FOR IMMEDIATE RELEASE
30 June 2020
LONDON & ASSOCIATED PROPERTIES PLC
(“LAP”):
ANNUAL RESULTS FOR 12 MONTHS TO 31 DECEMBER
2019
HIGHLIGHTS
- Following lock-down, most of our properties have now reopened
and appropriate safety measures have been put in place. We expect
the few units that remain closed to reopen in July.
- Rent collection for the March quarter currently 64%
- £9.5 million sale of a retail unit on Fargate in Sheffield to Metro Bank
- Reduction in LAP borrowings (excluding Bisichi and Dragon) of
£14.6 million to £30.8 million
- £28.3 million term loan repaid
- New £14 million loan secured against Orchard Square,
Sheffield completed
- Result reflects previously reported loss on Harrogate joint venture (£1.7 million)
following decision not to inject further capital into the
project.
- Group loss for the year before taxation was £4.5 million, after
reflecting a £4.7 million write-down of investment and trading
property. (2018: £1.3 million profit after £2.6 million property
valuation decrease)
- Asset management initiatives continuing to improve
marketability of Orchard Square, Sheffield which has had strong recent lettings
with rental levels proving resilient.
- Bisichi profit before tax of £3.0 million.
- No dividend recommended until such time as the effects of the
COVID-19 lock-down are better understood.
“We have now entered a totally new chapter in economics. The
effect of the coronavirus has been severe and is continuing to
cause massive disruption across the UK. As the lockdown continues
to be relaxed we feel that the location and quality of our
portfolio remains a key advantage going forward.” Sir Michael Heller, Chairman, and John Heller, Chief Executive.
Contact:
London & Associated
Properties PLC Tel: 020 7415
5000
John Heller, CEO or Jonathan Mintz, Finance Director
Baron Phillips
Associates
Tel: 07767 444193
Baron Phillips
Chairman’s statement and Chief Executive’s review 2019
While this statement focuses on LAP’s performance in 2019, all
eyes are currently on the outbreak of Covid-19 and its far-reaching
impact on every aspect of the economy, including real estate.
COVID-19 UPDATE
At LAP, our first priority will always be the health and safety
of our staff, particularly those who will come into contact with
members of the public on a daily basis. Our operational response to
the virus was swift and decisive and we ensured that our staff were
isolated from the public wherever possible, even before the
lockdown was announced on 23rd March. Since the lockdown, we have
shuttered a number of our retail assets that have no essential
retailers, and worked with both our staff and tenants to minimise
contact where shops or takeaways have remained open.
Rent collection on the week around the March quarter day was
approximately 50% (of £1.8m billed), rising to around 55% within a
month. This compares with 65% around the March quarter day in 2019.
We are working hard with our managing agents to agree plans with
our tenants that will allow them to pay rent over time. In some
cases, this may be after they have reopened and been trading for a
period. Many of our tenants are eligible for grants and we are
working with them to access the grants that will enable them to
continue to trade and pay the rent. Tenants owing around £600k
have, so far, not engaged satisfactorily and are being pursued,
although our efforts are being hampered by the current
Government-imposed moratorium on legal action against tenants.
While March quarter day showed a significant drop in collection
rates, we are bracing ourselves for a markedly lower level of
collections in June. Almost all our tenants will have been closed
since mid-March and this will have had a serious effect on their
liquidity. We will again work with them to ensure that they are
able to survive and pay us in due course.
So far, none of our tenants has commenced an insolvency
procedure and all rents remain due and payable.
Currently we have unencumbered property worth £4.0m and
unencumbered cash reserves of £4.3m. This money had been earmarked
for future investment, although all non-essential capital
expenditure is currently on hold to maintain sufficient liquidity
to ensure that we can survive this lockdown.
We have not furloughed any head office staff. This is in part
due to our decision to outsource much of our day-to-day property
management to Carter Towler, a firm
of chartered surveyors in Leeds.
This move is cash neutral at day one, although we anticipate that
it will lead to substantial savings in due course as we are able to
reduce head office costs and other expenses. This change means that
a previously fixed cost has been converted to a variable cost which
will fluctuate with rental income. Our experience of the quality of
the outsourcing services provided has been positive to date.
We will now turn to our 2019 results.
CONSOLIDATED RESULTS
2019 was a difficult year for real estate generally as political
uncertainty weighed on investor sentiment. This was particularly
acute in retail property as investors shied away from shopping
centres particularly
in mid-market towns with low levels of differentiation.
Our own property portfolio was revalued at £47.9m compared to
£50.7m the year before. This 5.5% drop is a creditable performance
given underlying negative sentiment towards the retail sector. We
have suffered less than many as a result of focusing primarily on
value orientated locations which continue to remain relevant and
where tenants have been better able to avoid insolvency
procedures.
Net assets fell from £55.7m to £49.1m. This reflects the
reduction in the value of the property portfolio of £3.0m and the
loss relating to our investment in Project Harrogate of £1.7m.
These items together with other gains of £0.2m and a nil profit
before revaluations (2018: £3.7m) led to a loss before tax of £4.5m
compared with a profit of £1.3m for the same period last year.
DEBT MANAGEMENT
More positively we have reduced our borrowings by £15.4m to
£41.2m improving gearing from 70.5% to 65.0%.
Our five year loans with Santander and Europa Mezzanine Finance
expired in May 2019. Although these
loans initially had totalled £45.0m, they had been paid down to a
combined £28.3m by the start of 2019. The loans were further
reduced to £18.3m following the disposal of part of our shopping
centre in Sheffield in
July 2019, which we describe more
fully below.
Many consider that the lending market for retail property
reached a low during 2019. However, following an extensive review
of all lenders still willing to finance retail property assets, we
were able to agree terms with clients of PMM, specialist lenders,
to refinance Orchard Square in Sheffield with a new £14m loan at an all-in
rate of 6.95%. Although this debt is significantly more expensive
than the previous loan on this asset, the new financing reflects
the market and it should be noted that this was one of the only
loans to be made against a shopping centre during the whole of
2019. Our successful refinancing reflects the quality of the asset
as well as our strong reputation for asset management, allied to
the fact that we have never defaulted on a loan.
The balance of the outstanding Santander loan was repaid from
our cash resources leaving Wickersley uncharged. We have, however,
since the financial year end, charged £2.35m of the Wickersley
property to Metro Bank to enable us to access £2.27m of cash held
by them in a locked account.
LAP PROPERTY ACTIVITIES
Orchard Square, Sheffield
While progressing with our efforts to develop this site for
realisation, we have continued to manage it actively. Progress has
been satisfactory, particularly given the harsh trading backdrop
for shopping centres.
The most significant deal that we completed was the disposal of a
long-leasehold interest, for £9.5m, of our unit on Fargate –
previously let to River Island at
£0.5m a year. The buyer was Metro Bank, who will occupy the unit as
a flagship bank at ground level with offices throughout the
remainder of the building.
As part of the development process we continue to reposition
Orchard Square towards experiential retail, in particular food and
beverage. We were carrying out works to create a street food market
when the lockdown was announced. The management contract to operate
this market is under offer to an established and successful market
operator with experience of South
Yorkshire and we expect to conclude this contract once the
lockdown is lifted.
As part of the repositioning we have let two units at first
floor adjacent to a large terrace to two restaurant operators. This
includes an existing successful independent restaurateur who has
opened a wood-fired pizza restaurant and a new venture that is
selling macaroni cheese. Both units opened just before the lockdown
and initial trading was strong.
We also commissioned a large mural at first floor level to
improve the public realm and appeal to a different type of
consumer. The mural has received much positive media coverage.
Manor Park, Runcorn
We have had a successful year at Manor Park where we own eight
freehold industrial units. During 2019 and the early part of 2020,
we completed an extension of the 16,500 sq. ft. unit let to
Bay-Lynx to add a further 6,000 sq. ft. As part of the deal, we
have signed a new 10 year lease, with a 5 year break, at a rent
which is some 25% higher than before.
This is the first deal that we have completed for a different
asset class, where we have used the skill set which, for many years
we have applied to investing in multi-let retail. We believe that
this demonstrates the transferability of these skills and we look
forward to completing further similar transactions in the future
both at Manor Park and in other investments.
We also completed the re-gear of a lease on another unit and are
about to refurbish a large self-contained unit which the tenant
vacated towards the end of the year. We have received strong
interest in the unit and are confident that not only will it be let
quickly but also that we should see positive rental growth.
West Ealing
We acquired this residential development site in West Ealing in
a joint venture with Bisichi plc and Metroprop, a developer, in
2018. Following a long pre-application process with Ealing Council,
we have now submitted a planning application to develop 54 flats
with ground floor retail. The application has been well received
and we are negotiating some design details with the Council. The
lockdown has interrupted the planning process but we expect to make
progress over the next few months.
West Bromwich
This shopping centre continues to trade at full occupancy
although there is some turnover of traders as is usual in a
community-orientated shopping centre with a number of independent
retailers. Prior to the lockdown, we had not struggled to find new
occupiers.
In addition, Superdrug renewed their lease albeit at a rent some
45% lower than that agreed in 2009. Similarly, Bon Marche opted to
keep their store following their administration in October at a
rent some 19% lower than was previously passing.
Brixton
In July we completed the sale of 414 Coldharbour Lane in
Brixton, the final asset from the Ocean Portfolio which we had
acquired in 2005. We received £2.35m compared to a 2018 book value
of £1.25m. The buyer was the same as for Brixton Markets the
previous year.
As this property formed part of the collateral pledged to Metro
Bank, the net cash receipts of £2.25m were held on deposit, but, as
noted above, this cash has been released as a result of part of
Wickersley being added to the collateral for the loan.
Project Harrogate
In May 2019, LAP announced that
its partner, Oaktree Capital Management, had declined to inject
further cash into the joint venture to cure a loan-to-value breach
following the annual revaluation in March. As a result, the
mezzanine lender, DRC, exercised its right to take over the equity
of the joint venture and our stake became worthless. This has led
to a write down of £1.7m. This was a most unsatisfactory end to
what had been a reasonable performance of the shopping centres
against strong retail headwinds and reflected the poor investment
market for secondary shopping centres.
Following a refinancing in December
2017, in which we declined to participate, Oaktree owned
approximately 97% of the equity and we were therefore unable to
influence the decisions that led to the ultimate loss of
control.
DRAGON RETAIL PROPERTIES
Dragon had a good year as Boots the chemist, its principal
tenant, signed a new 10 year lease with a 5 year break at £93,000
per annum, a 1.1% increase over the previous passing rent. This was
an excellent result in the current retail climate. Dragon has a
£1.2m loan against this property which expires in September 2020. We are talking to Santander, the
existing lender, about a new loan or a short extension to enable us
to refinance in an orderly manner. I will update shareholders on
progress in due course.
BISICHI PLC
Bisichi PLC benefited from improved coal prices and stable
operating costs but these advantages were offset by lower coal
production and adverse exchange rates. This resulted in an
operating profit before depreciation, fair value adjustments and
exchange movements (adjusted EBITDA) of £7.4m, as compared with the
£9.1m achieved in 2018.
Looking forward is more difficult. Bisichi’s South African coal
mining and processing operations have been designated as essential
business operations, which has allowed the Group’s operations to
continue during lockdown periods, although with a reduced or
socially distanced workforce to help safeguard the health and
safety of our employees. In terms of the coal markets, Bisichi has
seen the significant downturn in economic activity related to the
Covid-19 pandemic have an impact on overall demand for coal in the
international market. However, demand for their particular coal in
the domestic market has to date remained more stable. The duration
and extent of the impact of the Covid-19 pandemic on the Bisichi
South African operations, particularly in terms of their coal
markets, remains uncertain. Similarly, the pandemic may have a
significant impact on rental revenue collections from Bisichi’s UK
retail property portfolio, which is managed by LAP.
Bisichi continues to do all it can to ensure that the health and
safety of its employees and stakeholders are protected and that its
operations can continue in an efficient manner. In the
circumstances, the directors of Bisichi have decided that they will
not be recommending a dividend for the financial year ending
31 December 2019, although they will
keep this position under review in the coming months depending on
how the situation evolves. LAP’s share of the dividend in 2019 was
£266,000.
Summary
As mentioned above we have now entered a totally new chapter in
economics. The effect of the coronavirus has been severe and is
continuing to cause massive disruption across the UK. As the
lockdown continues to be relaxed we feel that the location and
quality of our portfolio remains a key advantage going forward.
Sir Michael
Heller,
John Heller,
Chairman
Chief Executive
29 June 2020
STRATEGIC
REPORT
Financial and performance review
The financial statements for 2019 have been prepared to reflect
the requirements of IFRS 10. This means that the accounts of
Bisichi PLC (a London Stock Exchange main market quoted company –
BISI) (“Bisichi”), have been consolidated with those of LAP.
Bisichi continues to operate as a fully independent company and
currently LAP owns only 41.52% of the issued ordinary share
capital. However, because related parties also have shareholdings
in Bisichi and there is a wide disposition of other shareholdings,
LAP is deemed under IFRS 10 to have effective control of Bisichi
for accounting purposes. This treatment means that the income and
net assets of Bisichi are disclosed in full and the value
attributable to the “non-controlling interest” (58.48%) is shown
separately in the equity section as a non-controlling interest.
There is no impact on the net assets attributable to LAP
shareholders.
Dragon Retail Properties Limited (“Dragon”) and West Ealing
Projects Limited (West Ealing), are both 50:50 joint ventures with
Bisichi and are also consolidated. Shareholders are aware that LAP
is a property business with a significant investment in a listed
mining company. The effect of consolidating the results, assets and
liabilities of the property business and the mining company make
the figures complex and less transparent. Property company accounts
are already subject to significant volatility as valuations of
property assets as well as derivative liabilities can be subject to
major movements based on market sentiment. Most of these changes,
though, have little or no effect on the cash position and it is, of
course, self-evident that cash flow is the most important factor
influencing the success of a property business. We explain the
factors affecting the property business first, clearly separating
these from factors affecting the mining business which we do not
manage. Comments about Bisichi (the mining business) are based on
information provided by the independent management of that
company.
This report comments on the performance of each of the Group’s
segments separately.
LONDON & ASSOCIATED
PROPERTIES PLC
LAP’s main objectives in 2019 have been to:
- Continue to provide environments in
which tenants can thrive.
- Improve the business’ operating
cashflow on an ongoing basis.
- Reduce exposure to the retail
sector.
- Ensure gearing is at an appropriate
level.
- Maintain sufficient cash in the
business to enable it to react to opportunities when they
arise.
During 2019, as a result of ongoing negative market sentiment in
the retail property sector, sensible investment opportunities have
been limited, so LAP has sought to reduce its gearing levels.
During the year the following key actions have been taken to
meet these objectives:
- Sale
of part of the Sheffield
development property, which has reduced LAP’s exposure to the
retail sector, in particular mid-market fashion retail, and enabled
LAP to reduce its debt by £9.3m.
- Refinancing, in September 2019, of the debt outstanding against
the Sheffield property, with a new
£14m facility, the details of which are shown in note 18.
- As part of this refinancing £3.5m of
cash was utilised to unencumber another property secured against
this loan, further improving LAP’s gearing.
- Sale
of the remaining property in Brixton, in July 2019, for £2.35m. This cash was held as
security by the lender on the Brixton property at 31 December 2019. In May
2020, this cash was released to LAP, with a further property
being substituted as security, improving liquidity.
- Outsourcing LAP’s property management
activities to a third party provider, while retaining key strategic
management. This is part of ongoing efforts to reduce overheads and
improve operating cashflow. The full benefit of these changes is
not expected to
be seen until late 2020 and beyond.
- Development of the largest asset,
Orchard Square, Sheffield, to
refocus its use, reflecting the changing ways in which the public
interacts with the city centre. In the current early stages of
development, this is being achieved using existing cash
resources.
As the business moves into 2020, on a more stable financial
footing as a result of these actions, the key objectives remain the
same.
The business continues to look for investment opportunities,
particularly within the industrial sector and is taking further
actions to improve its efficiency and its operating cashflow. The
business continues to develop and refurbish its properties to
provide environments in which tenants can thrive.
Income Statement
|
2019
£’000 |
2018
£’000 |
BUSINESS ANALYSIS |
|
|
Rental income |
4,813 |
5,049 |
Service charge income |
628 |
802 |
Proceeds from sale of trading properties |
9,500 |
– |
Management income from third party properties |
607 |
718 |
LAP Revenue |
15,548 |
6,569 |
Direct property costs |
(1,823) |
(2,269) |
Impairment of inventory |
(1,750) |
– |
Costs of sale of trading properties |
(10,491) |
– |
Overheads |
(3,230) |
(4,035) |
Depreciation |
(215) |
(9) |
Operating (loss)/profit |
(1,961) |
256 |
Finance income |
58 |
37 |
Finance expenses |
(2,552) |
(3,111) |
Result before valuation movements |
(4,455) |
(2,818) |
Other segment items |
|
|
Net decrease on revaluation of investment
properties |
(1,498) |
(2,170) |
Decrease in value of other investments |
(1,749) |
– |
Adjustment to interest rate derivative |
169 |
265 |
Revaluation and other movements |
(3,078) |
(1,905) |
LAP loss for the year before taxation |
(7,533) |
(4,723) |
Note: The figures exclude inter-company transactions.
LAP generates the majority of its income from property rentals,
property management fees and development activities.
Rental income is down £236,000 year on year, although like for
like rental income is up by £13,000, 0.3%, which in view of market
conditions is a positive result.
In July 2019, part of our
development property in Sheffield
was sold for £9.5m. This was previously held at £10.3m, being the
agreed sale price, less costs, at the date of the last Annual
Report. The subsequent reduction in sales price has resulted in a
trading loss of £1.0m. The gross revenue of £9.5m and total cost of
the sale of £10.5m are shown in the Income Statement. The value of
the Sheffield property, which is
held as inventory, was reduced by £1.75m at 31 December 2019.
Net property costs after taking into account costs recovered
through service charges have decreased by £0.3m to £1.2m, mostly as
a result of the sale of Brixton Markets in 2018.
Overheads have reduced by £0.8m in the year to £3.2m. Lower
Directors’ bonuses in LAP of £0.7m (pre employers NIC) accounted
for the majority of this. Following the adoption of IFRS 16 in
2019, £0.2m of office rent payments are no longer recognised as an
overhead cost, rather the right-of-use asset created at
1 January 2019 has been depreciated
by £0.2m in the year and an interest charge of £0.047m recognised
on the lease liability.
Finance expenses have reduced by £0.6m, predominantly due to the
reduction in total debt of LAP, following the sale of part of
Sheffield, the subsequent
repayment of debt held against that property and then the
refinancing of this debt package.
Revaluation movements in the year include a £1.5m decrease
(4.3%)
in the value of investment properties to £33.7m. This was driven by
increasing yields in the year, within the retail property sector,
with
a more minor impact from reduced rental values.
Revaluation movements in the year also include the previously
announced write off of LAP’s investment with Oaktree Capital
Management (HRGT Shopping Centres LP) of £1.7m. This is explained
in the Statement by the Chairman and Chief Executive. LAP acted as
asset and property manager of the properties in the joint venture.
Its annual gross fees of approximately £0.4m ended when our
management agreement was terminated in September 2019. This is reflected in management
income from third parties in the segmental analysis for 2019 in
note 1. While the impact of this loss in income has been mitigated
in 2020 by an overhead reduction arising from the outsourcing of
our day to day management role to a new provider, it is still
expected to have a net negative impact of approximately £0.2m in
2020.
Excluding the loss on sale and the impairment of trading
properties in the year, the adjusted loss before valuation
movements was £1.7m. This excludes management income and dividends
received from Bisichi. Reducing this loss through the activities
described above and generating more rental income remains a key
focus for the business.
BALANCE SHEET
|
2019
£’000 |
2018
£’000 |
Segment assets |
|
|
- Non-current assets – property |
33,718 |
35,011 |
- Non-current assets – property, plant &
equipment |
946 |
106 |
Assets held for sale |
– |
2,285 |
Trading assets |
26,915 |
38,556 |
- Cash & cash equivalents |
5,709 |
11,345 |
- Non-current assets – other |
– |
1,748 |
- Current assets – others |
686 |
1,947 |
Total assets excluding investment in joint
ventures, assets held for sale and trading |
67,974 |
90,998 |
Segment liabilities |
|
|
Borrowings |
(30,764) |
(45,352) |
Current liabilities |
(5,750) |
(6,372) |
Non-current liabilities |
(3,156) |
(3,122) |
Total liabilities |
(39,670) |
(54,846) |
Net assets |
28,304 |
36,152 |
Note: The figures exclude inter-company transactions.
The reduction in non-current property assets is largely as a
result
of a £1.5m (4.3%) reduction in the valuation of LAP’s investment
properties.
The increase in property, plant and equipment follows the
inclusion under IFRS 16 of a value for the rented head office
building occupied by the Company. This was reclassified as an asset
valued at £1.054m on 1 January 2019
and has been depreciated by £0.211m in the year, having a net book
value of £0.843m at 31 December 2019.
The present value of future rentals of £0.861m is included within
liabilities.
In May 2019, LAP sold its Brixton
property for £2.35m, shown as an asset held for sale in 2018. After
costs there was no profit or loss on this transaction as the gain
had been reflected in the 2018 accounts
Trading assets include Sheffield Orchard Square, which is
currently being developed for sale and a residential development
property in West Ealing. Both of these properties are held at the
lower of cost and net realisable value.
The reduction to zero in the value of the other non-current
assets relates entirely to the HRGT Shopping Centres LP joint
venture and is discussed above.
Borrowings have reduced by £14.6m. We repaid loans to Santander
(£21.5m) and Europa (£6.8m) which had a blended interest rate of
5.33%. As part of this debt repayment a new non-recourse loan of
£14.0m was placed, with Phoenix CRE Sàrl, at a current interest
rate
of 6.95%. The loan has a minimum and maximum LIBOR agreement
limiting the interest rate to between 6.95% and 7.45%. The increase
in the interest rate of the new loan reflects the market for retail
property lending in the UK currently.
LAP’s debt now consists of the £14m facility expiring in
September 2022, a debenture of £10m
repayable in August 2022 and a £3.9m
facility expiring in 2028. As in previous years, all loans and
debentures are secured on core property and cash deposits and are
covenant compliant at the year end.
Gearing |
2019
£’000 |
2018
£’000 |
Total borrowings |
30,764 |
43,352 |
Less cash and cash equivalents |
(5,709) |
(11,345) |
Net borrowings |
25,055 |
32,077 |
Total Equity |
28,304 |
36,152 |
|
88.5% |
88.7% |
The business has not set a target gearing level but monitors its
debt and asset values constantly to maintain an appropriate level,
taking into account market sentiment, the availability and cost of
debt and cash flow forecasts.
Cash flow
CASH FLOW FROM OPERATIONS |
2019
£’000 |
2018
£’000 |
Cash inflows / (outflows) from operating
activities |
9,295 |
(272) |
Cash inflows from investing activities |
2,471 |
27,058 |
Cash outflows from financing activities |
(17,402) |
(17,550) |
Net (decrease) / increase in cash and cash
equivalents |
(5,636) |
9,236 |
|
|
|
Cash and cash equivalents at 1 January |
11,345 |
2,109 |
Cash and cash equivalents at 31 December |
5,709 |
11,345 |
Note: The figures within the LAP cashflow include inter-company
transactions.
Cash inflows from operating activities in 2019 include net sale
proceeds of £9.3m from the part sale of the Sheffield development property in July 2019. Other operating cashflow was at
break-even.
Investing activities include:
- The sale of Coldharbour Lane Brixton
for £2.35m before costs
in May 2019.
- No substantial acquisitions were made
in 2019.
Financing activities include:
- The full repayment of the remaining
Santander and Europa loans of £28.3m in September 2019.
- A new £14.0m, 3 year term loan in
September 2019, with
Phoenix CRE Sàrl, at 5.95% above LIBOR where LIBOR has a minimum
and maximum rate of 1.0% and 1.5% respectively.
WEST EALING PROJECTS LIMITED
West Ealing is a 50:50 joint venture between LAP and Bisichi
created with the purpose of delivering a primarily residential
development in West Ealing, London. The joint venture owns 90% of the
property which is under development and on which £6.67m has been
spent to date. There is a linked development loan of £3.61 million,
described further in note 18.
Bisichi plc (Formerly Bisichi Mining PLC)
Although the results of Bisichi PLC have been consolidated in
these financial statements, the Board of LAP has no direct
influence over the management of Bisichi. The comments below are
based on the published accounts of Bisichi.
The Bisichi group results are stated in full in its published
2019 financial statements which are available on its website
www.bisichi.co.uk.
Bisichi has two core revenue streams – investment in retail
property in the UK and coal mining in South Africa.
The Bisichi group profit before tax reduced to £3.0m (2018:
£6.1m) mainly due to lower coal production and sales from the South
African operations as well as a weakening in the South African Rand
to UK Sterling. The weakening of the Rand offset the higher prices
achieved for coal and stable operating costs achieved in 2019.
UK retail property investments were valued at the year end at
£11.75m (2018: £13.23m). The property portfolio is actively managed
by LAP and generated rental income of £1.2 million in the year
(2018: £1.1 million).
Bisichi has a South African structured trade finance facility
with Absa Bank Limited for R100million (South African Rand) which
covers the fluctuating working capital requirements of the South
African operations. As part of the process and sale of the washing
plant facilities from Black Wattle Colliery (Pty) Limited to its
wholly owned subsidiary Sisonke Coal Processing (Pty) Limited
(“Sisonke Coal Processing”), the R100million bank overdraft
facility held by Black Wattle Colliery (Pty) Limited with Absa Bank
Limited at 31 December 2018 was
replaced in January 2019 by a new
structured trade finance facility for R100million held by Sisonke
Coal Processing (“new trade facility”). The new trade facility is
renewable annually at 25 January and is secured against inventory,
debtors and cash that are held in the South African operations.
In December 2019, Bisichi repaid
its £5.84million loan facility with Santander Bank PLC and signed a
new £3.96million term loan facility with Julian Hodge Bank Limited.
The new debt package has a five year term and is repayable at the
end of the term in December 2024. The
interest cost of the loan is 4.00% above LIBOR. The loan is secured
by way of a first charge over the investment properties in the UK
which are included in the financial statements at a value of
£11,565,000. No banking covenants were breached by the group during
the year.
The reduction in operating profit impacted cash flow negatively
by £1.7m although this was offset by a saving in income tax paid of
£1.1m. Additional investment in working capital of £1.9m as
compared with last year’s investment of £1.6m meant that operating
cash flow was £3.7m as compared with £4.8m. Additional asset
purchases including extra reserves and investments totalling £3.8m,
net repayment of borrowings £2.1m and dividends paid (£0.6m)
resulted in a reduction in cash resources of £2.8m.
The Bisichi group’s financial position remains strong. Its net
assets at 31st December 2019 were
£20.6 million (2018: £20.1 million). The group expects to continue
achieving significant value in 2020 from its existing mining
operation.
Bisichi continues to seek to expand its operations in
South Africa through the
acquisition of additional coal reserves. In the UK, management is
looking forward to progressing its development in West Ealing and
is currently investigating other major investment opportunities in
the domestic property sector. This is in line with Bisichi’s
overall strategy of balancing the high risk of the mining
operations with a dependable cash flow and capital appreciation
from the UK property investment operations.
DRAGON RETAIL PROPERTIES LIMITED
Dragon is a UK property investment company. The company has a
Santander bank loan of £1.2m secured against its investment
property, see note 18. It paid management fees of £88,000 (2018:
£72,000) split equally between the two joint venture partners. Its
results continue to be near breakeven after taxation. Dragon has
net assets of £1.6m (2018: £1.5m).
ACCOUNTING JUDGEMENTS AND GOING CONCERN
The most significant judgements made in preparing these accounts
relate to the carrying value of the properties, investments and
interest rate hedges. The hedges have been valued by the hedge
provider. The Group uses external property valuers to determine the
fair value of most of its properties.
Under IFRS10 the Group has included Bisichi 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. Further disclosure of specific factors affecting going
concern are discussed in more detail in the going concern section
of the group accounting policies of the financial statements. In
addition, the Directors consider that Note 21 to the financial
statements sets out the Group’s objectives, policies and processes
for managing its capital; its financial risk management objectives;
details of its financial instruments and hedging activities; and
its exposure to credit risk, liquidity risk and other risks.
STATEMENT REGARDING SECTION 172 OF THE UK COMPANIES ACT
Section 172 of the UK Companies Act requires the Board to report
on how the directors have had regard to the matters outlined below
in performing their duties. During the year, the Directors consider
that they have acted in a way, and have made decisions that would,
most likely promote the success of the Group for the benefit of its
members as a whole as outlined in the matters below:
- The likely consequences of any
decision in the long term: see Principal Activity, Strategy &
Business Model and Risks and Uncertainties on pages 10 to 11;
- The interests of the Group’s
employees; ethics and compliance; fostering of the Company’s
business relationships with suppliers, customers and others; and
the impact of the Group’s operations on the community and
environment: see Corporate Responsibility and Sustainability
reports on pages 13 to 14;
- The need to act fairly between members
of the Company: see the Corporate Responsibility section on page
14;
- The desirability of maintaining a
reputation for high standards of business conduct: see the
Corporate Governance section on pages 19 to 20
Covid-19 update
LAP
At this time, our main priority is the health and safety of our
staff,
tenants and the public. For that reason properties have been closed
in line with government guidance, as described further in the
Chairman’s statement and Chief Executive’s Review.
We have received 64% of all rent in relation to the March
quarter and we are expecting a similar amount to be paid in respect
of the June quarter. Excluding VAT, LAP would normally expect to
receive circa £1.2m in rent each quarter.
LAP has unencumbered cash of £4.3m currently, all of which is
held in UK bank accounts. There are no barriers, taxes or other
costs to be paid in accessing this cash. The cash is available to
meet any shortfalls brought about by the impacts on the business of
COVID -19. These may include:
- Delayed tenant payments
- Unpaid debt due to tenant
insolvencies
- Additional costs to ensure our
properties are safe for use
We are working with our tenants so that they pay their
obligations to us when they are financially able. Many tenants are
eligible for the various Government schemes set up in the wake of
the Coronavirus pandemic and we are supporting them in accessing
these, including:
- Coronavirus Job Retention Scheme
- Business Rates Relief
- Business Support Grant Funds
- Coronavirus Business Interruption Loan
Scheme
- Coronavirus Bounce Back Loan
- Deferral of VAT payments
LAP has conducted a range of cashflow scenario testing and
believes that its existing available cash resources are sufficient
to meet its obligations, even in, what the Directors consider, is
the worst case scenario. The Directors are of the opinion that LAP
does not require additional funding to meet the cash impact of
COVID-19 on the business.
LAP has no overdraft facility or undrawn credit lines and has
three existing borrowing arrangements all of which are secured
against its properties. No banking covenants have been breached and
LAP has met all of its obligations under its agreements with
lenders. The Directors see no impediment to LAP continuing to meet
its obligations to lenders in the future.
