, CEO, or Anil Thapar, Finance Director
Baron Phillips
Associates Tel:
07767 444193
Baron Phillips
LONDON & ASSOCIATED PROPERTIES
ANNUAL REPORT 2017
OVERVIEW
LAP AT A GLANCE
CHAIRMAN AND CHIEF EXECUTIVE'S STATEMENT
STRATEGIC REPORT
FINANCIAL REVIEW AND PERFORMANCE
PRINCIPAL ACTIVITIES, STRATEGY & BUSINESS MODEL
RISKS AND UNCERTAINTIES
BISICHI RISKS AND UNCERTAINTIES
KEY PERFORMANCE INDICATORS
CORPORATE RESPONSIBILITY
GOVERNANCE
DIRECTORS & ADVISORS
DIRECTORS' REPORT
CORPORATE GOVERNANCE
GOVERNANCE STATEMENT BY THE CHAIRMAN OF THE REMUNERATION COMMITTEE
ANNUAL REMUNERATION REPORT
REMUNERATION POLICY SUMMARY
AUDIT COMMITTEE REPORT
DIRECTORS' RESPONSIBILITIES STATEMENT
INDEP AUDITOR'S REPORT
FINANCIAL STATEMENTS
CONDOLIDATED INCOME STATEMENT
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
CONSOLIDATED BALANCE SHEET
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
CONSOLIDATED CASH FLOW STATEMENT
GROUP ACCOUNTING POLICIES
NOTES TO THE FINANCIAL STATEMENTS
FIVE YEAR FINANCIAL SUMMARY
Financial calendar
Annual General Meeting
19 June 2018
Announcement of half year results to 30 June 2018
Late August 2018
Payment of final and special dividend for 2017 (if approved)
14 September 2018
Announcement of annual results for 2018
Late April 2019
LAP at a glance
London & Associated Properties PLC ("LAP") is a main market listed group which
invests in UK shopping centres and retail property whilst also managing
property assets for institutional clients. LAP owns and/or manages GBP186 million
of property investments. As a property company we look to create environments
where tenants can thrive.
The Group also holds a substantial investment in Bisichi Mining PLC, which
operates coal mines in South Africa and owns UK property investments. In
accordance with IFRS 10 the results of Bisichi have been consolidated in the
group accounts.
Financial highlights
Fully diluted net IFRS net assets Properties portfolio
assets per share valuation*
53.74p GBP56.7m GBP186m
2016: 44.83p 2016: GBP48.6m 2016: GBP221m
*Including properties under management
OVERALL PORTFOLIO SPLIT
PORTFOLIO BY RENTAL INCOME
KEY PROJECTS HIGHLIGHT
Wholly owned * Market Row and Brixton Village Market Row and Brixton Village sold
Brixton in April 2018
* Orchard Square, Sheffield
* Kings Square, West Bromwich
Investments * Kingsgate Centre, Dunfermline Co-investment with Oaktree Capital
and management * The Rushes Centre, Loughborough Management and manage three of their
* The Vancouver Quarter Centre shopping centres
Kings Lynn
Coal * In South Africa, Black Wattle produced 1.30 million metric tonnes of
production Run of Mine Coal in 2017 (2016: 1.26 million metric tonnes)
OVERVIEW
Chairman and Chief Executive's statement
We are pleased to report on a very satisfactory period for the 12 months to
31st December 2017.
The most significant event in 2017 was our decision to offer for sale the two
markets in Brixton, valued at GBP24.5 million last year and yielding around GBP0.5
million annually, net of interest expense. We believed that the timing was
right to realise this asset and generate a significant profit. Sale proceeds of
GBP37.25 million were received in April 2018. Allowing for costs and repayment of
related loans, this will leave the Company with cash from this disposal of GBP
20.5 million.
We are already in discussions with third parties on potential new investments
and will look for opportunities to reinvest the cash and expand the portfolio
over the coming months.
The year was also marked by a successful conclusion to a long running dispute
with The Market Village Company Limited (the tenant of the two Brixton
Markets). The lease entitles LAP to a share of total income less specified
expenses. The Court supported our claim that inappropriate expenses had been
deducted in calculating the income due. As a result, rental income for 2017
includes GBP0.6 million for back rent which is now due from the tenant.
LAP Group (excluding Bisichi and Dragon) property revenue for the year to 31st
December 2017 was GBP6.8 million as compared with GBP6.1 million in the previous
year. Excluding the extra Brixton and other income, our property revenue would
have been GBP6.1 million, which is a creditable result in the very challenging
current trading environment.
Within the LAP Group we have been particularly focused on operating costs
during 2017 and we are pleased to report that in 2017 these were approximately
8% lower at GBP3.8 million compared to GBP4.1 million the year before.
Consolidated results
The Group (including Bisichi and Dragon) net assets at the year end were GBP56.71
million (2016: GBP48.63 million).
Total net assets of LAP Group (including our net interest in Bisichi) have
increased by almost 20% to GBP45.85 million (2016: GBP38.24 million), while net
asset value per share has increased by 20% to 53.74p from 44.83p in 2016. Total
property assets owned by LAP, Bisichi and other companies in which LAP has a
financial interest amount to GBP186 million (2016: GBP221 million).
The Group profit after valuation movements and before taxation for the year was
GBP11.28 million (loss 2016: GBP0.97 million). Besides the improvements in Bisichi
(as detailed in the Bisichi section below) and LAP income and costs (as stated
above), the main improvement was due to the increase in valuation of investment
properties by GBP9.37 million (2016: GBP0.53 million). A full breakdown of group
income and result by sector is included in the financial review and in the
segmental analysis in Note 1 to the financial statements.
Debt Management
In June 2017 we repaid GBP0.75 million of Prudential debenture stock which
carried a coupon of 11.6% per annum. In August 2018, the residual GBP3 million of
this debenture will expire. We are currently talking to a number of lenders
about refinancing the portfolio against which the debenture is secured, and we
are pleased to report that interest is strong. We will update shareholders on
the terms of any new loan once we have selected the lender. We are confident
that we will make a significant saving on the GBP0.3 million per annum interest
we are currently paying.
LAP PROPERTY ACTIVITIES
Orchard Square, Sheffield
The shops at Orchard Square have remained effectively fully let throughout
2017, and we therefore have no significant new lettings to report. However, we
have a number of lease expiries in 2018 and have commenced negotiations with
tenants to renew their leases. Responses to date have been positive.
Kings Square, West Bromwich
Kings Square, our shopping centre at West Bromwich, has had a strong year
during which we have achieved several good lettings. The principal mall remains
fully let and recent lettings have underscored rental growth compared to a year
ago. Additionally, the side mall, which has always been the weakest of the
malls within the Centre, is fully let following a period of intensive
marketing.
The town seems to be finding its equilibrium after the opening of a new Tesco
Extra and adjacent shopping centre and Kings Square is clearly the location of
choice for discount retailers. This is helped by the tram and bus terminus
being attached to the rear of our centre. We therefore believe that this Centre
will continue to trade successfully.
414 Coldharbour Lane, Brixton
Shareholders are aware that, following lease expiry in 2015, we are in the
process of trying to obtain vacant possession of this property from the current
tenant. We believe that the tenant has lost the statutory rights of renewal. In
December 2017, the Court found in favour of LAP on two counts. A third and
final count requires a separate hearing which is scheduled for September 2018.
We are confident of our position and we will update shareholders in due course.
Other
The rest of our property portfolio continues to trade well and the LAP Group
portfolio has a void level of 1.47%, (2016: 2.15%).
Properties outlook
There has been a lot of press coverage recently about retailer insolvencies and
the increasing migration to online shopping. So far we have not directly
suffered any increased level of retailer insolvency but we cannot be isolated
entirely from general high street trends. Like all retail landlords, we will be
forced to compete against an increased supply of empty shops.
As highlighted in Chairman's Statements over the last few years, we believe
that our portfolio is relatively protected from online shopping as our core
property holdings are all either part of a major city that will remain a
destination in its own right; a differentiated offer which forms part of a
leisure experience; or they fulfil a role providing convenience retail
facilities. We still believe that these sections of the retail world will
continue to be relevant for the foreseeable future.
Harrogate joint venture
Our Harrogate joint venture with Oaktree Capital Management, which owns three
shopping centres in Dunfermline, Kings Lynn and Loughborough, underwent a
refinancing during the year. A loan at 80% of valuation was secured from
Goldman Sachs with mezzanine funding provided by DRC. During this refinancing,
we declined the option to put further cash into the joint venture and
consequently our share of the equity was diluted from 6.95% to 3.17%. However,
our asset and property management contracts remain unchanged and we continue to
receive fees for managing the centres.
Mining and property activities by Bisichi Mining PLC
The management of Bisichi report that for the year ended 31st December 2017,
the company achieved earnings before interest, tax, depreciation and
amortisation (EBITDA) of GBP3.7 million (2016: GBP2.4 million). This significant
improvement was achieved despite the impact on Black Wattle, its direct coal
mining subsidiary in South Africa, of mining challenges in the first half of
the year.
For the first half of 2017 production at Black Wattle was impacted by higher
than expected seasonal rains as well as ongoing stone contamination issues at
its opencast areas. Overall, during this period, the mine achieved production
of 582,000 metric tonnes (2016 H1: 795,000 metric tonnes). The stone
contamination issues affected both yield and mining production through the
washing plant, thus impacting on sales volumes and earnings in the first half
of the year.
During the second half of the year, further development of Black Wattle's
opencast areas and the successful completion of infrastructure improvements to
its washing plant allowed the mine to increase production to 714,000 metric
tonnes (2016 H2: 465,000 tonnes). In addition, the completion of these
infrastructure improvements assisted in reducing the stone contamination
through the washing plant and increasing its overall yield.
As a result of the higher production in the second half of the year, overall
mining production from Black Wattle increased in 2017, with total production
for the year of 1.30 million metric tonnes (2016: 1.26 million metric tonnes).
As part of Black Wattle's mining plan, the opencast areas that were mined in
2017 will continue to be mined throughout 2018. Bisichi expect mining
production levels achieved in the second half of 2017 to be maintained in 2018.
Looking forward to 2018, Bisichi management will focus on maintaining
production at the higher levels achieved in the second half of 2017 and
increasing the life of the mine through the acquisition of additional reserves.
With strong demand and improved prices achievable for the company's coal,
Bisichi believes the group is in a strong position to achieve significant value
from its South African mining operations in 2018.
Bisichi's property portfolio is managed by LAP and continues to perform well.
Overall, net property revenue (excluding joint ventures) was GBP1.12 million
(2016: GBP1.06 million).
The property portfolio was externally valued at 31st December 2017 and the
value of UK investment properties attributable to the group at year end
remained unchanged at GBP13.25 million.
Bisichi has decided to recommend a final dividend of 3p (2016: 3p) and in light
of the strong results achieved, a special dividend of 1p (2016: nil). The total
Bisichi dividend for the year is 5p (2016: 4p). LAP's cash share of this is GBP
221,000 (2016: GBP177,000).
Dragon Retail Properties
Dragon has a single retail asset in Bristol. There is a lease renewal on the
ground floor. The tenant has requested a new lease, and we believe the rent to
be reversionary. Negotiations are underway.
LAP Dividend
We are pleased to recommend a final dividend of 0.175p, an increase of over 6%
on the 2016 dividend of 0.165p. We are also pleased to report that we will
recommend a special dividend of 0.125p following the sale of our Brixton
properties. This means we will pay a total dividend of 0.30p.
Finally, we would like to thank all of our directors, staff and advisors for
their hard work during the year. We look forward to the year ahead with
cautious optimism.
Sir Michael Heller, John Heller,
Chairman Chief Executive
27 April 2018
STRATEGIC REPORT
Financial and performance review
The financial statements for 2017 have been prepared to reflect the
requirements of IFRS 10. This means that the accounts of Bisichi Mining PLC (a
London Stock Exchange main market quoted company - BISI) ("Bisichi"), have been
consolidated with those of LAP.
Bisichi continues to operate as a fully independent company and currently LAP
owns only 41.52% of the issued ordinary share capital. However, because related
parties also have shareholdings in Bisichi and there is a wide disposition of
other shareholdings, LAP is deemed under IFRS 10 to have effective control of
Bisichi for accounting purposes. This treatment means that the income and net
assets of Bisichi are disclosed in full and the value attributable to the
"non-controlling interest" (58.48%) is shown separately in the equity section
as a non-controlling interest. There is no impact on the net assets
attributable to LAP shareholders.
Dragon Retail Property Limited ("Dragon"), our 50:50 joint venture with Bisichi
is also consolidated.
Shareholders are aware that LAP is a property business with a significant
investment in a listed mining company. The effect of consolidating the results,
assets and liabilities of the property business and the mining company make the
figures complex and less transparent. Property company accounts are already
subject to significant volatility as valuations of property assets as well as
derivative liabilities can be subject to major movements based on market
sentiment. Most of these changes, though, have little or no effect on the cash
position and it is, of course, self-evident that cash flow is the most
important factor influencing the success of a property business. We explain the
factors affecting the property business first, clearly separating these from
factors affecting the mining business which we do not manage. Comments about
Bisichi (the mining business) are based on information provided by the
independent management of that company.
LOANS
Long term debt of LAP (excluding Bisichi and Dragon which are detailed
separately below), consists of a GBP45 million facility expiring in July 2019 and
two debentures: one of GBP10 million expiring in August 2022 and another of GBP3
million expiring in August 2018. During the year GBP0.75 million of debenture was
repaid. As in previous years, all loans and debentures are secured on core
property and cash deposits and are covenant compliant.
LAP's five year GBP35 million non-recourse loan from Santander, as senior lender,
is supported by a GBP10 million loan from Europa Capital Mezzanine Limited, as
mezzanine lender. The senior loan facility is fully hedged and at the year end,
50% of the loan was swapped at a rate of 2.25% and the remaining 50% was
covered by an interest cap at 2.25%. This gives a blended current interest rate
of 4.73% for the total GBP45 million debt. On completion of the sale of Brixton
Markets, GBP15.9 million of senior and mezzanine loans are repayable.
Cash flow
The operating cash flow and net cash balances at the year-end were as follows:
CASH FLOW FROM OPERATIONS 2017 2016
GBP'000 GBP'000
LAP 2,708 2,623
Bisichi 7,593 2,879
Dragon (14) 84
Group total 10,287 5,586
Note: The figures exclude inter-company transactions.
NET CASH BALANCES 2017 2016
GBP'000 GBP'000
LAP 2,109 3,706
Bisichi 4,065 (890)
Dragon 92 115
Group total 6,266 2,931
Our investment with Oaktree Capital Management (HRGT Shopping Centres LP),
remains profitable and generates management fees (2017: GBP0.46 million and 2016:
GBP0.46 million) for our wholly owned subsidiary (London & Associated Management
Services Limited). We also received GBP0.1 million (2016: GBP0.1 million) as a
partial repayment of our loan.
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 2017 2016
GBP'000 GBP'000
LAP (130) (1,070)
Bisichi 3,536 (241)
Dragon (29) 9
Group total 3,377 (1,302)
Note: The figures exclude inter-company transactions.
Rental income in LAP includes a one off receipt of GBP0.6 million for Brixton
back rent. Additionally, renewed efforts to cut costs at LAP are reflected in
lower overheads and property expenses, resulting in an improvement of GBP0.9
million in the operating result before revaluations of the core property
business.
Bisichi's improvement of GBP3.8 million is explained under Bisichi Mining PLC, in
this review.
The Group property portfolio, including assets held for sale (including
Bisichi) of GBP114.46 million increased on revaluation by GBP9.37 million, a 9%
increase.
The improved property revenues, reductions in running costs and increased
property valuations, have resulted in the LAP Group property business showing
an increase of GBP10.76 million in the profit before taxation to GBP9.61 million
(2016: loss GBP1.15 million).
profit/(Loss) before taxation 2017 2016
GBP'000 GBP'000
LAP 9,614 (1,150)
Bisichi 1,696 216
Dragon (32) (40)
Group profit/(loss) before taxation 11,278 (974)
Note: The figures exclude inter-company transactions.
Taxation
The LAP Group taxation charge of GBP2.98 million (2016: GBP1.17 million) is mainly
due to changes in the rules governing the utilisation of tax losses which has
restricted the group's ability to offset the deferred tax liability arising on
the revaluation gains recognised in the year.
Balance sheet
Taking account of the changes required by IFRS 10 (see table below) LAP has
group net assets of GBP56.7 million (2016: GBP48.6 million).
Net assets attributable to equity shareholders at the year-end were 53.74p per
share (2016: 44.83p per share).
2017 Bisichi
LAP Mining PLC Dragon
Original Group Retail Consolidation LAP
Group GBP'000 Properties adjustments Net
GBP'000 GBP'000 GBP'000 assets
GBP'000
Investment properties 65,231 13,397 2,630 - 81,258
Other fixed assets 116 8,613 6 - 8,735
Investments in Bisichi Mining PLC 7,120 - - (7,120) -
Investments in joint ventures 874 874 - (1,748) -
Other non current assets 1,748 51 - - 1,799
Held for sale assets 36,441 - - - 36,441
Current assets 4,824 13,622 2,528 (4,416) 16,558
Current liabilities (10,822) (9,025) (2,124) 4,416 (17,555)
Non-current liabilities (59,377) (9,858) (1,291) - (70,526)
Net assets 46,155 17,674 1,749 (8,868) 56,710
2016
Investment properties 93,791 13,426 2,630 - 109,847
Other fixed assets 112 8,520 21 - 8,653
Investments in Bisichi Mining 6,918 - - (6,918) -
PLC
Investments and loans in joint 866 2,671 - (1,732) 1,805
ventures
and assets held for sale
Other non current assets 3,008 32 - - 3,040
Current assets 5,559 12,224 2,447 (4,347) 15,883
Current liabilities (9,014) (10,326) (2,078) 4,347 (17,071)
Non-current liabilities (62,697) (9,541) (1,288) - (73,526)
Net assets 38,543 17,006 1,732 (8,650) 48,631
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 2017 financial
statements which are available on its website: www.bisichi.co.uk.
The Bisichi group increased its EBITDA to GBP3.7 million (2016: GBP2.4 million)
mainly due to increased operating profits before depreciation from the mining
activities of GBP4.6 million (2016: GBP1.2 million) offset by the group's share of
losses in its joint venture of GBP1.8 million (2016: GBPnil). The share of losses
in joint ventures arises from writing off the investment in Ezimbokodweni
Mining (Pty) Ltd of GBP1.8 million, as detailed in Notes 12 and 13 to the
accounts. Depreciation in the year relating to mining activities remained
unchanged at GBP1.8 million. Profit for the year after tax was GBP1.5 million
(2016: GBP0.3 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 by 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 GBP13.25 million
(2016: GBP13.25 million). The property portfolio is actively managed by LAP and
generated rental income of GBP1.1 million in the year (2016: GBP1.1 million).
In South Africa, a subsidiary of Bisichi signed an increase in the structured
trade finance facility from R80 million to R100 million (South African Rand) in
July 2017 with Absa Bank Limited. This facility is renewable annually at 30th
June and is secured against inventory, debtors and cash that are held in the
Bisichi group's South African operations. This facility is expected to be
renewed again in 2018.
