London & Associated Properties PLC
Annual Report 2017

Plain-text annual report

LONDON & ASSOCIATED PROPERTIES ANNUAL REPORT 2017 Contents OVERVIEW 1 LAP at a glance 2 Chairman and Chief Executive’s statement STRATEGIC REPORT 4 Financial and performance review 7 Principal activities, strategy & business model 7 Risks and uncertainties 8 Bisichi risks and uncertainties 9 Key performance indicators 10 Corporate responsibility GOVERNANCE 12 Directors & advisors 13 Directors’ report 17 Corporate Governance 19 Governance Statement by the Chairman of The Remuneration Committee 20 Annual remuneration report 24 Remuneration policy 26 Audit committee report 27 Directors’ responsibilities statement 28 Independent auditor’s report FINANCIAL STATEMENTS Consolidated income statement 32 32 33 34 Consolidated statement of comprehensive income Consolidated balance sheet Consolidated statement of changes in shareholders’ equity 35 Consolidated cash flow statement 36 Group accounting policies 42 69 Notes to the financial statements Five year financial summary Financial calendar Annual General Meeting 19 June 2018 Announcement of half year results to 30 June 2018 Late August 2018 Payment of final and special dividend for 2017 (if approved) 14 September 2018 Announcement of annual results for 2018 Late April 2019 OVERVIEW OVERVIEW LAP at a glance London & Associated Properties PLC (“LAP”) is a main market listed group which invests in UK shopping centres and retail property whilst also managing property assets for institutional clients. LAP owns and/or manages £186 million of property investments. As a property company we look to create environments where tenants can thrive. The Group also holds a substantial investment in Bisichi Mining PLC, which operates coal mines in South Africa and owns UK property investments. In accordance with IFRS 10 the results of Bisichi have been consolidated in the group accounts. FINANCIAL HIGHLIGHTS Fully diluted net assets per share 53.74p 2016: 44.83p IFRS net assets £56.7m 2016: £48.6m Properties portfolio valuation* £186m 2016: £221m *Including properties under management OVERALL PORTFOLIO SPLIT PORTFOLIO BY RENTAL INCOME 42% 42% 58% 58% KEY PROJECTS HIGHLIGHT Wholly owned • Market Row and Brixton Village Brixton Market Row and Brixton Village sold in April 2018 Investments and management • Orchard Square, Sheffield • Kings Square, West Bromwich • Kingsgate Centre, Dunfermline • The Rushes Centre, Loughborough • The Vancouver Quarter Centre Kings Lynn Co-investment with Oaktree Capital Management and manage three of their shopping centres Coal production • In South Africa, Black Wattle produced 1.30 million metric tonnes of Run of Mine Coal in 2017 (2016: 1.26 million metric tonnes) London & Associated Properties PLC 2017 1 OVERVIEW Chairman and Chief Executive’s statement We are pleased to report on a very satisfactory period for the 12 months to 31st December 2017. The most significant event in 2017 was our decision to offer for sale the two markets in Brixton, valued at £24.5 million last year and yielding around £0.5 million annually, net of interest expense. We believed that the timing was right to realise this asset and generate a significant profit. Sale proceeds of £37.25 million were received in April 2018. Allowing for costs and repayment of related loans, this will leave the Company with cash from this disposal of £20.5 million. We are already in discussions with third parties on potential new investments and will look for opportunities to reinvest the cash and expand the portfolio over the coming months. The year was also marked by a successful conclusion to a long running dispute with The Market Village Company Limited (the tenant of the two Brixton Markets). The lease entitles LAP to a share of total income less specified expenses. The Court supported our claim that inappropriate expenses had been deducted in calculating the income due. As a result, rental income for 2017 includes £0.6 million for back rent which is now due from the tenant. LAP Group (excluding Bisichi and Dragon) property revenue for the year to 31st December 2017 was £6.8 million as compared with £6.1 million in the previous year. Excluding the extra Brixton and other income, our property revenue would have been £6.1 million, which is a creditable result in the very challenging current trading environment. Within the LAP Group we have been particularly focused on operating costs during 2017 and we are pleased to report that in 2017 these were approximately 8% lower at £3.8 million compared to £4.1 million the year before. CONSOLIDATED RESULTS The Group (including Bisichi and Dragon) net assets at the year end were £56.71 million (2016: £48.63 million). Total net assets of LAP Group (including our net interest in Bisichi) have increased by almost 20% to £45.85 million (2016: £38.24 million), while net asset value per share has increased by 20% to 53.74p from 44.83p in 2016. Total property assets owned by LAP, Bisichi and other companies in which LAP has a financial interest amount to £186 million (2016: £221 million). The Group profit after valuation movements and before taxation for the year was £11.28 million (loss 2016: £0.97 million). Besides the improvements in Bisichi (as detailed in the Bisichi section below) and LAP income and costs (as stated above), the main improvement was due to the increase in valuation of investment properties by £9.37 million (2016: £0.53 million). A full breakdown of group income and result by sector is included in the financial review and in the segmental analysis in Note 1 to the financial statements. DEBT MANAGEMENT In June 2017 we repaid £0.75 million of Prudential debenture stock which carried a coupon of 11.6% per annum. In August 2018, the residual £3 million of this debenture will expire. We are currently talking to a number of lenders about refinancing the portfolio against which the debenture is secured, and we are pleased to report that interest is strong. We will update shareholders on the terms of any new loan once we have selected the lender. We are confident that we will make a significant saving on the £0.3 million per annum interest we are currently paying. LAP PROPERTY ACTIVITIES Orchard Square, Sheffield The shops at Orchard Square have remained effectively fully let throughout 2017, and we therefore have no significant new lettings to report. However, we have a number of lease expiries in 2018 and have commenced negotiations with tenants to renew their leases. Responses to date have been positive. Kings Square, West Bromwich Kings Square, our shopping centre at West Bromwich, has had a strong year during which we have achieved several good lettings. The principal mall remains fully let and recent lettings have underscored rental growth compared to a year ago. Additionally, the side mall, which has always been the weakest of the malls within the Centre, is fully let following a period of intensive marketing. The town seems to be finding its equilibrium after the opening of a new Tesco Extra and adjacent shopping centre and Kings Square is clearly the location of choice for discount retailers. This is helped by the tram and bus terminus being attached to the rear of our centre. We therefore believe that this Centre will continue to trade successfully. 414 Coldharbour Lane, Brixton Shareholders are aware that, following lease expiry in 2015, we are in the process of trying to obtain vacant possession of this property from the current tenant. We believe that the tenant has lost the statutory rights of renewal. In December 2017, the Court found in favour of LAP on two counts. A third and final count requires a separate hearing which is scheduled for September 2018. We are confident of our position and we will update shareholders in due course. OTHER The rest of our property portfolio continues to trade well and the LAP Group portfolio has a void level of 1.47%, (2016: 2.15%). 2 London & Associated Properties PLC 2017 OVERVIEW Chairman and Chief Executive’s statement PROPERTIES OUTLOOK There has been a lot of press coverage recently about retailer insolvencies and the increasing migration to online shopping. So far we have not directly suffered any increased level of retailer insolvency but we cannot be isolated entirely from general high street trends. Like all retail landlords, we will be forced to compete against an increased supply of empty shops. As highlighted in Chairman’s Statements over the last few years, we believe that our portfolio is relatively protected from online shopping as our core property holdings are all either part of a major city that will remain a destination in its own right; a differentiated offer which forms part of a leisure experience; or they fulfil a role providing convenience retail facilities. We still believe that these sections of the retail world will continue to be relevant for the foreseeable future. HARROGATE JOINT VENTURE Our Harrogate joint venture with Oaktree Capital Management, which owns three shopping centres in Dunfermline, Kings Lynn and Loughborough, underwent a refinancing during the year. A loan at 80% of valuation was secured from Goldman Sachs with mezzanine funding provided by DRC. During this refinancing, we declined the option to put further cash into the joint venture and consequently our share of the equity was diluted from 6.95% to 3.17%. However, our asset and property management contracts remain unchanged and we continue to receive fees for managing the centres. MINING AND PROPERTY ACTIVITIES BY BISICHI MINING PLC The management of Bisichi report that for the year ended 31st December 2017, the company achieved earnings before interest, tax, depreciation and amortisation (EBITDA) of £3.7 million (2016: £2.4 million). This significant improvement was achieved despite the impact on Black Wattle, its direct coal mining subsidiary in South Africa, of mining challenges in the first half of the year. For the first half of 2017 production at Black Wattle was impacted by higher than expected seasonal rains as well as ongoing stone contamination issues at its opencast areas. Overall, during this period, the mine achieved production of 582,000 metric tonnes (2016 H1: 795,000 metric tonnes). The stone contamination issues affected both yield and mining production through the washing plant, thus impacting on sales volumes and earnings in the first half of the year. During the second half of the year, further development of Black Wattle’s opencast areas and the successful completion of infrastructure improvements to its washing plant allowed the mine to increase production to 714,000 metric tonnes (2016 H2: 465,000 tonnes). In addition, the completion of these infrastructure improvements assisted in reducing the stone contamination through the washing plant and increasing its overall yield. As a result of the higher production in the second half of the year, overall mining production from Black Wattle increased in 2017, with total production for the year of 1.30 million metric tonnes (2016: 1.26 million metric tonnes). As part of Black Wattle’s mining plan, the opencast areas that were mined in 2017 will continue to be mined throughout 2018. Bisichi expect mining production levels achieved in the second half of 2017 to be maintained in 2018. Looking forward to 2018, Bisichi management will focus on maintaining production at the higher levels achieved in the second half of 2017 and increasing the life of the mine through the acquisition of additional reserves. With strong demand and improved prices achievable for the company’s coal, Bisichi believes the group is in a strong position to achieve significant value from its South African mining operations in 2018. Bisichi’s property portfolio is managed by LAP and continues to perform well. Overall, net property revenue (excluding joint ventures) was £1.12 million (2016: £1.06 million). The property portfolio was externally valued at 31st December 2017 and the value of UK investment properties attributable to the group at year end remained unchanged at £13.25 million. Bisichi has decided to recommend a final dividend of 3p (2016: 3p) and in light of the strong results achieved, a special dividend of 1p (2016: nil). The total Bisichi dividend for the year is 5p (2016: 4p). LAP’s cash share of this is £221,000 (2016: £177,000). DRAGON RETAIL PROPERTIES Dragon has a single retail asset in Bristol. There is a lease renewal on the ground floor. The tenant has requested a new lease, and we believe the rent to be reversionary. Negotiations are underway. LAP DIVIDEND We are pleased to recommend a final dividend of 0.175p, an increase of over 6% on the 2016 dividend of 0.165p. We are also pleased to report that we will recommend a special dividend of 0.125p following the sale of our Brixton properties. This means we will pay a total dividend of 0.30p. Finally, we would like to thank all of our directors, staff and advisors for their hard work during the year. We look forward to the year ahead with cautious optimism. Sir Michael Heller, Chairman John Heller, Chief Executive 27 April 2018 London & Associated Properties PLC 2017 3 STRATEGIC REPORT STRATEGIC REPORT Financial and performance review CASH FLOW The operating cash flow and net cash balances at the year-end were as follows: CASH FLOW FROM OPERATIONS LAP Bisichi Dragon Group total 2017 £'000 2,708 7,593 (14) 10,287 Note: The figures exclude inter-company transactions. NET CASH BALANCES LAP Bisichi Dragon Group total 2017 £'000 2,109 4,065 92 6,266 2016 £'000 2,623 2,879 84 5,586 2016 £'000 3,706 (890) 115 2,931 Our investment with Oaktree Capital Management (HRGT Shopping Centres LP), remains profitable and generates management fees (2017: £0.46 million and 2016: £0.46 million) for our wholly owned subsidiary (London & Associated Management Services Limited). We also received £0.1 million (2016: £0.1 million) as a partial repayment of our loan. INCOME STATEMENT The segmental analysis in Note 1 to the financial statements gives more detail but the tables below give a clearer summary of the Group results. RESULTS BEFORE REVALUATIONS AND NON-CASH MOVEMENTS LAP Bisichi Dragon Group total 2017 £'000 (130) 3,536 (29) 3,377 2016 £'000 (1,070) (241) 9 (1,302) Note: The figures exclude inter-company transactions. Rental income in LAP includes a one off receipt of £0.6 million for Brixton back rent. Additionally, renewed efforts to cut costs at LAP are reflected in lower overheads and property expenses, resulting in an improvement of £0.9 million in the operating result before revaluations of the core property business. Bisichi’s improvement of £3.8 million is explained under Bisichi Mining PLC, in this review. The Group property portfolio, including assets held for sale (including Bisichi) of £114.46 million increased on revaluation by £9.37 million, a 9% increase. The financial statements for 2017 have been prepared to reflect the requirements of IFRS 10. This means that the accounts of Bisichi Mining PLC (a London Stock Exchange main market quoted company – BISI) (“Bisichi”), have been consolidated with those of LAP. Bisichi continues to operate as a fully independent company and currently LAP owns only 41.52% of the issued ordinary share capital. However, because related parties also have shareholdings in Bisichi and there is a wide disposition of other shareholdings, LAP is deemed under IFRS 10 to have effective control of Bisichi for accounting purposes. This treatment means that the income and net assets of Bisichi are disclosed in full and the value attributable to the “non-controlling interest” (58.48%) is shown separately in the equity section as a non-controlling interest. There is no impact on the net assets attributable to LAP shareholders. Dragon Retail Property Limited (“Dragon”), our 50:50 joint venture with Bisichi is also consolidated. Shareholders are aware that LAP is a property business with a significant investment in a listed mining company. The effect of consolidating the results, assets and liabilities of the property business and the mining company make the figures complex and less transparent. Property company accounts are already subject to significant volatility as valuations of property assets as well as derivative liabilities can be subject to major movements based on market sentiment. Most of these changes, though, have little or no effect on the cash position and it is, of course, self-evident that cash flow is the most important factor influencing the success of a property business. We explain the factors affecting the property business first, clearly separating these from factors affecting the mining business which we do not manage. Comments about Bisichi (the mining business) are based on information provided by the independent management of that company. LOANS Long term debt of LAP (excluding Bisichi and Dragon which are detailed separately below), consists of a £45 million facility expiring in July 2019 and two debentures: one of £10 million expiring in August 2022 and another of £3 million expiring in August 2018. During the year £0.75 million of debenture was repaid. As in previous years, all loans and debentures are secured on core property and cash deposits and are covenant compliant. LAP’s five year £35 million non-recourse loan from Santander, as senior lender, is supported by a £10 million loan from Europa Capital Mezzanine Limited, as mezzanine lender. The senior loan facility is fully hedged and at the year end, 50% of the loan was swapped at a rate of 2.25% and the remaining 50% was covered by an interest cap at 2.25%. This gives a blended current interest rate of 4.73% for the total £45 million debt. On completion of the sale of Brixton Markets, £15.9 million of senior and mezzanine loans are repayable. 4 London & Associated Properties PLC 2017 STRATEGIC REPORT Financial and performance review The improved property revenues, reductions in running costs and increased property valuations, have resulted in the LAP Group property business showing an increase of £10.76 million in the profit before taxation to £9.61 million (2016: loss £1.15 million). PROFIT/(LOSS) BEFORE TAXATION LAP Bisichi Dragon Group profit/(loss) before taxation 2017 £'000 9,614 1,696 (32) 11,278 2016 £'000 (1,150) 216 (40) (974) Note: The figures exclude inter-company transactions. TAXATION The LAP Group taxation charge of £2.98 million (2016: £1.17 million) is mainly due to changes in the rules governing the utilisation of tax losses which has restricted the group's ability to offset the deferred tax liability arising on the revaluation gains recognised in the year. BALANCE SHEET Taking account of the changes required by IFRS 10 (see table below) LAP has group net assets of £56.7 million (2016: £48.6 million). Net assets attributable to equity shareholders at the year-end were 53.74p per share (2016: 44.83p per share). 