LAP currently has unencumbered properties, valued at
31 December 2019 at circa £4m.
To mitigate the cash impact of COVID-19 on the business, LAP is
managing its expenditure until such time as the Directors consider
the risks to have sufficiently subsided.
- The Directors are not recommending a
final dividend for the current financial year.
- A number of staff located at our
properties have been furloughed.
- VAT payments have been deferred in
line with the amended rules
- All refurbishment and development
capital expenditure has been suspended and projects placed on hold.
There will be no material additional cost to the business of doing
this.
- We have actively reduced spending
where possible following the cessation of trading at our
properties. This will result in lower service charge costs for our
tenants and a saving for the business on any vacant properties.
- Material property acquisitions are on
hold.
The Directors have produced a four year cashflow forecast with
varying scenarios examining the sensitivity of LAP’s liquidity to
the following variables:
- Length of duration of COVID-19’s
impact on the business
- Value of delayed receipts from tenants
over that period
- Length of duration of delayed receipts
from tenants
- Loss in cash receipts from tenants
never settling their lease obligations
- Volume of tenants going into
insolvency or administration and
the length of time expected to re-let the property
The Directors have taken into consideration our experiences of
tenant payments to date, information received directly from tenants
about their financial position and expectations of our tenants’
future trading. The Directors anticipate that the effects of the
closure of some of our properties will have a permanent effect on
the results of the business in 2020 although are unable to estimate
the quantum at this stage.
LAP has three principal loans, as described in note 18, with the
below maturity dates:
- £10m
Debenture
August 2022
- £14m term
loan
September 2022
- £3.9m term
loan
September 2028 (Bank break
September 2023)
The £10m debenture and £3.9m term loan have remained compliant
after the year end and are anticipated to continue to do so, based
on the scenario forecasting.
The £14m term loan was covenant compliant in April 2020, but due to lower tenant receipts in
March and April following the COVID-19 lockdown there was
insufficient cash in the subsidiary for it to meet its obligation
to the lender. The Board agreed with the lender that the LAP Group
will fund its subsidiary’s obligations under the loan agreement in
April and is putting in place the same arrangement for July 2020.
The Directors are satisfied that LAP has sufficient liquidity to
meet its obligations under any of the scenarios examined and is
committed to doing so.
The Board continues to monitor the situation and our modelling
is updated continually.
BISICHI
Bisichi has consulted with the government authorities and its
stakeholders in South Africa to
determine and agree the appropriate measures to be taken across its
South African mining and processing operations. Such measures have
been focused on the health and safety of employees, assisting in
the continuing provision of coal as an essential raw material, the
security and integrity of the assets, and the ability to maintain
operations at levels of activity that are aligned with government
objectives and the country’s broader economic interests.
Bisichi continues to monitor and adhere to all of the South
African government’s Covid-19 related guidelines and regulations
including all updates and advice from the National Department of
Health, the Department of Minerals Resources and Energy and the
Office of
the President.
The Group’s South African coal mining and processing operations
have been designated as essential business operations as they fall
within the supply chains of other essential businesses as defined
by the South African government. Since late March, Bisichi’s South
African operations, have continued, although with a reduced or
socially distanced workforce to safeguard the health and safety of
employees.
Bisichi management have been fully engaged in managing the
impact of the Covid-19 pandemic on its operations both in the UK
and in South Africa. Bisichi
management’s priorities are the health and safety of all of
employees and stakeholders and the continuity of the business
during this challenging time.
In terms of business continuity, Bisichi’s South African coal
mining and processing operations have been designated as essential
business operations. At present, the final impact of the pandemic
on Bisichi’s future prospects and financial performance remains
uncertain. However, to date, the financial position has remained
strong and at present, there are adequate financial resources to
ensure the business remains viable for the foreseeable future and
that liabilities are met.
OVERALL POSITION
With a quality property portfolio comprising a majority of
tenants with long leases supported by suitable financial
arrangements, the Directors believe that the group property
operations (including Bisichi and Dragon) are well placed to
address the current business risks successfully, despite the
continuing uncertain economic climate. The mining operations too,
as a key industry in South Africa,
have a positive future despite the pandemic risks. It is also
relevant that LAP would be able to continue as a viable business if
Bisichi were to face unexpected problems as there are no cross
guarantees and LAP is not dependent on the income from Bisichi.
The Directors therefore have a reasonable expectation that the
Group and the Company have adequate resources to continue in
operational existence for the foreseeable future. Thus, they
continue to adopt the going concern basis of accounting in
preparing the annual financial statements.
TAXATION
The LAP Group tax strategy is to account for tax on an accurate
and timely basis. We only structure our affairs based on sound
commercial principles and wish to maintain a low tax risk position.
We do not engage in aggressive tax planning.
The LAP Group (excluding Bisichi and Dragon) has unused tax
losses and deductions with a potential value of £7.9m (2018:
£7.2m). As LAP returns to profit, these tax losses and deductions
should be utilised.
DIVIDENDS AND FUTURE PROSPECTS
Due to the current economic uncertainties, the LAP Board has
agreed that it will not be recommending a dividend for the
financial year ending 31 December 2019.
The Group remains reasonably optimistic about our ability to
weather the COVID-19 storm. We have strong relations with our
tenants and are in active discussion with a number of them to
ensure that we are paid the rent that we are owed while they are
able to continue trading once non-essential shops and restaurants
are permitted to re-open. We have also refinanced two loans to
ensure that further cash is now uncharged and available to spend if
required.
Looking through to our medium term trading, we intend to pursue
our previously stated strategies. These include further reducing
the Group’s reliance on retail property although we feel that our
value-orientated properties with low reliance on fashion retailers
have inbuilt defensive qualities. We do not need to fire-sell
assets therefore, but we are prepared to enter into negotiations
with parties that have approached us to explore disposals or joint
ventures to redevelop certain assets within our portfolio. A number
of these negotiations are ongoing although we are not yet able to
say if any will come to fruition.
We will also pursue our policy of investing in other asset
classes, including industrial property where we have enjoyed early
success and in further joint ventures to undertake residential
development. We will see through our development in Ealing to
satisfactory planning consent and then either build it out or seek
to sell our shares in the joint venture.
We will also pursue our strategy of developing our Sheffield shopping centre. We have commenced
initial preparation of a number of plans there which fit in with
the Local Authority’s wider aspirations for the city centre.
Principal activities, strategy & business model
The LAP Group’s principal business model is the investment in
and management and development of industrial and retail property
through direct investment and joint ventures.
The principal activity of Bisichi PLC is coal mining in
South Africa. Further information
is available in its 2019 Financial Statements which are available
on their web site: www.bisichi.co.uk
STRATEGIC
PRIORITIES ARE |
OUR STRATEGY IS |
Maximising income |
By achieving an appropriate tenant mix and
shopping experience we can increase footfall through the centres,
hence increase tenant demand for space and enhance income. |
Creating quality property |
We look to improve the consumer experience at all
our centres by achieving an appropriate tenant mix and a vibrant
trading environment through investment activity, enhancement,
refurbishment and development. |
Capital strength |
We operate within a prudent and flexible financial
structure. Our gearing policy provides financial stability whilst
giving capacity and flexibility to look for further
investments. |
Maintain the value of investment
in bisichi |
By encouraging the Bisichi management to maximise
sustainable profits and cash distributions. |
Risks and uncertainties
DESCRIPTION OF RISK |
DESCRIPTION OF IMPACT |
MITIGATION |
COVID-19 risk |
Health and safety of employees and stakeholders.
Risks related to business interruption and tenant failures as
outlined below. |
Strategies for mitigating the risks have been
defined and specific measures for achieving these are already
underway. These include the measures outlined in the Chairman’s
Statement and Financial & Performance Review sections of this
report. |
ASSET MANAGEMENT: |
|
|
Tenant failure |
Financial loss. |
Initial and subsequent assessment of tenant
covenant strength combined with an active credit control
function. |
Leases not renewed |
Financial loss. |
Lease expiries regularly reviewed. Experienced
teams with strong tenant and market knowledge who manage
appropriate tenant mix. |
Asset liquidity (size and
geographical location) |
Assets may be illiquid and affect flexing of
balance sheet. |
Regular reporting of current and projected
position
to the Board with efficient treasury management. |
PEOPLE: |
|
|
Retention and recruitment of staff |
Unable to retain and attract the best people for
the key roles. |
Nomination Committee and senior staff review
skills gaps and succession planning. Training and development
offered. |
REPUTATION: |
|
|
Business interruption |
Loss in revenue.
Impact on footfall.
Adverse publicity.
Potential for criminal/civil proceedings. |
Documented Recovery Plan in
place.
General and terrorism insurance policies in place and risks
monitored by trained security staff.
Health and Safety policies in place.
CCTV in centres. |
FINANCING: |
|
|
Fluctuation in property
Values |
Impact on covenants and other loan agreement
obligations. |
Secure income flows.
Regular monitoring of LTV and IC covenants and other
obligations.
Focus on quality assets. |
Reduced availability of borrowing facilities |
Insufficient funds to meet existing debts/interest
payments and
operational payments. |
Efficient treasury management.
Loan facilities extended where possible.
Regular reporting of current and projected position
to the Board. |
Loss of cash and deposits |
Financial loss. |
Only use a spread of banks and financial
institutions which have a strong credit rating. |
Fluctuation of interest rates |
Uncertainty of interest rate costs. |
Manage derivative contracts to achieve a balance
between hedging interest rate exposure and minimising potential
cash calls. |
Bisichi risks and uncertainties
Bisichi (although it is consolidated into group accounts as
required by IFRS 10) is managed independently of LAP. The risks
outlined below are an abbreviated summary of the risks reported by
the Directors of Bisichi to the shareholders of that Company. Full
details are available in the published accounts of Bisichi
(www.bisichi.co.uk).
These risks, although critical to Bisichi, are of less
significance to LAP which only has a minority investment of 41.52%
in the company. In the unlikely event that Bisichi was unable to
continue trading, it would not affect the ability of LAP to
continue operating as a going concern.
DESCRIPTION OF RISK |
DESCRIPTION OF IMPACT |
MITIGATION |
COVID-19 risk |
Health and safety of employees and stakeholders
and risks related to coal prices and demand and the value of UK
property. |
Strategies for mitigating the risks have been
defined and specific measures for achieving these are already
underway. These include the measures outlined in the Chairman’s
Statement and Financial & Performance Review sections of this
report. |
Coal prices can be impacted materially
by market and currency variations |
Affects sales value and therefore margins. |
Forward sales contracts are used to manage value
expectations. |
Mining operations are inherently risky. Mineral
reserves, regulations, licensing, power availability, health and
safety can all damage operations |
Loss of production causing loss
of revenue. |
Use of geology experts, careful attention to
regulations, health and safety training, employee dialogue to
minimise controllable risks. |
Currency risk |
Affects realised sales value and therefore
margins. |
Regular monitoring and review of forward currency
situation. |
Cashflow variation because of mining risks,
commodity price or currency variations |
Variations can deliver significant
shifts in cash flow. |
UK property investments used to offset high risk
mining operations. |
Key performance indicators
The Group’s Key Performance Indicators are selected to ensure
clear alignment between its strategy and shareholder interests.
The KPIs are calculated using data from management reporting
systems.
Strategic priority |
KPI |
Performance |
|
|
MAXIMISING INCOME – LIKE FOR LIKE
PROPERTY INCOME |
To increase the like-for-like income
from each property year on year. |
Like-for-like rental
income as a percentage of the prior year rental. |
The like-for-like
rental income by property has remained broadly unchanged.
In the continuing difficult trading environment, this is considered
satisfactory. |
|
|
MAXIMISING INCOME – OCCUPANCY |
We aim to maximise the total income
in our properties by achieving full occupancy. |
The ERV of the empty
units as a percentage of our total income. |
Void levels increased
to 8.38%, with a larger industrial unit in Runcorn currently being
refurbished. |
|
|
CAPITAL STRENGTH – GROWTH IN NET ASSET
VALUE PER SHARE |
The net assets per share is the
principal measure used by the group for monitoring its performance
and is an indicator of the level of reserves available for
distribution by way of dividend. |
Movement in the net
assets per share. |
The net assets per
share reduced by 7.79 pence per share (15.3%) to 43.04p. |
|
|
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
2019:
- Black Wattle Colliery recorded one
Lost Time Injury during 2019.
- 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 2019
Financial Statements which are available on their web site:
www.bisichi.co.uk
Greenhouse gas reporting
We have reported on all emission sources required under the
Companies Act 2006 (Strategic Report and Directors’ Reports)
Regulations 2013 for the reporting period 1st January 2019 to 31st December 2019. The
emissions are detailed in Tables 1, 2
and 3 below.
We have employed the Financial Control definition to outline our
carbon footprint boundary, reporting Scope 1 & 2 emissions
only. Emissions from both landlord & tenant-controlled areas of
LAP owned shopping centres and facilities fall within the footprint
boundary. LAP has landlord-controlled areas in Kings Square,
Orchard Square, Brewery Street, Shipley and Bridgend. Properties
that we manage on behalf of others or are not wholly owned by LAP
are excluded from our footprint boundary.
Emissions for landlord-controlled areas have been calculated
based on actual consumption data collected from each shopping
centre. Emissions from tenant-controlled areas have been calculated
based on floor area and energy consumption benchmarks for general
retail services in the UK.
We have used the ISO14046-1 Standard (2006) and guidance
provided by UK’s Department of Environment and Rural Affairs
(DEFRA) on voluntary and mandatory carbon reporting. Emission
factors were used from UK Government’s GHG Conversion Factors for
Company Reporting 20191.
As well as reporting Scope 1 and Scope 2 emissions, the
regulations require that at least one intensity ratio is reported
for the given reporting period. The intensity figure below shows
the emissions
in tCO2e per thousand pounds revenue.
Table 1. Landlord & tenant controlled areas
|
Emissions Source |
2019 |
2018 |
Scope 1 emissions |
Natural gas (tCO2e) |
53 |
169 |
|
Refrigerants (tCO2e) |
0 |
0 |
Scope 2 emissions |
Electricity (tCO2e) |
1,354 |
2,519 |
|
Total tCO2e |
1,407 |
2,688 |
|
Intensity ratio (tCO2e/£thousand) |
0.296 |
0.514 |
Table 2. LAP controlled areas
|
Emissions Source |
2019 |
2018 |
Scope 1 emissions |
Natural gas (tCO2e) |
53 |
169 |
|
Refrigerants (tCO2e) |
0 |
0 |
Scope 2 emissions |
Electricity (tCO2e) |
104 |
134 |
|
Total tCO2e |
157 |
303 |
Table 3. Tenant controlled areas
|
Emissions Source |
2019 |
2018 |
Scope 1 emissions |
Natural gas (tCO2e) |
0 |
0 |
|
Refrigerants (tCO2e) |
0 |
0 |
Scope 2 emissions |
Electricity (tCO2e) |
1,250 |
2,385 |
|
Total tCO2e |
1,250 |
2,385 |
1. 2019 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
|
2019
CO2e
Tonnes |
2018
CO2e
Tonnes |
Emissions source: |
|
|
Scope 1 Combustion
of fuel & operation of facilities |
22,626 |
21,348 |
Scope 1 Emissions
from coal mining activities |
26,435 |
27,428 |
Scope 2
Electricity, heat, steam and cooling purchased for own use |
13,153 |
12,177 |
Total |
62,213 |
60,953 |
Intensity: |
|
|
Intensity 1 Tonnes
of CO2 per pound sterling of revenue |
0.0013 |
0.0012 |
Intensity 2 Tonnes
of CO2 per pound of coal produced |
0.0486 |
0.0462 |
Environment
United Kingdom
The Group’s principal UK activity is property investment, which
involves renting premises to commercial businesses. We seek to
provide those tenants with good quality premises from which they
can operate in an efficient and environmentally friendly manner.
Where possible, improvements, repairs and replacements are made in
an environmentally efficient manner and waste re-cycling
arrangements are in place
at all the Company’s locations.
South Africa
The Bisichi group’s principal activity in South Africa is coal mining. Under the terms
of the mine’s Environmental Management Programme approved by the
Department of Mineral Resource (“DMR”), Black Wattle undertakes a
host of environmental protection activities to ensure that the
approved Environmental Management Plan is fully implemented. A
performance assessment audit was conducted to verify compliance to
their Environmental Management Programme and no significant
deviations were found.
EMPLOYEE, SOCIAL, COMMUNITY AND HUMAN RIGHTS
The Group’s policy is to attract staff and motivate employees by
offering competitive terms of employment. The Group provides equal
opportunities to all employees and prospective employees including
those who are disabled and operates in compliance with
all relevant national legislation.
The Group believes that it is in the interest of shareholders to
consider social and human rights issues when conducting business.
Various policies and initiatives implemented by the Group that fall
within these areas are discussed within this report.
ANTI-SLAVERY AND HUMAN TRAFFICKING
The Group is committed to the prevention of the use of forced
labour and has a zero tolerance policy for human trafficking and
slavery.
The Group’s policies and initiatives in this area can be found
within the Group’s Anti-slavery and human trafficking statement
found
on the Group’s website at www.lap.co.uk.
DIVERSITY AND EQUALITY
The Board recognises the importance of diversity, both in its
membership, and in the Group’s employees. It has a clear policy to
promote diversity across the business. The Board considers that
quotas are not appropriate in determining its composition and has
therefore chosen not to set targets. All aspects of diversity,
including but not limited to gender, are considered at every level
of recruitment. Gender diversity of the Board and the Group is set
out below.
DIRECTORS, EMPLOYEES AND GENDER REPRESENTATION
At the year end the LAP Group (excluding Bisichi and Dragon),
had 6 directors (6 male, 0 female), 2 senior managers (2 male, 0
female) and 10 employees (5 male, 5 female).
BISICHI PLC
Bisichi PLC’s Group at the year end had 8 directors (7 male,
1 female), 7 senior managers (6 male, 1 female) and 219
employees (150 male, 69 female).
Detailed information relating to the Bisichi Strategic Report is
available in its 2019 financial statements.
Approved on behalf of the board of directors
Jonathan Mintz
Finance Director
29 June 2020
GOVERNANCE
Directors & advisors
EXECUTIVE DIRECTORS
Sir Michael Heller MA FCA*
(Chairman)
John A Heller LLB MBA
(Chief Executive)
Jonathan Mintz FCA
(Finance Director) Appointed 11 February
2019
NON-EXECUTIVE DIRECTORS
Howard D Goldring BSC (ECON) ACA†
Howard Goldring is Executive
Chairman of Delmore Holdings Limited which specialises in the
discretionary management of investment portfolios for pension
funds, charities, family trusts and private clients. He also acts
as an advisor providing high level asset allocation advice to
family offices and pension schemes. He has been a member of the LAP
Board since July 1992, and has almost
40 years’ experience of the real estate market. He was a director
of Baronsmead VCT 2 PLC from 2010-2016, and has specialised in
providing many companies with investor relations support.
Clive A Parritt FCA CF FIIA #†
Clive Parritt joined the board on
1 January 2006. He is a chartered
accountant with over 40 years’ experience of providing strategic,
financial and commercial advice to businesses of all sizes. He is a
director of Jupiter US Smaller Companies plc, chairman of BG
Training Limited and a member of the Performance, Audit and Risk
Committee of Arts Council England. Until April 2016 he was Group Finance Director of
Audiotonix Limited (an international manufacturer of audio mixing
consoles). He has chaired and been a director of a number of other
public and private companies. Clive
Parritt was President of the Institute of Chartered
Accountants in England and
Wales in 2011-12. He is Chairman
of the Audit Committee and as Senior Independent Director he chairs
the Nomination and Remuneration Committees.
Robin Priest MA
Robin Priest joined the board on
31 July 2013. He is a senior advisor
to Alvarez & Marsal LLP (“A&M”) and to a major listed
German real estate investment fund manager. He has more than 38
years’ experience in real estate and structured finance. He was
formerly Managing Director of A&M’s real estate practice,
advising private sector and public sector clients on both
operational and financial real estate matters. Prior to joining
A&M, Robin was lead partner for Real Estate Corporate Finance
in London with Deloitte LLP and
before this he founded and ran a property company backed by private
equity. He is also a trustee of London’s Oval House Theatre.
* Member of the nomination
committee
† Member of the audit, remuneration and
nomination committees
# Senior independent director
SECRETARY & REGISTERED OFFICE
Jonathan Mintz FCA
24 Bruton Place
London W1J 6NE
AUDITOR
RSM UK Audit LLP
PRINCIPAL BANKERS
Phoenix CRE Sàrl
Santander UK plc
Metro Bank plc
SOLICITORS
Pinsent Masons LLP
Wake Smith Solicitors Limited
STOCKBROKER
Shore Capital Markets Limited
REGISTRARS & TRANSFER OFFICE
Link Asset Services
Shareholder Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
UK telephone: 0871 664 0300
International telephone: +44 371 664 0300
(Calls cost 12p per minute plus your phone company’s access charge.
Calls outside the United
Kingdom will be charged at the applicable international
rate).
Lines are open between 9.00am to
5.30pm, Monday to Friday, excluding public holidays in
England and Wales.
Website: www.linkassetservices.com
Email: enquiries@linkgroup.co.uk
Company registration number
341829 (England and Wales)
WEBSITE
www.lap.co.uk
E-MAIL
admin@lap.co.uk
Directors’ report
The Directors submit their report and the audited financial
statements for the year ended 31 December 2019.
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 14 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 PLC (Bisichi) in which the Company holds a 41.52 %
interest. Bisichi is listed on the main market of the London Stock
Exchange and operates in England
and South Africa with subsidiaries
which are involved in overseas mining and mining investment. The
results, together with the assets and liabilities, of Bisichi are
consolidated with those of LAP in accordance with the terms of IFRS
10 even though the Group only has a minority interest – under IFRS
10 the 58.48% majority interest is disclosed as a “non-controlling
interest”.
Business review AND POST BALANCE SHEET EVENTS
Review of the Group’s development and performance
A review of the Group’s development and performance can be found
below and should be read in conjunction with the Strategic Report
on pages 4 to 14.
Details of any post balance sheet events are disclosed in Note
29 to the financial statements.
Future developments
The Group continues to look for new opportunities to acquire
real estate assets where it feels it can increase value by applying
its intensive management skills. At the same time, it seeks to
reduce its interest payments on its loans as they expire or where
opportunities arise to refinance on better terms. We also seek to
improve our existing estate through the continued pursuit of asset
management initiatives.
Property activities
The Group is a long-term investor in property. It acquires
properties, actively manages those assets to improve rental income,
and thus seeks to enhance the value of its properties over time. In
reviewing performance, the principal areas regularly monitored
by the Group include:
- Rental income – the aim of the Group
is to maximise the maintainable income from each property by
careful tenant management supported by sympathetic and revenue
enhancing development. Income may be affected adversely by the
inability of tenants to pay their rent, but careful monitoring of
rent collection and tenant quality helps to mitigate this risk.
Risk is also minimised by a diversified tenant base, which should
limit the impact of the failure of any individual tenant.
- Cash flow – allowing for voids,
acquisitions, development expenditure, disposals and the impact of
operating costs and interest charges, the Group aims to maintain a
positive cash flow over time.
- Financing costs – the exposure of the Group
to interest rate movements is managed partly by the use of swap and
cap arrangements (see Note 21 for full details of the contracts in
place) and also by using loans with fixed terms and interest rates.
These arrangements are designed to ensure that our interest costs
are known in advance and are always covered by anticipated
rental income.
- Property valuations – market sentiment
and economic conditions have a direct effect on property
valuations, which can vary significantly (upwards or downwards)
over time. Bearing in mind the long term nature of the Group’s
business, valuation changes have little direct effect on the
ongoing activities or the income and expenditure of the Group.
Tenants generally have long term leases, so rents are unaffected by
short term valuation changes. Borrowings are secured against
property values and if those values fall very significantly, this
could limit the ability of the Group to develop the business using
external borrowings. The risk is minimised by trying to ensure that
there is adequate cover to allow for fluctuations in value on
a short term basis.
It continues to be the policy of the Group to realise property
assets when the valuation of those assets reaches a level at which
the directors consider that the long-term rental yield has been
reached. The Group also seeks to acquire additional property
investments on an opportunistic basis when the potential rental
yields offer scope for future growth.
Investment activities
The investments in joint ventures and Bisichi are for the long
term.
LAP manages the UK property assets of Bisichi. However, the
principal activity of Bisichi is overseas mining investment (in
South Africa). While IFRS 10
requires the consolidation of Bisichi, the investment is held to
generate income and capital growth over the longer term. It is
managed independently of LAP and should be viewed by shareholders
as an investment and not a subsidiary. The other listed investments
are held as current assets to provide the liquidity needed to
support the property activities while generating income and capital
growth.
Investments in property are made through joint ventures when the
financing alternatives and spreading of risk make such an approach
desirable.
Dividend
In the light of the current uncertain economic environment, the
directors are not recommending payment of a final dividend for 2019
(2018: 0.18p per share).
The company’s ordinary shares held in treasury
At 31 December 2019, 218,197
(2018: 218,197) ordinary shares were held in Treasury with a market
value of £47,349 (2018: £56,731). At the Annual General Meeting
(AGM) in June 2019 members renewed
the authority for the Company to purchase up to 10 per cent of its
issued ordinary shares. The Company will be asking members to renew
this authority at the next AGM to be held on Wednesday 23 July 2020.
Treasury shares held at 1 January 2019 and
at 31 December 2019 |
218,197 |
Treasury shares are not included in issued share capital for the
purposes of calculating earnings per share or net assets per share
and they do not qualify for dividends payable.
Investment properties
The freehold and long leasehold properties of the Company, its
subsidiaries and Bisichi were revalued as at 31 December 2019 by independent professional
firms of chartered surveyors – Allsop LLP, London (71.1 per cent of the portfolio),
Carter Towler, Leeds (26.0 per cent) – and by the Directors
(2.9 per cent). The valuations, which are reflected in the
financial statements, amount to £44.6m (2018: £47.4m).
No property (2018: £2.3m) is included under current assets, as
assets held for sale.
Property of £26.9m (2018: £38.6m) is included under current
assets, as inventory, at the lower of cost or net realisable
value.
Taking account of prevailing market conditions, the valuation of
the properties at 31 December 2019
resulted in a decrease of £3.0m (2018: decrease of £2.6m). The
proportion of this revaluation attributable to the Group (net of
taxation) is reflected in the consolidated income statement and the
consolidated balance sheet.
Financial instruments
Note 21 to the financial statements sets out the risks in
respect of financial instruments. The board reviews and agrees
overall treasury policies, delegating appropriate authority for
applying these policies to the Chief Executive and Finance
Director. Financial instruments are used to manage the financial
risks facing the Group and speculative transactions are prohibited.
Treasury operations are reported at each board meeting and are
subject to weekly internal reporting. Hedging arrangements are in
place for the Company, its subsidiaries and joint ventures in order
to limit the effect of higher interest rates upon the Group. Where
appropriate, hedging arrangements are covered in the Chairman and
Chief Executive’s Statement and the Financial Review.
Directors
Sir Michael Heller, J A Heller, H
D Goldring, C A Parritt and R Priest were Directors of the company
for the whole of 2019. Mr J Mintz was appointed as a Director on
11 February 2019.
R Priest is retiring by rotation at the Annual General Meeting
in 2020 and offers himself for re-election.
Robin Priest is a senior advisor
to Alvarez & Marsal LLP (“A&M”) and to a German real estate
investment fund manager. He has more than 38 years’ experience in
real estate and structured finance. He was formerly Managing
Director of A&M’s real estate practice, advising private sector
and public sector clients on both operational and financial real
estate matters. Prior to joining A&M, Robin was lead partner
for Real Estate Corporate Finance in London with Deloitte LLP and before this he
founded and ran a property company backed by private equity. He is
also a trustee of London’s Oval House Theatre. The board has
considered the appointment of Robin
Priest and recommends his re-election as Director. His
knowledge of structured finance and experience of dealing with
challenging and complex assets and portfolios is of significant
benefit to the business.
Directors’ interests
The interests of the Directors in the ordinary shares of the
Company, including family and trustee holdings, where appropriate,
can be found on page 24 in the Annual Remuneration Report.
Substantial shareholdings
|
31 Dec 2019 |
31 Dec 2018 |
|
no. |
% |
no. |
% |
Sir Michael Heller
and family |
48,080,511 |
56.35 |
48,080,511 |
56.35 |
Cavendish Asset Management Limited |
8,211,044 |
9.62 |
8,061,044 |
9.45 |
James Hyslop |
4,886,258 |
5.73 |
4,886,258 |
5.73 |
Maland Pension Fund |
3,323,383 |
3.89 |
2,931,198 |
3.44 |
The Company does not consider that the Heller family has a
controlling share interest irrespective of the number of shares
held as no individual party holds a majority and there is no legal
obligation for shareholders to act in concert. The Directors do not
consider that any single party has control.
The Company is not aware of any other holdings exceeding 3 per
cent of the issued share capital.
share capital and Takeover directive
The Company has one class of share capital, namely ordinary
shares. Each ordinary share carries one vote. All the ordinary
shares rank pari passu. There are no securities issued by the
Company which carry special rights with regard to control of the
Company.
The identity of all significant direct or indirect holders of
securities
in the Company and the size and nature of their holdings is
shown
in “Substantial Shareholdings” above.
The rights of the ordinary shares to which the HMRC approved
Share Incentive Plan relates are exercisable by the trustees on
behalf of the employees.
There are no restrictions on voting rights or on the transfer of
ordinary shares in the Company, save in respect of treasury shares.
The rules governing the appointment and replacement of Directors,
alteration of the articles of association of the Company and the
powers of the Company’s Directors accord with usual English company
law provisions. Each Director is subject to re-election at least
every three years.
The Company is not party to any significant agreements that take
effect, alter or terminate upon a change of control of the Company
following a takeover bid. The Company is not aware of any
agreements between holders of its ordinary shares that may result
in restrictions on the transfer of its ordinary shares or on voting
rights.
There are no agreements between the Company and its Directors or
employees providing for compensation for loss of office or
employment that occurs because of a takeover bid.
Statement as to disclosure of information to the auditor
The Directors in office at the date of approval of the financial
statements have confirmed that, so far as they are aware, there is
no relevant audit information of which the auditor is unaware. Each
of the Directors has confirmed that they have taken all the steps
that they ought to have taken as a Director in order to make them
aware of any relevant audit information and to establish that it
has been communicated to the auditor.
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 2019 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 (2018: £Nil).
£2,250 of donations for charitable purposes were made during the
year (2018: £2,800).
CORPORATE RESPONSIBILITY
Environment
The environmental considerations of the group’s South African
coal mining operations are covered in the Bisichi PLC Strategic
Report.
The group’s UK activities are principally property investment
whereby premises are provided for rent to commercial businesses.
The group seeks to provide those tenants with good quality premises
from which they can operate in an efficient and environmentally
efficient manner and waste re-cycling arrangements are in place at
all the company’s locations.
Greenhouse gas emissions
Details of the group’s greenhouse gas emissions for the year
ended 31 December 2019 can be found
on pages 13 and 14 of the Strategic Report.