In the UK, the Bisichi group signed a GBP6 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.
Overall the Bisichi group achieved a net increase in cash and cash equivalents
of GBP4.9 million (2016: GBP0.4 million). This increase was mainly attributable to
improved coal mining operations which generated a substantial (GBP7.3 million)
increase in cash from operating activities. Bisichi group's net balance of cash
and cash equivalents (including bank overdrafts) at the year end was GBP4.1
million (owing 2016: GBP0.9 million). The Bisichi group's cash and cash
equivalents (excluding bank overdrafts), at the year-end was GBP5.3 million
(2016: GBP2.4 million).
The Bisichi group's financial position remains strong. Its net assets at 31st
December 2017 were GBP17.7 million (2016: GBP17 million). The group expects to
continue achieving significant value in 2018 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 GBP1.25 million secured against its investment property and is covenant
compliant. It paid management fees of GBP84,000 (2016: GBP72,000) split equally to
the two joint venture partners. Its results continue to be near breakeven after
taxation. Dragon has net assets of GBP1.7 million (2016: GBP1.7 million).
Accounting judgements and going concern
The most significant judgements made in preparing these accounts relate to the
carrying value of the properties, investments and interest rate hedges. The
hedges have been valued by the hedge provider. The Group uses external property
valuers to determine the fair value of its properties.
Under IFRS10 the Group has included Bisichi Mining PLC in the consolidated
accounts, as it is deemed to be under the effective control of LAP and has
therefore been treated as a subsidiary.
The Directors exercise their commercial judgement when reviewing the Group's
cash flow forecasts and the underlying assumptions on which the forecasts are
based. The Group's business activities, together with the factors likely to
affect its future development, are set out in the Chairman and Chief
Executive's Statement and in this review. In addition, the Directors consider
that Note 23 to the financial statements sets out the Group's objectives,
policies and processes for managing its capital; its financial risk management
objectives; details of its financial instruments and hedging activities; and
its exposure to credit risk, liquidity risk and other risks.
With a quality property portfolio comprising a majority of tenants with long
leases supported by suitable financial arrangements, the Directors believe the
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 GBP10.167 million of which only GBP4.74
million has been recognised in the 2017 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 0.175p per ordinary share
payable in September 2018.
The directors are also proposing a special dividend of 0.125p per ordinary
share payable in September 2018.
The Group remains cautiously confident about its trading and future outlook and
it continues to look at further reducing its overhead costs and interest
payable, while it stabilises its property income together with seeking out
growth opportunities.
STRATEGIC REPORT
Principal activities, strategy & business model
The LAP Group's principal business model is the investment in and management of
town centre retail property through direct investment and joint ventures, where
we manage the property ourselves and on behalf of our partners.
The principal activity of Bisichi Mining PLC is coal mining in South Africa.
Further information is available in its 2017 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 We look to improve the consumer experience at all our centres
PROPERTY by achieving an appropriate tenant mix and a vibrant trading
environment through investment activity, enhancement,
refurbishment and development.
CAPITAL STRENGTH We operate within a prudent and flexible financial structure.
Our gearing, which has been substantially reduced, provides
financial stability whilst giving capacity and flexibility to
look for further investments.
MAINTAIN THE VALUE OF By encouraging the Bisichi management to maximise sustainable
INVESTMENT IN BISICHI profits and cash distributions.
Risks and uncertainties
DESCRIPTION OF RISK DESCRIPTION OF IMPACT MITIGATION
ASSET MANAGEMENT:
TENANT FAILURE Financial loss. Initial and subsequent assessment of
tenant covenant strength combined with
an active credit control function.
LEASES NOT RENEWED Financial loss. Lease expiries regularly reviewed.
Experienced in house teams with strong
tenant and market knowledge who manage
appropriate tenant mix.
ASSET LIQUIDITY (SIZE Assets may be illiquid Regular reporting of current and
AND GEOGRAPHICAL and affect flexing of projected position to the Board with
LOCATION) balance sheet. efficient treasury management.
PEOPLE:
RETENTION AND Unable to retain and Nomination Committee and senior staff
RECRUITMENT OF STAFF attract the best people review skills gaps and succession
for the key roles. planning. Training and development
offered.
REPUTATION:
BUSINESS INTERRUPTION Loss in revenue. Documented Recovery Plan in place.
Impact on footfall. General and terrorism insurance
Adverse publicity. policies in place and risks
Potential for criminal/ monitored by trained security staff.
civil proceedings. Health and Safety policies in place.
CCTV in centres.
FINANCING:
FLUCTUATION IN PROPERTY Impact on covenants and Secure income flows.
VALUES other loan agreement Regular monitoring of LTV and IC
obligations. covenants and other obligations.
Focus on quality assets.
REDUCED AVAILABILITY OF Insufficient funds to Efficient treasury management.
BORROWING FACILITIES meet existing debts/ Loan facilities extended where
interest payments and possible.
operational payments. Regular reporting of current and
projected position to the Board.
LOSS OF CASH AND Financial loss. Only use a spread of banks and
DEPOSITS financial institutions which have a
strong credit rating.
FLUCTUATION OF INTEREST Uncertainty of interest Manage derivative contracts to achieve
RATES rate costs. a balance between hedging interest
rate exposure and minimising potential
cash calls.
STRATEGIC REPORT
Bisichi risks and uncertainties
Bisichi (although it is consolidated into group accounts as required by IFRS
10) is managed independently of LAP. The risks outlined below are an
abbreviated summary of the risks reported by the Directors of Bisichi to the
shareholders of that Company. Full details are available in the published
accounts of Bisichi (www.bisichi.co.uk).
These risks, although critical to Bisichi, are of less significance to LAP
which only has a minority investment of 41.52% in the company. In the unlikely
event that Bisichi was unable to continue trading, it would not affect the
ability of LAP to continue operating as a going concern.
DESCRIPTION OF RISK DESCRIPTION OF IMPACT MITIGATION
COAL PRICES CAN BE IMPACTED Affects sales value and Forward sales contracts are
MATERIALLY BY MARKET AND therefore margins. used to manage value
CURRENCY VARIATIONS expectations.
MINING OPERATIONS ARE Loss of production causing Use of geology experts,
INHERENTLY RISKY. MINERAL loss of revenue. careful attention to
RESERVES, REGULATIONS, regulations, health and
LICENSING, POWER safety training, employee
AVAILABILITY, HEALTH AND dialogue to minimise
SAFETY CAN ALL DAMAGE controllable risks.
OPERATIONS
CURRENCY RISK Affects realised sales value Regular monitoring and
and therefore margins. review of forward currency
situation.
CASHFLOW VARIATION BECAUSE OF Variations can deliver UK property investments used
MINING RISKS, COMMODITY PRICE significant shifts in cash to offset high risk mining
OR CURRENCY VARIATIONS flow. operations.
STRATEGIC REPORT
Key performance indicators
The Group's Key Performance Indicators are selected to ensure clear alignment
between its strategy and shareholder interests.
The KPIs are calculated using data from management reporting systems.
Strategic priority KPI Performance
MAXIMISING INCOME - LIKE FOR LIKE PROPERTY INCOME
To increase the like-for-like Like-for-like rental income as The like-for-like rental
income from the property year a percentage of the prior year income has remained unchanged.
on year. rental. In the continuing difficult
trading environment, this is
considered satisfactory.
MAXIMISING INCOME - OCCUPANCY
We aim to maximise the total The ERV of the empty units as a Void levels have remained
income in our properties by percentage of our total income. unchanged at 2.06%.
achieving full occupancy.
CAPITAL STRENGTH - GROWTH IN NET ASSET VALUE PER SHARE
The net assets per share is Movement in the net assets The net assets per share
the principal measure used by per share. increased by 8.91 pence per
the group for monitoring its share
performance and is an or nearly 20% to 53.74p.
indicator of the level of The strategic realisation of
reserves available for Brixton markets is the main
distribution by way of reason for the significant
dividend. increase this year. This is in
accordance with our policy of
selling assets when we believe
that they have achieved
maximum value.
STRATEGIC REPORT
Corporate responsibility
Sustainable Development
Bisichi's Black Wattle continues to strive to conduct business in a safe,
environmentally and socially responsible manner. Some highlights of their
Health, Safety and Environment performance in 2017:
* Black Wattle Colliery recorded one Lost Time Injury during 2017 (2016:
One).
* 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 2017 Financial Statements which are available on
their web site: www.bisichi.co.uk
Greenhouse gas reporting
We have reported on all of the emission sources required under the Companies
Act 2006 (Strategic Report and Directors' Reports) Regulations 2013 for the
reporting period 1st January 2017 to 31st December 2017. The emissions are
detailed in tables 1, 2, 3 and 4 below.
We have employed the Financial Control definition to outline our carbon
footprint boundary reporting Scope 1 & 2 emissions only. Emissions from both
landlord and tenant controlled areas of LAP owned shopping centres and
facilities that fall within the footprint boundary. LAP has landlord controlled
areas in Kings Square, Orchard Square, Brewery Street, Shipley and Bridgend.
Excluded from our footprint boundary are: properties that we manage on behalf
of others or are not wholly owned by LAP and emissions are considered non
material by the business.
Emissions for landlord controlled areas have been calculated based on actual
consumption information collected from each shopping centre. Emissions from
tenant controlled areas have been calculated based on floor area and energy
consumption benchmarks for general retail services in the UK.
The Bisichi Group has employed the Operational Control boundary definition to
outline the carbon footprint boundary. Included within that boundary are Scope
1 & 2 emissions from coal extraction and onsite mining processes for Black
Wattle Colliery. Excluded from the footprint boundary are emission sources
considered non material by Bisichi Group, including refrigerant use onsite.
We have used the 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 20171.
As well as reporting Scope 1 and Scope 2 emissions, legislation requires that
at least one intensity ratio is reported for the given reporting period. The
intensity figure represented below shows the emissions in tCO2e per thousand
pounds revenue.
Table 1. landlord & tenant controlled areas
Emissions Source 2017 2016
Scope 1 emissions Natural gas (tCO2e) 71 234
Refrigerants (tCO2e) 0 5
Scope 2 emissions Electricity (tCO2e) 2,938 3,491
Total tCO2e 3,009 3,730
Intensity ratio (tCO2e/GBPthousand) 0.467 0.076
Table 2. LAP controlled areas
Emissions Source 2017 2016
Scope 1 emissions Natural gas (tCO2e) 71 234
Refrigerants (tCO2e) 0 5
Scope 2 emissions Electricity (tCO2e) 176 236
Total tCO2e 247 475
Table 3. Tenant controlled areas
Emissions Source 2017 2016
Scope 1 emissions Natural gas (tCO2e) - -
Refrigerants (tCO2e) - -
Scope 2 emissions Electricity (tCO2e) 2,762 3,255
Total tCO2e 2,762 3,255
1. 2017 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
2017 2016
CO2e CO2e
Tonnes Tonnes
Emissions source:
Scope 1 Combustion of fuel & operation of facilities 15,575 11,860
Scope 1 Emissions from coal mining activities 22,683 22,171
Scope 2 Electricity, heat, steam and cooling purchased 11,210 8,530
for own use
Total 49,468 42,561
Intensity:
Intensity 1 Tonnes of CO2 per pound sterling of revenue 0.0013 0.0019
Intensity 2 Tonnes of CO2 per pound of coal produced 0.038 0.034
Environment
United Kingdom
The Group's principal UK activity is property investment, which involves
renting premises to retail businesses. We seek to provide those tenants with
good quality premises from which they can operate in an efficient and
environmentally friendly manner. Where possible, improvements, repairs and
replacements are made in an environmentally efficient manner and waste
re-cycling arrangements are in place at all of the Company's locations.
South Africa
The Bisichi group's principal activity in South Africa is coal mining. Under
the terms of the mine's Environmental Management Programme approved by the
Department of Mineral Resource ("DMR"), Black Wattle undertakes a host of
environmental protection activities to ensure that the approved Environmental
Management Plan is fully implemented. A performance assessment audit was
conducted to verify compliance to their Environmental Management Programme and
no significant deviations were found.
Employee, social, community and human rights
The Group's policy is to attract staff and motivate employees by offering
competitive terms of employment. The Group provides equal opportunities to all
employees and prospective employees including those who are disabled and
operates in compliance with all relevant national legislation.
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 the 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 6 directors (6 male, 0 female),
7 senior managers (6 male, 1 female) and 196 employees (143 male, 53 female).
Detailed information relating to Bisichi Strategic Report is available in its
2017 financial statements.
Approved on behalf of the board of directors
Anil Thapar,
Finance Director
27 April 2018
GOVERNANCE
Directors & advisors
EXECUTIVE DIRECTORS
Sir Michael Heller MA FCA*
(Chairman)
John A Heller LLB MBA
(Chief Executive)
Anil K Thapar FCCA
(Finance Director)
NON-EXECUTIVE DIRECTORS
Howard D Goldring BSC (ECON) ACA?
Howard Goldring is Executive Chairman of Delmore Asset Management Limited which
specialises in the discretionary management of investment portfolios for
pension funds, charities, family trusts and private clients. He also acts as an
advisor providing high level asset allocation advice to family offices and
pension schemes, including Tesco Pension Investment Ltd. He has been a member
of the LAP Board since July 1992, and has 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 Chairman of BG Training Limited and a
director of Jupiter US Smaller Companies plc. Until April 2016 he was Group
Finance Director of Audiotonix Limited (an international manufacturer of audio
mixing consoles). He has chaired and been a director of a number of other
public and private companies. Clive Parritt was President of the Institute of
Chartered Accountants in England and Wales in 2011-12. He is Chairman of the
Audit Committee and as Senior Independent Director he chairs the Nomination and
Remuneration Committees.
Robin Priest MA
Robin Priest joined the board on 31 July 2013. He is chairman of private real
estate company Property Alliance Group and a senior advisor to Alvarez & Marsal
LLP ("A&M") and to a major listed German real estate investment fund manager.
He has more than 36 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
Anil K Thapar FCCA
24 Bruton Place
London W1J 6NE
AUDITOR
RSM UK Audit LLP
PRINCIPAL BANKERS
Santander UK plc
Abbey National Treasury Services plc
Europa Capital Mezzanine Ltd
SOLICITORS
Olswang LLP
Pinsent Masons LLP
STOCKBROKER
Stockdale Securities Limited
REGISTRARS & TRANSFER OFFICE
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
GOVERNANCE
Directors' report
The Directors submit their report and the audited financial statements for the
year ended 31 December 2017.
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 per cent interest. Bisichi is listed on the main market
of the London Stock Exchange and operates in England and South Africa with
subsidiaries which are involved in overseas mining and mining investment. The
results, together with the assets and liabilities, of Bisichi are consolidated
with those of LAP in accordance with the terms of IFRS 10 even though the Group
only has a minority interest - under IFRS 10 the 58% majority interest is
disclosed as a "non-controlling interest".
Business review 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 32 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 retail properties,
actively manages those assets to improve rental income, and thus seeks to
enhance the value of its properties over time. In reviewing performance,
the principal areas regularly monitored by the Group include:
* Rental income - the aim of the Group is to maximise the maintainable income
from each property by careful tenant management supported by sympathetic and
revenue enhancing development. Income may be affected adversely by the
inability of tenants to pay their rent, but careful monitoring of rent
collection and tenant quality helps to mitigate this risk. Risk is also
minimised by a diversified tenant base, which should limit the impact of the
failure of any individual tenant.
* Cash flow - allowing for voids, acquisitions, development expenditure,
disposals and the impact of operating costs and interest charges, the Group
aims to maintain a positive cash flow over time.
* Financing costs - the exposure of the Group to interest rate movements is
managed partly by the use of swap and cap arrangements (see Note 23 on page 56
for full details of the contracts in place) and also by using loans with fixed
terms and interest rates. These arrangements are designed to ensure that our
interest costs are known in advance and are always covered by anticipated
rental income. Details of key estimates that have been adopted are contained in
the accounting policies Note on page 37.
* 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 2017 of 0.175p
per share (2016 0.165p per share) and a special dividend for 2017 of 0.125p
(2016: nil).
Subject to shareholder approval, the ordinary final dividend and special
dividend will be payable on Friday 14 September 2018 to shareholders registered
at the close of business on Friday 17 August 2018.
The company's ordinary shares held in treasury
At 31 December 2017, 221,061 (2016: 221,061) ordinary shares were held in
Treasury with a market value of GBP54,160 (2016: GBP46,422). At the Annual General
Meeting (AGM) in June 2017 members renewed the authority for the Company to
purchase up to 10 per cent of its issued ordinary shares. The Company will be
asking members to renew this authority at the next AGM to be held on Tuesday 19
June 2018.
Treasury shares held at 1 January 2017 and 31 December 2017 221,061
Treasury shares are not included in issued share capital for the purposes of
calculating earnings per share or net assets per share and they do not qualify
for dividends payable.
Investment properties
The freehold and long leasehold properties of the Company, its subsidiaries and
Bisichi were revalued as at 31 December 2017 by independent professional firms
of chartered surveyors - Allsop LLP, London (80.69 per cent of the portfolio),
Carter Towler, Leeds (16.98 per cent) - and by the Directors (2.34 per cent).
The valuations, which are reflected in the financial statements, amount to GBP78
million (2016: GBP105.08 million).
Investment property of GBP36.4 million sold in 2018 is stated under current
assets, as Assets held for sale.
Taking account of prevailing market conditions, the valuation of the properties
at 31 December 2017 resulted in an increase of GBP9.37 million (2016: increase of
GBP0.53 million). The proportion of this revaluation attributable to the Group
(net of taxation) is reflected in the consolidated income statement and the
consolidated balance sheet.
Financial instruments
Note 23 to the financial statements sets out the risks in respect of financial
instruments. The board reviews and agrees overall treasury policies, delegating
appropriate authority for applying these policies to the Chief Executive and
Finance Director. Financial instruments are used to manage the financial risks
facing the Group and speculative transactions are prohibited. Treasury
operations are reported at each board meeting and are subject to weekly
internal reporting. Hedging arrangements are in place for the Company, its
subsidiaries and joint ventures in order to limit the effect of higher interest
rates upon the Group. Where appropriate, hedging arrangements are covered in
the Chairman and Chief Executive's Statement and the Financial Review.
Directors
Sir Michael Heller, J A Heller, A K Thapar, H D Goldring, C A Parritt and
R Priest were Directors of the company for the whole of 2017.
C A Parritt, J A Heller and A K Thapar are retiring by rotation at the Annual
General Meeting in 2018 and offer themselves for re-election.
Clive Parritt has been a Director since January 2006 and has a contract of
service determinable upon three months' notice and is the Senior Independent
Director and Chairman of the audit, nomination and remuneration committees. He
is a Chartered Accountant with over 40 years' experience in providing
strategic, financial and commercial advice to business. His financial knowledge
and broad commercial experience are of significant benefit to the business. The
board has considered the re-appointment of Clive Parritt and recommends his
re-election as a Director.
