+44 (0)207 415 5000
2nd Floor, 12 Little Portland Street, London, W1W 8BJ
OR IMMEDIATE RELEASE
26 May 2015
LONDON & ASSOCIATED PROPERTIES PLC
RESULTS FOR 12 MONTHS TO 31 DECEMBER 2014
London & Associated Properties (LAP) is a fully listed focused UK shopping
centre and retail property
specialist.
HIGHLIGHTS
* Accounts of Bisichi Mining PLC consolidated into LAP's for first time
following new accounting standard
* RBS corporate facility replaced with £45m non-recourse loans
* Restructured loan portfolio leaves LAP in strong financial position
* Total property portfolio valued at £250m, including properties under
management
* Property investments performing well reflecting strong investor and
occupational demand
* Fully diluted net assets now 50.35p per share
* Dividend of 0.156p per share recommended - an increase of 25%
"There is strong investor demand for shopping centre and retail property
following a recovery in occupational demand. Rental levels for shops found a
floor during 2014 and, in many locations, are now showing growth. A tightening
of yields has meant that investors have looked outside London with more
enthusiasm and provincial locations are in greater demand than for some time.
In this environment of low interest rates and attractive risk premia, the value
of properties in our portfolio should remain firm," said Sir Michael Heller,
Chairman, and John Heller, Chief Executive.
Contact:
London & Associated Properties
PLC Tel: 020 7415 5000
John Heller, Chief Executive
Anil Thapar, Finance Director
Baron Phillips
Associates Tel: 07767 444193
Baron Phillips
chairman and chief executive's statement
We are pleased to report on a year of steady progress at LAP. As previously
reported, the most significant event of last year was the refinancing of our £
45 million facility away from the Royal Bank of Scotland to Santander UK PLC.
At the same time we closed our associated long-dated swap positions. As a
result we are in a much stronger financial position going forward with a less
volatile balance sheet.
As reported in 2013, Windsor Shopping Centre's sale was completed in January
2014 for £105 million. The sale proceeds were utilised to repay the related
bank loan and all group to interest rate derivatives.
In March 2015, we also repaid from our cash resources £1.25 million of the £5
million outstanding 2018 debenture stock from Prudential Assurance Co. The
total consideration was £1.4 million and this will reduce interest expense by £
145,000 per annum. As a result of both
of these events, LAP's average cost of borrowing now stands at 5.8% (2013:
7.6%) while the Group's borrowing cost is 5.7% (2013: 7.2%).
At 31 December 2014 our directly owned properties were valued at £103.7
million, compared to £102.1 million in the previous year. Total assets under
management including those of our joint ventures amounted to £250 million
(2013: £238 million).
Our gross property income for 2014 amounted to £7.1 million (2013: £7.6
million). The Group loss before tax is £2.7 million (2013 profit £1.1 million).
The result has, however, been impacted materially by the now terminated
interest rate derivatives. Some £1.1 million has been charged in the current
year as compared with a credit last year of £4.4 million. Had this been
excluded the result this year would have been a small loss of £1.6 million
(mainly attributable to short term loss of income in Sheffield and £1.1 million
new interest derivatives charge) as compared with an adjusted loss in 2013 of £
3.3 million. The after tax position is similarly affected by a deferred tax
charge of £4.8 million arising as a result of the repayment of interest rate
derivatives in the year.
There is strong investor demand for shopping centres and retail property
following a recovery in occupational demand. Rental levels for shops found a
floor during 2014 and, in many locations, are now showing growth. A tightening
of yields has meant that investors have looked outside London with more
enthusiasm and provincial locations are in greater demand than for some time.
In this environment of low interest rates and attractive risk premia, the value
of the shopping centres in our portfolio should remain firm. As shareholders
know, we have deliberately focused on both major city centres and
value-orientated shopping locations. We expect both of these types of rental
locations to continue to perform.
This year for the first time we have consolidated the accounts of Bisichi
Mining into our own, because under new accounting standard IFRS 10
we have effective control of Bisichi. This means that our accounts have been
restated for 2013 as well. In reality, there has been no change in the
relationship between the companies and Bisichi continues to be managed
independently of LAP. While this change means that our accounts contain much
more detail about the mining company and its assets and liabilities, there is
no material difference to our net asset value. Previously we included only the
value of our share of Bisichi's net assets, while we now include the full value
of all the assets and liabilities and deduct the amount attributable to the
other shareholders.
We report on LAP's directly-owned portfolio
Orchard Square, Sheffield
There has been much activity at Orchard Square, our shopping centre in the
heart of Sheffield. On Fargate, Sheffield's prime shopping street, most of the
former Republic unit is under offer to a strong covenant for
15 years. The proposed letting is at ERV and will lead to a cash flow
improvement of nearly £600,000 net per annum once rent free periods have
expired and taking into account non-recoverable expenses currently payable. We
will split the unit as part of the transaction, and there will be an additional
smaller unit available once these works are completed.
Elsewhere at Orchard Square, we agreed a new lease with River Island on our
other unit fronting onto Fargate at £495,000 per annum. Since we reported on
this letting in our interim accounts, Sheffield Council has revealed its plans
for the New Retail Quarter, a significant redevelopment in the City Centre
which will link Fargate with The Moor, Sheffield's other prime pedestrianised
high street. Although we have not seen detailed plans yet, we view this news as
positive and are confident that our position in Sheffield's retail hierarchy
will be enhanced as the new scheme extends the prime retail pitch and further
consolidates our position. We also believe that our two Fargate units will
become reversionary once the development is completed.
Elsewhere in our Centre, Schuh signed a reversionary lease and refitted its
stores and we let the only two empty shops in the Centre to a bubble tea
operator and to a chocolatier. Since the year end, two further units have
become available due to tenants relocating to larger units which we do not have
available within our Centre. We currently have both units under offer to
national retailers. All lettings will at least maintain the £80 Zone A rental
level of the Centre.
Once these lettings complete, the retail units at Orchard Square will be
effectively fully let.
Brixton Market
Our two markets continue to trade exceptionally well. The units remain fully
let, and the waiting list of traders seeking space within the markets continues
to grow.
Within Brixton, Lambeth Council is currently promoting two significant
redevelopments. One, directly to the rear of Brixton Village, is a major
development of Somerleyton Road that will comprise a cultural hub (including a
theatre), a chef school, along with some 350 new homes and a small element of
retail.
The second development is on the other side of Brixton Village and will
comprise several hundred new homes plus further retail and leisure units to
compliment those that we already own. Both of these events will place our
markets at the very heart of a thriving major London village. We believe that
this will have a positive effect on rental levels in the medium term.
West Bromwich
Kings Square has had a challenging year as West Bromwich absorbed a number of
recently developed units and a new Tesco Extra. This had led to a surfeit of
available space in the town.
Last year, two of our tenants were enticed away with rental offers from rival
Centres that we were unwilling to match. However, we have acted decisively to
secure our position and have commenced lease extensions with a number of the
anchor stores there. In addition, we have let a large unit to Pepkor, a retail
chain from South Africa. We have also placed two units under offer to national
retailers who will be new to the town.
We feel that there is a positive shift in momentum at our Centre which we
intend to capitalise upon. We will also carry out a re-branding of the Centre
during this year.
The rest of our directly-owned portfolio is trading well. Where units have
fallen empty, we found it relatively easy to re-let them at similar rents.
We currently have two joint ventures with third parties:
Langney
Our joint venture with Schroders is now in its fourth year and still owns a
shopping centre in Langney, Eastbourne. This Centre has recovered from a roof
collapse in heavy rain in December 2012 and is once again trading
satisfactorily.
We obtained planning consent in 2014 for a 30,000 sq ft extension and are at
engrossment stage with an anchor tenant. We have also driven rental growth
within the original part of the shopping centre, and together with our joint
venture partner, consider this to be a good time to sell this asset. We expect
to achieve a substantial surplus over cost.
We now have ownership of 25% of Langney Joint Venture in the
enlarged Group.
Oaktree Capital
Our other joint venture was set up with Oaktree Capital Management in 2013. It
owns three shopping centres in Dunfermline, Loughborough and Kings Lynn. We
felt at the time that they had suffered from underinvestment and I am pleased
to report that early indications bear this out.
Dunfermline
We have achieved a number of important lettings at Kingsgate Shopping Centre as
we seek to strengthen its position as a significant fashion-led Centre. During
the year we carried out a letting to DW Sports and re-geared the leases of a
number of fashion retailers, including Top Shop. In addition, Somerfield
supermarket assigned its lease to 99p Stores. This has led to an improvement in
footfall generally for the town, and particularly in that part of the Centre.
We have now put a large unit under offer to a fashion retailer, new to the
town, and are close to putting several further units under offer. Additionally,
a number of the tenants have refitted their stores as the Centre improves
generally.
Loughborough
At the time of acquisition this Centre had a number of empty units, some of
which had never been let. Following our management initiatives, The Rushes will
be fully let following successful lettings to Poundworld and 108 World Buffet,
a Midlands-based restaurant chain and the completion of one final unit which is
under offer to a national chain of restaurants. These lettings are ahead of
estimated rental value at the time of acquisition and complement the existing
tenant line-up which includes Tesco, Marks & Spencer, Next, TK Maxx and Argos.
There is strong institutional demand for Centres with this quality of tenants.
As there is now limited opportunity for further active management, this
property is likely to be disposed of during the course of the year.
Kings Lynn
We have carried out a number of lettings at the Vancouver Centre to fashion
retailers, including Select Fashion, Discount Shoe Zone and Romans Originals.
In addition we have re-geared leases with a number of the existing fashion
operators there as we seek to maximise occupancy and improve tenant mix.
We are also exploring a major redevelopment of one section of the Centre and
have an offer from a national fashion retailer who wishes to rent the majority
of the space. The Council, which is the freeholder, is very supportive of the
proposal and we are in negotiations with them to take this initiative forward.
Bisichi Mining PLC
Bisichi Mining PLC ("Bisichi") operates an open cast coal mine in Middelburg,
South Africa and continues to operate in an environment of historically low
coal prices.
Bisichi achieved EBITDA of £4.7 million in 2014 compared to £3.0 million the
previous year. The uplift was due to successful trading at Black Wattle
Colliery, Bisichi's direct coal mining asset in Middelburg, South Africa. This
was particularly pleasing as a year earlier the mining operation had run into
old unrecorded underground workings. A turnaround plan was put in place which
involved the swift movement of the machinery to two of Bisichi's more
profitable production pits in order to increase production from these areas.
Bisichi's Run of Mine production from Black Wattle weakened in 2014, with total
production for the year of 1.53 million metric tonnes (2013: 1.77 million
metric tonnes); production improved in the second half of the year.
Although the plan initially suffered a set-back caused by unusually heavy
rainfall in the first quarter of 2014, Black Wattle steadily increased
production from its lower costing pits. This ensured that the mine returned to
acceptable levels of profitability in the second half of 2014.
In regard to the new reserve at Blue Nightingale, plans were initiated to
develop the reserve by the end of 2014. Bisichi reports that delivery of coal
from the reserve has commenced and they expect the reserve to begin
contributing to earnings this year.
Black Wattle will look to combine production from Black Wattle's existing
reserves with coal received from the new reserve at Blue Nightingale.
Bisichi also signed a new £6 million 5-year term loan facility with Santander
UK plc. This new loan replaces the previous £5 million term facility and
overdraft facility held with Royal Bank of Scotland. This new loan is secured
against Bisichi's UK retail property portfolio which was externally valued at
the 2014 year end at £11.6million (2013: £11.6 million).
The coal mining income fell in the year from £34.1 million in 2013 to £25
million. However, due to lower production costs the operating profits
increased.
Bisichi continues to seek to balance the high risk of its mining operations
with the dependable cash flow from its UK property investment operations.
Dividends
LAP is pleased to recommend a dividend of 0.156p, an increase of 25% over the
dividend of 2013.
On behalf of the Board and shareholders, I would like to thank all of our staff
for their hard work during the course of the year.
Robert Corry retired in December 2014 and we record our appreciation of his
hard work and contribution to the Group over the last 22 years.
He is replaced by Anil Thapar, who has been with the Group since 2005. We
welcome Anil to the Board and look forward to continuing to work with him.
Sir Michael Heller, John Heller,
Chairman Chief Executive
21 May 2015
finanCIAL review
The financial statements for 2014 have been prepared to reflect the
requirements of IFRS 10. This has meant that the accounts of Bisichi Mining PLC
(a London Stock Exchange main market quoted company - BISI) ("Bisichi"), have
been consolidated with those of LAP.
Bisichi continues to operate as a fully independent company and currently LAP
owns only 41.52% of the issued ordinary share capital. However, because related
parties also have shareholdings in Bisichi and there is a wide disposition of
other shareholdings, LAP now has effective control of Bisichi for accounting
purposes. This also means that Dragon Retail Property Limited ("Dragon"), our
50:50 joint venture with Bisichi is consolidated.
In previous years the accounts reflected only our interests in the results and
net assets of Bisichi and Dragon. These interests were included as a single
line on the income statement and balance sheet, either as an associated company
or as a joint venture. The revised treatment means that the income and net
assets are disclosed in full and the value attributable to the "non-controlling
interest" (58.48%) is shown as a liability. There is, therefore, no impact on
the net assets attributable to LAP shareholders although there is much more
disclosure.
Cash flow
As reported in 2013, LAP completed the disposal of Windsor Shopping Centre in
January 2014 and the sale proceeds of £105 million were utilised to repay the
Bank of Scotland ("BOS") loan of £70 million plus the costs of settling the
related interest derivatives of £14.6 million. These proceeds were also
utilised to meet the costs (£10.7 million) of terminating the remaining Royal
Bank of Scotland ("RBS") derivatives while still leaving surplus cash for
further investment.
A major event during the year was the repayment of all borrowings from RBS. The
RBS facility was replaced by a five year £45 million non-recourse loan from
Santander, as senior lender, supported by Europa Capital Mezzanine Limited, as
mezzanine lender. The senior loan facility is fully hedged with 50% of the loan
being swapped at a rate of 2.25 % and the remaining 50% loan being covered by
an interest cap at 2.25 %. This gives a blended current interest rate of 4.79 %
for the total £45 million debt.
LAP's long term debt (excluding Bisichi and Dragon), at the year-end consists
of the new £45 million facility expiring in July 2019 and two debentures; one
of £10 million expiring in August 2022 and another of £5 million with staged
repayments to August 2018.
Since the year end, we have repaid £1.25m of the £5 million debenture, leaving
£750,000 to be repaid in August 2017 and the balance of £3 million in August
2018. All debentures are secured on core property and are covenant compliant.
Our investment in a joint venture with Oaktree Capital Management (HRGT
Shopping Centres LP), remains profitable and is generating management fees for
our wholly owned management subsidiary (London & Associated Management Services
Limited). We also received a £300,000 partial repayment of our loan investment.
LAP acquired a property in New Kings Road, London at a cost of £0.68 million
from our cash resources. This has since been included in the security for a
debenture stock.
After deducting bank overdrafts, LAP group, excluding Bisichi and Dragon, had £
6.3 million (2013: £5.5 million) of cash and cash equivalent balances.
Income statement
As the Group's income statement now includes the income of Bisichi and Dragon
on a consolidated basis, the 2013 figures has been restated. However
shareholders in LAP will wish to understand the results without the distortions
arising from this consolidation. The table below gives, I believe, a clearer
understanding of Group results.
Our results have been affected by some exceptional factors this year. Firstly,
we spent £25.3 million on the termination of long dated swaps, which we had
used to hedge our loans from BOS and RBS. While we had provided for the
expected losses in the 2013 accounts, the actual costs of termination were
higher, resulting in a further charge of £1.1 million against income in this
year.
LAP has now reorganised its finances at lower interest rates along with
corresponding hedges, which have resulted in reduced interest costs from July
2014 onwards.
The new swaps covering the Santander loan cost £1.08 million being a premium of
£0.43 million payable for the interest cap and a mark to market charge of £0.65
million to reflect the year-end fair valuation of the swaps.
The operating profits were further reduced by exceptional costs of £0.6 million
relating to non- recoverable property costs and the loss of a significant
tenant in Sheffield (Republic) which resulted in a short term loss of rental
income.
The cost of the £45 million borrowing was £1.18 million which is amortised over
five years, being the period of the loan. This results in an additional cost of
£0.1 million this year. There were additional professional fees and other costs
of £0.5 million relating to the refinancing of the RBS debts together with
related group restructuring. A further £0.3 million was spent on office costs
relating to the renewal of the current office lease and the net costs of the
previous sub-let office premises where the lease expired in October 2014.
The results before tax, including Bisichi and Dragon, revaluation and other
non-cash movements, show a loss of £2.7 million (2013: profit of £1.1 million).
The segmental analysis in note 1 to the financial statements shows the split
position, after excluding inter-company transactions.
The income tax charge of £3.7 million is mostly due to deferred tax provision
release, as a result of the repayment of 2013 interest derivative liabilities.
2014 2013
£'000 £'000
LAP (4,305) 810
Bisichi 1,531 (85)
Dragon 81 414
(Loss)/profit before taxation (2,693) 1,139
Note: The figures excludes inter company revenue.
Balance sheet
Taking account of the changes required by IFRS 10 (see table below) LAP has
group net assets of £53.4 million (2013: £59.7 million).
Net assets per share attributable to equity shareholders at the year-end were
50.35p per share (2013: 59.00p per share).
2014 LAP Bisichi Dragon Consolidation LAP
Original Mining PLC Retail adjustments Net assets
Group Group Properties £'000 £'000
£'000 £'000 £'000
Investment properties 93,563 11,770 3,110 - 108,443
Other fixed assets 178 6,064 15 - 6,257
Investments in associate 7,184 - - (7,184) -
Investments in joint ventures 2,276 3,938 - (1,740) 4,474
Other non current assets 4,520 152 - - 4,672
Current assets 8,497 12,289 2,693 (4,755) 18,724
Current liabilities (10,560) (7,148) (1,984) 4,755 (14,937)
Non-current liabilities (62,812) (9,346) (2,102) - (74,260)
Net assets 42,846 17,719 1,732 (8,924) 53,373
2013
Investment properties 92,046 11,755 3,110 - 106,911
Other fixed assets 203 7,096 19 - 7,318
Investments in associate 6,986 - - (6,986) -
Investments in joint ventures 2,607 4,219 - (3,532) 3,294
Other non current assets 7,851 151 - - 8,002
Current assets 136,959 12,980 3,617 (5,660) 147,896
Current liabilities (167,696) (16,124) (1,112) 5,660 (179,272)
Non-current liabilities (29,222) (3,090) (2,102) - (34,414)
Net assets 49,734 16,987 3,532 (10,518) 59,735
BISICHI MINING PLC
Although the results of our associated company 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 Bischi group results in full are stated in its published 2014 financial
statements which are available on its website: www.bisichi.co.uk.
The Bisichi group achieved earnings before interest, tax, depreciation and
amortisation (EBITDA) of £4.6 million (2013: £3.0 million). Of these earnings £
3.5 million was generated in the second half of the year. Profit for the year
after tax was £1.2 million (2013: £0.36 million). Bisichi has two core revenue
streams -- investment in retail property in the UK; and coal mining in South
Africa.
The turnaround plan of Bisichi management at Black Wattle Colliery, the direct
coal mining asset in South Africa was successful. The coal mined during the
year, at a lower cost of production than 2013, helped offset the impact of
weaker international coal prices. The mining turnover for the year was £25.5
million (2013: £34.1 million) and mining operating profit was £721,000 (2013:
operating loss £545,000).
The UK retail property portfolio valued at the year end at £11.6 million (2013:
£11.6 million) and which underpins the Bisichi group, is actively managed by
LAP and generates rental income of £931,000 (2013: £953,000).
The Bisichi group signed a £6 million five year term loan with Santander in
2014 and the interest cost of the loan is 2.35% above LIBOR. The Bisichi
group's cash and cash equivalents at the year-end was £2.8 million (2013: £1.7
million).
Bisichi's net assets at 31 December 2014 were £17.7 million (2013: £17.0
million).
ACCOUNTING JUDGEMENTs AND GOING CONCERN
The most significant judgements made in preparing these accounts relate to the
carrying value of the properties, investments and interest rate hedges. The
swaps have been valued by the bank swap provider. The group uses external
property valuers to determine the fair value of our properties. Under IFRS10
the group has included Bisichi Mining PLC for the first time 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 Report and in this review. In addition the Directors consider that
note 22 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; its
exposure to credit risk and liquidity risk.
LAP repaid its previous £40 million loan and successfully negotiated a new five
year loan for £45 million with non-recourse security on better terms.
Appropriate new hedge facilities are in place to minimise interest rate risk
and fix cash flows.
With a quality property portfolio comprising a majority of long leases
supported by suitable financial arrangements, the Directors believe the company
is well placed to manage its business risks successfully, despite the
continuing uncertain economic climate. The Directors therefore have
a reasonable expectation that the company has adequate resources to continue in
operational existence for the foreseeable future. Thus they continue to adopt
the going concern basis of accounting in preparing the annual financial
statements.
DIVIDENDS
The directors are proposing a final dividend of 0.156 p per ordinary share
payable in July 2015. This is an increase of 25% compared to the 2013 dividend,
reflecting the Group's confidence in its trading and future outlook together
with the restructured loan facility and cash balances.
principal activity, strategy & business model
The Group's principal business model is the investment in and management of
town centre retail property through direct investment and joint ventures, where
we manage the property ourselves and on behalf of our partners.
The principal activity of Bisichi Mining PLC is coal mining in South Africa.
Further information is available in their 2014 Financial Statements which are
available on their web site:
www.bisichi.co.uk.
STRATEGIC PRIORITIES ARE OUR STRATEGY IS
MAXIMISING INCOME By achieving an appropriate tenant mix and
shopping experience we can increase footfall through the centres, hence
increase tenant demand for space and enhance income.
CREATING QUALITY PROPERTY We look to improve the consumer experience
at all our centres by achieving an appropriate tenant mix and a vibrant trading
environment through investment activity, enhancement, refurbishment and
development.
CAPITAL STRENGTH We operate within a prudent and flexible
financial structure. Our gearing, which has been substantially reduced,
provides financial stability whilst giving capacity and flexibility to look for
further investments.
MAINTAIN THE VALUE OF By encouraging the Bisichi management to maximise
INVESTMENT IN BISICHI sustainable profits and cash distributions.
risk and uncertainties
DESCRIPTION OF RISK DESCRIPTION OF IMPACT MITIGATION
ASSET MANAGEMENT:
TENANT FAILURE Financial loss. Initial and subsequent assessment of
tenant covenant strength combined with
an active credit control function.
LEASES NOT RENEWED Financial loss. Lease expiries regularly reviewed.
Experienced in house teams with strong
tenant and market knowledge who manage
appropriate tenant mix.
ASSET LIQUIDITY Assets may be liquid and Regular reporting of current and
(SIZE AND affect flexing of balance projected position to the Board with
GEOGRAPHICAL sheet. efficient treasury management.