Employment
The group’s policy is to attract staff and motivate employees by
offering competitive terms of employment. The group provides equal
opportunities to all employees and prospective employees including
those who are disabled. The Bisichi PLC Strategic Report gives
details of the Bisichi group’s activities and policies concerning
the employment, training, health and safety and community support
and social development concerning the Bisichi group’s employees in
South Africa.
Going concern
The directors have reviewed the cash flow forecasts of the Group
and the underlying assumptions on which they are based. The
directors have reviewed the COVID-19 scenario forecasts and the
underlying assumptions on which they are based, which are described
in more detail in the COVID-19 section of the Strategic Report. The
Group’s business activities, together with the factors likely to
affect its future development, are set out in the Chairman’s and
Chief Executive’s Statement and Financial Review. In addition, Note
21 to the financial statements sets out the Group’s objectives,
policies and processes for managing its capital; its financial risk
management objectives; details of its financial instruments and
hedging activities; and its exposure to credit risk and liquidity
risk.
With secured long term banking facilities, sound financial
resources and long term leases in place the Directors believe it
remains appropriate to adopt the going concern basis of accounting
in preparing the annual financial statements.
The Bisichi directors continue to adopt the going concern basis
of accounting in preparing the Bisichi annual financial
statements.
Corporate Governance
The Corporate governance report can be found on pages 19 and 20
of the annual report and accounts.
Annual General Meeting
The Annual General Meeting will be held at 24 Bruton Place,
London, W1J 6NE on Thursday
30 July 2020 at 10.00 a.m. Items 1 to 7 will be proposed as
ordinary resolutions. More than 50 per cent. of shareholders’ votes
cast at the meeting must be in favour for those ordinary
resolutions to be passed. The Directors consider that all of the
resolutions to be put to the meeting are in the best interests of
the Company and its shareholders as a whole and accordingly the
board unanimously recommends that shareholders vote in favour of
all of the resolutions as the Directors intend to do in respect of
their own beneficial holdings of ordinary shares. Please note that
the following paragraphs are only summaries of certain of the
resolutions to be proposed at the Annual General Meeting and do not
represent the full text of the resolutions. You should therefore
read this section in conjunction with the full text of the
resolutions contained in the notice of Annual General Meeting which
accompanies this Directors’ Report.
Ordinary resolutions
Resolution 7 – Authority to allot securities
Paragraph 7.1.1 of Resolution 7 would give the Directors the
authority to allot shares in the Company and grant rights to
subscribe for or convert any security into shares in the Company up
to an aggregate nominal value of £2,836,478. This represents
approximately 1/3 (one third) of the ordinary share capital of the
Company in issue (excluding treasury shares) as at 26 June 2020 (being the last practicable date
prior to the publication of this Directors’ Report).
In line with guidance issued by the Institutional Voting
Information Service (IVIS), paragraph 7.1.2 of Resolution 7 would
give the directors the authority to allot shares in the Company and
grant rights to subscribe for or convert any security into shares
in the Company up to a further aggregate nominal value of
£2,836,478, in connection with an offer by way of a rights issue.
This amount represents approximately another 1/3 (one third) of the
ordinary share capital of the Company in issue (excluding treasury
shares) as at 26 June 2020 (being the
last practicable date prior to the publication of this Directors’
Report).
The Directors’ authority will expire on the earlier of
31 August 2021 or the next AGM. The
Directors do not currently intend to make use of this authority.
However, if they do exercise the authority, the Directors intend to
follow best practice as recommended by the IVIS regarding its use
(including as regards the Directors standing for re-election in
certain cases).
OTHER MATTERS
RSM UK Audit LLP has expressed its willingness to continue in
office as auditor. A proposal will be made at the Annual General
Meeting for its reappointment.
By order of the board
Jonathan Mintz
Secretary
For and on behalf of London
& Associated Properties PLC
29 June 2020
24 Bruton Place
London
W1J 6NE
Corporate Governance
The Company has adopted the Corporate Governance Code for Small
and Mid-Size Quoted Companies (the QCA Code) published by the
Quoted Companies Alliance. The QCA Code provides governance
guidance to small and mid-size quoted companies. The paragraphs
below set out how the Company has applied this guidance during the
year. The Company
has complied with the QCA Code
throughout the year.
Principles of corporate governance
The board promotes good corporate governance in the areas of
risk management and accountability as a positive contribution to
business prosperity. The board endeavours to apply corporate
governance principles in a sensible and pragmatic fashion having
regard to the circumstances of the business. The key objective is
to enhance
and protect shareholder value.
Board structure
During the year the board comprised the Chairman, the Chief
Executive, one other executive Director and three non-executive
Directors. Their details appear on page 15. The board is
responsible to shareholders for the proper management of the
Group.
The Directors’ responsibilities statement in respect of the
accounts is set
out on page 32. The non-executive Directors have a particular
responsibility to ensure that the strategies proposed by the
executive Directors are fully considered. To enable the board to
discharge its duties, all Directors have full and timely access to
all relevant information and there is a procedure for all
Directors, in furtherance of their duties, to take independent
professional advice, if necessary, at the expense of the Group. The
board has a formal schedule of matters reserved to it and normally
has eleven regular meetings scheduled each year. Additional
meetings are held for special business when required.
The board is responsible for overall Group strategy, approval of
major capital expenditure and consideration of significant
financial and operational matters.
The board committees, which have written terms of reference,
deal with specific aspects of the Group’s affairs:
- The nomination committee is chaired by
C A Parritt and comprises one other non-executive Director and the
executive Chairman. The committee is responsible for proposing
candidates for appointment to the board, having regard to the
balance and structure of the board. In appropriate cases
recruitment consultants may be used to assist the process. All
Directors are subject to re-election at a maximum of every three
years.
- The remuneration committee is
responsible for making recommendations to the board on the
Company’s framework of executive remuneration and its cost. The
committee determines the contract terms, remuneration and other
benefits for each of the executive directors, including performance
related bonus schemes, pension rights, option grants and
compensation payments. The board itself determines the remuneration
of the non-executive Directors. The committee comprises two
non-executive Directors and it is chaired by C A Parritt. The
executive Chairman of the board is normally invited to attend. The
Annual Remuneration Report is set out on pages 22 to 25.
- The audit committee comprises two
non-executive Directors and is chaired by C A Parritt. The audit
committee report, with its terms of reference, is set out on page
31. The Chief Executive and Finance Director are normally invited
to attend.
Board and board committee meetings held in 2019
The number of regular meetings during the year and attendance
was as follows:
|
|
Meetings
held |
Meetings
attended |
Sir Michael Heller |
Board
Nomination committee
Remuneration committee |
10
1
1 |
9
1
1 |
J A Heller* |
Board
Audit committee |
10
2 |
10
2 |
J Mintz* |
Board
Audit committee |
10
2 |
10
2 |
C A Parritt |
Board
Audit committee
Nomination committee
Remuneration committee |
10
2
1
1 |
10
2
1
1 |
H D Goldring |
Board
Audit committee
Nomination committee
Remuneration committee |
10
2
1
1 |
9
2
1
1 |
R Priest |
Board |
10 |
10 |
*Attended audit committee by invitation.
Performance evaluation – board, board committees and
directors
The performance of the board as a whole, its committees and the
non-executive Directors is assessed by the Chairman and the Chief
Executive and is discussed with the senior independent
non-executive Director. Their recommendations are discussed at the
nomination committee prior to proposals for re-election being
recommended to the board. The performance of executive Directors is
discussed and assessed by the remuneration committee. The senior
independent Director meets regularly with the Chairman, executive
and non-executive Directors individually outside of formal
meetings. The Directors will take outside advice in reviewing
performance but
have not found this to be necessary to date.
Independent directors
The senior independent non-executive Director is C A Parritt.
The other independent non-executive Directors are H D Goldring and
R Priest. 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. Their
background and skills are set out on page 15.
The independent Directors exchange views regularly between board
meetings and meet when required to discuss corporate governance and
other issues concerning the Group.
Internal control
The Directors are responsible for the Group’s system of internal
control and for reviewing its effectiveness at least annually, and
for the preparation and review of its financial statements. The
board has designed the Group’s system of internal control in order
to provide the Directors with reasonable assurance that assets are
safeguarded, that transactions are authorised and properly recorded
and that material errors and irregularities are either prevented or
would be detected within a timely period. However, no system of
internal control can eliminate the risk of failure to achieve
business objectives or provide absolute assurance against material
misstatement or loss. The key elements of the control system in
operation are:
- The board meets regularly on full
notice with a formal schedule of matters reserved for its decision
and has put in place an organisational structure with clearly
defined lines of responsibility and with appropriate delegation of
authority;
- There are established procedures for
planning, approval and monitoring of capital expenditure and
information systems for monitoring the Group’s financial
performance against approved budgets and forecasts;
- The departmental heads are required
annually to undertake a full assessment process to identify and
quantify the risks that face their departments and functions, and
assess the adequacy of the prevention, monitoring and modification
practices in place for those risks. In addition, regular reports
about significant risks and associated control and monitoring
procedures are made to the executive Directors. The process adopted
by the Group accords with the guidance contained in the document
“Internal Control Guidance for Directors on the Combined Code”
issued by the Institute of Chartered Accountants in England and Wales. The audit committee receives reports
from external auditors and from executive Directors of the Group.
During the period the audit committee has reviewed the
effectiveness of the system of internal control as described above.
The board receives periodic reports from all committees.
- There are established procedures for the
presentation and review of the financial statements and the Group
has in place an organisational structure with clearly defined lines
of responsibility and with appropriate delegation of authority.
There are no internal control issues to report in the annual
report and financial statements for the year ended 31 December 2019. Up to the date of approval of
this report and the financial statements, the board has not been
required to deal with any related material internal control issues.
The Directors confirm that the board has reviewed the effectiveness
of the system of internal control as described during the
period.
COMMUNICATION WITH SHAREHOLDERS
Prompt communication with shareholders is given high priority.
Extensive information about the Group and its activities is
provided in the Annual Report. In addition, a half-year report is
produced for each financial year and published on the Company’s
website. The Company’s website www.lap.co.uk is updated promptly
with announcements and Annual Reports upon publication. Copies from
previous years are also available on the website.
The share price history and market information can be found at
http://www.londonstockexchange.com/prices-and-markets/markets/prices.htm.
The company code is LAS.
There is a regular dialogue with the Company’s stockbrokers and
institutional investors. Enquiries from individuals on matters
relating to their shareholdings and the business of the Group are
dealt with promptly and informatively.
The Company’s website is under continuous development to enable
better communication with both existing and potential new
shareholders.
THE BRIBERY ACT 2010
The Company is committed to acting ethically, fairly and with
integrity in all its endeavours and compliance with the Company’s
anti–bribery code is monitored closely.
Governance statement by the Chairman
of the remuneration committee
The remuneration committee is pleased to present its report for
the year ended 31 December 2019. The
report is presented in two parts in accordance with the
remuneration regulations.
The first part is the Annual Remuneration Report which details
remuneration awarded to Directors and non-executive Directors
during the year. The shareholders will be asked to approve the
Annual Remuneration Report as an ordinary resolution (as in
previous years) at the AGM in July
2020.
The current remuneration policy, which details the remuneration
policy for directors, can be found at www.lap.co.uk. The current
remuneration policy was subject to a binding vote which was
approved by shareholders at the AGM in June
2017. The approval will continue to apply for a
3 year period up to the AGM on 30 July
2020.
The second part details the Remuneration Policy for
Directors.
This policy is subject to a binding vote which will be proposed to
shareholders at the AGM in 2020 and if approved will apply for
a
3 year period commencing from the conclusion of the AGM.
Both of the reports have been prepared in accordance with The
Large and Medium-sized Companies and Groups (Accounts and Reports)
(Amendment) Regulations 2013.
The Company’s auditor, RSM UK Audit LLP is required by law to
audit certain disclosures and where disclosures have been audited
that is indicated.
C A Parritt
Chairman, Remuneration Committee
29 June 2020
Annual remuneration report
The following information has been audited
Single total figure of remuneration for the year ended
31 December 2019
|
Salary
and fees
£’000 |
BONUSES
£’000 |
BENEFITS
£’000 |
PENSIONS
£’000 |
TOTAL
BEFORE SHARE OPTIONS
£’000 |
SHARE
OPTIONS
£’000 |
TOTAL
2019
£’000 |
Executive Directors |
|
|
|
|
|
|
|
Sir Michael Heller* |
7 |
- |
59 |
- |
66 |
n/a |
66 |
Sir Michael Heller - Bisichi |
82 |
200 |
- |
- |
282 |
n/a |
282 |
J A Heller |
533 |
- |
43 |
- |
576 |
n/a |
576 |
J Mintz |
143 |
50 |
- |
12 |
205 |
n/a |
205 |
|
765 |
250 |
102 |
12 |
1,129 |
- |
1,129 |
Non-executive Directors |
|
|
|
|
|
|
|
H D Goldring*+ |
18 |
- |
9 |
- |
27 |
n/a |
27 |
C A Parritt*+ |
37 |
- |
- |
- |
37 |
n/a |
37 |
R Priest* |
35 |
- |
- |
- |
35 |
n/a |
35 |
|
90 |
- |
9 |
- |
99 |
- |
99 |
Total |
855 |
250 |
111 |
12 |
1,228 |
- |
1,228 |
J A Heller has an entitlement to an employer pension
contribution of £72,000 at 31 December
2019, but has elected for this not to be paid.
Single total figure of remuneration for the year ended
31 December 2018
|
Salary
and fees
£’000 |
BONUSES
£’000 |
BENEFITS
£’000 |
PENSIONS
£’000 |
TOTAL
BEFORE SHARE OPTIONS
£’000 |
SHARE
OPTIONS
£’000 |
TOTAL
2018
£’000 |
Executive Directors |
|
|
|
|
|
|
|
Sir Michael Heller* |
7 |
350 |
55 |
- |
412 |
n/a |
412 |
Sir Michael Heller - Bisichi |
82 |
200 |
2 |
- |
284 |
n/a |
284 |
J A Heller |
533 |
300 |
37 |
- |
870 |
n/a |
870 |
A K Thapar |
161 |
60 |
11 |
10 |
242 |
n/a |
242 |
|
783 |
910 |
105 |
10 |
1,808 |
- |
1,808 |
Non-executive Directors |
|
|
|
|
|
|
|
H D Goldring*+ |
18 |
- |
8 |
- |
26 |
n/a |
26 |
C A Parritt*+ |
40 |
- |
- |
- |
40 |
n/a |
40 |
R Priest* |
35 |
- |
- |
- |
35 |
n/a |
35 |
|
93 |
- |
8 |
- |
101 |
- |
101 |
Total |
876 |
910 |
113 |
10 |
1,909 |
- |
1,909 |
* Note 25 “Related party
transactions”
+ Members of the remuneration committee
for years ended 31 December 2018 and
31 December 2019. C A Parritt was the
chair of the remuneration committee throughout both years.
Benefits include the provision of car, health and other
insurance
and subscriptions.
Sir Michael Heller is a director
of Bisichi PLC, (a subsidiary for IFRS 10 purposes) and received a
salary from that company of £82,500 (2018: £82,500) for services.
He also received a bonus of
£200,000 in each year.
Although Sir Michael Heller
receives reduced remuneration in respect of his services to LAP,
the Company does supply office premises, property management,
general management, accounting and administration services for a
number of companies in which Sir Michael
Heller has an interest. The board estimates that the annual
value of these services, if supplied to a third party, would have
been £300,000 (2018: £300,000). Further details of these services
are set out in Note 25 to the financial statements “Related party
transactions”.
J A Heller is a director of Dragon Retail Properties Limited, (a
subsidiary for IFRS 10 purposes) and received benefits from that
company of £9,632 (2018: £6,500) for services. This is included in
the remuneration figures disclosed above.
Using its discretion the Committee awarded a bonus of
£50,000
to J Mintz in recognition of his considerable contribution to
the
cost cutting programme.
The remuneration figures disclosed for H D Goldring include fees
paid to his company, Delmore Holdings Limited for consultancy
services provided to the Group. This is detailed in Note 25 to the
financial statements.
The remuneration figures for C A Parritt include fees paid to
his accountancy practice for consultancy services provided to the
Group. This is detailed in Note 25 to the financial statements.
R Priest provides consultancy services to the Group. This is
detailed in Note 25 to the financial statements.
Summary of directors’ terms
|
Date of
contract |
Unexpired term |
Notice period |
Executive Directors |
|
|
|
Sir Michael Heller |
1 January 1971 |
Continuous |
6 months |
John Heller |
1 May 2003 |
Continuous |
12 months |
Jonathan Mintz |
11 February 2019 |
Continuous |
3 months |
Non-executive Directors |
|
|
|
H D Goldring |
1 July 1992 |
Continuous |
3 months |
C A Parritt |
1 January 2006 |
Continuous |
3 months |
R Priest |
31 July 2013 |
Continuous |
3 months |
Total pension entitlements
One director had benefits under money purchase schemes. Under
his contract of employment, he was entitled to a regular employer
contribution (currently £15,000 a year). There are no final salary
schemes in operation. No pension costs are incurred on behalf of
non-executive Directors.
Share Incentive Plan (SIP)
In 2006 the Directors set up an HMRC approved share incentive
plan (SIP). The purpose of the plan, which is open to all eligible
LAP executive Directors and head office based staff, is to enable
them to acquire shares in the Company and give them a continuing
stake in the Group.
The SIP comprises four types of share – (1) free shares under which
the Company may award shares of up to the value of £3,000 each
year, (2) partnership shares, under which members may save up to
£1,500 per annum to acquire shares, (3) matching shares, through
which the Company may award up to two shares for each share
acquired as a partnership share, and (4) dividend shares, acquired
from dividends paid on shares within the SIP.
1. Free shares: No free shares were issued for 2019
bonuses or for 2018 bonuses.
2. Partnership shares: No partnership shares were issued
between November 2018 and
October 2019.
3. Matching shares: The partnership share agreements for
the year to 31 October 2018 provide
for two matching shares to be awarded free of charge for each
partnership share acquired. No partnership shares were acquired in
2018 (2017: nil). Matching shares will usually be forfeited if a
member leaves employment in the Group within five years of their
grant.
4. Dividend shares: Dividends on shares acquired under
the SIP will be utilised to acquire additional shares. Accumulated
dividends received on shares in the SIP to 31 December 2019 amounted to £Nil (2018:
£Nil).
Dividend shares issued:
|
Number of members |
Number of shares |
Value of shares |
|
2019 |
2018 |
2019 |
2018 |
2019
£ |
2018
£ |
Directors:
J A Heller |
- |
1 |
- |
448 |
- |
125 |
A K Thapar |
- |
1 |
- |
579 |
- |
161 |
Staff |
- |
- |
- |
- |
- |
- |
Total at 31 December |
- |
2 |
- |
1,027 |
- |
286 |
The SIP is set up as an employee benefit trust. The trustee is
London & Associated Securities
Limited, a wholly owned subsidiary of LAP, and all shares and
dividends acquired under the SIP will be held by the trustee until
transferred to members in accordance with the rules of the SIP.
Share Option Schemes
The Company has an HMRC approved scheme (Approved Scheme). It
was set up in 1986 in accordance with HMRC rules to gain HMRC
approved status which gave the members certain tax advantages.
There are no performance criteria for the exercise of options under
the Approved Scheme, as this was set up before such requirements
were considered to be necessary. No Director has any options
outstanding under the Approved Scheme nor were any options granted
under the Approved Scheme for the year ended 31 December 2019.
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 2019 there were no options to subscribe for
ordinary shares outstanding. The exercise of options under the
Unapproved Scheme is subject to the satisfaction of objective
performance conditions specified by the remuneration committee
which conforms to institutional shareholder guidelines and best
practice provisions. Further details of this scheme are set out in
Note 23 “Share Capital” to the financial statements.
Payments to past directors
No payments were made to past Directors in the year ended
31 December 2019.
Payments for loss of office
No payments for loss of office were made in the year ended
31 December 2019.
Statement of directors’ shareholdingS and share interestS
Directors’ interests
The interests of the Directors in the ordinary shares of the
Company, including family and trustee holdings, where appropriate,
were as follows:
|
Beneficial
interests |
Non-beneficial interests |
|
31 Dec 19 |
1 Jan 19 |
31 Dec 19 |
1 Jan 19 |
Sir Michael Heller |
5,749,341 |
5,753,541 |
19,277,931 |
19,277,931 |
H D Goldring |
19,819 |
19,819 |
- |
- |
J A Heller |
1,872,041 |
1,867,841 |
†14,073,485 |
†14,073,485 |
C A Parritt |
36,168 |
36,168 |
- |
- |
R Priest |
- |
- |
- |
- |
J Mintz |
- |
- |
- |
- |
† These non-beneficial holdings are duplicated with those of Sir
Michael Heller.
The beneficial holdings of Directors shown above include their
interests in the Share Incentive Plan.
No share awards were made to the Directors in the year, and
accordingly no discretion was exercised in determining any award or
bonus payment as a result of any share price appreciation.
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 2019
was 21.7p (2018: 26p). During the year the share middle market
price ranged between 18.5p and 26p.
Total Shareholder Return
Remuneration of the Chief Executive over the last ten years
Year |
CEO |
Chief Executive Single
total figure of
remuneration
£’000 |
Annual bonus payment
against maximum
opportunity*
% |
Long-term incentive
vesting rates
against maximum
opportunity*
% |
2019 |
J A Heller |
576 |
0% |
n/a |
2018 |
J A Heller |
870 |
20% |
n/a |
2017 |
J A Heller |
487 |
11% |
n/a |
2016 |
J A Heller |
569 |
18% |
n/a |
2015 |
J A Heller |
762 |
41% |
n/a |
2014 |
J A Heller |
835 |
49% |
n/a |
2013 |
J A Heller |
716 |
n/a |
n/a |
2012 |
J A Heller |
417 |
n/a |
n/a |
2011 |
J A Heller |
671 |
n/a |
n/a |
2010 |
J A Heller |
577 |
n/a |
n/a |
2009 |
J A Heller |
982 |
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 2018 and 2019
group. The remuneration committee chose head office based employees
as the comparator group as this group forms the closest comparator
group.
|
Chief Executive
£’000 |
Head Office Employees*
£’000 |
|
2019 |
2018 |
% change |
2019 |
2018 |
% change |
Base salary and allowances |
533 |
533 |
0% |
279 |
256 |
9.0% |
Taxable benefits |
43 |
37 |
16.2% |
78 |
72 |
8.3% |
Annual bonus |
0 |
300 |
-100% |
37 |
383 |
-90.3% |
Total |
576 |
870 |
-33.8% |
394 |
711 |
-44.6% |
*Head office employees consist of those employed by the business
for the whole of 2018 and 2019 and differ from those included in
the calculation in the previous Annual Report.
Relative importance of spend on pay
The total expenditure of the Group on remuneration to all
employees (Note 26 refers) is shown below:
|
2019
£’000 |
2018
£’000 |
Employee Remuneration |
9,614 |
9,889 |
Distributions to shareholders |
0 |
256 |
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
2019. No increases were awarded and no external advice was
taken in reaching this decision.
Shareholder voting
At the Annual General Meeting on 12 June
2019, there was an advisory vote on the resolution to
approve the Remuneration Report, other than the part containing the
remuneration policy.
In addition, on 6 June 2017, there
was a binding vote on the resolution to approve the Remuneration
Policy. The results are detailed below:
|
% of votes
for |
% of votes
against |
Number of votes
withheld |
Resolution to approve the Remuneration Report (12
June 2019) |
72.91 |
27.09 |
41,952 |
Resolution to approve the Remuneration Policy (6
June 2017) |
83.14 |
16.69 |
89,602 |
Although more than 20% of shareholders voted against the
approval of the remuneration report at the 2019 AGM, the
Remuneration Committee and the Board believe that the current
remuneration policy (approved by shareholders in 2017) is still
appropriate. They have noted that a number of shareholders voted
against the remuneration report. However, they believe that it is
essential to reward executive directors at a commercial rate and
that the payments are in accordance with the agreed Policy.
Remuneration policy summary
The remuneration policy summary below is an extract of the
group’s current remuneration policy on directors’ remuneration,
which was approved by a binding vote at the 2017 AGM. The approved
policy took effect from 6 June
2017.
Element |
Purpose |
Policy |
|
Operation |
Opportunity and performance conditions |
Executive directors |
|
|
|
|
Base salary |
To recognise:
Skills
Responsibility
Accountability
Experience
Value |
Considered by remuneration committee
on appointment
Set at a level considered appropriate to attract, retain,
motivate
and reward the right individuals |
|
Reviewed annually whenever there is
a
change of role or operational responsibility
Paid monthly in cash |
There is no prescribed maximum salary
or maximum rate of increase
No individual director will be awarded a base salary in excess of
£700,000 a year
No specific performance conditions are attached to base
salaries |
Pension |
To provide competitive retirement benefits |
Company contribution offered at up to 10% of base
salary as part of overall remuneration package |
|
The contribution payable by the
Company is included in the director’s contract of employment
Paid into money purchase schemes |
Company contribution offered at up to
10% of base salary as part of overall remuneration package
No specific performance conditions are attached to pension
contributions |
Benefits |
To provide a competitive benefits package |
Contractual benefits include:
Car or car allowance
Group health cover
Death in service cover
Permanent health insurance |
|
The committee retains the discretion to approve
changes in contractual benefits in exceptional circumstances or
where factors outside the control of the Group lead to increased
costs
(e.g. medical inflation) |
The costs associated with benefits
offered are closely controlled and reviewed on
an annual basis
No director will receive benefits of a value in excess of 30% of
their base salary
No specific performance conditions are attached to contractual
benefits |
Annual
bonus |
To reward and incentivise |
In assessing the performance of the executive
team, and in particular
to determine whether bonuses are merited the remuneration committee
takes into account the overall performance of the business, as well
as individual contribution to the business in the period |
|
The remuneration committee determines
the level of bonus on an annual basis
In assessing performance consideration is given to the level of net
rental income, cash flow, voids, realised development gains and
income from managing joint ventures. Achieved results are then
compared with expectation taking account
of market conditions
Bonuses are generally offered in cash or shares |
The current maximum bonus will not
exceed 200% of base salary in any one year but the remuneration
committee reserves the power to award up to 300% in an exceptional
year
Performance conditions will be assessed on an annual basis
The performance measures applied may be financial, non-financial,
corporate, divisional or individual and in such proportion as the
remuneration committee considers appropriate |
Share
options |
To provide executive directors with a
long-term interest in the company |
Share options may be granted under
existing schemes (see page 23)
Where it is necessary to attract, retain, motivate and reward the
right individuals, the directors may establish new schemes to
replace any expired schemes |
|
Offered at appropriate times by the
remuneration committee |
Entitlements to share options granted
under the Approved Option scheme are
not subject to performance criteria. Share Options granted under
the Unapproved Scheme are subject to the performance criteria
specified in the Scheme rules
The aggregate number of shares over which options may be granted
under all of
the company’s option schemes (including any options and awards
granted under the company’s employee share plans) in any period of
ten years, will not exceed, at the time of grant, 10 % of the
ordinary share capital of the company from time to time
Share options will be offered by the remuneration committee as
appropriate |
Share incentive plan (SIP) |
To offer a shorter term incentive in the company
and to give directors a stake
in the group |
Offered to executive directors and head office
staff |
|
Maximum participation levels are set by HMRC |
Of any bonus awarded, Directors may opt to have
maximum of £3,000 per year
paid in ‘Free Shares’ under the SIP scheme rules |
Non-executive directors |
|
|
|
|
Base salary |
To recognise:
Skills
Responsibility
Experience
Risk
Value |
Considered by the board on
appointment
Set at a level considered appropriate to attract, retain and
motivate
he individual
Experience and time required for the role are considered on
appointment |
|
Reviewed annually |
No individual non-executive director
will be awarded a base salary in excess of £40,000 a year
No performance conditions are attached to base salaries |
Pension |
|
No pension offered |
|
|
|
Benefits |
|
No benefits offered except to one non-executive
director who is eligible for health cover (see annual remuneration
report page 22) |
|
The committee retains the discretion to approve
changes in contractual benefits in exceptional circumstances or
where factors outside the control of the Group lead to increased
costs
(e.g. medical inflation) |
The costs associated with benefits
offered are closely controlled and reviewed on
an annual basis
No non-executive director will receive benefits in excess of
£10,000 a year
No specific performance conditions are attached to contractual
benefits |
Share
options |
|
Non-executive directors do not participate in the
share option schemes |
|
|
|
Notes to the Remuneration Policy
The remuneration committee considers the performance measures
outlined in the table above to be appropriate measures of
performance and that the KPIs chosen align the interests of the
directors and shareholders.
A copy of the full policy can be found at www.lap.co.uk.
Remuneration policy
INTRODUCTION
Set out below is the LAP Group policy on directors’ remuneration
(excluding Bisichi). This will be proposed for a binding vote at
the 2020 AGM. If approved the policy will take effect from
30 July 2020.
Future policy table
Element |
Purpose |
Policy |
|
Operation |
Opportunity and performance conditions |
Executive directors |
|
|
|
|
Base salary |
To recognise:
Skills
Responsibility
Accountability
Experience
Value |
Considered by remuneration committee
on appointment
Set at a level considered appropriate to attract, retain,
motivate
and reward the right individuals |
|
Reviewed annually whenever there is a
change
of role or operational responsibility
Paid monthly in cash |
There is no prescribed maximum salary
or maximum rate of increase, although any increase in excess of
inflation is unlikely, unless there are changes in
responsibility.
No individual director will be awarded a base salary in excess of
£575,000 a year
No specific performance conditions are attached to base
salaries |
Pension |
To provide competitive retirement benefits |
Company contribution offered at up to 10% of base
salary as part
of overall remuneration package |
|
The contribution payable by the
Company is included in the director’s contract of employment
Paid into money purchase schemes |
Company contribution offered at up to
10% of base salary as part of overall remuneration package
No specific performance conditions are attached to pension
contributions |
Benefits |
To provide a competitive benefits package |
Contractual benefits include:
Car or car allowance
Group health cover
Death in service cover
Permanent health insurance |
|
The committee retains the discretion
to approve changes in contractual benefits in exceptional
circumstances or where factors outside the control of the Group
lead to increased costs
(e.g. medical inflation) |
The costs associated with benefits
offered are closely controlled and reviewed on an annual basis
No director will receive benefits of a value in excess of 30% of
their base salary
No specific performance conditions are attached to contractual
benefits |
Annual
bonus |
To reward and incentivise |
In assessing the performance of the executive
team, and in particular
to determine whether bonuses are merited the remuneration committee
takes into account the overall performance of the business, as well
as individual contribution to the business in the period |
|
The remuneration committee is using
its discretion to determine the level of bonus on an annual
basis
In assessing performance consideration is given to the level of net
rental income, cash flow, voids, realised development gains and
income from managing joint ventures, as well as NAV changes.