John Heller has been a Director since 1998 and was appointed Chief Executive in
September 2001. He has a contract of employment determinable upon twelve
months' notice. The board has considered the re-appointment of John Heller and
recommends his re-election as a Director.
Anil Thapar has been Finance Director since January 2015 and is also the
Company Secretary. He has a contract of employment determinable upon three
months' notice. Anil Thapar is a Chartered Certified Accountant and has worked
at LAP since November 2005. The board has considered the re-appointment of Anil
Thapar and recommends his re-election as a Director.
Directors' interests
The interests of the Directors in the ordinary shares of the Company, including
family and trustee holdings, where appropriate, can be found on page 22 of the
Annual Remuneration Report.
Substantial shareholdings
At 31 December 2017, Sir Michael Heller and his family had an interest in 48.08
million shares of the Company, representing 56.35 per cent of the issued share
capital net of treasury shares (2016: 48.08 million shares representing 56.35
per cent). Cavendish Asset Management Limited had an interest in 7,909,464
shares representing 9.27 per cent of the issued share capital of the Company
(2016: 8,173,875 shares representing 9.58 per cent). James Hyslop had an
interest in 4,846,258 shares representing 5.68 per cent of the issued share
capital of the Company (2016: 4,456,258 shares representing 5.22 per cent).
The Company does not consider that the Heller family have a controlling share
interest irrespective of the number of shares held as no individual party holds
a majority and there is no legal obligation for shareholders to act in concert.
The Directors do not consider that any 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 re-elected at least
every three years. The Company has requested authority from shareholders to buy
back its own ordinary shares and there will be a resolution to renew the
authority at this year's AGM (Resolution 12).
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 2017 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 (2016: GBPNil). GBP1,000 of
donations for charitable purposes were made during the year (2016: GBP2,000).
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 retail businesses. The group seeks to provide those
tenants with good quality premises from which they can operate in an efficient
and environmentally efficient manner and waste re-cycling arrangements are in
place at all the company's locations.
Greenhouse gas emissions
Details of the group's greenhouse gas emissions for the year ended 31 December
2017 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 group's activities and
policies concerning the employment, training, health and safety and community
support and social development concerning the group's employees in South
Africa.
Going concern
The directors have reviewed the cash flow forecasts of the Group and the
underlying assumptions on which they are based. The Group's business
activities, together with the factors likely to affect its future development,
are set out in the Chairman's and Chief Executive's Statement and Financial
Review. In addition, Note 23 to the financial statements sets out the Group's
objectives, policies and processes for managing its capital; its financial risk
management objectives; details of its financial instruments and hedging
activities; and its exposure to credit risk and liquidity risk.
With secured long term banking facilities, sound financial resources and long
term leases in place the Directors believe it remains appropriate to adopt the
going concern basis of accounting in preparing the annual financial statements.
The Bisichi directors continue to adopt the going concern basis of accounting
in preparing the Bisichi annual financial statements.
Corporate Governance
The Corporate governance report can be found on pages 17 and 18 of the
annual report and accounts.
Annual General Meeting
The Annual General Meeting will be held at Royal Automobile Club, 89 Pall Mall,
London, SW1Y 5HS on Tuesday 19 June 2018 at 10.00 a.m. Items 1 to 10 and 14
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 11 to 13 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 (other than 14), 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, other than 14, as the Directors intend to do in
respect of their own beneficial holdings of ordinary shares. The Directors do
not consider resolution 14 to be in the best interests of the Company and its
shareholders as a whole. The Directors recommend that shareholders vote against
this resolution.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 10 - Authority to allot securities
Paragraph 10.1.1 of Resolution 10 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 GBP
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 2018
(being the last practicable date prior to the publication of this Directors'
Report).
In line with guidance issued by the Investment Association ('IA'), paragraph
10.1.2 of Resolution 10 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 GBP2,836,478, in
connection with an offer by way of a rights issue. This amount represents
approximately 1/3 (one third) of the ordinary share capital of the Company in
issue (excluding treasury shares) as at 26 April 2018 (being the last
practicable date prior to the publication of this Directors' Report).
The Directors' authority will expire on the earlier of 31 August 2019 or the
next AGM. The Directors do not currently intend to make use of this authority.
However, if they do exercise the authority, the Directors intend to follow best
practice as recommended by the IA regarding its use (including as regards the
Directors standing for re-election in certain cases).
Special resolutions
The following special resolutions will be proposed at the Annual General
Meeting:
Resolution 11 - 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 2019, 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 GBP425,472 representing, in accordance
with institutional investor guidelines, approximately 5 per cent. of the total
ordinary share capital in issue as at 26 April 2018 (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 2019 or the date of next AGM.
Resolution 12 - Purchase of own ordinary shares
The effect of Resolution 12 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 2018 (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 12 will expire at the
conclusion of the Company's next annual general meeting to be held in 2019 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 13 - Notice of General Meetings
Resolution 13 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 2017. The notice
period required by the Companies Act 2006 for general meetings of the Company
is 21 days, unless shareholders approve a shorter notice period, which cannot
however be less than 14 clear days. Annual General Meetings must always be held
on at least 21 clear days' notice. It is intended that the flexibility offered
by this resolution will only be used for time-sensitive, non-routine business
and where merited in the interests of shareholders as a whole. The approval
will be effective until the Company's next Annual General Meeting, when it is
intended that a similar resolution will be proposed.
Other matters
RSM UK Audit LLP has expressed its willingness to continue in office as
auditor. A proposal will be made at the Annual General Meeting for its
reappointment.
By order of the board
Anil Thapar
Secretary
27 April 2018
24 Bruton Place
London
W1J 6NE
GOVERNANCE
Corporate Governance
The Company has adopted the Corporate Governance Code for Small and Mid-Size
Quoted Companies (the QCA Code) published by the Quoted Companies Alliance. The
QCA Code provides governance guidance to small and mid-size quoted companies.
The paragraphs below set out how the Company has applied this guidance during
the year. The Company has complied with the QCA Code throughout the year.
Principles of corporate governance
The board promotes good corporate governance in the areas of risk management
and accountability as a positive contribution to business prosperity. The board
endeavors 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 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 2017
The number of regular meetings during the year and attendance was as follows:
Meetings Meetings
held attended
Sir Michael Heller Board 10 10
Nomination committee 1 1
Remuneration committee 1 1
J A Heller Board 10 10
Audit committee 2 2
A K Thapar Board 10 9
Audit committee 2 2
C A Parritt Board 10 10
Audit committee 2 2
Nomination committee 1 1
Remuneration committee 1 1
H D Goldring Board 10 10
Audit committee 2 2
Nomination committee 1 1
Remuneration committee 1 1
R Priest Board 10 7
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 2017. Up to the date of
approval of this report and the financial statements, the board has not been
required to deal with any related material internal control issues. The
Directors confirm that the board has reviewed the effectiveness of the system
of internal control as described during the period.
Communication with shareholders
Prompt communication with shareholders is given high priority. Extensive
information about the Group and its activities is provided in the Annual
Report. In addition, a half-year report is produced for each financial year and
published on the Company's website. The Company's website www.lap.co.uk is
updated promptly with announcements and Annual Reports upon publication. Copies
from previous years are also available on the website.
The Company's share price is published daily in the Financial Times.
The share price history and market information can be found at http://
www.londonstockexchange.com/prices-and-markets/markets/prices.htm. The company
code is LAS.
There is a regular dialogue with the Company's stockbrokers and institutional
investors. Enquiries from individuals on matters relating to their
shareholdings and the business of the Group are dealt with promptly and
informatively.
The Company's website is under continuous development to enable better
communication with both existing and potential new shareholders.
The Bribery Act 2010
The Company is committed to acting ethically, fairly and with integrity in all
its endeavours and compliance with the code is monitored closely.
GOVERNANCE
Governance Statement by the Chairman of The Remuneration Committee
The remuneration committee is pleased to present its report for the year ended
31 December 2017. The report is presented in two parts in accordance with the
regulations.
The first part is the Annual Remuneration Report which details remuneration
awarded to Directors and non-executive Directors during the year. The
shareholders will be asked to approve the Annual Remuneration Report as an
ordinary resolution (as in previous years) at the AGM in June 2018.
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
27 April 2018
GOVERNANCE
Annual remuneration report
The following information has been audited
Single total figure of remuneration for the year ended 31 December 2017
Salary BONUSES BENEFITS PENSIONS TOTAL SHARE OPTIONS TOTAL
and fees GBP'000 GBP'000 GBP'000 BEFORE GBP'000 2017
GBP'000 SHARE GBP'000
OPTIONS
GBP'000
Executive
Directors
Sir Michael Heller 7 - 49 - 56 n/a 56
*
Sir Michael Heller 75 - - - 75 n/a 75
- Bisichi
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
Single total figure of remuneration for the year ended 31 December 2016
Salary BONUSES BENEFITS PENSIONS TOTAL SHARE TOTAL
and GBP'000 GBP'000 GBP'000 BEFORE OPTIONS 2016
fees SHARE GBP'000 GBP'000
GBP'000 OPTIONS
GBP'000
Executive Directors
Sir Michael Heller* 7 - 43 - 50 n/a 50
Sir Michael Heller - 75 - - - 75 n/a 75
Bisichi
J A Heller 333 166 40 30 569 n/a 569
A K Thapar 152 35 11 15 213 n/a 213
567 201 94 45 907 - 907
Non-executive
Directors
H D Goldring*+ 32 - 5 - 37 n/a 37
C A Parritt*+ 38 - - - 38 n/a 38
R Priest* 51 - - - 51 n/a 51
121 - 5 - 126 - 126
Total 688 201 99 45 1,033 - 1,033
* Note 28 "Related party transactions"
+ Members of the remuneration committee for years ended 31 December 2016 and 31
December 2017
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 GBP75,000 (2016: GBP75,000)
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 GBP300,000 (2016: GBP300,000). Further details of these services are set out
in Note 28 to the financial statements "Related party transactions".
J A Heller is a director of Dragon Retail Properties Limited, (a subsidiary for
IFRS 10 purposes) and received benefits from that company of GBP10,698 (2016: GBP
11,336) for services. This is included in the remuneration figures disclosed
above.
The remuneration figures disclosed for H D Goldring include fees paid to his
company, Delmore Holdings Limited for consultancy services provided to the
Group. This is detailed in Note 28 to the financial statements.
The remuneration figures for C A Parritt include fees paid to his accountancy
practice for consultancy services provided to the Group. This is detailed in
Note 28 to the financial statements.
R Priest provides consultancy services to the Group. This is detailed in Note
28 to the financial statements.
Summary of directors' terms
Date of contract Unexpired term Notice period
Executive Directors
Sir Michael Heller 1 January 1971 Continuous 6 months
John Heller 1 May 2003 Continuous 12 months
Anil Thapar 1 January 2015 Continuous 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
Two directors had benefits under money purchase schemes. Under their contracts
of employment, they were entitled to a regular employer contribution (currently
GBP17,000 and GBP10,000 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 GBP3,000 each year, (2) partnership shares, under which members may save
up to GBP1,500 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 2017 bonuses or for 2016
bonuses.
2. Partnership shares: No partnership shares were issued between November 2016
and October 2017.
3. Matching shares: The partnership share agreements for the year to 31 October
2017 provide for two matching shares to be awarded free of charge for each
partnership share acquired. No partnership shares were acquired in 2017 (2016:
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 2017 amounted to GBPNil (2016: GBP602).
Dividend shares issued:
Number of members Number of shares Value of shares
2017 2016 2017 2016 2017 2016
GBP GBP
Directors: - 1 - 402 - 85
J A
Heller
A K - 1 - 495 - 105
Thapar
Staff - 6 - 1,934 - 412
Total at 31 December - 8 - 2,831 - 602
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 2017.
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 2017 there were no options to subscribe for ordinary shares
outstanding. The exercise of options under the Unapproved Scheme is subject to
the satisfaction of objective performance conditions specified by the
remuneration committee which conforms to institutional shareholder guidelines
and best practice provisions. Further details of this scheme are set out in
Note 26 "Share Capital" to the financial statements.
Payments to past directors
No payments were made to past Directors in the year ended 31 December 2017.
Payments for loss of office
No payments for loss of office were made in the year ended 31 December 2017.
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 17 1 Jan 17 31 Dec 17 1 Jan 17
Sir Michael Heller 5,753,541 6,053,541 19,277,931 19,277,931
H D Goldring 19,819 19,819 - -
J A Heller 1,867,393 1,867,393 ?14,073,485 ?14,073,485
C A Parritt 36,168 36,168 - -
R Priest - - - -
A K Thapar 120,495 120,495 - -
?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 2017 was 24.50p (2016: 21p). During the year the share middle
market price ranged between 18.25p and 24.50p.
Total Shareholder Return
Remuneration of the Chief Executive over the last ten years
Year CEO Chief Executive Annual bonus payment Long-term incentive vesting
Single against maximum rates
total figure of opportunity* against maximum opportunity
remuneration % *
GBP'000 %
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 2016
and 2017 group. The remuneration committee chose head office based employees as
the comparator group as this group forms the closest comparator group.
Chief Executive Head Office Employees
GBP'000 GBP'000
2017 2016 % change 2017 2016 % change
Base salary and allowances 333 333 0% 643 692 (7.1%)
Taxable benefits 37 40 (7.5%) 81 77 5.2%
Annual bonus 100 166 (39.75%) 80 97 (17.5%)
Total 470 539 (12.8%) 804 866 (7.2%)
Relative importance of spend on pay
The total expenditure of the Group on remuneration to all employees (Note 29
refers) is shown below:
2017 2016
GBP'000 GBP'000
Employee Remuneration 8,113 7,173
Distributions to shareholders 141 136
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
forthcoming AGM.
Consideration by the directors of matters relating to directors' remuneration
The Remuneration Committee considered the executive Directors' remuneration and
the board considered the non-executive Directors' remuneration in the year
ended 31 December 2017. No increases were awarded and no external advice was
taken in reaching this decision.
Shareholder voting
At the Annual General Meeting on 6 June 2017, 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 % of Number of
votes votes votes
for against withheld
Resolution to approve the Remuneration Report 83.16 0.18 9,765,315
Resolution to approve the Remuneration Policy 83.14 16.69 89,602
GOVERNANCE
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 To recognise: Considered by Reviewed annually There is no prescribed
salary Skills remuneration whenever there is a maximum salary or maximum
Responsibility committee on change rate of increase
Accountability appointment of role or operational No individual director
Experience Set at a level responsibility will be awarded a base
Value considered Paid monthly in cash salary in excess of GBP
appropriate to 700,000 a year
attract, retain, No specific performance
motivate and reward conditions are attached to
the right base salaries
individuals
Pension To provide Company The contribution Company contribution
competitive contribution payable by the Company offered at up to 10% of
retirement offered at up to is included in the base salary as part of
benefits 10% of base salary director's contract of overall remuneration
as part of overall employment package
remuneration Paid into money No specific performance
package purchase schemes conditions are attached to
pension contributions
Benefits To provide a Contractual The committee retains The costs associated with
competitive benefits include: the discretion to benefits offered are
benefits Car or car approve changes in closely controlled and
package allowance contractual benefits reviewed on an annual
Group health cover in exceptional basis
Death in service circumstances or where No director will receive
cover factors outside the benefits of a value in
Permanent health control of the Group excess of 30% of their
insurance lead to increased base salary
costs No specific performance
(e.g. medical conditions are attached to
inflation) contractual benefits
Annual To reward and In assessing the The remuneration The current maximum bonus
bonus incentivise performance of the committee determines will not exceed 200% of
executive team, and the level of bonus on base salary in any one
in particular to an annual basis year but the remuneration
determine whether In assessing committee reserves the
bonuses are merited performance power to award up to 300%
the remuneration consideration is given in an exceptional year
committee takes to the level of net Performance conditions
into account the rental income, cash will be assessed on an
overall performance flow, voids, realised annual basis
of the business, as development gains and The performance measures
well as income from managing applied may be financial,
individual joint ventures. non-financial, corporate,
contribution to the Achieved results are divisional or individual
business in the then compared with and in such proportion as
period expectation taking the remuneration committee
account of market considers appropriate
conditions
Bonuses are generally
offered in cash or
shares
Share To provide Share options may Offered at appropriate Entitlements to share
options executive be granted under times by the options granted under the
directors with existing schemes remuneration committee Approved Option scheme are
a long-term (see page 21) not subject to performance
interest in Where it is criteria. Share Options
the company necessary to granted under the
attract, retain, Unapproved Scheme are
motivate and reward subject to the performance
the right criteria specified in the
individuals, the Scheme rules
directors may The aggregate number of
establish new shares over which options
schemes to replace may be granted under all
any expired schemes 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 To offer a Offered to Maximum participation Of any bonus awarded,
incentive shorter term executive directors levels are set by HMRC Directors may opt to have
plan incentive in and head office maximum of GBP3,000 per year
(SIP) the company staff paid in 'Free Shares'
and to give under the SIP scheme rules
directors a
stake
in the group
Non-executive directors
Base To recognise: Considered by the Reviewed annually No individual
salary Skills board on non-executive director
Responsibility appointment will be awarded a base
Experience Set at a level salary in excess of GBP
Risk considered 40,000 a year
Value appropriate to No performance conditions
attract, retain and are attached to base
motivate the salaries
individual
Experience and time
required for the
role are considered
on appointment
Pension No pension offered
Benefits No benefits offered The committee retains The costs associated with
except to one the discretion to benefits offered are
non-executive approve changes in closely controlled and
director who is contractual benefits reviewed on an annual
eligible for health in exceptional basis
cover (see annual circumstances or where No non-executive director
remuneration report factors outside the will receive benefits in
page 20) control of the Group excess of GBP10,000 a year
lead to increased No specific performance
costs (e.g. medical conditions are attached to
inflation) contractual benefits
Share Non-executive
options 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.
GOVERNANCE
Audit committee report
The committee's terms of reference have been approved by the board and follow
published guidelines, which are available on request from the company
secretary.
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 GBP0.8 million in relation to the consolidated balance sheet and GBP
0.3 million for underlying profitability and 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
27 April 2018
GOVERNANCE
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 in the United Kingdom governing the preparation and dissemination
of financial statements may differ from legislation in other jurisdictions.
GOVERNANCE
Independent auditor's report
TO THE MEMBERS OF LONDON & ASSOCIATED PROPERTIES PLC
Opinion
We have audited the financial statements of London & Associated Properties PLC
("the parent company") and its subsidiaries ("the group") for the year ended 31
December 2017 which comprise the consolidated income statement, the
consolidated statement of comprehensive income, the consolidated balance sheet,
the consolidated statement of changes in equity, the consolidated cash flow
statement, the parent company balance sheet, the parent 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 2017 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 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 financial statements
as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
Valuation of investment properties
The group's properties are accounted for in the financial statements as
investment properties under IAS 40 and held at fair value. The investment
properties are valued by two firms of external third party valuers and these
valuations are adopted in the financial statements. At 31 December 2017
investment property valued at GBP78.0m (Note 10) was disclosed within non-current
assets in the financial statements. Separately, property valued at GBP36.4m (Note
14) was disclosed as assets held for sale, within current assets.