LOCATION)
PEOPLE:
RETENTION AND Unable to retain and Nomination Committee and senior staff
RECRUITMENT attract the best people for review skills gaps and succession
OF STAFF the key roles. planning. Training and development
offered.
REPUTATION:
BUSINESS Loss in revenue. Documented Recovery Plan in place.
INTERRUPTION Impact on footfall. General and terrorism insurance
Adverse publicity. policies in place and risks
Potential for criminal/ monitored by trained security staff.
civil proceedings. Health and Safety policies in place.
CCTV in centres.
FINANCING:
FLUCTUATION IN Impact on covenants and Secure income flows.
PROPERTY VALUES other loan agreement Regular monitoring of LTV and IC
obligations. covenants and other obligations.
Focus on quality assets.
REDUCED AVAILABILITY Insufficient funds to meet Efficient treasury management.
OF existing debts/interest Loan facilities extended where
BORROWING FACILITIES payments and operational possible.
payments. Regular reporting of current and
projected position to the Board.
LOSS OF CASH AND Financial loss. Only use a spread of banks and
DEPOSITS financial institutions which have a
strong credit rating.
FLUCTUATION OF Uncertainty of interest Manage derivative contracts to achieve
INTEREST RATES rate costs. a balance between hedging interest
rate exposure and minimising potential
cash calls.
Bisichi risk and uncertainties
Bisichi Mining PLC, our associate which we now consolidate under IFRS 10 has a
number of key risks and uncertainties relating to mining for coal.
Coal price risk
The Bisichi's mining operational earnings are largely dependent on movements in
the coal price.
Coal washing
The Bisichi's mining operation's earnings are highly sensitive to coal washing,
therefore a stoppage or disruption to the process could significantly impact
earnings. However, there is scope to raise earnings substantially if the yield
from the washing process is improved even marginally.
Mining risk
Attached to mining there are inherent health and safety risks. Any such safety
incidents disrupt operations, and can slow or even stop production. The Bisichi
has a comprehensive Health and Safety programme in place to mitigate this. As
with many mining operations, the reserve that is mined has the risk of not
having the qualities and accessibility expected from geological and
environmental analysis.
Currency risk
The Bisichi's South African operations are sensitive to currency movements,
especially those between the South African Rand, US Dollar and British Pound.
New reserves and mining permissions
The acquisition of additional reserves, permissions to mine and new mining
opportunities in South Africa generally are contingent on a number of factors
outside of the Bisichi's control, e.g. approval by the Department of Mineral
Resources and the Department of Water Affairs and Forestry.
Regulatory risk
The Bisichi's South African operations are subject to the government Mining
Charter and scorecard which primarily seeks to:
• Promote equitable access to South Africa's mineral resources for all
people in South Africa;
• Expand opportunities for historically disadvantaged South Africans
(HDSAs), including women, to enter the mining and minerals industry and benefit
from the extraction and processing of the country's resources;
• Utilise the existing skills base for the empowerment of HDSAs;
• Expand the skills base of HDSAs in order to serve the community;
• Promote employment and the social and economic welfare of mining
communities and areas supplying mining labour; and
• Promote beneficiation of South Africa's mineral commodities beyond mining
and processing, including the production of consumer goods.
The Bisichi continues to make good progress towards meeting the Charter
requirements. However any regulatory changes to these,
or failure to meet existing targets, could adversely affect the mine's ability
to retain its mining rights in South Africa.
Transport risk
At present the government owned Transnet Freight Rail (TFR) is the sole rail
freight provider for coal in South Africa. The Bisichi's South African
operations are therefore reliant on TFR for delivery of its export quality coal
directly or indirectly via the Southern African ports to its end customers.
Power supply risk
The current utility provider for power supply in South Africa is the government
run Eskom. Eskom continues to undergo capacity problems resulting in power cuts
and lack of provision of power supply to new projects. The Bisichi's mining
operations have to date not been affected by power cuts.
Flooding risk
The Bisichi's mining operations are susceptible to seasonal flooding which
could disrupt production. Management monitors water levels on an ongoing basis
and various projects have been completed, including the construction of
additional dams, to mitigate this risk.
Environmental risk
The Bisichi's South African mining operations are required to adhere to local
environmental regulations.
Health & Safety risk
The Bisichi's South African mining operations are required to adhere to local
Health and Safety regulations.
Labour risk
The Bisichi's mining operations and coal washing plant facility are labour
intensive and unionised. Any labour disputes, strikes or wage negotiations may
disrupt production and impact earnings.
Cashflow risk
Bisichi seeks to balance the high risk of our mining operations with a
dependable cash flow from their UK property investment operations. Fluctuations
in property values, which are reflected in the Consolidated Income Statement
and Balance Sheet, are dependent on an annual valuation of commercial
properties. A fall in UK commercial property can have a marked effect on the
profitability and the net asset value of the Bisichi. However, due to the long
term nature of the leases, the effect on cash flows from property investment
activities will remain stable as long as tenants remain in operation.
key performance indicators
The Group's Key Performance Indicators are selected to ensure clear alignment
between its strategy and shareholder interests.
The KPIs are calculated using data from management reporting systems.
STRATEGIC PRIORITY KPI PERFORMANCE
MAXIMISING INCOME - LIKE FOR LIKE PROPERTY INCOME
TO INCREASE THE LIKE-FOR-LIKE Like-for-like The like-for-like rental income has
INCOME FROM THE PROPERTY YEAR rental income as a fallen by £0.5m. This was primarily
ON YEAR. percentage of the due to the loss of Republic at
prior year rental. Sheffield, where the unit is
currently under offer.
MAXIMISING INCOME - OCCUPANCY
WE AIM TO MAXIMISE THE TOTAL The ERV of the Void levels were higher in a
INCOME IN OUR empty difficult trading environment. Void
PROPERTIES BY ACHIEVING FULL units as a levels to date, excluding units let
OCCUPANCY. percentage since the year end or currently
of our total under offer, is 2.6%.
income.
CAPITAL STRENGTH - GROWTH IN NET ASSET VALUE PER SHARE
THE NET ASSETS PER SHARE IS Movement in the The net assets per share fell
THE net by 8.65 pence per share or 14.6%.
PRINCIPAL MEASURE USED BY THE assets per share. However the strength and quality of
GROUP FOR MONITORING ITS net NAV is significantly improved as
PERFORMANCE AND IS AN a result of the re-financing.
INDICATOR OF THE LEVEL OF
RESERVES AVAILABLE FOR
DISTRIBUTION BY WAY OF
DIVIDEND.
corporate responsibility
Greenhouse gas reporting
We have reported on all of the emission sources required under the Companies
Act 2006 (Strategic Report and Directors' Reports) Regulations for the
reporting period 1st January 2014 to 31st December 2014. The emissions are
detailed in tables 1, 2, 3 and 4 below.
We have employed the Financial Control definition to outline our carbon
footprint boundary. Included within that boundary are Scope 1 & 2 emissions
from the landlord & tenant controlled areas of shopping centres and facilities
that we own. These include Orchard Square, Brewery Street, Brixton Market,
Shipley, Bridgend and Kings Square. King Edward Court, Windsor, was sold in
January 2014 so the gas and electricity usage for this site along with their
associated emissions are reported for January 2014 only. This site was the
largest of all LAP properties, making up 60% of total LAP emissions in 2013. As
such, the selling of King Edward Court has resulted in a significant reduction
in LAP emissions for the 2014 reporting year.
Excluded from our footprint boundary are properties that we manage on behalf of
others or are not wholly owned by LAP and emissions considered non material by
the business.
We have reported on emissions from Scope 1 & 2 emissions sources only. We have
not measured and reported on our Scope 3 emissions sources. Emissions for
landlord controlled areas have been calculated based on actual consumption
information collected from each shopping centre. Emissions from tenant
controlled areas have been calculated based on floor area and energy
consumption benchmarks for general retail services in the UK.
Bisichi has employed the Operational Control boundary definition to outline our
carbon footprint boundary. Included within that boundary are Scope 1 & 2
emissions from coal extraction and onsite mining processes for Black Wattle
Colliery. We have not measured and reported on our Scope 3 emissions sources.
Excluded from the footprint boundary are emission sources considered non
material by the group, including refrigerant use onsite.
We have used the GHG Protocol Corporate Accounting and Reporting Standard
(revised edition) and guidance provided by UK's Department of Environment and
Rural Affairs (DEFRA) on voluntary and mandatory carbon reporting. Emission
factors were used from UK Government's GHG Conversion Factors for Company
Reporting 2014.
As well as reporting Scope 1 and Scope 2 emissions, legislation requires that
at least one intensity ratio is reported for the given reporting period. The
intensity figure represented below shows the emissions in tCO2e per thousand
pounds revenue.
TABLE1. LANDLORD & TENANT CONTROLLED AREAS
Emissions Source 2014 2013 % DIFFERENCE
Scope 1 emissions Natural gas (tCO2e) 129 227 -43%
Refrigerants (tCO2e) 0 9 -100%
Scope 2 emissions Electricity (tCO2e) 4,386 5,829 -25%
Total tCO2e 4,515 6,065 -26%
Intensity ratio (tCO2e/£ 0.70 0.43 60%
thousand)
TABLE 2. LAP CONTROLLED AREAS
Emissions Source 2014 2013 % DIFFERENCE
Scope 1 emissions Natural gas (tCO2e) 129 227 -43%
Refrigerants (tCO2e) 0 9 -100%
Scope 2 emissions Electricity (tCO2e) 346 939 -52%
Total tCO2e 475 1,175 -50%
TABLE 3. TENANT CONTROLLED AREAS
Emissions Source 2014 2013 % DIFFERENCE
Scope 1 emissions Natural gas (tCO2e) - - -
Refrigerants (tCO2e) - - -
Scope 2 emissions Electricity (tCO2e) 4,040 4,890 -17%
Total tCO2e 4,040 4,890 -17%
TABLE 4. COAL MINING CARBON FOOTPRINT
2014 2013
CO2e CO2e
Tonnes Tonnes
Emissions source:
Scope 1 Combustion of fuel & operation of facilities 14,867 24,862
Scope 1 Emissions from coal mining activities 26,872 31,014
Scope 2 Electricity, heat, steam and cooling purchased for 8,300 9,947
own use
Total 50,039 65,823
Intensity:
Intensity 1 Tonnes of CO2 per pound sterling of revenue 0.00189 0.00188
Environment
The Group's principal UK activity is property investment, which involves
renting premises to retail businesses. We seek to provide those tenants with
good quality premises from which they can operate in an efficient and
environmentally friendly manner. Where possible, improvements, repairs and
replacements are made in an environmentally efficient manner and waste
re-cycling arrangements are in place at all of the Company's locations.
Employee, social, community and human rights
The Group's principal UK activity 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.
Director, employees and gender representation
At the year end the company had 6 directors (6 male, 0 female),
5 senior managers (4 male, 1 female) and 19 employees (8 male, 11 female).
Bisichi Mining PLC
Bisichi Mining PLC's principal activity in the UK is property investment and in
South Africa is coal mining. The employment terms and conditions of their UK
office employees and South Africa Mining employees are regulated and operated
in compliance of all relevant national legislation.
Bisichi Mining PLC's group at the year end had 6 directors (6 male, 0 female),
7 senior managers (6 male,1 female) and 217 employees (165 male, 52 female).
Detailed information relating to their Strategic Report is available in their
2014 financial statements.
Approved on behalf of the board of directors
Anil Thapar,
Finance Director
21 May 2015
GOVERNANCE
DIRECTORS & ADVISoRS
EXECUTIVE DIRECTORS
Sir Michael Heller MA FCA*
(Chairman)
John A Heller LLB MBA
(Chief Executive)
Robert J Corry BA FCA
(Finance Director) Resigned 31 December 2014
Anil K Thapar FCCA
(Finance Director) Appointed 1 January 2015
NON-EXECUTIVE DIRECTORS
Howard D Goldring BSC (ECON) ACA †
Howard Goldring has been a member of the board since July 1992, he is a global
asset allocation specialist and has over 30 years' experience in the real
estate market. He is Executive Chairman of Delmore Asset Management Limited
which specialises in the management of investment portfolios for private
clients, charities, family trusts and pension funds. He also acts as an advisor
providing high level asset allocation advice to family offices and pension
schemes, including among others, Tesco Pension Investment Ltd. From 1997-2003
he was consultant director on global asset allocation to Liverpool Victoria
Asset Management Limited.
Clive A Parritt FCA CF FIIA #†
Clive Parritt joined the board on 1 January 2006. He is a chartered accountant
with over 30 years' experience of providing strategic, financial and commercial
advice to businesses of all sizes. He is Chairman of Baronsmead VCT 2 plc and
BG Consulting Group Limited as well as being a director of Jupiter US Smaller
Companies plc. Clive 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
Robin Priest joined the board on 31 July 2013. He is a Managing Director of
Alvarez & Marsal Real Estate Advisory Services LLP (A&M) and has more than 30
years' experience in real estate and structured finance. He advises private
sector and public sector clients on both operational and financial real estate
matters. Prior to joining A&M, Robin Priest was lead partner for Real Estate
Corporate Finance in London with Deloitte LLP. He is a member of the investment
committee of a European real estate fund. He is also a trustee of London's Oval
House Theatre.
* Member of the nomination committee
# Senior independent director
† Member of the audit, remuneration and nomination committees
SECRETARY & REGISTERED OFFICE
Anil K Thapar FCCA
24 Bruton Place
London W1J 6NE
AUDITOR
Baker Tilly UK Audit LLP
PRINCIPAL BANKERS
Santander UK plc
Abbey National Treasury Services plc
Europa Capital Mezzanine Ltd
SOLICITORS
Olswang LLP
Pinsent Masons LLP
STOCKBROKER
Westhouse Securities Limited
REGISTRARS & TRANSFER OFFICE
Capita Asset Services
Shareholder Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Telephone 0871 664 0300
(Calls cost 10p per minute + network extras,
lines are open Mon-Fri 9.00am to 5.30pm)
or +44 208 639 3399 for overseas callers.
Website: www.capitaregistrars.com
Email: shareholderenquiries@capita.co.uk
Company registration number
341829 (England and Wales)
WEBSITE
www.lap.co.uk
E-MAIL
admin@lap.co.uk
DIRECTORS' REPORT
The Directors submit their report and the audited accounts, for the year ended
31 December 2014.
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 4 to 23 and should be read in
conjunction with this report.
Activities
The principal activities of the Group during the year were property investment
and development, as well as investment in joint ventures and an associated
company. The associated company is Bisichi Mining PLC (Bisichi) in which the
Company holds a 42 per cent interest. Bisichi is listed on the main market of
the London Stock Exchange and operates in England and South Africa with
subsidiaries which are involved in overseas mining and mining investment. The
results, together with the assets and liabilities, of Bisichi are consolidated
with those of LAP in accordance with the terms of IFRS 10 even though the Group
only has a minority interest - under the new rules the 58% majority interest is
disclosed as a "non-controlling interest".
Business review
Review of the Group's development and performance
A review of the Group's development and performance can be found below and
should be read in conjunction with the Strategic Report on pages 12 to 23.
Property activities
The Group is a long-term investor in property. It acquires retail properties,
actively manages those assets to improve rental income and thus seeks to
enhance the value of its properties over time. In reviewing performance, the
principal areas regularly monitored by the Group include:
• Rental income - the aim of the Group is to maximise the maintainable
income from each property by careful tenant management supported by sympathetic
and revenue enhancing development. Whilst income may be affected adversely by
the inability of tenants to pay their rent, rent collection and tenant quality
are monitored carefully. 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.
• Financing costs - the exposure of the Group to interest rate movements is
managed partly by the use of swap arrangements (see note 22 on page 71 for full
details of the contracts in place) and also by using loans with fixed terms and
interest rates. These arrangements are designed to ensure that our interest
costs are known in advance and are always covered by anticipated rental income.
Details of key estimates adopted are contained in the accounting policies note
on page 49.
• Property valuations - market sentiment and economic conditions have a
direct effect on property valuations, which can vary significantly (upwards or
downwards) over time. Bearing in mind the long-term nature of the Group's
business, valuation changes have little direct effect on the ongoing activities
or the income and expenditure of the Group. Tenants generally have long-term
leases, so rents are unaffected by short-term valuation changes. Borrowings are
secured against property values and if those values fall very significantly,
this could limit the ability of the Group to develop the business using
external borrowings. The risk is minimised by trying to ensure that there is
adequate cover to allow for fluctuations in value on a short-term basis.
It continues to be the policy of the Group to realise property assets when the
valuation of those assets reaches a level at which the directors consider that
the long-term rental yield has been reached. The Group also seeks to acquire
additional property investments on an opportunistic basis when the potential
rental yields offer scope for future growth.
Investment activities
The investments in joint ventures and Bisichi are for the long term.
LAP manages the UK property assets of Bisichi. However the principal activity
of Bisichi is overseas mining investment (principally in South Africa). While
IFRS 10 requires 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 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 and
spreading of risk make such an approach desirable.
Dividend policy
The directors are recommending payment of a final dividend for 2014 of 0.156p
per share (2013 0.125p per share).
Subject to shareholder approval, the total dividend per ordinary share for 2014
will be 0.156p per ordinary share (2013 0.125p per share). The final dividend
will be payable on Friday 3 July 2015 to shareholders registered at the close
of business on 5 June 2015.
The company's ordinary shares held in treasury
At 31 December 2014, 1,032,991 (2013: 1,254,738) ordinary shares were held in
Treasury with a market value of £400,284 (2013: £552,084). At the Annual
General Meeting (AGM) in June 2014 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 24 June 2015.
Movements in Treasury shares during the year: Number of
shares
Treasury shares held at 1 January 2014 1,254,738
Issued for directors' bonuses (264,257 shares at 58.25p) (264,257)
Issued for staff bonuses (91,728 shares at 58.25p) (91,728)
Issued for Share Incentive Plan (5,150)
(Directors 5,150 shares at 58.25p)
Issued for Share Inventive Plan (30,368)
(Staff 30,368 shares at 58.25p)
Purchase of shares (171,674 shares at 50.65p) 171,674
Issued for Share Incentive Plan - dividends (1,918)
(1,918 shares at 39.5p)
Treasury shares held at 31 December 2014 1,032,991
Treasury shares are not included in issued share capital for the purposes of
calculating earnings per share and net assets per share and they do not qualify
for dividends payable.
Following the year-end, 598,373 shares were transferred from Treasury to enable
the issue of shares in connection with an approved HMRC Share Incentive Plan
and Directors' and Staff bonuses. The shares were issued at 38p on 15 January
2015.
Investment properties
The freehold and long leasehold properties of the Company, its subsidiaries and
Bisichi were revalued as at 31 December 2014 by external professional firms of
chartered surveyors - Allsop LLP, London (84.07 per cent of the portfolio),
Carter Towler, Leeds (11.17 per cent) and by the Directors (4.76 per cent). The
valuations, which are reflected in the financial statements, amount to £103.65
million (2013: £102.12 million).
Taking account of prevailing market conditions, the valuation of the properties
at 31 December 2014 resulted in an increase of £0.85 million (2013: decrease of
£0.2 million). The impact of property revaluations on the Company's joint
venture (Langney Shopping Centre Unit Trust) was an increase of £3.98 million
(2013: reduction of £0.7 million). The proportion of this revaluation
attributable to the Group (net of taxation) is reflected in the consolidated
income statement and the consolidated balance sheet.
Financial instruments
Note 22 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, R J Corry, H D Goldring, C A Parritt and
R Priest were Directors of the company for the whole of 2014.
R J Corry retired as a Director on 31 December 2014.
J A Heller and C A Parritt are retiring by rotation at the Annual General
Meeting in 2015 and offer themselves for re-election.
A K Thapar was appointed an executive Director on 1 January 2015 and will offer
himself for election at the Annual General Meeting in 2015.
Brief details of the Directors offering themselves for re-election, are as
follows:
John Heller has been a Director since 1998 and was appointed Chief Executive in
September 2001. He has a contract of service determinable upon twelve months'
notice. The board has considered the re-appointment of John Heller and
recommends his re-election as a Director.
Clive Parritt has been a Director since January 2006 and has a contract of
service determinable upon three months' notice and is the Senior Independent
Director and chairman of the audit, nomination and remuneration committees. He
is a chartered accountant with over 30 years' experience in providing
strategic, financial and commercial advice to business. His financial knowledge
and broad commercial experience are of significant benefit to the business. The
board has considered the re-appointment of Clive Parritt and recommends his
re-election as a Director.
Anil Thapar was appointed a Director on 1 January 2015 and is also the Company
Secretary. He has a contract of employment determinable upon three months'
notice. Anil Thapar is a Chartered Certified Accountant and has worked with LAP
as Group Financial Controller since November 2005. He has worked in the
property section since 1998 and previously in industry. The board has
considered the appointment of Anil Thapar and recommends his election as a
Director.
Directors' interests
The interests of the Directors in the ordinary shares of the Company, including
family and trustee holdings, where appropriate, can be found on page 35 of the
Annual Remuneration Report.
Substantial shareholdings
At 31 December 2014 Sir Michael Heller and his family had an interest in 47.6
million shares of the Company, representing 56.3 per cent of the issued share
capital net of treasury shares (2013: 47.6 million shares representing 56.5 per
cent). Cavendish Asset Management Limited had an interest in 7,705,611 shares
representing 9.12 per cent of the issued share capital of the Company (2013:
7,717,314 shares representing 9.16 per cent). James Hyslop had an interest in
3,856,258 shares representing 4.56 per cent of the issued share capital of the
Company (2013: 3,856,258 shares representing 4.58 per cent). The Company does
not consider that the Heller family have a controlling share interest
irrespective of the number of shares held as no individual party holds a
majority and there is no legal obligation for shareholders to act in concert.
Therefore the Directors deem no party to have control.
The Company is not aware of any other holdings exceeding 3 per cent of the
issued share capital. After the year-end and at the date of this report Sir
Michael Heller and his family's interest increased to 48 million shares of the
Company representing 56.4 per cent of the issued share capital net of treasury
shares.
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 in the Company which carry special rights with regard
to control of the Company.
The identity of all significant direct or indirect holders of securities in the
Company and the size and nature of their holdings is shown in "Substantial
Shareholdings" above.
The rights of the ordinary shares to which the HMRC approved Share Incentive
Plan relates, are exercisable by the trustees on behalf of the employees.
There are no restrictions on voting rights or on the transfer of ordinary
shares in the Company, save in respect of Treasury Shares. The rules governing
the appointment and replacement of Directors, alteration of the articles of
association of the Company and the powers of the Company's Directors accord
with usual English company law provisions. Each Director is re-elected at least
every three years. The Company has requested authority from shareholders to buy
back its own ordinary shares and there will be a resolution to renew the
authority at this year's AGM (Resolution 11).
The Company is not party to any significant agreements that take effect, alter
or terminate upon a change of control of the Company following a takeover bid.
The Company is not aware of any agreements between holders of its ordinary
shares that may result in restrictions on the transfer of its ordinary shares
or on voting rights.
There are no agreements between the Company and its Directors or employees
providing for compensation for loss of office or employment that occurs because
of a takeover bid.