Achieved results are then compared with expectation taking account
of market conditions
Bonuses are generally offered in cash or shares |
The current maximum bonus will not
exceed 80% of base salary in any one year but the remuneration
committee reserves the power to award up to 150% in an exceptional
year
Performance conditions will be assessed on an annual basis
The performance measures applied may be financial, non-financial,
corporate, divisional or individual and in such proportion as the
remuneration committee considers appropriate |
Share
options |
To provide executive directors
with
a long-term interest in the company |
Share options may be granted under
existing schemes (see page 23)
Where it is necessary to attract, retain, motivate and reward the
right individuals, the directors may establish new schemes to
replace any expired schemes |
|
Offered at appropriate times by the
remuneration committee |
The aggregate number of shares over
which options may be granted under all of the company’s option
schemes (including any options and awards granted under the
company’s employee share plans) in any period of ten years, will
not exceed, at the time of grant, 10% of the ordinary share capital
of the company from time to time
Share options will be offered by the remuneration committee at
their discretion and will be subject to appropriate performance
criteria at the time. |
Share incentive plan (SIP) |
To offer a shorter term incentive in the company
and to give directors a stake in
the group |
Offered to executive directors and head office
staff |
|
Maximum participation levels are set by HMRC |
Of any bonus awarded, Directors may opt to have
maximum of £3,000 per year paid in ‘Free Shares’ under the SIP
scheme rules |
Non-executive directors |
|
|
|
|
Base salary |
To recognise:
Skills
Responsibility
Experience
Risk
Value |
Considered by the board on
appointment
Set at a level considered appropriate to attract, retain and
motivate
the individual
Experience and time required for the role are considered on
appointment |
|
Reviewed annually |
No individual non-executive director
will be awarded a base salary in excess of £40,000 a year
No performance conditions are attached to base salaries |
Pension |
|
No pension offered |
|
|
|
Benefits |
|
No benefits offered except in exchange for
sacrificing fees. |
|
|
|
Share
options |
|
Non-executive directors do not participate in the
share option schemes |
|
|
|
Notes to the Remuneration Policy
The changes made to the remuneration policy impose greater
limitation on maximum bonuses payable to executive directors and
add greater clarity to the arrangements for share options. There
have been no other significant changes made to the proposed future
remuneration policy from its predecessor.
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.
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.
For details of remuneration of other company employees please
see page 25
Remuneration scenarios
An indication of the possible level of remuneration that would
be received by each Executive director in the year commencing
30 July 2020 in accordance with the
directors’ remuneration policy is
shown below.
Sir Michael Heller
J A Heller
J Mintz
The base salary level for Sir Michael
Heller for the purpose of these graphs (and bonus
calculations) is £300k as per note on page 22.
Assumptions
Minimum
Consists of base salary, benefits and pension. Base salary,
benefits and pension for 2020 are assumed at the levels included in
the single total figure remuneration table for the year ended
31 December 2019.
On target
Based on the minimum, enhanced by a bonus calculated as the
average percentage bonus awarded to the individual in the three
years ended on 31 December 2019. As
outlined in the policy table above, the remuneration committee has
discretion to award bonuses of up to 80% of base salary in any one
year (up to 150% in an exceptional year).
Maximum
Based on the minimum, enhanced by the maximum bonus available in
an exceptional year (150% of base salary).
Approach to NEW recruitment remuneration
All appointments to the board are made on merit. The components
of the remuneration package (for a new director who is recruited
within the life of the approved remuneration policy) would comprise
base salary, pension, benefits and an opportunity to earn an annual
bonus and be granted share options as outlined above. The approach
to such appointments is detailed within the policy summary above.
The company will pay remuneration to new directors at a level that
will enable it to attract appropriately skilled and experienced
individuals but which is not, in the opinion of the remuneration
committee excessive.
Service contracts
All executive directors have full-time contracts of employment
with the company. Non-executive directors have contracts of
service. No director has a contract of employment or contract of
service with the company, its joint venture or associated companies
with a fixed term which exceeds twelve months. Directors’ notice
periods (see the annual remuneration report) are set in line with
market practice and are of a length considered sufficient to ensure
an effective handover of duties should a director leave the
company.
All directors’ contracts as amended from time to time, have run
from the date of appointment. Service contracts are kept at the
registered office.
Policy on payment for loss of office
There are no contractual provisions that could impact on a
termination payment. Termination payments will be calculated in
accordance with the existing contract of employment or service
contract. It is the policy of the remuneration committee to issue
employment contracts to executive directors with normal commercial
terms and without extended terms of notice which could give rise to
extraordinary termination payments.
Consideration of employment conditions elsewhere in the
company
In setting this policy for directors’ remuneration the
remuneration committee has been mindful of the company’s objective
to reward all employees fairly according to their role, performance
and market forces. In setting the policy for Directors’
remuneration the committee has considered the pay and employment
conditions of the other employees within the group, but no formal
consultation has been undertaken with employees in drawing up the
policy. The committee has not used formal comparison measures.
Consideration of shareholder views
There have been no direct consultations with shareholders in
formulating this policy, but the Committee has taken note of
comments made at the 2019 AGM and the votes against the
Remuneration report. In accordance with the regulations, an
ordinary resolution for approval of this policy will be put to
shareholders at the AGM on 30 July
2020.
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 a year prior to the
publication
of the annual results and discusses and considers the half year
results prior to their approval by the board. The audit committee
meetings are attended by the external audit partner, chief
executive, finance director and company secretary. During the year
the members of the committee also meet on an informal basis to
discuss any relevant matters which may have arisen. Additional
formal meetings may be held as necessary.
During the past year the committee:
- met with the external auditors, and
discussed their reports to
the audit committee;
- approved the publication of annual and
half year financial results;
- considered and approved the annual
review of internal controls;
- decided that there was no current need
for an internal audit function;
- agreed the independence of the
auditors and approved their fees for both audit and non-audit
services as set out in Note 2 to the financial statements; and
- reviewed and discussed with the
auditors the results of the FRC Audit Quality Review in respect of
the 2018 accounts and, noting that the FRC considered that limited
improvements were required, we discussed the auditor’s proposals to
address these for the 2019 audit; and, in addition
- the chairman of the audit committee
has also had separate meetings and discussions with the external
audit partner.
FINANCIAL REPORTING
As part of its role, the Audit Committee assessed the audit
findings that were considered most significant to the financial
statements, including those areas requiring significant judgement
and/or estimation. When assessing the identified financial
reporting matters, the committee assessed quantitative materiality
primarily by reference to the carrying value of the group’s total
assets, given that the group operates a principally asset based
business. When determining quantitative materiality, the Board also
gave consideration to the value of revenues generated by the group
and net asset value, given that they are key trading and business
KPIs. The qualitative aspects of any financial reporting matters
identified during the audit process were also considered when
assessing their materiality. Based on the considerations set out
above we have considered quantitative errors individually or in
aggregate in excess of approximately £1.5 million in relation to
the consolidated balance sheet and £0.4 million for underlying
profitability and £0.3 million for the Bisichi group to be
material.
External Auditor
RSM UK Audit LLP held office throughout the period under review.
In the United Kingdom London & Associated Properties PLC
provides extensive administration and accounting services to
Bisichi 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
29 June 2020
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 15, confirms that to the best of each person’s
knowledge:
a. the financial statements, prepared in accordance
with the applicable set of accounting standards, give a true and
fair view of the assets, liabilities, financial position and profit
of the Company and the undertakings included in the consolidation
taken as a whole; and
b. the Strategic Report contained in the Annual
Report includes a fair review of the development and performance of
the business and the position of the Company and the undertakings
included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that they
face.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
London & Associated Properties
PLC website.
Legislation and regulations in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation
and regulations in other jurisdictions.
Independent auditor’s report
TO THE MEMBERS OF LONDON &
ASSOCIATED PROPERTIES PLC
Opinion
We have audited the financial statements of London &
Associated Properties plc (the ‘parent company’) and its
subsidiaries (the ‘group’) for the year ended 31 December 2019 which comprise the consolidated
income statement, the consolidated statement of comprehensive
income, the consolidated balance sheet, the consolidated statement
of changes in shareholders’ equity, the consolidated cash flow
statement, the company balance sheet, the company statement of
changes in equity and notes to the financial statements, including
a summary of significant accounting policies. The financial
reporting framework that has been applied in the preparation of the
group financial statements is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European
Union. The financial reporting framework that has been applied in
the preparation of the parent company financial statements is
applicable law and United Kingdom Accounting Standards including
FRS 101 “Reduced Disclosure Framework” (United Kingdom Generally
Accepted Accounting Practice).
In our opinion:
- the financial statements give a true
and fair view of the state of the group’s and of the parent
company’s affairs as at 31 December
2019 and of the group’s loss for the year then ended;
- the group financial statements have
been properly prepared in accordance with IFRSs as adopted by the
European Union;
- the parent company financial
statements have been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice; and
- the financial statements have been
prepared in accordance with the requirements of the Companies Act
2006 and, as regards the group financial statements, Article 4 of
the IAS regulations.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor’s responsibilities for the audit of the financial
statements section of our report. We are independent of the group
and parent company in accordance with the ethical requirements that
are relevant to our audit of the financial statements in the UK,
including the FRC’s Ethical Standard as applied to listed public
interest entities and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe
that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Conclusions relating to going concern
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.
Summary of our audit approach
Key audit matters |
Group
- Going concern
- Valuation of investment and development
properties
Parent Company
- None |
Materiality |
Group
- Overall materiality: £1.50 million
(2018: £1.50 million)
Parent Company
- Overall materiality: £0.65 million
(2018: £0.65 million) |
Scope |
Our audit procedures covered 99.7%
of revenue, 99.8% of net assets and 98.3% of loss before tax. |
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the group
financial statements of the current period and include the most
significant assessed risks of material misstatement (whether or not
due to fraud) we identified, including those which had the greatest
effect on the overall audit strategy, the allocation of resources
in the audit and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the
group financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these
matters.
Going concern |
|
Key audit matter
description |
Following the year end,
Covid-19 was declared a global pandemic and is having a significant
and unprecedented impact on all sections of the global economy, the
extent of which is not yet fully apparent. The potential risks to
the Group include:
- tenants defaulting on, or deferring, rent
payments resulting in cash flow difficulties for the Group;
- reductions in asset values in the
property market, which may cause the Group to breach loan to value
covenants; and
- tightening of lending conditions
including covenants.
The financial statements are prepared on the going concern basis of
accounting, and the above factors have an impact on the assessment
of the Group’s ability to continue as a going concern. There is a
risk, therefore, that the judgements involved in assessing going
concern in the current climate are inappropriate, resulting in a
material misstatement. There is also a risk that the disclosures
made, including of whether there is a material uncertainty in
relation to going concern, are inadequate or incomplete.
Group management has set out its disclosures in relation to
Covid-19 and going concern on pages 18 and 42. |
How the matter was
addressed in the audit |
We discussed with
management the process they undertook to assess going concern,
including the impact of Covid-19. We audited the Group’s assessment
of going concern, including cash flow projections and forecast
covenant compliance based on normal trading conditions, which were
then sensitised to enable management to assess the potential impact
of Covid-19.
The audit work included:
- reviewing minutes of board meetings, and
the board paper prepared on going concern
- reviewing the base case forecasts in
detail for the period to September 2021. We checked the
mathematical accuracy of the model, and compared revenues and costs
to the actual results for 2019, taking account of known and
reasonably foreseeable changes;
- considering the reasonableness of
assumptions and the sensitivity analysis prepared by
management;
- checking projected covenant compliance to
the model and against the loan agreements;
- applying reverse stress tests to the
model, which included a reduction in property revenues due to
deferral of collection of 60% of rent to Q1 2021, non-payment of
rents of 20% for the remainder of the 2020 calendar year and Q1 of
2021, and a reduction in property valuations of up to 20%.
- considering the likelihood and
reasonableness of possible mitigating actions proposed by
management, including the provision of additional security to cure
possible loan to value covenant breaches, and alternative financing
plans; and
- reviewing the disclosures made in the
financial statements in respect of going concern. |
Key observations |
The conclusions in relation to going
concern are set out in the “Conclusions relating to going concern”
paragraph above. |
Valuation of investment and
development properties |
Key audit matter
description |
The group’s properties are accounted
for in the financial statements as investment properties under IAS
40 and held at fair value, or as inventory where appropriate and
held at the lower of cost and net realisable value.
The majority of investment properties are valued by two firms of
independent external valuers and these valuations are adopted in
the financial statements. At 31 December 2019 investment property
valued at £44.6 million (note 8) was disclosed within non-current
assets in the financial statements. Separately, property inventory
was carried at £26.9 million (note 12).
The directors’ assessment of the value of properties is considered
a key audit matter due to the relative importance of these assets
to the group’s financial statements, the potential impact of
movements in the values of the assets, and the subjectivity and
complexity of the valuation process, which involves significant
judgements and estimates as disclosed on page 44 of the financial
statements.
The valuations are carried out by two firms of professional
external valuers, together with, in respect of one property, an
internal valuer in accordance with the methodology described in
note 8. |
How the matter was
addressed in the audit |
Investment properties
Our response included:
- agreeing the valuations of all properties
recorded in the financial statements and subject to the external
valuation process to the valuation reports prepared by the valuers.
These reports covered all of the value of investment properties,
except one property valued at £1.3 million which was subject to
internal valuation;
- assessing the qualifications and
expertise of management’s valuers, considering their objectivity
and any threats to their independence. We concluded that there was
no threat which might impair the valuers’ independence and
objectivity;
- meeting the valuers, both external and
internal, to discuss and challenge the assumptions used and the
movements in valuations observed in the year;
- consulting an independent auditor’s
expert on the valuation of certain properties in the portfolio
whose values fell outside our expectations; and
- comparing the key inputs to the valuation
model to the underlying records of the leases and records of rents
received and against our knowledge of market yields.
Development properties
Our response included:
- agreeing the cost of properties held as
inventory to underlying records;
- for the Sheffield property, held at a
value of £21.3 million, we assessed the value of the related
development project by
o reviewing and challenging the assumptions made
by management in respect of anticipated sales prices and
development costs, and the forecast profit margin on the
project;
o consulting an independent auditor’s expert in
respect of these assumptions; and
o considering the adequacy of the impairment
charge. |
Key observations |
The carrying values of the properties are
consistent with the valuation reports provided for investment
properties. Properties held in inventory, after impairment, are
carried at the lower of cost and net realisable value. |
|
|
|
Our application of materiality
When establishing our overall audit strategy, we set certain
thresholds which help us to determine the nature, timing and extent
of our audit procedures. When evaluating whether the effects of
misstatements, both individually and on the financial statements as
a whole, could reasonably influence the economic decisions of the
users we take into account the qualitative nature and the size of
the misstatements. Based on our professional judgement, we
determined materiality as follows:
|
Group |
Parent company |
Overall materiality |
£1.50 million
(2018: £1.50 million) |
£0.65 million
(2018: £0.65 million) |
Basis for determining overall
materiality |
3% of net assets |
2.5% of net assets |
Rationale for benchmark applied |
Net assets are the key criteria on
which the performance of the group is measured, and the group
regularly reports net asset value per share as a metric to
shareholders. |
Reporting of misstatements
to the Audit Committee |
Misstatements in excess of £37,500 and
misstatements below that threshold that, in our view, warranted
reporting on
qualitative grounds. |
Misstatements in excess of £16,250 and
misstatements below that threshold that, in our view, warranted
reporting on qualitative grounds. |
An overview of the scope of our audit
The group consists of 31 components. 27 of these are based in
the UK and four are based in South
Africa.
Full scope audits were undertaken for 28 components. This
resulted in coverage of 99.8% of the group’s net assets, 99.7% of
revenue and 98.3% of the loss for the period.
Of the above, full scope audits for eight components were
undertaken by component auditors.
One other component was considered significant as it contained
material amounts of inventory, the recognition of which is a key
audit matter for the group. That component was subject to specific
audit procedures, in respect of development properties. The
remaining two components were subject to analytical review
procedures at group level.
Other information
The directors are responsible for the other information. The
other information comprises the information included in the annual
report set out on pages 2 to 31 other than the financial statements
and our auditor’s report thereon. Our opinion on the financial
statements does not cover the other information and, except to the
extent otherwise explicitly stated in our report, we do not express
any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a
material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we
have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act
2006
In our opinion, the part of the directors’ remuneration report
to be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of
the audit:
- the information given in the Strategic
Report and the Directors’ Report for the financial year for which
the financial statements are prepared is consistent with the
financial statements; and
- the Strategic Report and the
Directors’ Report have been prepared in accordance with applicable
legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and
the parent company and their environment obtained in the course of
the audit, we have not identified material misstatements in the
Strategic Report or the Directors’ Report.
We have nothing to report in respect of the following matters in
relation to which the Companies Act 2006 requires us to report to
you if, in our opinion:
- adequate accounting records have not
been kept by the parent company, or returns adequate for our audit
have not been received from branches not visited by us; or
- the parent company financial
statements and the part of the directors’ remuneration report 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 32, 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 33 years,
covering the years ending 31 December
1987 to 31 December 2019.
The non-audit services prohibited by the FRC’s Ethical Standard
were not provided to the group or the parent company and we remain
independent of the group and the parent company in conducting our
audit.
During the period under review agreed upon procedures were
completed in respect of a number of the group’s service charge
accounts.
Our audit opinion is consistent with the additional report to
the audit committee.
Use of our report
This report is made solely to the company’s members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
company’s members those matters we are required to state to them in
an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the company and the company’s members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Geoff Wightwick (Senior Statutory
Auditor)
For and on behalf of RSM UK Audit LLP, Statutory Auditor
Chartered Accountants
25 Farringdon Street
London
EC4A 4AB
29 June 2020
financial statements
Consolidated income statement
for the year ended 31 December
2019
|
Notes |
2019
£’000 |
2018
£’000 |
|
|
|
|
Group revenue |
1 |
63,966 |
56,651 |
Operating costs |
|
(60,766) |
(49,293) |
Operating profit |
|
3,200 |
7,358 |
Finance income |
4 |
86 |
61 |
Finance expenses |
4 |
(3,252) |
(3,682) |
Result before revaluation and other movements |
|
34 |
3,737 |
|
|
|
|
Non–cash changes in valuation of assets and
liabilities and other movements |
|
|
|
Decrease in value of investment properties |
8 |
(2,988) |
(2,565) |
Decrease in value of trading investments |
|
(6) |
(169) |
Decrease in value of other investments |
|
(1,749) |
– |
Adjustment to interest rate derivative |
21 |
169 |
265 |
(Loss)/profit for the year before taxation |
2 |
(4,540) |
1,268 |
Income tax charge |
5 |
(951) |
(675) |
(Loss)/profit for the year |
|
(5,491) |
593 |
|
|
|
|
Attributable to: |
|
|
|
Equity holders of the Company |
|
(6,477) |
(2,082) |
Non-controlling interest |
24 |
986 |
2,675 |
(Loss)/profit for the year |
|
(5,491) |
593 |
|
|
|
|
Earnings per share |
|
|
|
Loss per share - basic and diluted |
7 |
(7.59)p |
(2.44)p |
Consolidated statement of comprehensive income
for the year ended 31 December
2019
|
2019
£’000 |
2018
£’000 |
|
|
|
(Loss)/profit for the year |
(5,491) |
593 |
Other comprehensive income/(expense): |
|
|
Items that may be subsequently recycled to the
income statement: |
|
|
Exchange differences on translation of Bisichi PLC
foreign operations |
(49) |
(430) |
Other comprehensive expense for the year net of
tax |
(49) |
(430) |
Total comprehensive (expense)/income for the year
net of tax |
(5,540) |
163 |
Attributable to: |
|
|
Equity shareholders |
(6,493) |
(2,239) |
Non–controlling interest |
953 |
2,402 |
|
(5,540) |
163 |
Consolidated balance sheet
at 31 December 2019
|
Notes |
2019
£’000 |
2018
£’000 |
|
|
|
|
Non–current assets |
|
|
|
Market value of properties attributable to
Group |
8 |
44,580 |
47,430 |
Present value of head leases |
8 |
3,326 |
3,261 |
Property |
|
47,906 |
50,691 |
Mining reserves, property, plant and
equipment |
9 |
10,472 |
8,659 |
Investments |
14 |
287 |
1,783 |
|
|
58,665 |
61,133 |
Current assets |
|
|
|
Inventories - Property |
12 |
26,915 |
38,556 |
Inventories - Mining |
13 |
2,432 |
1,511 |
Assets held for sale |
10 |
– |
2,285 |
Trade and other receivables |
15 |
8,399 |
8,022 |
Corporation tax recoverable |
|
19 |
– |
Investments |
16 |
1,119 |
887 |
Cash and cash equivalents |
|
13,533 |
20,655 |
|
|
52,417 |
71,916 |
Total assets |
|
111,082 |
133,049 |
Current liabilities |
|
|
|
Trade and other payables |
17 |
(12,835) |
(13,341) |
Borrowings |
18 |
(10,120) |
(41,388) |
Lease liabilities |
19 |
(424) |
(213) |
Interest rate derivatives |
|
– |
(169) |
Current tax liabilities |
|
(457) |
(73) |
|
|
(23,836) |
(55,184) |
Non–current liabilities |
|
|
|
Borrowings |
18 |
(31,063) |
(15,255) |
Lease liabilities |
19 |
(3,842) |
(3,048) |
Provisions |
20 |
(1,554) |
(1,571) |
Deferred tax liabilities |
22 |
(1,654) |
(2,305) |
|
|
(38,113) |
(22,179) |
Total liabilities |
|
(61,949) |
(77,363) |
Net assets |
|
49,133 |
55,686 |
Equity attributable to the owners of the
parent |
|
|
|
Share capital |
23 |
8,554 |
8,554 |
Share premium account |
|
4,866 |
4,866 |
Translation reserve (Bisichi PLC) |
|
(868) |
(852) |
Capital redemption reserve |
|
47 |
47 |
Retained earnings
(excluding treasury shares) |
|
24,271 |
30,906 |
Treasury
shares |
23 |
(144) |
(144) |
Retained earnings |
|
24,127 |
30,762 |
Total equity attributable to equity
shareholders |
|
36,726 |
43,377 |
Non–controlling interest |
24 |
12,407 |
12,309 |
Total equity |
|
49,133 |
55,686 |
|
|
|
|
Net assets per share - basic and diluted |
7 |
43.04p |
50.83p |
These financial statements were approved by the board of
directors and authorised for issue on 29
June 2020 and signed on its behalf by:
Sir Michael
Heller
Jonathan Mintz Company Registration No.
341829
Director
Director
Consolidated statement of changes in shareholders’ equity
for the year ended 31 December
2019
|
Share
capital
£’000 |
Share
premium
£’000 |
Translation
reserves
£’000 |
Capital
redemption
reserve
£’000 |
Treasury
shares
£’000 |
Retained
earnings
excluding
treasury
shares
£’000 |
Total
excluding
Non–
Controlling
Interests
£’000 |
Non–
controlling
Interests
£’000 |
Total
equity
£’000 |
Balance at 1 January 2018 |
8,554 |
4,866 |
(695) |
47 |
(145) |
33,227 |
45,854 |
10,856 |
56,710 |
Profit for year |
– |
– |
– |
– |
– |
(2,082) |
(2,082) |
2,675 |
593 |
Other comprehensive expense: |
|
|
|
|
|
|
|
|
|
Currency translation |
– |
– |
(157) |
– |
– |
– |
(157) |
(273) |
(430) |
Total other comprehensive expense |
– |
– |
(157) |
– |
– |
– |
(157) |
(273) |
(430) |
Total comprehensive expense |
– |
– |
(157) |
– |
– |
(2,082) |
(2,239) |
2,402 |
163 |
Transactions with owners: |
|
|
|
|
|
|
|
|
|
Share options charge |
– |
– |
– |
– |
– |
17 |
17 |
7 |
24 |
Dividends – equity holders |
– |
– |
– |
– |
– |
(256) |
(256) |
– |
(256) |
Dividends – non–controlling interests |
– |
– |
– |
– |
– |
– |
– |
(956) |
(956) |
Disposal of own shares |
– |
– |
– |
– |
1 |
– |
1 |
– |
1 |
Transactions with owners |
– |
– |
– |
– |
1 |
(239) |
(238) |
(949) |
(1,187) |
Balance at 31 December 2018 |
8,554 |
4,866 |
(852) |
47 |
(144) |
30,906 |
43,377 |
12,309 |
55,686 |
(Loss)/profit for year |
– |
– |
– |
– |
– |
(6,477) |
(6,477) |
986 |
(5,491) |
Other comprehensive
income/(expense): |
|
|
|
|
|
|
|
|
|
Currency translation |
– |
– |
(16) |
– |
– |
– |
(16) |
(33) |
(49) |
Total comprehensive
income/(expense) |
– |
– |
(16) |
– |
– |
– |
(16) |
(33) |
(49) |
Total comprehensive
income/(expense) |
– |
– |
(16) |
– |
– |
(6,477) |
(6,493) |
953 |
(5,540) |
Transactions with owners: |
|
|
|
|
|
|
|
|
|
Dividends – equity holders |
– |
– |
– |
– |
– |
(158) |
(158) |
|
(158) |
Dividends – non–controlling interests |
– |
– |
– |
– |
– |
– |
– |
(855) |
(855) |
Transactions with owners |
– |
– |
– |
– |
– |
(158) |
(158) |
(855) |
(1,013) |
Balance at 31 December 2019 |
8,554 |
4,866 |
(868) |
47 |
(144) |
24,271 |
36,726 |
12,407 |
49,133 |
Consolidated cash flow statement
for the year ended 31 December
2019
|
2019
£’000 |
2018
£’000 |
Operating activities |
|
|
(Loss)/profit for the year before taxation |
(4,540) |
1,268 |
Finance income |
(86) |
(61) |
Finance expense |
3,252 |
3,682 |
Decrease in value of investment properties |
2,988 |
2,565 |
Decrease in trading and other investments |
1,755 |
169 |
Adjustment to interest rate derivative |
(169) |
(265) |
Depreciation |
2,407 |
2,122 |
Share based payment expense |
– |
18 |
Development expenditure on inventories |
(409) |
(6,256) |
Sale of inventory - property (net of costs) |
9,309 |
– |
Loss on sale of inventory - property |
991 |
– |
Exchange adjustments |
123 |
65 |
Change in inventories |
805 |
(797) |
Change in receivables |
(448) |
(235) |
Change in payables |
(994) |
(354) |
Cash generated from operations |
14,984 |
1,921 |
Income tax paid |
(1,199) |
(2,281) |
Cash inflows/(outflows) from operating
activities |
13,785 |
(360) |
Investing activities |
|
|
Disposal of assets held for sale |
2,285 |
36,474 |
Acquisition of investment properties, mining
reserves, plant and equipment |
(3,350) |
(9,438) |
Acquisition of other investments |
(490) |
– |
Sale of plant and equipment |
– |
1 |
Interest received |
86 |
199 |
Cash (outflows)/inflows from investing
activities |
(1,469) |
27,236 |
Financing activities |
|
|
Interest paid |
(2,932) |
(3,711) |
Interest obligation under leases |
(259) |
(178) |
Repayment of lease liability |
(193) |
– |
Receipt of bank loan - Bisichi PLC |
3,908 |
753 |
Repayment of bank loan - Bisichi PLC |
(6,011) |
(19) |
Repayment of bank loan - Dragon Retail Properties
Ltd |
– |
(65) |
Receipt of bank loan - London & Associated
Properties PLC |
13,725 |
7,202 |
Repayment of bank loan - London & Associated
Properties PLC |
(28,482) |
(16,438) |
Repayment of short term loan from joint ventures
and related parties |
– |
(30) |
Repayment of debenture stocks |
– |
(3,000) |
Equity dividends paid |
(154) |
(255) |
Equity dividends paid - non-controlling
interests |
(375) |
(309) |
Cash outflows from financing activities |
(20,773) |
(16,050) |
Net increase in cash and cash equivalents |
(8,457) |
10,826 |
Cash and cash equivalents at beginning of
year |
17,120 |
6,266 |
Exchange adjustment |
28 |
28 |
Cash and cash equivalents at end of year |
8,691 |
17,120 |
The cash flows above relate to continuing operations.
Cash and cash equivalents
For the purpose of the cash flow statement, cash and cash
equivalents comprise the following balance sheet amounts:
|
2019
£’000 |
2018
£’000 |
Cash and cash equivalents (before bank
overdrafts) |
13,533 |
20,655 |
Bank overdrafts |
(4,842) |
(3,535) |
Cash and cash equivalents at end of year |
8,691 |
17,120 |
£340,000 of cash deposits at 31 December
2019 were charged as security to debenture stocks (2018:
£340,000).
£2,271,000 of cash deposits at 31
December 2019 were charged as security to bank loans (2018:
£500,000).
Group accounting policies
The following are the principal Group accounting policies:
Basis of accounting
The Group financial statements are prepared in accordance with
International Financial Reporting Standards (IFRS), as adopted by
the European Union and with those parts of the Companies Act 2006
applicable to companies reporting under IFRS.
The Company has elected to prepare the parent company’s
financial statements in accordance with Financial Reporting
Standard 101 ’Reduced Disclosure Framework’ (FRS 101) and Companies
Act 2006 and these are presented in Note 30. The financial
statements are prepared under the historical cost convention,
except for the revaluation of freehold and leasehold properties and
financial assets at fair value through profit and loss as well as
fair value of interest rate derivatives at fair value.
The Group financial statements are presented in Pounds Sterling
and all values are rounded to the nearest thousand pounds (£’000)
except when otherwise stated.
The functional currency for each entity in the Group is the
currency of the country in which the entity has been incorporated.
Details of the country in which each entity has been incorporated
can be found in note 11.
The exchange rates used in the accounts were as follows:
|
£1 Sterling: Rand |
£1 Sterling:
Dollar |
|
2019 |
2018 |
2019 |
2018 |
Year-end rate |
18.5759 |
18.3723 |
1.3254 |
1.2690 |
Annual average |
18.4326 |
17.5205 |
1.2781 |
1.3096 |
London & Associated
Properties PLC (“LAP”), the parent company, is a public limited
company incorporated and domiciled in England and quoted on the London Stock
Exchange. The Company registration number is 341829. LAP and its
subsidiaries (“the Group”) consist of LAP, all of its subsidiary
undertakings, including Bisichi PLC (“Bisichi”) and Dragon Retail
Properties Limited (“Dragon”). The Group without Bisichi and Dragon
is referred to as LAP Group.
Going concern
In reviewing going concern it is necessary to consider
separately the position of LAP Group and Bisichi. Although both are
consolidated into group accounts (as required by IFRS 10), they are
managed independently and in the unlikely event that Bisichi was
unable to continue trading this would not affect the ability of LAP
Group to continue operating as a going concern. The same would be
true for Bisichi in reverse.
The directors have reviewed the cash flow forecasts of the LAP
Group and the underlying assumptions on which they are based for
the 15 months from the date of signing. 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, including separate sections
discussing the potential impact of COVID-19 on the LAP Group. In
addition, Note 21 to the financial statements sets out the Group’s
objectives, policies and processes for managing its capital; its
financial risk management objectives; details of its financial
instruments and hedging activities; and its exposure to credit risk
and liquidity risk.