2017 Investment properties Other fixed assets Investments in Bisichi Mining PLC Investments in joint ventures Other non current assets Held for sale assets Current assets Current liabilities Non-current liabilities Net assets 2016 Investment properties Other fixed assets Investments in Bisichi Mining PLC Investments and loans in joint ventures and assets held for sale Other non current assets Current assets Current liabilities Non-current liabilities Net assets LAP ORIGINAL GROUP £'000 65,231 116 7,120 874 1,748 36,441 4,824 (10,822) (59,377) 46,155 93,791 112 6,918 866 3,008 5,559 (9,014) (62,697) 38,543 BISICHI MINING PLC GROUP £'000 13,397 8,613 - 874 51 - 13,622 (9,025) (9,858) 17,674 13,426 8,520 – 2,671 32 12,224 (10,326) (9,541) 17,006 DRAGON RETAIL PROPERTIES £'000 2,630 6 - - - - 2,528 (2,124) (1,291) 1,749 CONSOLIDATION ADJUSTMENTS £'000 - - (7,120) (1,748) - - (4,416) 4,416 - (8,868) 2,630 21 – – – 2,447 (2,078) (1,288) 1,732 – – (6,918) (1,732) – (4,347) 4,347 – (8,650) LAP NET ASSETS £'000 81,258 8,735 - - 1,799 36,441 16,558 (17,555) (70,526) 56,710 109,847 8,653 – 1,805 3,040 15,883 (17,071) (73,526) 48,631 London & Associated Properties PLC 2017 5 STRATEGIC REPORT Financial and performance review BISICHI MINING PLC Although the results of Bisichi Mining PLC have been consolidated in these financial statements, the Board of LAP has no direct influence over the management of Bisichi. The comments below are based on the published accounts of Bisichi. The Bisichi group results are stated in full in its published 2017 financial statements which are available on its website: www.bisichi.co.uk. The Bisichi group increased its EBITDA to £3.7 million (2016: £2.4 million) mainly due to increased operating profits before depreciation from the mining activities of £4.6 million (2016: £1.2 million) offset by the group’s share of losses in its joint venture of £1.8 million (2016: £nil). The share of losses in joint ventures arises from writing off the investment in Ezimbokodweni Mining (Pty) Ltd of £1.8 million, as detailed in Notes 12 and 13 to the accounts. Depreciation in the year relating to mining activities remained unchanged at £1.8 million. Profit for the year after tax was £1.5 million (2016: £0.3 million). Bisichi has two core revenue streams – investment in retail property in the UK and coal mining in South Africa. The increase in operating profit was mainly attributable to the higher prices achieved by coal and increased mining production at Black Wattle offsetting the impact of the higher mining and washing costs. The UK retail property portfolio was valued at the year end at £13.25 million (2016: £13.25 million). The property portfolio is actively managed by LAP and generated rental income of £1.1 million in the year (2016: £1.1 million). In South Africa, a subsidiary of Bisichi signed an increase in the structured trade finance facility from R80 million to R100 million (South African Rand) in July 2017 with Absa Bank Limited. This facility is renewable annually at 30th June and is secured against inventory, debtors and cash that are held in the Bisichi group’s South African operations. This facility is expected to be renewed again in 2018. In the UK, the Bisichi group signed a £6 million five-year term loan with Santander in December 2014. This loan is secured against UK investment property. No covenants were breached during the year. Overall the Bisichi group achieved a net increase in cash and cash equivalents of £4.9 million (2016: £0.4 million). This increase was mainly attributable to improved coal mining operations which generated a substantial (£7.3 million) increase in cash from operating activities. Bisichi group’s net balance of cash and cash equivalents (including bank overdrafts) at the year end was £4.1 million (owing 2016: £0.9 million). The Bisichi group’s cash and cash equivalents (excluding bank overdrafts), at the year-end was £5.3 million (2016: £2.4 million). The Bisichi group’s financial position remains strong. Its net assets at 31st December 2017 were £17.7 million (2016: £17 million). The group expects to continue achieving significant value in 2018 from its existing mining operation. In addition, Bisichi seeks to expand its operations in South Africa through the acquisition of additional coal reserves. DRAGON RETAIL PROPERTIES LIMITED Dragon is a UK property investment company. The company has a Santander bank loan of £1.25 million secured against its investment property and is covenant compliant. It paid management fees of £84,000 (2016: £72,000) split equally to the two joint venture partners. Its results continue to be near breakeven after taxation. Dragon has net assets of £1.7 million (2016: £1.7 million). ACCOUNTING JUDGEMENTS AND GOING CONCERN The most significant judgements made in preparing these accounts relate to the carrying value of the properties, investments and interest rate hedges. The hedges have been valued by the hedge provider. The Group uses external property valuers to determine the fair value of its properties. Under IFRS10 the Group has included Bisichi Mining PLC in the consolidated accounts, as it is deemed to be under the effective control of LAP and has therefore been treated as a subsidiary. The Directors exercise their commercial judgement when reviewing the Group’s cash flow forecasts and the underlying assumptions on which the forecasts are based. The Group’s business activities, together with the factors likely to affect its future development, are set out in the Chairman and Chief Executive’s Statement and in this review. In addition, the Directors consider that Note 23 to the financial statements sets out the Group’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposure to credit risk, liquidity risk and other risks. With a quality property portfolio comprising a majority of tenants with long leases supported by suitable financial arrangements, the Directors believe the group is well placed to manage its business risks successfully, despite the continuing uncertain economic climate. The Directors therefore have a reasonable expectation that the group and the company have adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing the annual financial statements. TAXATION The LAP Group tax strategy is to account for tax on an accurate and timely basis. We only structure our affairs based on sound commercial principles and wish to maintain a low tax risk position. We do not engage in aggressive tax planning. The LAP Group (excluding Bisichi and Dragon) has unused tax losses and deductions with a potential value of £10.167 million of which only £4.74 million has been recognised in the 2017 financial statements. As LAP returns to profit, these tax losses and deductions should be utilised. DIVIDENDS AND FUTURE PROSPECTS The directors are proposing a final dividend of 0.175p per ordinary share payable in September 2018. The directors are also proposing a special dividend of 0.125p per ordinary share payable in September 2018. The Group remains cautiously confident about its trading and future outlook and it continues to look at further reducing its overhead costs and interest payable, while it stabilises its property income together with seeking out growth opportunities. 6 London & Associated Properties PLC 2017 STRATEGIC REPORT STRATEGIC REPORT Principal activities, strategy & business model The LAP Group’s principal business model is the investment in and management of town centre retail property through direct investment and joint ventures, where we manage the property ourselves and on behalf of our partners. The principal activity of Bisichi Mining PLC is coal mining in South Africa. Further information is available in its 2017 Financial Statements which are available on their web site: www.bisichi.co.uk STRATEGIC PRIORITIES ARE OUR STRATEGY IS MAXIMISING INCOME By achieving an appropriate tenant mix and shopping experience we can increase footfall through the centres, hence increase tenant demand for space and enhance income. CREATING QUALITY PROPERTY CAPITAL STRENGTH MAINTAIN THE VALUE OF INVESTMENT IN BISICHI 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. 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. By encouraging the Bisichi management to maximise sustainable profits and cash distributions. Risks and uncertainties DESCRIPTION OF RISK ASSET MANAGEMENT: TENANT FAILURE Financial loss. DESCRIPTION OF IMPACT MITIGATION LEASES NOT RENEWED Financial loss. Initial and subsequent assessment of tenant covenant strength combined with an active credit control function. Lease expiries regularly reviewed. Experienced in house teams with strong tenant and market knowledge who manage appropriate tenant mix. ASSET LIQUIDITY (SIZE AND GEOGRAPHICAL LOCATION) Assets may be illiquid and affect flexing of balance sheet. Regular reporting of current and projected position to the Board with efficient treasury management. PEOPLE: RETENTION AND RECRUITMENT OF STAFF Unable to retain and attract the best people for the key roles. REPUTATION: BUSINESS INTERRUPTION Loss in revenue. Impact on footfall. Adverse publicity. Potential for criminal/ civil proceedings. FINANCING: FLUCTUATION IN PROPERTY VALUES Impact on covenants and other loan agreement obligations. REDUCED AVAILABILITY OF BORROWING FACILITIES Insufficient funds to meet existing debts/ interest payments and operational payments. LOSS OF CASH AND DEPOSITS Financial loss. FLUCTUATION OF INTEREST RATES Uncertainty of interest rate costs. Nomination Committee and senior staff review skills gaps and succession planning. Training and development offered. Documented Recovery Plan in place. General and terrorism insurance policies in place and risks monitored by trained security staff. Health and Safety policies in place. CCTV in centres. Secure income flows. Regular monitoring of LTV and IC covenants and other obligations. Focus on quality assets. Efficient treasury management. Loan facilities extended where possible. Regular reporting of current and projected position to the Board. Only use a spread of banks and financial institutions which have a strong credit rating. Manage derivative contracts to achieve a balance between hedging interest rate exposure and minimising potential cash calls. London & Associated Properties PLC 2017 7 STRATEGIC REPORT STRATEGIC REPORT Bisichi risks and uncertainties Bisichi (although it is consolidated into group accounts as required by IFRS 10) is managed independently of LAP. The risks outlined below are an abbreviated summary of the risks reported by the Directors of Bisichi to the shareholders of that Company. Full details are available in the published accounts of Bisichi (www.bisichi.co.uk). These risks, although critical to Bisichi, are of less significance to LAP which only has a minority investment of 41.52% in the company. In the unlikely event that Bisichi was unable to continue trading, it would not affect the ability of LAP to continue operating as a going concern. DESCRIPTION OF RISK DESCRIPTION OF IMPACT MITIGATION COAL PRICES CAN BE IMPACTED MATERIALLY BY MARKET AND CURRENCY VARIATIONS Affects sales value and therefore margins. Forward sales contracts are used to manage value expectations. MINING OPERATIONS ARE INHERENTLY RISKY. MINERAL RESERVES, REGULATIONS, LICENSING, POWER AVAILABILITY, HEALTH AND SAFETY CAN ALL DAMAGE OPERATIONS CURRENCY RISK CASHFLOW VARIATION BECAUSE OF MINING RISKS, COMMODITY PRICE OR CURRENCY VARIATIONS Loss of production causing loss of revenue. Use of geology experts, careful attention to regulations, health and safety training, employee dialogue to minimise controllable risks. Affects realised sales value and therefore margins. Regular monitoring and review of forward currency situation. Variations can deliver significant shifts in cash flow. UK property investments used to offset high risk mining operations. 8 London & Associated Properties PLC 2017 STRATEGIC REPORT STRATEGIC REPORT Key performance indicators The Group’s Key Performance Indicators are selected to ensure clear alignment between its strategy and shareholder interests. The KPIs are calculated using data from management reporting systems. STRATEGIC PRIORITY MAXIMISING INCOME – LIKE FOR LIKE PROPERTY INCOME KPI PERFORMANCE To increase the like-for-like income from the property year on year. Like-for-like rental income as a percentage of the prior year rental. The like-for-like rental income has remained unchanged. LIKE-FOR-LIKE INCOME In the continuing difficult trading environment, this is considered satisfactory. MAXIMISING INCOME – OCCUPANCY We aim to maximise the total income in our properties by achieving full occupancy. The ERV of the empty units as a percentage of our total income. Void levels have remained unchanged at 2.06%. CAPITAL STRENGTH – GROWTH IN NET ASSET VALUE PER SHARE Movement in the net assets per share. The net assets per share is the principal measure used by the group for monitoring its performance and is an indicator of the level of reserves available for distribution by way of dividend. The net assets per share increased by 8.91 pence per share or nearly 20% to 53.74p. The strategic realisation of Brixton markets is the main reason for the significant increase this year. This is in accordance with our policy of selling assets when we believe that they have achieved maximum value. 4.0 2.0 0.0 -4.0 -8.0 6.0 4.0 2.0 0.0 75.0 50.0 25.0 0.0 2015 2016 2017 VOIDS 2015 2016 2017 NET ASSETS PER SHARE 2015 2016 2017 London & Associated Properties PLC 2017 9 STRATEGIC REPORT STRATEGIC REPORT Corporate responsibility SUSTAINABLE DEVELOPMENT Bisichi’s Black Wattle continues to strive to conduct business in a safe, environmentally and socially responsible manner. Some highlights of their Health, Safety and Environment performance in 2017: • Black Wattle Colliery recorded one Lost Time Injury during 2017 (2016: One). • No cases of Occupational Diseases were recorded. • Zero claims for the Compensation for Occupational Diseases were submitted. They continue to be compliant and make progress in terms of their Social and Labour Plan and their various BEE initiatives. A fuller explanation of these can be found in Bisichi’s 2017 Financial Statements which are available on their web site: www.bisichi.co.uk footprint boundary are: properties that we manage on behalf of others or are not wholly owned by LAP and emissions are considered non material by the business. Emissions for landlord controlled areas have been calculated based on actual consumption information collected from each shopping centre. Emissions from tenant controlled areas have been calculated based on floor area and energy consumption benchmarks for general retail services in the UK. The Bisichi Group has employed the Operational Control boundary definition to outline the carbon footprint boundary. Included within that boundary are Scope 1 & 2 emissions from coal extraction and onsite mining processes for Black Wattle Colliery. Excluded from the footprint boundary are emission sources considered non material by Bisichi Group, including refrigerant use onsite. GREENHOUSE GAS REPORTING We have reported on all of the emission sources required under the Companies Act 2006 (Strategic Report and Directors’ Reports) Regulations 2013 for the reporting period 1st January 2017 to 31st December 2017. The emissions are detailed in tables 1, 2, 3 and 4 below. We have used the ISO14046-1 Standard (2006) and guidance provided by UK’s Department of Environment and Rural Affairs (DEFRA) on voluntary and mandatory carbon reporting. Emission factors were used from UK Government’s GHG Conversion Factors for Company Reporting 20171. We have employed the Financial Control definition to outline our carbon footprint boundary reporting Scope 1 & 2 emissions only. Emissions from both landlord and tenant controlled areas of LAP owned shopping centres and facilities that fall within the footprint boundary. LAP has landlord controlled areas in Kings Square, Orchard Square, Brewery Street, Shipley and Bridgend. Excluded from our As well as reporting Scope 1 and Scope 2 emissions, legislation requires that at least one intensity ratio is reported for the given reporting period. The intensity figure represented below shows the emissions in tCO2e per thousand pounds revenue. Table 1. landlord & tenant controlled areas Scope 1 emissions Scope 2 emissions EMISSIONS SOURCE Natural gas (tCO2e) Refrigerants (tCO2e) Electricity (tCO2e) Total tCO2e Intensity ratio (tCO2e/£thousand) Table 2. LAP controlled areas Scope 1 emissions Scope 2 emissions EMISSIONS SOURCE Natural gas (tCO2e) Refrigerants (tCO2e) Electricity (tCO2e) Total tCO2e Table 3. Tenant controlled areas Scope 1 emissions Scope 2 emissions EMISSIONS SOURCE Natural gas (tCO2e) Refrigerants (tCO2e) Electricity (tCO2e) Total tCO2e 1. 2017 Guidelines to DEFRA/DECC’s GHG Conversion Factors for Company Reporting, Department for environment, Food and Rural Affairs (DEFRA) and Department for Energy and Climate Change (DECC) 10 London & Associated Properties PLC 2017 2017 71 0 2,938 3,009 0.467 2017 71 0 176 247 2017 - - 2,762 2,762 2016 234 5 3,491 3,730 0.076 2016 234 5 236 475 2016 - - 3,255 3,255 STRATEGIC REPORT Corporate responsibility Table 4. Coal mining carbon footprint Emissions source: Scope 1 Combustion of fuel & operation of facilities Scope 1 Emissions from coal mining activities Scope 2 Electricity, heat, steam and cooling purchased for own use Total Intensity: Intensity 1 Tonnes of CO2 per pound sterling of revenue Intensity 2 Tonnes of CO2 per pound of coal produced 2017 CO2E TONNES 15,575 22,683 11,210 49,468 0.0013 0.038 2016 CO2E TONNES 11,860 22,171 8,530 42,561 0.0019 0.034 ENVIRONMENT United Kingdom The Group’s principal UK activity is property investment, which involves renting premises to retail businesses. We seek to provide those tenants with good quality premises from which they can operate in an efficient and environmentally friendly manner. Where possible, improvements, repairs and replacements are made in an environmentally efficient manner and waste re-cycling arrangements are in place at all of the Company’s locations. South Africa The Bisichi group’s principal activity in South Africa is coal mining. Under the terms of the mine’s Environmental Management Programme approved by the Department of Mineral Resource (“DMR”), Black Wattle undertakes a host of environmental protection activities to ensure that the approved Environmental Management Plan is fully implemented. A performance assessment audit was conducted to verify compliance to their Environmental Management Programme and no significant deviations were found. EMPLOYEE, SOCIAL, COMMUNITY AND HUMAN RIGHTS The Group’s policy is to attract staff and motivate employees by offering competitive terms of employment. The Group provides equal opportunities to all employees and prospective employees including those who are disabled and operates in compliance with all relevant national legislation. DIVERSITY AND EQUALITY The board recognises the importance of diversity, both in its membership, and in the Group's employees. It has a clear policy to promote diversity across the business. The Board considers that the quotas are not appropriate in determining its composition and has therefore chosen not to set targets. All aspects of diversity, including but not limited to gender, are considered at every level of recruitment. Gender diversity of the Board and the Group is set out below. DIRECTORS, EMPLOYEES AND GENDER REPRESENTATION At the year end the LAP Group (excluding Bisichi and Dragon), had 6 directors (6 male, 0 female), 2 senior managers (2 male, 0 female) and 23 employees (12 male, 11 female). BISICHI MINING PLC Bisichi Mining PLC’s group at the year end had 6 directors (6 male, 0 female), 7 senior managers (6 male, 1 female) and 196 employees (143 male, 53 female). Detailed information relating to Bisichi Strategic Report is available in its 2017 financial statements. Approved on behalf of the board of directors Anil Thapar, Finance Director 27 April 2018 London & Associated Properties PLC 2017 11 GOVERNANCE GOVERNANCE Directors & advisors SECRETARY & REGISTERED OFFICE Anil K Thapar FCCA 24 Bruton Place London W1J 6NE AUDITOR RSM UK Audit LLP PRINCIPAL BANKERS Santander UK plc Abbey National Treasury Services plc Europa Capital Mezzanine Ltd SOLICITORS Olswang LLP Pinsent Masons LLP STOCKBROKER Stockdale Securities Limited REGISTRARS & TRANSFER OFFICE Link Asset Services Shareholder Services The Registry 34 Beckenham Road Beckenham Kent BR3 4TU UK telephone: 0871 664 0300 International telephone: +44 371 664 0300 (Calls cost 12p per minute plus your phone company’s access charge. Calls outside the United Kingdom will be charged at the applicable international rate). Lines are open between 9.00am to 5.30pm, Monday to Friday, excluding public holidays in England and Wales. Website: www.linkassetservices.com Email: enquiries@linkgroup.co.uk Company registration number 341829 (England and Wales) WEBSITE www.lap.co.uk E-MAIL admin@lap.co.uk EXECUTIVE DIRECTORS Sir Michael Heller MA FCA* (Chairman) John A Heller LLB MBA (Chief Executive) Anil K Thapar FCCA (Finance Director) NON-EXECUTIVE DIRECTORS Howard D Goldring BSC (ECON) ACA† Howard Goldring is Executive Chairman of Delmore Asset Management Limited which specialises in the discretionary management of investment portfolios for pension funds, charities, family trusts and private clients. He also acts as an advisor providing high level asset allocation advice to family offices and pension schemes, including Tesco Pension Investment Ltd. He has been a member of the LAP Board since July 1992, and has almost 40 years’ experience of the real estate market. He was a director of Baronsmead VCT 2 PLC from 2010-2016, and has specialised in providing many companies with investor relations support. Clive A Parritt FCA CF FIIA #† Clive Parritt joined the board on 1 January 2006. He is a chartered accountant with over 40 years’ experience of providing strategic, financial and commercial advice to businesses of all sizes. He is Chairman of BG Training Limited and a director of Jupiter US Smaller Companies plc. Until April 2016 he was Group Finance Director of Audiotonix Limited (an international manufacturer of audio mixing consoles). He has chaired and been a director of a number of other public and private companies. Clive Parritt was President of the Institute of Chartered Accountants in England and Wales in 2011-12. He is Chairman of the Audit Committee and as Senior Independent Director he chairs the Nomination and Remuneration Committees. Robin Priest MA Robin Priest joined the board on 31 July 2013. He is chairman of private real estate company Property Alliance Group and a senior advisor to Alvarez & Marsal LLP (“A&M”) and to a major listed German real estate investment fund manager. He has more than 36 years’ experience in real estate and structured finance. He was formerly Managing Director of A&M’s real estate practice, advising private sector and public sector clients on both operational and financial real estate matters. Prior to joining A&M, Robin was lead partner for Real Estate Corporate Finance in London with Deloitte LLP and before this he founded and ran a property company backed by private equity. He is also a trustee of London’s Oval House Theatre. * Member of the nomination committee † Member of the audit, remuneration and nomination committees # Senior independent director 12 London & Associated Properties PLC 2017 GOVERNANCE Directors’ report The Directors submit their report and the audited financial statements for the year ended 31 December 2017. STRATEGIC REPORT A comprehensive review and assessment of the Group’s activities during the year as well as its position at the year end and prospects for the forthcoming year are included in the Chairman and Chief Executive’s Statement and the Strategic Report. These reports can be found on pages 2 to 11 and should be read in conjunction with this report. ACTIVITIES The principal activities of the Group during the year were property investment and development, as well as investment in joint ventures and an associated company. The associated company is Bisichi Mining PLC (Bisichi) in which the Company holds a 41.52 per cent interest. Bisichi is listed on the main market of the London Stock Exchange and operates in England and South Africa with subsidiaries which are involved in overseas mining and mining investment. The results, together with the assets and liabilities, of Bisichi are consolidated with those of LAP in accordance with the terms of IFRS 10 even though the Group only has a minority interest – under IFRS 10 the 58% majority interest is disclosed as a “non-controlling interest”. BUSINESS REVIEW AND