Statement as to disclosure of information to the auditor
The Directors in office on 31 December 2014 have confirmed that, so far as they
are aware, there is no relevant audit information of which the auditor is
unaware. Each of the Directors has confirmed that they have taken all the steps
that they ought to have taken as a Director in order to make them aware of any
relevant audit information and to establish that it has been communicated to
the auditor.
Directors and officers liability insurance
The Group maintains Directors and officers insurance, which is reviewed
annually and is considered to be adequate by the Company and its insurance
advisers.
Donations
No political donations were made during the year (2013: £Nil). Donations for
charitable purposes amounted to £1,005 (2013: £2,548).
Greenhouse Gas Reporting
Details of the Group's Greenhouse Gas Reporting for the year ended 31 December
2014 can be found on page 22 of the Strategic Report.
Going concern
The directors have reviewed the cash flow forecasts of the Group and the
underlying assumptions on which they are based. The Group's business
activities, together with the factors likely to affect its future development,
are set out in the Chairman's and Chief Executive's Statement and Financial
Review. In addition note 22 to the financial statements sets out the Company'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.
Corporate Governance
The Corporate governance report can be found on page 30 of the annual report
and accounts.
Annual General Meeting
The Annual General Meeting will be held at 24 Bruton Place, London W1J 6NE on
Wednesday 24 June 2015 at 10.30 a.m. Items 1 to 9 will be proposed as ordinary
resolutions. More than 50 per cent of shareholders' votes cast at the meeting
must be in fa vour for those resolutions to be passed. Items 10 to 12 will be
proposed as special resolutions. At least
75 per cent of shareholders' votes cast at the meeting must be in favour for
those 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 not 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.
Ordinary resolutions
Resolution 9 - Authority to allot securities
Paragraph 9.1.1 of Resolution 9 would give the Directors the authority
to allot shares in the Company and grant rights to subscribe for or convert any
security into shares in the Company up to an aggregate nominal value of £
2,836,936. This represents approximately 1/3 (one third) of the ordinary share
capital of the Company in issue (excluding treasury shares) as at 15 May 2015
(being the last practicable date prior to the publication of this Directors'
Report).
In line with guidance issued by the Investment Association ('IA') paragraph
9.1.2 of Resolution 9 would give the directors the authority to allot shares in
the Company and grant rights to subscribe for or convert any security into
shares in the Company up to a further aggregate nominal value of £2,836,936, in
connection with a rights issue. This amount represents approximately 1/3 (one
third) of the ordinary share capital of the Company in issue (excluding
treasury shares) as at 15 May 2015 (being the last practicable date prior to
the publication of this Directors' Report).
The Directors' authority will expire on 31 August 2016 or if earlier 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 Investment Association regarding its use
(including as regards the Directors standing for re-election in certain cases).
Special resolutions
The following special resolutions will be proposed at the Annual General
Meeting:
Resolution 10 - Disapplication of pre-emption rights
Under company law, when new shares are allotted or treasury shares are sold for
cash (otherwise than pursuant to an employee share scheme) they must first be
offered to existing shareholders in proportion to their existing shareholdings.
This special resolution gives the Directors authority, for the period ending on
the date of the next annual general meeting to be held in 2016, to: (a) allot
shares of the Company and sell treasury shares for cash in connection with a
rights issue or other pre-emptive offer; and (b) otherwise allot shares of the
Company, or sell treasury shares, for cash up to an aggregate nominal value of
£425,540 representing, in accordance with institutional investor guidelines,
approximately 5 per cent of the total ordinary share capital in issue as at 15
May 2015 (being the last practicable date prior to the publication of this
Directors' Report) in each case as if the pre-emption rights in company law did
not apply.
Save in respect of issues of shares in respect of employee share schemes and
share dividend alternatives, the Directors do not currently intend to make use
of these authorities. The board intends to adhere to the provisions in the
Pre-emption Group's Statement of Principles not to allot shares for cash on a
non-pre-emptive basis in excess of an amount equal to 7.5 per cent of the
Company's ordinary share capital within a rolling three-year period without
prior consultation with shareholders. The Directors' authority will expire on
on 31 August 2016 or if earlier the next AGM.
Resolution 11 - Purchase of own ordinary shares
The effect of Resolution 11 would be to renew the Directors' current authority
to make limited market purchases of the Company's ordinary shares of 10 pence
each. The power is limited to a maximum aggregate number of 8,510,809 ordinary
shares (representing approximately 10 per cent of the Company's issued share
capital as at 15 May 2015 (being the latest practicable date prior to
publication of this Directors' Report)). The minimum price (exclusive of
expenses) which the Company would be authorised to pay for each ordinary share
would be 10 pence (the nominal value of each ordinary share). The maximum price
(again exclusive of expenses) which the Company would be authorised to pay for
an ordinary share is an amount equal to 105 per cent of the average market
price for an ordinary share for the five business days preceding any such
purchase. The authority conferred by Resolution 11 will expire at the
conclusion of the Company's next annual general meeting to be held in 2016 or
15 months from the passing of the resolution, whichever is the earlier. Any
purchases of ordinary shares would be made by means of market purchases through
the London Stock Exchange.
If granted, the authority would only be exercised if, in the opinion of the
Directors, to do so would result in an increase in earnings per share or asset
values per share and would be in the best interests of shareholders generally.
In exercising the authority to purchase ordinary shares, the Directors may
treat the shares that have been bought back as either cancelled or held as
treasury shares (shares held by the Company itself). No dividends may be paid
on shares which are held as treasury shares and no voting rights are attached
to them.
Other matters
Baker Tilly UK Audit LLP has expressed its willingness to continue in office as
auditor. A proposal will be made at the Annual General Meeting for
reappointment.
By order of the board
Anil Thapar
Secretary
21 May 2015
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 26. The board is responsible to shareholders for the proper
management of the Group.
The Directors' responsibility statement in respect of the accounts is set out
on page 41. 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 are used to assist the process. All Directors are subject to
re-election at a maximum of every three years.
• The remuneration committee is responsible for making recommendations to
the board on the Company's framework of executive remuneration and its cost.
The committee determines the contract terms, remuneration and other benefits
for each of the executive directors, including performance related bonus
schemes, pension rights and compensation payments. The board itself determines
the remuneration of the non-executive Directors. The committee comprises two
non-executive Directors and it is chaired by C A Parritt. The executive
Chairman of the board is normally invited to attend. The Annual Remuneration
Report is set out on pages 33 to 37.
The audit committee comprises two non-executive Directors and is chaired by C A
Parritt. The audit committee report is set out on page 40.
Board and board committee meetings held in 2014
The number of regular meetings during the year and attendance was as follows:
Meetings Meetings
held attended
R J Corry Board 11 11
Audit committee 2 2
H D Goldring Board 11 11
Audit committee 2 2
Nomination committee 2 2
Remuneration committee 2 2
Sir Michael Heller Board 11 11
Nomination committee 2 2
Remuneration committee 2 2
J A Heller Board 11 11
Audit committee 2 2
C A Parritt Board 11 11
Audit committee 2 2
Nomination committee 2 2
Remuneration committee 2 2
R Priest Board 11 10
Performance evaluation - board, board committees and directors
The performance of the board as a whole and of its committees and the
non-executive Directors is assessed by the Chairman and the Chief Executive and
is discussed with the senior non-executive independent Director. Their
recommendations are discussed at the nomination committee prior to proposals
for re-election being recommended to the board. The performance of executive
Directors is discussed and assessed by the remuneration committee. The senior
independent Director meets regularly with the Chairman, executive and
non-executive Directors individually outside of formal meetings. The Directors
will take outside advice in reviewing performance but have not found this to be
necessary to date.
Independent directors
The senior independent non-executive Director is C A Parritt. The other
independent non-executive Directors are H D Goldring and R Priest. Delmore
Asset Management Limited (Delmore) is a Company in which H D Goldring is the
majority shareholder and a Director. Delmore provides consultancy services to
the Company on a fee paying basis. Alvarez and Marsal Real Estate Advisory
Services (A&M) is a Company in which R Priest is a Managing Director. A&M
provides consultancy and advisory services the Company on a fee paying basis. C
A Parritt also provides some advisory services from his accounting practice.
The board encourages all three non-executive Directors to act independently and
does not consider that length of service of any individual non-executive
Director, nor any connection with the above mentioned consultancy and advisory
companies has resulted in the inability or failure to act independently. In the
opinion of the board the three non-executive Directors continue to fulfil their
roles as independent non-executive Directors.
The independent Directors exchange views regularly between board meetings and
meet when required to discuss corporate governance and other issues concerning
the Group.
Internal control
The Directors are responsible for the Group's system of internal control and
for reviewing its effectiveness at least annually, and for the preparation and
review of its financial statements. The board has designed the Group's system
of internal control in order to provide the Directors with reasonable assurance
that assets are safeguarded, that transactions are authorised and properly
recorded and that material errors and irregularities are either prevented or
would be detected within a timely period. However, no system of internal
control can eliminate the risk of failure to achieve business objectives or
provide absolute assurance against material misstatement or loss. The key
elements of the control system in operation are:
• The board meets regularly on full notice with a formal schedule of matters
reserved for its decision and has put in place an organisational structure with
clearly defined lines of responsibility and with appropriate delegation of
authority;
• There are established procedures for planning, approval and monitoring of
capital expenditure and information systems for monitoring the Group's
financial performance against approved budgets and forecasts;
• The departmental heads are required annually to undertake a full
assessment process to identify and quantify the risks that face their
departments and functions, and assess the adequacy of the prevention,
monitoring and modification practices in place for those risks. In addition,
regular reports about significant risks and associated control and monitoring
procedures are made to the executive Directors. The process adopted by the
Group accords with the guidance contained in the document "Internal Control
Guidance for Directors on the Combined Code" issued by the Institute of
Chartered Accountants in England and Wales. The audit committee receives
reports from external auditors and from executive Directors of the Group.
During the period, the audit committee has reviewed the effectiveness of the
system of internal control as described above. The board receives periodic
reports from all committees.
• There are established procedures for the presentation and review of the
financial statements and the Group has in place an organisational structure
with clearly defined lines of responsibility and with appropriate delegation of
authority.
There are no internal control issues to report in the annual report and
financial statements for the year ended 31 December 2014. Up to the date of
approval of this report and the financial statements, the board has not been
required to deal with any related material internal control issues. The
Directors confirm that the board has reviewed the effectiveness of the system
of internal control as described during the period.
Communication with shareholders
Prompt communication with shareholders is given high priority. Extensive
information about the Group and its activities is provided in the Annual
Report. In addition, a half-year report is produced for each financial year and
published on the Company's website. The Company's website www.lap.co.uk is
updated promptly with announcements and Annual Reports upon publication. Copies
from previous years are also available on the website.
The Company's share price is published daily in the Financial Times. The share
price history and market information can be found at http://
www.londonstockexchange.com/prices-and-markets/markets/prices.htm. The company
code is LAS.
There is a regular dialogue with the Company's stockbrokers and institutional
investors. Enquiries from individuals on matters relating to their
shareholdings and the business of the Group are dealt with promptly and
informatively.
The Company's website is under continuous development to enable better
communication with both existing and potential new shareholders.
The Bribery Act 2010
The Company is committed to acting ethically, fairly and with integrity in all
its endeavours and compliance with the code is monitored closely.
statement by the chairman of remuneration committee
The remuneration committee is pleased to present its report for the year ended
31 December 2014. The report is presented in two parts in accordance with the
regulations.
The first part, is the Annual Remuneration Report which details remuneration
awarded to Directors and non-executive Directors during the year. The
shareholders will be asked to approve the Annual Remuneration Report as an
ordinary resolution (as in previous years) at the AGM in June 2015. The second
part, is the Remuneration Policy which details the remuneration policy for
Directors. This policy was subject to a binding vote by shareholders at the AGM
in 2014 and approved for a 3 year period commencing from then. The committee
reviewed the existing policy and deemed no changes necessary to the current
arrangements.
Both of the above 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, Baker Tilly UK Audit LLP is required by law to audit
certain disclosures and where disclosures have been audited they are indicated
as such.
C A Parritt
Chairman, Remuneration Committee
21 May 2015
annual remuneration report
The following information has been audited
Single total figure of remuneration for the year ended 31 December 2014
Salary and BONUSES BENEFITS PENSIONS TOTAL NOTIONAL TOTAL
fees £'000 £'000 £'000 BEFORE SHARE VALUE OF 2014
£'000 OPTIONS VESTING SHARE £'000
£'000 OPTIONS
£'000
Executive Directors
Sir Michael 7 91 40 - 138 n/a 138
Heller*
J A Heller 333 442 24 36 835 n/a 835
R J Corry 180 - 25 33 238 n/a 238
520 533 89 69 1,211 - 1,211
Non-executive Directors
H D Goldring* 43 - 5 - 48 n/a 48
+
C A Parritt * 32 - - - 32 n/a 32
+
R Priest * 63 - - - 63 n/a 63
138 - 5 - 143 - 143
Total 658 533 94 69 1,354 - 1,354
* Note 27 "Related party transactions"
+ Members of the remuneration committee for year ended 31 December 2014
Benefits include the provision of car, health and other insurance and
subscriptions
Single total figure of remuneration for the year ended 31 December 2013
Salary BONUSES BENEFITS PENSIONS TOTAL NOTIONAL VALUE TOTAL 2013
and £'000 £'000 £'000 BEFORE OF VESTING £'000
fees SHARE OPTIONS SHARE OPTIONS
£'000 £'000 £'000
Executive Directors
Sir Michael 7 216 34 - 257 n/a 257
Heller*
J A Heller 327 326 30 33 716 n/a 716
R J Corry 166 10 24 33 233 n/a 233
500 552 88 66 1,206 - 1,206
Non-executive Directors
H D Goldring*+ 43 - 5 - 48 n/a 48
C A Parritt*+ 32 - - - 32 n/a 32
R Priest* 37 - - - 37 n/a 37
112 - 5 - 117 - 117
Total 612 552 93 66 1,323 - 1,323
* Note 27 "Related party transactions"
+ Members of the remuneration committee for year ended 31 December 2013
Benefits include the provision of car, health and other insurance and
subscriptions
Sir Michael Heller is a director of Bischi Mining PLC, (a subsidiary for IFRS
10 purposes from this year) and received a salary from that company of £75,000
(2013: £75,000) for services.
Although Sir Michael Heller receives reduced remuneration in respect of his
services to the Group, the Group 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 value of these services, if supplied to a third party, would
have been £300,000 (2013: £300,000) for the year. Further details of these
services are set out in Note 27 "Related party transactions" to the financial
statements.
John Heller is a director of Dragon Retail Properties Limited, (a subsidiary
for IFRS 10 purposes from this year) and received benefits from that company of
£7,250 (2013: £5,250) for services.
H D Goldring's company, Delmore Asset Management Limited provides consultancy
services to the Group. This is detailed in Note 27 to the financial statements.
C A Parritt provides consultancy services to the Group. This is detailed in
Note 27 to the financial statements.
R Priest is a managing director of Alvarez & Marsal Real Estate Advisory
Services who provide consultancy services to the Group. This is detailed in
Note 27 to the financial statements.
R J Corry resigned as a director on 31 December 2014.
Summary of directors' terms
Date of Unexpired Notice
contract term period
Executive Directors
Sir Michael Heller 1 January Continuous 6 months
1971
John Heller 1 May 2003 Continuous 12 months
Robert Corry 1 September Continuous 6 months
1992
Non-executive Directors
H D Goldring 1 July 1992 Continuous 3 months
C A Parritt 1 January Continuous 3 months
2006
R Priest 31 July 2013 Continuous 3 months
Total pension entitlements
Two directors had benefits under money purchase schemes. Under their contracts
of employment they were entitled to a regular employer contribution (currently
£33,000 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: 35,518 free shares were awarded in 2014 in respect of 2013
bonuses (see below as 2013). Additionally, 55,218 shares were awarded in
January 2015 relating to 2014 bonuses and these are shown below as 2014.
Free shares awarded:
Number of members Number of shares Value of shares
2014 2013 2014 2013 2014 2013
£ £
Directors: - 1 - 5,150 - 3,000
R J Corry
J A Heller 1 - 7,947 - 3,000 -
Staff 6 6 47,271 30,368 17,845 17,690
Total at 31 December 7 7 55,218 35,518 20,845 20,690
2. Partnership shares: No partnership shares were issued between November 2013
and October 2014.
3. Matching shares: The partnership share agreements for the year to 31 October
2014 provide for two matching shares to be awarded free of charge for each
partnership share acquired. No partnership shares were acquired in 2014 (2013:
nil). Matching shares will usually be forfeited if a member leaves employment
in the Group within 5 years of their grant.
4. Dividend shares: Dividends on shares acquired under the SIP will be utilised
to acquire additional shares. Accumulated dividends received on shares in the
SIP to 31 December 2014 amounted to nil (2013: nil).
Dividend shares issued:
Number of members Number of shares Value of shares
2014 2013 2014 2013 2014 2013
£ £
Directors: 1 - 293 - 116 -
R J Corry
J A Heller 1 - 253 - 100 -
Staff 9 - 1,372 - 542 -
Total at 31 December 11 - 1,918 - 758 -
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 2014.
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 2014 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. 20,000 options under the Unapproved Scheme, were
issued during the year and following the resignation of the option holder, the
share option lapsed during the year to 31 December 2014. Further details of
this scheme are set out in Note 25 "Share Capital" to the financial statements.
Payments to past directors
No payments were made to past Directors in the year ended 31 December 2014.
Payments for loss of office
No payments for loss of office were made in the year ended 31 December 2014.
Statement of directors' shareholding and share interest
Directors' interests
The interests of the Directors in the ordinary shares of the Company, including
family and trustee holdings, where appropriate, were as follows:
Beneficial interests Non-beneficial interests
31 Dec 14 1 Jan 14 31 Dec 14 1 Jan 14
Sir Michael Heller 6,421,089 6,335,252 19,277,931 19,277,931
R J Corry 1,040,637 1,028,448 - -
H D Goldring 19,819 19,819 - -
J A Heller 1,668,976 1,673,581 †14,073,485 †14,073,485
C A Parritt 36,168 36,168 - -
†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.
Remuneration of the Chief Executive over the last TEN years
Year CEO Chief Executive Single Annual bonus payout Long-term incentive
total figure against maximum vesting rates
of remuneration opportunity* against maximum
£'000 % opportunity*
%
2014 J A Heller 835 n/a n/a
2013 J A Heller 716 n/a n/a
2012 J A Heller 417 n/a n/a
2011 J A Heller 671 n/a n/a
2010 J A Heller 577 n/a n/a
2009 J A Heller 982 n/a n/a
2008 J A Heller 688 n/a n/a
2007 J A Heller 1,032 n/a n/a
2006 J A Heller 981 n/a n/a
2005 J A Heller 637 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) appear in the 2013
and 2014 group. The remuneration committee chose Head Office based employees as
the comparator group as this group forms the closest comparator group.
Chief Executive Head Office Employees
£'000 £'000
2014 2013 % change 2014 2013 % change
Base salary 333 327 2% 848 894 (5%)
Taxable benefits 24 30 (20%) 113 117 (3%)
Annual bonus 442 326 36% 235 209 12%
Total 799 683 17% 1,196 1,220 (2%)
Relative importance of spend on pay
The total expenditure of the Group on remuneration to all employees (Note 28
refers) is shown below:
2014 2013
£'000 £'000
Employee Remuneration 7,786 8,851
Distributions to shareholders 106 -
Statement of implementation of remuneration policy
The policy was approved at the AGM in June 2014 and was effective from 10 June
2014. The vote on the remuneration policy is binding in nature. The Company may
not then make a remuneration payment or payment for loss of office to a person
who is, is to be, or has been a director of the Company unless that payment is
consistent with the approved remuneration policy, or has otherwise been
approved by a resolution of members. Unless changed it will be presented next
for approval at the AGM in 2017.
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 2014. Increases were awarded and no external advice was taken
in reaching this decision.
Shareholder voting
At the Annual General Meeting on 10 June 2014, there was an advisory vote on
the resolution to approve the Remuneration Report the result of which is
detailed below:
% of votes % of votes Number of
for against votes
withheld
Resolution to approve the Remuneration 99.11 0.69 62,723
Report
Resolution to approve the Remuneration 99.12 0.67 66,918
Policy
remuneration POLICY
Set out below is an extract of the Group policy on Directors' remuneration.
This policy was approved
at the 2014 AGM and it is effective from 10 June 2014. Unless changed it will
be presented next for approval at the AGM in 2017.
A copy of the full policy can be found at www.lap.co.uk.
In setting the policy, the Remuneration Committee has taken the following into
account:
• The need to attract, retain and motivate individuals of a calibre who will
ensure successful leadership and management of the Company
• The Group's general aim of seeking to reward all employees fairly
according to the nature of their role and their performance
• Remuneration packages offered by 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
• The need to be flexible and adjust with operational changes throughout the
term of this policy
The remuneration of non-executive Directors is determined by the board, and
takes into account additional remuneration for services outside the scope of
the ordinary duties of non-executive Directors.