Given the significant impact of Covid-19 on the macro-economic
conditions in which LAP is operating, additional stress-testing has
been carried out on LAP’s ability to continue in operation under
extremely unfavourable operating conditions, including a scenario
in which we are unable to collect a significant proportion of our
rent for an extended period of time. While the assumptions we have
applied in these scenarios are possible, they do not represent our
view of the likely outturn. However, the results of these tests
help to inform the Directors’ assessment of the viability of LAP.
We have assessed the impact of these assumptions on the key
financial metrics over a four year period, including the net cash
position and debt covenants. The majority of our properties serve
local communities with convenience retail and tenants therefore
tend to be sole traders, rather than large fashion retailers. Sole
traders rely on their property to serve the local community and are
less affected by the structural disruptions seen in the wider
retail environment. We have over two hundred tenants and we are not
reliant on any single large tenant.
Cash position
Our worst-case scenario, which we consider a remote possibility,
assumes that over a twelve-month period:
- 60% of tenants delay payments for nine
months
- 20% of tenants are never able to
pay
- 15% of tenants become insolvent
- It takes 5 months to re-let an empty
property
- No dividend is received from Bisichi
until 2021
As a result of the above assumptions, in June 2021 LAP’s cash balances would fall to £0.5m
and increase to £1.3m by June 2024.
These estimates include discretionary spending that could be
delayed or stopped entirely and assume that no further sources of
funding are sought.
Debt Covenants
We have looked at falls in valuations across all our properties
and assessed the effect on our debt covenants. In all cases we have
the option to paydown the loans to cure Loan to Value
covenants.
A 20% reduction in property valuations, being our worst-case
scenario, would require LAP to repay loans of £2.0m to meet Loan to
Value covenants. This could either be met from existing cash
reserves, by providing currently unencumbered properties, valued at
£4.275 million, as additional security or by selling or leveraging
other investments and assets.
Some, but not all, loans are non-recourse to the group. Our
largest loan, of £14 million with Phoenix CRE S.à r.l, is
non-recourse and could be called without a material impact on the
wider group in the short and medium term. Should properties secured
against London & Associated
Properties PLC’s £10 million debenture with Aviva suffer a 20% fall
in value, either currently unencumbered properties or £320,000 of
cash could be added to the existing security. The property mix of
the current security is 72% community retail and 28% industrial;
values of the latter are widely considered to be more resilient in
the current climate.
Loan debt service covenants react more immediately to short term
delays in rent payments than property values. For all loans, the
group is able, at its discretion, to provide assistance to match
any shortfall in rents received.
Debt Refinancing
Dragon has a £1.2 million loan expiring within the next year,
where we have been granted an extension to January 2021 by the existing lender to assist us
in the refinancing, following the delays caused by COVID. We are
exploring a number of options for this refinancing which we expect
to be able to complete in good time. The LTV on this loan is
relatively low at 49% and the security is considered
attractive.
Broadway Regen has a development loan expiring in July 2020 on which an extension is currently
being arranged with the existing lender, following extensions of
the facility in July 2019 and
January 2020. This is a residential
development on which we anticipate strong returns. We expect this
refinancing to be completed shortly, and that the lender will
continue to roll over until such time as we dispose of the
project.
Both these loans are ring-fenced within the group’s joint
venture vehicles, where the major partner is Bisichi PLC. Although
in both cases we are confident that refinancing can be achieved
satisfactorily, we note that, were the loans to be called, there
are sufficient assets available to settle the obligations and their
disposal would not affect the ability of the group to continue to
operate as a going concern.
Bisichi PLC
The directors note the consideration of going concern by the
Bisichi board, but also note that any failure of Bisichi would not
itself impact on the going concern status of the LAP group for the
reasons set out on page 8 of the financial statements.
The directors believe that the LAP Group has adequate resources
to continue in operational existence for the foreseeable future and
that the LAP Group is well placed to manage its business risks.
Thus they continue to adopt the going concern basis of accounting
in preparing the annual financial statements.
The Bisichi directors continue to adopt the going concern basis
of accounting in preparing the Bisichi annual financial
statements.
International Financial Reporting Standards (IFRS)
The Group has adopted all of the new and revised Standards and
Interpretations issued by the International Accounting Standards
Board (“IASB”) that are relevant to its operations and effective
for accounting periods beginning 1 January
2019.
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 has replaced IAS 17 ‘Leases’
and eliminates the classification of leases as either operating
leases or finance leases and, instead, introduces a single lessee
accounting model specifying how leases are recognised, measured,
presented and disclosed.
The Group has applied IFRS 16 using the modified retrospective
approach and has not adjusted prior period figures, resulting in a
nil impact on opening equity.
In applying IFRS 16 for the first time, the group has used the
following practical expedients permitted by the standard:
- the use of a single discount rate to a
portfolio of leases with reasonably similar characteristics
- reliance on previous assessments on
whether leases are onerous
- the accounting for operating leases
with a remaining lease term of less than 12 months as at
1 January 2020 as short-term leases;
and
- the use of hindsight in determining
the lease term where the contract contains options to extend or
terminate the lease
The group has also elected not to reassess whether a contract
is, or contains a lease at the date of initial application.
Instead, for contracts entered into before the transition date the
group relied on its assessment made applying IAS 17 and IFRIC 4
Determining whether an Arrangement contains a Lease.
Right of use assets totalling £1,111,000, being £1,054,000 of
properties occupied by the Group and £57,000 of mining equipment,
were recognised on transition at 1 January
2019 at a value equal to the lease liability using a
discount rate at the date of the initial application. This has been
applied using the exemption not to re-present the prior reporting
period. The related lease liability of £1,111,000 is recognised as
the present value of the lease payments. No impairment provisions
have been made against leases as they are not considered to be
onerous.
Interest is accrued on the lease liability based on the discount
rate and is reported in finance costs and subsequent payments
reduce the lease liability. The right of use asset is depreciated
over the life of the contract on a straight line basis. In the
cashflow statement the principal and interest portions of the lease
payments are classified within financing activities.
The table below sets out the impact on the Consolidated Balance
Sheet as at 31 December 2019 and
1 January 2019:
|
31 December 2019
£’000 |
1 January 2019
£’000 |
Right of Use Assets |
|
|
Head leases |
3,326 |
3,261 |
Property |
843 |
1,054 |
Equipment |
81 |
57 |
|
4,250 |
4,372 |
Lease liability |
|
|
> 1 year |
424 |
213 |
< 1 year |
3,842 |
4,159 |
|
4,266 |
4,372 |
The table below shows the impact on the Consolidated Statement
of Comprehensive Income for the year to 31
December 2019 compared tor reporting under IAS17:
12 months ended 31
December 2019
£’000 |
Loss before tax under IFRS 16 |
(2,790) |
Depreciation of right of use assets |
224 |
Finance costs |
252 |
|
(2,314) |
Rental cost under IAS17 |
(452) |
Profit before tax under IAS 17 |
(2,766) |
Whilst the cash flows of the group have not been affected by the
adoption of IFRS 16, during the period ended 31 December 2019 cash outflows from financing
activities presented with the Consolidated Statement of Cash Flows
increased by £193,000 for cash payments of the principal portion
and £47,000 for cash payments of the interest portion of leases
recognised within lease liabilities under IFRS 16. Cash generated
from operations reflects the corresponding reduction of £240,000 of
payments for leases previously classified as operating leases under
IAS 17.
Differences between the operating lease commitments disclosed
at 31 December 2018 under IAS17 discounted at the incremental
borrowing rate of 4.5% at 1 January
2019 and lease liabilities recognised at 1 January 2019 are shown below:
|
£’000 |
Operating lease commitments at 31 December
2018 |
1,200 |
Impact of discounting |
(146) |
Finance lease liabilities at 31 December 2018 |
3,261 |
Other reconciling items (net) |
57 |
Lease liability opening balance 1 January
2019 |
4,372 |
The Group has not adopted any Standards or Interpretations
in advance of the required implementation dates. A number of
standards and amendments to standards have been issued but are not
effective for the current year. These are not expected to have a
material impact on the Group financial statements.
We are committed to improving disclosure and transparency and
will continue to work with our different stakeholders to ensure
they understand the detail of these accounting changes. We continue
to remain committed to a robust financial policy.
Key judgements and estimates
The preparation of the financial statements requires management
to make assumptions and estimates that may affect the reported
amounts of assets and liabilities and the reported income and
expenses, further details of which are set out below. Although
management believes that the assumptions and estimates used are
reasonable, the actual results may differ from those estimates.
Further details of the estimates and judgements which may have a
material impact on next year’s financial statements are contained
in the Directors’ Report.
Property operations
Fair value measurements of investment properties
An assessment of the fair value of these assets is undertaken
annually. The fair value measurements are estimated based on the
amounts for which the assets and liabilities could be exchanged
between market participants. To the extent possible, the
assumptions and inputs used take into account externally verifiable
inputs. However, such information is by nature subject to
uncertainty and is discussed further in the Directors’ Report and
shown in note 8.
Inventories - Property
When the Group begins to redevelop an existing investment
property with a view to sale, the property is transferred to
inventory and held as a current asset. The property is re-measured
to fair value as at the date of the transfer with any gain or loss
being taken to the income statement. The re-measured amount becomes
the deemed cost at which the property is then carried in trading
properties plus any costs for asset management initiatives or
development in preparation for sale and subject to any provision
required to reduce cost to net realisable value.
In assessing the net realisable value of a property development,
the directors make significant estimates and judgements regarding,
inter alia, forecast sales and costs per square foot, gross
internal area, affordable housing allocations and appropriate rates
of financing. The degree to which these variables can be accurately
forecast will depend on the stage of development of the particular
project and the impact of changes in these assumptions to the net
realisable value could be material. Further detail is included in
note 12.
Mining operations
Life of mine and reserves
The directors of Bisichi consider their judgements and estimates
surrounding the life of the mine and its reserves to have
significant effect on the amounts recognised in the financial
statements and to be an area where the financial statements are
subject to significant estimation uncertainty. The life of mine
remaining is currently estimated at 4 years. This life of mine is
based on the group’s existing coal reserves including reserves
acquired but subject to regulatory approval. The life of mine
excludes future coal purchases and coal reserve acquisitions. The
group’s estimates of proven and probable reserves are prepared
utilising the South African code for the reporting of exploration
results, mineral resources and mineral reserves (the SAMREC code)
and are subject to assessment by an independent Competent Person
experienced in the field of coal geology and specifically opencast
and pillar coal extraction. Estimates of coal reserves impact
assessments of the carrying value of property, plant and equipment,
depreciation calculations and rehabilitation and decommissioning
provisions. There are numerous uncertainties inherent in estimating
coal reserves and changes to these assumptions may result in
restatement of reserves. These assumptions include geotechnical
factors as well as economic factors such as commodity prices,
production costs and yield.
Depreciation, amortisation of mineral rights, mining development
costs and plant & equipment
The annual depreciation/amortisation charge is dependent on
estimates, including coal reserves and the related life of the
mine, expected development expenditure for probable reserves, the
allocation of certain assets to relevant ore reserves and estimates
of residual values of the processing plant. The charge can
fluctuate when there are significant changes in any of the factors
or assumptions used, such as estimating mineral reserves which in
turn affects the life of mine or the expected life of reserves.
Estimates of proven and probable reserves are prepared by an
independent Competent Person. Assessments of
depreciation/amortisation rates against the estimated reserve base
are performed regularly. Details of the depreciation/amortisation
charge can be found in note 9.
Provision for mining rehabilitation including restoration and
de-commissioning costs
A provision for future rehabilitation including restoration and
decommissioning costs requires estimates and assumptions to be made
around the relevant regulatory framework, the timing, extent and
costs of the rehabilitation activities and of the risk free rates
used to determine the present value of the future cash outflows.
The provisions, including the estimates and assumptions contained
therein, are reviewed regularly by management. The Group engages an
independent expert to assess the cost of restoration and
decommissioning annually as part of management’s assessment of the
provision. Details of the provision for mining rehabilitation can
be found in note 20.
Mining impairment
Property, plant and equipment representing the Group’s mining
assets in South Africa are
reviewed for impairment at each reporting date. The impairment test
is performed using the approved Life of Mine plan and those future
cash flow estimates are discounted using asset specific discount
rates and are based on expectations about future operations. The
impairment test requires estimates about production and sales
volumes, commodity prices, proven and probable reserves (as
assessed by the Competent Person), operating costs and capital
expenditures necessary to extract reserves in the approved Life of
Mine plan. Changes in such estimates could impact recoverable
values of these assets. Details of the carrying value of property,
plant and equipment can be found in note 9.
The impairment test indicated significant headroom as at
31 December 2019 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 11%
reduction in average forecast coal prices or a 12% reduction in
yield would give rise to a breakeven scenario. However, the Bisichi
directors consider the forecasted yield levels and pricing to be
appropriate and supportable best estimates.
Basis of consolidation
The Group accounts incorporate the accounts of LAP and all of
its subsidiary undertakings, together with the Group’s share of the
results and net assets of its joint ventures.
Non–controlling interests in subsidiaries are presented
separately from the equity attributable to equity owners of the
parent company. When changes in ownership in a subsidiary do not
result in a loss of control, the non–controlling shareholders’
interests are initially measured at the non–controlling interests’
proportionate share of the subsidiaries’ net assets. Subsequent to
this, the carrying amount of non–controlling interests is the
amount of those interests at initial recognition plus the
non–controlling interests’ share of subsequent changes in equity.
Total comprehensive income is attributed to non–controlling
interests even if this results in the non–controlling interests
having a deficit balance.
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group
controls an entity when it is exposed to, or has rights to,
variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity.
Subsidiaries acquired during the year are consolidated using the
acquisition method. Their results are incorporated from the date
that control passes.
All intra Group transactions, balances, income and expenses are
eliminated on consolidation. Details of the Group’s trading
subsidiary companies are set out in Note 11.
The directors are required to consider the implications of IFRS
10 on the LAP investment in Bisichi PLC (“Bisichi”). Related
parties also have shareholdings in Bisichi. When combined with the
42% held by LAP and, taking account of the wide disposition of
other shareholders, there is potential for LAP and these related
parties to exercise voting control over Bisichi. IFRS 10 makes it
clear that possible voting control is of more significance than
actual management control.
For this reason the directors have concluded that there is a
requirement to consolidate Bisichi with LAP. While, in theory, they
could achieve control, in practice they do not get involved in the
day to day operations of Bisichi. The directors have presented
consolidated accounts using the published accounts of Bisichi but
it is important to note that any figures, risks and assumptions
attributable to that company are the responsibility of the Bisichi
Board of directors who are independent from LAP.
As a result of treating Bisichi as a subsidiary, Dragon Retail
Properties Limited and West Ealing Properties Limited are also
subsidiaries for accounting purposes, as LAP and Bisichi each own
50% of these joint venture businesses.
Goodwill
Goodwill arising on acquisition is recognised as an intangible
asset and initially measured at cost, being the excess of the cost
of the acquired entity over the Group’s interest in the fair value
of the assets and liabilities acquired. Goodwill is carried at cost
less accumulated impairment losses. Goodwill arising from the
difference in the calculation of deferred tax for accounting
purposes and fair value in negotiations is judged not to be an
asset and is accordingly impaired on completion of the relevant
acquisition.
Revenue
Revenue comprises sales of coal, property rental income and
property management fees.
Rental income
Rental income arises from properties where leases have granted
tenants a right of occupation and use of the properties. Rental
income is recognised in the Group income statement on a
straight–line basis over the term of the lease. This includes the
effect of lease incentives to tenants, which are normally in the
form of rent free periods. Contingent rents, being the difference
between the rent currently receivable and the minimum lease
payments, are recognised in property income in the periods in which
they are receivable. Rent reviews are recognised when such reviews
have been agreed with tenants.
Service charge income
Service charge income and management fees are recorded as income
in the period in which they are earned.
Reverse surrender premiums
Payments received from tenants to surrender their lease
obligations are recognised immediately in the income statement.
Dilapidations
Dilapidations monies received from tenants in respect of their
lease obligations are recognised immediately in the income
statement.
Other revenue
Revenue in respect of listed investments held for trading
represents investment dividends received and profit or loss
recognised on realisation. Dividends are recognised in the income
statement when the dividend is received.
Property operating expenses
Operating expenses are expensed as incurred and any property
operating expenditure not recovered from tenants through service
charges is charged to the income statement.
Employee benefits
Share based remuneration
The Company operates a long–term incentive plan and two share
option schemes. The fair value of the conditional awards on shares
granted under the long–term incentive plan and the options granted
under the share option scheme is determined at the date of grant.
This fair value is then expensed on a straight–line basis over the
vesting period, based on an estimate of the number of shares that
will eventually vest. At each reporting date, the fair value of the
non–market based performance criteria of the long–term incentive
plan is recalculated and the expense is revised. In respect of the
share option scheme, the fair value of options granted is
calculated using the binomial method.
Pensions
The Company operates a defined contribution pension scheme. The
contributions payable to the scheme are expensed in the period to
which they relate.
Foreign currencies
Monetary assets and liabilities are translated at year end
exchange rates and the resulting exchange rate differences are
included in the consolidated income statement within the results of
operating activities if arising from trading activities, including
inter-company trading balances and within finance cost / income if
arising from financing.
For consolidation purposes, income and expense items are
included in the consolidated income statement at average rates, and
assets and liabilities are translated at year end exchange rates.
Translation differences arising on consolidation are recognised in
other comprehensive income. Foreign exchange differences on
intercompany loans are recorded in other comprehensive income when
the loans are not considered trading balances and are not expected
to be repaid in the foreseeable future. Where foreign operations
are sold or closed, the cumulative exchange differences
attributable to that foreign operation are recognised in the
consolidated income statement when the gain or loss on disposal is
recognised.
Transactions in foreign currencies are translated at the
exchange rate ruling on transaction date.
FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are recognised in the
Group’s consolidated statement of financial position when the group
becomes a party to the contractual provisions of the
instrument.
Financial assets
Financial assets are classified as either financial assets at
amortised cost, at fair value through other comprehensive income
(“FVTOCI”) or at fair value through profit or loss (“FVPL”)
depending upon the business model for managing the financial assets
and the nature of the contractual cash flow characteristics of the
financial asset.
A loss allowance for expected credit losses is determined for
all financial assets, other than those at FVPL, at the end of each
reporting period. The Group applies a simplified approach to
measure the credit loss allowance for trade receivables using the
lifetime expected credit loss provision. The lifetime expected
credit loss is evaluated for each trade receivable taking into
account payment history, payments made subsequent to year end and
prior to reporting, past default experience and the impact of any
other relevant and current observable data. The group applies a
general approach on all other receivables classified as financial
assets. The general approach recognises lifetime expected credit
losses when there has been a significant increase in credit risk
since initial recognition.
The Group no longer recognises a financial asset when the
contractual rights to the cash flows from the asset expire, or when
it transfers the financial asset and substantially all the risks
and rewards of ownership of the asset to another party. The Group
does not recognise financial liabilities when the Group’s
obligations are discharged, cancelled, or have expired.
Investments
Current financial asset investments and other investments
classified as non-current (“The investments”) comprise of shares in
listed companies. The investments are measured at fair value. Any
changes in fair value are recognised in the profit or loss account
and accumulated in retained earnings.
Trade and other receivables
Trade receivables are recorded at amortised cost. As the
interest that would be recognised from discounting future cash
payments over the short payment period is not considered to be
material, trade receivables which do not carry any interest are
stated at their nominal value as reduced by credit loss allowances
for estimated recoverable amounts.
Trade and other payables
Trade and other payables are non-interest bearing and are stated
at their nominal value, as the interest that would be recognised
from discounting future cash payments over the short payment period
is not considered to be material.
Bank loans and overdrafts
Bank loans and overdrafts are included as financial liabilities
on the Group balance sheet net of the unamortised costs of issue.
The cost of issue is recognised in the Group income Statement over
the life of the bank loan. Interest payable on those facilities is
expensed as a finance cost in the period to which it relates.
Debenture loans
The debenture loan is included as a financial liability on the
balance sheet net of the unamortised costs on issue. The cost of
issue is recognised in the Group income statement over the life of
the debenture. Interest payable to debenture holders is expensed in
the period to which it relates.
Leases
At inception, the Group assesses whether a contract is or
contains a lease. This assessment involves the exercise of
judgement about whether the Group obtains substantially all the
economic benefits from the use of that asset, and whether the Group
has the right to direct the use of the asset. The Group recognises
a right-of-use (“ROU”) asset and the lease liability at the
commencement date of the lease.
Lease liabilities include the present value of payments which
generally include fixed payments and variable payments that depend
on an index (such as an inflation index). Each lease payment is
allocated between the liability and finance cost. The lease
payments are discounted using the interest rate implicit in the
lease if that rate can be readily determined or if not, the
incremental borrowing rate is used. The finance cost is charged to
profit or loss over the lease period so as to produce a constant
rate of interest on the remaining balance of the liability for each
period. In the cashflow statement the principal and interest
portions of the lease payments are classified within financing
activities.
The ROU asset is measured at a cost based on the amount of the
initial measurement of the lease liability, plus initial direct
costs and the cost of obligations to refurbish the asset, less any
incentives received. The ROU asset (other than the ROU assets that
relate to land or property that meets the definition of investment
property under IAS 40) is depreciated over the shorter of the lease
term or the useful life of the underlying asset. The ROU asset is
subject to testing for impairment if there is an indicator of
impairment. ROU assets are included in the heading Property, plant
and equipment, and the lease liability is included in the headings
current and non-current lease labilities on the Balance Sheet
Lease liabilities arise for those investment properties held
under a leasehold interest and recorded as investment property. The
liability is calculated as the present value of the minimum lease
payments, reducing in subsequent reporting periods by the
apportionment of payments to the lessor. Lease payments are
allocated between the liability and finance charges to achieve a
constant financing rate. Contingent rents payable, such as rent
reviews or those related to rental income, are charged as an
expense in the period in which they are incurred.
The Group has elected not to recognise ROU assets and
liabilities for leases where the total lease term is less than or
equal to 12 months, or for low value leases. The payments for such
leases are recognised in the Income Statement on a straight-line
basis over the lease term.
Interest rate derivatives
The Group uses derivative financial instruments to hedge the
interest rate risk associated with the financing of the Group’s
business. No trading in such financial instruments is undertaken.
At each reporting date, these interest rate derivatives are
recognised at their fair value to the business, being the Net
Present Value of the difference between the hedged rate of interest
and the market rate of interest for the remaining period of the
hedge.
Ordinary shares
Shares are classified as equity when there is no obligation to
transfer cash or other assets. Incremental costs directly
attributable to the issue of new shares are shown in equity as a
deduction, net of tax, from the proceeds.
Treasury shares
When the Group’s own equity instruments are repurchased,
consideration paid is deducted from equity as treasury shares until
they are cancelled. When such shares are subsequently sold or
reissued, any consideration received is included in equity.
Investment properties
Valuation
Investment properties are those that are held either to earn
rental income or for capital appreciation or both, including those
that are undergoing redevelopment for future use as an investment
property. They are reported on the Group balance sheet at fair
value, being the amount for which an investment property could be
exchanged between knowledgeable and willing parties in an arm’s
length transaction. The directors’ property valuation is at fair
value.
The external valuation of properties is undertaken by
independent valuers who hold recognised and relevant professional
qualifications and have recent experience in the locations and
categories of properties being valued. Surpluses or deficits
resulting from changes in the fair value of investment properties
are reported in the Group income statement in the period in which
they arise.
Capital expenditure
Investment properties are measured initially at cost, including
related transaction costs. Additional expenditure of a capital
nature, directly attributable to the redevelopment or refurbishment
of an investment property held for future use as an investment
property, up to the point of it being completed for its intended
use, is capitalised in the carrying value of that property. Where
there is a change of use, such as commencement of development with
a view to sale, the property is transferred to inventory at deemed
cost, which is its fair value on the date of the change in use.
Capitalised interest is calculated with reference to the actual
rate payable on borrowings for development purposes, or for that
part of the development costs financed out of borrowings the
capitalised interest is calculated on the basis of the average rate
of interest paid on the relevant debt outstanding.
Disposal
The disposal of investment properties is recorded on completion
of the contract. On disposal, any gain or loss is calculated as the
difference between the net disposal proceeds and the valuation at
the last year end plus subsequent capitalised expenditure in the
period.
Depreciation and amortisation
In applying the fair value model to the measurement of
investment properties, depreciation and amortisation are not
provided.
Other assets and depreciation
The cost, less estimated residual value, of other property,
plant and equipment is written off on a straight–line basis over
the asset’s expected useful life. Residual values and useful lives
are reviewed, and adjusted if appropriate, at each balance sheet
date. Changes to the estimated residual values or useful lives are
accounted for prospectively. The depreciation rates generally
applied are:
Motor vehicles |
25–33 per cent per annum |
Office equipment |
10–33 per cent per annum |
Assets held for sale
Non-current assets are classified as held-for-sale if it is
highly probable that they will be recovered primarily through sale
rather through continuing use. Such assets are generally measured
at the lower of their carrying amount and fair value less costs of
sale. Impairment losses on initial classification as assets
held-for-sale and subsequent gains and losses on remeasurement are
recognised in profit or loss. Once classified as held-for-sale,
intangible assets and property, plant and equipment are no longer
amortised or depreciated, and any equity-accounted investment is no
longer equity accounted.
Inventories–property
Properties held as trading inventory are those which are being
developed with a view to sale. Inventories are recorded at the
lower of cost and net realisable value. If the net realisable value
of inventory is lower than its carrying value, an impairment loss
is recorded in the income statement. If, in subsequent periods, the
net realisable value of inventory that was previously impaired
increases above its carrying value, the impairment is reversed to
align the carrying value of the property with the net realisable
value. Inventory is presented on the balance sheet within current
assets.
Income taxes
The charge for current taxation is based on the results for the
year as adjusted for disallowed or non–assessable items. Tax
payable upon realisation of revaluation gains recognised in prior
periods is recorded as a current tax charge with a release of the
associated deferred tax. Deferred tax is the tax expected to be
payable or recoverable on differences between the carrying amounts
of assets and liabilities in the financial statements and the
corresponding tax bases used in the tax computations and is
recorded using the balance sheet liability method. Deferred tax
liabilities are generally recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent
that it is probable that taxable profits will be available against
which deductible temporary differences can be utilised. In respect
of the deferred tax on the revaluation surplus, this is calculated
on the basis of the chargeable gains that would crystallise on the
sale of the investment portfolio as at the reporting date. The
calculation takes account of indexation on the historic cost of
properties and any available capital losses. Deferred tax is
calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised.
Deferred tax is charged or credited in the Group income statement,
except when it relates to items charged or credited directly to
equity, in which case it is also dealt with in equity.
Dividends
Dividends payable on the ordinary share capital are recognised
as a liability in the period in which they are approved.
Cash and cash equivalents
Cash comprises cash in hand and on-demand deposits. Cash and
cash equivalents comprise short-term, highly liquid investments
that are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value and original
maturities of three months or less.
The cash and cash equivalents shown in the cashflow statement
are stated net of bank overdrafts that are repayable on demand in
accordance with IAS 7. This includes the structured trade finance
facility held in South Africa as
detailed in note 21. These facilities are considered to form an
integral part of the treasury management of the Group and can
fluctuate from positive to negative balances during the period.
Bisichi PLC (formerly Bisichi Mining plc)
Mining revenue
Revenue is recognised when the customer has a legally binding
obligation to settle under the terms of the contract when the
performance obligations have been satisfied, which is once control
of the goods and/or services have transferred to the buyer. Revenue
is measured based on consideration specified in the contract with a
customer on a per metric tonne basis.
Export revenue is generally recognised when the product is
delivered to the export terminal location specified in the customer
contract, at which point control of the goods have been transferred
to the customer. Domestic coal revenues are generally recognised on
collection by the customer from the mine or when loaded into
transport from the mine’s rail sidings, where the customer pays the
transportation costs. Fulfilment costs to satisfy the performance
obligations of coal revenues such as transport and loading costs
borne by the group from the mine to the delivery point are recoded
in operating costs.
Mining costs
Expenditure is recognised in respect of goods and services
received. Where coal is purchased from third parties at point of
extraction the expenditure is only recognised when the coal is
extracted and all of the significant risks and rewards of ownership
have been transferred.
Mining reserves, plant and equipment
The cost of property, plant and equipment comprises its purchase
price and any costs directly attributable to bringing the asset to
the location and condition necessary for it to be capable of
operating in accordance with agreed specifications. Freehold land
is not depreciated. Other property, plant and equipment is stated
at historical cost less accumulated depreciation. The cost
recognised includes the recognition of any decommissioning assets
related to property, plant and equipment.
Heavy surface mining and other plant and equipment is
depreciated at varying rates depending upon its expected usage. The
depreciation rates generally applied are between 5-10 per cent per
annum, but limited to the shorter of its useful life or the life of
the mine.
Other non–current assets, comprising motor vehicles and office
equipment, are depreciated at a rate of between 10% and 33% per
annum which is calculated to write off the cost, less estimated
residual value of the assets, on a straight line basis over their
expected useful lives.
Mine inventories
Inventories are stated at the lower of cost and net realisable
value. Cost includes materials, direct labour and overheads
relevant to the stage of production. Cost is determined using the
weighted average method. Net realisable value is based on estimated
selling price less all further costs to completion and all relevant
marketing, selling and distribution costs.
Mine provisions
Provisions are recognised when the Group has a present
obligation as a result of a past event which it is probable
will result in an outflow of economic benefits that can be reliably
estimated.
A provision for rehabilitation of the mine is initially recorded
at present value and the discounting effect is unwound over time as
a finance cost. Changes to the provision as a result of changes in
estimates are recorded as an increase/decrease in the provision and
associated decommissioning asset. The decommissioning asset is
depreciated in line with the Group’s depreciation policy over the
life of mine. The provision includes the restoration of the
underground, opencast, surface operations and de-commissioning of
plant and equipment. The timing and final cost of the
rehabilitation is uncertain and will depend on the duration of the
mine life and the quantities of coal extracted from the
reserves.
Mine impairment
Whenever events or changes in circumstance indicate that the
carrying amount of an asset may not be recoverable that asset is
reviewed for impairment. This includes mining reserves, plant and
equipment and net investments in joint ventures. A review involves
determining whether the carrying amounts are in excess of the
recoverable amounts.
An asset’s recoverable amount is determined as the higher of its
fair value less costs of disposal and its value in use. Such
reviews are undertaken on an asset-by-asset basis, except where
assets do not generate cash flows independent of other assets, in
which case the review is undertaken on a company or Group
level.
If the carrying amount of an asset exceeds its recoverable
amount the carrying value is written down to its estimated
recoverable amount (being the higher of the fair value less cost to
sell and value in use). Any change in carrying value is recognised
in the comprehensive income statement.