The directors' assessment of the fair value of investment 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 valuation is 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 10.
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 except GBP1.8m of the
value of investment properties, which were subject to internal valuation;
* agreeing the carrying value (sales price less costs to sell) of the Brixton
Village and Market Row properties, included as assets held for sale, to the
agreement for sale, and the costs to invoices;
* 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; and
* challenging and discussing the assumptions used with the valuers, both
external and internal, and comparing the key inputs to the valuation to
underlying records of the leases and records of rents received and against our
knowledge of market yields.
Our findings
The carrying values of the investment properties are consistent with the
valuation reports provided and, in the case of assets held for sale, with the
agreed selling price less direct costs to sell.
Accuracy of life of mine estimates
The mining assets amounted to GBP8.5m as at 31 December 2017 (2016: GBP8.4m) and
relate to the South African mining operations. These assets represent a
significant part of the Bisichi group's balance sheet (see Note 11).
Bisichi's management performed an impairment assessment based on the Bisichi
Board's approved Life of Mine plan at 31 December 2017 as detailed in the key
judgements and estimates Note on page 37.
The assessment by Bisichi management of inputs to the Life of Mine plan
requires significant judgment and estimate, including determination of forecast
coal prices, production, coal reserves and costs. These factors caused this
area to be a significant focus for our audit.
Management's discounted cash flow impairment assessment, including the
underlying Life of Mine plan, was evaluated. In doing so, key inputs to the
model including forecast coal prices, exchange rates, production, costs and the
discount rate were critically assessed. This included assessment compared to
empirical data and trends, pricing information and market data.
In respect of the coal reserves included in the model, the independent
Competent Person's Report was reviewed and discussions were held with the
Competent Person. In relying on the Competent Person their independence and
competence was assessed.
Sensitivity analysis was performed on the impairment model in respect of
factors such as pricing, costs, yields, exchange rates and the discount rate.
The disclosures in the key judgements and estimates note were evaluated based
on the audit procedures.
Our findings
The work on the impairment test found Bisichi management's conclusion that no
impairment exists to be appropriate. The key assumptions were found to be
balanced and appropriately considered by Bisichi management and the disclosures
in the key judgements and estimates note to be sufficient.
Impairment of Ezimbokodweni
As at 31 December 2016 the group's net investment in Ezimbokedweni Mining (Pty)
Limited ("Ezimbokedweni"), an equity accounted joint venture, was GBP1.8m (Notes
12 and 13). The carrying value was dependent upon the ultimate completion of a
sale and purchase agreement to acquire the Pegasus coal project in South
Africa, under which a deposit had been paid by Ezimbokedweni.
During the year the joint venture was placed into Business Rescue under the
South African Companies Act by the joint venture partner. The original deposit
has been returned to Ezimbokodweni and as a result, the Bisichi Board considers
there to be no reasonable prospect of the Pegasus coal project transaction
completing.
Further to these developments, the Bisichi Board performed an impairment review
of the carrying value of the net investment in Ezimbokodweni and recorded an
impairment of the net investment of GBP1.8m, with any further movements since 31
December 2016 reflecting foreign exchange differences.
The assessment of the carrying value, subsequent impairment and associated
disclosure represented a significant focus for our audit.
Additionally, the tax treatment of this transaction was considered to be an
area of risk of material misstatement. This was also considered to be an area
requiring specialist knowledge and expertise.
Specific inquiries were made of Bisichi's management and Board to gain an
understanding of the fact pattern and events during the year regarding
Ezimbokedweni.
Minutes of Bisichi Board meetings, legal documents and correspondence relating
to the joint venture, the Business Rescue and assessments of the resulting
financial position and interests of the joint venture were reviewed.
The Bisichi Board's conclusion that the net investment is impaired based on the
facts and circumstances, including assessment of the probability of value being
recovered from the joint venture was assessed.
The tax treatment of the transaction applied by Bisichi management was assessed
in conjunction with specialists.
The accounting entries in respect of the impairment as well as the disclosures
in Note 12 and the key judgements and estimates note were assessed.
Our findings
The judgements made by Bisichi management relating to the impairment recorded
by the group are considered to be appropriate based on the developments during
the year. The disclosures at Note 12 and the key judgements and estimates note
are also considered to be acceptable.
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 and
to evaluate the effects of misstatements, both individually and on the
financial statements as a whole.
During planning we determined a magnitude of uncorrected misstatements that we
judge would be material for the financial statements as a whole (FSM). During
planning FSM was calculated
as GBP1.1m, which was not changed during the course of our audit.
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.
During planning, we determined materiality in respect of these components at:
* for the London & Associated Properties PLC property investment sub group
balance sheet, GBP0.8 million and to underlying profitability GBP0.3 million; and
* for the Bisichi Mining PLC coal mining and property investment sub group, GBP
0.3 million.
We agreed with the audit committee that we would report to them all unadjusted
differences in excess of GBP15,000 for both components of the group. We also
agreed to report other differences below that threshold which, in our view,
warranted reporting for other reasons.
An overview of the scope of our audit
The audit was scoped to support our audit opinion on the company and group
financial statements of London & Associated Properties PLC and was based on
group materiality and an assessment of risk at group level. We planned our 2017
audit on the understanding that the activities of the group had changed very
little from the previous year, and that there had been no changes in the
valuation methodologies to be applied, or the accounting standards applicable
to the group and company's financial statements.
The group comprises 27 trading, or active holding, companies and 12 dormant
companies. Full scope audits, using component materiality, were performed on 24
of the active entities with the other three entities subjected to desktop
review. Six of the full scope audits and the three 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, the audited part of the directors'
remuneration report 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 the 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 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 31 years, covering the years
ending 31 December 1987 to 2017.
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 under ISRS 4400 were
completed in respect of a number of the group's service charge account, and in
respect of two deeds of release relating to two debentures.
Our audit opinion is consistent with the additional report to the audit
committee.
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
27 April 2018
London & Associated Properties PLC
Report and accounts 2017
Financial statements
Consolidated Income Statement
for the year ended 31 December 2017
Notes 2017 2016
GBP'000 GBP'000
Group revenue 1 44,979 29,704
Operating costs (37,428) (26,860)
Gain on disposal of other investments 3 -
Income from listed investments held for trading 3 - 2
Operating profit 7,554 2,846
Finance income 5 105 144
Finance expenses 5 (4,268) (4,292)
Debenture break cost 23 (14) -
Result before revaluation and other movements 3,377 (1,302)
Non-cash changes in valuation of assets and liabilities and
other movements
Increase in value of investment properties 10 9,373 532
Write off investment in joint venture 12, 13 (1,827) -
Increase in trading investments - 1
Increase in value of other investments - 12
Adjustment to interest rate derivative 23 355 (217)
Profit/(loss) for the year before taxation 2 11,278 (974)
Income tax charge 6 (2,982) (1,175)
Profit/(loss) for the year 8,296 (2,149)
Attributable to:
Equity holders of the Company 7,686 (2,357)
Non-controlling interest 27 610 208
Profit/(loss) for the year 8,296 (2,149)
Earnings per share
Profit/(loss) per share - basic and diluted 9 9.01p (2.77)p
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2017
2017 2016
GBP'000 GBP'000
Profit/(loss) for the year 8,296 (2,149)
Other comprehensive income/(expense):
Items that may be subsequently recycled to the income statement:
Exchange differences on translation of Bisichi Mining PLC 91 1,106
foreign operations
Transfer of gain on available for sale investments 103 193
Taxation (20) (13)
Other comprehensive income for the year net of tax 174 1,286
Total comprehensive income/(expense) for the year net of tax 8,470 (863)
Attributable to:
Equity shareholders 7,753 (1,864)
Non-controlling interest 717 1,001
8,470 (863)
Consolidated Balance Sheet
at 31 December 2017
Notes 2017 2016
GBP'000 GBP'000
Non-current assets
Market value of properties attributable to Group 10 78,025 105,080
Present value of head leases 31 3,233 4,767
Property 81,258 109,847
Mining reserves, plant and equipment 11 8,735 8,653
Investments in joint ventures 12 - 455
Loan to joint venture 13 - 1,350
Held to maturity investments 17 1,748 1,874
Other investments 17 51 32
Deferred tax 24 - 1,134
91,792 123,345
Current assets
Inventories 16 828 1,721
Assets held for sale 14 36,441 -
Trade and other receivables 18 7,132 7,061
Interest rate derivatives 23 1 4
Corporation tax recoverable - 32
Available for sale investments 19 1,050 781
Investments held for trading 19 19 19
Cash and cash equivalents 7,528 6,265
52,999 15,883
Total assets 144,791 139,228
Current liabilities
Trade and other payables 20 (12,909) (12,942)
Borrowings 21 (4,288) (4,108)
Current tax liabilities (358) (21)
(17,555) (17,071)
Non-current liabilities
Borrowings 21 (61,661) (64,401)
Interest rate derivatives 23 (435) (793)
Present value of head leases on properties 31 (3,233) (4,767)
Provisions 22 (1,349) (1,236)
Deferred tax liabilities 25 (3,848) (2,329)
(70,526) (73,526)
Total liabilities (88,081) (90,597)
Net assets 56,710 48,631
Consolidated Balance Sheet
at 31 December 2017
Notes 2017 2016
GBP'000 GBP'000
Equity attributable to the owners of the parent
Share capital 26 8,554 8,554
Share premium account 4,866 4,866
Translation reserve (Bisichi Mining PLC) (695) (728)
Capital redemption reserve 47 47
Retained earnings (excluding treasury shares) 33,227 25,648
Treasury shares 26 (145) (145)
Retained earnings 33,082 25,503
Total equity attributable to equity shareholders 45,854 38,242
Non-controlling interest 27 10,856 10,389
Total equity 56,710 48,631
Net assets per share 9 53.74p 44.83p
Diluted net assets per share 9 53.74p 44.83p
These financial statements were approved by the board of directors and
authorised for issue on 27 April 2018 and signed on its behalf by:
Sir Michael Heller Anil Thapar
Company Registration No. 341829
Director
Director
Consolidated Statement of Changes in Shareholders' Equity
for the year ended 31 December 2017
Share Share Translation Capital Treasury Retained Total Non- Total
capital premium reserves redemption shares earnings excluding controlling equity
GBP'000 GBP'000 GBP'000 reserve GBP'000 excluding Non- Interests GBP'000
GBP'000 treasury Controlling GBP'000
shares Interests
GBP'000 GBP'000
Balance at 1 8,554 4,866 (1,145) 47 (482) 28,238 40,078 9,574 49,652
January 2016
Loss for year - - - - - (2,357) (2,357) 208 (2,149)
Other
comprehensive
expense:
Currency - - 417 - - - 417 689 1,106
translation
Gain on - - - - - 76 76 104 180
available for
sale investments
(net of tax)
Total other - - 417 - - 76 493 793 1,286
comprehensive
expense
Total - - 417 - - (2,281) (1,864) 1,001 (863)
comprehensive
expense
Transactions
with owners:
Share options - - - - - 45 45 64 109
charge
Dividends - - - - - - (136) (136) - (136)
equity holders
Dividends - - - - - - - - (250) (250)
non-controlling
interests
Disposal of own - - - - 119 - 119 - 119
shares
Loss on transfer - - - - 218 (218) - - -
of own shares
Transactions - - - - 337 (309) 28 (186) (158)
with owners
Balance at 31 8,554 4,866 (728) 47 (145) 25,648 38,242 10,389 48,631
December 2016
Profit for year - - - - - 7,686 7,686 610 8,296
Other
comprehensive
income:
Currency - - 33 - - - 33 58 91
translation
Gain on - - - - - 34 34 49 83
available for
sale investments
(net of tax)
Total other - - 33 - - 34 67 107 174
comprehensive
income
Total - - 33 - - 7,720 7,753 717 8,470
comprehensive
income/
(expense)
Transactions
with owners:
Dividends - - - - - - (141) (141) - (141)
equity holders
Dividends - - - - - - - - (250) (250)
non-controlling
interests
Transactions - - - - - (141) (141) (250) (391)
with owners
Balance at 31 8,554 4,866 (695) 47 (145) 33,227 45,854 10,856 56,710
December 2017
Consolidated Cash Flow Statement
for the year ended 31 December 2017
2017 2016
GBP'000 GBP'000
Operating activities
Profit/(loss) for the year before taxation 11,278 (974)
Finance income (105) (144)
Finance expense 4,268 4,292
Debenture break cost 14 -
Realised gain on disposal of other investments (3) -
Decrease in value of investment properties (9,373) (532)
Write off investment in joint venture 1,827 -
Increase in trading investments - (1)
Increase in value of other investments - (12)
Adjustment to interest rate derivative (355) 217
Depreciation 1,804 1,818
Profit on disposal of non-current assets (3) (32)
Share based payment expense - 109
Gain on investment held for trading - 4
Exchange adjustments 258 (449)
Change in inventories 896 (258)
Change in receivables 196 468
Change in payables (415) 1,080
Cash generated from operations 10,287 5,586
Income tax paid (14) (57)
Cash inflows from operating activities 10,273 5,529
Investing activities
Disposal of shares and loans held to maturity - 121
Disposal of assets held for sale (56) 2,275
Share of profit in joint ventures (assets held for sale) - 60
Acquisition of investment properties, mining reserves, plant and (1,771) (3,022)
equipment
Sale of plant and equipment 29 32
Residual receipt from Windsor Shopping Centre disposal - 414
Interest received 137 133
Cash (outflows)/inflows from investing activities (1,661) 13
Financing activities
Sale of treasury shares - 119
Interest paid (3,963) (3,943)
Interest obligation under finance leases (178) (216)
Debenture stock break costs paid (14) -
Receipt of bank loan - Bisichi Mining PLC 23 37
Repayment of bank loan - Bisichi Mining PLC (25) (131)
Short term loan from joint ventures and related parties (30) -
Repayment of debenture stocks (750) -
Equity dividends paid (141) (136)
Equity dividends paid - non-controlling interests (250) (250)
Cash outflows from financing activities (5,328) (4,520)
Net increase in cash and cash equivalents 3,284 1,022
Cash and cash equivalents at beginning of year 2,931 2,575
Exchange adjustment 51 (666)
Cash and cash equivalents at end of year 6,266 2,931
The cash flows above relate to continuing and discontinued operations. See note
7 for information on discontinued operations.
Cash and cash equivalents
For the purpose of the cash flow statement, cash and cash equivalents comprise
the following balance sheet amounts:
2017 2016
GBP'000 GBP'000
Cash and cash equivalents (before bank overdrafts) 7,528 6,265
Bank overdrafts (1,262) (3,334)
Cash and cash equivalents at end of year 6,266 2,931
GBP120,000 of cash deposits at 31 December 2017 were charged as security to
debenture stocks.
financial statements
group accounting policies
The following are the principal Group accounting policies:
Basis of accounting
The Group financial statements are prepared in accordance with International
Financial Reporting Standards (IFRS), as adopted by the European Union and with
those parts of the Companies Act 2006 applicable to companies reporting under
IFRS.
The Company has elected to prepare the parent company's financial statements in
accordance with Financial Reporting Standard 101 'Reduced Disclosure Framework'
(FRS 101) and Companies Act 2006 and these are presented in note 33. The
financial statements are prepared under the historical cost convention, except
for the revaluation of freehold and leasehold properties and financial assets
held for trading as well as fair value of interest derivatives.
The Group financial statements are presented in Pounds Sterling and all values
are rounded to the nearest thousand pounds (GBP'000) except when otherwise
stated.
The functional currency for each entity in the Group, and for joint
arrangements, is the currency of the country in which the entity has been
incorporated. Details of the country in which each entity has been incorporated
can be found in note 15 for subsidiaries and note 12 for joint ventures.
The exchange rates used in the accounts were as follows:
GBP1 Sterling: GBP1 Sterling:
Rand Dollar
2017 2016 2017 2016
Year-end rate 16.6686 16.9472 1.35028 1.23321
Annual average 17.1540 19.9269 1.29174 1.35477
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.
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 23 to the financial statements sets out the Group's
objectives, policies and processes for managing its capital; its financial risk
management objectives; details of its financial instruments and hedging
activities; and its exposure to credit risk and liquidity risk.
The directors believe that the LAP Group has adequate resources to continue in
operational existence for the foreseeable future and that the LAP Group is well
placed to manage its business risks. Thus they continue to adopt the going
concern basis of accounting in preparing the annual financial statements.
The Bisichi directors continue to adopt the going concern basis of accounting
in preparing the Bisichi annual financial statements.
International Accounting Standards (IAS/IFRS)
The 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 2017. An amendment to IAS 7 "Statement of Cash Flows: Disclosure
Initiative", which is mandatory for 2017, requires entities to provide
disclosures about changes in liabilities arising from financing activities,
including changes from financing cash flows and non-cash changes (such as
foreign exchange gains or losses). This amendment has been endorsed by the EU.
The adoption of this amendment and other new and revised Standards and
Interpretations had no material effect on the profit or loss or financial
position of the Group.
The Group has not adopted any Standards or Interpretations in advance of the
required implementation dates.
IFRS 15 'Revenue from Contracts with Customers' was issued by the IASB in May
2014. It is effective for accounting periods beginning on or after 1 January
2018. The new standard will replace existing accounting standards, and provides
enhanced detail on the principle of recognising revenue to reflect the transfer
of goods and services to customers at a value which the company expects to be
entitled to receive. The standard also updates revenue disclosure requirements.
The standard was endorsed by the EU on 22 September 2017. The Directors are
continuing to assess the impact of IFRS 15 on the results of the Group. Whilst
management do not envisage a material impact, the impact of adopting this
standard cannot be reliably estimated until the transition review is complete.
IFRS 9 was published in July 2014 and will be effective for the Group from 1
January 2018. The standard was endorsed by the EU on 22 November 2017. It is
applicable to financial assets and financial liabilities, and covers the
classification, measurement, impairment and de-recognition of financial assets
and financial liabilities together with a new hedge accounting model. IFRS 9
also introduces the expected credit loss model for impairment of financial
assets. Application of the IFRS 9 impairment model is expected to have minimal
impact given the Group's credit risk management policies. The Directors are
continuing to assess the impact on the results of the Group and will complete
the assessment during H1 2018.
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 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 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.
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 11.
Provision for mining rehabilitation including restoration and de-commissioning
costs
A provision for future rehabilitation including restoration and decommissioning
costs requires estimates and assumptions to be made around the relevant
regulatory framework, the timing, extent and costs of the rehabilitation
activities and of the risk free rates used to determine the present value of
the future cash outflows. The provisions, including the estimates and
assumptions contained therein, are reviewed regularly by management. The Group
engages an independent expert to assess the cost of restoration and
decommissioning annually as part of management's assessment of the provision.
Details of the provision for mining rehabilitation can be found in note 22.
Mining impairment
Property, plant and equipment representing the Group's mining assets in South
Africa are reviewed for impairment 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 11.
The impairment test indicated significant headroom as at 31 December 2017 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 9% reduction in average forecast coal prices or a 9%
reduction in yield would give rise to a breakeven scenario. However, the
Bisichi directors consider the forecasted yield levels and pricing to be
achievable.