POST BALANCE SHEET EVENTS Review of the Group’s development and performance A review of the Group’s development and performance can be found below and should be read in conjunction with the Strategic Report on pages 4 to 11. Details of any post balance sheet events are disclosed in Note 32 to the financial statements. FUTURE DEVELOPMENTS The Group continues to look for new opportunities to acquire real estate assets where it feels it can increase value by applying its intensive management skills. At the same time, it seeks to reduce its interest payments on its loans as they expire or where opportunities arise to refinance on better terms. We also seek to improve our existing estate through the continued pursuit of asset management initiatives. PROPERTY ACTIVITIES The Group is a long-term investor in property. It acquires retail properties, actively manages those assets to improve rental income, and thus seeks to enhance the value of its properties over time. In reviewing performance, the principal areas regularly monitored by the Group include: • Rental income – the aim of the Group is to maximise the maintainable income from each property by careful tenant management supported by sympathetic and revenue enhancing development. Income may be affected adversely by the inability of tenants to pay their rent, but careful monitoring of rent collection and tenant quality helps to mitigate this risk. Risk is also minimised by a diversified tenant base, which should limit the impact of the failure of any individual tenant. • Cash flow – allowing for voids, acquisitions, development expenditure, disposals and the impact of operating costs and interest charges, the Group aims to maintain a positive cash flow over time. • Financing costs – the exposure of the Group to interest rate movements is managed partly by the use of swap and cap arrangements (see Note 23 on page 56 for full details of the contracts in place) and also by using loans with fixed terms and interest rates. These arrangements are designed to ensure that our interest costs are known in advance and are always covered by anticipated rental income. Details of key estimates that have been adopted are contained in the accounting policies Note on page 37. • Property valuations – market sentiment and economic conditions have a direct effect on property valuations, which can vary significantly (upwards or downwards) over time. Bearing in mind the long term nature of the Group’s business, valuation changes have little direct effect on the ongoing activities or the income and expenditure of the Group. Tenants generally have long term leases, so rents are unaffected by short term valuation changes. Borrowings are secured against property values and if those values fall very significantly, this could limit the ability of the Group to develop the business using external borrowings. The risk is minimised by trying to ensure that there is adequate cover to allow for fluctuations in value on a short term basis. It continues to be the policy of the Group to realise property assets when the valuation of those assets reaches a level at which the directors consider that the long-term rental yield has been reached. The Group also seeks to acquire additional property investments on an opportunistic basis when the potential rental yields offer scope for future growth. INVESTMENT ACTIVITIES The investments in joint ventures and Bisichi are for the long term. LAP manages the UK property assets of Bisichi. However, the principal activity of Bisichi is overseas mining investment (in South Africa). While IFRS 10 requires the consolidation of Bisichi, the investment is held to generate income and capital growth over the longer term. It is managed independently of LAP and should be viewed by shareholders as an investment and not a subsidiary. The other listed investments are held as current assets to provide the liquidity needed to support the property activities while generating income and capital growth. Investments in property are made through joint ventures when the financing alternatives and spreading of risk make such an approach desirable. DIVIDEND The directors are recommending payment of a final dividend for 2017 of 0.175p per share (2016 0.165p per share) and a special dividend for 2017 of 0.125p (2016: nil). Subject to shareholder approval, the ordinary final dividend and special dividend will be payable on Friday 14 September 2018 to shareholders registered at the close of business on Friday 17 August 2018. London & Associated Properties PLC 2017 13 GOVERNANCE Directors & advisors THE COMPANY’S ORDINARY SHARES HELD IN TREASURY At 31 December 2017, 221,061 (2016: 221,061) ordinary shares were held in Treasury with a market value of £54,160 (2016: £46,422). At the Annual General Meeting (AGM) in June 2017 members renewed the authority for the Company to purchase up to 10 per cent of its issued ordinary shares. The Company will be asking members to renew this authority at the next AGM to be held on Tuesday 19 June 2018. Treasury shares held at 1 January 2017 and 31 December 2017 221,061 Treasury shares are not included in issued share capital for the purposes of calculating earnings per share or net assets per share and they do not qualify for dividends payable. INVESTMENT PROPERTIES The freehold and long leasehold properties of the Company, its subsidiaries and Bisichi were revalued as at 31 December 2017 by independent professional firms of chartered surveyors – Allsop LLP, London (80.69 per cent of the portfolio), Carter Towler, Leeds (16.98 per cent) – and by the Directors (2.34 per cent). The valuations, which are reflected in the financial statements, amount to £78 million (2016: £105.08 million). Investment property of £36.4 million sold in 2018 is stated under current assets, as Assets held for sale. Taking account of prevailing market conditions, the valuation of the properties at 31 December 2017 resulted in an increase of £9.37 million (2016: increase of £0.53 million). The proportion of this revaluation attributable to the Group (net of taxation) is reflected in the consolidated income statement and the consolidated balance sheet. FINANCIAL INSTRUMENTS Note 23 to the financial statements sets out the risks in respect of financial instruments. The board reviews and agrees overall treasury policies, delegating appropriate authority for applying these policies to the Chief Executive and Finance Director. Financial instruments are used to manage the financial risks facing the Group and speculative transactions are prohibited. Treasury operations are reported at each board meeting and are subject to weekly internal reporting. Hedging arrangements are in place for the Company, its subsidiaries and joint ventures in order to limit the effect of higher interest rates upon the Group. Where appropriate, hedging arrangements are covered in the Chairman and Chief Executive’s Statement and the Financial Review. DIRECTORS Sir Michael Heller, J A Heller, A K Thapar, H D Goldring, C A Parritt and R Priest were Directors of the company for the whole of 2017. C A Parritt, J A Heller and A K Thapar are retiring by rotation at the Annual General Meeting in 2018 and offer themselves for re-election. Clive Parritt has been a Director since January 2006 and has a contract of service determinable upon three months’ notice and is the Senior Independent Director and Chairman of the audit, nomination and remuneration committees. He is a Chartered Accountant with over 40 years’ experience in providing strategic, financial and commercial advice to business. His financial knowledge and broad commercial experience are of significant benefit to the business. The board has considered the re-appointment of Clive Parritt and recommends his re-election as a Director. John Heller has been a Director since 1998 and was appointed Chief Executive in September 2001. He has a contract of employment determinable upon twelve months’ notice. The board has considered the re-appointment of John Heller and recommends his re-election as a Director. Anil Thapar has been Finance Director since January 2015 and is also the Company Secretary. He has a contract of employment determinable upon three months’ notice. Anil Thapar is a Chartered Certified Accountant and has worked at LAP since November 2005. The board has considered the re-appointment of Anil Thapar and recommends his re-election as a Director. DIRECTORS’ INTERESTS The interests of the Directors in the ordinary shares of the Company, including family and trustee holdings, where appropriate, can be found on page 22 of the Annual Remuneration Report. SUBSTANTIAL SHAREHOLDINGS At 31 December 2017, Sir Michael Heller and his family had an interest in 48.08 million shares of the Company, representing 56.35 per cent of the issued share capital net of treasury shares (2016: 48.08 million shares representing 56.35 per cent). Cavendish Asset Management Limited had an interest in 7,909,464 shares representing 9.27 per cent of the issued share capital of the Company (2016: 8,173,875 shares representing 9.58 per cent). James Hyslop had an interest in 4,846,258 shares representing 5.68 per cent of the issued share capital of the Company (2016: 4,456,258 shares representing 5.22 per cent). The Company does not consider that the Heller family have a controlling share interest irrespective of the number of shares held as no individual party holds a majority and there is no legal obligation for shareholders to act in concert. The Directors do not consider that any single party has control. The Company is not aware of any other holdings exceeding 3 per cent of the issued share capital. 14 London & Associated Properties PLC 2017 GOVERNANCE Directors & advisors SHARE CAPITAL AND TAKEOVER DIRECTIVE The Company has one class of share capital, namely ordinary shares. Each ordinary share carries one vote. All the ordinary shares rank pari passu. There are no securities issued by the Company which carry special rights with regard to control of the Company. The identity of all significant direct or indirect holders of securities in the Company and the size and nature of their holdings is shown in “Substantial Shareholdings” above. The rights of the ordinary shares to which the HMRC approved Share Incentive Plan relates are exercisable by the trustees on behalf of the employees. There are no restrictions on voting rights or on the transfer of ordinary shares in the Company, save in respect of treasury shares. The rules governing the appointment and replacement of Directors, alteration of the articles of association of the Company and the powers of the Company’s Directors accord with usual English company law provisions. Each Director is re-elected at least every three years. The Company has requested authority from shareholders to buy back its own ordinary shares and there will be a resolution to renew the authority at this year’s AGM (Resolution 12). The Company is not party to any significant agreements that take effect, alter or terminate upon a change of control of the Company following a takeover bid. The Company is not aware of any agreements between holders of its ordinary shares that may result in restrictions on the transfer of its ordinary shares or on voting rights. There are no agreements between the Company and its Directors or employees providing for compensation for loss of office or employment that occurs because of a takeover bid. STATEMENT AS TO DISCLOSURE OF INFORMATION TO THE AUDITOR The Directors in office at the date of approval of the financial statements have confirmed that, so far as they are aware, there is no relevant audit information of which the auditor is unaware. Each of the Directors has confirmed that they have taken all the steps that they ought to have taken as a Director in order to make them aware of any relevant audit information and to establish that it has been communicated to the auditor. INDEMNITIES AND INSURANCE The Articles of Association of the company provide for it to indemnify, to the extent permitted by law, directors and officers (excluding the Auditor) of the company, including officers of subsidiaries and associated companies, against liabilities arising from the conduct of the Group’s business. The indemnities are qualifying third party indemnity provisions of the Companies Act 2006 and each of these qualifying third party indemnities was in force during the course of the financial year ended 31 December 2017 and as at the date of this Directors’ report. No amount has been paid under any of these indemnities during the year. The Group maintains Directors and officers insurance, which is reviewed annually and is considered to be adequate by the Company and its insurance advisers. DONATIONS No political donations were made during the year (2016: £Nil). £1,000 of donations for charitable purposes were made during the year (2016: £2,000). CORPORATE RESPONSIBILITY Environment The environmental considerations of the group’s South African coal mining operations are covered in the Bisichi Mining PLC Strategic Report. The group’s UK activities are principally property investment whereby premises are provided for rent to retail businesses. The group seeks to provide those tenants with good quality premises from which they can operate in an efficient and environmentally efficient manner and waste re-cycling arrangements are in place at all the company’s locations. Greenhouse gas emissions Details of the group’s greenhouse gas emissions for the year ended 31 December 2017 can be found on pages 10 and 11 of the Strategic Report. Employment The group’s policy is to attract staff and motivate employees by offering competitive terms of employment. The group provides equal opportunities to all employees and prospective employees including those who are disabled. The Bisichi Mining PLC Strategic Report gives details of the group’s activities and policies concerning the employment, training, health and safety and community support and social development concerning the group’s employees in South Africa. GOING CONCERN The directors have reviewed the cash flow forecasts of the Group and the underlying assumptions on which they are based. The Group’s business activities, together with the factors likely to affect its future development, are set out in the Chairman’s and Chief Executive’s Statement and Financial Review. In addition, Note 23 to the financial statements sets out the Group’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposure to credit risk and liquidity risk. With secured long term banking facilities, sound financial resources and long term leases in place the Directors believe it remains appropriate to adopt the going concern basis of accounting in preparing the annual financial statements. The Bisichi directors continue to adopt the going concern basis of accounting in preparing the Bisichi annual financial statements. CORPORATE GOVERNANCE The Corporate governance report can be found on pages 17 and 18 of the annual report and accounts. ANNUAL GENERAL MEETING The Annual General Meeting will be held at the Royal Automobile Club, 89 Pall Mall, London, SW1Y 5HS on Tuesday 19 June 2018 at 10.00 a.m. Items 1 to 10 and 14 will be proposed as ordinary resolutions. More than 50 per cent. of shareholders’ votes cast at the meeting must be in favour for those ordinary resolutions to be passed. Items 11 to 13 will be proposed as special resolutions. At least 75 per cent. of shareholders’ votes cast at the meeting must be in favour for those special resolutions to be passed. The Directors consider that all of the resolutions (other than 14), to be put to the meeting are in the best interests of the Company and its shareholders as a whole and accordingly the board unanimously recommends that shareholders vote in favour of all of the resolutions, other than 14, as the Directors intend to do in respect of their own beneficial holdings of ordinary shares. The Directors do not consider resolution 14 to be in the best interests of the Company and its shareholders as a whole. The Directors recommend that shareholders vote against this resolution. Please note that the following paragraphs are only summaries of certain of the resolutions to be proposed at the Annual General Meeting and do not represent the full text of the resolutions. You should therefore read this section in conjunction with the full text of the resolutions contained in the notice of Annual General Meeting which accompanies this Directors’ Report. London & Associated Properties PLC 2017 15 GOVERNANCE Directors & advisors ORDINARY RESOLUTIONS Resolution 10 – Authority to allot securities Paragraph 10.1.1 of Resolution 10 would give the Directors the authority to allot shares in the Company and grant rights to subscribe for or convert any security into shares in the Company up to an aggregate nominal value of £2,836,478. This represents approximately 1/3 (one third) of the ordinary share capital of the Company in issue (excluding treasury shares) as at 26 April 2018 (being the last practicable date prior to the publication of this Directors’ Report). In line with guidance issued by the Investment Association (‘IA’), paragraph 10.1.2 of Resolution 10 would give the directors the authority to allot shares in the Company and grant rights to subscribe for or convert any security into shares in the Company up to a further aggregate nominal value of £2,836,478, in connection with an offer by way of a rights issue. This amount represents approximately 1/3 (one third) of the ordinary share capital of the Company in issue (excluding treasury shares) as at 26 April 2018 (being the last practicable date prior to the publication of this Directors’ Report). The Directors’ authority will expire on the earlier of 31 August 2019 or the next AGM. The Directors do not currently intend to make use of this authority. However, if they do exercise the authority, the Directors intend to follow best practice as recommended by the IA regarding its use (including as regards the Directors standing for re-election in certain cases). SPECIAL RESOLUTIONS The following special resolutions will be proposed at the Annual General Meeting: Resolution 11 – Disapplication of pre-emption rights Under English company law, when new shares are allotted or treasury shares are sold for cash (otherwise than pursuant to an employee share scheme) they must first be offered at the same price to existing shareholders in proportion to their existing shareholdings. This special resolution gives the Directors authority, for the period ending on the date of the next annual general meeting to be held in 2019, to: (a) allot shares of the Company and sell treasury shares for cash in connection with a rights issue or other pre-emptive offer; and (b) otherwise allot shares of the Company, or sell treasury shares, for cash up to an aggregate nominal value of £425,472 representing, in accordance with institutional investor guidelines, approximately 5 per cent. of the total ordinary share capital in issue as at 26 April 2018 (being the last practicable date prior to the publication of this Directors’ Report) in each case as if the pre-emption rights in English company law did not apply. Save in respect of issues of shares in respect of employee share schemes and share dividend alternatives, the Directors do not currently intend to make use of these authorities. The board intends to adhere to the provisions in the Pre-emption Group’s Statement of Principles not to allot shares for cash on a non-pre-emptive basis in excess of an amount equal to 7.5 per cent. of the Company’s ordinary share capital within a rolling three-year period without prior consultation with shareholders. The Directors’ authority will expire on the earlier of 31 August 2019 or the date of next AGM. 16 London & Associated Properties PLC 2017 Resolution 12 – Purchase of own ordinary shares The effect of Resolution 12 would be to renew the Directors’ current authority to make limited market purchases of the Company’s ordinary shares of 10 pence each. The power is limited to a maximum aggregate number of 8,509,435 ordinary shares (representing approximately 10 per cent. of the Company’s issued share capital as at 26 April 2018 (being the latest practicable date prior to publication of this Directors’ Report)). The minimum price (exclusive of expenses) which the Company would be authorised to pay for each ordinary share would be 10 pence (the nominal value of each ordinary share). The maximum price (again exclusive of expenses) which the Company would be authorised to pay for an ordinary share is an amount equal to 105 per cent. of the average market price for an ordinary share for the five business days preceding any such purchase. The authority conferred by Resolution 12 will expire at the conclusion of the Company’s next annual general meeting to be held in 2019 or 15 months from the passing of the resolution, whichever is the earlier. Any purchases of ordinary shares would be made by means of market purchases through the London Stock Exchange. If granted, the authority would only be exercised if, in the opinion of the Directors, to do so would result in an increase in earnings per share or asset values per share and would be in the best interests of shareholders generally. In exercising the authority to purchase ordinary shares, the Directors may treat the shares that have been bought back as either cancelled or held as treasury shares (shares held by the Company itself). No dividends may be paid on shares which are held as treasury shares and no voting rights are attached to them. Resolution 13 – Notice of General Meetings Resolution 13 shall be proposed to allow the Company to call general meetings (other than an Annual General Meeting) on 14 clear days’ notice. A resolution in the same