Mine reserves and development cost
The purpose of mine development is to establish secure working
conditions and infrastructure to allow the safe and efficient
extraction of recoverable reserves. Depreciation on mine
development is not charged until production commences or the assets
are put to use. On commencement of full commercial production,
depreciation is charged over the life of the associated mine
reserves extractable using the asset on a unit of production basis.
The unit of production calculation is based on tonnes mined as a
ratio to proven and probable reserves and also includes future
forecast capital expenditure. The cost recognised includes the
recognition of any decommissioning assets related to mine
development.
Post production stripping
In surface mining operations, the Group may find it necessary to
remove waste materials to gain access to coal reserves prior to and
after production commences. Prior to production commencing,
stripping costs are capitalised until the point where the
overburden has been removed and access to the coal seam commences.
Subsequent to production, waste stripping continues as part of the
extraction process as a run of mine activity. There are two
benefits accruing to the Group from stripping activity during the
production phase: extraction of coal that can be used to produce
inventory and improved access to further quantities of material
that will be mined in future periods. Economic coal extracted is
accounted for as inventory. The production stripping costs relating
to improved access to further quantities in future periods are
capitalised as a stripping activity asset, if and only if, all of
the following are met:
- it is probable that the future
economic benefit associated with the stripping activity will flow
to the Group;
- the Group can identify the component
of the ore body for which access has been improved; and
- the costs relating to the stripping
activity associated with that component or components can be
measured reliably.
In determining the relevant component of the coal reserve for
which access is improved, the Group separates its mine into
geographically distinct sections or phases to which the stripping
activities being undertaken within that component are allocated.
Such phases are determined based on assessment of factors such as
geology and mine planning.
The Group depreciates deferred costs capitalised as stripping
assets on a unit of production method, with reference to the tons
mined and reserve of the relevant ore body component or phase.
Segmental reporting
For management reporting purposes, the Group is organised into
business segments distinguishable by economic activity. The Group’s
business segments are LAP operations, Bisichi operations and Dragon
operations. These business segments are subject to risks and
returns that are different from those of other business segments
and are the primary basis on which the Group reports its segmental
information. This is consistent with the way the Group is managed
and with the format of the Group’s internal financial reporting.
Significant revenue from transactions with any individual customer,
which makes up 10 per cent or more of the total revenue of the
Group, is separately disclosed within each segment. All coal
exports are sales to coal traders at Richard Bay’s terminal in
South Africa with the risks and
rewards passing to the coal trader at the terminal. Whilst the coal
traders will ultimately sell the coal on the international markets
the Group has no visibility over the ultimate destination of the
coal. Accordingly, the export sales are recorded as South Africa revenue.
Notes to the financial statements
for the year ended 31 December
2019
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
|
|
|
|
2019 |
BUSINESS ANALYSIS |
LAP
£’000 |
BISICHI
£’000 |
DRAGON
£’000 |
TOTAL
£’000 |
Rental income |
4,813 |
1,249 |
172 |
6,234 |
Service charge income |
628 |
181 |
– |
809 |
Proceeds from sale of trading properties |
9,500 |
– |
– |
9,500 |
Management income from third party properties |
607 |
– |
– |
607 |
Mining |
– |
46,816 |
– |
46,816 |
Group Revenue |
15,548 |
48,246 |
172 |
63,966 |
Direct property costs |
(1,823) |
(572) |
– |
(2,395) |
Impairment of inventory |
(1,750) |
– |
– |
(1,750) |
Cost of sale of trading properties |
(10,491) |
– |
– |
(10,491) |
Direct mining costs |
– |
(33,484) |
– |
(33,484) |
Overheads |
(3,230) |
(6,745) |
(143) |
(10,118) |
Exchange losses |
– |
(123) |
– |
(123) |
Depreciation |
(215) |
(2,190) |
– |
(2,405) |
Operating profit/(loss) |
(1,961) |
5,132 |
29 |
3,200 |
Finance income |
58 |
28 |
– |
86 |
Finance expenses |
(2,552) |
(667) |
(33) |
(3,252) |
Result before valuation movements |
(4,455) |
4,493 |
(4) |
34 |
Other segment items |
|
|
|
|
Net decrease on revaluation of investment
properties |
(1,498) |
(1,480) |
(10) |
(2,988) |
Decrease in value of other investments |
(1,749) |
– |
– |
(1,749) |
Net decrease on revaluation of investments held
for trading |
– |
(6) |
– |
(6) |
Adjustment to interest rate derivative |
169 |
– |
– |
169 |
Revaluation and other movements |
(3,078) |
(1,486) |
(10) |
(4,574) |
(Loss)/profit for the year before taxation |
(7,533) |
3,007 |
(14) |
(4,540) |
|
|
|
|
|
Segment assets |
|
|
|
|
- Non-current assets - property |
33,718 |
11,748 |
2,440 |
47,906 |
- Non-current assets - plant & equipment |
946 |
9,508 |
18 |
10,472 |
- Cash & cash equivalents |
5,709 |
7,720 |
104 |
13,533 |
- Non-current assets - other |
– |
287 |
– |
287 |
- Current assets - others |
686 |
10,940 |
343 |
11,969 |
Total assets excluding investment in joint
ventures, assets held for sale and trading |
41,059 |
40,203 |
2,905 |
84,167 |
Segment liabilities |
|
|
|
|
Borrowings |
(30,764) |
(9,244) |
(1,175) |
(41,183) |
Current liabilities |
(5,750) |
(7,887) |
(79) |
(13,716) |
Non-current liabilities |
(3,156) |
(3,857) |
(37) |
(7,050) |
Total liabilities |
(39,670) |
(20,988) |
(1,291) |
(61,949) |
Net assets |
1,389 |
19,215 |
1,614 |
22,218 |
Inventories-property |
26,915 |
– |
– |
26,915 |
Net assets as per balance sheet |
|
|
|
49,133 |
Major customers |
|
|
|
|
Customer A |
– |
32,424 |
– |
32,424 |
Customer B |
– |
10,985 |
– |
10,985 |
Customer C |
– |
989 |
– |
989 |
These customers are for mining revenue in South Africa.
Geographic analysis |
United
Kingdom
£’000 |
South
Africa
£’000 |
2019
Total
£’000 |
Revenue |
17,303 |
46,663 |
63,966 |
Operating (loss)/profit |
(1,074) |
4,274 |
3,200 |
Non-current assets excluding investments |
48,901 |
9,477 |
58,378 |
Total net assets |
44,081 |
5,052 |
49,133 |
Capital expenditure |
582 |
3,177 |
3,759 |
BUSINESS ANALYSIS |
LAP
£’000 |
BISICHI
£’000 |
DRAGON
£’000 |
2018
TOTAL
£’000 |
Rental income |
5,049 |
1,065 |
167 |
6,281 |
Service charge income |
802 |
137 |
– |
939 |
Management income from third party properties |
718 |
– |
– |
718 |
Mining |
– |
48,713 |
– |
48,713 |
Group Revenue |
6,569 |
49,915 |
167 |
56,651 |
Direct property costs |
(2,269) |
(340) |
– |
(2,609) |
Direct mining costs |
– |
(34,309) |
– |
(34,309) |
Overheads |
(4,035) |
(6,050) |
(105) |
(10,190) |
Exchange losses |
– |
(63) |
– |
(63) |
Depreciation |
(9) |
(2,113) |
– |
(2,122) |
Operating profit |
256 |
7,040 |
62 |
7,358 |
Finance income |
37 |
24 |
– |
61 |
Finance expenses |
(3,111) |
(538) |
(33) |
(3,682) |
Result before valuation movements |
(2,818) |
6,526 |
29 |
3,737 |
Other segment items |
|
|
|
|
Net decrease on revaluation of investment
properties |
(2,170) |
(215) |
(180) |
(2,565) |
Net decrease on revaluation of investments held
for trading |
– |
(169) |
– |
(169) |
Adjustment to interest rate derivative |
265 |
– |
– |
265 |
Revaluation and other movements |
(1,905) |
(384) |
(180) |
(2,469) |
(Loss)/profit for the year before taxation |
(4,723) |
6,142 |
(151) |
1,268 |
|
|
|
|
|
Segment assets |
|
|
|
|
- Non-current assets - property |
35,011 |
13,230 |
2,450 |
50,691 |
- Non-current assets - plant & equipment |
106 |
8,531 |
22 |
8,659 |
- Cash & cash equivalents |
11,345 |
9,221 |
89 |
20,655 |
- Non-current assets - other |
1,748 |
35 |
– |
1,783 |
- Current assets - others |
1,947 |
8,290 |
183 |
10,420 |
Total assets excluding investment in joint
ventures, assets held for sale and property inventories |
50,157 |
39,307 |
2,744 |
92,208 |
Segment liabilities |
|
|
|
|
Borrowings |
(45,352) |
(10,127) |
(1,164) |
(56,643) |
Current liabilities |
(6,372) |
(7,158) |
(73) |
(13,603) |
Non-current liabilities |
(3,122) |
(3,962) |
(33) |
(7,117) |
Total liabilities |
(54,846) |
(21,247) |
(1,270) |
(77,363) |
Net (liabilities)/assets |
(4,689) |
18,060 |
1,474 |
14,845 |
Assets held for sale |
2,285 |
– |
– |
2,285 |
Inventories-property |
38,556 |
– |
– |
38,556 |
Net assets as per balance sheet |
|
|
|
55,686 |
Major customers |
|
|
|
|
Customer A |
– |
34,112 |
– |
34,112 |
Customer B |
– |
11,557 |
– |
11,557 |
These customers are for mining revenue in South Africa.
Geographic analysis |
|
United
Kingdom
£’000 |
South
Africa
£’000 |
2018
Total
£’000 |
Revenue |
|
8,015 |
48,636 |
56,651 |
Operating profit |
|
1,274 |
6,084 |
7,358 |
Non-current assets excluding investments |
|
50,820 |
8,530 |
59,350 |
Total net assets |
|
51,118 |
4,568 |
55,686 |
Capital expenditure |
|
6,574 |
2,864 |
9,438 |
Group revenue is external to the Group and the directors
consider that inter segmental revenues are not material.
2. PROFIT before taxation
|
2019
£’000 |
2018
£’000 |
Profit before taxation is stated after
charging: |
|
|
Staff costs (see note 26) |
9,614 |
9,889 |
Depreciation on tangible fixed assets - owned
assets |
2,185 |
2,123 |
Depreciation on tangible fixed assets - right of
use assets |
224 |
– |
Operating lease rentals - land and buildings |
– |
240 |
Exchange loss |
123 |
63 |
Profit on disposal of motor vehicles and office
equipment |
– |
6 |
Amounts payable to the auditor in respect of both
audit and non-audit services |
|
|
Audit services |
|
|
Statutory - Company and consolidation |
88 |
83 |
Subsidiaries - audited by RSM |
19 |
17 |
Subsidiaries - audited by other auditors |
89 |
78 |
Further assurance services |
4 |
4 |
Other services |
11 |
9 |
|
211 |
191 |
Staff costs are included in overheads.
Following the adoption of IFRS 16 ‘Leases’, operating leases
have been recognised as Right of use Assets within property, plant
and equipment in the balance sheet at 1
January 2019 and depreciated in the year.
3. Directors’
emoluments
|
2019
£’000 |
2018
£’000 |
Emoluments |
823 |
1,899 |
Defined contribution pension scheme
contributions |
85 |
10 |
|
908 |
1,909 |
Sir Michael Heller received
£283,000 (2018: £284,000) as a Director of Bisichi PLC.
Details of directors’ emoluments and share options are set out
in the remuneration report.
4. Finance
income and expenses
|
2019
£’000 |
2018
£’000 |
Finance income |
86 |
61 |
Finance expenses |
|
|
Interest on bank loans and overdrafts |
(1,963) |
(2,034) |
Unwinding of discount (Bisichi) |
– |
(43) |
Other loans |
(915) |
(1,169) |
Interest on derivatives |
(122) |
(269) |
Interest on lease obligations |
(252) |
(167) |
Total finance expenses |
(3,252) |
(3,682) |
5. Income
tax
|
2019
£’000 |
2018
£’000 |
Current tax |
|
|
Corporation tax on profit of the period |
1,584 |
2,017 |
Corporation tax on profit of previous periods |
(2) |
33 |
Total current tax |
1,582 |
2,050 |
Deferred tax |
|
|
Loss relief |
44 |
3,740 |
Origination of timing differences |
75 |
(57) |
Revaluation of investment properties |
(412) |
(5,056) |
Accelerated capital allowances |
(370) |
(120) |
Fair value of interest derivatives |
32 |
51 |
Adjustment in respect of prior years |
– |
67 |
Total deferred tax (note 22) |
(631) |
(1,375) |
Tax on profit on ordinary activities |
951 |
675 |
Factors affecting tax charge for the year
The corporation tax assessed for the year is different from that
at the effective rate of corporation tax in the United Kingdom of 19.00 per cent (2018: 19.00
per cent). The differences are explained below:
|
2019
£’000 |
2018
£’000 |
(Loss)/Profit for the year before taxation |
(4,540) |
1,268 |
Taxation at 19 per cent (2018: 19 per cent) |
(863) |
241 |
|
|
|
Effects of: |
|
|
Capital gains / (losses) on disposal |
54 |
(1,799) |
Other differences |
386 |
1,637 |
Losses |
913 |
421 |
Adjustment in respect of prior years |
(2) |
(33) |
Deferred tax rate adjustment |
463 |
208 |
Income tax charge for the year |
951 |
675 |
Analysis of United Kingdom and
overseas tax:
United Kingdom tax included in
above:
|
2019
£’000 |
2018
£’000 |
Corporation tax |
14 |
(10) |
Adjustment in respect of prior years |
- |
33 |
Current tax |
14 |
23 |
Deferred tax |
(671) |
(1,458) |
|
(657) |
(1,435) |
Overseas tax included above:
|
2019
£’000 |
2018
£’000 |
Corporation tax |
1,570 |
2,026 |
Adjustments in respect of prior years |
(2) |
- |
Current tax |
1,568 |
2,026 |
Deferred tax |
40 |
84 |
|
1,608 |
2,110 |
Factors that may affect future tax charges:
Based on current capital expenditure plans, the Group expects to
continue to be able to claim capital allowances in excess of
depreciation in future years, but at a slightly lower level than in
the current year.
A deferred tax provision has been made for gains on revaluing
investment properties.
The Finance (no. 2) Act 2017 was substantively enacted on
16 November 2017. This includes a
restriction on the utilisation of brought forward tax losses and
corporate interest in certain circumstances effective from
1 April 2017.
Following the year end, in the Budget of 11 March 2020, the Chancellor announced the
reversal of the previously enacted reduction in the rate of
corporation tax. This reversal was subsequently confirmed by a
resolution under the Provisional Collection of Taxes Act 1968,
which set the rate at 19%. The impact of this reversal, which will
be recognised in 2020, will be negligible.
6. Dividend
|
2019 |
2018 |
|
Per share |
£’000 |
Per share |
£’000 |
Dividends paid during the year relating to the
prior period |
0.180p |
154 |
0.300p |
256 |
Dividends to be paid: |
|
|
|
|
Proposed final dividend for the year |
– |
– |
0.180p |
154 |
The Directors are not recommending a final dividend for 2019,
because of the uncertain state of the global economy.
7. Loss per share and net assets per share
Loss per share has been calculated as follows:
|
2019 |
2018 |
Loss for the year (£’000) |
(6,477) |
(2,082) |
Weighted average number of ordinary shares in
issue (’000) |
85,322 |
85,325 |
Basic loss per share |
(7.59)p |
(2.44)p |
Weighted average number of shares in issue is calculated after
excluding treasury shares of 218,197 (2018: 218,197).
Net assets per share have been calculated as follows:
|
2019 |
2018 |
Net assets (£’000) |
36,726 |
43,377 |
Shares in issue (’000) |
85,322 |
85,322 |
Basic net assets per share |
43.04p |
50.83p |
8. Investment
properties
|
Total
£’000 |
Freehold
£’000 |
Leasehold
over 50 years
£’000 |
Leasehold
under 50 years
£’000 |
Cost or valuation at 1 January 2019 |
50,691 |
32,318 |
16,314 |
2,059 |
Reclassification |
– |
– |
1,802 |
(1,802) |
Decrease on revaluation |
(2,988) |
(1,722) |
(1,216) |
(50) |
Acquisition of property |
138 |
62 |
76 |
– |
Increase/(decrease) in present value of head
leases |
65 |
– |
65 |
– |
At 31 December 2019 |
47,906 |
30,658 |
17,041 |
207 |
|
|
|
|
|
Representing assets stated at: |
|
|
|
|
Valuation |
44,580 |
30,658 |
13,722 |
200 |
Present value of head leases |
3,326 |
– |
3,319 |
7 |
|
47,906 |
30,658 |
17,041 |
207 |
|
Total
£’000 |
Freehold
£’000 |
Leasehold
over
50 years
£’000 |
Leasehold
under
50 years
£’000 |
Cost or valuation at 1 January 2018 |
81,258 |
62,425 |
16,856 |
1,977 |
(Decrease)/increase on revaluation |
(2,565) |
(2,075) |
(575) |
85 |
Transfer to assets held for sale (note 10) |
(2,285) |
(2,285) |
– |
– |
Transfer to inventory (note 12) |
(32,300) |
(32,300) |
– |
– |
Acquisition of property |
6,553 |
6,553 |
– |
– |
Increase/(decrease) in present value of head
leases |
30 |
– |
33 |
(3) |
At 31 December 2018 |
50,691 |
32,318 |
16,314 |
2,059 |
Representing assets stated at: |
|
|
|
|
Valuation |
47,430 |
32,318 |
13,996 |
1,116 |
Present value of head leases |
3,261 |
– |
2,318 |
943 |
|
50,691 |
32,318 |
16,314 |
2,059 |
The leasehold and freehold properties, excluding the present
value of head leases and directors’ valuations, were valued as at
31 December 2019 by professional
firms of chartered surveyors. The valuations were made at fair
value. The directors’ property valuations were made at fair
value.
|
2019
£’000 |
2018
£’000 |
Allsop LLP |
31,715 |
32,785 |
Carter Towler |
11,565 |
13,045 |
Directors’ valuations |
1,300 |
1,600 |
|
44,580 |
47,430 |
Add: present value of headleases |
3,326 |
3,261 |
|
47,906 |
50,691 |
Head leases on investment property represent the right-of-use
asset on certain investment property that has a head lease
interest. In the current year total cash outflow for head leases
and other lease liabilities is £0.2 million (2018: £0.2 million). A
number of these leases provide for payment of contingent rent,
usually a proportion of net rental income, in addition to fixed
rents.
The historical cost of investment properties, including total
capitalised interest of £1,161,000 (2018: £1,161,000) was as
follows:
|
2019 |
2018 |
|
Freehold
£’000 |
Leasehold
Over 50
years
£’000 |
Leasehold
under 50
years
£’000 |
Freehold
£’000 |
Leasehold
Over 50
years
£’000 |
Leasehold
under 50
years
£’000 |
Cost at 1 January |
35,151 |
17,653 |
1,939 |
67,702 |
17,653 |
1,939 |
Reclassification |
– |
1,154 |
(1,154) |
– |
– |
– |
Transfer to assets held for sale (note 10) |
– |
– |
– |
(202) |
– |
– |
Transfer to inventory (note 12) |
– |
– |
– |
(38,902) |
– |
– |
Additions |
62 |
76 |
– |
6,553 |
– |
– |
Cost at 31 December |
35,213 |
18,883 |
785 |
35,151 |
17,653 |
1,939 |
Each year external valuers are appointed by the executive
directors on behalf of the Board. The valuers are selected based
upon their knowledge, independence and reputation for valuing
assets such as those held by the Group.
Valuations are performed annually and are performed consistently
across all properties in the Group’s portfolio. At each reporting
date appropriately qualified employees of the Group verify all
significant inputs and review the computational outputs. Valuers
submit their report to the Board on the outcome of each
valuation.
Valuations take into account tenure, lease terms and structural
condition. The inputs underlying the valuations include market rent
or business profitability, likely incentives offered to tenants,
forecast growth rates, yields, EBITDA, discount rates, construction
costs including any specific site costs (for example section 106),
professional fees, developer’s profit including contingencies,
planning and construction timelines, lease regear costs, planning
risk and sales prices based on known market transactions for
similar properties to those being valued.
Valuations are based on what is determined to be the highest and
best use. When considering the highest and best use the valuer will
consider, on a property by property basis, its actual and potential
uses which are physically, legally and financially viable. Where
the highest and best use differs from the existing use, the valuer
will consider the cost and likelihood of achieving and implementing
this change in arriving at the valuation.
There are often restrictions on Freehold and Leasehold property
which could have a material impact on the realisation of these
assets. The most significant of these occur when planning
permission or lease extension and renegotiation of use are required
or when a credit facility is in place. These restrictions are
factored into the property’s valuation by the external valuer.
The methods of fair value measurement are classified into a
hierarchy based on the reliability of the information used to
determine the valuation, as follows:
Level 1: valuation based on inputs on quoted market
prices in active markets.
Level 2: valuation based on inputs other than quoted
prices included within level 1 that maximise the use of observable
data directly or from market prices or indirectly derived from
market prices.
Level 3: where one or more significant inputs to
valuations are not based on observable market data.
Class of property
Level 3 |
Carrying /
Fair value
2019
£’000 |
Carrying/ Fair value
2018
£’000 |
Valuation
technique |
|
Key
unobservable
inputs |
Range (weighted
average)
2019 |
Range (weighted
average) 2018 |
Freehold – external valuation |
29,358 |
30,720 |
Income capitalisation |
|
Estimated Rental
Value
Per sq ft p.a
Equivalent Yield |
£3 – £37
(£15)
5.5% – 13.3%
(9.8%) |
£4 – £39
(£16)
5.3% – 12.9%
(9.7%) |
Leasehold over 50 years –
external valuation |
13,722 |
13,995 |
Income capitalisation |
|
Estimated Rental
Value
Per sq ft p.a
Equivalent Yield |
£4 – £10
(£8)
5.8% – 21.4%
(14.9%) |
£5 – £10
(£9)
5.8% – 19.9%
(12.9%) |
Leasehold under 50 years – external valuation |
200 |
1,115 |
Income capitalisation |
|
Estimated Rental
Value
Per sq ft p.a
Equivalent Yield |
£5 – £5
(£5)
30.5% – 30.5%
(30.5%) |
£4 – £5
(£5)
22.9% – 25.8%
(23.5%) |
Freehold – Directors’ valuation |
1,300 |
1,600 |
Income capitalisation |
|
Estimated Rental
Value
Per sq ft p.a
Equivalent Yield |
£4 – £4
(£4)
7.0% – 7.0%
(7.0%) |
£5 – £5
(£5)
7.0% – 7.0%
(7.0%) |
At 31 December |
44,580 |
47,430 |
|
|
|
|
|
There are interrelationships between all these inputs as they
are determined by market conditions. The existence of an increase
in more than one input would be to magnify the input on the
valuation. The impact on the valuation will be mitigated by the
interrelationship of two inputs in opposite directions, for
example, an increase in rent may be offset by an increase in
yield.
The table below illustrates the impact of changes in key
unobservable inputs on the carrying / fair value of the Group’s
properties.
|
Estimated rental
value
10% increase or (decrease) |
Equivalent yield
25 basis point contraction
or (expansion) |
|
2019
£’000 |
2018
£’000 |
2019
£’000 |
2018
£’000 |
Freehold – external valuation |
2,932/(2,932) |
3,067/(3,067) |
884/(831) |
948/(891) |
Leasehold over 50 years – external valuation |
1,372/(1,372) |
1,400/(1,400) |
302/(289) |
337/(320) |
Leasehold under 50 years – external valuation |
20/(20) |
112/(112) |
2/(2) |
12/(12) |
Freehold – Directors’ valuation |
130/(130) |
160/(160) |
48/(45) |
59/(55) |
9. Mining reserves, plant and equipment
|
Total
£’000 |
Mining
reserves
£’000 |
Mining
equipment
£’000 |
Office
building
£’000 |
Office
equipment
and motor
vehicles
£’000 |
Cost at 1 January 2019 |
28,173 |
1,240 |
26,148 |
– |
785 |
Exchange adjustment |
(310) |
(14) |
(293) |
– |
(3) |
IFRS 16 transition adjustment |
1,111 |
– |
57 |
1,054 |
– |
Additions |
3,212 |
– |
3,074 |
– |
138 |
Disposals |
(2,326) |
– |
(2,312) |
– |
(14) |
At 31 December 2019 |
29,860 |
1,226 |
26,674 |
1,054 |
906 |
|
|
|
|
|
|
Accumulated depreciation at 1 January 2019 |
19,514 |
1,213 |
17,777 |
– |
524 |
Exchange adjustment |
(209) |
(14) |
(193) |
– |
(2) |
Charge for the year |
2,409 |
13 |
2,133 |
211 |
52 |
Disposals in year |
(2,326) |
– |
(2,312) |
– |
(14) |
Accumulated depreciation at 31 December 2019 |
19,388 |
1,212 |
17,405 |
211 |
560 |
Net book value at 31 December 2019 |
10,472 |
14 |
9,269 |
843 |
346 |
|
|
|
|
|
|
Cost at 1 January 2018 |
27,996 |
1,366 |
25,902 |
– |
728 |
Exchange adjustment |
(2,688) |
(126) |
(2,531) |
– |
(31) |
Additions |
2,883 |
– |
2,777 |
– |
106 |
Disposals |
(18) |
– |
– |
– |
(18) |
Cost at 31 December 2018 |
28,173 |
1,240 |
26,148 |
– |
785 |
|
|
|
|
|
|
Accumulated depreciation at 1 January 2018 |
19,261 |
1,308 |
17,441 |
– |
512 |
Exchange adjustment |
(1,853) |
(121) |
(1,712) |
– |
(20) |
Charge for the year |
2,123 |
26 |
2,048 |
– |
49 |
Disposals |
(17) |
|
– |
– |
(17) |
Accumulated depreciation at 31 December 2018 |
19,514 |
1,213 |
17,777 |
– |
524 |
Net book value at 31 December 2018 |
8,659 |
27 |
8,371 |
– |
261 |
Included in the above line items are right-of-use assets over
the following:
|
Total
£’000 |
Mining
equipment
£’000 |
Office
building
£’000 |
Office
equipment
and motor
vehicles
£’000 |
Net book value at 1 January 2019 |
- |
- |
- |
- |
IFRS 16 transition adjustment |
1,111 |
57 |
1,054 |
- |
Additions |
38 |
5 |
- |
33 |
Exchange adjustment |
(1) |
(1) |
|
|
Depreciation |
(224) |
(9) |
(211) |
(4) |
Net book value at 31 December 2019 |
924 |
52 |
843 |
29 |
10. ASSETS HELD FOR SALE
|
2019
£’000 |
2018
£’000 |
At 1 January |
2,285 |
36,441 |
Transfer from investment property (note 8) |
- |
2,285 |
Disposal |
(2,285) |
(36,441) |
At 31 December |
- |
2,285 |
In April 2018 the sale of both
Brixton markets was completed for a combined price of £37.25
million. The properties were held at a valuation of £36.441
million. This value equated to the net sale proceeds and there was
no profit on sale.
In July 2019 the sale of the
Group’s remaining property in Brixton was completed for a price of
£2.457 million. The property was held at a valuation of £2.285
million. This value equated to the net sale proceeds and there was
no profit on sale.
11. Subsidiary companies
In accordance with Section 409 of the Companies Act 2006 a full
list of subsidiaries, the principal activity, the country of
incorporation and the percentage of equity owned, as at
31 December 2019 is disclosed
below:
Entity |
Activity |
Percentage of share capital |
Registered address |
Country of
incorporation |
Analytical Investments Limited |
Dormant |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Analytical Portfolios Limited |
Dormant |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Analytical Properties Holdings Limited |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Analytical Properties Limited |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Analytical Ventures Limited |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
24 Bruton Place Limited |
Dormant |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
24 BPL (Harrogate) Limited |
Investment |
88% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
24 BPL (Harrogate ) Two Limited |
Investment |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Brixton Village Limited |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Market Row Limited |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Newincco 1243 Limited |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Newincco 1244 Limited |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Newincco 1245 Limited |
Property Management Services |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Newincco 1299 Limited |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Newincco 1300 Limited |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
LAP Ocean Holdings Limited |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
LAP Ocean Two Limited |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
London & Associated Limited |
Dormant |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
London & Associated (Rugeley) Limited |
Dormant |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
London & Associated Securities Limited |
Dormant |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
London & Associated Management Services
Limited |
Property Management Services |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
London & African Investments Limited |
Dormant |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Orchard Chambers Residential Limited |
Dormant |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Orchard Square Limited |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Bisichi PLC (note D) |
Coal mining |
41.52% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Mineral Products Limited (note A)(note D) |
Share dealing |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Bisichi (Properties) Limited (note A)(note D) |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Bisichi Mining (Exploration) Limited (note A)(note
D) |
Holding company |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Sisonke Coal Processing (pty) Limited (note
A) |
Coal processing |
62.5% |
Samora Machel Street, Bethal Road, Middelburg,
Mpumalanga, 1050 |
South Africa |
Black Wattle Colliery (Pty) Limited (note A)(note
D) |
Coal mining |
62.5% |
Samora Machel Street, Bethal Road, Middelburg,
Mpumalanga, 1050 |
South Africa |
Bisichi Coal Mining (Pty) Limited (note A)(note
D) |
Coal mining |
100% |
Samora Machel Street, Bethal Road, Middelburg,
Mpumalanga, 1050 |
South Africa |
Urban First (Northampton) Limited (note A)(note
D) |
Dormant |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Bisichi Trustee Limited (note A)(note D) |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Bisichi Mining Management Services Limited (note
A)(note D) |
Dormant |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Ninghi Marketing Limited (note A)(note D) |
Dormant |
90.1% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Bisichi Northampton Limited (note A)(note D) |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Amandla Ehtu Mineral Resource Development (Pty)
Limited (note A)(note D) |
Dormant |
70% |
Samora Machel Street, Bethal Road, Middelburg,
Mpumalanga, 1050 |
South Africa |
Black Wattle Klipfontein (Pty) Limited (note
A)(note D) |
Coal mining |
62.5% |
Samora Machel Street, Bethal Road, Middelburg,
Mpumalanga, 1050 |
South Africa |
Dragon Retail Properties Limited (note B)(note
D) |
Property |
50% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Newincco 1338 Limited (note C) |
Property |
100% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
West Ealing Projects Limited (note B)(note D) |
Property |
50% |
24 Bruton Place, London, W1J 6NE |
England and Wales |
Broadway Regen Limited (note E) |
Property |
90% |
73 Cornhill, London, EC3V 3QQ |
England and Wales |
Details on the non–controlling interest in subsidiaries are
shown under note 24.
Note A: these companies are owned by Bisichi and the equity
shareholdings disclosed relate to that company.
Note B: this entity is a joint venture owned 50% by LAP and 50%
by Bisichi.
Note C: this company is owned by Dragon and the equity
shareholdings disclosed relate to that company.