EZIMBOKODWENI JOINT VENTURE
During the year the Group wrote off its GBP1.8million (2016: GBP1.8million)
investment in Ezimbokodweni Mining (Pty) Limited ("Ezimbokodweni") made up of a
GBP1.35million loan (2016: GBP1.35million) and a GBP0.45million (2016: GBP0.45million)
joint venture investment.
The carrying value of the investment was dependent upon the completion of the
acquisition of the Pegasus coal project ("the project") in South Africa.
Although a proposed sale and purchase agreement had been negotiated and a
deposit paid for the project, the conclusion of the transaction had been
delayed pending the commercial transfer of the prospecting right from the
current owners of the project to Ezimbokodweni. Although the Group has always
remained committed to completing the transaction, previous negotiations to
complete the commercial acquisition of the project had been beset by various
delays outside of its control and at the beginning of 2017, the current owners
of the project notified Ezimbokodweni that they no longer wished to divest the
project. More recently, the Group was notified that an agreement was reached
between the current owners of the project and the directors of Ezimbokodweni
for the deposit for the project to be returned and any further negotiations
with Ezimbokodweni to acquire the project to be terminated.
Although, a legal claim by the Group has been issued against Ezimbokodweni and
its representatives, in order for the Group to recover some of the investment,
the Bisichi Board has exercised its judgement and decided that it is
appropriate and prudent to write off the investment in full at this time.
DEFERRED TAX
The calculation of deferred tax involves the exercise of judgement in relation
to the amount of income and gains which will be realised in future to support
the recognition of a deferred tax asset in respect of unrelieved losses.
INTEREST RATE HEDGES
All interest rate hedges are held at fair value as valued by the hedge
provider.
Further detail is provided in notes 21 and 23.
Basis of consolidation
The Group accounts incorporate the accounts of 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 15.
The directors are required to consider the implications of IFRS 10 on the LAP
investment in Bisichi Mining PLC ("Bisichi"). Related parties also have
shareholdings in Bisichi. When combined with the 42% held by LAP and, taking
account of the wide disposition of other shareholders, there is potential for
LAP and these related parties to exercise voting control over Bisichi. IFRS 10
makes it clear that possible voting control is of more significance than actual
management control.
For this reason the directors have concluded that there is a requirement to
consolidate Bisichi with LAP. While, in theory, they could achieve control, in
practice they do not get involved in the day to day operations of Bisichi. The
directors have presented consolidated accounts using the published accounts of
Bisichi but it is important to note that any figures, risks and assumptions
attributable to that company are the responsibility of the Bisichi Board of
directors who are independent from LAP.
As a result of treating Bisichi as a subsidiary, Dragon Retail Properties
Limited is also a subsidiary for accounting purposes, as LAP and Bisichi each
own 50% of that joint venture business.
Joint ventures
Investments in joint ventures, being those entities over whose activities the
Group has joint control, as established by contractual agreement, include the
appropriate share of the results and net assets of those undertakings.
Loans to joint ventures are classified as non-current assets when they are not
expected to be received in the normal working capital cycle.
Goodwill
Goodwill arising on acquisition is recognised as an intangible asset and
initially measured at cost, being the excess of the cost of the acquired entity
over the Group's interest in the fair value of the assets and liabilities
acquired. Goodwill is carried at cost less accumulated impairment losses.
Goodwill arising from the difference in the calculation of deferred tax for
accounting purposes and fair value in negotiations is judged not to be an asset
and is accordingly impaired on completion of the relevant acquisition.
Revenue
Revenue comprises sales of coal, property rental income and property management
fees.
Rental income
Rental income arises from operating leases granted to tenants. An operating
lease is a lease other than a finance lease. A finance lease is one whereby
substantially all the risks and rewards of ownership are passed to the lessee.
Rental income is recognised in the Group income statement on a straight-line
basis over the term of the lease. This includes the effect of lease incentives
to tenants, which are normally in the form of rent free periods. Contingent
rents, being the difference between the rent currently receivable and the
minimum lease payments, are recognised in property income in the periods in
which they are receivable. Rent reviews are recognised when such reviews have
been agreed with tenants.
Reverse surrender premiums
Payments received from tenants to surrender their lease obligations are
recognised immediately in the income statement.
Dilapidations
Dilapidations monies received from tenants in respect of their lease
obligations are recognised immediately in the income statement.
Other revenue
Revenue in respect of listed investments held for trading represents investment
dividends received and profit or loss recognised on realisation. Dividends are
recognised in the income statement when the dividend is received.
Property operating expenses
Operating expenses are expensed as incurred and any property operating
expenditure not recovered from tenants through service charges is charged to
the income statement.
Employee benefits
Share based remuneration
The Company operates a long-term incentive plan and two share option schemes.
The fair value of the conditional awards on shares granted under the long-term
incentive plan and the options granted under the share option scheme is
determined at the date of grant. This fair value is then expensed on a
straight-line basis over the vesting period, based on an estimate of the number
of shares that will eventually vest. At each reporting date, the fair value of
the non-market based performance criteria of the long-term incentive plan is
recalculated and the expense is revised. In respect of the share option scheme,
the fair value of options granted is calculated using a binomial method.
Pensions
The Company operates a defined contribution pension scheme. The contributions
payable to the scheme are expensed in the period to which they relate.
Foreign currencies
Monetary assets and liabilities are translated at year end exchange rates and
the resulting exchange rate differences are included in the consolidated income
statement within the results of operating activities if arising from trading
activities, including inter-company trading balances and within finance cost /
income if arising from financing.
For consolidation purposes, income and expense items are included in the
consolidated income statement at average rates, and assets and liabilities are
translated at year end exchange rates. Translation differences arising on
consolidation are recognised in other comprehensive income. Foreign exchange
differences on intercompany loans are recorded in other comprehensive income
when the loans are not considered trading balances and are not expected to be
repaid in the foreseeable future. Where foreign operations are sold or closed,
the cumulative exchange differences attributable to that foreign operation are
recognised in the consolidated income statement when the gain or loss on
disposal is recognised.
Transactions in foreign currencies are translated at the exchange rate ruling
on transaction date.
Financial instruments
Investments
Held to maturity investments are stated at amortised cost using the effective
interest rate method.
Investments held for trading are included in current assets at fair value. For
listed investments, fair value is the bid market listed value at the balance
sheet date. Realised and unrealised gains or losses arising from changes in
fair value are included in the income statement of the period in which they
arise.
Trade and other receivables
Trade and other receivables are recognised initially at fair value. A provision
for impairment of trade receivables is made when there is evidence that the
Group will not be able to collect all amounts due. Trade receivables do not
carry any interest, as any interest that would be recognised from discounting
future cash payments over the short period is not considered to be material.
Trade and other payables
Trade and other payables are non-interest bearing and are stated at their
nominal value, as the interest that would be recognised from discounting future
cash payments over the short payment period is not considered to be material.
Bank loans and overdrafts
Bank loans and overdrafts are included as financial liabilities on the Group
balance sheet net of the unamortised discount and costs of issue. The cost of
issue is recognised in the Group income Statement over the life of the bank
loan. Interest payable on those facilities is expensed as a finance cost in the
period to which it relates.
Debenture loans
The debenture loans are included as a financial liability on the balance sheet
net of the unamortised costs on issue. The cost of issue is recognised in the
Group income statement over the life of the debenture. Interest payable to
debenture holders is expensed in the period to which it relates.
Finance lease liabilities
Finance lease liabilities arise for those investment properties held under a
leasehold interest and accounted for as investment property. The liability is
calculated as the present value of the minimum lease payments, reducing in
subsequent reporting periods by the apportionment of payments to the lessor.
Lease payments are allocated between the liability and finance charges so as to
achieve a constant financing rate. Contingent rents payable, such as rent
reviews or those related to rental income, are charged as an expense in the
period in which they are incurred.
Interest rate derivatives
The Group uses derivative financial instruments to hedge the interest rate risk
associated with the financing of the Group's business. No trading in such
financial instruments is undertaken. At each reporting date, these interest
rate derivatives are recognised at their fair value to the business, being the
Net Present Value of the difference between the hedged rate of interest and the
market rate of interest for the remaining period of the hedge.
Ordinary shares
Shares are classified as equity when there is no obligation to transfer cash or
other assets. Incremental costs directly attributable to the issue of new
shares are shown in equity as a deduction, net of tax, from the proceeds.
Treasury shares
When the Group's own equity instruments are repurchased, consideration paid is
deducted from equity as treasury shares until they are cancelled. When such
shares are subsequently sold or reissued, any consideration received is
included in equity.
Investment properties
Valuation
Investment properties are those that are held either to earn rental income or
for capital appreciation or both, including those that are undergoing
redevelopment. They are reported on the Group balance sheet at fair value,
being the amount for which an investment property could be exchanged between
knowledgeable and willing parties in an arm's length transaction. The
directors' property valuation is at fair value.
The external valuation of properties is undertaken by independent valuers who
hold recognised and relevant professional qualifications and have recent
experience in the locations and categories of properties being valued.
Surpluses or deficits resulting from changes in the fair value of investment
property are reported in the Group income statement in the period in which they
arise.
Capital expenditure
Investment properties are measured initially at cost, including related
transaction costs. Additions to capital expenditure, being costs of a capital
nature, directly attributable to the redevelopment or refurbishment of an
investment property, up to the point of it being completed for its intended
use, are capitalised in the carrying value of that property. The redevelopment
of an existing investment property will remain an investment property measured
at fair value and is not reclassified. Capitalised interest is calculated with
reference to the actual rate payable on borrowings for development purposes, or
for that part of the development costs financed out of borrowings the
capitalised interest is calculated on the basis of the average rate of interest
paid on the relevant debt outstanding.
Disposal
The disposal of investment properties is recorded on completion of the
contract. On disposal, any gain or loss is calculated as the difference between
the net disposal proceeds and the valuation at the last year end plus
subsequent capitalised expenditure in the period.
Depreciation and amortisation
In applying the fair value model to the measurement of investment properties,
depreciation and amortisation are not provided in respect of investment
properties.
Other assets and depreciation
The cost, less estimated residual value, of other property, plant and equipment
is written off on a straight-line basis over the asset's expected useful life.
Residual values and useful lives are reviewed, and adjusted if appropriate, at
each balance sheet date. Changes to the estimated residual values or useful
lives are accounted for prospectively. The depreciation rates generally
applied are:
Motor vehicles 25-33 per cent per annum
Office equipment 10-33 per cent per annum
Assets held for sale
Non-current assets, or disposal groups comprising assets and liabilities, are
classified as held-for-sale if it is highly probable that they will be
recovered primarily through sale rather through continuing use. Such assets, or
disposal groups, are generally measured at the lower of their carrying amount
and fair value less costs of sale. Any impairment loss on a disposal group is
allocated first to goodwill and then to the remaining assets and liabilities on
a pro rata basis, except that no loss is allocated to inventories, financial
assets, deferred tax assets, employee benefit assets, 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.
Available for sale assets
Financial assets available for sale are measured at fair value. Any changes in
fair value above cost are recognised in other comprehensive income and
accumulated in the available-for-sale reserve. For any changes in fair value
below cost a provision for impairment is recognised in the profit or loss
account.
Other investments classified as non-current available for sale investments
comprise shares in listed companies and are carried at fair value.
Income taxes
The charge for current taxation is based on the results for the year as
adjusted for disallowed or non-assessable items. Tax payable upon realisation
of revaluation gains recognised in prior periods is recorded as a current tax
charge with a release of the associated deferred tax. Deferred tax is the tax
expected to be payable or recoverable on differences between the carrying
amounts of assets and liabilities in the financial statements and the
corresponding tax bases used in the tax computations and is recorded using the
balance sheet liability method. Deferred tax liabilities are generally
recognised for all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits will be
available against which deductible temporary differences can be utilised. In
respect of the deferred tax on the revaluation surplus, this is calculated on
the basis of the chargeable gains that would crystallise on the sale of the
investment portfolio as at the reporting date. The calculation takes account of
indexation on the historic cost of properties and any available capital losses.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised. Deferred tax is
charged or credited in the Group income statement, except when it relates to
items charged or credited directly to equity, in which case it is also dealt
with in equity.
Dividends
Dividends payable on the ordinary share capital are recognised as a liability
in the period in which they are approved.
Cash and cash equivalents
Cash comprises cash in hand and on-demand deposits. 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 21. These facilities
are considered to form an integral part of the treasury management of the Group
and can fluctuate from positive to negative balances during the period.
Bisichi Mining PLC
Mining revenue
Revenue is recognised when the customer has a legally binding obligation to
settle under the terms of the contract and has assumed all significant risks
and rewards of ownership.
Revenue is only recognised on individual sales of coal when all of the
significant risks and rewards of ownership have been transferred
to a third party. Export revenue is generally recognised when the product is
delivered to the export terminal location specified by the customer, at which
point the customer assumes risks and rewards under the contract. Domestic coal
revenues are generally recognised on collection by the customer from the mine
when loaded into transport, where the customer pays the transportation costs.
MINING COSTS
Expenditure is recognised in respect of goods and services received. Where
coal is purchased from third parties at point of extraction the expenditure is
only recognised when the coal is extracted and all of the significant risks and
rewards of ownership have been transferred.
Mining reserves, plant and equipment
The cost of property, plant and equipment comprises its purchase price and any
costs directly attributable to bringing the asset to the location and condition
necessary for it to be capable of operating in accordance with agreed
specifications. Freehold land is not depreciated. Other property, plant and
equipment is stated at historical cost less accumulated depreciation. The cost
recognised includes the recognition of any decommissioning assets related to
property, plant and equipment.
Heavy surface mining and other plant and equipment is depreciated at varying
rates depending upon its expected usage. The depreciation rates generally
applied are between 5-10 per cent per annum, but limited to the shorter of its
useful life or the life of the mine.
Other non-current assets, comprising motor vehicles and office equipment, are
depreciated at a rate of between 10% and 33% per annum which is calculated to
write off the cost, less estimated residual value of the assets, on a straight
line basis over their expected useful lives.
Mine inventories
Inventories are stated at the lower of cost and net realisable value. Cost
includes materials, direct labour and overheads relevant to the stage of
production. Cost is determined using the weighted average method. Net
realisable value is based on estimated selling price less all further costs to
completion and all relevant marketing, selling and distribution costs.
Mine provisions
Provisions are recognised when the Group has a present obligation as a result
of a past event which it is probable will result in an outflow of economic
benefits that can be reliably estimated.
A provision for rehabilitation of the mine is initially recorded at present
value and the discounting effect is unwound over time as a finance cost.
Changes to the provision as a result of changes in estimates are recorded as an
increase/decrease in the provision and associated decommissioning asset. The
decommissioning asset is depreciated in line with the Group's depreciation
policy over the life of mine. The provision includes the restoration of the
underground, opencast, surface operations and de-commissioning of plant and
equipment. The timing and final cost of the rehabilitation is uncertain and
will depend on the duration of the mine life and the quantities of coal
extracted from the reserves.
Mine impairment
Whenever events or changes in circumstance indicate that the carrying amount of
an asset may not be recoverable that asset is reviewed for impairment. 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 2017
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
2017
LAP BISICHI DRAGON TOTAL
GBP'000 GBP'000 GBP'000 GBP'000
BUSINESS ANALYSIS
Rental income 6,825 1,112 166 8,103
Management income from third party 542 - - 542
properties
Mining - 36,334 - 36,334
Group Revenue 7,367 37,446 166 44,979
Direct property costs (926) (152) (1) (1,079)
Direct mining costs - (25,664) - (25,664)
Overheads (2,869) (5,589) (164) (8,622)
Exchange losses - (256) - (256)
Depreciation (13) (1,790) (1) (1,804)
Operating profit 3,559 3,995 - 7,554
Finance income 38 67 - 105
Finance expenses (3,713) (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 9,386 (13) - 9,373
investment properties
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 71,919 33,673 2,758 108,350
joint ventures and assets held for sale
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.
United South 2017
Kingdom Africa Total
Geographic analysis GBP'000 GBP'000 GBP'000
Revenue 8,692 36,287 44,979
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
BISICHI DRAGON 2016
LAP GBP'000 GBP'000 TOTAL
GBP'000 GBP'000
BUSINESS ANALYSIS
Rental income 6,241 1,060 171 7,472
Management income from third party 501 - - 501
properties
Mining - 21,731 - 21,731
Group Revenue 6,742 22,791 171 29,704
Direct property costs (1,168) (187) 5 (1,350)
Direct mining costs - (16,184) - (16,184)
Overheads (2,926) (4,903) (128) (7,957)
Exchange gains - 449 - 449
Depreciation (25) (1,785) (8) (1,818)
Operating profit before listed 2,623 181 40 2,844
investments held for trading
Listed investments held for trading 2 - - 2
Operating profit 2,625 181 40 2,846
Finance income 11 132 1 144
Finance expenses (3,706) (554) (32) (4,292)
Result before valuation movements (1,070) (241) 9 (1,302)
Other segment items
Net increase/(decrease) on revaluation of 125 445 (38) 532
investment properties
Increase in value of other investments - 12 - 12
Net increase on revaluation of 1 - - 1
investments held for trading
Adjustment to interest rate derivative (206) - (11) (217)
Revaluation and other movements (80) 457 (49) 328
(Loss)/profit for the year before (1,150) 216 (40) (974)
taxation
Segment assets
- Non - current assets - property 93,791 13,426 2,630 109,847
- Non - current assets - plant and 112 8,520 21 8,653
equipment
- Cash and cash equivalents 3,706 2,444 115 6,265
- Non - current assets - other 1,874 32 - 1,906
- Non - current assets - deferred tax 1,134 - - 1,134
asset
- Current assets - others 1,853 7,745 20 9,618
Total assets excluding investment in 102,470 32,167 2,786 137,423
joint ventures and assets held for sale
Segment liabilities
Borrowings (58,068) (9,234) (1,207) (68,509)
Current liabilities (6,074) (6,811) (78) (12,963)
Non-current liabilities (5,379) (3,665) (81) (9,125)
Total liabilities (69,521) (19,710) (1,366) (90,597)
Net assets 32,949 12,457 1,420 46,826
Investment in joint ventures non - - - 1,805
segmental
Net assets as per balance sheet - - - 48,631
Major customer
Customer A - 14,543 - 14,543
This customer is for mining revenue in South Africa.
Geographic analysis United South 2016
Kingdom Africa Total
GBP'000 GBP'000 GBP'000
Revenue 8,025 21,679 29,704
Operating profit/(loss) 3,441 (595) 2,846
Non-current assets excluding investments 111,117 8,517 119,634
Total net assets 43,916 4,715 48,631
Capital expenditure 164 2,858 3,022
Group revenue is external to the Group and the directors consider that inter
segmental revenues are not material. Revenue includes contingent rents of GBP0.7
million (2016: GBP0.2 million).