terms was passed at the Annual General Meeting in 2017. The notice period required by the Companies Act 2006 for general meetings of the Company is 21 days, unless shareholders approve a shorter notice period, which cannot however be less than 14 clear days. Annual General Meetings must always be held on at least 21 clear days’ notice. It is intended that the flexibility offered by this resolution will only be used for time-sensitive, non-routine business and where merited in the interests of shareholders as a whole. The approval will be effective until the Company’s next Annual General Meeting, when it is intended that a similar resolution will be proposed. OTHER MATTERS RSM UK Audit LLP has expressed its willingness to continue in office as auditor. A proposal will be made at the Annual General Meeting for its reappointment. By order of the board Anil Thapar Secretary 27 April 2018 24 Bruton Place London W1J 6NE GOVERNANCE Corporate Governance The Company has adopted the Corporate Governance Code for Small and Mid-Size Quoted Companies (the QCA Code) published by the Quoted Companies Alliance. The QCA Code provides governance guidance to small and mid-size quoted companies. The paragraphs below set out how the Company has applied this guidance during the year. The Company has complied with the QCA Code throughout the year. PRINCIPLES OF CORPORATE GOVERNANCE The board promotes good corporate governance in the areas of risk management and accountability as a positive contribution to business prosperity. The board endeavors to apply corporate governance principles in a sensible and pragmatic fashion having regard to the circumstances of the business. The key objective is to enhance and protect shareholder value. BOARD STRUCTURE During the year the board comprised the Chairman, the Chief Executive, one other executive Director and three non-executive Directors. Their details appear on page 12 The board is responsible to shareholders for the proper management of the Group. The Directors’ responsibilities statement in respect of the accounts is set out on page 27. The non-executive Directors have a particular responsibility to ensure that the strategies proposed by the executive Directors are fully considered. To enable the board to discharge its duties, all Directors have full and timely access to all relevant information and there is a procedure for all Directors, in furtherance of their duties, to take independent professional advice, if necessary, at the expense of the Group. The board has a formal schedule of matters reserved to it and normally has eleven regular meetings scheduled each year. Additional meetings are held for special business when required. The board is responsible for overall Group strategy, approval of major capital expenditure and consideration of significant financial and operational matters. The board committees, which have written terms of reference, deal with specific aspects of the Group’s affairs: • The nomination committee is chaired by C A Parritt and comprises one other non-executive Director and the executive Chairman. The committee is responsible for proposing candidates for appointment to the board, having regard to the balance and structure of the board. In appropriate cases recruitment consultants may be used to assist the process. All Directors are subject to re-election at a maximum of every three years. • The remuneration committee is responsible for making recommendations to the board on the Company’s framework of executive remuneration and its cost. The committee determines the contract terms, remuneration and other benefits for each of the executive directors, including performance related bonus schemes, pension rights and compensation payments. The board itself determines the remuneration of the non-executive Directors. The committee comprises two non-executive Directors and it is chaired by C A Parritt. The executive Chairman of the board is normally invited to attend. The Annual Remuneration Report is set out on pages 20 to 23. • The audit committee comprises two non-executive Directors and is chaired by C A Parritt. The audit committee report, with its terms of reference, is set out on page 26 The Chief Executive and Finance Director are normally invited to attend. BOARD AND BOARD COMMITTEE MEETINGS HELD IN 2017 The number of regular meetings during the year and attendance was as follows: Sir Michael Heller Board Nomination committee J A Heller A K Thapar C A Parritt H D Goldring R Priest Remuneration committee Board Audit committee Board Audit committee Board Audit committee Nomination committee Remuneration committee Board Audit committee Nomination committee Remuneration committee Board MEETINGS HELD 10 MEETINGS ATTENDED 10 1 1 10 2 10 2 10 2 1 1 10 2 1 1 10 1 1 10 2 9 2 10 2 1 1 10 2 1 1 7 PERFORMANCE EVALUATION – BOARD, BOARD COMMITTEES AND DIRECTORS The performance of the board as a whole, its committees and the non-executive Directors is assessed by the Chairman and the Chief Executive and is discussed with the senior independent non- executive Director. Their recommendations are discussed at the nomination committee prior to proposals for re-election being recommended to the board. The performance of executive Directors is discussed and assessed by the remuneration committee. The senior independent Director meets regularly with the Chairman, executive and non-executive Directors individually outside of formal meetings. The Directors will take outside advice in reviewing performance but have not found this to be necessary to date. London & Associated Properties PLC 2017 17 GOVERNANCE Corporate Governance INDEPENDENT DIRECTORS The senior independent non-executive Director is C A Parritt. The other independent non-executive Directors are H D Goldring and R Priest. Delmore Holdings Limited (Delmore) is a Company in which H D Goldring is the majority shareholder and the Executive Chairman. Delmore provides consultancy services to the Company on a fee paying basis. R Priest provides services to the Company on a fee paying basis. C A Parritt also provides some advisory services as part of his accounting practice. The board encourages all three non-executive Directors to act independently and does not consider that length of service of any individual non-executive Director, nor any connection with the above mentioned consultancy and advisory companies, has resulted in the inability or failure to act independently. In the opinion of the board the three non-executive Directors continue to fulfil their roles as independent non-executive Directors. The independent Directors exchange views regularly between board meetings and meet when required to discuss corporate governance and other issues concerning the Group. INTERNAL CONTROL The Directors are responsible for the Group’s system of internal control and for reviewing its effectiveness at least annually, and for the preparation and review of its financial statements. The board has designed the Group’s system of internal control in order to provide the Directors with reasonable assurance that assets are safeguarded, that transactions are authorised and properly recorded and that material errors and irregularities are either prevented or would be detected within a timely period. However, no system of internal control can eliminate the risk of failure to achieve business objectives or provide absolute assurance against material misstatement or loss. The key elements of the control system in operation are: • The board meets regularly on full notice with a formal schedule of matters reserved for its decision and has put in place an organisational structure with clearly defined lines of responsibility and with appropriate delegation of authority; • There are established procedures for planning, approval and monitoring of capital expenditure and information systems for monitoring the Group’s financial performance against approved budgets and forecasts; 18 London & Associated Properties PLC 2017 • The departmental heads are required annually to undertake a full assessment process to identify and quantify the risks that face their departments and functions, and assess the adequacy of the prevention, monitoring and modification practices in place for those risks. In addition, regular reports about significant risks and associated control and monitoring procedures are made to the executive Directors. The process adopted by the Group accords with the guidance contained in the document “Internal Control Guidance for Directors on the Combined Code” issued by the Institute of Chartered Accountants in England and Wales. The audit committee receives reports from external auditors and from executive Directors of the Group. During the period the audit committee has reviewed the effectiveness of the system of internal control as described above. The board receives periodic reports from all committees. • There are established procedures for the presentation and review of the financial statements and the Group has in place an organisational structure with clearly defined lines of responsibility and with appropriate delegation of authority. There are no internal control issues to report in the annual report and financial statements for the year ended 31 December 2017. Up to the date of approval of this report and the financial statements, the board has not been required to deal with any related material internal control issues. The Directors confirm that the board has reviewed the effectiveness of the system of internal control as described during the period. COMMUNICATION WITH SHAREHOLDERS Prompt communication with shareholders is given high priority. Extensive information about the Group and its activities is provided in the Annual Report. In addition, a half-year report is produced for each financial year and published on the Company’s website. The Company’s website www.lap.co.uk is updated promptly with announcements and Annual Reports upon publication. Copies from previous years are also available on the website. The Company’s share price is published daily in the Financial Times. The share price history and market information can be found at http://www.londonstockexchange.com/prices-and-markets/markets/ prices.htm. The company code is LAS. There is a regular dialogue with the Company’s stockbrokers and institutional investors. Enquiries from individuals on matters relating to their shareholdings and the business of the Group are dealt with promptly and informatively. The Company’s website is under continuous development to enable better communication with both existing and potential new shareholders. THE BRIBERY ACT 2010 The Company is committed to acting ethically, fairly and with integrity in all its endeavours and compliance with the code is monitored closely. GOVERNANCE Governance Statement by the Chairman of The Remuneration Committee The remuneration committee is pleased to present its report for the year ended 31 December 2017. The report is presented in two parts in accordance with the regulations. The first part is the Annual Remuneration Report which details remuneration awarded to Directors and non-executive Directors during the year. The shareholders will be asked to approve the Annual Remuneration Report as an ordinary resolution (as in previous years) at the AGM in June 2018. The second part is the Remuneration Policy which details the remuneration policy for Directors. This policy was subject to a binding vote by shareholders at the AGM in 2017 and was approved for a 3 year period commencing from then. The committee reviewed the existing policy and deemed that no changes were necessary to the current arrangements. Both of the reports have been prepared in accordance with The Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013. The Company’s auditor, RSM UK Audit LLP is required by law to audit certain disclosures and where disclosures have been audited that is indicated. C A Parritt Chairman, Remuneration Committee 27 April 2018 London & Associated Properties PLC 2017 19 GOVERNANCE Annual remuneration report THE FOLLOWING INFORMATION HAS BEEN AUDITED Single total figure of remuneration for the year ended 31 December 2017 SALARY AND FEES £'000 BONUSES £'000 BENEFITS £'000 PENSIONS £'000 TOTAL BEFORE SHARE OPTIONS £'000 SHARE OPTIONS £'000 TOTAL 2017 £'000 Executive Directors Sir Michael Heller* Sir Michael Heller - Bisichi J A Heller A K Thapar Non-executive Directors H D Goldring*+ C A Parritt*+ R Priest* Total 7 75 333 157 572 17 38 35 90 662 - - 100 30 130 - - - - 130 49 - 37 9 95 7 - - 7 102 - - 17 10 27 - - - - 27 Single total figure of remuneration for the year ended 31 December 2016 Executive Directors Sir Michael Heller* Sir Michael Heller - Bisichi J A Heller A K Thapar Non-executive Directors H D Goldring*+ C A Parritt*+ R Priest* Total * Note 28 “Related party transactions” SALARY AND FEES £'000 BONUSES £'000 BENEFITS £'000 PENSIONS £'000 7 75 333 152 567 32 38 51 121 688 - - 166 35 201 - - - - 201 43 - 40 11 94 5 - - 5 99 - - 30 15 45 - - - - 45 + Members of the remuneration committee for years ended 31 December 2016 and 31 December 2017 Benefits include the provision of car, health and other insurance and subscriptions. 56 75 487 206 824 24 38 35 97 921 TOTAL BEFORE SHARE OPTIONS £'000 50 75 569 213 907 37 38 51 126 1,033 n/a n/a n/a n/a - n/a n/a n/a - - 56 75 487 206 824 24 38 35 97 921 SHARE OPTIONS £'000 TOTAL 2016 £'000 n/a n/a n/a n/a - n/a n/a n/a - - 50 75 569 213 907 37 38 51 126 1,033 Sir Michael Heller is a director of Bisichi Mining PLC, (a subsidiary for IFRS 10 purposes) and received a salary from that company of £75,000 (2016: £75,000) for services. Although Sir Michael Heller receives reduced remuneration in respect of his services to LAP, the Company does supply office premises, property management, general management, accounting and administration services for a number of companies in which Sir Michael Heller has an interest. The board estimates that the annual value of these services, if supplied to a third party, would have been £300,000 (2016: £300,000). Further details of these services are set out in Note 28 to the financial statements “Related party transactions”. J A Heller is a director of Dragon Retail Properties Limited, (a subsidiary for IFRS 10 purposes) and received benefits from that company of £10,698 (2016: £11,336) for services. This is included in the remuneration figures disclosed above. The remuneration figures disclosed for H D Goldring include fees paid to his company, Delmore Holdings Limited for consultancy services provided to the Group. This is detailed in Note 28 to the financial statements. The remuneration figures for C A Parritt include fees paid to his accountancy practice for consultancy services provided to the Group. This is detailed in Note 28 to the financial statements. R Priest provides consultancy services to the Group. This is detailed in Note 28 to the financial statements. 20 London & Associated Properties PLC 2017 GOVERNANCE Annual remuneration report Summary of directors’ terms Executive Directors Sir Michael Heller John Heller Anil Thapar Non-executive Directors H D Goldring C A Parritt R Priest DATE OF CONTRACT UNEXPIRED TERM NOTICE PERIOD 1 January 1971 1 May 2003 1 January 2015 1 July 1992 1 January 2006 31 July 2013 Continuous Continuous Continuous Continuous Continuous Continuous 6 months 12 months 3 months 3 months 3 months 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 £17,000 and £10,000 a year). There are no final salary schemes in operation. No pension costs are incurred on behalf of non-executive Directors. SHARE INCENTIVE PLAN (SIP) In 2006 the Directors set up an HMRC approved share incentive plan (SIP). The purpose of the plan, which is open to all eligible LAP executive Directors and head office based staff, is to enable them to acquire shares in the Company and give them a continuing stake in the Group. The SIP comprises four types of share – (1) free shares under which the Company may award shares of up to the value of £3,000 each year, (2) partnership shares, under which members may save up to £1,500 per annum to acquire shares, (3) matching shares, through which the Company may award up to two shares for each share acquired as a partnership share, and (4) dividend shares, acquired from dividends paid on shares within the SIP. 1. Free shares: No free shares were issued for 2017 bonuses or for 2016 bonuses. 2. Partnership shares: No partnership shares were issued between November 2016 and October 2017. 3. Matching shares: The partnership share agreements for the year to 31 October 2017 provide for two matching shares to be awarded free of charge for each partnership share acquired. No partnership shares were acquired in 2017 (2016: nil). Matching shares will usually be forfeited if a member leaves employment in the Group within five years of their grant. 4. Dividend shares: Dividends on shares acquired under the SIP will be utilised to acquire additional shares. Accumulated dividends received on shares in the SIP to 31 December 2017 amounted to £Nil (2016: £602). Dividend shares issued: Directors: J A Heller A K Thapar Staff Total at 31 December NUMBER OF MEMBERS NUMBER OF SHARES VALUE OF SHARES 2017 2016 2017 2016 - - - - 1 1 6 8 - - - - 402 495 1,934 2,831 2017 £ - - - - 2016 £ 85 105 412 602 The SIP is set up as an employee benefit trust. The trustee is London & Associated Securities Limited, a wholly owned subsidiary of LAP, and all shares and dividends acquired under the SIP will be held by the trustee until transferred to members in accordance with the rules of the SIP. SHARE OPTION SCHEMES The Company has an HMRC approved scheme (Approved Scheme). It was set up in 1986 in accordance with HMRC rules to gain HMRC approved status which gave the members certain tax advantages. There are no performance criteria for the exercise of options under the Approved Scheme, as this was set up before such requirements were considered to be necessary. No Director has any options outstanding under the Approved Scheme nor were any options granted under the Approved Scheme for the year ended 31 December 2017. A share option scheme known as the “Non-approved Executive Share Option Scheme” (Unapproved Scheme) which does not have HMRC approval was set up during 2000. At 31 December 2017 there were no options to subscribe for ordinary shares outstanding. The exercise of options under the Unapproved Scheme is subject to the satisfaction of objective performance conditions specified by the remuneration committee which conforms to institutional shareholder guidelines and best practice provisions. Further details of this scheme are set out in Note 26 “Share Capital” to the financial statements. London & Associated Properties PLC 2017 21 GOVERNANCE Annual remuneration report PAYMENTS TO PAST DIRECTORS No payments were made to past Directors in the year ended 31 December 2017. PAYMENTS FOR LOSS OF OFFICE No payments for loss of office were made in the year ended 31 December 2017. STATEMENT OF DIRECTORS’ SHAREHOLDING AND SHARE INTEREST Directors’ interests The interests of the Directors in the ordinary shares of the Company, including family and trustee holdings, where appropriate, were as follows: Sir Michael Heller H D Goldring J A Heller C A Parritt R Priest A K Thapar BENEFICIAL INTERESTS NON-BENEFICIAL INTERESTS 31 DEC 17 5,753,541 19,819 1,867,393 36,168 - 120,495 1 JAN 17 6,053,541 19,819 1,867,393 36,168 - 120,495 31 DEC 17 19,277,931 - †14,073,485 - - - 1 JAN 17 19,277,931 - †14,073,485 - - - †These non-beneficial holdings are duplicated with those of Sir Michael Heller. The beneficial holdings of Directors shown above include their interests in the Share Incentive Plan. THE FOLLOWING INFORMATION IS UNAUDITED: The graph illustrates the Company’s performance as compared with a broad equity market index over a five year period. Performance is measured by total shareholder return. The directors have chosen the FTSE All Share – Total Return Index as a suitable index for this comparison as it gives an indication of performance against a large spread of quoted companies. The middle market price of London & Associated Properties PLC ordinary shares at 31 December 2017 was 24.50p (2016: 21p). During the year the share middle market price ranged between 18.25p and 24.50p. Total Shareholder Return 220 200 180 160 140 120 100 80 31/12/2012 31/12/2013 31/12/2014 31/12/2015 31/12/2016 31/12/2017 –– London & Associated Properties –– FTSE All Share Index 22 London & Associated Properties PLC 2017 GOVERNANCE Annual remuneration report REMUNERATION OF THE CHIEF EXECUTIVE OVER THE LAST TEN YEARS YEAR 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 CEO J A Heller J A Heller J A Heller J A Heller J A Heller J A Heller J A Heller J A Heller J A Heller J A Heller CHIEF EXECUTIVE SINGLE TOTAL FIGURE OF REMUNERATION £'000 487 569 762 835 716 417 671 577 982 688 ANNUAL BONUS PAYMENT AGAINST MAXIMUM OPPORTUNITY* % 11% 18% 41 % 49 % n/a n/a n/a n/a n/a n/a LONG-TERM INCENTIVE VESTING RATES AGAINST MAXIMUM OPPORTUNITY* % n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a *There were no formal criteria or conditions to apply in determining the amount of bonus payable or the number of shares to be issued prior to 2014. PERCENTAGE CHANGE IN CHIEF EXECUTIVE’S REMUNERATION (AUDITED) The table below shows the percentage change in Chief Executive remuneration for the prior year compared to the average percentage change for all other Head Office based employees. To provide a meaningful comparison, the same group of employees (although not necessarily the same individuals) appears in the 2016 and 2017 group. The remuneration committee chose head office based employees as the comparator group as this group forms the closest comparator group. Base salary and allowances Taxable