FUTURE POLICY TABLE
Element Purpose Policy Operation Opportunity and
performance
conditions
EXECUTIVE DIRECTORS
Base To recognise: Considered by Reviewed annually There is no
salary Skills remuneration whenever there is a prescribed maximum
Responsibility committee on change of role or salary or maximum
Accountability appointment operational rate of increase
Experience Set at a level responsibility No specific
Value considered Paid monthly in performance
appropriate to cash conditions are
attract, retain, attached to base
motivate and reward salaries
the right individuals
Pension To provide Company contribution The contribution Company
competitive offered at up to 10% payable by the contribution
retirement of base salary as Company is included offered at up to
benefits part of overall in the Director's 10% of base salary
remuneration package contract of as part of overall
employment remuneration
Paid into money package
purchase schemes No specific
performance
conditions are
attached to pension
contributions
Benefits To provide a Contractual benefits The committee The costs
competitive include: retains the associated with
benefits Car or car allowance discretion to benefits offered
package Group health cover approve changes in are closely
Death in service contractual controlled and
cover benefits in reviewed on an
Permanent health exceptional annual basis
insurance circumstances or No specific
where factors performance
outside the control conditions are
of the Group lead attached to
to increased costs contractual
(e.g. medical benefits
inflation) The value of
benefits for each
Director for the
year ended 31
December 2014 is
shown in the table
on page 33
Annual To reward and In assessing the The remuneration The current maximum
Bonus incentivise performance of the committee bonus will not
executive team, and determines the exceed 200% of base
in particular to level of bonus on salary in any one
determine whether an annual basis year but the
bonuses are merited applying such remuneration
the remuneration performance committee reserves
committee takes into conditions and the power to award
account the overall performance up to 300% in an
performance of the measures as it exceptional year
business, as well as considers Performance
individual appropriate conditions will be
contribution to the assessed on an
business in the annual basis
period The performance
Bonuses are generally measures applied
offered in cash or may be financial,
shares non-financial,
corporate,
divisional or
individual and in
such proportion as
the remuneration
committee considers
appropriate
Share To provide Granted under Offered at Entitlement to
Options executive existing schemes (see appropriate times share options
Directors with page 35) by the remuneration granted under the
a committee Approved Option
long-term scheme are not
interest in subject to
the Company performance
criteria. Share
Options granted
under the
Unapproved Scheme
are subject to the
performance
criteria specified
in the Scheme rules
Share options will
be offered by the
remuneration
committee as
appropriate
There are no
maximum levels for
share options
offered
Share To offer a Offered to executive Maximum Of any bonus
Incentive shorter term Directors and head participation awarded, Directors
Plan incentive in office staff levels are set by may opt to have
(SIP) the Company HMRC maximum of £3,000
and to give of per year paid in
Directors a 'Free Shares' under
stake in the the SIP scheme
Group rules
Full detail of the
SIP can be found on
page 34
NON-EXECUTIVE DIRECTORS
Base To recognise: Considered by the Reviewed annually There is no
salary Skills board on appointment prescribed maximum
Experience Set at a level salary or maximum
Value considered rate of increase
appropriate to No performance
attract, retain and conditions are
motivate the attached to base
individual salaries
Experience and time
required for the role
are considered on
appointment
Pension No pension offered
Benefits No benefits offered The committee The costs
except to one retains the associated with
non-executive discretion to benefits offered
Director who is approve changes in are closely
eligible for health contractual controlled and
cover (see annual benefits in reviewed on an
remuneration report exceptional annual basis
page 33) circumstances or No specific
where factors performance
outside the control conditions are
of the Group lead attached to
to increased costs contractual
(e.g. medical benefits
inflation)
Share Non-executive
Options Directors do not
participate in the
share option schemes
Notes to the Future Policy Table
The remuneration committee considers the performance measures outlined in the
table above to be appropriate measures of performance
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 Baker
Tilly UK Audit LLP and to review the half-yearly and annual accounts before
they are presented to the board, focusing in particular on accounting policies
and areas of management judgement and estimation;
• monitor the controls which are in force to ensure the integrity of the
information reported to the shareholders;
• act as a forum for discussion of internal control issues and contribute to
the board's review of the effectiveness of the Group's internal control and
risk management systems and processes;
• to review the risk assessments made by management, consider key risks with
action taken to mitigate these and to act as a forum for discussion of risk
issues and contribute to the board's review of the effectiveness of the Group's
risk management control and processes;
• consider once a year the need for an internal audit function;
• advise the board on the appointment of the external auditors, the rotation
of the audit partner every five years and on their remuneration for both audit
and non-audit work; discuss the nature and scope of their audit work and
undertake a formal assessment of their independence each year, which includes:
i) a review of non-audit services provided to the Group and related
fees;
ii) discussion with the auditors of their written report detailing all
relationships with the Company and any other parties that could affect
independence or the perception of independence;
iii) a review of the auditors' own procedures for ensuring the
independence of the audit firm and partners and staff involved in the audit,
including the regular rotation of the audit partner; and
iv) obtaining a written confirmation from the auditors that, in their
professional judgement, they are independent.
Meetings
The committee meets at least twice prior to the publication of the annual
results and discusses and considers the half year results prior to their
approval by the board. The audit committee meetings are attended by the
external audit partner, chief executive, finance director and company
secretary. During the year the members of the committee also meet on an
informal basis to discuss any relevant matters which may have arisen.
Additional formal meetings may be held as necessary.
During the past year the committee:
• met with the external auditors, and discussed their reports to the audit
committee;
• approved the publication of annual and half year financial results;
• considered and approved the annual review of internal controls;
• decided that there was no current need for an internal audit function;
• agreed the independence of the auditors and approved their fees for both
audit and non-audit services as set out in note 2 to the financial statements;
and
• the chairman of the audit committee has also had separate meetings and
discussions with the external audit partner.
External Auditor
Baker Tilly UK Audit LLP held office throughout the period under review. In the
United Kingdom London & Associated Properties PLC provides extensive
administration and accounting services to Bisichi Mining PLC, which has its own
audit committee and employs BDO LLP, a separate and independent firm of
registered auditor.
C A Parritt
Chairman - Audit Committee
21 May 2015
directors' responsibility
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.
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 company
law to prepare the company financial statements in accordance with United
Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting
Standards and applicable law).
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 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 IFRSs 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 company
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 Regulation.
They are also responsible for safeguarding the assets of the Group and the
Company and hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
Directors' statement pursuant to the Disclosure and Transparency Rules
Each of the directors, whose names and functions are listed on page 26 confirm
that, to the best of each person's knowledge:
a. the financial statements, prepared in accordance with the applicable set of
accounting standards, give a true and fair view of the assets, liabilities,
financial position and profit of the Company and the undertakings included in
the consolidation taken as a whole; and
b. the Strategic Report contained in the Annual Report includes a fair review
of the development and performance of the business and the position of the
Company and the undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and uncertainties that they
face.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the London & Associated
Properties PLC website.
Legislation in the United Kingdom governing the preparation and dissemination
of financial statements may differ from legislation in other jurisdictions.
independent auditor's report
to the members of London & Associated Properties PLC
We have audited the Group and parent Company financial statements ("the
financial statements")
on pages 44 to 88. The financial reporting framework that has been applied in
the preparation of the group financial statements is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by the European
Union. The financial reporting framework that has been applied in the
preparation of the parent company financial statements is applicable law and
United Kingdom Accounting Standards (United Kingdom Generally Accepted
Accounting Practice).
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.
Respective responsibilities of directors and auditor
As more fully explained in the Directors' Responsibilities Statement set out on
page 41 the Directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view. Our
responsibility is to audit and express an opinion on the financial statements
in accordance with applicable law and International Standards on Auditing (UK
and Ireland). Those standards require us to comply with the Auditing Practices
Board's (APB's) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on
the Financial Reporting Council's website at http://www.frc.org.uk/
auditscopeukprivate
Opinion on financial statements
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 2014 and of the
group's loss for the year then ended;
• the group financial statements have been properly prepared in accordance
with IFRSs as adopted by the European Union;
• the parent company financial statements have been properly prepared in
accordance with United Kingdom Generally Accepted Accounting Practice; and
• the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006 and, as regards the group financial
statements, Article 4 of the IAS Regulation.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
• the part of the Directors' Remuneration Report to be audited has been
properly prepared in accordance with the Companies Act 2006; and
• 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.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where 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.
Euan Banks (Senior Statutory Auditor)
For and on behalf of
BAKER TILLY UK AUDIT LLP,
Statutory Auditor
Chartered Accountants
25 Farringdon Street
London EC4A 4AB
21 May 2015
consolidated income statement
for the year ended 31 December 2014
Notes 2014 2013
£'000 restated
£'000
Group revenue 1 33,526 43,291
Operating costs (31,237) (40,101)
Income from listed investments held for trading 3 3 (4)
Operating profit 2,292 3,186
Finance income 5 115 247
Finance expenses 5 (4,875) (5,958)
Interest rate derivative break cost 22 (1,117) -
Result before valuation movements (3,585) (2,525)
Non-cash changes in valuation of assets and
liabilities
Increase/(decrease) in value of investment properties 853 (241)
(Decrease)/increase in trading investments (86) 38
Increase/(decrease) in value of other investments 1 (1)
Adjustment to interest rate derivative 22 (1,086) 4,419
Share of profit/(loss) of joint ventures, net of tax 12 1,124 (90)
Result including revaluation and other movements (2,779) 1,600
Attributable to discontinued operations 7 86 (461)
(Loss)/profit for the year before taxation 2 (2,693) 1,139
Income tax (charge)/credit 6 (3,702) 2,547
(Loss)/profit for the year (6,395) 3,686
Attributable to:
Equity holders of the Company (7,140) 3,473
Non-controlling interest 26 745 213
(Loss)/profit for the year (6,395) 3,686
Earnings per share
(Loss)/profit per share - basic and diluted - 9 (8.55)p 2.74p
continuing operations
Profit per share - basic and diluted - discontinued 9 0.10p 1.38p
operations
Total 9 (8.45)p 4.12p
consolidated statement of comprehensive income
for the year ended 31 December 2014
2014 2013
£'000 restated
£'000
(Loss)/profit for the year (6,395) 3,686
Other comprehensive income:
Items that may be subsequently recycled to the income statement:
Exchange differences on translation of foreign operations (121) (858)
Transfer of gain on available for sale investments 56 -
Taxation (15) -
Other comprehensive income for the year net of tax (80) (858)
Total comprehensive income for the year net of tax (6,475) 2,828
Attributable to:
Equity shareholders (7,168) 3,153
Non-controlling interest 693 (325)
(6,475) 2,828
consolidated balance sheet
at 31 December 2014
Notes 2014 2013 2012
£'000 restated restated
£'000 £'000
Non-current
assets
Market value of 10 103,655 102,118 219,834
properties
attributable to
Group
Present value of 30 4,788 4,793 28,859
head leases
Property 108,443 106,911 248,693
Mining reserves, 11 6,257 7,318 8,921
plant and
equipment
Investments in 12 3,434 2,310 1,153
joint ventures
Loan to joint 13 1,040 984 1,117
venture
Held to maturity 16 2,196 2,200 1,913
investments
Other 152 151 131
investments
Deferred tax 23 2,324 5,651 3,324
123,846 125,525 265,252
Current assets
Inventories 15 1,760 1,756 1,876
Assets held for 7 - 126,590 -
sale
Trade and other 17 6,774 9,741 10,185
receivables
Corporation tax 35 36 49
recoverable
Available for 18 796 822 787
sale investments
Investments held 18 122 133 145
for trading
Cash and cash 9,237 8,818 10,156
equivalents
18,724 147,896 23,198
Total assets 142,570 273,421 288,450
Current
liabilities
Liabilities 7 - (111,523) -
associated with
assets held for
sale
Trade and other 19 (11,323) (13,775) (17,333)
payables
Borrowings 20 (3,590) (53,960) (58,852)
Current tax (24) (14) (22)
liabilities
(14,937) (179,272) (76,207)
Non-current
liabilities
Borrowings 20 (65,476) (17,074) (88,910)
Interest rate 22 (656) (9,569) (33,935)
derivatives
Present value of 30 (4,788) (4,793) (28,859)
head leases on
properties
Provisions 21 (930) (874) (989)
Deferred tax 24 (2,410) (2,104) (2,605)
liabilities
(74,260) (34,414) (155,298)
Total (89,197) (213,686) (231,505)
liabilities
Net assets 53,373 59,735 56,945
Equity
attributable to
the owners of
the parent
Share capital 25 8,554 8,554 8,554
Share premium 4,866 4,866 4,866
account
Translation (696) (658) (338)
reserve in
associate
Capital 47 47 47
redemption
reserve
Retained 30,659 38,084 34,749
earnings
(excluding
treasury shares)
Treasury 25 (883) (1,159) (1,421)
shares
Retained 29,776 36,925 33,328
earnings
Total equity 42,547 49,734 46,457
attributable to
equity
shareholders
Non - 26 10,826 10,001 10,488
controlling
interest
Total equity 53,373 59,735 56,945
Net assets per 9 50.35p 59.00p
share
Diluted net 9 50.35p 59.00p
assets per share
These financial statements were approved by the board of directors and
authorised for issue on 21 May 2015 and signed on its behalf by:
Sir Michael Heller Anil Thapar Company Registration
No. 341829
Director
Director
consolidated statement of changes in shareholders' equity
for the year ended 31 December 2014
Share Share Translation Capital Treasury Retained Total Non- Total
capital premium reserves redemption shares earnings excluding controlling equity
£'000 £'000 £'000 reserve £'000 excluding Non- Interests £'000
£'000 treasury Controlling £'000
shares Interests
£'000 £'000
Balance at 1 8,554 4,866 (338) 47 (1,421) 34,749 46,457 - 46,457
January 2013 as
previously
reported
IFRS 10 - - - - - - - 10,488 10,488
adjustments
Restated 8,554 4,866 (338) 47 (1,421) 34,749 46,457 10,488 56,945
balance at 1
January 2013
Profit for year - - - - - 3,473 3,473 213 3,686
Other
comprehensive
income:
Currency - - (320) - - - (320) (538) (858)
translation in
associate
Total other - - (320) - - - (320) (538) (858)
comprehensive
income
Total - - (320) - - 3,473 3,153 (325) 2,828
comprehensive
income
Transactions - - - - - 62 62 - 62
with owners:
Equity share
options
Shares issued - - - - - - - 86 86
to
non-controlling
interests
Dividends - - - - - - - - (248) (248)
non-controlling
interests
Disposal of own - - - - 62 - 62 - 62
shares
Loss on - - - - 200 (200) - - -
transfer of own
shares
Transactions - - - - 262 (138) 124 (162) (38)
with owners
Balance at 31 8,554 4,866 (658) 47 (1,159) 38,084 49,734 10,001 59,735
December 2013
(Loss)/profit - - - - - (7,140) (7,140) 745 (6,395)
for year
Other
comprehensive
income:
Currency - - (45) - - - (45) (76) (121)
translation
Gain on - - - - - 17 17 24 41
available for
sale
investments
(net of tax)
Total other - - (45) - - 17 (28) (52) (80)
comprehensive
income
Total - - (45) - - (7,123) (7,168) 693 (6,475)
comprehensive
income
Transaction
with owners:
Equity share - - - - - 27 27 - 27
options
Shares issued - - - - - - - 313 313
to
non-controlling
interests
Dividends - - - - - - (106) (106) - (106)
equity holders
Dividends - - - - - - - - (292) (292)
non-controlling
interests
Change in - - 7 - - (88) (81) 111 30
equity held by
LAP
Acquisition of - - - - (88) - (88) - (88)
own shares
Disposal of own - - - - 229 - 229 - 229
shares
Loss on - - - - 135 (135) - - -
transfer of own
shares
Transactions - - 7 - 276 (302) (19) 132 113
with owners
Balance at 31 8,554 4,866 (696) 47 (883) 30,659 42,547 10,826 53,373
December 2014
consolidated cash flow statement
for the year ended 31 December 2014
2014 2013
£'000 restated
£'000
Operating activities
Operating profit - continuing operations 2,292 3,186
- discontinued operations 250 6,557
Depreciation and amortisation 2,732 2,875
Profit on disposal of non-current assets (43) (21)
Share based payment expense 65 120
(Increase)/decrease in inventories (4) 120
Decrease/(increase) in receivables 2,922 (1,527)
(Decrease)/increase in payables (5,253) 934
Change in provisions - 15
Cash generated from operations 2,961 12,259
Interest received 97 188
Interest paid (403) (252)
Income tax (received)/paid (26) 11
Cash inflows from operating activities 2,629 12,206
Investing activities
Investment in shares and loan stock in joint ventures - 409
Disposal of/(Investment in) shares and loans held to maturity 300 (2,200)
Acquisition of investment properties, mining reserves, plant and (2,601) (3,127)
equipment
Sale of plant and equipment - continuing operations 58 57
Sale of investment properties - discontinued operations 102,663 9,310
Acquisition of investments - (102)
Interest received - continuing operations 24 41
Interest received - discontinued operations 7 -
Cash inflows from investing activities 100,451 4,388
Financing activities
Purchase of treasury shares (88) -
Sale of treasury shares 229 62
Interest paid - continuing operations (4,387) (3,314)
- discontinued operations (623) (5,990)
Interest on obligation under finance leases - continuing (292) (269)
operations
- discontinued operations (544) (1,786)
Debenture stock break costs paid - discontinued operations - (545)
Interest derivatives paid - continuing operations (430) -
Interest derivatives break costs paid - continuing operations (10,686) -
Interest derivatives break costs paid - discontinued operations (14,599) -
Payment of bank loan - Bisichi Mining PLC 5,902 39
Repayment of bank loan - Bisichi Mining PLC (5,000) (96)
Payment of bank loan - continuing operations 45,002 -
Repayment of bank loan - continuing operations (44,452) -
Repayment of bank loan - discontinued operations (70,000) -
Short term loan from joint ventures and related parties - 700
Repayment of debenture stocks - discontinued operations - (6,700)
Repayment of medium term bank loan - (247)
Equity dividends paid (106) -
Equity dividends paid - non-controlling interests (250) (248)
Net proceeds from issue of ordinary shares - non-controlling 13 27
interests
Cash outflows from financing activities (100,311) (18,367)
Net increase/(decrease) in cash and cash equivalents 2,769 (1,773)
Cash and cash equivalents at beginning of year 4,299 5,797
Exchange adjustment 50 275
Cash and cash equivalents at end of year 7,118 4,299
The cash flows above relate to continuing and discontinued operations. See Note
7 for information on discontinued operations.
Cash and cash equivalents
For the purpose of the cash flow statement, cash and cash equivalents comprise
the following balance sheet amounts:
2014 2013
£'000 restated
£'000
Cash and cash equivalents (before bank overdrafts) 9,237 8,818
Bank overdrafts (2,119) (4,519)
Cash and cash equivalents at end of year 7,118 4,299
£0.5 million of cash deposits at 31 December 2013 was charged as security to a
debenture stock and released in 2014.
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 UK GAAP, as applied in accordance with the provisions of the
Companies Act 2006 and these are presented in Note 32. The financial statements
are prepared under the historical cost convention, except for the revaluation
of freehold and leasehold properties and financial assets held for trading as
well as fair value of interest derivatives. The Group financial statements are
presented in Pounds Sterling and all values are rounded to the nearest thousand
pounds (£'000) except when otherwise stated.
London & Associated Properties PLC, the parent company is a listed public
company, incorporated and domiciled in England and quoted on the London Stock
Exchange. The Company registration number is 341829.
Going concern
The directors have reviewed the cash flow forecasts of the Group and the
underlying assumptions on which they are based. The Group's business
activities, together with the factors likely to affect its future development,
are set out in the Chairman and Chief Executive's Statement and Financial
Review. In addition Note 22 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; its exposure to credit risk and liquidity risk.
The directors believe that the Group has adequate resources to continue in
operational existence for the foreseeable future and that the 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.
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.
The directors consider their judgements and estimates surrounding the life of
the mine and its reserves to have the most significant effect on the amounts
recognised in the financial statements and to be the area where the financial
statements are at most risk of a material adjustment due to estimation
uncertainty. Areas where key estimates and judgements are considered to have a
significant effect on the amounts recognised in the financial statements
include:
Depreciation, amortisation of mineral rights, mining development costs and
plant and equipment.
The annual depreciation/amortisation charge to operations, can fluctuate from
initial estimates. This could generally result when there are significant
changes in any of the factors or assumptions used in estimating mineral
reserves and resources which in turn affects the life of mine or the expected
life of reserves. Estimates of proven and probable reserves and resources are
prepared by suitable qualified experts. Assessments of depreciation/
amortisation rates against the estimated reserve and resource base are
performed regularly.
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 adjusted discount 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.
Mining impairment
Property, plant and equipment are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying value may not be fully
recoverable. Future cash flow estimates are discounted using asset specific
discount rates and are based on expectations about future operations, primarily
comprising estimates about production and sales volumes, commodity prices,
reserves and resources, operating, rehabilitation and restoration costs and
capital expenditures. Changes in such estimates could impact recoverable values
of these assets. Estimates are reviewed regularly by management.
Fair value measurements of investment properties, investments and interest rate
hedges
An assessment of the fair value of assets and liabilities, in particular
investment properties, is required to be performed. In such instances, fair
value measurements are estimated based on the amounts for which the assets and
liabilities could be exchanged at the relevant transaction date or reporting
period end. To the extent possible, the assumptions and inputs used take into
account externally verifiable inputs. However, such information is by nature
subject to uncertainty. The directors note that the fair value measurement of
the investment properties, may be considered to be less judgemental where
external valuers have been used and as a result of the nature of the underlying
assets.
All interest rate hedges are held at fair value as valued by the hedge
provider.
Further detail is provided in notes 20 and 22.
Bisichi Mining PLC
The directors are required to consider the implications of IFRS 10 on the LAP
investment in Bisichi Mining PLC ("Bisichi"). Related parties also have
shareholdings in Bisichi when combined with the 42% held by LAP and taking
account of the wide disposition of other shareholders, there is potential for
LAP and these related parties to exercise voting control over Bisichi. IFRS 10
makes it clear that possible voting control is of more significance than actual
management control. For this reason the directors have decided that it 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. They have, therefore, presented consolidated accounts
using the published accounts of Bisichi and 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.
International Accounting Standards (IAS/IFRS)
The financial statements are prepared in accordance with International
Financial Reporting Standards and Interpretations in force at the reporting
date. These are prepared under the historic cost basis as modified by the
revaluation of investment properties and held for trading investments. The
application of the following International Financial Reporting Standards
effective January 1, 2014, resulted in changes to London & Associated
Properties PLC accounting methods and presentation in 2014:
IFRS 10 - Consolidated Financial Statements
IFRS 10 contains a new, comprehensive definition of control. The new standard
replaces the provisions of IAS 27 - Separate Financial Statements (previously
"Consolidated and Separate Financial Statements"), which regulates the
preparation of consolidated financial statement, as well as SIC 12
Consolidation - Special Purpose Entities.
According to both IAS 27 and IFRS 10, a Group consists of a parent entity and
the subsidiaries controlled by the parent. IFRS 10 provides a new definition of
control compared with IAS 27. This is applied in determining the companies to
be consolidated. "Control" assumes the simultaneous fulfilment of the following
three criteria:
The parent company holds decision-making power over the relevant
activities of the investee,
The parent company has rights to variable returns from the investee, and
The parent company can use its decision-making power to affect the
variable returns.
The introduction of this standard has required a change in accounting policy as
follows:
Under IFRS 10, as explained above, it is necessary to consolidate Bisichi from
the earliest date at which it is believed by the Board that, under current
rules, Bisichi would have been deemed to be controlled by LAP. Having
determined the date at which "control" under current IFRS rules occurred, it is
necessary to calculate the amount of any goodwill or premium arising on
consolidation at that date. Any goodwill or surplus arising at the date of
deemed control would have been amortised over 10 years. Based on the
distribution of all shareholdings in Bisichi the directors have concluded that,
with effect from late 1976, Bisichi was under the voting control of LAP and
related parties. Our review of fair values at that date suggests that no
material goodwill or reserve would have been created. However, even if it had
been created any such goodwill or reserve would have been written off
completely some years ago. In these circumstances no adjustments are required
to the book values of Bisichi assets and liabilities.
As a result of treating Bisichi as a "subsidiary" Dragon Retail Properties
Limited ("Dragon") also becomes a subsidiary for accounting purposes as each of
LAP and Bisichi own 50% of that joint venture business.
The quantitative impact of the changes is set out below:
Summary of quantitative impacts
The Group has taken advantage of the transitional provisions of Consolidated
Financial Statements, Joint Arrangements and Disclosure of interests in Other
Entities: Transition Guidance (Amendments to IFRS 10, IFRS 11 and IFRS 12) and
the tables below show the restated consolidated balance sheets at 1 January
2013 and 31 December 2013.