Note D: Bisichi, Dragon and West Ealing Projects and their
subsidiaries are included in the consolidated financial statements
in accordance with IFRS 10.
Note E: This company is 90% owned by West Ealing Projects and
the equity shareholdings disclosed relate to that company.
12. Inventories – Property
Development land and infrastructure:
|
2019
£’000 |
2018
£’000 |
At 1 January |
38,556 |
– |
Capitalised expenditure |
127 |
6,196 |
Capitalised interest |
282 |
60 |
Sales |
(10,300) |
– |
Impairments |
(1,750) |
– |
Transfer from investment property (note 8) |
- |
32,300 |
At 31 December |
26,915 |
38,556 |
The net realisable value of developments is assessed by the
Directors and is subject to key estimates made in respect of future
sales prices and build costs. Variations in these assumptions can
have significant effects on the net realisable value of
developments.
In 2018 the Group acquired a development property through West
Ealing Projects Limited a 50:50 joint venture with Bisichi. This
property is held at cost of £6.665 million (2018: £6.256 million)
and is currently being developed for sale.
In 2018 the Group decided to develop for sale Orchard Square,
Sheffield and transferred the
asset to inventory. In 2019 part of this property was sold. The
remainder of the property is held at a value of £20.25 million,
being cost of £22 million less an impairment provision of £1.75
million, and is being developed for sale. A 5% movement in the
estimated sales price of this development would have an effect of
£2.6 million on its net realisable value. A 5% movement in the
estimated build costs of this development would have an effect of
£1.8 million on its net realisable value. The uncertainties in the
assumptions used to calculate the net realisable value of this
development will reduce over time, but will not resolve within the
next 12 months due to the duration of this project.
13. Inventories - Mining
|
2019
£’000 |
2018
£’000 |
Coal |
|
|
Washed |
2,037 |
777 |
Mining production |
135 |
316 |
Work in progress |
215 |
378 |
Other |
45 |
40 |
|
2,432 |
1,511 |
14. Non-current asset investments
|
2019
Total
£’000 |
Listed
Shares
£’000 |
Unlisted
shares
£’000 |
Loan
stock
£’000 |
2018
Total
£’000 |
Listed
Shares
£’000 |
Unlisted
shares
£’000 |
Loan
stock
£’000 |
At 1 January |
1,783 |
35 |
1 |
1,747 |
1,925 |
51 |
1 |
1,873 |
Additions |
255 |
255 |
– |
– |
– |
– |
– |
– |
Repayments |
– |
– |
– |
– |
(141) |
(15) |
– |
(126) |
Exchange adjustment |
– |
– |
– |
– |
(1) |
(1) |
– |
– |
Impairments |
(1,751) |
(3) |
(1) |
(1,747) |
– |
– |
– |
– |
At 31 December |
287 |
287 |
– |
– |
1,783 |
35 |
1 |
1,747 |
In May 2019, The Group declined to
inject further capital into the 3.17% (2018: 3.17%) investment in
the HRGT Shopping Centres LP, a limited partnership set up in
England to acquire and own 3
shopping centres in Dunfermline, Kings
Lynn and Loughborough,
following a revaluation by the senior lender resulting in a breach
of the loan to value covenant. As a result, the investment was
fully written down. The investment was subsequently sold to the
mezzanine loan provider in October
2019.
The listed shares are all listed on overseas stock exchanges
(Level 1 hierarchy).
15. Trade and other receivables
|
2019
£’000 |
2018
£’000 |
Trade receivables |
6,609 |
6,055 |
Other receivables |
1,143 |
949 |
Prepayments and accrued income |
647 |
1,018 |
|
8,399 |
8,022 |
Financial assets falling due within one year are held at
amortised cost. The fair value of trade and other receivables
approximates their carrying amounts. The Group applies a simplified
approach to measure the credit loss allowance for trade receivables
using the lifetime expected credit loss provision. The lifetime
expected credit loss is evaluated for each trade receivable taking
into account payment history, payments made subsequent to year end
and prior to reporting, past default experience and the impact of
any other relevant and current observable data. The group applies a
general approach on all other receivables classified as financial
assets. At year end, the group allowance for impairment of trade
receivables was £301,000 (2018: £277,000).
16. Investments IN LISTED SECURITIES HELD AT FVPL
|
2019
£’000 |
2018
£’000 |
Market value of listed Investments: |
|
|
Listed in Great Britain |
863 |
847 |
Listed outside Great Britain |
256 |
40 |
|
1,119 |
887 |
Original cost of listed investments |
1,150 |
916 |
Unrealised surplus / deficit of market value
versus cost |
(31) |
(29) |
The market value of listed investments is derived from their
quoted share price on public markets (Level 1 hierarchy).
17. Trade and other payables
|
2019
£’000 |
2018
£’000 |
Trade payables |
3,996 |
4,637 |
Other taxation and social security costs |
427 |
411 |
Other payables |
3,894 |
3,372 |
Accruals and deferred income |
4,518 |
4,921 |
|
12,835 |
13,341 |
The directors consider that the carrying amount of trade and
other payables approximates to their fair value.
18. Borrowings
|
2019
£’000
Current |
2019
£’000
Non-
current |
2018
£’000
Current |
2018
£’000
Non-
current |
Other loans (Bisichi) |
261 |
382 |
205 |
547 |
£1.25 million term bank loan (secured) repayable
by 2020 (Dragon)* |
1,175 |
– |
– |
1,164 |
Bank overdrafts (secured) (Bisichi) |
4,842 |
– |
3,535 |
– |
£14 million term bank loan (secured) repayable by
2022 at 6.95 per cent* |
96 |
13,502 |
– |
– |
£10 million first mortgage debenture stock 2022 at
8.109 per cent* |
– |
9,956 |
– |
9,939 |
£3.96 million term bank loan (secured) repayable
by 2024 (Bisichi)* |
– |
3,759 |
– |
– |
£5.876 million term bank loan (secured) repayable
by 2019 (Bisichi)* |
– |
– |
5,840 |
– |
£3.605 million term loan (secured) - repayable by
2019 (Broadway Regen) |
3,605 |
– |
3,461 |
– |
£34.897 million term bank loan (secured) repayable
by 2019* |
– |
– |
21,403 |
– |
£10.105 million term bank loan (secured) repayable
by 2019 at 9.5 per cent* |
– |
– |
6,808 |
– |
£3.932 million term loan (secured) repayable by
2028* |
141 |
3,464 |
136 |
3,605 |
|
10,120 |
31,063 |
41,388 |
15,255 |
Borrowings analysis by origin:
|
2019
£’000 |
2018
£’000 |
United Kingdom |
35,698 |
52,356 |
South Africa |
5,485 |
4,287 |
|
41,183 |
56,643 |
* The £10 million debenture and
bank loans are shown after deduction of un-amortised issue
costs.
Interest payable on the term bank loans is variable being based
upon the London inter–bank offered
rate (LIBOR) plus margin.
No banking covenants were breached by the group during the
year.
In September 2019, the £34.897
million Santander bank loan and £10.105 million Europa bank loan
were repaid in full, utilising proceeds from the sale of property
and a new £14 million term loan.
The £14 million term loan taken out in September 2019, with Phoenix CRE S.à r.l., is
secured by way of a charge on a single freehold property, included
in the financial statements as inventory at a value of £20.25
million. This loan has an interest rate of 5.95% above LIBOR, where
LIBOR has a minimum and maximum rate of 1.0% and 1.5%,
respectively.
The First Mortgage Debenture Stock August
2022 is secured by way of a charge on specific freehold and
leasehold properties which are included in the financial statements
at a value of £13.15 million. In addition, £0.34 million of cash
deposits are charged as security to debenture stocks. An additional
property has been charged to this Debenture in April 2020 and the cash deposit released.
In September 2018 a 10 year term,
loan of £3.932 million was taken out with Metro Bank secured by way
of a charge on freehold and leasehold properties which are included
in the financial statements at a value of £4.875 million. In
addition, £2.271 million of cash deposits are charged as security,
following the sale of a property previously held as security. The
interest cost of the loan is 2.95 per cent above the bank’s base
rate and the loan is amortised over a 20 year repayment profile,
with a final bullet payment after 10 years.
In South Africa, as part of a
restructuring and sale of the washing plant facilities from Black
Wattle Colliery (Pty) Limited (“Black Wattle”) to its wholly owned
subsidiary Sisonke Coal Processing (Pty) Limited (“Sisonke Coal
Processing”), the R100million bank overdraft facility held by Black
Wattle with Absa Bank Limited was replaced in January 2019 by a new structured trade finance
facility for R100million held by Sisonke Coal Processing (“new
trade facility”). The South African bank loans are secured by way
of a first charge over specific pieces of mining equipment,
inventory and the debtors of the relevant company which holds the
loan which are included in the financial statements at a value of
£10,533,000.
In December 2019, Bisichi repaid
its £5.84 million loan facility with Santander Bank PLC and signed
a new £3.96 million term loan facility with Julian Hodge Bank
Limited. The new debt package has a five year term and is repayable
at the end of the term in December
2024. The interest cost of the loan is 4.00% above LIBOR.
The loan is secured by way of a first charge over the investment
properties in the UK which are included in the financial statements
at a value of £11,565,000.
The bank loan of £1.25 million (Dragon) which is repayable in
November 2020 is secured by way of a
first charge on specific freehold property which is included in the
financial statements at a value of £2.44 million. The interest cost
of the loan is 2 per cent above LIBOR. A refinancing of this loan
is currently underway. An extension of the existing loan is
available, if required, to allow time for refinancing discussions
to be concluded.
The bank loan of £3.605 million (Broadway Regen) which is
repayable in June 2020, following an
extension of the facility, is secured by way of a first charge on a
specific freehold development property, which is included in the
financial statements at £6.7 million. The interest cost of the loan
is fixed at 7.0% per annum. The extension of this development loan
is currently being discussed with the lender and our expectation is
that this will be extended on the same terms to allow sufficient
time to achieve a planning decision.
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:
|
2019
£’000
Bank borrowings |
2019
£’000
Lease obligations |
2018
£’000
Bank borrowings |
2018
£’000
Finance leases |
Balance at 1 January |
56,643 |
3,261 |
65,949 |
3,233 |
Exchange adjustments |
(57) |
– |
(273) |
– |
Cash movements excluding exchange adjustments |
(15,583) |
(456) |
(9,044) |
– |
Valuation movements |
180 |
1,461 |
11 |
28 |
Balance at 31 December |
41,183 |
4,266 |
56,643 |
3,261 |
19. LEASE LIABILITIES
|
2019
Total
£’000 |
2019
Head leases on
investment property 1
£’000 |
2019
Office 2
£’000 |
2019
Other 2
£’000 |
2018
Total
£’000 |
|
|
|
|
|
|
Minimum lease payments fall due: |
|
|
|
|
|
Within one year |
476 |
212 |
240 |
24 |
213 |
Second to fifth year |
1,639 |
849 |
720 |
70 |
849 |
After five years |
20,105 |
20,105 |
– |
– |
16,725 |
|
22,220 |
21,166 |
960 |
94 |
17,787 |
Future finance charges on lease liabilities |
(17,954) |
(17,840) |
(99) |
(15) |
(14,526) |
Present value of lease liabilities |
4,266 |
3,326 |
861 |
79 |
3,261 |
|
|
|
|
|
|
Present value of lease liabilities: |
|
|
|
|
|
Within one year |
424 |
212 |
193 |
19 |
213 |
Second to fifth year |
1,511 |
783 |
668 |
60 |
783 |
After five years |
2,331 |
2,331 |
– |
– |
2,265 |
|
4,266 |
3,326 |
861 |
|
3,261 |
Lease liabilities greater than one year are £3,842,000.
1 Many head leases on investment properties provide for
contingent rent in addition to the rents above, usually a
proportion of rental income.
2 On adoption of IFRS 16 Leases (see note 1 for details), at
1 January 2019 the Group recognised
right-of-use assets of £1,111,000 and lease liabilities of an
equivalent amount. The right-of-use assets are presented within
property, plant and equipment on the balance sheet, as shown in
note 9.
The office lease minimum lease payments at 31 December 2018 were:
|
£’000 |
Minimum lease payments fall due: |
|
Within one year |
240 |
Second to fifth year |
960 |
After five years |
– |
Lease liabilities are effectively secured as the rights to the
leased asset revert to the lessor in the event of default.
20. Provisions
|
2019
£’000 |
2018
£’000 |
At 1 January |
1,571 |
1,349 |
Exchange adjustment |
(17) |
(150) |
Additions |
– |
329 |
Unwinding of discount |
– |
43 |
At 31 December |
1,554 |
1,571 |
The above provision relates to mine rehabilitation costs in
Bisichi.
21. Financial instruments
Total financial assets and liabilities
The Group’s financial assets and liabilities and their fair values
are as follows:
|
2019 |
2018 |
|
Fair
value
£’000 |
Carrying
value
£’000 |
Fair
value
£’000 |
Carrying
value
£’000 |
Cash and cash equivalents |
13,533 |
13,533 |
20,655 |
20,655 |
Investments - non-current assets |
287 |
287 |
1,783 |
1,783 |
Investments - current assets |
1,119 |
1,119 |
887 |
887 |
Other assets |
7,793 |
7,793 |
7,004 |
7,004 |
Derivative liabilities |
– |
– |
(169) |
(169) |
Bank overdrafts |
(4,842) |
(4,842) |
(3,535) |
(3,535) |
Bank loans |
(26,385) |
(26,385) |
(43,521) |
(43,169) |
Lease liabilities |
(4,266) |
(4,266) |
(3,261) |
(3,261) |
Other liabilities |
(7,923) |
(7,923) |
(8,008) |
(8,008) |
Total financial liabilities before debentures |
(20,684) |
(20,684) |
(28,165) |
(27,813) |
Fair value of the Group’s debenture liabilities:
|
2019 |
2018 |
|
Book
value
£’000 |
Fair
value
£’000 |
Fair value
adjustment
£’000 |
Fair value
adjustment
£’000 |
Debenture stocks |
(10,000) |
(10,497) |
(497) |
(1,977) |
Tax at 19 per cent (2018: 19 per cent) |
– |
– |
94 |
376 |
Post tax fair value adjustment |
– |
– |
(403) |
(1,601) |
Post tax fair value adjustment – basic pence per
share |
– |
– |
(0.47p) |
(1.88p) |
Except for debenture stocks there is no material difference
between the carrying value and fair value of financial liabilities
or financial assets. The fair values of the debentures are based on
the net present value at the relevant gilt interest rate of the
future payments of interest on the debentures.
Treasury policy
The Group enters derivative transactions such as interest rate
swaps and forward exchange contracts in order to help manage the
financial risks arising from the Group’s activities. The main risks
arising from the Group’s financing structure are interest rate
risk, liquidity risk and market price risk, credit risk, commodity
price risk and foreign exchange risk. The policies for managing
each of these risks and the principal effects of these policies on
the results are summarised below.
Sensitivity analysis
The LAP Group and Dragon have variable interest term debts which
are covered by derivatives. Additionally, The LAP Group has a
variable interest term debt with minimum and maximum rates. At
31 December 2019, with other
variables unchanged, a 1% increase in interest rates would change
the profit/loss for the year by £119,000 (2018: £91,000). Bisichi
has variable loans and a 1% increase in interest rates would change
the profit/loss for the year by £107,000 (2018: £101,000).
Interest rate risk
Treasury activities take place under procedures and policies
approved and monitored by the Board to minimise the financial risk
faced by the Group.
The Bisichi United Kingdom bank loans and overdraft are secured
by way of a first charge on certain fixed assets. The rates of
interest vary based on LIBOR in the UK.
The Bisichi South African bank loans are secured by way of a
first charge over specific pieces of mining equipment, inventory
and the debtors of the relevant company which holds the loan. The
rates of interest vary based on PRIME in South Africa.
The £3.932 million bank loan is secured by way of a first charge
on specific freehold and leasehold property. The rate of interest
varies based on the bank’s base rate.
The £1.25 million bank loan (Dragon) is secured by way of a
first charge on specific freehold property. The rate of interest
varies based on LIBOR in the UK.
The £3.605 million bank loan (Broadway Regen) is secured by way
of first charge on a specific freehold development property. This
loan is based on a fixed interest rate of 7.0%.
The £14 million bank loan is secured by way of first charge on a
specific freehold development property held in inventory. The rates
of interest vary based on LIBOR in the UK, with a minimum LIBOR of
1% and a maximum LIBOR of 1.5%.
Liquidity risk
The Group’s policy is to minimise refinancing risk by balancing
its exposure to interest risk and to refinancing risk. In effect
the Group seeks to borrow for as long as possible at the lowest
acceptable cost. Efficient treasury management and strict credit
control minimise the costs and risks associated with this policy
which ensures that funds are available to meet commitments as they
fall due. Cash and cash equivalents earn interest at rates based on
LIBOR in the UK. The cash resources and funding facilities together
are considered adequate to meet the Group’s anticipated cash flow
requirements for the foreseeable future.
In South Africa, as part of the
restructuring and sale of the washing plant facilities from Black
Wattle Colliery (Pty) Limited (“Black Wattle”) to its wholly owned
subsidiary Sisonke Coal Processing (Pty) Limited (“Sisonke Coal
Processing”), the R100million facility held by Black Wattle with
Absa Bank Limited at the year end (“old trade facility”) was
replaced in January 2019 by a new
structured trade finance facility for R100million held by Sisonke
Coal Processing (“new trade facility”).
The new trade facility comprises of a R100million revolving
facility to cover the working capital requirements of the group’s
South African operations. The interest cost of the loan is at the
South African prime lending rate. The new trade facility is
renewable annually each January, is repayable on demand and is
secured against inventory, debtors and cash that are held by
Sisonke Coal Processing (Pty)
The old trade facility, which was also repayable on demand, is
included in cash and cash equivalents within the cashflow
statement.
In December 2019, Bisichi repaid
its £5.84million loan facility with Santander Bank PLC and signed a
new £3.96million term loan facility with Julian Hodge Bank Limited.
The loan is secured against Bisichi’s UK retail property portfolio.
The debt package has a five year term and is repayable at the end
of the term in December 2024. The
interest cost of the loan is 4.00% above LIBOR.
In September 2019 the LAP Group’s
£34.897 million term bank loan and the £10.105 million bank loan
were repaid and a new £14 million facility signed with Pheonix CRE
S.à r.l. This loan is secured on a single freehold property and is
repayable in September 2022. The
interest cost is 5.95% above LIBOR, where LIBOR has a minimum and
maximum rate of 1.0% and 1.5%, respectively.
The table below analyses the Group’s financial liabilities
(excluding interest rate derivatives) into maturity groupings and
also provides details of the liabilities that bear interest at
fixed, floating and non–interest bearing rates.
|
2019
Total
£’000 |
Less than
1 year
£’000 |
2-5 years
£’000 |
Over
5 years
£’000 |
Bank overdrafts (floating) |
4,842 |
4,842 |
– |
– |
Debentures (fixed) |
9,956 |
– |
9,956 |
– |
Bank loans (fixed) |
3,605 |
3,605 |
– |
– |
Bank loans (floating)* |
22,780 |
1,673 |
18,269 |
2,838 |
Lease liabilities |
4,266 |
424 |
1,511 |
2,331 |
Trade and other payables (non–interest) |
12,408 |
12,408 |
– |
– |
|
57,857 |
22,952 |
29,736 |
5,169 |
|
2018
Total
£’000 |
Less than
1 year
£’000 |
2-5 years
£’000 |
Over
5 years
£’000 |
Bank overdrafts (floating) |
3,535 |
3,535 |
– |
– |
Debentures (fixed) |
9,939 |
– |
9,939 |
– |
Bank loans (fixed) |
11,433 |
10,269 |
1,164 |
– |
Bank loans (floating)* |
31,736 |
27,584 |
1,156 |
2,996 |
Lease liabilities |
3,261 |
213 |
783 |
2,265 |
Trade and other payables (non–interest) |
12,930 |
12,930 |
– |
– |
|
72,834 |
54,531 |
13,042 |
5,261 |
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 on the next page.
Market price risk
The Group is exposed to market price risk through interest rate
and currency fluctuations.
Credit risk
The group is mainly exposed to credit risk on its cash and cash
equivalents, trade and other receivables. The maximum exposure to
credit risk is represented by the carrying amount of each financial
asset in the balance sheet which at year end amounted to
£22,691,000 (2018: £30,329,000).
To mitigate risk on its cash and cash equivalents, the group
only deposits surplus cash with well-established financial
institutions of high quality credit standing.
The group’s credit risk is primarily attributable to its trade
receivables. Customers’ credit ratings are reviewed regularly. The
Group’s review includes measures such as the use of external
ratings and establishing purchase limits for each customer. The
Group’s approach to measure the credit loss allowance for trade
receivables is outlined in note 15. At year end, the group
allowance for doubtful debts provided against trade receivables was
£301,000 (2018: £277,000).
The Group exposure to credit risk on its other receivables is
mitigated through ongoing review of the underlying performance and
resources of the counterparty including evaluation of different
scenarios of probability of default and expected loss applicable to
each of the underlying balances.
Foreign exchange risk
Only Bisichi is subject to this risk. All trading is undertaken
in the local currencies except for certain export sales which are
invoiced in US Dollars. It is not the Bisichi Group’s policy to
obtain forward contracts to mitigate foreign exchange risk on these
contracts as payment terms are within 15 days of invoice or
earlier. Funding is also in local currencies other than
inter-company investments and loans and it is also not the Bisichi
Group’s policy to obtain forward contracts to mitigate foreign
exchange risk on these amounts. During 2019 and 2018 the Bisichi
Group did not hedge its exposure of foreign investments held in
foreign currencies.
The principal currency risk to which the Bisichi Group is
exposed in regard to inter-company balances is the exchange rate
between Pounds Sterling and South African Rand. It arises as a
result of the retranslation of Rand denominated inter-company trade
receivable balances held within the UK which are payable by South
African Rand functional currency subsidiaries.
Based on the Bisichi Group’s net financial assets and
liabilities as at 31 December 2019, 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 £176,000 (2018: £130,000). 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 £294,000 (2018: £216,000).
The 25% sensitivity has been determined based on the average
historic volatility of the exchange rate for 2018 and 2019.
The table below shows the Bisichi currency profiles of cash and
cash equivalents:
|
2019
£’000 |
2018
£’000 |
Sterling |
4,741 |
6,897 |
South African Rand |
1,672 |
2,322 |
US Dollar |
1,307 |
2 |
|
7,720 |
9,221 |
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:
2019: |
UK
£’000 |
South Africa
£’000 |
Sterling |
1,151 |
- |
South African Rand |
40 |
(3,510) |
US Dollar |
1,582 |
- |
|
2,773 |
(3,510) |
2018: |
UK
£’000 |
South Africa
£’000 |
Sterling |
1,042 |
- |
South African Rand |
37 |
(1,974) |
US Dollar |
13 |
- |
|
1,092 |
(1,974) |
Borrowing facilities
At 31 December 2019 the Group was
within its bank borrowing facilities and was not in breach of any
of the covenants. Term loan repayments are as set out at the end of
this note. Details of other financial liabilities are shown in
Notes 17, 18 and 19.
Interest rate and hedge profile
|
2019
£’000 |
2018
£’000 |
Fixed rate borrowings |
13,561 |
20,224 |
Floating rate borrowings |
|
|
– Subject to interest rate swap |
14,773 |
18,685 |
– Other borrowings |
12,849 |
18,048 |
|
41,183 |
56,957 |
Average fixed interest rate |
7.82% |
8.39% |
Weighted average swapped interest rate |
6.63% |
4.16% |
Weighted average cost of debt on overdrafts, bank
loans and debentures |
7.06% |
5.92% |
Average period for which borrowing rate is
fixed |
2.1 years |
2.1 years |
Average period for which borrowing rate is
swapped |
2.6 years |
0.6 years |
The Group’s floating rate debt bears interest based on LIBOR for
the term bank loans and bank base rate for the overdraft.
At 31 December 2019 the Group had
a £14 million floating rate loan to September 2022, where LIBOR has a minimum and
maximum rate of 1.0% and 1.5%, respectively.
The Group’s hedges for £21.489 million expired in July 2019 and the bank loans which they covered
were repaid in September 2019.
At the year end the fair value liability in the accounts was
£nil (2018: £169,000), as valued by the hedge provider.
At 31 December 2019, Dragon had an
interest rate hedge of £1.25 million to cover the £1.25 million
bank loan. This consists of a 5 year £1.25 million cap agreement
taken out in November 2016 at 2.5%.
At the year end, the fair value asset in the accounts was nil
(2018: £nil), as valued by the hedge provider.
Fair value of financial instruments
Fair value estimation
The Group has adopted the amendment to IFRS 7 for financial
instruments that are measured in the balance sheet at fair value.
This requires the methods of fair value measurement to be
classified into a hierarchy based on the reliability of the
information used to determine the valuation, as follows:
– Quoted prices (unadjusted) in active markets
for identical assets or liabilities (level 1).
– Inputs other than quoted prices included
within level 1 that are observable for the asset or liability,
either directly (that is, as prices) or indirectly (that is,
derived from prices) (level 2).
– Inputs for the asset or liability that are
not based on observable market data (that is unobservable inputs)
(level 3).
|
Level 1
£’000 |
Level 2
£’000 |
Level 3
£’000 |
Total
£’000 |
2019
Gain/(loss)
to income
statement
£’000 |
Financial assets |
|
|
|
|
|
Quoted equities – non-current assets |
287 |
– |
– |
287 |
(3) |
Quoted equities – current assets |
1,119 |
– |
– |
1,119 |
(2) |
Financial liabilities |
|
|
|
|
|
Interest rate swaps |
– |
– |
– |
– |
169 |
|
Level 1
£’000 |
Level 2
£’000 |
Level 3
£’000 |
Total
£’000 |
2018
Gain/(loss)
to income
statement
£’000 |
Financial assets |
|
|
|
|
|
Quoted equities – non-current assets |
35 |
– |
– |
– |
– |
Quoted equities – current assets |
887 |
– |
– |
887 |
- |
Interest rate swaps |
– |
– |
– |
– |
(1) |
Financial liabilities |
|
|
|
|
|
Interest rate swaps |
– |
169 |
– |
169 |
266 |
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:
|
2019
£’000 |
2018
£’000 |
Total debt |
45,449 |
59,904 |
Less cash and cash equivalents |
(13,533) |
(20,655) |
Net debt |
31,916 |
39,249 |
Total equity |
49,133 |
55,686 |
|
65.0% |
70.5% |
The Group does not have any externally imposed capital
requirements.
Following the introduction of IFRS 16 total debt now includes
lease liabilities.
Financial assets
The Group’s principal financial assets are bank balances and
cash, trade and other receivables, investments and assets held for
sale. The Group has no significant concentration of credit risk as
exposure is spread over a large number of counterparties and
customers. The credit risk in liquid funds and derivative financial
instruments is limited because the counterparties are banks with
high credit ratings assigned by international credit–rating
agencies. The Group’s credit risk is primarily attributable to its
trade receivables. The amounts presented in the balance sheet are
net of allowances for doubtful receivables, estimated by the
Group’s management based on prior experience and the current
economic environment.
Financial assets maturity
Cash and cash equivalents all have a maturity of less than three
months.
|
2019
£’000 |
2018
£’000 |
Cash at bank and in hand |
13,533 |
20,655 |
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
|
2019
£’000 |
2018
£’000 |
Bank loans and overdrafts: |
|
|
Repayable on demand or within one year |
10,120 |
41,388 |
Repayable between two and five years |
18,269 |
2,320 |
Repayable after five years |
2,838 |
2,996 |
|
31,227 |
46,704 |
Debentures: |
|
|
Repayable between two and five years |
9,956 |
9,939 |
|
41,183 |
56,643 |
Certain borrowing agreements contain financial and other
conditions that if contravened by the Group, could alter the
repayment profile.
22. Deferred tax liabilitIES
|
2019
£’000 |
2018
£’000 |
Balance at 1 January |
2,305 |
3,848 |
Transferred (to)/from consolidated income
statement |
(631) |
(1,375) |
Exchange adjustment |
(20) |
(168) |
Balance at 31 December |
1,654 |
2,305 |
|
|
|
The deferred tax balance comprises the
following: |
|
|
Revaluation of properties |
314 |
726 |
Accelerated capital allowances |
2,810 |
2,166 |
Short-term timing differences |
(532) |
139 |
Unredeemed capital deductions |
– |
(32) |
Losses and other deductions |
(938) |
(694) |
Deferred tax liability provision at end of
year: |
1,654 |
2,305 |
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 £7,339,000 (2018: £6,310,000), which have not
been recognised as a deferred tax asset. As the Group returns to
profit, these losses and reliefs can be utilised.
23. Share capital
The Company has one class of ordinary shares which carry no
right to fixed income.
|
Number of
ordinary 10p
shares
2019 |
Number of
ordinary 10p
shares
2018 |
2019
£’000 |
2018
£’000 |
Authorised: ordinary shares of 10p each |
110,000,000 |
110,000,000 |
11,000 |
11,000 |
Allotted, issued and fully paid share capital |
85,542,711 |
85,542,711 |
8,554 |
8,554 |
Less: held in Treasury (see below) |
(218,197) |
(218,197) |
(22) |
(22) |
“Issued share capital” for reporting purposes |
85,324,514 |
85,324,514 |
8,532 |
8,532 |
Treasury shares
|
Number of ordinary
10p shares |
Cost /issue value |
|
2019 |
2018 |
2019
£’000 |
2018
£’000 |
Shares held in Treasury at 1 January |
218,197 |
221,061 |
144 |
145 |
Issued for share incentive plan - dividends
investment (June 2018 - 30p) |
– |
(1,271) |
– |
– |
Issued for share incentive plan - dividends
investment (Dec 2018 - 26p) |
– |
(1,593) |
– |
(1) |
Shares held in Treasury at 31 December |
218,197 |
218,197 |
144 |
144 |
Share Option Schemes
Employees’ share option scheme (Approved scheme)
At 31 December 2019 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 2019 is as
follows:
|
|
Changes during the
year |
|
|
At 1
January
2019 |
Options
Exercised |
Options
granted |
Options
lapsed |
At 31
December
2019 |
Shares issued to date |
2,367,604 |
– |
– |
– |
2,367,604 |
Shares allocated over which options have not been
granted |
1,549,955 |
– |
– |
– |
1,549,955 |
Total shares allocated for issue to employees
under the scheme |
3,917,559 |
– |
– |
– |
3,917,559 |
Non–approved Executive Share Option Scheme (Unapproved
scheme)
A share option scheme known as the “Non–approved Executive Share
Option Scheme” which does not have HMRC approval was set up during
2000. At 31 December 2019 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 2019 is as
follows:
|
Changes during the
year |
|
At 1
January
2019 |
Options
Exercised |
Options
granted |
Options
lapsed |
At 31
December
2019 |
Shares issued to date |
450,000 |
– |
– |
– |
450,000 |
Shares allocated over which options have not yet
been granted |
550,000 |
– |
– |
– |
550,000 |
Total shares allocated for issue to employees
under the scheme |
1,000,000 |
– |
– |
– |
1,000,000 |
The Bisichi PLC Unapproved Option Schemes
Details of the share option schemes in Bisichi are as
follows:
Year of grant |
Subscription
price per share |
Period within
which options
exercisable |
Number of shares
for which
options
outstanding at
31 December 2018 |
Number of
share options
issued/exercised/
(cancelled)
during year |
Number of shares
for which
options
outstanding at
31 December 2019 |
2015 |
87.0p |
Sep 2015 – Sep 2025 |
300,000 |
– |
300,000 |
2018 |
73.5p |
Feb 2018 - Feb 2028 |
380,000 |
– |
380,000 |
The exercise of options under the Unapproved Share Option
Schemes, for certain option issues, is subject to the satisfaction
of the objective performance conditions specified by the
remuneration committee, which will conform to institutional
shareholder guidelines and best practice provisions in force from
time to time.