benefits Annual bonus Total CHIEF EXECUTIVE £'000 HEAD OFFICE EMPLOYEES £'000 2017 333 37 100 470 2016 333 40 166 539 % CHANGE 0% (7.5%) (39.75%) (12.8%) 2017 643 81 80 804 2016 692 77 97 866 % CHANGE (7.1%) 5.2% (17.5%) (7.2%) RELATIVE IMPORTANCE OF SPEND ON PAY The total expenditure of the Group on remuneration to all employees (Note 29 refers) is shown below: Employee Remuneration Distributions to shareholders STATEMENT OF IMPLEMENTATION OF REMUNERATION POLICY The policy was approved at the AGM in June 2017 and was effective from 6 June 2017. The vote on the remuneration policy is binding in nature. The Company may not then make a remuneration payment or payment for loss of office to a person who is, is to be, or has been a director of the Company unless that payment is consistent with the approved remuneration policy, or has otherwise been approved by a resolution of members. It is to be presented for approval at the forthcoming AGM. 2017 £'000 8,113 141 2016 £'000 7,173 136 CONSIDERATION BY THE DIRECTORS OF MATTERS RELATING TO DIRECTORS’ REMUNERATION The Remuneration Committee considered the executive Directors’ remuneration and the board considered the non-executive Directors’ remuneration in the year ended 31 December 2017. No increases were awarded and no external advice was taken in reaching this decision. SHAREHOLDER VOTING At the Annual General Meeting on 6 June 2017, there was an advisory vote on the resolution to approve the Remuneration Report, other than the part containing the remuneration policy. In addition, on 6 June 2017, there was a binding vote on the resolution to approve the Remuneration Policy. The results are detailed below: Resolution to approve the Remuneration Report Resolution to approve the Remuneration Policy % OF VOTES FOR 83.16 83.14 % OF VOTES AGAINST 0.18 16.69 NUMBER OF VOTES WITHHELD 9,765,315 89,602 London & Associated Properties PLC 2017 23 GOVERNANCE Remuneration policy INTRODUCTION Set out below is the LAP Group policy on directors’ remuneration (excluding Bisichi). This policy was approved at the 2017 AGM and it is effective from 6 June 2017. Unless changed it will be presented next for approval at the AGM in 2020. FUTURE POLICY TABLE 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 PURPOSE Pension ELEMENT Executive directors Base salary To recognise: Skills Responsibility Accountability Experience Value To provide competitive retirement benefits Benefits To provide a competitive benefits package Annual bonus To reward and incentivise POLICY OPERATION OPPORTUNITY AND PERFORMANCE CONDITIONS Considered by remuneration committee on appointment Set at a level considered appropriate to attract, retain, motivate and reward the right individuals Reviewed annually whenever there is a change There is no prescribed maximum salary or maximum rate of increase of role or operational responsibility Paid monthly in cash No individual director will be awarded a base salary in excess of £700,000 a year No specific performance conditions are attached to base salaries Company contribution offered at up to 10% of base salary as part of overall remuneration package Contractual benefits include: Car or car allowance Group health cover Death in service cover Permanent health insurance In assessing the performance of the executive team, and in particular to determine whether bonuses are merited the remuneration committee takes into account the overall performance of the business, as well as individual contribution to the business in the period The contribution payable by the Company is Company contribution offered at up to 10% of base salary as part of overall included in the director’s contract of employment remuneration package Paid into money purchase schemes No specific performance conditions are attached to pension contributions The committee retains the discretion to approve The costs associated with benefits offered are closely controlled and reviewed on an changes in contractual benefits in exceptional circumstances or where factors outside the control of the Group lead to increased costs (e.g. medical inflation) annual basis No director will receive benefits of a value in excess of 30% of their base salary No specific performance conditions are attached to contractual benefits The remuneration committee determines the level of bonus on an annual basis The current maximum bonus will not exceed 200% of base salary in any one year but the remuneration committee reserves the power to award up to 300% in an In assessing performance consideration is given exceptional year to the level of net rental income, cash flow, voids, Performance conditions will be assessed on an annual basis The performance measures applied may be financial, non-financial, corporate, divisional or individual and in such proportion as the remuneration committee considers appropriate realised development gains and income from managing joint ventures. Achieved results are then compared with expectation taking account of market conditions Bonuses are generally offered in cash or shares Offered at appropriate times by the remuneration committee Entitlements to share options granted under the Approved Option scheme are not subject to performance criteria. Share Options granted under the Unapproved Scheme are subject to the performance criteria specified in the Scheme rules The aggregate number of shares over which options may be granted under all of the company’s option schemes (including any options and awards granted under the company’s employee share plans) in any period of ten years, will not exceed, at the time of grant, 10 % of the ordinary share capital of the company from time to time Share options will be offered by the remuneration committee as appropriate in ‘Free Shares’ under the SIP scheme rules Reviewed annually No individual non-executive director will be awarded a base salary in excess of £40,000 a year No performance conditions are attached to base salaries The committee retains the discretion to approve The costs associated with benefits offered are closely controlled and reviewed on an changes in contractual benefits in exceptional circumstances or where factors outside the control of the Group lead to increased costs (e.g. annual basis medical inflation) No non-executive director will receive benefits in excess of £10,000 a year No specific performance conditions are attached to contractual benefits Share options To provide executive directors with a long-term interest in the company Share options may be granted under existing schemes (see page 21) Where it is necessary to attract, retain, motivate and reward the right individuals, the directors may establish new schemes to replace any expired schemes Share incentive plan (SIP) To offer a shorter term incentive in the company and to give directors a stake in the group Non-executive directors Base salary To recognise: Skills Responsibility Experience Risk Value Pension Benefits Share options Offered to executive directors and head office staff Maximum participation levels are set by HMRC Of any bonus awarded, Directors may opt to have maximum of £3,000 per year paid Considered by the board on appointment Set at a level considered appropriate to attract, retain and motivate the individual Experience and time required for the role are considered on appointment No pension offered No benefits offered except to one non-executive director who is eligible for health cover (see annual remuneration report page 20) Non-executive directors do not participate in the share option schemes Notes to the Remuneration Policy The remuneration committee considers the performance measures outlined in the table above to be appropriate measures of performance and that the KPIs chosen align the interests of the directors and shareholders. 24 London & Associated Properties PLC 2017 GOVERNANCE Remuneration policy • The LAP Group’s general aim of seeking to reward all employees fairly according to the nature of their role and their performance • Remuneration packages offered to similar companies within the same sector • The need to align the interests of shareholders as a whole with the long-term growth of the Group; and • The need to be flexible and adjust with operational changes throughout the term of this policy The remuneration of non-executive directors is determined by the board, and takes into account additional remuneration for services outside the scope of the ordinary duties of non-executive directors. FUTURE POLICY TABLE ELEMENT PURPOSE Executive directors Base salary To recognise: Skills Responsibility Accountability Experience Value Pension To provide competitive retirement benefits Company contribution offered at up to 10% of base salary as part of Benefits To provide a competitive benefits package Contractual benefits include: overall remuneration package Car or car allowance Group health cover Death in service cover Permanent health insurance Annual bonus To reward and incentivise In assessing the performance of the executive team, and in particular to determine whether bonuses are merited the remuneration committee takes into account the overall performance of the business, as well as individual contribution to the business in the period Share options To provide executive directors with a long-term interest in the company Share options may be granted under existing schemes (see page 21) Where it is necessary to attract, retain, motivate and reward the right individuals, the directors may establish new schemes to replace any expired schemes Share incentive plan (SIP) To offer a shorter term incentive in the company and to give directors a stake in the group Non-executive directors Base salary To recognise: Skills Responsibility Experience Risk Value Pension Benefits Share options Experience and time required for the role are considered on individual appointment No pension offered No benefits offered except to one non-executive director who is eligible for health cover (see annual remuneration report page 20) Non-executive directors do not participate in the share option schemes POLICY OPERATION OPPORTUNITY AND PERFORMANCE CONDITIONS Considered by remuneration committee on appointment Set at a level considered appropriate to attract, retain, motivate and reward the right individuals Reviewed annually whenever there is a change of role or operational responsibility Paid monthly in cash There is no prescribed maximum salary or maximum rate of increase No individual director will be awarded a base salary in excess of £700,000 a year No specific performance conditions are attached to base salaries The contribution payable by the Company is included in the director’s contract of employment Paid into money purchase schemes The committee retains the discretion to approve changes in contractual benefits in exceptional circumstances or where factors outside the control of the Group lead to increased costs (e.g. medical inflation) Company contribution offered at up to 10% of base salary as part of overall remuneration package No specific performance conditions are attached to pension contributions The costs associated with benefits offered are closely controlled and reviewed on an annual basis No director will receive benefits of a value in excess of 30% of their base salary No specific performance conditions are attached to contractual benefits The remuneration committee determines the level of bonus on an annual basis In assessing performance consideration is given to the level of net rental income, cash flow, voids, realised development gains and income from managing joint ventures. Achieved results are then compared with expectation taking account of market conditions Bonuses are generally offered in cash or shares Offered at appropriate times by the remuneration committee The current maximum bonus will not exceed 200% of base salary in any one year but the remuneration committee reserves the power to award up to 300% in an exceptional year Performance conditions will be assessed on an annual basis The performance measures applied may be financial, non-financial, corporate, divisional or individual and in such proportion as the remuneration committee considers appropriate Entitlements to share options granted under the Approved Option scheme are not subject to performance criteria. Share Options granted under the Unapproved Scheme are subject to the performance criteria specified in the Scheme rules The aggregate number of shares over which options may be granted under all of the company’s option schemes (including any options and awards granted under the company’s employee share plans) in any period of ten years, will not exceed, at the time of grant, 10 % of the ordinary share capital of the company from time to time Share options will be offered by the remuneration committee as appropriate Offered to executive directors and head office staff Maximum participation levels are set by HMRC Of any bonus awarded, Directors may opt to have maximum of £3,000 per year paid in ‘Free Shares’ under the SIP scheme rules Considered by the board on appointment Set at a level considered appropriate to attract, retain and motivate the Reviewed annually No individual non-executive director will be awarded a base salary in excess of £40,000 a year No performance conditions are attached to base salaries The committee retains the discretion to approve changes in contractual benefits in exceptional circumstances or where factors outside the control of the Group lead to increased costs (e.g. medical inflation) The costs associated with benefits offered are closely controlled and reviewed on an annual basis No non-executive director will receive benefits in excess of £10,000 a year No specific performance conditions are attached to contractual benefits London & Associated Properties PLC 2017 25 GOVERNANCE Audit committee report The committee’s terms of reference have been approved by the board and follow published guidelines, which are available on request from the company secretary. At the year end the audit committee comprised two of the non- executive directors – H D Goldring and C A Parritt, both of whom are Chartered Accountants. The audit committee’s primary tasks are to: 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. • review the scope of external audit, to receive regular reports from During the past year the committee: RSM UK Audit LLP and to review the half-yearly and annual accounts before they are presented to the board, focusing in particular on accounting policies and areas of management judgement and estimation; • monitor the controls which are in force to ensure the integrity of the information reported to the shareholders; • act as a forum for discussion of internal control issues and contribute to the board’s review of the effectiveness of the Group’s internal control and risk management systems and processes; • to review the risk assessments made by management, consider key risks with action taken to mitigate these and to act as a forum for discussion of risk issues and contribute to the board’s review of the effectiveness of the Group’s risk management control and processes; • consider once a year the need for an internal audit function; • advise the board on the appointment of the external auditors, the rotation of the audit partner every five years and on their remuneration for both audit and non-audit work; discuss the nature and scope of their audit work and undertake a formal assessment of their independence each year, which includes: i) ii) a review of non-audit services provided to the Group and related fees; 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. • met with the external auditors, and discussed their reports to the audit committee; • approved the publication of annual and half year financial results; • considered and approved the annual review of internal controls; • decided that there was no current need for an internal audit function; • agreed the independence of the auditors and approved their fees for both audit and non-audit services as set out in Note 2 to the financial statements; and • the chairman of the audit committee has also had separate meetings and discussions with the external audit partner. FINANCIAL REPORTING As part of its role, the Audit Committee assessed the audit findings that were considered most significant to the financial statements, including those areas requiring significant judgement and/or estimation. When assessing the identified financial reporting matters, the committee assessed quantitative materiality primarily by reference to the carrying value of the group’s total assets, given that the group operates a principally asset based business. When determining quantitative materiality, the Board also gave consideration to the value of revenues generated by the group and net asset value, given that they are key trading and business KPIs. The qualitative aspects of any financial reporting matters identified during the audit process were also considered when assessing their materiality. Based on the considerations set out above we have considered quantitative errors individually or in aggregate in excess of approximately £0.8 million in relation to the consolidated balance sheet and £0.3 million for underlying profitability and the Bisichi group to be material. EXTERNAL AUDITOR RSM UK Audit LLP held office throughout the period under review. In the United Kingdom London & Associated Properties PLC provides extensive administration and accounting services to Bisichi Mining PLC, which has its own audit committee and employs BDO LLP, a separate and independent firm of registered auditor. C A Parritt Chairman – Audit Committee 27 April 2018 26 London & Associated Properties PLC 2017 GOVERNANCE Directors’ responsibilities statement The Directors are responsible for preparing the Strategic Report and the Directors’ Report, the Directors’ Remuneration Report and the financial statements in accordance with applicable law and regulations. English company law requires the Directors to prepare Group and Company financial statements for each financial year. The Directors are required under the Listing Rules of the Financial Conduct Authority to prepare Group financial statements in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union (“EU”) and have elected under English company law to prepare the Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law) including FRS101 ‘Reduced Disclosure Framework’. The Group financial statements are required by law and IFRS adopted by the EU to present fairly the financial position and performance of the Group; the Companies Act 2006 provides in relation to such financial statements that references in the relevant part of that Act to financial statements giving a true and fair view are references to their achieving a fair presentation. Under English company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period. In preparing each of the Group and Company financial statements, the Directors are required to: a. select suitable accounting policies and then apply them consistently; b. make judgements and accounting estimates that are reasonable and prudent; c. for the Group financial statements, state whether they have been prepared in accordance with IFRS adopted by the EU and for the company financial statements state whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and d. prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Company will continue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s and the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and the Company and enable them to ensure that the financial statements and the Directors’ Remuneration Report comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulations. They are also responsible for safeguarding the assets of the Group and the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. DIRECTORS’ STATEMENT PURSUANT TO THE DISCLOSURE GUIDANCE AND TRANSPARENCY RULES Each of the directors, whose names and functions are listed on page 12, confirms that to the best of each person’s knowledge: a. the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit of the Company and the undertakings included in the consolidation taken as a whole; and b. the Strategic Report contained in the Annual Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the London & Associated Properties PLC website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. London & Associated Properties PLC 2017 27 GOVERNANCE Independent auditor’s report TO THE MEMBERS OF LONDON & ASSOCIATED PROPERTIES PLC Opinion We have audited the financial statements of London & Associated Properties PLC (“the parent company”) and its subsidiaries (“the group”) for the year ended 31 December 2017 which comprise the consolidated income statement, the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated cash flow statement, the parent company balance sheet, the parent company statement of changes in equity and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial reporting framework that has been applied in the preparation of the parent company financial statements is applicable law and United Kingdom Accounting Standards including FRS 101 “Reduced Disclosure Framework (United Kingdom Generally Accepted Accounting Practice). In our opinion: • the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 December 2017 and of the group’s profit for the year then ended; • the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; • the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the group financial statements, Article 4 of the IAS Regulation. BASIS FOR OPINION We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. CONCLUSIONS RELATING TO GOING CONCERN We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where: • the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or • the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the group’s or the parent company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue. KEY AUDIT MATTERS Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. 