Consolidated balance sheet at 1 January 2013
As previously Impact of As
reported IFRS 10 restated
£'000 £'000 £'000
Non-current assets
Market value of properties attributable to Group 205,412 14,422 219,834
Present value of head leases 28,657 202 28,859
Property 234,069 14,624 248,693
Mining reserves, plant and equipment 260 8,661 8,921
Investments in joint ventures 1,337 (184) 1,153
Investments in associated company 7,271 (7,271) -
Loan to joint venture - 1,117 1,117
Held to maturity investments 1,913 - 1,913
Other investments - 131 131
Deferred tax 3,324 - 3,324
248,174 17,078 265,252
Current assets
Inventories - 1,876 1,876
Trade and other receivables 4,656 5,529 10,185
Corporation tax recoverable - 49 49
Available for sale investments - 787 787
Investments held for trading 20 125 145
Cash and cash equivalents 8,303 1,853 10,156
12,979 10,219 23,198
Total assets 261,153 27,297 288,450
Current liabilities
Trade and other payables (12,514) (4,819) (17,333)
Borrowings (52,666) (6,186) (58,852)
Current tax liabilities - (22) (22)
(65,180) (11,027) (76,207)
Non-current liabilities
Borrowings (86,924) (1,986) (88,910)
Interest rate derivatives (33,935) - (33,935)
Present value of head leases on properties (28,657) (202) (28,859)
Provisions - (989) (989)
Deferred tax liabilities - (2,605) (2,605)
(149,516) (5,782) (155,298)
Total liabilities (214,696) (16,809) (231,505)
Net assets 46,457 10,488 56,945
Equity attributable to the owners of the parent
Share capital 8,554 - 8,554
Share premium account 4,866 - 4,866
Translation reserve in associate (338) - (338)
Capital redemption reserve 47 - 47
Retained earnings (excluding treasury shares) 34,749 - 34,749
Treasury shares (1,421) - (1,421)
Retained earnings 33,328 - 33,328
Total equity attributable to equity shareholders 46,457 - 46,457
Non - controlling interest - 10,488 10,488
Total equity 46,457 10,488 56,945
Consolidated balance sheet at 31 December 2013
As previously Impact of As
reported IFRS 10 restated
£'000 £'000 £'000
Non-current assets
Market value of properties attributable to Group 87,449 14,669 102,118
Present value of head leases 4,597 196 4,793
Property 92,046 14,865 106,911
Mining reserves, plant and equipment 203 7,115 7,318
Investments in joint ventures 2,607 (297) 2,310
Loan to joint venture - 984 984
Investments in associated company 6,986 (6,986) -
Held to maturity investments 2,200 - 2,200
Other investments - 151 151
Deferred tax 5,651 - 5,651
109,693 15,832 125,525
Current assets
Inventories - 1,756 1,756
Assets held for sale 126,590 - 126,590
Trade and other receivables 3,356 6,385 9,741
Corporation tax recoverable - 36 36
Available for sale investments - 822 822
Financial assets - investments held for trading 23 110 133
Cash and cash equivalents 6,990 1,828 8,818
136,959 10,937 147,896
Total assets 246,652 26,769 273,421
Current liabilities
Liabilities associated with assets held for sale (111,523) - (111,523)
Trade and other payables (10,255) (3,520) (13,775)
Borrowings (45,918) (8,042) (53,960)
Current tax liabilities - (14) (14)
(167,696) (11,576) (179,272)
Non-current liabilities
Borrowings (15,056) (2,018) (17,074)
Interest rate derivatives (9,569) - (9,569)
Present value of head leases on properties (4,597) (196) (4,793)
Provisions - (874) (874)
Deferred tax liabilities - (2,104) (2,104)
(29,222) (5,192) (34,414)
Total liabilities (196,918) (16,768) (213,686)
Net assets 49,734 10,001 59,735
Equity attributable to the owners of the parent
Share capital 8,554 - 8,554
Share premium account 4,866 - 4,866
Translation reserve in associate (658) - (658)
Capital redemption reserve 47 - 47
Retained earnings (excluding treasury shares) 38,084 - 38,084
Treasury shares (1,159) - (1,159)
Retained earnings 36,925 - 36,925
Total equity attributable to equity shareholders 49,734 - 49,734
Non - controlling interest - 10,001 10,001
Total equity 49,734 10,001 59,735
Consolidated income statement for the year ended 31 December 2013
As Impact of As
previously IFRS 10 restated
reported
Group revenue 8,229 35,062 43,291
Operating costs (5,250) (34,851) (40,101)
Income from listed investments held for trading 2 (6) (4)
Operating profit 2,981 205 3,186
Finance income 59 188 247
Finance expenses (5,616) (342) (5,958)
Result before valuation movements and exchange (2,576) 51 (2,525)
movements
Non-cash changes in valuation of assets and
liabilities
Decrease in value of investment properties (488) 247 (241)
Gains on held for trading investments 3 35 38
Decrease in value of other investments - (1) (1)
Adjustment to interest rate derivative 4,419 - 4,419
Share of profit of associate, after tax 151 (151) -
Share of profit of joint ventures, net of tax 99 (189) (90)
Result including revaluation and other movement 1,608 (8) 1,600
Attributable to discontinued operations (461) - (461)
Profit for the year before taxation 1,147 (8) 1,139
Income tax 2,326 221 2,547
Profit for the year 3,473 213 3,686
Attributable to:
Equity holders of the Company 3,473 - 3,473
Non-controlling interest - 213 213
Profit for the year 3,473 213 3,686
Consolidated statement of comprehensive income for the year ended 31 December
2013
As previously Impact of As
reported IFRS 10 restated
£'000 £'000
Profit for the year 3,473 213 3,686
Other comprehensive income:
Items that may be subsequently recycled to the
income statement:
Exchange differences on translation of foreign (320) (538) (858)
operations
Total comprehensive income for the year net of (320) (538) (858)
tax
Attributable to:
Equity shareholders 3,153 - 3,153
Non-controlling interest - (325) (325)
3,153 (325) 2,828
Consolidated cash flow statement for the year ended 31 December 2013
As Impact of As
previously IFRS 10 restated
reported £'000 £'000
Cash flow related to operating activities: 10,834 1,372 12,206
Cash flow related to investment activities 7,727 (3,339) 4,388
Cash flow related to financing activities (18,089) (278) (18,367)
Exchange adjustment - 275 275
Change in cash and cash equivalents 472 (1,970) (1,498)
Cash and cash equivalents at beginning of year 5,028 769 5,797
Cash and cash equivalents at end of year 5,500 (1,201) 4,299
IFRS 12 - Disclosure of Interests in Other Entities
IFRS 12 stipulates the disclosures required with regard to the new IFRS 10 -
Consolidated Financial Statements. This standard replaces the disclosures
previously required by IAS 27 - Separate Financial Statements and IAS 28 -
Investments in Associates. The application of IFRS 12 is intended to enable
assessment of the nature of, and risks associated with, interests in
subsidiaries, joint arrangements, associated companies and unconsolidated
structured entities.
The following standards and interpretations have been applied for the first
time in these financial statements:
• Amendments to IAS 32 - Financial instruments: presentation - offsetting
financial assets and financial liabilities
• Amendments to IAS 39 - Novation of Derivatives and Continuation of Hedge
• Amendments to IFRS 12 and IAS 27 - Investment entities
• IFRIC 21 - Levies
• IFRS 11 Joint Arrangements
• Amendment of IAS 36 - Impairment of assets
The accounting treatment detailed in the above standards has not resulted in a
change of the Group's accounting policy and had no impact on the Group's
financial position or performance.
All other standards and interpretations that were mandatory for the accounting
period and were required to be adopted by the Group either had no material
impact on the Group's financial statements or were not relevant to the
operations of the Group.
The Group has not adopted any standards or interpretations in advance of the
required implementation dates. The following new or revised standards that are
applicable to the Group were issued but not yet effective:
• IFRS 9 - Financial instruments
• IFRS 15 - Revenue from Contracts with Customers
• Amendments to IAS 16 and IAS 38 - Clarification of Acceptable Methods of
Depreciation and Amortisation
It is not expected that adoption of any standards or interpretations which have
been issued by the International Accounting Standards Board but have not been
adopted will have a material impact on the financial statements.
Basis of consolidation
The Group accounts incorporate the accounts of London & Associated Properties
PLC and all of its subsidiary undertakings, together with the Group's share of
the results and net assets of its joint ventures.
Non-controlling interests in subsidiaries are presented separately from the
equity attributable to equity owners of the parent company. When changes in
ownership in a subsidiary do not result in a loss of control, the
non-controlling shareholders' interests are initially measured at the
non-controlling interests' proportionate share of the subsidiaries net assets.
Subsequent to this, the carrying amount of non-controlling interests is the
amount of those interests at initial recognition plus the non-controlling
interests' share of subsequent changes in equity. Total comprehensive income is
attributed to non-controlling interests even if this results in the
non-controlling interests having a deficit balance.
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity
when it is exposed to, or has rights to, variable returns from its involvement
with the entity and has the ability to affect those returns through its power
over the entity. Subsidiaries acquired during the year are consolidated using
the acquisition method. Their results are incorporated from the date that
control passes.
All intra Group transactions, balances, income and expenses are eliminated on
consolidation. Details of Group's trading subsidiary companies are set out in
Note 14.
Joint ventures
Investments in joint ventures, being those entities over whose activities the
Group has joint control, as established by contractual agreement, include the
appropriate share of the results and net assets of those undertakings.
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.
Revenue in Bisichi is recognised when delivery of the product or service has
been made and when the customer has a legally binding obligation to settle
under the terms of the contract and has assumed all significant risks and
rewards of ownership.
Bisichi only recognises revenue on individual sales of coal when all of the
significant risks and rewards of ownership have been transferred to a third
party. In most instances revenue is recognised when the product is delivered to
the location specified by the customer, which is typically when loaded into
transport, where the customer pays the transportation costs.
Rental income
Rental income arises from operating leases granted to tenants. An operating
lease is a lease other than a finance lease. A finance lease is one whereby
substantially all the risks and rewards of ownership are passed to the lessee.
Rental income is recognised in the Group income statement on a straight-line
basis over the term of the lease. This includes the effect of lease incentives
to tenants, which are normally in the form of rent free periods. Contingent
rents, being the difference between the rent currently receivable and the
minimum lease payments, are recognised in property income in the periods in
which they are receivable. Rent reviews are recognised when such reviews have
been agreed with tenants.
Reverse surrender premiums
Payments received from tenants to surrender their lease obligations are
recognised immediately in the income statement.
Dilapidations
Dilapidations monies received from tenants in respect of their lease
obligations are recognised immediately in the income statement.
Other revenue
Revenue in respect of listed investments held for trading represents investment
dividends received and profit or loss recognised on realisation. Dividends are
recognised in the income statement when the dividend is received.
Mining and Property operating expenses
Operating expenses are expensed as incurred and any property operating
expenditure not recovered from tenants through service charges is charged to
the income statement.
Employee benefits
Share based remuneration
The Company operates a long-term incentive plan and two share option schemes.
The fair value of the conditional awards on shares granted under the long- term
incentive plan and the options granted under the share option scheme is
determined at the date of grant. This fair value is then expensed on a
straight-line basis over the vesting period, based on an estimate of the number
of shares that will eventually vest. At each reporting date, the fair value of
the non-market based performance criteria of the long-term incentive plan is
recalculated and the expense is revised. In respect of the share option scheme,
the fair value of options granted is calculated using a binomial method.
Pensions
The Company operates a defined contribution pension scheme. The contributions
payable to the scheme are expensed in the period to which they relate.
Foreign currencies
Monetary assets and liabilities are translated at year end exchange rates and
the resulting exchange rate differences are included in the consolidated income
statement within the results of operating activities if arising from trading
activities 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. Where foreign
operations are disposed of, the cumulative exchange differences of that foreign
operation are recognised in the consolidated income statement when the gain or
loss on disposal is recognised.
Transactions in foreign currencies are translated at the exchange rate ruling
on transaction date.
Financial instruments
Investments
Held to maturity investments are stated at amortised cost using the effective
interest rate method.
Investments held for trading are included in current assets at fair value. For
listed investments, fair value is the bid market listed value at the balance
sheet date. Realised and unrealised gains or losses arising from changes in
fair value are included in the income statement of the period in which they
arise.
Trade and other receivables
Trade and other receivables are recognised initially at fair value. A provision
for impairment of trade receivables is made when there is evidence that the
Group will not be able to collect all amounts due.
Trade and other payables
Trade and other payables are non-interest bearing and are stated at their
nominal value.
Bank loans and overdrafts
Bank loans and overdrafts are included as financial liabilities on the Group
balance sheet net of the unamortised discount and costs of issue. The cost of
issue is recognised in the Group income Statement over the life of the bank
loan. Interest payable on those facilities is expensed as a finance cost in the
period to which it relates.
Debenture loans
The debenture loans are included as a financial liability on the balance sheet
net of the unamortised costs on issue. The cost of issue is recognised in the
Group income statement over the life of the debenture. Interest payable to
debenture holders is expensed in the period to which it relates.
Finance lease liabilities
Finance lease liabilities arise for those investment properties held under a
leasehold interest and accounted for as investment property. The liability is
calculated as the present value of the minimum lease payments, reducing in
subsequent reporting periods by the apportionment of payments to the lessor.
Lease payments are allocated between the liability and finance charges so as to
achieve a constant financing rate. Contingent rents payable, such as rent
reviews or those related to rental income, are charged as an expense in the
period in which they are incurred.
Interest rate derivatives
The Group uses derivative financial instruments to hedge the interest rate risk
associated with the financing of the group's business. No trading in such
financial instruments is undertaken. At each reporting date, these interest
rate derivatives are recognised at their fair value to the business, being the
Net Present Value of the difference between the hedged rate of interest and the
market rate of interest for the remaining period of the hedge.
Where a derivative is designated as a hedge of the variability of a highly
probable forecast transaction i.e. an interest payment, the element of the gain
or loss on the derivative that is an effective hedge is recognised directly in
equity. When the forecast transaction subsequently results in the recognition
of a financial asset or a financial liability, the associated gains or losses
that were recognised directly in equity are reclassified into the income
statement in the same period or periods during which the asset acquired or
liability assumed affects the income statement i.e. when interest income or
expense is recognised.
The gain or loss arising from any adjustment to the fair value to the business
calculation is recognised immediately in the group income statement when the
criteria set out in IAS 32 allowing the movements to be shown in equity have
not been met.
Ordinary Shares
Shares are classified as equity when there is no obligation to transfer cash or
other assets. Incremental costs directly attributable to the issue of new
shares are shown in equity as a deduction, net of tax, from the proceeds.
Treasury Shares
When the Group's own equity instruments are repurchased, consideration paid is
deducted from equity as treasury shares until they are cancelled. When such
shares are subsequently sold or reissued, any consideration received is
included in equity.
Investment properties
Valuation
Investment properties are those that are held either to earn rental income or
for capital appreciation or both, including those that are undergoing
redevelopment. They are reported on the Group balance sheet at fair value,
being the amount for which an investment property could be exchanged between
knowledgeable and willing parties in an arm's length transaction. The
directors' property valuation is at fair value.
The valuation of properties is undertaken by independent valuers who hold
recognised and relevant professional qualifications and have recent experience
in the locations and categories of properties being valued. Surpluses or
deficits resulting from changes in the fair value of investment property are
reported in the Group income statement in the period in which they arise.
Capital expenditure
Investment properties are measured initially at cost, including related
transaction costs. Additions to capital expenditure, being costs of a capital
nature, directly attributable to the redevelopment or refurbishment of an
investment property, up to the point of it being completed for its intended
use, are capitalised in the carrying value of that property. The redevelopment
of an existing investment property will remain an investment property measured
at fair value and is not reclassified. Capitalised interest is calculated with
reference to the actual rate payable on borrowings for development purposes, or
for that part of the development costs financed out of borrowings the
capitalised interest is calculated on the basis of the average rate of interest
paid on the relevant debt outstanding.
Disposal
The disposal of investment properties is accounted for on completion of
contract. On disposal, any gain or loss is calculated as the difference between
the net disposal proceeds and the valuation at the last year end plus
subsequent capitalised expenditure in the period.
Depreciation and amortisation
In applying the fair value model to the measurement of investment properties,
depreciation and amortisation are not provided in respect of investment
properties.
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.
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. 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 carried at present value and is
provided for over the life of mine. The provision includes the restoration of
the underground, opencast, surface operations and de-commissioning of plant and
equipment and is estimated to be utilised at the end of the life of mine of the
Group. 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 an asset is reviewed for impairment. A review
involves determining whether the carrying amounts are in excess of their
recoverable amounts. An asset's recoverable amount is determined as the higher
of its fair value less costs of disposal and its value in use. Such reviews are
undertaken on an asset-by-asset basis, except where assets do not generate cash
flows independent of other assets, in which case the review is undertaken on a
company or group level.
If the carrying amount of an asset exceeds its recoverable amount an asset's
carrying value is written down to its estimated recoverable amount (being the
higher of the fair value less cost to sell and value in use). Any change in
carrying value is recognised in the comprehensive income statement.
Mine reserves and development cost
The purpose of mine development is to establish secure working conditions and
infrastructure to allow the safe and efficient extraction of recoverable
reserves. Depreciation on mine development is not charged until production
commences or the assets are put to use. On commencement of full production,
depreciation is charged over the life of the associated mine reserves on a
straight-line basis.
Surface mine development
Expenditure incurred prior to the commencement of working surface mine sites,
net of any residual value and taking into account the likelihood of the site
being mined, is capitalised within property, plant and equipment and charged to
the income statement over the life of the recoverable reserves of the scheme.
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. Heavy surface mining and other plant and
equipment is depreciated at varying rates depending upon its expected usage.
The depreciation rates generally applied are:
Mining The shorter of its useful life or the life of the mine
equipment
Mining reserves Over the expected life of the reserves using the units of production
basis
Motor vehicles 25-33 per cent per annum
Office 10-33 per cent per annum
equipment
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 accounted for
using the balance sheet liability method. Deferred tax liabilities are
generally recognised for all taxable temporary differences and deferred tax
assets are recognised to the extent that it is probable that taxable profits
will be available against which deductible temporary differences can be
utilised. In respect of the deferred tax on the revaluation surplus, this is
calculated on the basis of the chargeable gains that would crystallise on the
sale of the investment portfolio as at the reporting date. The calculation
takes account of indexation on the historic cost of properties and any
available capital losses. Deferred tax is calculated at the tax rates that are
expected to apply in the period when the liability is settled or the asset is
realised. Deferred tax is charged or credited in the Group income statement,
except when it relates to items charged or credited directly to equity, in
which case it is also dealt with in equity.
DIVIDENDS
Dividends payable on the ordinary share capital are recognised as a liability
in the period in which they are approved.
Cash and cash equivalents
Cash comprises cash in hand and on demand deposits, net of bank overdrafts.
Cash equivalents comprise short-term, highly liquid investments that are
readily convertible to known amounts of cash and which are subject to an
insignificant risk of changes in value and original maturities of three months
or less.
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
percent or more of the total revenue of the Group, is separately disclosed
within each segment.
notes to the financial statements
for the year ended 31 December 2014
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. The
introduction of IFRS 10 has caused the Group to change the accounting treatment
for Bisichi which is now 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;
Dragon was previously accounted for as a joint venture. Bisichi is a coal
mining company with operations in South Africa and also holds investment
property in the United Kingdom and derives income from property rentals. Dragon
is a property investment company and derives its income from property rentals.
These operating segments (LAP, Bisichi and Dragon) are each viewed separately
and have been so reported below.
Business segments
Business analysis 2014 Bisichi Dragon Total
LAP £'000 £'000 £'000
£'000
Rental income 6,000 930 180 7,110
Management income from third party 880 - - 880
properties
Mining - 25,536 - 25,536
Group Revenue 6,880 26,466 180 33,526
Direct property costs (1,468) (63) (31) (1,562)
Direct mining costs - (18,244) - (18,244)
Overheads (4,743) (3,783) (30) (8,556)
Exchange losses - (143) - (143)
Depreciation and amortisation (46) (2,682) (4) (2,732)
Operating profit before listed investments 623 1,551 115 2,289
held for trading
Income from listed investments held for 1 - 2 3
trading
Operating profit 624 1,551 117 2,292
Finance income 18 97 - 115
Finance expenses (4,248) (593) (34) (4,875)
Interest rate derivative costs (1,117) - - (1,117)
Result before valuation movements (4,723) 1055 83 (3,585)
Other segment items
Net increase/(decrease) on revaluation of 859 (6) - 853
investment properties
Net increase in value of other investments - 1 - 1
Net decrease on revaluation of investments (2) (82) (2) (86)
held for trading
Adjustment to interest rate derivative (1,086) - - (1,086)
Share of profit of joint ventures, net of 561 563 - 1,124
tax
Result including revaluation and other (4,391) 1,531 81 (2,779)
movements
Attributable to discontinued operations 86 - - 86
(Loss)/profit for the year before taxation (4,305) 1,531 81 (2,693)
Segment assets
- Non - current assets - property 93,563 17,721 3,110 114,394
- Non - current assets - plant and 178 113 15 306
equipment
- Cash and cash equivalents 6,286 2,838 113 9,237
- Non - current assets 2,196 152 - 2,348
- Non - current assets - deferred tax asset 2,324 - - 2,324
- Current assets - others 2,073 7,277 137 9,487
Total assets excluding investment in joint 106,620 28,101 3,375 138,096
ventures
Segment liabilities
Borrowings (59,014) (8,152) (1,900) (69,066)
- Current liabilities (6,702) (4,566) (79) (11,347)
- Non-current liabilities (5,249) (3,333) (202) (8,784)
Total liabilities (70,965) (16,051) (2,181) (89,197)
Net assets 35,655 12,050 1,194 48,899
Investment in joint ventures non segmental 4,474
Net assets as per balance sheet 53,373
Major customers
Customer A - 12,607 - 12,607
Customer B - 6,455 - 6,455
These customers are for mining revenue in South Africa.