2. Profit/(Loss) before taxation
2017 2016
GBP'000 GBP'000
Profit/(loss) before taxation is stated after charging/
(crediting):
Staff costs (see note 29) 8,113 7,173
Depreciation on tangible fixed assets - owned assets 1,804 1,818
Operating lease rentals - land and buildings 411 442
Exchange loss/(gain) 256 (449)
Profit on disposal of motor vehicles and office equipment (3) (32)
Amounts payable to the auditor in respect of both audit and
non-audit services
Audit services
Statutory - Company and consolidation 83 88
Subsidiaries - audited by RSM 17 20
Subsidiaries - audited by other auditors 51 50
Further assurance services 4 4
Other services 5 32
160 194
Staff costs are included in overheads.
3. Listed investments held for trading
2017 2016
GBP'000 GBP'000
Dividends receivable - 2
Net profit from listed investments - 2
4. Directors' emoluments
2017 2016
GBP'000 GBP'000
Emoluments 894 988
Defined contribution pension scheme contributions 27 45
921 1,033
Sir Michael Heller received GBP75,000 (2016: GBP75,000) as a Director of Bisichi
Mining PLC.
Details of directors' emoluments and share options are set out in the
remuneration report.
5. Finance income and expenses
2017 2016
GBP'000 GBP'000
Finance income 105 144
Finance expenses
Interest on bank loans and overdrafts (2,223) (2,243)
Unwinding of discount (Bisichi) (92) (78)
Other loans (1,414) (1,420)
Interest on derivatives (337) (302)
Interest on obligations under finance leases (202) (249)
Total finance expenses (4,268) (4,292)
(4,163) (4,148)
6. Income tax
2017 2016
GBP'000 GBP'000
Current tax
Corporation tax on profit of the period 369 73
Corporation tax on profit/(loss) of previous periods (5) -
Total current tax 364 73
Deferred tax
Origination of timing differences (35) 874
Revaluation of investment properties 2,348 472
Accelerated capital allowances 235 (48)
Fair value of interest derivatives 68 (40)
Adjustment in respect of prior years 2 (156)
Total deferred tax (notes 24 and 25) 2,618 1,102
Tax on profit on ordinary activities 2,982 1,175
The 2016 deferred tax recognised in income of GBP1,102,000 includes a credit of GBP
168,000 arising in the Bisichi Group on the correction of an error in the
calculation of deferred tax in 2015 related to the accounting of a deferred tax
liability incorrectly recognised in respect of management fees. The Group
adjusted the effect of this error in its 2016 financial statements by reducing
the tax charge for the year by GBP168,000 and reducing the associated deferred
tax liability as it was not considered to be material to the current or prior
year financial statements.
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 19.25 per cent
(2016: 20 per cent). The differences are explained below:
2017 2016
GBP'000 GBP'000
Profit/(loss) for the year before taxation 11,278 (974)
Taxation at 19.25 per cent (2016: 20 per cent) 2,171 (195)
Effects of:
Capital gains 1,792 800
Other differences (785) 506
Adjustment in respect of prior years (3) (157)
Deferred tax rate adjustment (193) 221
Income tax charge for the year 2,982 1,175
Analysis of United Kingdom and overseas tax:
United Kingdom tax included in above:
2017 2016
GBP'000 GBP'000
Corporation tax 233 13
Adjustment in respect of prior years (5) -
Current tax 228 13
Deferred tax 2,219 1,241
2,447 1,254
Overseas tax included above:
2017 2016
GBP'000 GBP'000
Corporation tax 136 60
Current tax 136 60
Deferred tax 397 (139)
Adjustment in respect of prior years 2 -
Deferred tax 399 (139)
535 (79)
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 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.
7. Discontinued operations
As part of the Group's strategy to focus on core assets, the Group disposed of
King Edward Court, Windsor in 2013. The profits and losses arising from this
disposal were classified as discontinued operations. Contracts for the sale of
King Edward Court had been exchanged in 2013 and completion took place in
January 2014. Following the settlement of a dispute additional proceeds of GBP
414,000 were received by the Group in 2016.
8. Dividend
2017 2016
Per GBP'000 Per GBP'000
share share
Dividends paid during the year relating 0.165p 141 0.16p 136
to the prior period
Dividends to be paid:
Proposed final dividend 0.175p 149 0.165p 141
for the year
Proposed special dividend for 0.125p 107 - -
the year
9. Profit/(Loss) per share and net assets per share
Profit/(loss) per share has been calculated as follows:
2017 2016
Profit / (loss) for the year for the purposes of basic and 7,686 (2,357)
diluted profit/(loss) per share (GBP'000)
Weighted average number of ordinary shares in issue for the 85,322 85,107
purpose of basic profit/(loss) per share ('000)
Basic profit / (loss) per share 9.01p (2.77)p
Weighted average number of ordinary shares in issue for the 85,322 85,107
purpose of diluted profit/(loss) per share ('000)
Fully diluted profit /(loss) per share 9.01p (2.77)p
Weighted average number of shares in issue is calculated after excluding
treasury shares of 221,061 (2016: 221,061).
Net assets per share have been calculated as follows:
2017 2016
Net assets (GBP'000) 45,854 38,242
Shares in issue ('000) 85,322 85,322
Basic net assets per share 53.74p 44.83p
Net assets diluted (GBP'000) 45,854 38,242
Shares in issue ('000) 85,322 85,322
Diluted net assets per share 53.74p 44.83p
10. Investment properties
Leasehold Leasehold
Total Freehold over 50 under 50
years years
GBP'000 GBP'000 GBP'000 GBP'000
Cost or valuation at 1 January 2017 109,847 88,585 19,620 1,642
Transfer to assets held for sale (note 14) (36,441) (36,441) - -
Additions in year 13 13 - -
(Decrease)/increase in present value of (1,534) - (1,839) 305
head leases
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
At 31 December 2017 81,258 62,425 16,856 1,977
At 31 December 2016 109,847 88,585 19,620 1,642
Total Freehold Leasehold Leasehold
GBP'000 GBP'000 over under
50 years 50 years
GBP'000 GBP'000
Cost or valuation at 1 January 2016 109,172 86,468 21,060 1,644
Additions in year 160 160 - -
Decrease in present value of head leases (17) - (15) (2)
Increase/(decrease) on revaluation 532 1,957 (1,425) -
At 31 December 2016 109,847 88,585 19,620 1,642
Representing assets stated at:
Valuation 105,080 88,585 15,495 1,000
Present value of head leases 4,767 - 4,125 642
109,847 88,585 19,620 1,642
At 31 December 2016 109,847 88,585 19,620 1,642
At 31 December 2015 109,172 86,468 21,060 1,644
The leasehold and freehold properties, excluding the present value of head
leases and directors' valuations, were valued as at 31 December 2017 by
professional firms of chartered surveyors. The valuations were made at fair
value. The directors' property valuations were made at fair value.
2017 2016
GBP'000 GBP'000
Allsop LLP 62,955 90,010
Carter Towler 13,245 13,245
Directors' valuations 1,825 1,825
78,025 105,080
Add: present value of headleases 3,233 4,767
81,258 109,847
The historical cost of investment properties, including total capitalised
interest of GBP1,161,000 (2016: GBP1,161,000) was as follows:
2017 2016
Leasehold Leasehold Leasehold Leasehold
Over 50 under 50 Over 50 under 50
Freehold years years Freehold years years
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost at 1 January 72,711 17,653 1,939 72,551 17,653 1,939
Transfer to assets held for sale (5,022) - - - - -
(note 14)
Additions 13 - - 160 - -
Cost at 31 December 67,702 17,653 1,939 72,711 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 Carrying Carrying Valuation Key Range
Level 3 / / Fair technique unobservable (weighted Range
Fair value inputs average) (weighted
value 2016 2017 average)
2017 GBP'000 2016
GBP'000
Freehold - external 60,600 86,760 Income Estimated
valuation capitalisation Rental Value GBP5 - GBP39 GBP5 - GBP37
Per sq ft p.a (GBP19) (GBP19)
Equivalent 4.9% - 5% - 14%
Yield 12.9% (8%)
(8.4%)
Leasehold over 50 14,570 15,495 Income Estimated
years - capitalisation Rental Value GBP5 - GBP10 GBP5 - GBP11
external valuation Per sq ft p.a (GBP9) (GBP9)
Equivalent 5.8% - 7% - 18%
Yield 17.6% (11%)
(9%)
Leasehold under 50 1,030 1,000 Income Estimated
years - external capitalisation Rental Value GBP4 - GBP5 GBP3 - GBP5
valuation Per sq ft p.a (GBP5) (GBP4)
Equivalent 25.4% - 18% - 23%
Yield 25.8% (19%)
(25.5%)
Freehold - 1,825 1,825 Income Estimated
Directors' valuation capitalisation Rental Value GBP5 - GBP5 GBP5 - GBP5
Per sq ft p.a (GBP5) (GBP5)
Equivalent 6.1% - 6% - 6%
Yield 6.1% (6%)
(6.1%)
At 31 December 78,025 105,080
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 Equivalent yield
10% increase or 25 basis point
(decrease) contraction
or (expansion)
2017 2016 2017 2016
GBP'000 GBP'000 GBP'000 GBP'000
Freehold - external valuation 6,055/ 8,671/ 2,095/ 3,585/
(6,055) (8,671) (1,956) (3,298)
Leasehold over 50 years - external valuation 1,457/ 1,545/ 355/(338) 394/(375)
(1,457) (1,545)
Leasehold under 50 years - external valuation 103/(103) 100/(100) 10/(10) 13/(13)
Freehold - Directors' valuation 183/(183) 183/(183) 78/(71) 78/(72)
11. Mining reserves, plant and equipment
Office
equipment
Mining Mining and motor
Total reserves equipment vehicles
GBP'000 GBP'000 GBP'000 GBP'000
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)
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 in year (39) (1) - (38)
Accumulated depreciation at 31 December 19,261 1,308 17,441 512
2017
Net book value at 31 December 2017 8,735 58 8,461 216
Cost at 1 January 2016 17,188 995 15,453 740
Exchange adjustment 6,273 349 5,858 66
Additions 2,862 - 2,814 48
Disposals (506) - (401) (105)
Cost at 31 December 2016 25,817 1,344 23,724 749
Accumulated depreciation at 1 January 2016 11,636 949 10,201 486
Exchange adjustment 4,202 336 3,824 42
Charge for the year 1,818 2 1,746 70
Disposals (492) - (401) (91)
Accumulated depreciation at 31 December 17,164 1,287 15,370 507
2016
Net book value at 31 December 2016 8,653 57 8,354 242
12. Investment in joint venture
Shares in joint venture:
2017 2016
GBP'000 GBP'000
At 1 January 455 325
Write off of investment (447) -
Exchange adjustment (8) 130
At 31 December - 455
At 31 December 2017 the joint venture had non-current assets of GBPnil (2016: GBP
1,346,000), current assets of GBPnil (2016: GBP3,000) and current liabilities of GBP
nil (2016: GBP,1,349,000).
2017 2016
GBP'000 GBP'000
At 1 January 455 325
Write off of investment (447) -
Exchange adjustment (8) 130
At 31 December - 455
Bisichi owned 49% of the issued share capital of Ezimbokodweni (an unlisted
coal production company in South Africa). The Directors of Bisichi have now
concluded that the joint venture (which has not traded to date) is unlikely to
generate income in the foreseeable future. For that reason, the investment and
the loan (note 13) have been written off.
13. Loan to joint venture
2017 2016
Joint Joint
ventures ventures
assets assets
GBP'000 GBP'000
Loan to Ezimbokodweni Mining (Pty) Limited
At 1 January 1,350 900
Exchange adjustment (16) 336
Additions - interest 46 114
Write-off (1,380) -
At 31 December - 1,350
14. Assets held for sale
2017 2016
GBP'000 GBP'000
At 1 January - 2,335
Transfer from investment 36,441 -
property (note 10)
Disposal - (2,335)
At 31 December 36,441 -
In March 2018 contracts were exchanged for the sale of both Brixton markets for
a combined price of GBP37.25 million. The properties were held at a valuation of
GBP24.52 million at 31 December 2016 and a revaluation gain of GBP11.92 million is
recognised in note 10 prior to the transfer of the property to assets held for
sale. Following the Market Row completion on 23 April 2018, GBP15.9 million of
bank loans related to those properties have been repaid as required by the
terms of the loan agreements. The Brixton Village completion was on 26 April
2018. As required under IFRS, these properties have been reclassified from
investment properties to assets held for sale, at fair value less costs to sell
of GBP36.44 million. Related loans are classified as non-current in note 23.
15. Subsidiary companies
In accordance with Section 409 of the Companies Act 2006 a full list of
subsidiaries, the principal activity, the country of incorporation and the
percentage of equity owned, as at 31 December 2017 is disclosed below:
Entity Activity Percentage Country of
of Registered address incorporation
share
capital
Analytical Investments Limited Dormant 100% 24 Bruton Place, England and
London, W1J 6NE Wales
Analytical Portfolios Limited Dormant 100% 24 Bruton Place, England and
London, W1J 6NE Wales
Analytical Properties Holdings Property 100% 24 Bruton Place, England and
Limited London, W1J 6NE Wales
Analytical Properties Limited Property 100% 24 Bruton Place, England and
London, W1J 6NE Wales
Analytical Ventures Limited Property 100% 24 Bruton Place, England and
London, W1J 6NE Wales
24 Bruton Place Limited Dormant 100% 24 Bruton Place, England and
London, W1J 6NE Wales
24 BPL (Harrogate) Limited Investment 88% 24 Bruton Place, England and
London, W1J 6NE Wales
24 BPL (Harrogate ) Two Limited Investment 100% 24 Bruton Place, England and
London, W1J 6NE Wales
Brixton Village Limited Property 100% 24 Bruton Place, England and
London, W1J 6NE Wales
Market Row Limited Property 100% 24 Bruton Place, England and
London, W1J 6NE Wales
Newincco 1243 Limited Property 100% 24 Bruton Place, England and
London, W1J 6NE Wales
Newincco 1244 Limited Property 100% 24 Bruton Place, England and
London, W1J 6NE Wales
Newincco 1245 Limited Property 100% 24 Bruton Place, England and
Management London, W1J 6NE Wales
Services
Newincco 1299 Limited Property 100% 24 Bruton Place, England and
London, W1J 6NE Wales
Newincco 1300 Limited Property 100% 24 Bruton Place, England and
London, W1J 6NE Wales
LAP Ocean Holdings Limited Property 100% 24 Bruton Place, England and
London, W1J 6NE Wales
LAP Ocean Two Limited Property 100% 24 Bruton Place, England and
London, W1J 6NE Wales
London & Associated Limited Dormant 100% 24 Bruton Place, England and
London, W1J 6NE Wales
London & Associated (Rugeley) Dormant 100% 24 Bruton Place, England and
Limited London, W1J 6NE Wales
London & Associated Securities Dormant 100% 24 Bruton Place, England and
Limited London, W1J 6NE Wales
London & Associated Management Property 100% 24 Bruton Place, England and
Services Limited Management London, W1J 6NE Wales
Services
London & African Investments Dormant 100% 24 Bruton Place, England and
Limited London, W1J 6NE Wales
Orchard Chambers Residential Dormant 100% 24 Bruton Place, England and
Limited London, W1J 6NE Wales
Bisichi Mining PLC (note D) Coal 41.52% 24 Bruton Place, England and
mining London, W1J 6NE Wales
Mineral Products Limited (note A) Share 100% 24 Bruton Place, England and
(note D) dealing London, W1J 6NE Wales
Bisichi (Properties) Limited (note Property 100% 24 Bruton Place, England and
A)(note D) London, W1J 6NE Wales
Bisichi Mining (Exploration) Holding 100% 24 Bruton Place, England and
Limited (note A)(note D) company London, W1J 6NE Wales
Black Wattle Colliery (Pty) Coal 62.5% Samora Machel Street, South Africa
Limited (note A)(note D) mining Bethal Road,
Middelburg, Mpumalanga,
1050
Bisichi Coal Mining (Pty) Limited Coal 100% Samora Machel Street, South Africa
(note A)(note D) mining Bethal Road,
Middelburg, Mpumalanga,
1050
Urban First (Northampton) Limited Dormant 100% 24 Bruton Place, England and
(note A)(note D) London, W1J 6NE Wales
Bisichi Trustee Limited (note A) Property 100% 24 Bruton Place, England and
(note D) London, W1J 6NE Wales
Bisichi Mining Management Services Dormant 100% 24 Bruton Place, England and
Limited (note A) London, W1J 6NE Wales
(note D)
Ninghi Marketing Limited (note A) Dormant 90.1% 24 Bruton Place, England and
(note D) London, W1J 6NE Wales
Bisichi Northampton Limited (note Property 100% 24 Bruton Place, England and
A)(note D) London, W1J 6NE Wales
Amandla Ehtu Mineral Resource Dormant 70% Samora Machel Street, South Africa
Development (Pty) Limited (note A) Bethal Road,
(note D) Middelburg, Mpumalanga,
1050
Black Wattle Klipfontein (Pty) Coal 62.5% Samora Machel Street, South Africa
Limited (note A)(note D) mining Bethal Road,
Middelburg, Mpumalanga,
1050
Dragon Retail Properties Limited Property 50% 24 Bruton Place, England and
(note B)(note D) London, W1J 6NE Wales
Newincco 1338 Limited (note C) Property 100% 24 Bruton Place, England and
London, W1J 6NE Wales
Details on the non-controlling interest in subsidiaries are shown under note
27.
Note A: these companies are owned by Bisichi and the equity shareholdings
disclosed relate to that company.
Note B: this entity is a joint venture owned 50% by LAP and 50% by Bisichi.
Note C: this company is owned by Dragon and the equity shareholdings disclosed
relate to that company.
Note D: Bisichi and Dragon and their subsidiaries are included in the
consolidated financial statements in accordance with IFRS 10.
16. Inventories
2017 2016
GBP'000 GBP'000
Coal
Washed 301 1,139
Mining production 286 83
Work in progress 227 458
Other 14 41
828 1,721
17. Held to maturity investments and other investments
Held to maturity investments:
2017 Unlisted Loan 2016 Unlisted Loan
Total shares stock Total shares stock
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 1,874 1 1,873 1,995 1 1,994
Repayments (126) - (126) (121) - (121)
At 31 December 1,748 1 1,747 1,874 1 1,873
The Group owns a 3.17% (2016: 6.95%) interest in the equity and loans of HRGT
Shopping Centres LP (HRGT), a limited partnership set up in England to acquire
and own 3 shopping centres in Dunfermline, Kings Lynn and Loughborough. 96.4%
(2016: 92.10%) of the equity and loans are owned by Oaktree Capital Management
and 0.43% (2016: 0.95%) by Gooch Cunliffe Whale LLP. London & Associated
Management Services Limited has a management contract to manage the properties
on behalf of HRGT.
OTHER INVESTMENTS:
2017 2016
GBP'000 GBP'000
Net book and market value of investments listed on overseas 51 32
stock exchange
18. Trade and other receivables
2017 2016
GBP'000 GBP'000
Trade receivables 4,920 4,701
Other receivables 736 1,010
Prepayments and accrued income 1,476 1,350
7,132 7,061
The directors consider that the carrying amount of trade and other receivables
approximates to their fair value.