28 London & Associated Properties PLC 2017 GOVERNANCE Independent auditor’s report VALUATION OF INVESTMENT PROPERTIES The group’s properties are accounted for in the financial statements as investment properties under IAS 40 and held at fair value. The investment properties are valued by two firms of external third party valuers and these valuations are adopted in the financial statements. At 31 December 2017 investment property valued at £78.0m (Note 10) was disclosed within non-current assets in the financial statements. Separately, property valued at £36.4m (Note 14) was disclosed as assets held for sale, within current assets. The directors’ assessment of the fair value of investment properties is considered a key audit matter due to the relative importance of these assets to the group’s financial statements, the potential impact of movements in the fair values of the assets, and the subjectivity and complexity of the valuation process, which involves significant judgements and estimates as disclosed on page 37 of the financial statements. The valuation is carried out by two firms of professional external valuers together with, in respect of one property, an internal valuer in accordance with the methodology described in Note 10. Our response to the key audit matter included: ACCURACY OF LIFE OF MINE ESTIMATES The mining assets amounted to £8.5m as at 31 December 2017 (2016: £8.4m) and relate to the South African mining operations. These assets represent a significant part of the Bisichi group’s balance sheet (see Note 11). Bisichi’s management performed an impairment assessment based on the Bisichi Board’s approved Life of Mine plan at 31 December 2017 as detailed in the key judgements and estimates Note on page 37. The assessment by Bisichi management of inputs to the Life of Mine plan requires significant judgment and estimate, including determination of forecast coal prices, production, coal reserves and costs. These factors caused this area to be a significant focus for our audit. Management’s discounted cash flow impairment assessment, including the underlying Life of Mine plan, was evaluated. In doing so, key inputs to the model including forecast coal prices, exchange rates, production, costs and the discount rate were critically assessed. This included assessment compared to empirical data and trends, pricing information and market data. • agreeing the valuations of all properties recorded in the financial statements and subject to the external valuation process to the valuation reports prepared by the valuers. These reports covered all except £1.8m of the value of investment properties, which were subject to internal valuation; In respect of the coal reserves included in the model, the independent Competent Person’s Report was reviewed and discussions were held with the Competent Person. In relying on the Competent Person their independence and competence was assessed. • agreeing the carrying value (sales price less costs to sell) of the Brixton Village and Market Row properties, included as assets held for sale, to the agreement for sale, and the costs to invoices; Sensitivity analysis was performed on the impairment model in respect of factors such as pricing, costs, yields, exchange rates and the discount rate. • assessing the qualifications and expertise of the valuers, and considering their objectivity and any threats to their independence. We concluded that there was no threat which might impair the valuers’ independence and objectivity; and • challenging and discussing the assumptions used with the valuers, both external and internal, and comparing the key inputs to the valuation to underlying records of the leases and records of rents received and against our knowledge of market yields. Our findings The carrying values of the investment properties are consistent with the valuation reports provided and, in the case of assets held for sale, with the agreed selling price less direct costs to sell. The disclosures in the key judgements and estimates note were evaluated based on the audit procedures. Our findings The work on the impairment test found Bisichi management’s conclusion that no impairment exists to be appropriate. The key assumptions were found to be balanced and appropriately considered by Bisichi management and the disclosures in the key judgements and estimates note to be sufficient. London & Associated Properties PLC 2017 29 GOVERNANCE Independent auditor’s report IMPAIRMENT OF EZIMBOKODWENI As at 31 December 2016 the group’s net investment in Ezimbokedweni Mining (Pty) Limited (“Ezimbokedweni”), an equity accounted joint venture, was £1.8m (Notes 12 and 13). The carrying value was dependent upon the ultimate completion of a sale and purchase agreement to acquire the Pegasus coal project in South Africa, under which a deposit had been paid by Ezimbokedweni. During the year the joint venture was placed into Business Rescue under the South African Companies Act by the joint venture partner. The original deposit has been returned to Ezimbokodweni and as a result, the Bisichi Board considers there to be no reasonable prospect of the Pegasus coal project transaction completing. Further to these developments, the Bisichi Board performed an impairment review of the carrying value of the net investment in Ezimbokodweni and recorded an impairment of the net investment of £1.8m, with any further movements since 31 December 2016 reflecting foreign exchange differences. The assessment of the carrying value, subsequent impairment and associated disclosure represented a significant focus for our audit. Additionally, the tax treatment of this transaction was considered to be an area of risk of material misstatement. This was also considered to be an area requiring specialist knowledge and expertise. Specific inquiries were made of Bisichi’s management and Board to gain an understanding of the fact pattern and events during the year regarding Ezimbokedweni. Minutes of Bisichi Board meetings, legal documents and correspondence relating to the joint venture, the Business Rescue and assessments of the resulting financial position and interests of the joint venture were reviewed. The Bisichi Board’s conclusion that the net investment is impaired based on the facts and circumstances, including assessment of the probability of value being recovered from the joint venture was assessed. The tax treatment of the transaction applied by Bisichi management was assessed in conjunction with specialists. The accounting entries in respect of the impairment as well as the disclosures in Note 12 and the key judgements and estimates note were assessed. Our findings The judgements made by Bisichi management relating to the impairment recorded by the group are considered to be appropriate based on the developments during the year. The disclosures at Note 12 and the key judgements and estimates note are also considered to be acceptable. OUR APPLICATION OF MATERIALITY When establishing our overall audit strategy, we set certain thresholds which help us to determine the nature, timing and extent of our audit procedures and to evaluate the effects of misstatements, both individually and on the financial statements as a whole. During planning we determined a magnitude of uncorrected misstatements that we judge would be material for the financial statements as a whole (FSM). During planning FSM was calculated as £1.1m, which was not changed during the course of our audit. 30 London & Associated Properties PLC 2017 The London & Associated Properties PLC group consists of two distinct components: a UK based property investment group, and a fully listed mining group carrying out mining operations in South Africa with a relatively small investment property portfolio. During planning, we determined materiality in respect of these components at: • for the London & Associated Properties PLC property investment sub group balance sheet, £0.8 million and to underlying profitability £0.3 million; and • for the Bisichi Mining PLC coal mining and property investment sub group, £0.3 million. We agreed with the audit committee that we would report to them all unadjusted differences in excess of £15,000 for both components of the group. We also agreed to report other differences below that threshold which, in our view, warranted reporting for other reasons. AN OVERVIEW OF THE SCOPE OF OUR AUDIT The audit was scoped to support our audit opinion on the company and group financial statements of London & Associated Properties PLC and was based on group materiality and an assessment of risk at group level. We planned our 2017 audit on the understanding that the activities of the group had changed very little from the previous year, and that there had been no changes in the valuation methodologies to be applied, or the accounting standards applicable to the group and company’s financial statements. The group comprises 27 trading, or active holding, companies and 12 dormant companies. Full scope audits, using component materiality, were performed on 24 of the active entities with the other three entities subjected to desktop review. Six of the full scope audits and the three desktop reviews were performed by component auditors whose work we evaluated and reviewed for the purpose of the group audit. This resulted in coverage of 100% of total revenues and profit before tax of the group, and 100% of total gross assets of the group. OTHER INFORMATION The other information comprises the information included in the annual report other than the financial statements, the audited part of the directors’ remuneration report and our auditor’s report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact. We have nothing to report in this regard. GOVERNANCE Independent auditor’s report OPINIONS ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006 In our opinion, the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006. In our opinion, based on the work undertaken in the course of the audit: • the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and • the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements. MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors’ report. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: • adequate accounting records have not been kept by the parent As part of our audit, we will consider the susceptibility of the group and parent company to fraud and other irregularities, taking account of the business and control environment established and maintained by the directors, as well as the nature of transactions, assets and liabilities recorded in the accounting records. Owing to the inherent limitations of an audit, there is an unavoidable risk that some material misstatements of the financial statements may not be detected, even though the audit is properly planned and performed in accordance with the ISAs. However, the principal responsibility for ensuring that the financial statements are free from material misstatement, whether caused by fraud or error, rests with management who should not rely on the audit to discharge those functions. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. OTHER MATTERS WHICH WE ARE REQUIRED TO ADDRESS Following the recommendation of the audit committee, we were appointed by the Board of Directors on 27 July 1987 to audit the financial statements for the year ended 31 December 1987 and subsequent financial periods. company, or returns adequate for our audit have not been received from branches not visited by us; or The period of total uninterrupted engagement is 31 years, covering the years ending 31 December 1987 to 2017. • 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 The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the group or the parent company and we remain independent of the group and the parent company in conducting our audit. not made; or • we have not received all the information and explanations we require for our audit. RESPONSIBILITIES OF DIRECTORS As explained more fully in the directors’ responsibilities statement set out on page 27 the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so. AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. During the period under review agreed upon procedures under ISRS 4400 were completed in respect of a number of the group’s service charge account, and in respect of two deeds of release relating to two debentures. Our audit opinion is consistent with the additional report to the audit committee. This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Geoff Wightwick (Senior Statutory Auditor) For and on behalf of RSM UK Audit LLP, Statutory Auditor Chartered Accountants 25 Farringdon Street London EC4A 4AB 27 April 2018 London & Associated Properties PLC 2017 31 financial state- ments FINANCIAL STATEMENTS Consolidated income statement for the year ended 31 December 2017 Group revenue Operating costs Gain on disposal of other investments Income from listed investments held for trading Operating profit Finance income Finance expenses Debenture break cost Result before revaluation and other movements Non–cash changes in valuation of assets and liabilities and other movements Increase in value of investment properties Write off investment in joint venture Increase in trading investments Increase in value of other investments Adjustment to interest rate derivative Profit/(loss) for the year before taxation Income tax charge Profit/(loss) for the year Attributable to: Equity holders of the Company Non–controlling interest Profit/(loss) for the year Earnings per share Profit/(loss) per share – basic and diluted NOTES 1 3 5 5 23 10 12, 13 23 2 6 27 2017 £'000 44,979 (37,428) 3 – 7,554 105 (4,268) (14) 3,377 9,373 (1,827) – – 355 11,278 (2,982) 8,296 7,686 610 8,296 2016 £'000 29,704 (26,860) – 2 2,846 144 (4,292) – (1,302) 532 – 1 12 (217) (974) (1,175) (2,149) (2,357) 208 (2,149) 9 9.01p (2.77)p Consolidated statement of comprehensive income for the year ended 31 December 2017 Profit/(loss) for the year Other comprehensive income/(expense): Items that may be subsequently recycled to the income statement: Exchange differences on translation of Bisichi Mining PLC foreign operations Transfer of gain on available for sale investments Taxation Other comprehensive income for the year net of tax Total comprehensive income/(expense) for the year net of tax Attributable to: Equity shareholders Non–controlling interest 32 London & Associated Properties PLC 2017 2017 £'000 8,296 91 103 (20) 174 8,470 7,753 717 8,470 2016 £'000 (2,149) 1,106 193 (13) 1,286 (863) (1,864) 1,001 (863) FINANCIAL STATEMENTS FINANCIAL STATEMENTS Consolidated balance sheet at 31 December 2017 Non–current assets Market value of properties attributable to Group Present value of head leases Property Mining reserves, plant and equipment Investments in joint ventures Loan to joint venture Held to maturity investments Other investments Deferred tax Current assets Inventories Assets held for sale Trade and other receivables Interest rate derivatives Corporation tax recoverable Available for sale investments Investments held for trading Cash and cash equivalents Total assets Current liabilities Trade and other payables Borrowings Current tax liabilities Non–current liabilities Borrowings Interest rate derivatives Present value of head leases on properties Provisions Deferred tax liabilities Total liabilities Net assets Equity attributable to the owners of the parent Share capital Share premium account Translation reserve (Bisichi Mining PLC) Capital redemption reserve Retained earnings (excluding treasury shares) Treasury shares Retained earnings Total equity attributable to equity shareholders Non–controlling interest Total equity Net assets per share Diluted net assets per share NOTES 2017 £'000 2016 £'000 10 31 11 12 13 17 17 24 16 14 18 23 19 19 20 21 21 23 31 22 25 26 26 27 9 9 78,025 3,233 81,258 8,735 – – 1,748 51 – 91,792 828 36,441 7,132 1 – 1,050 19 7,528 52,999 144,791 (12,909) (4,288) (358) (17,555) (61,661) (435) (3,233) (1,349) (3,848) (70,526) (88,081) 56,710 8,554 4,866 (695) 47 33,227 (145) 33,082 45,854 10,856 56,710 53.74p 53.74p 105,080 4,767 109,847 8,653 455 1,350 1,874 32 1,134 123,345 1,721 – 7,061 4 32 781 19 6,265 15,883 139,228 (12,942) (4,108) (21) (17,071) (64,401) (793) (4,767) (1,236) (2,329) (73,526) (90,597) 48,631 8,554 4,866 (728) 47 25,648 (145) 25,503 38,242 10,389 48,631 44.83p 44.83p These financial statements were approved by the board of directors and authorised for issue on 27 April 2018 and signed on its behalf by: Sir Michael Heller Director Anil Thapar Director Company Registration No. 341829 London & Associated Properties PLC 2017 33 FINANCIAL STATEMENTS Consolidated statement of changes in shareholders’ equity for the year ended 31 December 2017 SHARE CAPITAL £'000 8,554 – SHARE PREMIUM £'000 4,866 – TRANSLATION RESERVES £'000 (1,145) – CAPITAL REDEMPTION RESERVE £'000 47 – TREASURY SHARES £'000 (482) – RETAINED EARNINGS EXCLUDING TREASURY SHARES £'000 28,238 (2,357) TOTAL EXCLUDING NON– CONTROLLING INTERESTS £'000 40,078 (2,357) NON– CONTROLLING INTERESTS £'000 TOTAL EQUITY £'000 9,574 49,652 (2,149) 208 – – – – – – – – – – – – – – 8,554 – – – – – – – 4,866 – – – – – – – – – – – – – – 8,554 – 4,866 417 – 417 417 – – – – – – (728) – 33 – 33 33 – – – (695) – – – – – – – – – – 47 – – – – – – – – – – – – – – 119 218 337 (145) – – – – – – – – 417 689 1,106 76 76 (2,281) 45 (136) – – (218) (309) 25,648 7,686 76 493 (1,864) 45 (136) – 119 – 28 38,242 7,686 104 793 1,001 180 1,286 (863) 64 – (250) – – (186) 109 (136) (250) 119 – (158) 10,389 48,631 8,296 610 – 34 33 34 58 49 91 83 34 7,720 67 7,753 107 717 174 8,470 (141) – (141) – – (250) (141) (250) – 47 – (145) (141) 33,227 (141) 45,854 (250) (391) 10,856 56,710 Balance at 1 January 2016 Loss for year Other comprehensive expense: Currency translation Gain on available for sale investments (net of tax) Total other comprehensive expense Total comprehensive expense Transactions with owners: Share options charge Dividends – equity holders Dividends – non–controlling interests Disposal of own shares Loss on transfer of own shares Transactions with owners Balance at 31 December 2016 Profit for year Other comprehensive income: Currency translation Gain on available for sale investments (net of tax) Total other comprehensive income Total comprehensive income/ (expense) Transactions with owners: Dividends – equity holders Dividends – non–controlling interests Transactions with owners Balance at 31 December 2017 34 London & Associated Properties PLC 2017 FINANCIAL STATEMENTS Consolidated cash flow statement for the year ended 31 December 2017 Operating activities Profit/(loss) for the year before taxation Finance income Finance expense Debenture break cost Realised gain on disposal of other investments Decrease in value of investment properties Write off investment in joint venture Increase in trading investments Increase in value of other investments Adjustment to interest rate derivative Depreciation Profit on disposal of non-current assets Share based payment expense Gain on investment held for trading Exchange adjustments Change in inventories Change in receivables Change in payables Cash generated from operations Income tax paid Cash inflows from operating activities Investing activities Disposal of shares and loans held to maturity Disposal of assets held for sale Share of profit in joint ventures (assets held for sale) Acquisition of investment properties, mining reserves, plant and equipment Sale of plant and equipment Residual receipt from Windsor Shopping Centre disposal Interest received Cash (outflows)/inflows from investing activities Financing activities Sale of treasury shares Interest paid Interest obligation under finance leases Debenture stock break costs paid Receipt of bank loan - Bisichi Mining PLC Repayment of bank loan - Bisichi Mining PLC Short term loan from joint ventures and related parties Repayment of debenture stocks Equity dividends paid Equity dividends paid - non-controlling interests Cash outflows from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Exchange adjustment Cash and cash equivalents at end of year 2017 £'000 2016 £'000 11,278 (105) 4,268 14 (3) (9,373) 1,827 – – (355) 1,804 (3) – – 258 896 196 (415) 10,287 (14) 10,273 – (56) – (1,771) 29 – 137 (1,661) – (3,963) (178) (14) 23 (25) (30) (750) (141) (250) (5,328) 3,284 2,931 51 6,266 (974) (144) 4,292 – – (532) – (1) (12) 217 1,818 (32) 109 4 (449) (258) 468 1,080 5,586 (57) 5,529 121 2,275 60 (3,022) 32 414 133 13 119 (3,943) (216) – 37 (131) – – (136) (250) (4,520) 1,022 2,575 (666) 2,931 The cash flows above relate to continuing and discontinued operations. See Note 7 for information on discontinued operations. Cash and cash equivalents For the purpose of the cash flow statement, cash and cash equivalents comprise the following balance sheet amounts: Cash and cash equivalents (before bank overdrafts) Bank overdrafts Cash and cash equivalents at end of year 2017 £'000 7,528 (1,262) 6,266 2016 £'000 6,265 (3,334) 2,931 £120,000 of cash deposits at 31 December 2017 were charged as security to debenture stocks. London & Associated Properties PLC 2017 35 FINANCIAL STATEMENTS FINANCIAL STATEMENTS Group accounting policies The following are the principal Group accounting policies: BASIS OF ACCOUNTING The Group financial statements are prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The Company has elected to prepare the parent company’s financial statements in accordance with Financial Reporting Standard 101 ’Reduced Disclosure Framework’ (FRS 101) and Companies Act 2006 and these are presented in Note 33. The financial statements are prepared under the historical cost convention, except for the revaluation of freehold and leasehold properties and financial assets held for trading as well as fair value of interest derivatives. The Group financial statements are presented in Pounds Sterling and all values are rounded to the nearest thousand pounds (£'000) except when otherwise stated. The functional currency for each entity in the Group, and for joint arrangements, is the currency of the country in which the entity has been incorporated. Details of the country in which each entity has been incorporated can be found in Note 15 for subsidiaries and Note 12 for joint ventures. The exchange rates used in the accounts were as follows: £1 STERLING: RAND £1 STERLING: DOLLAR Year-end rate Annual average 2017 2016 2016 16.6686 16.9472 1.35028 1.23321 17.1540 19.9269 1.29174 1.35477 2017 London & Associated Properties PLC (“LAP”), the parent company, is a listed public company incorporated and domiciled in England and quoted on the London Stock Exchange. The Company registration number is 341829. LAP and its subsidiaries (“the Group”) consists of LAP, all of its subsidiary undertakings, including Bisichi Mining PLC (“Bisichi”) and Dragon Retail Properties Limited (“Dragon”). The Group without Bisichi and Dragon is referred to as LAP Group. GOING CONCERN In reviewing going concern it is necessary to consider separately the position of LAP Group and Bisichi. Although both are consolidated into group accounts (as required by IFRS 10), they are managed independently and in the unlikely event that Bisichi was unable to continue trading this would not affect the ability of LAP Group to continue operating as a going concern. The same would be true for Bisichi in reverse. The directors have reviewed the cash flow forecasts of the LAP Group and the underlying assumptions on which they are based. The LAP Group’s business activities, together with the factors likely to affect its future development, are set out in the Chairman and Chief Executive’s Statement and Financial Review. In addition, Note 23 to the financial statements sets out the Group’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposure to credit risk and liquidity risk. The directors believe that the LAP Group has adequate resources to continue in operational existence for the foreseeable future and that the LAP Group is well placed to manage its business risks. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements. 36 London & Associated Properties PLC 2017 The Bisichi directors continue to adopt the going concern basis of accounting in preparing the Bisichi annual financial statements. INTERNATIONAL ACCOUNTING STANDARDS (IAS/IFRS) The Group has adopted all of the new and revised Standards and Interpretations issued by the International Accounting Standards Board (“IASB”) that are relevant to its operations and effective for accounting periods beginning 1 January 2017. An amendment to IAS 7 “Statement of Cash Flows: Disclosure Initiative”, which is mandatory for 2017, requires entities to provide disclosures about changes in liabilities arising from financing activities, including changes from financing cash flows and non-cash changes (such as foreign exchange gains or losses). This amendment has been endorsed by the EU. The adoption of this amendment and other new and revised Standards and Interpretations had no material effect on the profit or loss or financial position of the Group. The Group has not adopted any Standards or Interpretations in advance of the required implementation dates. IFRS 15 ‘Revenue from Contracts with Customers’ was issued by the IASB in May 2014. It is effective for accounting periods beginning on or after 1 January 2018. The new standard will replace existing accounting standards, and provides enhanced detail on the principle of recognising revenue to reflect the transfer of goods and services to customers at a value which the company expects to be entitled to receive. The standard also updates revenue disclosure requirements. The standard was endorsed by the EU on 22 September 2017. The Directors are continuing to assess the impact of IFRS 15 on the results of the Group. Whilst management do not envisage a material impact, the impact of adopting this standard cannot be reliably estimated until the transition review is complete. IFRS 9 was published in July 2014 and will be effective for the Group from 1 January 2018. The standard was endorsed by the EU on 22 November 2017. It is applicable to financial assets and financial liabilities, and covers the classification, measurement, impairment and de-recognition of financial assets and financial liabilities together with a new hedge accounting model. IFRS 9 also introduces the expected credit loss model for impairment of financial assets. Application of the IFRS 9 impairment model is expected to have minimal impact given the Group’s credit risk management policies. The Directors are continuing to assess the impact on the results of the Group and will complete the assessment during H1 2018. IFRS 16 ‘Leases’ – IFRS 16 ‘Leases’ was issued by the IASB in January 2017 and is effective for accounting periods beginning on or after 1 January 2019. The new standard will replace IAS 17 ‘Leases’ and will eliminate the classification of leases as either operating leases or finance leases and, instead, introduce a single lessee accounting model. The standard, which has been endorsed by the EU, provides a single lessee accounting model, specifying how leases are recognised, measured, presented and disclosed. The Directors are currently evaluating the financial and operational impact of this standard including the application to service contracts at the mine containing leases. The review of the impact of IFRS 16 will require an assessment of all leases and the impact of adopting this standard cannot be reliably estimated until this work is substantially complete. The Directors do not anticipate that the adoption of the other standards and interpretations not listed above will have a material impact on the accounts. Certain of these standards and interpretations will, when adopted, require addition to or amendment of disclosures in the accounts. FINANCIAL STATEMENTS Group accounting policies We are committed to improving disclosure and transparency and will continue to work with our different stakeholders to ensure they understand the detail of these accounting changes. We continue to remain committed to a robust financial policy. KEY JUDGEMENTS AND ESTIMATES The preparation of the financial statements requires management to make assumptions and estimates that may affect the reported amounts of assets and liabilities and the reported income and expenses, further details of which are set out below. Although management believes that the assumptions and estimates used are reasonable, the actual results may differ from those estimates. Further details of the estimates are contained in the Directors’ Report. PROPERTY OPERATIONS Fair value measurements of investment properties and investments An assessment of the fair value of certain assets and liabilities, in particular investment properties, is required to be performed. In such instances, fair value measurements are estimated based on the amounts for which the assets and liabilities could be exchanged between market participants. To the extent possible, the assumptions and inputs used take into account externally verifiable inputs. However, such information is by nature subject to uncertainty. MINING OPERATIONS Life of mine and reserves The directors consider their judgements and estimates surrounding the life of the mine and its reserves to have significant effect on the amounts recognised in the financial statements and to be an area where the financial statements are at most risk of a significant estimation uncertainty. The life of the mine remaining is currently estimated at 4 years. This life of mine is based on the Groups existing coal reserves and excludes future coal purchases and coal reserve acquisitions. The Group’s estimates of proven and probable reserves are prepared and subject to assessment by an independent Competent Person experienced in the field of coal geology and specifically opencast and pillar coal extraction. Estimates of coal reserves impact assessments of the carrying value of property, plant and equipment, depreciation calculations and rehabilitation and decommissioning provisions. There are numerous uncertainties inherent in estimating coal reserves and changes to these assumptions may result in restatement of reserves. These assumptions include geotechnical factors as well as economic factors such as commodity prices, production costs and yield. Depreciation, amortisation of mineral rights, mining development costs and plant & equipment The annual depreciation/amortisation charge is dependent on estimates, including coal reserves and the related life of the mine, expected development expenditure for probable reserves, the allocation of certain assets to relevant ore reserves and estimates of residual values of the processing plant. The charge can fluctuate when there are significant changes in any of the factors or assumptions used, such as estimating mineral reserves which in turn affects the life of mine or the expected life of reserves. Estimates of proven and probable reserves are prepared by an independent Competent Person. Assessments of depreciation/amortisation rates against the estimated reserve base are performed regularly. Details of the depreciation/amortisation charge can be found in Note 11. Provision for mining rehabilitation including restoration and de-commissioning costs A provision for future rehabilitation including restoration and decommissioning costs requires estimates and assumptions to be made around the relevant regulatory framework, the timing, extent and costs of the rehabilitation activities and of the risk free rates used to determine the present value of the future cash outflows. The provisions, including the estimates and assumptions contained therein, are reviewed regularly by management. The Group engages an independent expert to assess the cost of restoration and decommissioning annually as part of management’s assessment of the provision. Details of the provision for mining rehabilitation can be found in Note 22. MINING IMPAIRMENT Property, plant and equipment representing the Group’s mining assets in South Africa are reviewed for impairment at each reporting date. The impairment test is performed using the approved Life of Mine plan and those future cash flow estimates are discounted using asset specific discount rates and are based on expectations about future operations. The impairment test requires estimates about production and sales volumes, commodity prices, proven and probable reserves (as assessed by the Competent Person), operating costs and capital expenditures necessary to extract reserves in the approved Life of Mine plan. Changes in such estimates could impact recoverable values of these assets. Details of the carrying value of property, plant and equipment can be found in Note 11. The impairment test indicated significant headroom as at 31 December 2017 and therefore no impairment is considered appropriate. The key assumptions include: coal prices, including domestic coal prices based on recent pricing and assessment of market forecasts for export coal; production based on proven and probable reserves assessed by the independent Competent Person and yields associated with mining areas based on assessments by the Competent Person and empirical data. A 9% reduction in average forecast coal prices or a 9% reduction in yield would give rise to a breakeven scenario. However, the Bisichi directors consider the forecasted yield levels and pricing to be achievable. EZIMBOKODWENI JOINT VENTURE During the year the Group wrote off its £1.8million (2016: £1.8million) investment in Ezimbokodweni Mining (Pty) Limited (“Ezimbokodweni”) made up of a £1.35million loan (2016: £1.35million) and a £0.45million (2016: £0.45million) joint venture investment. The carrying value of the investment was dependent upon the completion of the acquisition of the Pegasus coal project (“the project”) in South Africa. Although a proposed sale and purchase agreement had been negotiated and a deposit paid for the project, the conclusion of the transaction had been delayed pending the commercial transfer of the prospecting right from the current owners of the project to Ezimbokodweni. Although the Group has always remained committed to completing the transaction, previous negotiations to complete the commercial acquisition of the project had been beset by various delays outside of its control and at the beginning of 2017, the current owners of the project notified Ezimbokodweni that they no longer wished to divest the project. More recently, the Group was notified that an agreement was reached between the current owners of the project and the directors of Ezimbokodweni for the deposit for the project to be returned and any further negotiations with Ezimbokodweni to acquire the project to be terminated. Although, a legal claim by the Group has been issued against Ezimbokodweni and its representatives, in order for the Group to recover some of the investment, the Bisichi Board has exercised its judgement and decided that it is appropriate and prudent to write off the investment in full at this time. London & Associated Properties PLC 2017 37 FINANCIAL STATEMENTS Group accounting policies GOODWILL Goodwill arising on acquisition is recognised as an intangible asset and initially measured at cost, being the excess of the cost of the acquired entity over the Group’s interest in the fair value of the assets and liabilities acquired. Goodwill is carried at cost less accumulated impairment losses. Goodwill arising from the difference in the calculation of deferred tax for accounting purposes and fair value in negotiations is judged not to be an asset and is accordingly impaired on completion of the relevant acquisition. REVENUE Revenue comprises sales of coal, property rental income and property management fees. Rental income Rental income arises from operating leases granted to tenants. An operating lease is a lease other than a finance lease. A finance lease is one whereby substantially all the risks and rewards of ownership are passed to the lessee. Rental income is recognised in the Group income statement on a straight–line basis over the term of the lease. This includes the effect of lease incentives to tenants, which are normally in the form of rent free periods. Contingent rents, being the difference between the rent currently receivable and the minimum lease payments, are recognised in property income in the periods in which they are receivable. Rent reviews are recognised when such reviews have been agreed with tenants. Reverse surrender premiums Payments received from tenants to surrender their lease obligations are recognised immediately in the income statement. Dilapidations Dilapidations monies received from tenants in respect of their lease obligations are recognised immediately in the income statement. Other revenue Revenue in respect of listed investments held for trading represents investment dividends received and profit or loss recognised on realisation. Dividends are recognised in the income statement when the dividend is received. PROPERTY OPERATING EXPENSES Operating expenses are expensed as incurred and any property operating expenditure not recovered from tenants through service charges is charged to the income statement. EMPLOYEE BENEFITS Share based remuneration The Company operates a long–term incentive plan and two share option schemes. The fair value of the conditional awards on shares granted under the long–term incentive plan and the options granted under the share option scheme is determined at the date of grant. This fair value is then expensed on a straight–line basis over the vesting period, based on an estimate of the number of shares that will eventually vest. At each reporting date, the fair value of the non–market based performance criteria of the long–term incentive plan is recalculated and the expense is revised. In respect of the share option scheme, the fair value of options granted is calculated using a binomial method. PENSIONS The Company operates a defined contribution pension scheme. The contributions payable to the scheme are expensed in the period to which they relate. DEFERRED TAX The calculation of deferred tax involves the exercise of judgement in relation to the amount of income and gains which will be realised in future to support the recognition of a deferred tax asset in respect of unrelieved losses. INTEREST RATE HEDGES All interest rate hedges are held at fair value as valued by the hedge provider. Further detail is provided in Notes 21 and 23. BASIS OF CONSOLIDATION The Group accounts incorporate the accounts of LAP and all of its subsidiary undertakings, together with the Group’s share of the results and net assets of its joint ventures. Non–controlling interests in subsidiaries are presented separately from the equity attributable to equity owners of the parent company. When changes in ownership in a subsidiary do not result in a loss of control, the non–controlling shareholders’ interests are initially measured at the non–controlling interests’ proportionate share of the subsidiaries’ net assets. Subsequent to this, the carrying amount of non–controlling interests is the amount of those interests at initial recognition plus the non–controlling interests’ share of subsequent changes in equity. Total comprehensive income is attributed to non–controlling interests even if this results in the non–controlling interests having a deficit balance. SUBSIDIARIES Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries acquired during the year are consolidated using the acquisition method. Their results are incorporated from the date that control passes. All intra Group transactions, balances, income and expenses are eliminated on consolidation. Details of the Group’s trading subsidiary companies are set out in Note 15. The directors are required to consider the implications of IFRS 10 on the LAP investment in Bisichi Mining PLC (“Bisichi”). Related parties also have shareholdings in Bisichi. When combined with the 42% held by LAP and, taking account of the wide disposition of other shareholders, there is potential for LAP and these related parties to exercise voting control over Bisichi. IFRS 10 makes it clear that possible voting control is of more significance than actual management control. For this reason the directors have concluded that there is a requirement to consolidate Bisichi with LAP. While, in theory, they could achieve control, in practice they do not get involved in the day to day operations of Bisichi. The directors have presented consolidated accounts using the published accounts of Bisichi but it is important to note that any figures, risks and assumptions attributable to that company are the responsibility of the Bisichi Board of directors who are independent from LAP. As a result of treating Bisichi as a subsidiary, Dragon Retail Properties Limited is also a subsidiary for accounting purposes, as LAP and Bisichi each own 50% of that joint venture business. JOINT VENTURES Investments in joint ventures, being those entities over whose activities the Group has joint control, as established by contractual agreement, include the appropriate share of the results and net assets of those undertakings. Loans to joint ventures are classified as non-current assets when they are not expected to be received in the normal working capital cycle. 