Geographic analysis United South 2014
Kingdom Africa Total
£'000 £'000 £'000
Revenue 7,990 25,536 33,526
Operating profit 1,571 721 2,292
Non-current assets excluding investments 123,879 6,030 129,909
Total net assets 49,377 5,296 54,673
Capital expenditure 724 1,877 2,601
Business analysis 2013 Bisichi Dragon Total
LAP £'000 £'000 £'000
£'000
Rental income 6,540 917 207 7,664
Management income from third party 1,510 - - 1,510
properties
Mining - 34,117 - 34,117
Group Revenue 8,050 35,034 207 43,291
Direct property costs (851) (121) (17) (989)
Direct mining costs - (26,158) - (26,158)
Overheads (4,345) (4,826) (28) (9,199)
Exchange losses - (880) - (880)
Depreciation and amortisation (54) (2,817) (4) (2,875)
Operating profit before listed investments 2,800 232 158 3,190
held for trading
Income/(losses) from listed investments 2 - (6) (4)
held for trading
Operating profit 2,802 232 152 3,186
Finance income 59 188 - 247
Finance expenses (5,479) (446) (33) (5,958)
Result before valuation movements (2,618) (26) 119 (2,525)
Other segment items
Net (decrease)/increase on revaluation of (488) (53) 300 (241)
investment properties
Net decrease in value of other investments - (1) - (1)
Net increase/(decrease) on revaluation of 3 40 (5) 38
investments held for trading
Adjustment to interest rate derivative 4,419 - - 4,419
Share of loss of joint ventures, net of tax (45) (45) - (90)
Result including revaluation and other 1,271 (85) 414 1,600
movements
Attributable to discontinued operations (461) - - (461)
Profit/(Loss) for the year before taxation 810 (85) 414 1,139
Segment assets
- Non - current assets - property 92,046 18,739 3,110 113,895
- Non - current assets - plant and 203 112 19 334
equipment
- Cash and cash equivalents 6,990 1,707 121 8,818
- Non - current assets 2,200 151 - 2,351
- Non - current assets - deferred tax asset 5,651 - - 5,651
- Current assets - others 3,241 9,093 154 12,488
- Current assets - assets held for sale 126,590 - - 126,590
Total assets excluding investment in joint 236,921 29,802 3,404 270,127
ventures
Segment liabilities
- Borrowings (60,174) (8,960) (1,900) (71,034)
- Current liabilities (6,955) (6,739) (95) (13,789)
- Non-current liabilities (14,166) (2,972) (202) (17,340)
- Non-current liabilities - associated with (111,523) - - (111,523)
assets held for sale
Total liabilities (192,818) (18,671) (2,197) (213,686)
Net assets 44,103 11,131 1,207 56,441
Investment in joint ventures non segmental 3,294
Net assets as per balance sheet 59,735
Major customers
Customer A - 12,981 - 12,981
Customer B - 7,448 - 7,448
Customer C - 6,829 - 6,829
These customers are for mining revenue in South Africa.
Geographic analysis United South 2013
Kingdom Africa Total
£'000 £'000 £'000
Revenue 9,174 34,117 43,291
Operating profit/(loss) 3,731 (545) 3,186
Non-current assets excluding investments 123,999 7,050 131,049
Total net assets 52,487 7,248 59,735
Capital expenditure 95 3,012 3,173
Group revenue is external to the Group and the directors consider that inter
segmental revenues are not material.
Operating profit excludes the share of profit and losses of joint ventures,
finance income and expenses, movement on revaluation of investment properties
and investments held for trading and the movement on interest rate derivatives.
2. (Loss)/profit for the year before taxation
2014 2013
£'000 restated
£'000
(Loss)/profit for the year before taxation is stated after
charging/(crediting):
Staff costs (note 28) 7,786 8,581
Depreciation on tangible fixed assets - owned assets 2,732 2,875
Operating lease rentals - land and buildings 610 645
Exchange loss 143 880
Profit on disposal of motor vehicles and office equipment (43) (21)
Amounts payable to the auditor in respect of both audit and
non-audit services
Audit services:
Statutory - Company and consolidation 87 75
- subsidiaries 78 68
Further assurance services 8 19
Other services 28 5
201 167
Staff costs are included in overheads.
3. Listed investments held for trading
2014 2013
£'000 restated
£'000
Loss on disposal - (10)
Dividends receivable 3 6
Net Profit/(loss) from listed investments 3 (4)
4. Directors' emoluments
2014 2013
£'000 £'000
Emoluments 1,367 1,337
Defined contribution pension scheme contributions 69 66
1,436 1,403
Details of directors' emoluments and share options are set out in the
remuneration report.
5. Finance income and expenses
2014 2013
£'000 restated
£'000
Finance income 115 247
Finance expenses
Interest on bank loans and overdrafts (2,366) (1,982)
Unwinding of discount (Bisichi) (87) (89)
Other loans (1,508) (1,489)
Interest on derivatives (655) (2,111)
Interest on obligations under finance leases (259) (287)
Total finance expenses (4,875) (5,958)
(4,760) (5,711)
6. Income tax
2014 2013
£'000 restated
£'000
Current tax
Corporation tax on profit of the period 17 8
Adjustments in respect of previous periods 29 -
Total current tax 46 8
Deferred tax
Origination of timing differences (1,554) (3,453)
Revaluation of investment properties 192 (1,206)
Accelerated capital allowances 299 (867)
Fair value of interest derivatives 4,702 2,971
Adjustment in respect of prior years 17 -
Total deferred tax (notes 23 and 24) 3,656 (2,555)
Tax on profit on ordinary activities 3,702 (2,547)
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 21.5 per cent
(2013: 23.25 per cent). The differences are explained below:
2014 2013
£'000 restated
£'000
(Loss)/profit for the year before taxation (2,693) 1,139
Taxation at 21.5 per cent (2013: 23.25%) (579) 265
Effects of:
Other differences 4,051 (1,311)
Joint ventures (14) -
Adjustment in respect of prior years 46 -
Deferred tax rate adjustment 198 (1,501)
Income tax charge/(credit) for the year 3,702 (2,547)
The main component of other differences in the reconciliation relates to
capital gains of (£0.1 million) (2013: £1.4 million) and indexation allowances
of (£0.5 million) (2013: (£0.6 million)) and fair value of interest derivatives
of £4.7 million (2013: (£1.7 million)).
Factors that may affect future tax charges:
Based on current capital expenditure plans, the Group expects to continue to be
able to claim capital allowances in excess of depreciation in future years, but
at a slightly lower level than in the current year.
A deferred tax provision has been made for gains on revaluing investment
properties. At present it is not envisaged that any tax will become payable in
the foreseeable future.
7. Discontinued operations and assets and liabilities classified as held for
sale
A. Disposals
As part of the Group's strategy to focus on core assets, the Group disposed of
King Edward Court, Windsor during the year. The profits and losses arising from
this disposals are classified as discontinued operations. Contracts for the
sale of King Edward Court had been exchanged in 2013 and completion took place
in January 2014. The transaction was included as a discontinued operation in
2013 in order to show a true and fair view.
B. Result for the year of discontinued operations
2014 2013
£'000 £'000
Gross property income 464 7,370
Direct property costs (144) (720)
Net property income 320 6,650
Overheads (70) (93)
Net revenue from property 250 6,557
Loss on sale of investment properties - (165)
250 6,392
Finance expenses (164) (5,990)
Debenture break costs - (545)
86 (143)
Net decrease on revaluations of investment properties - (5,351)
Share of loss of joint venture after tax - (315)
Interest rate derivative - 5,348
Profit/(loss) before tax attributable to shareholders 86 (461)
Income tax - 1,626
C. Cash flows from discontinued operations
2014 2013
£'000 £'000
Cash flows from operating activities 250 6,392
Cash flows from investing activities 102,670 9,310
Cash flows from financing activities (85,766) (15,021)
Net cash inflow from discontinued operations 17,154 681
D. Summary of assets and liabilities associated with assets held for sale
2014 2013
£'000 £'000
Investment properties - 102,663
Present value of head leases - 23,627
Property - 126,290
Trade and other receivables - 300
Assets held for sale - 126,590
Net current borrowings - (70,000)
Trade and other payables - (3,297)
Interest rate derivatives - (14,599)
Present value of head leases - (23,627)
Liabilities associated with assets held for sale - (111,523)
Net assets associated with assets held for sale - 15,067
8. Dividend
2014 £'000 2013 £'000
Per Per
share share
Dividends paid during the year relating to the prior 0.125p 106 - -
period
Dividends to be paid:
Proposed final dividend 0.156p 133 0.125p 105
9. (Loss)/profit per share and net assets per share
(Loss)/profit per share has been calculated as follows:
2014 2013
(Loss)/profit for the year for the purposes of basic and diluted profit (7,140) 3,473
per share (£'000)
Weighted average number of ordinary shares in issue for the purpose of 84,500 84,266
basic profit per share ('000)
Basic (loss)/profit per share (8.45)p 4.12p
Weighted average number of ordinary shares in issue for the purpose of 84,500 84,266
diluted profit per share ('000)
Fully diluted (loss)/profit per share (8.45)p 4.12p
Weighted average number of shares in issue is calculated after excluding
treasury shares of 1,032,991 (2013: 1,254,738).
The loss for continuing operations was £7,226,000 (2013: profit £2,308,000) and
the profit for discontinued operations was £86,000 (2013: £1,165,000).
There was no dilutive effect of the outstanding options in either year.
Net assets per share have been calculated as follows:
2014 2013
Net assets (£'000) 42,547 49,734
Shares in issue ('000) 84,510 84,288
Basic net assets per share 50.35p 59.00p
Net assets diluted (£'000) 42,547 49,734
Shares in issue ('000) 84,510 84,288
Diluted net assets per share 50.35p 59.00p
10. Investment properties
Total Freehold Leasehold Leasehold
£'000 £'000 over under
50 years 50 years
£'000 £'000
Cost or valuation at 1 January 2014 106,911 82,644 23,986 281
Reclassification - - (1,493) 1,493
Additions 684 684 - -
Decrease in present value of head leases (4) - (2) (2)
Increase/(decrease) on revaluation 852 1,752 (900) -
Cost or valuation at 31 December 2014 108,443 85,080 21,591 1,772
Representing assets stated at:
Valuation 103,655 85,080 17,450 1,125
Present value of head leases 4,788 - 4,141 647
108,443 85,080 21,591 1,772
Net book value at 1 January 2014 106,911 82,644 23,986 281
Net book value at 31 December 2014 108,443 85,080 21,591 1,772
Total Freehold Leasehold Leasehold
£'000 £'000 over under
50 years 50 years
£'000 £'000
Cost or valuation at 1 January 2013 248,693 88,956 159,431 306
Discontinued operations (126,290) - (126,290) -
Additions 14 - 14 -
Disposals (9,475) (7,585) (1,890) -
Decrease in present value of head leases (433) - (433) -
(Decrease)/ Increase on revaluation (5,598) 1,273 (6,846) (25)
Cost or valuation at 31 December 2013 106,911 82,644 23,986 281
Representing assets stated at:
Valuation 102,118 82,644 19,199 275
Present value of head leases 4,793 - 4,787 6
106,911 82,644 23,986 281
Net book value at 1 January 2013 248,693 88,956 159,431 306
Net book value at 31 December 2013 106,911 82,644 23,986 281
The leasehold and freehold properties, excluding the present value of head
leases and directors valuations, were valued as at 31 December 2014 by external
professional firms of chartered surveyors. The valuations were made at fair
value. The directors' property valuations were made at fair value.
2014 2013
£'000 £'000
Allsop LLP 87,145 87,240
Woolhouse Real Estate - 13,053
Carter Towler 11,575 -
Directors valuations 4,935 1,825
103,655 102,118
Add: Present value of headleases 4,788 4,793
108,443 106,911
The historical cost of investment properties, including total capitalised
interest of £1,161,000 (2013: £1,161,000) was as follows:
Freehold 2014 Leasehold Freehold 2013 Leasehold
£'000 Leasehold under 50 £'000 Leasehold under 50
Over 50 years Over 50 years
years £'000 years £'000
£'000 £'000
Cost at 1 January 70,917 18,660 785 83,277 122,963 785
Reclassification - (1,154) 1,154 - - -
Additions 684 - - - 14 -
Disposals - - - (12,360) (2,322) -
Discontinued - - - - (101,995) -
operations
Cost at 31 December 71,601 17,506 1,939 70,917 18,660 785
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
implanting this change in arriving at its 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 in the property's valuation by the external valuer.
The methods of fair value measurement are classified into a hierarchy based on
the reliability of the information used to determine the valuation, as follows:
Level 1: valuation based on inputs on quoted market prices in active markets.
Level 2: valuation based on inputs other than quoted prices included within
level 1 that maximise the use of observable data directly or from market prices
or indirectly derived from market prices.
Level 3: where one or more inputs to valuations are not based
on observable market data.
Class of property Carrying / Valuation Key Range
Level 3 Fair value technique unobservable (weighted
2014 inputs average)
£'000 2014
Freehold - external valuation 80,145 Income Estimated £4 - £41
capitalisation Rental Value (£7 - £15)
Per sq ft 5.3% -
p.a 12.5%
Equivalent (6.9%)
Yield
Leasehold over 50 years - 21,591 Income Estimated £7 - £26
external valuation capitalisation Rental Value (£13 - £
Per sq ft 19)
p.a 6.9% -
Equivalent 11.3%
Yield (8.8%)
Leasehold under 50 years - 1,772 Income Estimated £5 - £11
external valuation capitalisation Rental Value (£8)
Per sq ft 14.3% -
p.a 23.8%
Equivalent (15.6%)
Yield
Freehold - Directors' valuation 4,935 Income Estimated £5 - £19
capitalisation Rental Value (£9)
Per sq ft 5.9% -
p.a 8.3%
Equivalent (6.8%)
Yield
At 31 December 2014 108,443
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 Equivalent
rental yield
value 25 basis
10% point
increase contraction
or or
(decrease) (expansion)
£'000 £'000
Freehold - external valuation 8,014/ 3,532/
(8,014) (4,716)
Leasehold over 50 years - external valuation 1,745/ 412/(418)
(1,745)
Leasehold under 50 years - external valuation 113/(112) 17/(19)
Freehold - Directors' valuation 493/(494) 184/(171)
11. Mining reserves, plant and equipment
Total Mining Mining Office
£'000 reserves equipment Equipment
£'000 £'000 and motor
vehicles
£'000
Cost at 1 January 2014 18,985 1,310 16,328 1,347
Exchange adjustment (600) (44) (550) (6)
Additions 1,917 - 1,838 79
Disposals (766) - (77) (689)
Cost at 31 December 2014 19,536 1,266 17,539 731
Accumulated depreciation at 1 January 2014 11,667 1,184 9,470 1,013
Exchange adjustment (369) (38) (329) (2)
Charge for the year 2,732 3 2,641 88
Disposals (751) - (77) (674)
Accumulated depreciation at 31 December 13,279 1,149 11,705 425
2014
Net book value at 31 December 2014 6,257 117 5,834 306
Cost at 1 January 2013 19,939 1,651 16,835 1,453
Exchange adjustment (3,853) (341) (3,479) (33)
Additions 3,093 - 2,972 121
Disposals (194) - - (194)
Cost at 31 December 2013 18,985 1,310 16,328 1,347
Accumulated depreciation at 1 January 2013 11,018 1,438 8,462 1,118
Exchange adjustment (2,068) (296) (1,749) (23)
Charge for the year 2,875 42 2,757 76
Disposals in year (158) - - (158)
Accumulated depreciation at 31 December 11,667 1,184 9,470 1,013
2013
Net book value at 31 December 2013 7,318 126 6,858 334
12. Investment in joint ventures
Shares in joint ventures:
2014 2013
£'000 £'000
At 1 January 2,310 1,153
Share of profit/(loss) after tax 1,124 (404)
Investment in shares - 151
Transferred to subsidiary undertaking - 1,410
1,124 1,157
At 31 December 3,434 2,310
Results of joint ventures:
Langney Ezimbokodweni 2014 2013
£'000 £'000 £'000 £'000
Turnover 1,048 - 1,048 1,312
Profit and loss
Profit/(loss) before and after 4,496 - 4,496 (360)
taxation
Balance sheet
Non-current assets 19,688 2,120 21,808 18,352
Current assets 3,080 6 3,086 1,935
Current liabilities (1,376) (2,126) (3,502) (2,707)
Non-current liabilities (10,392) - (10,392) (11,076)
Net assets at 31 December 11,000 - 11,000 6,504
Reconciliation to amounts included in the financial statements:
Group share of: Langney Ezimbokodweni 2014 2013
25% 49% £'000 £'000
£'000 £'000
Net assets at 1 January 1,626 - 1,626 1,716
Profit/(loss) before and after taxation 1,124 - 1,124 (90)
Share of net assets at 31 December 2,750 - 2,750 1,626
Investment not represented by net assets - 684 684 684
Shares in joint ventures 2,750 684 3,434 2,310
Langney Shopping Centre Unit Trust (Langney) - unlisted property investment
unit trust. The Company acquired 12.50 per cent of the total ordinary units in
issue in June 2011. A further 12.50 per cent is owned by Bisichi Mining PLC.
The remaining 75 per cent is owned by Columbus Capital Management LLP. Langney
is incorporated in Jersey and has 7,707 (2013: 7,707) ordinary units in issue
of £1,000 each. The Company has a management contract to manage the property on
behalf of Langney and accordingly has a significant influence in Langney. It is
a single asset unit trust.
Ezimbokodweni Mining (pty) Limited (Ezimbokodweni) - unlisted coal production
company. The Group owns, via Bisichi Mining PLC, 49% of the issued share
capital. The company is incorporated in South Africa. It has issued share
capital of 100 (2013: 100) ordinary shares of ZAR1 each.
13. Loan to joint venture
2014 2013
Joint Joint
ventures ventures
assets assets
£'000 £'000
Loan to Ezimbokodweni Mining (pty) Limited
At 1 January 984 1,117
Exchange adjustments (36) (242)
Additions 92 109
Transfers - -
At 31 December 1,040 984
14. Subsidiary companies
The Group owns the ordinary share capital of the following principal
subsidiaries which are included within the consolidated financial statements:
Entity Activity Percentage Country of
of incorporation
share
capital
LAP Ocean Holdings Limited Property 100% England and
Investment Wales
Brixton Village Limited Property 100% England and
Investment Wales
Market Row Limited Property 100% England and
Investment Wales
Analytical Properties Holdings Limited Property 100% England and
Investment Wales
Analytical Properties Limited Property 100% England and
Investment Wales
Newincco 1243 Limited Property 100% England and
Investment Wales
Newincco 1244 Limited Property 100% England and
Investment Wales
Newincco 1245 Limited Property 100% England and
Investment Wales
Newincco 1299 Limited Property 100% England and
Investment Wales
Newincco 1300 Limited Property 100% England and
Investment Wales
London & Associated Management Services Limited Property 100% England and
Management Wales
Services
Bisichi Mining PLC (note C) Coal 41.58% England and
mining Wales
Mineral Products Limited (note A) Share 100% England and
dealing Wales
Bisichi (Properties) Limited (note A) Property 100% England and
Wales
Black Wattle Colliery (pty) Limited (note A) Coal 62.5% South Africa
mining
Bisichi Coal Mining (pty) Limited (note A) Coal 100% South Africa
mining
Dragon Retail Properties Limited (note B)(note C) Property 100% England and
Wales
Details on the non-controlling interest in subsidiaries are shown under note
26.
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: These entities are included in the consolidated financial statements as
a result of the change in accounting policy described on pages 50 - 54. The
directors are satisfied that the fair value of assets at the effective date of
acquisition of Bisichi Mining PLC in 1976 and Dragon Retail Properties Limited
were not materially different to the values included under the previous equity
accounting treatment and that accordingly no goodwill or discount to book value
would have arisen at that time. They have been treated as if they had been
subsidiaries from the date of acquisition and the comparative figures have been
amended accordingly.
15. Inventories
2014 2013
£'000 £'000
Coal
Washed 606 481
Run of mine 1,070 754
Work in progress 45 487
Other 39 34
1,760 1,756
16. Held to maturity investments
2014 Unlisted Loan Stock 2013 Unlisted Loan Stock
Total Shares £'000 Total Shares in joint
£'000 £'000 £'000 £'000 ventures
£'000
Cost
At 1 January 2,200 2,200 - 1,913 5 1,908
Reclassification 300 (2,199) 2,499 (1,423) - (1,423)
Loan stock issued - - - 26 - 26
Repayments (304) - (304) (511) - (511)
Impairment - - - (5) (5) -
Additions - HRGT - - - 2,200 2,200 -
At 31 December 2,196 1 2,195 2,200 2,200 -
HRGT - The Group acquired a 6.95% interest in the equity and loans of HRGT
Shopping Centres LP (HRGT), a limited partnership set up in England to acquire
and own 3 shopping centres in Dunfermline, Kings Lynn and Loughborough. 92.10%
of the equity and loans are owned by Oaktree Capital Management and 0.95% by
Gooch Cunliffe Whale LLP. London & Associated Management Services Limited has a
management contract to manage the properties on behalf of HRGT.
17. Trade and other receivables
2014 2013
£'000 £'000
Trade receivables 4,790 6,699
Amounts due from joint ventures 338 476
Other receivables 669 725
Prepayments and accrued income 977 1,841
6,774 9,741
The directors consider that the carrying amount of trade and other receivables
approximates to their fair value.
18. Investments available for sale and held for trading
2014 2013
£'000 £'000
Market bid value of the listed investment portfolio - available for sale 796 822
Market bid value of the listed investment portfolio - held for trading 122 133
Unrealised gain/(loss) of market value over cost 54 (85)
Listed investment portfolio at cost 763 760
Investments are listed on the London Stock Exchange with the exception of £
38,000 (2013: £44,000) listed outside Great Britain.
19. Trade and other payables
2014 2013
£'000 £'000
Trade payables 1,905 4,365
Amounts owed to joint ventures 7 -
Other taxation and social security costs 896 765
Other payables 3,229 2,026
Accruals and deferred income 5,286 6,619
11,323 13,775
The directors consider that the carrying amount of trade and other payables
approximates to their fair value.
20. Borrowings
Current borrowings - amounts falling due within one year
2014 2013
£'000 £'000
Other loans (Bisichi) 20 13
£5 million First Mortgage Debenture Stock 2018 at 11.6 per cent 1,250 -
Bank overdrafts (secured) - 1,490
Bank overdrafts (secured) - Bisichi 2,119 3,029
£5 million revolving credit facility(secured) repayable on demand - 5,000
£1 million term bank loan repayable by 2015 (unsecured) 201 258
£47 million revolving credit facility (secured) repayable in 2013 - 44,170
*
3,590 53,960
Non-current borrowings - amounts falling due after more than one year
2014 2013
£'000 £'000
Term borrowings
Debenture stocks:
£5 million First Mortgage Debenture Stock 2018 at 11.6 per cent 3,750 5,000
£10 million First Mortgage Debenture Stock 2022 at 8.109 per cent 9,871 9,855
*
13,621 14,855
Other loans (Bisichi) 111 118
Term bank loans:
£6 million term bank loan (secured) repayable by 2019 (Bisichi)* 5,902 -
£1.9 million revolving credit facility term bank loan (secured) 1,900 1,900
repayable by 2016 (Dragon)
£1 million term bank loan (unsecured) repayable by 2015 - 201
£34.895 million term bank loan (secured) repayable by 2019* 34,124 -
£10.105 million term bank loan (secured) repayable by 2019* 9,818 -
51,855 2,219
65,476 17,074
* 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.
First Mortgage Debenture Stocks August 2018 and 2022 and the £34.895 million
and £10.105 million term bank loans repayable in July 2019 are secured by way
of a charge on specific freehold and leasehold properties which are included in
the financial statements at a value of £87.1 million.
The Bisichi United Kingdom bank loans and overdraft are secured by way of a
first charge over the investment properties in the UK which are included in the
financial statements at a value of £11.6 million. At the year-end an amount of
£472,500 was held in a blocked account by Santander UK PLC that relates to the
new £6 million loan facility. The funds have been blocked in order to satisfy
the bank that certain conditions relating to the facility will be fulfilled.