19. Investments available for sale and held for trading
2017 2016
GBP'000 GBP'000
Market bid value of the listed investment portfolio - available 1,050 781
for sale
Market bid value of the listed investment portfolio - held for 19 19
trading
Unrealised gain of market value over cost 129 45
Listed investment portfolio at cost 940 755
Investments are listed on the London Stock Exchange with the exception of GBP
47,000 (2016: GBP60,000) listed outside Great Britain.
The directors have reviewed the individual investments for impairment and do
not consider the investments which are below cost to be impaired.
20. Trade and other payables
2017 2016
GBP'000 GBP'000
Trade payables 3,937 3,618
Other taxation and social security costs 629 739
Other payables 2,842 2,815
Accruals and deferred income 5,501 5,770
12,909 12,942
The directors consider that the carrying amount of trade and other payables
approximates to their fair value.
21. Borrowings
2017 2017 2016 2016
GBP'000 GBP'000 GBP'000 GBP'000
Current Non-current Current Non-current
Other loans (Bisichi) 26 - 24 -
GBP1.25 million term bank loan (secured) - 1,218 - 1,207
repayable by 2020 (Dragon)*
GBP3.75 million first mortgage debenture stock 3,000 - 750 3,000
2018 at 11.6 per cent
Bank overdrafts (secured) (Bisichi) 1,262 - 3,334 -
Bank loan (secured)(Bisich) - - - 66
GBP10 million first mortgage debenture stock - 9,922 - 9,905
2022 at 8.109 per cent*
GBP5.876 million term bank loan (secured) - 5,872 - 5,810
repayable by 2019 (Bisichi)*
GBP34.897 million term bank loan (secured) - 34,640 - 34,468
repayable by 2019*
GBP10.105 million term bank loan (secured) - 10,009 - 9,945
repayable by 2019 at 9.5 per cent*
4,288 61,661 4,108 64,401
Borrowings analysis by origin:
2017 2016
GBP'000 GBP'000
United Kingdom 64,621 65,085
South Africa 1,328 3,424
65,949 68,509
* The GBP10 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 June 2017, the Group repaid early GBP0.75 million of the GBP5 million first
mortgage debenture stock 2018, at an additional cost of GBP14,000.
First Mortgage Debenture Stocks August 2018 and 2022 and the Santander GBP34.897
million and Europa GBP10.105 million term bank loans repayable in July 2019 are
secured by way of a charge on specific freehold and leasehold properties which
are included in the financial statements at a value of GBP96.52 million. In
addition, GBP0.12 million of cash deposits are charged as security to debenture
stocks. The GBP34.897 million 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 23. Santander bank loans of GBP12.8 million and Europa bank loans of GBP3.1m
related to Brixton Markets sales are repayable on completion in accordance with
the terms of the loan agreements.
The Bisichi United Kingdom bank loans of GBP5.832 million (2016: GBP5.810 million)
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 GBP13.2 million. The
interest cost of the bank loan is 2.35 per cent above LIBOR.
The Bisichi South African bank loans and overdrafts of GBP1.328 million (2016: GBP
3.424 million) 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 GBP6.1
million.
The bank loan of GBP1.25 million (Dragon) which is repayable in November 2020 is
secured by way of a first charge on specific freehold property and which is
included in the financial statements at a value of GBP2.58 million. The interest
cost of the loan is 2 per cent above LIBOR.
The Group's objectives when managing capital are:
- To safeguard the Group's ability to continue as a going concern, so that
it may provide returns for shareholders and benefits for other stakeholders;
and
- To provide adequate returns to shareholders by ensuring returns are
commensurate with the risk.
Analysis of the changes in liabilities arising from financing activities:
2017 2017 2016 2016
GBP'000 GBP'000 GBP'000 GBP'000
BORROWINGS FINANCE BORROWINGS FINANCE
LEASES LEASES
Balance at 1 January 68,509 4,767 67,218 4,784
Exchange adjustments (4) - 854 -
Cash movements excluding exchange (2,820) - 173 -
adjustments
Valuation movements 264 (1,534) 264 (17)
Balance at 31 December 65,949 3,233 68,509 4,767
22. Provisions
2017 2016
GBP'000 GBP'000
At 1 January 1,236 847
Exchange adjustment 21 311
Unwinding of discount 92 78
At 31 December 1,349 1,236
The above provision relates to mine rehabilitation costs in Bisichi.
23. Financial instruments
Total financial assets and liabilities
The Group's financial assets and liabilities and their fair values are as
follows:
2017 2016
Fair Carrying Fair Carrying
value value value value
GBP'000 GBP'000 GBP'000 GBP'000
Cash and cash equivalents 7,528 7,528 6,265 6,265
Assets held for sale 36,441 36,441 - -
Investments held to maturity 1,748 1,748 1,874 1,874
Loan to joint venture - - 1,350 1,350
Other investments 51 51 32 32
Investments held for trading 19 19 19 19
Available for sale 1,050 1,050 781 781
investments
Derivative assets 1 1 4 4
Other assets 5,656 5,656 5,711 5,711
Derivative liabilities (435) (435) (793) (793)
Bank overdrafts (1,262) (1,262) (3,334) (3,334)
Bank loans (52,218) (51,765) (52,218) (51,520)
Present value of head leases (3,233) (3,233) (4,767) (4,767)
on properties
Other liabilities (6,779) (6,779) (6,432) (6,432)
Total financial liabilities (11,433) (10,980) (51,508) (50,810)
before debentures
Fair value of debenture stocks
Fair value of the Group's debenture liabilities:
2017 2016
Book Fair Fair Fair value
value
value value adjustment adjustment
GBP'000 GBP'000 GBP'000 GBP'000
Debenture stocks (13,000) (15,686) (2,686) (3,526)
Tax at 19.25 per cent (2016: - - 517 705
20 per cent)
Post tax fair value - - (2,169) (2,821)
adjustment
Post tax fair value - - (2.54)p (3.3)p
adjustment - basic pence per
share
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 2017 and
reflect the replacement value of the financial instruments used to manage the
Group's exposure to adverse rate movements.
The fair values of the debentures are based on the net present value at the
relevant gilt interest rate of the future payments of interest on the
debentures. The bank loans and overdrafts are at variable rates and there is no
material difference between book values and fair values.
Investments held for trading and available for sale fall under level 1 of the
fair value hierarchy into which fair value measurements are recognised in
accordance with the levels set out in IFRS 7. Held to maturity investments are
held at cost and other investments are held at fair value. The directors are of
the opinion that the difference in value between cost and fair value of other
investments is not significant or material. The comparative figures for 2016
fall under the same category of financial instrument as 2017.
The carrying amount of short term (less than 12 months) trade receivable and
other liabilities approximates its fair values. The fair value of non-current
borrowings in note 21 approximates its carrying value and was determined under
level 2 of the fair value hierarchy and is estimated by discounting the future
contractual cash flows at the current market interest rates for UK borrowings
and for the South African overdraft facility. The fair value of the finance
lease liabilities in note 31 approximates its carrying value 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 2017, with other variables unchanged, a 1%
increase in interest rates would change the profit/loss for the year by GBP
175,000 (2016: GBP173,000). Bisichi has variable loans and a 1% increase in
interest rates would change the profit/loss for the year by GBP82,000 (2016: GBP
56,000).
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 GBP
34.897 million bank loan and Bisichi United Kingdom bank loans and overdraft
are secured by way of a first charge on certain fixed assets. The rates of
interest vary based on LIBOR in the UK.
The GBP10.105 million term bank loan is secured by way of a second charge on
certain fixed assets. This loan is based on a fixed interest rate.
The Bisichi South African bank loans are secured by way of a first charge over
specific pieces of mining equipment, inventory and the debtors of the relevant
company which holds the loan. The rates of interest vary based on PRIME in
South Africa.
The GBP1.25 million bank loan (Dragon) is secured by way of a first charge on
specific freehold property. The rate of interest varies based on LIBOR in the
UK.
Liquidity risk
The Group's policy is to minimise refinancing risk by balancing its exposure to
interest risk and to refinancing risk. In effect the Group seeks to borrow for
as long as possible at the lowest acceptable cost. Efficient treasury
management and strict credit control minimise the costs and risks associated
with this policy which ensures that funds are available to meet commitments as
they fall due. Cash and cash equivalents earn interest at rates based on LIBOR
in the UK. These facilities are considered adequate to meet the Group's
anticipated cash flow requirements for the foreseeable future.
In South Africa, an increased structured trade finance facility for R100million
was signed by Black Wattle Colliery (Pty) Limited in July 2017 with Absa Bank
Limited. The facility is renewable annually at 30 June and is secured against
inventory, debtors and cash that are held by Black Wattle Colliery (Pty)
Limited. The trade facility, which is repayable on demand, is included in cash
and cash equivalents within the cashflow statement.
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.
2017 Less 2-5 Over
than years
Total 1 year 5 years
GBP'000 GBP'000 GBP'000 GBP'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 6,779 6,779 - -
(non-interest)
72,728 11,067 61,661 -
2016 Less 2-5 Over
than years
Total 1 year 5 years
GBP'000 GBP'000 GBP'000 GBP'000
Bank overdrafts (floating) 3,334 3,334 - -
Debentures (fixed) 13,655 750 3,000 9,905
Bank loans (fixed) 9,945 - 9,945 -
Bank loans (floating)* 41,575 24 41,551 -
Trade and other payables 6,432 6,432 - -
(non-interest)
74,941 10,540 54,496 9,905
The Group would normally expect that sufficient cash is generated in the
operating cycle to meet the contractual cash flows as disclosed above through
effective cash management.
*Certain bank loans are fully hedged with appropriate interest derivatives.
Details of all hedges are shown below.
Market price risk
The Group is exposed to market price risk through interest rate and currency
fluctuations.
Credit risk
At the balance sheet date there were no significant concentrations of credit
risk. The maximum exposure to credit risk is represented by the carrying amount
of each financial asset in the balance sheet. The Group only deposits surplus
cash with well-established financial institutions of high quality credit
standing.
Foreign exchange risk
Only Bisichi is subject to this risk. All trading is undertaken in the local
currencies except for certain export sales 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 2017 and 2016 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 2017, 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 GBP34,000 (2016: GBP435,000). 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 GBP56,000 (2016: GBP725,000).
The 25% sensitivity has been determined based on the average historic
volatility of the exchange rate for 2016 and 2017.
The table below shows the Bisichi currency profiles of cash and cash
equivalents:
2017 2016
GBP'000 GBP'000
Sterling 3,402 1,717
South African Rand 1,923 725
US Dollar 2 2
5,327 2,444
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:
2017: UK South
GBP'000 Africa
GBP'000
Sterling (832) -
South African Rand 54 (1,304)
US Dollar 13 -
(765) (1,304)
2016: UK South
GBP'000 Africa
GBP'000
Sterling (2,522) -
South African Rand 36 (2,262)
US Dollar 35 -
(2,451) (2,262)
Borrowing facilities
At 31 December 2017 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 on
the next page. Details of other financial liabilities are shown in notes 20 and
21.
Interest rate and hedge profile
2017 2016
GBP'000 GBP'000
Fixed rate borrowings 23,105 23,855
Floating rate borrowings
- Subject to interest rate 36,147 36,147
swap
- Other borrowings 7,160 9,300
66,412 69,302
Average fixed interest rate 9.17% 9.24%
Weighted average swapped 3.32% 3.30%
interest rate
Weighted average cost of debt 5.45% 5.80%
on overdrafts, bank loans and
debentures
Average period for which 2.9 3.8
borrowing rate is fixed years years
Average period for which 1.5 2.5
borrowing rate is swapped years 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 2017 the Group had hedges totalling GBP34.897 million to cover the
GBP34.9 million bank loan. These consisted of a 5 year swap for GBP17.5 million, at
2.25% and a GBP17.397 million cap agreement at 2.25% to July 2019.
At the year end the fair value liability in the accounts was GBP435,000 (2016: GBP
793,000) as valued by the hedge provider.
At 31 December 2017, Dragon had hedges of GBP1.25 million to cover the GBP1.25
million bank loan. This consists of a 5 year GBP1.25 million cap agreement taken
out in November 2016 at 2.5%. At the year end, the fair value asset in the
accounts was GBP1,000 (2016: GBP4,000), 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 Level 2 Level 3 Total 2017
GBP'000 GBP'000 GBP'000 GBP'000 Gain/
(loss)
to income
statement
GBP'000
Financial assets
Other financial assets held for
trading and available for sale
Quoted equities 1,069 - - 1,069 -
Derivative financial instruments
Interest rate swaps - 1 - 1 (3)
Financial liabilities
Derivative financial instruments
Interest rate swaps - 435 - 435 358
Level 1 Level 2 Level 3 Total 2016
GBP'000 GBP'000 GBP'000 GBP'000 Gain/
(loss)
to income
statement
GBP'000
Financial assets
Other financial assets held for
trading and available for sale
Quoted equities 832 - - 832 13
Derivative financial instruments
Interest rate swaps - 4 - 4 (11)
Financial liabilities
Derivative financial instruments
Interest rate swaps - 793 - 793 (206)
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:
2017 2016
GBP'000 GBP'000
Total debt 65,949 68,509
Less cash and cash equivalents (7,528) (6,265)
Net debt 58,421 62,244
Total equity 56,710 48,631
103.0% 128.0%
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.
2017 2016
GBP'000 GBP'000
Cash at bank and in hand 7,528 6,265
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
2017 2016
GBP'000 GBP'000
Bank loans and overdrafts:
Repayable on demand or within one year 1,288 3,358
Repayable between two and five years 51,739 51,496
53,027 54,854
Debentures:
Repayable within one year 3,000 750
Repayable between two and five years 9,922 3,000
Repayable in more than five years - 9,905
65,949 68,509
Certain borrowing agreements contain financial and other conditions that if
contravened by the Group, could alter the repayment profile.
Bank loans of GBP15.9 million currently shown as repayable between two and five
years related to Brixton markets sales are repayable on completion.
24. Deferred tax asset
2017 2016
GBP'000 GBP'000
Balance at 1 January 1,134 2,390
Transferred to consolidated income statement (1,134) (1,256)
Balance at 31 December - 1,134
The deferred tax balance comprises the following:
Revaluation of properties - (2,719)
Accelerated capital allowances - (904)
Fair value of interest derivatives - 151
Short-term timing differences - (124)
Loss relief - 4,730
Deferred tax asset at end of year: - 1,134
25. Deferred tax liabilities
2017 2016
GBP'000 GBP'000
Balance at 1 January 2,329 2,106
Transferred from/(to) consolidated income statement 1,484 (154)
Transferred from other comprehensive income - 13
Exchange adjustment 35 364
Balance at 31 December 3,848 2,329
The deferred tax balance comprises the following:
Revaluation of properties 5,836 793
Accelerated capital allowances 2,522 1,347
Short-term timing differences 144 191
Unredeemed capital deductions (83) (642)
Losses and other deductions (4,571) 640
Deferred tax liability provision at end of year: 3,848 2,329
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
GBP5,427,000 (2016: GBP5,455,000), which have not been recognised as a deferred tax
asset. As the Group returns to profit, these losses and reliefs can be
utilised.
26. Share capital
The Company has one class of ordinary shares which carry no right to fixed
income.
Number of Number of
ordinary 10p ordinary 10p
shares shares 2017 2016
2017 2016 GBP'000 GBP'000
Authorised: ordinary 110,000,000 110,000,000 11,000 11,000
shares of 10p each
Allotted, issued and fully 85,542,711 85,542,711 8,554 8,554
paid share capital
Less: held in Treasury (see (221,061) (221,061) (22) (22)
below)
"Issued share capital" for 85,321,650 85,321,650 8,532 8,532
reporting purposes
Treasury shares
Number of ordinary Cost/issue value
10p shares
2017 2016
2017 2016 GBP'000 GBP'000
Shares held in Treasury at 1 January 221,061 734,816 145 482
Issued for share incentive plan -dividends - (1,936) - (1)
investment (Jan 2016 - 25p)
Issued to meet directors bonuses (Jan - (69,225) - (45)
2016 - 24.50p)
Issued to meet staff bonuses (Jan 2016 - (154,073) - (101)
- 24.50p)
Issued for new directors share incentive plan - (24,488) - (16)
(Jan 2016 - 24.50p)
Issued for new staff share incentive plan - (36,732) - (24)
(Jan 2016 - 24.50p)
Issued for share incentive plan -dividends - (2,831) - (2)
investment (Nov 2016 - 21.25p)
Issued to meet directors bonuses (Nov - (224,470) - (148)
2016 - 21.25p)
Shares held in Treasury at 31 December 221,061 221,061 145 145
Share Option Schemes
Employees' share option scheme (Approved scheme)
At 31 December 2017 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 2017 is as follows:
Changes during the year
At 1 At 31
January Options Options Options December
2017 Exercised granted lapsed 2017
Shares issued to date 2,367,604 - - - 2,367,604
Shares allocated over which options have 1,549,955 - - - 1,549,955
not been granted
Total shares allocated for issue to 3,917,559 - - - 3,917,559
employees under the scheme
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 2017
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 2017 is as follows:
Changes during the year
At 1 At 31
January Options Options Options December
2017 Exercised granted lapsed 2017
Shares issued to date 450,000 - - - 450,000
Shares allocated over which options have 550,000 - - - 550,000
not yet been granted
Total shares allocated for issue to 1,000,000 - - - 1,000,000
employees under the scheme
The Bisichi Mining PLC Unapproved Option Schemes
Details of the share option schemes in Bisichi are as follows:
Number of
Number of share Number of
shares options shares
Period within for which issued/ for which
options exercised/ options
Subscription which options outstanding (cancelled) outstanding
at at
Year of price per exercisable 31 December during year 31 December
grant share 2016 2017
2010 202.5p Aug 2013 - Aug 80,000 - 80,000
2020
2015 87.0p Sep 2015 - Sep 300,000 - 300,000
2025
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 GBP1. There are no
performance or service conditions attached to 2015 options which are
outstanding at 31 December 2017 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.
2017 2016
Weighted Weighted
2017 average 2016 average
Number exercise Number exercise
price price
Outstanding at 1 380,000 111.3p 705,000 133.1p
January
Lapsed during the year - - (325,000) 237.5p
Outstanding at 31 380,000 111.3p 380,000 111.3p
December
Exercisable at 31 380,000 111.3p 380,000 111.3p
December
27. Non-controlling interest ("NCI")
2017 2016
GBP'000 GBP'000
As at 1 January 10,389 9,574
Share of profit for the year 610 208
Share of gain on available for sale investments 49 104
Dividends received (250) (250)
Shares issued - 64
Exchange movement 58 689
As at 31 December 10,856 10,389
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.