There are no performance or service conditions attached to 2015
and 2018 options which are outstanding at 31
December 2019.
|
2019
Number |
2019
Weighted
average
exercise price |
2018
Number |
2018
Weighted
average
exercise price |
Outstanding at 1 January |
680,000 |
79.5p |
380,000 |
111.3p |
Issued during year |
– |
– |
380,000 |
73.5p |
Lapsed/surrended during year |
– |
– |
(80,000) |
205.5p |
Outstanding at 31 December |
680,000 |
79.5p |
680,000 |
79.5p |
Exercisable at 31 December |
680,000 |
79.5p |
680,000 |
79.5p |
24. Non–controlling interest (“NCI”)
|
2019
£’000 |
2018
£’000 |
As at 1 January |
12,309 |
10,856 |
Share of profit for the year |
986 |
2,675 |
Dividends received |
(858) |
(957) |
Shares issued |
– |
8 |
Exchange movement |
(30) |
(273) |
As at 31 December |
12,407 |
12,309 |
The following subsidiaries had material NCI:
Bisichi PLC
Black Wattle Colliery (Pty) Ltd
Summarised financial information for these subsidiaries is set
out below. The information is before inter–company eliminations
with other companies in the Group.
BISICHI PLC |
2019
£’000 |
2018
£’000 |
Revenue |
48,274 |
49,945 |
Profit for the year attributable to owners of the
parent |
1,046 |
3,314 |
Profit/(loss) for the year attributable to
NCI |
549 |
729 |
Profit for the year |
1,595 |
4,043 |
Other comprehensive income attributable to owners
of the parent |
(42) |
(377) |
Other comprehensive income attributable to
NCI |
(7) |
(53) |
Other comprehensive income for the year |
(49) |
(430) |
Balance sheet |
|
|
Non–current assets |
22,885 |
23,118 |
Current assets |
18,849 |
18,475 |
Total assets |
41,734 |
41,593 |
Current liabilities |
(13,179) |
(16,929) |
Non–current liabilities |
(7,998) |
(4,529) |
Total liabilities |
(21,177) |
(21,458) |
Net current assets at 31 December |
20,557 |
20,135 |
Cash flows |
|
|
From operating activities |
4,305 |
4,767 |
From investing activities |
(3,730) |
(3,373) |
From financing activities |
(3,411) |
200 |
Net cash flows |
(2,836) |
1,594 |
The non–controlling interest comprises of a 37.5% shareholding
in Black Wattle Colliery (Pty) Ltd, a coal mining company
incorporated in South Africa.
Summarised financial information reflecting 100% of the
underlying subsidiary’s relevant figures, is set out below.
Black Wattle Colliery (Pty) Limited (“Black
Wattle”) |
2019
£’000 |
2018
£’000 |
Revenue |
46,706 |
48,666 |
Expenses |
(43,040) |
(43,801) |
Profit for the year |
3,666 |
4,865 |
Total comprehensive income for the year |
3,666 |
4,865 |
Non–current assets |
9,480 |
8,532 |
Current assets |
10,462 |
9,587 |
Current liabilities |
(12,087) |
(10,540) |
Non–current liabilities |
(3,682) |
(3,800) |
Net assets at 31 December |
4,173 |
3,779 |
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 PLC incorporated in England and Wales.
Vunani Mining (Pty) Ltd is a South African Black Economic
Empowerment company and minority shareholder in Black Wattle.
The “A” shares rank pari passu with the ordinary shares save
that they will have no dividend rights until such time as the
dividends paid by Black Wattle Colliery (Pty) Ltd on the ordinary
shares subsequent to 30 October 2008
will equate to ZAR832,075,000.
A non–controlling interest of 15% in Black Wattle is recognised
for all profits distributable to the 110 ordinary shares held by
Vunani Mining (Pty) Ltd from the date of issue of the shares
(18 October 2010). An additional
non–controlling interest will be recognised for all profits
distributable to the 265 “A” shares held by Vunani Mining (Pty) Ltd
after such time as the profits available for distribution, in Black
Wattle Colliery (Pty) Ltd, before any payment of dividends after
30 October 2008, exceeds ZAR832,075,000.
25. Related party transactions
|
Cost
recharged
to (by)
related
party
£’000 |
|
Amounts owed by (to) related
party
£’000 |
Advanced to
(by) related
party
£’000 |
Related party: |
|
|
|
|
Simon Heller Charitable Trust |
|
|
|
|
Current
account |
(63) |
|
– |
– |
Loan account |
– |
|
(700) |
– |
Directors and key management |
|
|
|
|
M A Heller and J A
Heller |
18 |
(i) |
1 |
– |
H D Goldring
(Delmore Holdings Limited) |
(17) |
(ii) |
(7) |
– |
C A Parritt |
(18) |
(ii) |
– |
– |
R Priest |
(35) |
(ii) |
(9) |
– |
Totals at 31 December 2019 |
(115) |
|
(715) |
– |
Totals at 31 December 2018 |
(115) |
|
(707) |
– |
Nature of costs recharged – (i) Property management fees (ii)
Consultancy fees.
Directors
London & Associated
Properties PLC provides office premises, property management,
general management, accounting and administration services for a
number of private property companies in which Sir Michael Heller and J A Heller have an interest.
Under an agreement with Sir Michael
Heller no charge is made for these services on the basis
that he reduces by an equivalent amount the charge for his services
to London & Associated
Properties PLC. The board estimates that the value of these
services, if supplied to a third party, would have been £300,000
for the year (2018: £300,000).
The companies for which services are provided are: Barmik
Properties Limited, Cawgate Limited, Clerewell Limited, Cloathgate
Limited, Ken–Crav Investments Limited, London & South Yorkshire Securities
Limited, Metroc Limited, Penrith Retail Limited, Shop.com Limited,
South Yorkshire Property Trust Limited, Wasdon Investments
Limited, Wasdon (Dover) Limited, and Wasdon (Leeds) Limited.
In addition the Company received management fees of £10,000
(2018: £10,000) for work done for two charitable foundations, the
Michael & Morven Heller Charitable Foundation and the
Simon Heller Charitable Trust.
The Simon Heller Trust has placed on deposit with LAP £700,000
at an interest rate of 9% which is refundable on demand.
Delmore Holdings Limited (Delmore) is a Company in which H D
Goldring is a majority shareholder and director. Delmore provides
consultancy services to the Company on an invoiced fee basis.
R Priest provided consultancy services to the Company on an
invoiced fee basis.
In 2012 a loan was made by Bisichi to one of the Bisichi
directors, Mr A R Heller, for £116,000. Interest is payable on the
Director’s Loan at a rate of 6.14 per cent. There is no fixed
repayment date for the Director’s Loan. The loan amount outstanding
at year end was £41,000 (2018: £41,000) and no repayment (2018:
£15,000) was made during the year.
The directors are considered to be the only key management
personnel and their remuneration including employer’s national
insurance for the year was £1,464,000 (2018: £1,838,000). All other
disclosures required, including interest in share options in
respect of those directors, are included within the remuneration
report.
26. Employees
The average number of employees, including directors, of the
Group during the year was as follows:
|
2019 |
2018 |
Production |
204 |
231 |
Administration |
44 |
46 |
|
248 |
277 |
Staff costs during the year were as follows:
|
2019
£’000 |
2018
£’000 |
Salaries and other costs |
8,741 |
8,994 |
Social security costs |
386 |
494 |
Pension costs |
487 |
377 |
Share based payments |
– |
24 |
|
9,614 |
9,889 |
27. Capital Commitments
|
2019
£’000 |
2018
£’000 |
Commitments for capital expenditure approved and
contracted at the year end |
– |
751 |
All the above relates to Bisichi PLC.
28. LEASE rentals receivable
The Group leases out its investment properties to tenants giving
them the right to occupation and use of the properties in exchange
for rental payments. The future aggregate minimum rentals
receivable under non–cancellable leases are as follows:
|
2019
£’000 |
2018
£’000 |
2020 |
4,997 |
5,379 |
2021 |
4,247 |
4,847 |
2022 |
3,583 |
4,070 |
2023 |
2,854 |
3,493 |
2024 + |
18,327 |
23,123 |
|
34,008 |
40,912 |
29. Contingent liabilities and events AFTER THE REPORTING
PERIOD
There were no contingent liabilities at 31 December 2019 (2018: £Nil), except as
disclosed in Note 21.
COVID-19 and the subsequent lockdown of many of our tenants’
businesses will have had a short and medium term effect on asset
values as tenants’ ability to meet their obligations to landlords
has been affected in some cases. In the longer term asset values
may be affected if there is a more permanent deterioration in our
tenants’ trading due to a wider slowdown in the economy. The
Directors are unable to give guidance on how this might affect
asset values due to the level of uncertainty at this time. This is
discussed further in the COVID-19 update in the Strategic Report on
page 8 and in the Going Concern section of the Group Accounting
Policies on page 42.
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:
|
2019
£’000 |
2018
£’000 |
Rail siding & transportation |
54 |
54 |
Rehabilitation of mining land |
1,553 |
1,259 |
Water & electricity |
52 |
52 |
|
1,659 |
1,365 |
The interpretation of laws and regulations in South Africa where Bisichi operates can be
complex and can lead to challenges from or disputes with regulatory
authorities. Such situations often take significant time to
resolve. Where there is a dispute and where a reliable estimate of
the potential liability cannot be made, or where Bisichi, based on
legal advice, considers that it is improbable that there will be an
outflow of economic resources, no provision is recognised.
Black Wattle Colliery (Pty) Ltd is currently involved in a tax
dispute in South Africa related to
VAT. The dispute arose subsequent to the year end and is related to
events which occurred during and prior to the years ended
31 December 2019. As at 5 June 2020, Bisichi has been advised that it has
a strong legal case, that it has complied fully with the
legislation and, therefore, no economic outflow is expected to
occur. Because of the nature and complexity of the dispute, the
possible financial effect of a negative decision cannot be measured
reliably. Accordingly, no provision has been booked at the year
end. At this stage, Bisichi believes that the dispute will be
resolved in its favour.
30. Company financial statements
Company balance sheet at 31 December
2019
|
Notes |
2019
£’000 |
2018
£’000 |
|
|
|
|
Fixed assets |
|
|
|
Tangible assets |
30.3 |
23,341 |
23,872 |
Other investments: |
|
|
|
Associated company – Bisichi Mining PLC |
30.4 |
489 |
489 |
Subsidiaries and others including Dragon Retail
Properties Limited |
30.4 |
47,922 |
42,598 |
|
|
48,411 |
43,087 |
|
|
71,752 |
66,959 |
|
|
|
|
Current assets |
|
|
|
Debtors |
30.5 |
5,848 |
3,764 |
Bank balances |
|
2,359 |
9,887 |
|
|
8,207 |
13,651 |
Creditors |
|
|
|
Amounts falling due within one year |
30.6 |
(44,043) |
(54,731) |
Deferred tax falling due after more than one
year |
|
(345) |
(744) |
Net current liabilities |
|
(36,181) |
(41,823) |
Total assets less current liabilities |
|
35,571 |
25,136 |
|
|
|
|
Creditors |
|
|
|
Amounts falling due after more than one year |
30.7 |
(11,604) |
(10,918) |
Net assets |
|
23,967 |
14,217 |
|
|
|
|
Capital and reserves |
|
|
|
Share capital |
30.9 |
8,554 |
8,554 |
Share premium account |
|
4,866 |
4,866 |
Capital redemption reserve |
|
47 |
47 |
Treasury shares |
30.9 |
(144) |
(144) |
Retained earnings |
|
10,644 |
894 |
Shareholders’ funds |
|
23,967 |
14,217 |
The profit for the financial year, before dividends was
£9,904,000 (2018: loss of £6,805,000)
These financial statements were approved by the board of
directors and authorised for issue on 29
June 2020 and signed on its behalf by:
Sir Michael
Heller
Jonathan Mintz Company Registration No.
341829
Director
Director
COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED
31 DECEMBER 2019
|
Share
capital
£’000 |
Share
premium
£’000 |
Capital
redemption
reserve
£’000 |
Treasury
shares
£’000 |
Retained
earnings
excluding
treasury
shares
£’000 |
Total
equity
£’000 |
Balance at 1 January 2018 |
8,554 |
4,866 |
47 |
(145) |
7,955 |
21,277 |
Loss for the year |
– |
– |
– |
– |
(6,805) |
(6,805) |
Total comprehensive expense |
– |
– |
– |
– |
(6,805) |
(6,805) |
Transactions with owners: |
|
|
|
|
|
|
Dividends – equity holders |
– |
– |
– |
– |
(256) |
(256) |
Disposal of own shares |
– |
– |
– |
1 |
– |
1 |
Transactions with owners |
– |
– |
– |
1 |
(256) |
(255) |
Balance at 31 December 2018 |
8,554 |
4,866 |
47 |
(144) |
894 |
14,217 |
Profit for the year |
– |
– |
– |
– |
9,904 |
9,904 |
Total comprehensive income |
– |
– |
– |
– |
9,904 |
9,904 |
Transaction with owners: |
|
|
|
|
|
|
Dividends – equity holders |
– |
– |
– |
– |
(154) |
(154) |
Transactions with owners |
– |
– |
– |
– |
(154) |
(154) |
Balance at 31 December 2019 |
8,554 |
4,866 |
47 |
(144) |
10,644 |
23,967 |
£11.3 million (2018: £0.2 million) of retained earnings
(excluding treasury shares) is distributable.
30.1. COMPANY
Accounting policies
The following are the main accounting policies of the
Company:
Basis of preparation
The financial statements have been prepared on a going concern
basis and in accordance with Financial Reporting Standard 101
’Reduced Disclosure Framework’ (FRS 101) and Companies Act 2006.
The financial statements are prepared under the historical cost
convention as modified to include the revaluation of freehold and
leasehold properties and fair value adjustments in respect of
current asset investments and interest rate hedges.
The results of the Company are included in the consolidated
financial statements. No profit or loss is presented by the Company
as permitted by Section 408 of the Companies Act 2006.
In these financial statements, the company has applied the
exemptions available under FRS 101 in respect of the following
disclosures:
- Cash Flow Statement and related
notes;
- Comparative period reconciliations for
share capital, tangible fixed assets and intangible assets;
- Disclosures in respect of transactions
with wholly owned subsidiaries;
- Disclosures in respect of capital
management;
- The effects of new but not yet
effective IFRSs;
- Disclosures in respect of the
compensation of Key Management Personnel.
As the consolidated financial statements include the equivalent
disclosures, the Company has also taken the exemptions under FRS
101 available in respect of the following disclosures:
- IFRS 2 Share Based Payments in respect
of Group settled share based payments;
- The disclosures required by IFRS 7 and
IFRS 13 regarding financial instrument disclosures have not been
provided apart from those which are relevant for the financial
instruments which are held at fair value and are not either held as
part of the trading portfolio or derivatives.
Key judgements and estimates
The preparation of the financial statements requires management
to make assumptions and estimates that may affect the reported
amounts of assets and liabilities and the reported income and
expenses, further details of which are set out below. Although
management believes that the assumptions and estimates used are
reasonable, the actual results may differ from those estimates.
Further details of the estimates are contained in the Directors’
Report and in the Group accounting policies.
Investments in subsidiaries, associated undertakings and joint
ventures
Investments in subsidiaries, associated undertakings and joint
ventures are held at cost less accumulated impairment losses.
Fair value measurements of investment properties and
investments
An assessment of the fair value of certain assets and
liabilities, in particular investment properties, is required. In
such instances, fair value measurements are estimated based on the
amounts for which the assets and liabilities could be exchanged
between market participants. To the extent possible, the
assumptions and inputs used take into account externally verifiable
inputs. However, such information is by nature subject to
uncertainty. The fair value measurement of the investment
properties may be considered to be less judgemental where external
valuers have been used as is the case with the Company.
The following accounting policies are consistent with those of
the Group and are disclosed on page 42 to 48 of the Group financial
statements.
-
Revenue
- Property operating expenses
- Employee benefits
- Financial instruments
- Investment properties
- Other assets and depreciation
- Assets held for sale
- Income taxes
- Leases
30.2. RESULT for the financial year
The Company’s result for the year was a profit of £11,665,000
(2018: loss of £6,805,000). In accordance with the exemption
conferred by Section 408 of the Companies Act 2006, the Company has
not presented its own profit and loss account.
30.3. Tangible assets
|
Investment
Properties |
Office |
|
|
Total
£’000 |
Freehold
£’000 |
Leasehold
over 50 years
£’000 |
Leasehold
under 50 years
£’000 |
equipment
and motor
vehicles
£’000 |
Office
Building
£’000 |
Cost or valuation at 1 January 2019 |
24,112 |
13,970 |
9,540 |
256 |
346 |
– |
IFRS 16 transition adjustment - right of use
asset |
1,054 |
– |
– |
– |
– |
1,054 |
Additions in the year |
63 |
62 |
– |
– |
1 |
– |
(Decrease)/increase in present value of head
leases |
(1) |
– |
(1) |
– |
– |
– |
(Decrease)/increase on revaluation |
(1,432) |
(382) |
(1,000) |
(50) |
– |
– |
Cost or valuation at 31 December 2019 |
23,796 |
13,650 |
8,539 |
206 |
347 |
1,054 |
|
|
|
|
|
|
|
Representing assets stated at: |
|
|
|
|
|
|
Valuation |
22,395 |
13,650 |
8,539 |
206 |
– |
– |
Cost |
1,401 |
– |
– |
– |
347 |
1,054 |
|
23,796 |
13,650 |
8,539 |
206 |
347 |
1,054 |
|
|
|
|
|
|
|
Depreciation at 1 January 2019 |
240 |
– |
– |
– |
240 |
– |
Charge for the year |
215 |
– |
– |
– |
4 |
211 |
Disposals |
– |
– |
– |
– |
– |
– |
Depreciation at 31 December 2019 |
455 |
– |
– |
– |
244 |
211 |
Net book value at 1 January 2019 |
23,872 |
13,970 |
9,540 |
256 |
106 |
– |
Net book value at 31 December 2019 |
23,341 |
13,650 |
8,539 |
206 |
103 |
843 |
The freehold and leasehold properties, excluding the present
value of head leases and directors’ valuations, were valued as at
31 December 2019 by professional
firms of chartered surveyors. The valuations were made at fair
value. The directors’ property valuations were made at fair
value.
|
2019
£’000 |
2018
£’000 |
Allsop LLP |
20,050 |
21,120 |
Directors’ valuation |
1,300 |
1,600 |
|
21,350 |
22,720 |
Add: Present value of headleases |
1,045 |
1,046 |
|
22,395 |
23,766 |
The historical cost of investment properties was as follows:
|
Freehold
£’000 |
Leasehold
over 50 years
£’000 |
Leasehold
under 50 years
£’000 |
Cost at 1 January 2019 |
10,228 |
9,333 |
785 |
Additions |
62 |
– |
– |
Cost at 31 December 2019 |
10,290 |
9,333 |
785 |
Head leases on investment property represent the value
attributed to the right of the Company to occupy and use investment
property that has a head lease interest. In the current year total
cash outflow for head leases is £0.1 million (2018: £0.1 million).
A number of these leases provide for payment of contingent rent,
usually a proportion of net rental income, in addition to fixed
rents.
Office building represents the value attributed under IFRS 16 to
the right of the Company to occupy its sole office building. In the
current year total cash outflow for the office lease liability is
£0.2 million.
30.4. Other investments
Cost or valuation |
Total
£’000 |
Shares in
subsidiary
companies
£’000 |
Shares in
joint
ventures
£’000 |
Shares in
associate
£’000 |
At 1 January 2019 |
43,087 |
42,434 |
164 |
489 |
Additions |
8,533 |
8,533 |
– |
– |
Impairment provision |
(3,209) |
(3,209) |
– |
– |
At 31 December 2019 |
48,411 |
47,758 |
164 |
489 |
Subsidiary companies
Details of the Company’s subsidiaries are set out in Note 11.
Under IFRS 10 Bisichi PLC and its subsidiaries, West Ealing
Projects Limited and its subsidiary and Dragon Retail Properties
Limited are treated in the financial statements as subsidiaries of
the Company.
During the year the Company impaired its investment in the
subsidiary undertaking that held the Group’s interest in HRGT
Shopping Centres LP by £1,448,000. Disclosure of the impairment
recognised in the consolidated financial statements is included in
Note 14. Other than this impairment, in the opinion of the
directors the value of the investment in subsidiaries is not less
than the amount shown in these financial statements.
During the year the Company impaired its investment in Orchard
Square Limited by £1,761,000, following a reduction in the carrying
value of the Orchard Square, Sheffield property.
30.5. Debtors
|
2019
£’000 |
2018
£’000 |
Trade debtors |
352 |
351 |
Amounts due from associate and joint ventures |
872 |
755 |
Amounts due from subsidiary companies |
4,049 |
2,127 |
Other debtors |
139 |
82 |
Prepayments and accrued income |
436 |
449 |
|
5,848 |
3,764 |
30.6. Creditors: amounts falling due within one year
|
2019
£’000 |
2018
£’000 |
Amounts owed to subsidiary companies |
40,223 |
50,874 |
Amounts owed to joint ventures |
156 |
156 |
Other taxation and social security costs |
267 |
200 |
Lease liabilities |
258 |
66 |
Other creditors |
1,393 |
1,442 |
Accruals and deferred income |
1,746 |
1,993 |
|
44,043 |
54,731 |
30.7. Creditors: amounts falling due after more than one
year
|
2019
£’000 |
2018
£’000 |
Present value of head leases on properties |
979 |
979 |
Lease liabilities |
669 |
– |
Term Debenture stocks: |
|
|
£10 million First Mortgage Debenture Stock 2022 at
8.109 per cent net of un-amortised issue costs |
9,956 |
9,939 |
|
11,604 |
10,918 |
Details of terms and security of overdrafts, loans and loan
renewal and debentures are set out in note 18.
Repayment of borrowings: |
2019
£’000 |
2018
£’000 |
Debentures: |
|
|
Repayable within one year |
– |
– |
Repayable between two and five years |
9,956 |
9,939 |
Repayable in more than five years |
– |
– |
|
9,956 |
9,939 |
|
2019 |
2018 |
Lease liabilities: |
Total
£’000 |
Head
leases on investment property 1
£’000 |
Office 2
£’000 |
Total
£’000 |
Minimum lease payments fall
due: |
|
|
|
|
Within one year |
306 |
66 |
240 |
66 |
Second to fifth year |
986 |
266 |
720 |
266 |
After five years |
8,000 |
8,000 |
– |
8,066 |
|
9,292 |
8,332 |
960 |
8,398 |
Future finance charges on lease
liabilities |
(7,386) |
(7,287) |
(99) |
(7,352) |
Present value of lease
liabilities |
1,906 |
1,045 |
861 |
1,046 |
|
|
|
|
|
Present value of lease
liabilities: |
|
|
|
|
Within one year |
258 |
66 |
192 |
66 |
Second to fifth year |
916 |
247 |
669 |
247 |
After five years |
732 |
732 |
– |
733 |
|
1,906 |
1,045 |
861 |
1,046 |
Lease liabilities falling due after more than one year are
£669,000 for the office lease and £979,000 for head leases,
totalling £1,648,000.
Lease liabilities are effectively secured as the rights to the
leased asset revert to the lessor in the event of default.
1 Many head leases on investment
properties provide for contingent rent in addition to the rents
above, usually a proportion of rental income.
2 On adoption of IFRS 16 Leases
(see note 1 for details), at 1 January
2019 a right-of-use asset (being the property occupied by
the Company) was recognised at a value of of £1,054,000, equal to
the lease liability. The value is presented within property, plant
and equipment on the balance sheet. The related lease liability of
£1,054,000 is recognised as the present value of the lease
payments.
30.8. deferred tax LIABILITY
|
2019
£’000 |
2018
£’000 |
Deferred Taxation |
|
|
Balance at 1 January |
(744) |
2,059 |
Transfer to profit and loss account |
399 |
(2,803) |
Balance at 31 December |
(345) |
(744) |
|
|
|
The deferred tax balance comprises the
following: |
|
|
Accelerated capital allowances |
(391) |
(795) |
Short–term timing differences |
(181) |
(124) |
Revaluation of investment properties |
227 |
175 |
Deferred tax liability at year end |
(345) |
(744) |
30.9. Share capital
Details of share capital, treasury shares and share options are
set out in Note 23.
30.10. Related party transactions
|
Cost
recharged
to (by)
related
party
£’000 |
|
Amounts owed
by (to)
related
party
£’000 |
Advanced to
(by) related
party
£’000 |
Related party: |
|
|
|
|
Dragon Retail Properties Limited |
|
|
|
|
Current
account |
44 |
(i) |
(156) |
– |
Bisichi Mining PLC |
|
|
|
|
Current
account |
200 |
(ii) |
33 |
– |
Simon Heller Charitable Trust |
|
|
|
|
Current
account |
(63) |
|
– |
– |
Loan account |
– |
|
(700) |
– |
Directors and key management |
|
|
|
|
M A Heller and J A
Heller |
18 |
(i) |
1 |
– |
H D Goldring
(Delmore Holdings Limited) |
(17) |
(iii) |
(7) |
– |
C A Parritt |
(18) |
(iii) |
– |
– |
R Priest |
(35) |
(iii) |
(9) |
– |
Totals at 31 December 2019 |
129 |
|
(838) |
– |
Totals at 31 December 2018 |
(29) |
|
(860) |
2,000 |
Nature of costs recharged – (i) Management fees (ii) Property
management fees (iii) Consultancy fees
During the period, the Company entered into transactions, in the
ordinary course of business, with other related parties. The
company has taken advantage of the exemption under paragraph 8(k)
of FRS101 not to disclose transactions with wholly owned
subsidiaries.
Dragon Retail Properties Limited – ‘Dragon’ is owned equally by
the Company and Bisichi PLC.
Bisichi PLC – The company has 41.52 per cent ownership of
‘Bisichi’.
Details of other related party transactions are given in note
25.
30.11. EMPLOYEES
The average weekly number of employees of the
company during the year were as follows: |
2019 |
2018 |
Directors & Administration |
22 |
24 |
Staff costs during the year were as follows: |
2019
£’000 |
2018
£’000 |
Salaries |
1,490 |
2,184 |
Social Security costs |
163 |
263 |
Pension costs |
178 |
107 |
|
1,831 |
2,554 |
30.12. Capital commitments
There were no capital commitments at 31
December 2019 (2018: £Nil).
30.13. FUTURE AGGREGATE MINIMUM RENTALS RECEIVABLE
The Company leases out its investment properties to tenants
under operating leases. The future aggregate minimum rentals
receivable under non–cancellable operating leases are as
follows:
|
2019
£’000 |
2018
£’000 |
2020 |
1,524 |
1,637 |
2021 |
1,155 |
1,442 |
2022 |
896 |
996 |
2023 |
666 |
807 |
2024 + |
1,680 |
2,355 |
|
5,921 |
7,237 |
30.14. Contingent liabilities and post balance sheet events
There were no contingent liabilities at 31 December 2019 (2018: £Nil).
COVID-19 and the subsequent lockdown of many of our tenants’
businesses will have had a short and medium term effect on asset
values as tenants’ ability to meet their obligations to landlords
has been affected in some cases. In the longer term asset values
may be affected if there is a more permanent deterioration in our
tenants’ trading due to a wider slowdown in the economy. The
Directors are unable to give guidance on how this might affect
asset values due to the level of uncertainty at this time.
Five year financial summary
|
2019
£M |
2018
£M |
2017
£M |
2016
£M |
2015
£M |
Portfolio size |
|
|
|
|
|
Investment properties–LAP^ |
31 |
32 |
62 |
89 |
89 |
Investment properties–joint ventures |
- |
– |
– |
– |
19 |
Investment properties–Dragon Retail
Properties |
2 |
2 |
3 |
3 |
3 |
Investment properties–Bisichi ^ |
12 |
13 |
13 |
13 |
13 |
Assets held for sale-LAP |
- |
2 |
36 |
- |
2 |
Inventories-LAP |
27 |
39 |
- |
- |
- |
|
72 |
88 |
114 |
105 |
126 |
|
|
|
|
|
|
Portfolio activity |
£M |
£M |
£M |
£M |
£M |
Acquisitions |
0.14 |
6.55 |
– |
– |
1.00 |
Disposals |
(12.59) |
(36.44) |
– |
– |
(0.40) |
Capital Expenditure |
0.41 |
6.26 |
– |
0.16 |
0.36 |
|
0.14 |
(23.63) |
– |
0.16 |
0.96 |
|
|
|
|
|
|
Consolidated income statement |
£M |
£M |
£M |
£M |
£M |
Group income |
63.97 |
56.65 |
47.87 |
31.81 |
34.61 |
Profit/(loss) before tax |
(4.54) |
1.27 |
11.28 |
(0.97) |
(2.09) |
Taxation |
(0.95) |
(0.68) |
(2.98) |
(1.18) |
0.04 |
Profit/(loss) attributable to shareholders |
(6.48) |
(2.08) |
7.69 |
(2.36) |
(1.90) |
(Loss)/earnings per share – basic and diluted |
(7.59)p |
(2.44)p |
9.01p |
(2.77)p |
(2.24)p |
Dividend per share |
0.00p |
0.18p |
0.300p |
0.165p |
0.160p |
|
|
|
|
|
|
Consolidated balance sheet |
£M |
£M |
£M |
£M |
£M |
Shareholders’ funds attributable to equity
shareholders |
36.73 |
43.38 |
45.86 |
38.24 |
40.08 |
Net borrowings, excluding lease obligations |
27.65 |
35.99 |
58.42 |
62.22 |
62.39 |
Net assets per
share
– basic |
43.04p |
50.83p |
53.74p |
44.83p |
47.26p |
– fully
diluted |
43.04p |
50.83p |
53.74p |
44.83p |
47.26p |
|
|
|
|
|
|
Consolidated cash flow statement |
£M |
£M |
£M |
£M |
£M |
Cash generated from operations |
14.89 |
1.92 |
10.29 |
5.59 |
4.37 |
Capital investment and financial investment |
(1.61) |
20.78 |
(1.80) |
(0.18) |
(2.77) |
Notes:
^ Excluding the present value of head leases