Subsequent to year end these conditions have been fulfilled and Santander UK
PLC have confirmed that these funds will be released in the near future.
The Bisichi South African bank loans and overdrafts of £2,179,000 (2013: £
2,794,000) are secured by way of a first charge over specific pieces of mining
equipment, inventory and the debtors of the relevant company which holds the
loan which are included in the financial statements at a value of £6.3 million.
The £1.9 million bank loan (Dragon) is repayable in May 2016 and is secured by
way of a first charge on specific freehold properties which are included in the
financial statements at a value of £3.1 million.
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.
21. Provisions
2014 2013
£'000 £'000
At 1 January 874 989
Exchange adjustment (31) (204)
Unwinding of discount 87 89
At 31 December 930 874
The above provision relates to mine rehabilitation costs in Bisichi.
22. Financial instruments
Total financial assets and liabilities
The Group's financial assets and liabilities and their fair values are as
follows:
Fair 2014 Fair 2013
value Carrying Value Carrying
£'000 value £'000 value
£'000 £'000
Cash and cash equivalents 9,237 9,237 8,818 8,818
Financial assets - investments held for 918 918 955 955
trading
Other assets 6,774 6,774 9,741 9,741
Derivative liabilities (656) (656) (9,569) (9,569)
Bank overdrafts (2,119) (2,119) (4,519) (4,519)
Bank loans (53,137) (52,076) (51,684) (51,660)
Present value of head leases on properties (4,788) (4,788) (4,793) (4,793)
Other liabilities (11,323) (11,323) (13,775) (13,775)
Total financial liabilities before (55,094) (54,033) (64,826) (64,802)
debentures
Fair value of debenture stocks
Fair value of the Group's debenture liabilities:
Book Fair 2014 2013
value value Fair value Fair Value
£'000 £'000 adjustment adjustment
£'000 £'000
Debenture stocks (15,000) (19,320) (4,320) (4,365)
Tax at 20 per cent (2013: 20 per cent) 864 873
Post tax fair value adjustment (3,456) (3,492)
Post tax fair value adjustment - basic pence (4.0)p (3.7)p
per share
There is no material difference in respect of other financial liabilities or
any financial assets.
The fair values were calculated by the directors as at 31 December 2014 and
reflect the replacement value of the financial instruments used to manage the
Group's exposure to adverse rate movements.
The fair values of the debentures are based on the net present value at the
relevant gilt interest rate of the future payments of interest on the
debentures. The bank loans and overdrafts are at variable rates and there is no
material difference between book values and fair values.
Investments held for trading fall under level 1 of the fair value hierarchy
into which fair value measurements are recognised in accordance with the levels
set out in IFRS 7. Other investments are held at cost. The directors are of the
opinion that the difference in value between cost and fair value of other
investments is not significant or material. The comparative figures for 2013
fall under the same category of financial instrument as 2014.
Treasury policy
The Group enters into derivative transactions such as interest rate swaps and
forward exchange contracts in order to help manage the financial risks arising
from the Group's activities. The main risks arising from the Group's financing
structure are interest rate risk, liquidity risk and market price risk. The
policies for managing each of these risks and the principal effects of these
policies on the results are summarised below.
Interest rate risk
Treasury activities take place under procedures and policies approved and
monitored by the Board to minimise the financial risk faced by the Group. The £
34.8975 million bank loan and Bisichi United Kingdom bank loans and overdraft
are secured by way of a first charge on certain fixed assets. The rates of
interest vary based on LIBOR in the UK.
The £10.105 million term bank loan is secured by way of a second charge on
certain fixed assets. This loan is based on a fixed interest rate.
The Bisichi South African bank loans are secured by way of a first charge over
specific pieces of mining equipment, inventory and the debtors of the relevant
company which holds the loan. The rates of interest vary based on PRIME in
South Africa.
The £1.9 million bank loan (Dragon) is secured by way of a first charge on
specific freehold properties. The rate of interest varies based on LIBOR in the
UK.
Sensitivity analysis
As all variable interest term debt has been covered by hedged derivatives it is
not considered that there is any material sensitivity for the Group to changes
in interest rates.
Liquidity risk
The Group's policy is to minimise refinancing risk by balancing its exposure to
interest risk and to refinancing risk. In effect the Group seeks to borrow for
as long as possible at the lowest acceptable cost. Efficient treasury
management and strict credit control minimise the costs and risks associated
with this policy which ensures that funds are available to meet commitments as
they fall due. Cash and cash equivalents earn interest at rates based on LIBOR
in the UK. These facilities are considered adequate to meet the Group's
anticipated cash flow requirements for the foreseeable future.
The table below analyses the Group's financial liabilities into maturity
Groupings and also provides details of the liabilities that bear interest at
fixed, floating and non-interest bearing rates.
2014 Less than 2-5 years Over
Total 1 year £'000 5 years
£'000 £'000 £'000
Bank overdrafts (floating) 2,119 2,119 - -
Debentures (fixed) 15,000 1,250 3,750 10,000
Bank loans (fixed) 10,105 - 10,105 -
Bank loans (floating)* 43,032 221 42,811 -
Trade and other payables (non-interest) 17,221 16,338 749 134
87,477 19,928 57,415 10,134
2013 Less than 2-5 years Over
Total 1 year £'000 5 years
£'000 £'000 £'000
Bank overdrafts (floating) 4,519 4,519 - -
Debentures (fixed) 15,000 - 5,000 10,000
Bank loans (floating)* 51,684 49,465 2,219 -
Trade and other payables (non-interest) 19,452 19,269 49 134
90,655 73,253 7,268 10,134
The Group would normally expect that sufficient cash is generated in the
operating cycle to meet the contractual cash flows as disclosed above through
effective cash management.
*Certain bank loans are fully hedged with appropriate interest derivatives.
Details of all hedges are shown below.
Market price risk
The Group is exposed to market price risk through interest rate and currency
fluctuations.
Credit risk
At the balance sheet date there were no significant concentrations of credit
risk. The maximum exposure to credit risk is represented by the carrying amount
of each financial asset in the balance sheet. The Group only deposits surplus
cash with well-established financial institutions of high quality credit
standing.
Borrowing facilities
At 31 December 2014 the Group was within its bank borrowing facilities and was
not in breach of any of the covenants. Term loan repayments are as set out
below. Details of other financial liabilities are shown in Notes 19 and 20.
Hedge profile
At 31 December 2013 the Group had hedges totalling £50.4 million to cover the £
44.2 million facility. These consisted of a 20 year swap for £10.4 million with
a 7 year call option in favour of the bank, taken out in November 2007, at 4.76
per cent; and a 20 year swap for £40 million with a 7 year call option in
favour of the bank, taken out in December 2007, at 4.685 per cent.
During the year all above hedges were cancelled and the bank loans repaid in
full.
Terminating the hedges cost a total of £10,686,000 against a provision of £
9,569,000 at 31 December 2013. The amount of hedge break costs recognised in
the 2014 income statement was a loss of £1,117,000.
At 31 December 2014 the Group had hedges totalling £35 million to cover the £
34.9 million bank loan. These consisted of a 5 year swap for £17.5 million,
taken out in July 2014 at 2.25%. A £17.5 million cap agreement taken out in
July 2014 at 2.25% until 29 January 2016 and a swaption at 2.25% on the capped
portion from 29 January 2016 to 1 July 2019.
Under IFRS 13 the hedges are not deemed to be eligible for hedge accounting and
any movement in the value of the hedges is therefore charged directly to the
consolidated income statement.
At the year end the fair value liability in the accounts was £656,000 as valued
by the hedge provider. The additional charge to the consolidated income
statement of £430,000 relates to the premiums paid on the purchase of the
swaption and a total charge to consolidated income statement of £1,086,000.
Fair value of financial instruments
Fair value estimation
The Group has adopted the amendment to IFRS 7 for financial instruments that
are measured in the balance sheet at fair value. This requires the methods of
fair value measurement to be classified into a hierarchy based on the
reliability of the information used to determine the valuation, as follows:
- Quoted prices (unadjusted) in active markets for identical assets or
liabilities (level 1).
- Inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly (that is, as prices)
or indirectly (that is, derived from prices) (level 2).
- Inputs for the asset or liability that are not based on observable market
data (that is unobservable inputs) (level 3).
Level 1 Level 2 Level 3 Total 2014
£'000 £'000 £'000 £'000 loss
to income
statement
'000
Financial assets
Other financial assets held for
trading and available for sale
Quoted equities 918 - - 918 (86)
Financial liabilities
Derivative financial instruments
Interest rate swaps - 656 - 656 (1,086)
Level 1 Level 2 Level 3 Total 2013
£'000 £'000 £'000 £'000 Gain
to income
statement
'000
Financial assets
Other financial assets held for
trading and available for sale
Quoted equities 955 - - 955 38
Financial liabilities
Derivative financial instruments
Interest rate swaps - 9,569 - 9,569 4,419
Discontinued
Derivative financial instruments
Interest rate swaps - 14,599 - 14,599 5,348
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. During
2014 this increased to 94.1 per cent (2013: 80.2 per cent) which was calculated
as follows:
2014 2013
£'000 £'000
Total debt 69,066 71,034
Less cash and cash equivalents (9,237) (8,818)
Net debt 59,829 62,216
Total equity 53,598 67,390
111.6% 92.3%
All the debt, apart from the overdrafts, is at fixed rates of interest as shown
in Notes 19 and 20. The Group does not have any externally imposed capital
requirements.
Financial assets
Financial assets are disclosed in Notes 16, 17 and 18 and above.
The Group's principal financial assets are bank balances and cash, trade and
other receivables and investments. The Group has no significant concentration
of credit risk as exposure is spread over a large number of counterparties and
customers. The credit risk in liquid funds and derivative financial instruments
is limited because the counterparties are banks with high credit ratings
assigned by international credit-rating agencies. The Group's credit risk is
primarily attributable to its trade receivables. The amounts presented in the
balance sheet are net of allowances for doubtful receivables, estimated by the
Group's management based on prior experience and the current economic
environment.
Financial assets maturity
Cash and cash equivalents all have a maturity of less than three months.
2014 2013
£'000 £'000
Cash at bank and in hand 9,237 8,818
These funds are primarily invested in short term bank deposits maturing within
one year bearing interest at the bank's variable rates.
Financial liabilities maturity
Repayment of borrowings
2014 2013
£'000 £'000
Bank loans and overdrafts:
Repayable on demand or within one year 2,340 53,960
Repayable between two and five years 51,855 2,115
Repayable after five years - 104
54,195 56,179
Debentures:
Repayable within one year 1,250 -
Repayable between two and five years 3,750 5,000
Repayable in more than five years 9,871 9,855
69,066 71,034
Certain borrowing agreements contain financial and other conditions that if
contravened by the Group, could alter the repayment profile.
Commodity price risk
Commodity price risk is the risk that the Group's future earnings will be
adversely impacted by changes in the market of commodities. Bisichi is exposed
to commodity price risk as its future revenues will be derived based on a
contract with a physical off-take partner at prices that will be determined by
reference to market prices of coal at the delivery date.
From time to time Bisichi may manage its exposure to commodity price risk by
entering into forward sales contracts with the goal of preserving future
revenue streams.
Foreign exchange risk
Only Bisichi is subject to this risk. For Bisichi all trading is undertaken in
the local currencies. Funding is also in local currencies other than
inter-company investments and loans and it is not the Group's policy to obtain
forward contracts to mitigate foreign exchange risk on these amounts. During
2014 and 2013 the Group did not hedge its exposure of foreign investments held
in foreign currencies.
The table below shows the currency profiles of cash and cash equivalents:
2014 2013
£'000 £'000
Sterling 1,697 139
South African Rand 1,138 1,426
US Dollar 3 142
2,838 1,707
Cash and cash equivalents earn interest at rates based on LIBOR in Sterling and
Prime in Rand.
The tables below shows the currency profiles of net monetary assets and
liabilities by functional currency of the Group:
2014: Sterling South
£'000 African
Rands
£'000
Sterling (2,515) -
South African Rand 153 618
US Dollar 20 -
(2,342) 618
2013: Sterling South
£'000 African
Rands
£'000
Sterling (4,082) -
South African Rand 768 (1,065)
US Dollar 187 -
(3,127) (1,065)
The directors consider there to be no significant risk from exchange rate
movements of foreign currencies against the functional currencies of the
reporting companies within the Group. As such no sensitivity analysis is
prepared.
Interest rate risk and hedge profile
2014 2013
£'000 £'000
Fixed rate borrowings 25,105 15,000
Floating rate borrowings
- Subject to interest rate swap 34,898 50,400
- Excess hedge - (4,281)
60,003 61,119
Average fixed interest rate 9.36% 9.27%
Weighted average swapped interest rate 4.79% 7.19%
Weighted average cost of debt on overdrafts, bank loans and 5.70% 7.25%
debentures
Average period for which borrowing rate is fixed 5.5 years 7.7 years
Average period for which borrowing rate is swapped 4.5 years 13.9 years
The Group's floating rate debt bears interest based on LIBOR for the term bank
loans and bank base rate for the overdrafts.
23. Deferred tax asset
2014 2013
£'000 £'000
Deferred tax asset balance at 1 January 5,651 3,324
Transfer to consolidated income statement (3,327) 2,327
Balance at 31 December 2,324 5,651
The deferred tax balance comprises the following:
Revaluation of investment properties (3,211) (3,020)
Accelerated capital allowances (1,052) (1,029)
Fair value of interest derivatives 131 4,833
Short-term timing differences (143) (143)
(4,275) 641
Loss relief 6,599 5,010
Deferred tax asset provision at end of period 2,324 5,651
The directors consider the temporary differences arising in connection with the
interests in joint ventures are insignificant. There is no time limit in
respect of the Group tax loss relief.
24. Deferred tax liabilitIES
2014 2013
£'000 £'000
Deferred tax liability balance at 1 January 2,070 2,605
Recognised as income 378 (228)
Exchange adjustment (38) (273)
Balance at 31 December 2,410 2,104
The deferred tax balance comprises the following:
Revaluation of properties 929 912
Accelerated capital allowances 1,421 1,186
Short-term timing differences 60 6
Deferred tax liability provision at end of period 2,410 2,104
25. Share capital
Number of Number of 2014 2013
ordinary ordinary £'000 £'000
10p 10p
shares shares
2014 2013
Authorised: Ordinary shares of 10p each 110,000,000 110,000,000 11,000 11,000
Allotted, issued and fully paid share 85,542,711 85,542,711 8,554 8,554
capital
Less: held in Treasury (see below) (1,032,991) (1,254,738) (103) (125)
"Issued share capital" for reporting 84,509,720 84,287,973 8,451 8,429
purposes
The Company has one class of ordinary shares which carry no right to fixed
income.
Treasury shares
Number of ordinary Cost/issue value
10p shares
2014 2013 2014 2013
£'000 £'000
Shares held in Treasury at 1 January 1,254,738 1,538,398 1,159 1,421
Issued to meet directors bonuses (Feb 14 - (264,257) (103,580) (244) (96)
58.25p) 2013: (Jan 13 - 22p)
Issued to meet staff bonuses (Feb 14 - (91,728) (64,818) (84) (60)
58.25p) 2013: (Jan 13 - 22p)
Issued for new directors share incentive (5,150) (27,272) (5) (25)
plan (Feb 14 - 58.25p) 2013: (Jan 13 - 22p)
Issued for new staff share incentive plan (30,368) (63,208) (28) (58)
(Feb 14 - 58.25p) 2013: (Jan 13 - 22p)
Issued for new directors share incentive - (4,673) - (4)
plan 2013: (Jan 13 - 21.75p)
Issued for new staff share incentive plan - (20,109) - (19)
2013: (Jan 13 - 21.75p)
Purchase of shares (Apr 14 - 50.65p) 171,674 - 87 -
Issued to meet staff bonuses (Dec 14 - (1,918) - (2) -
39.5p)
Shares held in Treasury at 31 December 1,032,991 1,254,738 883 1,159
Share Option Schemes
Employees' share option scheme (Approved scheme)
At 31 December 2014 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 2014 is as follows:
Changes during the year
At 1 Options Options Options At 31
January Exercised granted lapsed December
2014 2014
Shares issued to date 2,367,604 - - - 2,367,604
Options granted which have not - - 20,000 (20,000) -
been exercised
Shares allocated over which 1,549,955 - - - 1,549,955
options have not been granted
Total shares allocated for issue 3,917,559 - 20,000 (20,000) 3,917,559
to employees under the scheme
Non-approved Executive Share Option Scheme (Unapproved scheme)
A share option scheme known as the "Non-approved Executive Share Option Scheme"
which does not have HMRC approval was set up during 2000. At 31 December 2014
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 2014 is as follows:
Changes during the year
At 1 Options Options Options At 31
January Exercised granted lapsed December
2014 2014
Shares issued to date 450,000 - - - 450,000
Shares allocated over which 550,000 - - - 550,000
options have not yet been
granted
Total shares allocated for issue 1,000,000 - - - 1,000,000
to employees under the scheme
The Bisichi Mining PLC Unapproved Option Schemes
Details of the share option schemes in Bisichi are as follows:
Year of Subscription Period within Number of Number of Number of
grant price per which options share share options share
share exercisable for which issued/ for which
options exercised/ options
outstanding at (cancelled) outstanding at
31 December during year 31 December
2013 2014
2004 149.0p Sep 2007 - Sep 80,000 (80,000) -
2014
2006 237.5p Oct 2009 - Oct 325,000 - 325,000
2016
2010 202.5p Aug 2013 - Aug 80,000 - 80,000
2020
2012 34.0p Oct 2012 - Sep 233,000 (40,000) 193,000
2022
The exercise of options under the Unapproved Share Option Schemes, for certain
option issues, is subject to the satisfaction of objective performance
conditions specified by the remuneration committee, which will confirm to
institutional shareholder guidelines and best practice provisions in force from
time to time. The performance conditions for the 2010 scheme, agreed by members
on 31 August 2010 respectively, requires growth in net assets over a three year
period to exceed the growth of the retail prices index by a scale of
percentages. There are no performance conditions attached to the other schemes.
2014 2014 2013 2013
Number Weighted Number Weighted
average average
exercise exercise
price price
Outstanding at 1 January 718,000 157.7p 718,000 157.7p
Cancelled during the year (80,000) (149.0p) - -
Exercised during the year (40,000) (34.0p) - -
Outstanding at 31 December 598,000 167.1p 718,000 157.7p
Exercisable at 31 December 598,000 167.1p 718,000 157.7p
26. Non-controlling interest ("NCI")
2014 2013
£'000 £'000
As at 1 January 10,001 10,488
Share of profit for the year 745 213
Share of gain on available for sale investments 24 -
Dividends received (292) (248)
Shares issued 313 86
Exchange adjustment (76) (538)
Other changes in equity 111 -
As at 31 December 10,826 10,001
The following subsidiaries had material NCI:
Bisichi Mining Plc
Black Wattle Colliery (Pty) Ltd
Summarised financial information for these subsidiaries is set out below. The
information is before inter-company eliminations with other companies in the
Group.
Bisichi Mining Plc 2014 2013
£'000 £'000
Revenue 26,500 35,105
Profit for the year attributable to owners of the parent 458 151
Profit for the year attributable to NCI 745 213
Profit for the year 1,203 364
Other comprehensive income attributable to owners of the parent (67) (320)
Other comprehensive income attributable to NCI (13) (538)
Other comprehensive income for the year (80) (858)
Balance sheet
Non-current assets 21,924 23,221
Current assets 12,289 12,980
Total assets 34,213 36,201
Current liabilities (7,148) (16,124)
Non-current liabilities (9,346) (3,090)
Total liabilities (16,494) (19,214)
Net current assets at 31 December 17,719 16,987
Cash flows
From operating activities 3,406 1,302
From investing activities (1,903) (3,162)
From financing activities 488 (455)
Net cash flows 1,991 (2,315)
The non-controlling interest comprises of a 37.5% shareholding in Black Wattle
Colliery (Pty) Ltd, a coal mining company incorporated in South Africa.
26. Non-controlling interest ("NCI") continued
Summarised financial information reflecting 100% of the underlying subsidiary's
relevant figures, is set out below.
Black Wattle Colliery (pty) Limited ("Black Wattle") 2014
£'000
Revenue 25,536
Expenses (24,866)
Profit for the year 670
Other comprehensive income -
Total comprehensive income for the year 670
Balance sheet
Non-current assets 6,030
Current assets 8,054
Current liabilities (9,125)
Non-current liabilities (2,260)
Net assets at 31 December 2,699
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 was
increased from 136 shares to 1,000 shares at par of ZAR1 (South African Rand)
through the following shares issue:
- a subscription for 489 ordinary shares at par by Bisichi Mining
(Exploration) Limited increasing the number of shares held from 136 ordinary
shares to a total of 675 ordinary shares;
- a subscription for 110 ordinary shares at par by Vunani Mining (pty) Ltd;
- a subscription for 265 "A" shares at par by Vunani Mining (pty) Ltd
Bisichi Mining (Exploration) Limited is a wholly owned subsidiary of Bisichi
Mining PLC incorporated in England and Wales.
Vunani Mining (pty) Ltd is a South African Black Economic Empowerment company
and minority shareholder in Black Wattle.
The "A" shares rank pari passu with the ordinary shares save that they will
have no dividend rights until such time as the dividends paid by Black Wattle
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, before any payment of
dividends after 30 October 2008, exceeds ZAR832,075,000.
27. Related party transactions
Cost Amounts Cash
recharged Owed advanced
to/(by) (to)/by to/(by)
related related related
party party party
£'000 £'000 £'000
Related party:
Langney Shopping Centre Unit Trust
Current account 106 (i) 11 -
Loan account - 335 (128)
Ezimbokodweni Mining (pty)Limited 92 1,040
Simon Heller Charitable Trust
Current account (63) - -
Loan account - (700) -
Directors and key management
M A Heller and J A Heller 7 (i) 16 -
H D Goldring (Delmore Asset Management (25) (ii) - -
Limited)
C A Parritt (18) (iii) - -
R Priest (Alvarez & Marsal Real Estate (34) (iii) - -
Advisory Services LLP)
Totals at 31 December 2014 65 702 (128)
Totals at 31 December 2013 170 (2,628) (468)
Nature of costs recharged - (i) Property management fees (ii) Portfolio
management fees (iii) Consultancy fees.
Langney Shopping Centre Unit Trust (joint venture)
Langney Shopping Centre Unit Trust (Langney) is owned 12.5 per cent by the
Company and 12.5 per cent by Bisichi Mining PLC. The remaining 75 per cent is
owned by Columbus Capital Management LLP. At the year-end LAP and Bisichi each
had a loan of £167,625 repayable, of which £104,125 each has been received
since the year-end.
The Company provides property management services to Langney.
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 (2013: £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 (2013: £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 Asset Management Limited (Delmore) is a Company in which H D Goldring
is a majority shareholder and director. Delmore provides consultancy services
to the Company on an invoiced fee basis.
Alvarez & Marsal Real Estate Advisory Services LLP (A&M) is a company in which
R Priest is a director. A&M provides consultancy services to the Company on an
invoiced fee basis. During the year A&M were paid £180,000 for services
provided.