2017 2016
BISICHI MINING PLC GBP'000 GBP'000
Revenue 37,446 22,791
Profit for the year attributable to owners of the parent 749 479
Profit/(loss) for the year attributable to NCI 172 (72)
Profit for the year 921 407
Other comprehensive income attributable to owners of the parent 163 1,186
Other comprehensive income attributable to NCI 11 100
Other comprehensive income for the year 174 1,286
Balance sheet
Non-current assets 22,935 24,649
Current assets 13,622 12,224
Total assets 36,557 36,873
Current liabilities (9,025) (10,326)
Non-current liabilities (9,858) (9,541)
Total liabilities (18,883) (19,867)
Net current assets at 31 December 17,674 17,006
Cash flows
From operating activities 7,692 2,941
From investing activities (1,812) (1,570)
From financing activities (975) (969)
Net cash flows 4,905 402
The non-controlling interest comprises of a 37.5% shareholding in Black Wattle
Colliery (Pty) Ltd, a coal mining company incorporated in South Africa.
Summarised financial information reflecting 100% of the underlying subsidiary's
relevant figures, is set out below.
2017 2016
Black Wattle Colliery (Pty) Limited ("Black Wattle") GBP'000 GBP'000
Revenue 36,300 21,703
Expenses (35,150) (22,185)
Profit/(loss) for the year 1,150 (482)
Total comprehensive income/(expense) for the year 1,150 (482)
Balance sheet
Non-current assets 8,613 8,516
Current assets 6,747 8,600
Current liabilities (8,652) (12,151)
Non-current liabilities (3,155) (2,635)
Net assets at 31 December 3,553 2,330
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.
28. Related party transactions
Cost Amounts Advanced
recharged owed to
to (by) by (to) (by)
related related related
party party party
GBP'000 GBP'000 GBP'000
Related party:
Dragon Retail Properties Limited
Current account - 24 (84)
Loan account (1) - -
Bisichi Mining PLC
Current account - - -
Simon Heller Charitable Trust
Current account (63) - -
Loan account - (700) -
Directors and key management
M A Heller and J A Heller 15 (i) 1 -
H D Goldring (Delmore Holdings Limited) (15) (ii) - -
C A Parritt (18) (ii) (4) -
R Priest (35) (ii) - -
Ezimbokodweni Mining (pty) Limited - see 46 - -
note 12
Totals at 31 December 2017 (71) (679) (84)
Totals at 31 December 2016 53 340 (208)
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 GBP300,000 for the year (2016: GBP300,000).
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 receives management fees of GBP10,000 (2016: GBP10,000) 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 GBP700,000 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 GBP116,000 was made by Bisichi to one of the Bisichi directors
- A R Heller. The loan amount outstanding at the year end was GBP56,000 (2016: GBP
71,000) and a repayment of GBP15,000 (2016: GBP15,000) was made during the year.
Interest is payable on the loan at a rate of 6.14 percent. There is no fixed
repayment date for the loan.
The directors are considered to be the only key management personnel and their
remuneration including employer's national insurance for the year were GBP949,000
(2016: GBP1,103,000). All other disclosures required including interest in share
options in respect of those directors are included within the remuneration
report.
29. Employees
The average number of employees, including directors, of the Group during the
year was as follows:
2017 2016
Production 192 185
Administration 45 46
237 231
Staff costs during the year were as follows:
2017 2016
GBP'000 GBP'000
Salaries and other costs 7,426 6,397
Social security costs 327 332
Pension costs 360 335
Share based payments - 109
8,113 7,173
30. Capital Commitments
2017 2016
GBP'000 GBP'000
Commitments for capital expenditure approved and contracted for - 762
at the year end
Share of commitment of capital expenditure in joint venture - 1,489
All the above relates to Bisichi Mining PLC.
31. Operating and finance leases
Operating leases on land and buildings
At 31 December 2017 the Group had commitments under non-cancellable operating
leases on land and buildings expiring as follows:
2017 2016
GBP'000 GBP'000
Within one year 240 240
Second to fifth year 960 960
After five years 240 480
Operating lease payments represent rentals payable by the Group for its office
premises.
The leases are for an average term of ten years and rentals are fixed for an
average of five years.
Present value of head leases on properties
Present value
Minimum lease of minimum
Payments lease payments
2017 2016 2017 2016
GBP'000 GBP'000 GBP'000 GBP'000
Within one year 211 305 211 305
Second to fifth year 841 1,222 776 1,130
After five years 16,682 29,734 2,246 3,332
17,734 31,261 3,233 4,767
Future finance charges on finance leases (14,501) (26,494) - -
Present value of finance lease liabilities 3,233 4,767 3,233 4,767
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:
2017 2016
GBP'000 GBP'000
Within one year 5,088 6,684
Second to fifth year 14,597 20,104
After five years 18,519 36,736
38,204 63,524
32. Contingent liabilities and events after the reporting period
There were no contingent liabilities at 31 December 2017 (2016: GBPNil), except
as disclosed in note 23.
Bank guarantees have been issued by the bankers of Black Wattle Colliery (Pty)
Limited on behalf of the Company to third parties. The guarantees are secured
against the assets of the Company and have been issued in respect of the
following:
2017 2016
GBP'000 GBP'000
Rail siding & transportation 64 63
Rehabilitation of mining land 1,387 1,364
Water & electricity 58 57
1,509 1,484
In March 2018 contracts were exchanged for the sale of both Brixton markets for
a combined sale price of GBP37.25 million. Following the Market Row completion on
23 April 2018, GBP15.9 million of bank loans related to those properties have
been repaid. The Brixton Village completion was on 26 April 2018. As required
under IFRS, these properties have been reclassified from Investment properties
to Assets held for sale at their net disposal value of GBP36.44 million.
33. Company financial statements
Company balance sheet at 31 December 2017
2017 2016
Notes GBP'000 GBP'000
Fixed assets
Tangible assets 33.3 25,397 27,383
Other investments:
Associated company - Bisichi Mining PLC 33.4 489 489
Subsidiaries and others including Dragon 33.4 42,598 42,492
Retail Properties Limited
43,087 42,981
68,484 70,364
Current assets
Debtors 33.5 1,025 1,130
Deferred tax due after more than one year 33.9 2,059 2,082
Investments 33.6 19 19
Bank balances 1,233 2,625
4,336 5,856
Creditors
Amounts falling due within one year 33.7 (35,540) (34,790)
Borrowings 33.8 (3,000) (750)
Net current liabilities (34,204) (29,684)
Total assets less current liabilities 34,280 40,680
Creditors
Amounts falling due after more than one 33.8 (13,003) (17,491)
year
Net assets 21,277 23,189
Capital and reserves
Share capital 33.10 8,554 8,554
Share premium account 4,866 4,866
Capital redemption reserve 47 47
Treasury shares 33.10 (145) (145)
Retained earnings 7,955 9,867
Shareholders' funds 21,277 23,189
The loss for the financial year, before dividends was GBP1,771,000 (2016: profit
of GBP1,418,000)
These financial statements were approved by the board of directors and
authorised for issue on 27 April 2018 and signed on its behalf by:
Sir Michael Heller Anil Thapar
Company
Registration No. 341829
Director Director
COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEARED 31 DECEMBER 2017
Retained
earnings
Capital excluding
Share Share redemption Treasury treasury Total
capital premium reserve shares shares equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 January 2016 8,554 4,866 47 (482) 8,803 21,788
Profit for the year - - - - 1,418 1,418
Total comprehensive income - - - - 1,418 1,418
Transactions with owners:
Dividends - equity holders - - - - (136) (136)
Disposal of own shares - - - 119 - 119
Loss on transfer of own shares - - - 218 (218) -
Transactions with owners - - - 337 (354) (17)
Balance at 31 December 2016 8,554 4,866 47 (145) 9,867 23,189
Loss for the year - - - - (1,771) (1,771)
Total comprehensive expense - - - - (1,771) (1,771)
Transaction 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
GBP6.5 million (2016: GBP7.9 million) of retained earnings (excluding treasury
shares) is distributable.
33.1. Company
Accounting policies
The following are the main accounting policies of the Company:
Basis of Preparation
The financial statements have been prepared on a going concern basis and in
accordance with Financial Reporting Standard 101 'Reduced Disclosure Framework'
(FRS 101) and Companies Act 2006. The financial statements are prepared under
the historical cost convention as modified to include the revaluation of
freehold and leasehold properties and fair value adjustments in respect of
current asset investments and interest rate hedges.
The results of the Company are included in the consolidated financial
statements. No profit or loss is presented by the Company as permitted by
Section 408 of the Companies Act 2006.
In these financial statements, the company has applied the exemptions available
under FRS 101 in respect of the following disclosures:
* Cash Flow Statement and related notes;
* Comparative period reconciliations for share capital, tangible fixed assets
and intangible assets;
* Disclosures in respect of transactions with wholly owned subsidiaries;
* Disclosures in respect of capital management;
* The effects of new but not yet effective IFRSs;
* Disclosures in respect of the compensation of Key Management Personnel.
As the consolidated financial statements include the equivalent disclosures,
the Company has also taken the exemptions under FRS 101 available in respect of
the following disclosures:
* IFRS 2 Share Based Payments in respect of Group settled share based
payments;
* The disclosures required by IFRS 7 and IFRS 13 regarding financial
instrument disclosures have not been provided apart from those which are
relevant for the financial instruments which are held at fair value and are
not either held as part of trading portfolio or derivatives.
Key judgements and estimates
The preparation of the financial statements requires management to make
assumptions and estimates that may affect the reported amounts of assets and
liabilities and the reported income and expenses, further details of which are
set out below. Although management believes that the assumptions and estimates
used are reasonable, the actual results may differ from those estimates.
Further details of the estimates are contained in the Directors' Report and in
the Group accounting policies.
INVESTMENTS IN SUBSIDIARIES, ASSOCIATED UNDERTAKINGS AND JOINT VENTURES
Investments in subsidiaries, associated undertakings and joint ventures are
held at cost less accumulated impairment losses.
Fair value measurements of investment properties and investments
An assessment of the fair value of certain assets and liabilities, in
particular investment properties, is required to be performed. In such
instances, fair value measurements are estimated based on the amounts for which
the assets and liabilities could be exchanged between market participants. To
the extent possible, the assumptions and inputs used take into account
externally verifiable inputs. However, such information is by nature subject to
uncertainty. The 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
33.2. Result for the financial year
The Company's result for the year was a loss of GBP1,771,000 (2016: profit of GBP
1,418,000). In accordance with the exemption conferred by Section 408 of the
Companies Act 2006, the Company has not presented its own profit and loss
account.
33.3. Tangible assets
Investment Properties Office
equipment
Leasehold Leasehold and motor
Total Freehold over 50 under 50 vehicles
years years
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost or valuation at 1 January 27,618 8,885 16,744 1,642 347
2017
Additions 17 - - - 17
(Decrease)/increase in present (1,505) - (1,810) 305 -
value of head leases
(Decrease)/increase on (485) 410 (895) - -
revaluation
Cost or valuation at 31 December 25,645 9,295 14,039 1,947 364
2017
Representing assets stated at:
Valuation 25,281 9,295 14,039 1,947 -
Cost 364 - - - 364
25,645 9,295 14,039 1,947 364
Depreciation at 1 January 2017 235 - - - 235
Charge for the year 13 - - - 13
Depreciation at 31 December 2017 248 - - - 248
Net book value at 1 January 2017 27,383 8,885 16,744 1,642 112
Net book value at 31 December 25,397 9,295 14,039 1,947 116
2017
The freehold and leasehold properties, excluding the present value of head
leases and directors' valuations, were valued as at 31 December 2017 by
professional firms of chartered surveyors. The valuations were made at fair
value. The directors' property valuations were made at fair value.
2017 2016
GBP'000 GBP'000
Allsop LLP 20,375 20,860
Directors' valuation 1,825 1,825
22,200 22,685
Add: Present value of headleases 3,081 4,586
25,281 27,271
The historical cost of investment properties was as follows:
Leasehold Leasehold
Freehold over 50 under 50
years years
GBP'000 GBP'000 GBP'000
Cost at 1 January 2017 4,889 13,966 1,939
Cost at 31 December 2017 4,889 13,966 1,939
Long leasehold properties are held on leases with an unexpired term of more
than fifty years at the balance sheet date.
33.4. Other investments
Cost or valuation Shares in Shares in
subsidiary joint Shares in
Total companies ventures associate
GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2017 42,981 42,328 164 489
Impairment provision 106 106 - -
At 31 December 2017 43,087 42,434 164 489
Subsidiary companies
Details of the Company's subsidiaries are set out in note 15. Under IFRS 10,
Bisichi Mining PLC and its subsidiaries and Dragon Retail Properties Limited
are treated in the financial statements as subsidiaries of the Company.
Impairment reflects reduction in value of investment due to receipt of dividend
of GBP15 million from a subsidiary.
In the opinion of the directors the value of the investment in subsidiaries is
not less than the amount shown in these financial statements.
Details of the joint ventures are set out in notes 12 and 13.
33.5. Debtors
2017 2016
GBP'000 GBP'000
Trade debtors 366 343
Amounts due from associate and 33 35
joint ventures
Amounts due from subsidiary 100 150
companies
Other debtors 118 173
Prepayments and accrued income 408 429
1,025 1,130
33.6. Investments
2017 2016
GBP'000 GBP'000
Market value of the listed 19 19
investment portfolio
Unrealised gain of market value 1 1
over cost
Listed investment portfolio at 18 18
cost
All investments are listed on the London Stock Exchange.
33.7. Creditors: amounts falling due within one year
2017 2016
GBP'000 GBP'000
Amounts owed to subsidiary 29,775 28,750
companies
Amounts owed to joint ventures 2,214 2,190
Other taxation and social 278 388
security costs
Other creditors 1,400 1,323
Accruals and deferred income 1,873 2,139
35,540 34,790
33.8. Creditors: amounts falling due after more than one year
2017 2016
GBP'000 GBP'000
Present value of head leases on 3,081 4,586
properties
Term Debenture stocks:
GBP3.75 million First Mortgage - 3,000
Debenture Stock 2018 at 11.6 per
cent
GBP10 million First Mortgage 9,922 9,905
Debenture Stock 2022 at 8.109
per cent*
9,922 12,905
13,003 17,491
*The GBP10 million debenture is shown after deduction of un-amortised issue
costs.
Details of terms and security of overdrafts, loans and loan renewal and
debentures are set out in note 21.
Repayment of borrowings: 2017 2016
GBP'000 GBP'000
Debentures:
Repayable within one year 3,000 750
Repayable between two and five years 9,922 3,000
Repayable in more than five years - 9,905
12,922 13,655
33.9. Deferred tax asset
2017 2016
GBP'000 GBP'000
Deferred Taxation
Balance at 1 January 2,082 3,055
Transfer to profit and loss (23) (973)
account
Balance at 31 December 2,059 2,082
The deferred tax balance comprises the following:
Accelerated capital allowances (833) (823)
Short-term timing differences (124) (124)
Revaluation of investment 66 100
properties
Loss relief 2,950 2,929
Deferred tax asset at year end 2,059 2,082
33.10. Share capital
Details of share capital, treasury shares and share options are set out in note
26.
33.11. Related party transactions
Cost Amounts Advanced
recharged owed to
to (by) by (to) (by)
related related related
party party party
GBP'000 GBP'000 GBP'000
Related party:
Dragon Retail Properties Limited
Current account (95) (i) (214) -
Loan account - (2,000) -
Bisichi Mining PLC
Current account 138 (ii) 33 -
Simon Heller Charitable Trust
Current account (63) - -
Loan account - (700) -
Directors and key management
M A Heller and J A Heller 15 (i) 1 -
H D Goldring (Delmore Holdings Limited) (15) (iii) - -
C A Parritt (18) (iii) (4) -
R Priest (35) (iii) - -
Totals at 31 December 2017 (73) (2,884) -
Totals at 31 December 2016 (84) (2,916) (34)
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 GBP2 million at 6.875 per
cent annual interest.
Bisichi Mining PLC - The company has 41.52 per cent ownership of 'Bisichi'.
Other details of related party transactions are given in note 28.
33.12. Employees
2017 2016
The average weekly number of employees of the company during
the year were as follows:
Directors & Administration 24 25
Staff costs during the year were 2017 2016
as follows:
GBP'000 GBP'000
Salaries 1,375 1,474
Social Security costs 163 178
Pension costs 119 135
1,657 1,787
33.13. Capital commitments
There were no capital commitments at 31 December 2017 (2016: GBPNil).
33.14. Operating and finance leases
At 31 December 2017 the Company had commitments under non-cancellable operating
leases on land and buildings as follows:
2017 2016
GBP'000 GBP'000
Expiring in more than five years 1,440 1,680
In addition, the Company has an annual commitment to pay ground rents on its
leasehold investment properties which amount to GBP201,000 (2016: GBP246,000).
Present value of head leases on properties
Present value
Minimum lease of minimum
payments lease payments
2017 2016 2017 2016
GBP'000 GBP'000 GBP'000 GBP'000
Within one year 201 294 201 294
Second to fifth year 803 1,177 746 1,094
After five years 15,483 28,298 2,134 3,198
16,487 29,769 3,081 4,586
Future finance charges on (13,406) (25,183) - -
finance leases
Present value of finance lease 3,081 4,586 3,081 4,586
liabilities
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:
33.15. Contingent liabilities and post balance sheet events
There were no contingent liabilities at 31 December 2017 (2016: GBPNil).
Five year financial summary
2017 2016 2015 2014 2013
GBPM GBPM GBPM GBPM GBPM
Portfolio size
Investment properties-LAP^ 62 89 89 89 87
Investment properties-joint - - 19 20 16
ventures
Investment properties-Dragon 3 3 3 3 3
Retail Properties
Investment properties-Bisichi 13 13 13 12 12
Mining^
78 105 124 124 118
Portfolio activity GBPM GBPM GBPM GBPM GBPM
Acquisitions - - 1.00 0.68 -
Disposals - - (0.40) - (9.47)
Capital Expenditure - 0.16 0.36 - -
- 0.16 0.96 0.68 (9.47)
Consolidated income statement GBPM GBPM GBPM GBPM GBPM
Group income 44.98 29.70 32.67 33.53 43.29
Profit/(loss) before tax 11.28 (0.97) (2.09) (2.69) 1.14
Taxation (2.98) (1.18) 0.04 (3.70) 2.55
Profit/(loss) attributable to 7.69 (2.36) (1.90) (7.14) 3.47
shareholders
Earnings/(loss) per share - 9.01p (2.77)p (2.24)p (8.45)p 4.12p
basic and diluted
Dividend per share 0.300p 0.165p 0.160p 0.156p 0.125p
Consolidated balance sheet GBPM GBPM GBPM GBPM GBPM
Shareholders' funds attributable 45.86 38.24 40.08 42.55 49.73
to equity shareholders
Net borrowings 58.42 62.22 62.39 59.71 53.96
Net assets per share 53.74p 44.83p 47.26p 50.35p 59.00p
- basic
53.74p 44.83p 47.26p 50.35p 59.00p
-
fully diluted
Consolidated cash flow statement GBPM GBPM GBPM GBPM GBPM
Cash generated from operations 10.29 5.59 4.37 2.96 12.23
Capital investment and financial (1.80)) (0.18) (2.77) 100.42 4.35
investment
Notes:
^ Excluding the present value of head leases
END
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