J A Heller received a loan of £40,000, which has been repaid in the year.
In 2012 a loan was made by Bisichi to one of the Bisichi directors A R Heller.
The loan amount outstanding at the year end was £101,000 (2013: £116,000) and a
repayment of £15,000 (2013: £nil) was made during the year.
The directors are considered to be the only key management personnel and their
remunerations including employers national insurance for the year were £
1,521,000 (2013: £1,485,000). All other disclosures required including interest
in share options in respect of those directors are included within the
remuneration report.
28. Employees
The average number of employees, including directors, of the Group during the
year was as follows:
2014 2013
£'000 £'000
Production 213 220
Administration 45 49
258 269
2014 2013
£'000 £'000
Staff costs during the year were as follows:
Salaries and other costs 6,843 7,503
Social security costs 378 376
Pension costs 510 582
Share based payments 55 120
7,786 8,581
29. Capital Commitments
2014 2013
£'000 £'000
Commitments for capital expenditure approved but not contracted 389 402
for at the year end
Share of commitment of capital expenditure in joint venture 1,402 1,451
All the above relates to Bisichi Mining PLC.
30. Operating and finance leases
Operating leases on land and buildings
At 31 December 2014 the Group had commitments under non-cancellable operating
leases on land and buildings expiring as follows:
2014 2013
£'000 £'000
Within one year - 324
In more than five years 240 -
240 324
Operating lease payments represent rentals payable by the Group for its office
premises.
The leases are for an average term of ten years and rentals are fixed for an
average of five years.
Present value of head leases on properties
Minimum lease Present value
payments of minimum
lease payments
2014 2013 2014 2013
£'000 £'000 £'000 £'000
Amounts payable under finance leases:
Within one year 306 306 306 306
In the second to fifth years inclusive 1,226 1,226 1,139 1,139
After five years 30,456 30,770 3,343 3,348
31,988 32,302 4,788 4,793
Future finance charges on finance leases (27,200) (27,509) - -
Present value of finance lease liabilities 4,788 4,793 4,788 4,793
Finance lease liabilities are in respect of leased investment property. Many
leases provide for contingent rent in addition to the rents above, usually a
proportion of rental income.
Finance lease liabilities are effectively secured as the rights to the leased
asset revert to the lessor in the event of default.
Future aggregate minimum rentals receivable
The Group leases out its investment properties to tenants under operating
leases. The future aggregate minimum rentals receivable under non-cancellable
operating leases are as follows:
2014 2013
£'000 £'000
Within one year 6,129 6,290
In the second to fifth years inclusive 19,479 21,886
After five years 35,141 40,322
60,749 68,498
31. Contingent liabilities and post balance sheet events
There were no contingent liabilities at 31 December 2014 (2013: £Nil), except
as disclosed in Note 22.
Since the year end the Group has repaid early £1.25 million of the £5 million
debenture stock 2018, at an additional cost of £0.16 million.
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:
2014 2013
£'000 £'000
Rail siding 158 62
Rehabilitation of mining land 1,114 1,153
Water & electricity 52 54
32. Company financial statements
Company balance sheet at 31 December 2014
Notes 2014 2013
£'000 £'000
Fixed assets
Tangible assets 32.3 24,048 65,912
Other investments:
Associated company - Bisichi Mining PLC 32.4 489 489
Subsidiaries and others including Dragon Retail 32.4 57,917 47,649
Properties Limited
32.4 58,406 48,138
82,454 114,050
Current assets
Debtors 32.5 6,491 15,436
Investments 32.6 21 23
Bank balances 3,793 4,969
10,305 20,428
Creditors
Amounts falling due within one year 32.7 (53,226) (78,711)
Net current liabilities (42,921) (58,283)
Total assets less current liabilities 39,533 55,767
Creditors
Amounts falling due after more than one year 32.8 (13,621) (24,625)
Net assets 25,912 31,142
Capital and reserves
Share capital 32.10 8,554 8,554
Share premium account 32.11 4,866 4,866
Capital redemption reserve 32.11 47 47
Revaluation reserve 32.11 3,212 2,151
Treasury shares 32.10 (883) (1,159)
Retained earnings 32.11 10,116 16,683
Shareholders' funds 25,912 31,142
These financial statements were approved by the board of directors and
authorised for issue on 21 May 2015 and signed on its behalf by:
Sir Michael Heller Anil Thapar Company Registration
No. 341829
Director Director
32.1. Company
Accounting policies
The following are the main accounting policies of the Company:
Basis of accounting
The financial statements have been 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 and in accordance with applicable accounting
standards. All accounting policies applied are consistent with those of prior
periods.
Investment properties are accounted for in accordance with SSAP 19, "Accounting
for Investment Properties", which provides that these should not be subject to
periodic depreciation charges, but should be shown at open market value. This
is contrary to the Companies Act 2006 which states that, subject to any
provision for depreciation or diminution in value, fixed assets are normally to
be stated at purchase price or production cost. Current cost accounting or the
revaluation of specific assets to market value, as determined at the date of
their last valuation, is also permitted.
The treatment of investment properties under the Companies Act 2006 does not
give a true and fair view as these assets are not held for consumption in the
business but as investments, the disposal of which would not materially affect
any manufacturing or trading activities of the enterprise. In such a case it is
the current value of these investments, and changes in that current value,
which are of prime importance. Consequently, for the proper appreciation of the
financial position, the accounting treatment required by SSAP 19 is considered
appropriate for investment properties. Details of the current value and
historical cost information for investment properties are set out in Note 32.3.
Depreciation or amortisation is only one of the many factors reflected in the
annual revaluation and the amount that might otherwise have been shown cannot
be separately identified or quantified.
The financial statements have been prepared on a going concern basis. Further
details of which are contained in Group accounting policies on page 49 and in
the Financial review and Directors' report.
Revenue
Revenue comprises rental income, listed investment sales, dividends and other
income. The profit or loss on disposal of properties is recognised on
completion of sale.
Dividends receivable
Dividends are credited to the profit and loss account when the dividend is
received.
Tangible fixed assets
a) Investment properties
An external professional valuation of investment properties is carried
out every year. Properties professionally valued by Chartered Surveyors are on
an existing use open market value basis, in accordance with the Practice
Statements contained within the RICS valuation standards 2012 prepared by the
Royal Institution of Chartered Surveyors. Directors' valuation of properties
are at fair value.
The cost of improvements includes attributable interest.
b) Other tangible fixed assets
Other tangible fixed assets are stated at historical cost. Depreciation
is provided on all other tangible fixed assets at rates calculated to write
each asset down to its estimated residual value evenly over its expected useful
life. The rates generally used are - office equipment - 10 to 33 per cent per
annum, and motor vehicles - 20 per cent per annum, on a straight line basis.
Investments
Long term investments are described as participating interests and are
classified as fixed assets. Short term investments are classified as current
assets.
a) Investments held as fixed assets
These comprise investments in subsidiaries and investments in
Dragon Retail Properties Limited and Langney Shopping Centre Unit Trust
(unlisted joint ventures), Bisichi Mining PLC (listed associate) and in
unlisted companies which are all held for the long term. Provision is made for
any impairment in the value of fixed asset investments.
b) Investments held as current assets
Investments held for trading are included in current assets and are
revalued to fair value. For listed investments, fair value is the bid market
listed value at the balance sheet date. Realised and unrealised gains or losses
arising from changes in fair value are included in the income statement of the
period in which they arise.
Financial Instruments
Bank loans and overdrafts
Bank loans and overdrafts are included in creditors on the Company balance
sheet at the amounts drawn on the particular facilities. Interest payable on
those facilities is expensed as a finance cost in the period to which it
relates.
Interest rate derivatives
The Company uses derivative financial instruments to hedge the interest rate
risk associated with the financing of the Company's business. No trading in
such financial instruments is undertaken.
At previous reporting dates, these interest rate derivatives were recognised at
their fair value, being the Net Present Value of the difference between the
hedged rate of interest and the current market rate of interest assuming that
this rate was applied for the remainder of the hedge. Where a derivative is
designated as a hedge for the variability of a highly probable forecast
transaction e.g. an interest payment, the element of the gain or loss on the
derivative that is an effective hedge is recognised directly in equity. When
the forecast transaction subsequently results in the recognition of a financial
asset or a financial liability, the associated gains or losses that were
recognised directly in equity are reclassified into the income statement in the
same period or periods during which the asset acquired or liability assumed
affects the income statement e.g. when interest income or expense is
recognised.
The gain or loss arising from any adjustment to the fair value is recognised in
the income statement.
Debtors
Debtors do not carry any interest and are stated at their nominal value as
reduced by appropriate allowances for estimated irrecoverable amounts.
Creditors
Creditors are not interest bearing and are stated at their nominal value.
Joint ventures
Investments in joint ventures, being those entities over whose activities the
Group has joint control as established by contractual agreement, are included
at cost.
Deferred taxation
Deferred tax is recognised in respect of all timing differences that have
originated but not reversed at the balance sheet date where transactions or
events that result in an obligation to pay more tax in the future or a right to
pay less tax in the future have occurred at the balance sheet date. Timing
differences are differences between the Company's taxable profits and its
results as stated in the financial statements. Deferred tax is measured at the
average tax rates which are expected to apply in the periods in which timing
differences are expected to reverse, based on tax rates and laws that have been
enacted or substantively enacted by the balance sheet date. Deferred tax is
measured on a non-discounted basis.
Leased assets and obligations
All leases are "Operating Leases" and the annual rentals are charged to the
profit and loss account on a straight line basis over the lease term. Rent free
periods or other incentives received for entering into a lease are accounted
for over the period of the lease so as to spread the benefit received over the
lease term.
Retirement benefits
For defined contribution schemes the amount charged to the profit and loss
account in respect of pension costs and other post retirement benefits is the
contributions payable for the year. Differences between contributions payable
in the year and contributions actually paid are shown as either prepayments or
accruals at the balance sheet date.
32.2. Profit for the financial year
The Company's result for the year was a loss of £4,114,000 (2013 profit: £
9,684,000). 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.
32.3. Tangible assets
Investment Properties Office
Total Freehold Long Short Equipment
£'000 £'000 leasehold leasehold and motor
£'000 £'000 vehicles
£'000
Cost or valuation at 1 January 66,779 48,759 16,675 275 1,070
2014
Reclassification - - (850) 850 -
Additions 698 662 - - 36
Disposals (42,009) (41,350) - - (659)
Decrease on revaluation (1,151) (126) (1,025) - -
Cost or valuation at 31 December 24,317 7,945 14,800 1,125 447
2014
Representing assets stated at:
Valuation 23,870 7,945 14,800 1,125 -
Cost 447 - - - 447
24,317 7,945 14,800 1,125 447
Depreciation at 1 January 2014 867 - - - 867
Charge for the year 46 - - - 46
Disposals (644) - - - (644)
Depreciation at 31 December 2014 269 - - - 269
Net book value at 1 January 2014 65,912 48,759 16,675 275 203
Net book value at 31 December 24,048 7,945 14,800 1,125 178
2014
The freehold and leasehold properties were valued as at 31 December 2014 by
external professional firms of chartered surveyors. The valuations were made at
fair value. The directors' property valuations were made at fair value.
2014 2013
£'000 £'000
Allsop LLP 22,045 62,390
Woolhouse Real Estate - 1,494
Directors' valuation 1,825 1,825
23,870 65,709
The historical cost of investment properties, including total capitalised
interest of £Nil (2013: £1,161,000) was as follows:
Freehold Long Short
£'000 Leasehold Leasehold
£'000 £'000
Cost at 1 January 2014 47,761 14,972 785
Reclassification - (1,154) 1,154
Additions 662 - -
Disposals (43,562) - -
Cost at 31 December 2014 4,861 13,818 1,939
Long leasehold properties are held on leases with an unexpired term of more
than fifty years at the balance sheet date.
32.4. Other investments
Cost Total Shares in Loan stock Shares in Shares in
£'000 subsidiary in joint associate
companies subsidiary ventures £'000
£'000 companies £'000
£'000
At 1 January 2014 48,138 42,863 3,658 1,128 489
Additions 15,000 15,000 - - -
Repayments (3,658) - (3,658) - -
Impairment (1,074) (1,074) - - -
At 31 December 2014 58,406 56,789 - 1,128 489
Subsidiary companies
The Company owns 100 per cent of the ordinary share capital of the following
companies that are trading, all of which are registered in England and Wales:
Entity Activity % Held by % Held by
Company Group
LAP Ocean Holdings Limited Property 100 100
Investment
Brixton Village Limited Property - 100
Investment
Market Row Limited Property - 100
Investment
Analytical Properties Limited Property - 100
Investment
Analytical Properties Holdings Limited Property 100 100
Investment
London & Associated Management Services Limited Property 100 100
Management
Services
Newincco 1243 Limited Property - 100
Investment
Newincco 1244 Limited Property - 100
Investment
Newincco 1245 Limited Property - 100
Investment
Newincco 1299 Limited Property 100 100
Investment
Newincco 1300 Limited Property - 100
Investment
In the opinion of the Directors the value of the investment in subsidiaries is
not less than the amount shown in these financial statements.
Details of the joint ventures are set out in Notes 12 and 13.
32.5. Debtors
2014 2013
£'000 £'000
Trade debtors 384 893
Amounts due from subsidiary companies 390 8,949
Amounts due from associate and joint ventures 308 381
Deferred tax asset (note 32.9) 4,661 3,706
Other debtors 157 181
Prepayments and accrued income 591 1,326
6,491 15,436
32.6. Investments
2014 2013
£'000 £'000
Market value of the listed investment portfolio 21 23
Unrealised deficit of market value over cost (2) -
Listed investment portfolio at cost 23 23
All investments are listed on the London Stock Exchange.
32.7. Creditors: amounts falling due within one year
2014 2013
£'000 £'000
Bank overdrafts (unsecured) - 1,490
Bank loans (secured)* - 44,170
Bank loans (unsecured) 201 258
Debenture stocks £5 million First Mortgage Debenture Stock 2018 1,250 -
at 11.6 per cent
Amounts owed to subsidiary companies 44,947 22,982
Amounts owed to joint ventures 2,406 3,300
Other taxation and social security costs 536 635
Other creditors 1,630 1,408
Accruals and deferred income 2,256 4,468
53,226 78,711
*The bank loans are shown after deduction of un-amortised issue costs.
32.8. Creditors: amounts falling due after more than one year
2014 2013
£'000 £'000
Interest rate derivatives - 9,569
Term Debenture stocks:
£5 million First Mortgage Debenture Stock 2018 at 11.6 per cent 3,750 5,000
£10 million First Mortgage Debenture Stock 2022 at 8.109 per cent 9,871 9,855
*
13,621 14,855
Bank loans:
Repayable after more than one year - 201
13,621 24,625
*The £10 million debenture is shown after deduction of un-amortised issue
costs.
Details of terms and security of overdrafts, loans and loan renewal and
debentures are set out in note 20.
Repayment of borrowings:
Bank loans and overdrafts:
Repayable within one year 201 45,918
Repayable between two and three years - 201
201 46,119
Debentures:
Repayable within one year 1,250 -
Repayable between two and five years 3,750 5,000
Repayable in more than five years 9,871 9,855
15,072 60,974
Hedge profile
At 31 December 2013 the Company had hedges totalling £50.4 million to cover the
£44.2 million bank loan facility. These consisted of a 20 year swap for £10.4
million with a 7 year call option in favour of the bank, taken out in November
2007, at 4.76 per cent; and a 20 year swap for £40 million with a 7 year call
option in favour of the bank, taken out in December 2007, at 4.685 per cent.
The Board has decided to terminate all the long dated derivatives rather than
hold them to maturity. During the year all the above hedges were cancelled and
the bank loans repaid in full.
Under FRS 29 the hedges are not deemed to be eligible for hedge accounting and
any movement in the value of the hedges is therefore charged directly to the
profit and loss account. This results in a total cost of £10,686,000 against a
provision of £9,569,000 at 31 December 2013. The amount of hedge break cost
recognised in the profit and loss was a loss of £1,117,000.
Fair value of financial instruments
Fair value estimation
The Company has adopted the amendment to FRS29 for financial instruments that
are measured in the balance sheet at fair value. This requires the methods of
fair value measurement to be classified into a hierarchy based on the
reliability of the information used to determine the valuation, as follows:
- Quoted prices (unadjusted) in active markets for identical assets or
liabilities (level 1).
- Inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly (that is, as prices) or
indirectly (that is, derived from prices) (level 2).
- Inputs for the asset or liability that are not based on observable market
data (that is unobservable inputs) (level 3).
Level 1 Level 2 Level 3 Total 2014
£'000 £'000 £'000 £'000 loss to
profit and
loss
account
£'000
Financial assets
Other financial assets held for
trading
Quoted equities 21 - - 21 (2)
Financial liabilities
Derivative financial instruments
Interest rate swaps - - - - -
Level 1 Level 2 Level 3 Total 2013
£'000 £'000 £'000 £'000 Gain to
profit and
loss
account
£'000
Financial assets
Other financial assets held for
trading
Quoted equities 23 - - 23 3
Financial liabilities
Derivative financial instruments
Interest rate swaps - 9,569 - 9,569 4,419
Liquidity
The table below analyses the Company's financial liabilities into maturity
groupings and also provides details of the liabilities that bear interest at
fixed, floating and non-interest bearing rates.
Less than 2-5 years Over 2014
1 year £'000 5 years Total
£'000 £'000 £'000
Debentures (fixed) 1,250 3,750 10,000 15,000
Bank loans (floating) 201 - - 201
Trade and other payables (non-interest) 51,775 - - 51,775
53,226 3,750 10,000 66,976
Less than 2-5 years Over 2013
1 year £'000 5 years Total
£'000 £'000 £'000
Bank overdrafts (floating) 1,490 - - 1,490
Debentures (fixed) - 5,000 10,000 15,000
Bank loans (floating)* 44,451 201 - 44,652
Trade and other payables (non-interest) 32,793 - - 32,793
78,734 5,201 10,000 93,935
The Company 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.
*The bank loans are fully hedged with appropriate interest derivatives. Details
of the hedges are shown above.
Total financial assets and liabilities
The Company's financial assets and liabilities and their fair values are as
follows:
Fair 2014 Fair 2013
value Carrying value Carrying
£'000 value £'000 value
£'000 £'000
Cash and cash equivalents 3,793 3,793 4,969 4,969
Investments 21 21 23 23
Other assets 6,491 6,491 15,436 15,436
Bank overdrafts - - (1,490) (1,490)
Bank loans (201) (201) (44,451) (44,428)
Derivative liabilities - - (9,569) (9,569)
Other liabilities (51,775) (51,775) (32,793) (32,793)
Total financial liabilities before debentures (41,671) (41,671) (67,875) (67,852)
Additional details of borrowings and financial instruments are set out in Notes
20 and 22.
32.9. Provisions for liabilities and charges
2014 2013
£'000 £'000
Deferred Taxation
Balance at 1 January (3,706) (4,644)
Transfer to profit and loss account (955) 938
Balance at 31 December (4,661) (3,706)
No provision has been made for the approximate taxation liability at 20 per
cent (2013: 20 per cent) of £38,000 (2013: £101,000) which would arise if the
investment properties were sold at the stated valuation.
The deferred tax balance comprises the following:
Accelerated capital allowances 955 934
Fair value of interest derivatives - (1,914)
Short-term timing differences 146 146
Losses (5,762) (2,872)
Provision at end of period (4,661) (3,706)
32.10. Share capital
Details of share capital, treasury shares and share options are set out in Note
25.
32.11. Reserves
Share Capital Revaluation Retained Total
Premium redemption reserve Earnings £'000
Account reserve £'000 £'000
£'000 £'000
Balance at 1 January 2014 4,866 47 2,151 16,683 23,747
Decrease on valuation of - - (1,151) - (1,151)
investment properties
Retained loss for year - - - (4,114) (4,114)
Dividends paid in year - - - (106) (106)
Loss on disposal of Treasury - - - (135) (135)
Shares
Transfer of realised - - 2,212 (2,212) -
revaluation loss
Balance at 31 December 2014 4,866 47 3,212 10,116 18,241
32.12. Related party transactions
Details of related party transactions are given in Note 27.
As provided under Financial Reporting Standard 8: Related Party Disclosures,
the Company has taken advantage of the exemption from disclosing transactions
with other Group companies.
32.13. Capital commitments
There were no capital commitments at 31 December 2014 (2013: £Nil).
32.14. Commitments under operating leases
At 31 December 2014 the Company had annual commitments under non-cancellable
operating leases on land and buildings as follows:
2014 2013
£'000 £'000
Expiring in less than one year - 324
Expiring in more than five years 240 -
240 324
In addition, the Company has an annual commitment to pay ground rents on its
leasehold investment properties which amount to £299,000 (2013: £327,000).
32.15. Contingent liabilities and post balance sheet events
There were no contingent liabilities at 31 December 2014 (2013: £Nil), except
as disclosed in Note 32.8.
Since the year end the Company has repaid early £1.25 million of the £5 million
debenture stock 2018, at an additional cost of £0.16 million.
five year financial summary
2014 2013 2012* 2011* 2010*
£m £m £m £m £m
Portfolio size
Investment properties-LAP^ 89 87 205 194 195
Investment properties-joint 25 16 27 29 13
ventures
Investment properties-Dragon 3 3 - - -
Retail Properties
Investment properties-Bisichi 12 12 12 12 12
Mining^
129 118 244 235 220
Portfolio activity £m £m £m £m £m
Acquisitions 0.68 - - - -
Disposals - (9.47) - (0.60) (20.74)
Capital Expenditure - - 0.97 0.42 0.49
0.68 (9.47) 0.97 (0.18) (20.25)
Consolidated income statement £m £m £m £m £m
Group income 33.53 43.29 15.17 16.38 15.98
Profit/(loss) before tax (2.69) 1.14 7.62 (18.56) (10.69)
Taxation (3.70) 2.55 (0.35) 3.74 7.19
Loss/profit attributable to (7.14) 3.47 7.27 (14.82) (3.50)
shareholders
Earnings/(loss) per share - (8.45)p 4.12p 8.65p (17.63)p (4.24)p
basic
Earnings/(loss) per share - (8.45)p 4.12p 8.65p (17.63)p (4.24)p
fully diluted
Dividend per share 0.156 0.125p - 0.75p 1.15p
Consolidated balance sheet £m £m £m £m £m
Shareholders' funds attributable 42.55 49.73 46.46 39.93 55.76
to equity shareholders
Net borrowings 59.71 53.96 131.27 133.03 130.77
Net assets per share 50.35 59.00p 55.30p 47.53p 66.71p
- basic
- fully diluted 50.35 59.00p 55.29p 45.53p 66.69p
Consolidated cash flow statement £m £m £m £m £m
Cash generated from operations 2.96 12.23 12.72 10.89 9.58
Capital investment and financial 100.42 4.35 (0.87) (0.50) 20.42
investment
Notes:
* Original LAP group - pre IFRS 10 amendments
^ Excluding the present value of head leases