38 London & Associated Properties PLC 2017 FINANCIAL STATEMENTS Group accounting policies FOREIGN CURRENCIES Monetary assets and liabilities are translated at year end exchange rates and the resulting exchange rate differences are included in the consolidated income statement within the results of operating activities if arising from trading activities, including inter-company trading balances and within finance cost / income if arising from financing. For consolidation purposes, income and expense items are included in the consolidated income statement at average rates, and assets and liabilities are translated at year end exchange rates. Translation differences arising on consolidation are recognised in other comprehensive income. Foreign exchange differences on intercompany loans are recorded in other comprehensive income when the loans are not considered trading balances and are not expected to be repaid in the foreseeable future. Where foreign operations are sold or closed, the cumulative exchange differences attributable to that foreign operation are recognised in the consolidated income statement when the gain or loss on disposal is recognised. Transactions in foreign currencies are translated at the exchange rate ruling on transaction date. FINANCIAL INSTRUMENTS Investments Held to maturity investments are stated at amortised cost using the effective interest rate method. Investments held for trading are included in current assets at fair value. For listed investments, fair value is the bid market listed value at the balance sheet date. Realised and unrealised gains or losses arising from changes in fair value are included in the income statement of the period in which they arise. Trade and other receivables Trade and other receivables are recognised initially at fair value. A provision for impairment of trade receivables is made when there is evidence that the Group will not be able to collect all amounts due. Trade receivables do not carry any interest, as any interest that would be recognised from discounting future cash payments over the short period is not considered to be material. Trade and other payables Trade and other payables are non-interest bearing and are stated at their nominal value, as the interest that would be recognised from discounting future cash payments over the short payment period is not considered to be material. Bank loans and overdrafts Bank loans and overdrafts are included as financial liabilities on the Group balance sheet net of the unamortised discount and costs of issue. The cost of issue is recognised in the Group income Statement over the life of the bank loan. Interest payable on those facilities is expensed as a finance cost in the period to which it relates. Debenture loans The debenture loans are included as a financial liability on the balance sheet net of the unamortised costs on issue. The cost of issue is recognised in the Group income statement over the life of the debenture. Interest payable to debenture holders is expensed in the period to which it relates. Finance lease liabilities Finance lease liabilities arise for those investment properties held under a leasehold interest and accounted for as investment property. The liability is calculated as the present value of the minimum lease payments, reducing in subsequent reporting periods by the apportionment of payments to the lessor. Lease payments are allocated between the liability and finance charges so as to achieve a constant financing rate. Contingent rents payable, such as rent reviews or those related to rental income, are charged as an expense in the period in which they are incurred. Interest rate derivatives The Group uses derivative financial instruments to hedge the interest rate risk associated with the financing of the Group’s business. No trading in such financial instruments is undertaken. At each reporting date, these interest rate derivatives are recognised at their fair value to the business, being the Net Present Value of the difference between the hedged rate of interest and the market rate of interest for the remaining period of the hedge. Ordinary shares Shares are classified as equity when there is no obligation to transfer cash or other assets. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds. Treasury shares When the Group’s own equity instruments are repurchased, consideration paid is deducted from equity as treasury shares until they are cancelled. When such shares are subsequently sold or reissued, any consideration received is included in equity. INVESTMENT PROPERTIES Valuation Investment properties are those that are held either to earn rental income or for capital appreciation or both, including those that are undergoing redevelopment. They are reported on the Group balance sheet at fair value, being the amount for which an investment property could be exchanged between knowledgeable and willing parties in an arm’s length transaction. The directors’ property valuation is at fair value. The external valuation of properties is undertaken by independent valuers who hold recognised and relevant professional qualifications and have recent experience in the locations and categories of properties being valued. Surpluses or deficits resulting from changes in the fair value of investment property are reported in the Group income statement in the period in which they arise. Capital expenditure Investment properties are measured initially at cost, including related transaction costs. Additions to capital expenditure, being costs of a capital nature, directly attributable to the redevelopment or refurbishment of an investment property, up to the point of it being completed for its intended use, are capitalised in the carrying value of that property. The redevelopment of an existing investment property will remain an investment property measured at fair value and is not reclassified. Capitalised interest is calculated with reference to the actual rate payable on borrowings for development purposes, or for that part of the development costs financed out of borrowings the capitalised interest is calculated on the basis of the average rate of interest paid on the relevant debt outstanding. London & Associated Properties PLC 2017 39 FINANCIAL STATEMENTS Group accounting policies Disposal The disposal of investment properties is recorded on completion of the contract. On disposal, any gain or loss is calculated as the difference between the net disposal proceeds and the valuation at the last year end plus subsequent capitalised expenditure in the period. Depreciation and amortisation In applying the fair value model to the measurement of investment properties, depreciation and amortisation are not provided in respect of investment properties. OTHER ASSETS AND DEPRECIATION The cost, less estimated residual value, of other property, plant and equipment is written off on a straight–line basis over the asset’s expected useful life. Residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. Changes to the estimated residual values or useful lives are accounted for prospectively. The depreciation rates generally applied are: Motor vehicles Office equipment 25–33 per cent per annum 10–33 per cent per annum ASSETS HELD FOR SALE Non-current assets, or disposal groups comprising assets and liabilities, are classified as held-for-sale if it is highly probable that they will be recovered primarily through sale rather through continuing use. Such assets, or disposal groups, are generally measured at the lower of their carrying amount and fair value less costs of sale. Any impairment loss on a disposal group is allocated first to goodwill and then to the remaining assets and liabilities on a pro rata basis, except that no loss is allocated to inventories, financial assets, deferred tax assets, employee benefit assets, or investment property which continues to be measured in accordance with the Group’s other accounting policies. Impairment losses on initial classification as assets held-for-sale and subsequent gains and losses on remeasurement are recognised in profit or loss. Once classified as held-for-sale, intangible assets and property, plant and equipment are no longer amortised or depreciated, and any equity-accounted investment is no longer equity accounted. AVAILABLE FOR SALE ASSETS Financial assets available for sale are measured at fair value. Any changes in fair value above cost are recognised in other comprehensive income and accumulated in the available-for-sale reserve. For any changes in fair value below cost a provision for impairment is recognised in the profit or loss account. Other investments classified as non-current available for sale investments comprise shares in listed companies and are carried at fair value. INCOME TAXES The charge for current taxation is based on the results for the year as adjusted for disallowed or non–assessable items. Tax payable upon realisation of revaluation gains recognised in prior periods is recorded as a current tax charge with a release of the associated deferred tax. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the tax computations and is recorded using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. In respect of 40 London & Associated Properties PLC 2017 the deferred tax on the revaluation surplus, this is calculated on the basis of the chargeable gains that would crystallise on the sale of the investment portfolio as at the reporting date. The calculation takes account of indexation on the historic cost of properties and any available capital losses. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the Group income statement, except when it relates to items charged or credited directly to equity, in which case it is also dealt with in equity. DIVIDENDS Dividends payable on the ordinary share capital are recognised as a liability in the period in which they are approved. CASH AND CASH EQUIVALENTS Cash comprises cash in hand and on-demand deposits. Cash and cash equivalents comprises short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value and original maturities of three months or less. The cash and cash equivalents shown in the cashflow statement are stated net of bank overdrafts that are repayable on demand as per IAS 7. This includes the structured trade finance facility held in South Africa as detailed in Note 21. These facilities are considered to form an integral part of the treasury management of the Group and can fluctuate from positive to negative balances during the period. BISICHI MINING PLC Mining revenue Revenue is recognised when the customer has a legally binding obligation to settle under the terms of the contract and has assumed all significant risks and rewards of ownership. Revenue is only recognised on individual sales of coal when all of the significant risks and rewards of ownership have been transferred to a third party. Export revenue is generally recognised when the product is delivered to the export terminal location specified by the customer, at which point the customer assumes risks and rewards under the contract. Domestic coal revenues are generally recognised on collection by the customer from the mine when loaded into transport, where the customer pays the transportation costs. Mining costs Expenditure is recognised in respect of goods and services received. Where coal is purchased from third parties at point of extraction the expenditure is only recognised when the coal is extracted and all of the significant risks and rewards of ownership have been transferred. Mining reserves, plant and equipment The cost of property, plant and equipment comprises its purchase price and any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in accordance with agreed specifications. Freehold land is not depreciated. Other property, plant and equipment is stated at historical cost less accumulated depreciation. The cost recognised includes the recognition of any decommissioning assets related to property, plant and equipment. Heavy surface mining and other plant and equipment is depreciated at varying rates depending upon its expected usage. The depreciation rates generally applied are between 5-10 per cent per annum, but limited to the shorter of its useful life or the life of the mine. FINANCIAL STATEMENTS Group accounting policies Post production stripping In surface mining operations, the Group may find it necessary to remove waste materials to gain access to coal reserves prior to and after production commences. Prior to production commencing, stripping costs are capitalised until the point where the overburden has been removed and access to the coal seam commences. Subsequent to production, waste stripping continues as part of the extraction process as a run of mine activity. There are two benefits accruing to the Group from stripping activity during the production phase: extraction of coal that can be used to produce inventory and improved access to further quantities of material that will be mined in future periods. Economic coal extracted is accounted for as inventory. The production stripping costs relating to improved access to further quantities in future periods are capitalised as a stripping activity asset, if and only if, all of the following are met: • it is probable that the future economic benefit associated with the stripping activity will flow to the Group; • the Group can identify the component of the ore body for which access has been improved; and • the costs relating to the stripping activity associated with that component or components can be measured reliably. In determining the relevant component of the coal reserve for which access is improved, the Group componentises its mine into geographically distinct sections or phases to which the stripping activities being undertaken within that component are allocated. Such phases are determined based on assessment of factors such as geology and mine planning. The Group depreciates deferred costs capitalised as stripping assets on a unit of production method, with reference to the tons mined and reserve of the relevant ore body component or phase. SEGMENTAL REPORTING For management reporting purposes, the Group is organised into business segments distinguishable by economic activity. The Group’s business segments are LAP operations, Bisichi operations and Dragon operations. These business segments are subject to risks and returns that are different from those of other business segments and are the primary basis on which the Group reports its segmental information. This is consistent with the way the Group is managed and with the format of the Group’s internal financial reporting. Significant revenue from transactions with any individual customer, which makes up 10 per cent or more of the total revenue of the Group, is separately disclosed within each segment. All coal exports are sales to coal traders at Richard Bay’s terminal in South Africa with the risks and rewards passing to the coal trader at the terminal. Whilst the coal traders will ultimately sell the coal on the international markets the Group has no visibility over the ultimate destination of the coal. Accordingly, the export sales are recorded as South Africa revenue. Other non–current assets, comprising motor vehicles and office equipment, are depreciated at a rate of between 10% and 33% per annum which is calculated to write off the cost, less estimated residual value of the assets, on a straight line basis over their expected useful lives. Mine inventories Inventories are stated at the lower of cost and net realisable value. Cost includes materials, direct labour and overheads relevant to the stage of production. Cost is determined using the weighted average method. Net realisable value is based on estimated selling price less all further costs to completion and all relevant marketing, selling and distribution costs. Mine provisions Provisions are recognised when the Group has a present obligation as a result of a past event which it is probable will result in an outflow of economic benefits that can be reliably estimated. A provision for rehabilitation of the mine is initially recorded at present value and the discounting effect is unwound over time as a finance cost. Changes to the provision as a result of changes in estimates are recorded as an increase/decrease in the provision and associated decommissioning asset. The decommissioning asset is depreciated in line with the Group’s depreciation policy over the life of mine. The provision includes the restoration of the underground, opencast, surface operations and de-commissioning of plant and equipment. The timing and final cost of the rehabilitation is uncertain and will depend on the duration of the mine life and the quantities of coal extracted from the reserves. Mine impairment Whenever events or changes in circumstance indicate that the carrying amount of an asset may not be recoverable that asset is reviewed for impairment. This includes mining reserves, plant and equipment and net investments in joint ventures. A review involves determining whether the carrying amounts are in excess of the recoverable amounts. An asset’s recoverable amount is determined as the higher of its fair value less costs of disposal and its value in use. Such reviews are undertaken on an asset-by-asset basis, except where assets do not generate cash flows independent of other assets, in which case the review is undertaken on a company or Group level. If the carrying amount of an asset exceeds its recoverable amount an asset’s carrying value is written down to its estimated recoverable amount (being the higher of the fair value less cost to sell and value in use). Any change in carrying value is recognised in the comprehensive income statement. Mine reserves and development cost The purpose of mine development is to establish secure working conditions and infrastructure to allow the safe and efficient extraction of recoverable reserves. Depreciation on mine development is not charged until production commences or the assets are put to use. On commencement of full commercial production, depreciation is charged over the life of the associated mine reserves extractable using the asset on a unit of production basis. The unit of production calculation is based on tonnes mined as a ratio to proven and probable reserves and also includes future forecast capital expenditure. The cost recognised includes the recognition of any decommissioning assets related to mine development. London & Associated Properties PLC 2017 41 FINANCIAL STATEMENTS Notes to the financial statements for the year ended 31 December 2017 1. RESULTS FOR THE YEAR AND SEGMENTAL ANALYSIS Operating Segments are based on the internal reporting and operational management of the Group. LAP is focused primarily on property activities (which generate trading income), but it also holds and manages investments. IFRS 10 requires the Group to treat Bisichi as a subsidiary and therefore it is consolidated, rather than being included in the accounts as an associate using the equity method. The Group has also consolidated Dragon, a company which the Company jointly controls with Bisichi; Bisichi is a coal mining company with operations in South Africa and also holds investment property in the United Kingdom and derives income from property rentals. Dragon is a property investment company and derives its income from property rentals. These operating segments (LAP, Bisichi and Dragon) are each viewed separately and have been so reported below. Business segments BUSINESS ANALYSIS Rental income Management income from third party properties Mining Group Revenue Direct property costs Direct mining costs Overheads Exchange losses Depreciation Operating profit Finance income Finance expenses Debenture break costs Result before valuation movements Other segment items Net increase/(decrease) on revaluation of investment properties Write off investment in joint venture Adjustment to interest rate derivative Revaluation and other movements Profit/(loss) for the year before taxation Segment assets - Non-current assets - property - Non-current assets - plant & equipment - Cash & cash equivalents - Non-current assets - other - Current assets - others Total assets excluding investment in joint ventures and assets held for sale Segment liabilities Borrowings Current liabilities Non-current liabilities Total liabilities Net assets Assets held for sale Net assets as per balance sheet Major customers Customer A Customer B These customers are for mining revenue in South Africa. GEOGRAPHIC ANALYSIS Revenue Operating profit Non-current assets excluding investments Total net assets Capital expenditure 42 London & Associated Properties PLC 2017 LAP £'000 6,825 542 – 7,367 (926) – (2,869) – (13) 3,559 38 (3,713) (14) (130) 9,386 – 358 9,744 9,614 65,231 116 2,109 1,748 2,715 71,919 (57,571) (5,588) (4,806) (67,965) 3,954 36,441 BISICHI £'000 1,112 – 36,334 37,446 (152) (25,664) (5,589) (256) (1,790) 3,995 67 (526) – 3,536 (13) (1,827) – (1,840) 1,696 13,397 8,613 5,327 51 6,285 33,673 (7,160) (7,556) (3,986) (18,702) 14,971 – – – 27,528 7,226 UNITED KINGDOM £'000 8,692 4,645 81,383 52,452 30 DRAGON £'000 166 – – 166 (1) – (164) – (1) – – (29) – (29) – – (3) (3) (32) 2,630 6 92 – 30 2,758 (1,218) (123) (73) (1,414) 1,344 – – – SOUTH AFRICA £'000 36,287 2,909 8,610 4,258 1,741 2017 TOTAL £'000 8,103 542 36,334 44,979 (1,079) (25,664) (8,622) (256) (1,804) 7,554 105 (4,268) (14) 3,377 9,373 (1,827) 355 7,901 11,278 81,258 8,735 7,528 1,799 9,030 108,350 (65,949) (13,267) (8,865) (88,081) 20,269 36,441 56,710 27,528 7,226 2017 TOTAL £'000 44,979 7,554 89,993 56,710 1,771 FINANCIAL STATEMENTS Notes to the financial statements 1. RESULTS FOR THE YEAR AND SEGMENTAL ANALYSIS CONTINUED BUSINESS ANALYSIS Rental income Management income from third party properties Mining Group Revenue Direct property costs Direct mining costs Overheads Exchange gains Depreciation Operating profit before listed investments held for trading Listed investments held for trading Operating profit Finance income Finance expenses Result before valuation movements Other segment items Net increase/(decrease) on revaluation of investment properties Increase in value of other investments Net increase on revaluation of investments held for trading Adjustment to interest rate derivative Revaluation and other movements (Loss)/profit for the year before taxation Segment assets - Non – current assets – property - Non – current assets – plant and equipment - Cash and cash equivalents - Non – current assets – other - Non – current assets – deferred tax asset - Current assets – others Total assets excluding investment in joint ventures and assets held for sale Segment liabilities Borrowings Current liabilities Non-current liabilities Total liabilities Net assets Investment in joint ventures non segmental Net assets as per balance sheet Major customer Customer A This customer is for mining revenue in South Africa. GEOGRAPHIC ANALYSIS Revenue Operating profit/(loss) Non–current assets excluding investments Total net assets Capital expenditure LAP £'000 6,241 501 – 6,742 (1,168) – (2,926) – (25) 2,623 2 2,625 11 (3,706) (1,070) 125 – 1 (206) (80) (1,150) 93,791 112 3,706 1,874 1,134 1,853 102,470 (58,068) (6,074) (5,379) (69,521) 32,949 – – BISICHI £'000 1,060 – 21,731 22,791 (187) (16,184) (4,903) 449 (1,785) 181 – 181 132 (554) (241) 445 12 – – 457 216 13,426 8,520 2,444 32 – 7,745 32,167 (9,234) (6,811) (3,665) (19,710) 12,457 – – DRAGON £'000 171 – – 171 5 – (128) – (8) 40 – 40 1 (32) 9 (38) – – (11) (49) (40) 2,630 21 115 – – 20 2,786 (1,207) (78) (81) (1,366) 1,420 – – 2016 TOTAL £'000 7,472 501 21,731 29,704 (1,350) (16,184) (7,957) 449 (1,818) 2,844 2 2,846 144 (4,292) (1,302) 532 12 1 (217) 328 (974) 109,847 8,653 6,265 1,906 1,134 9,618 137,423 (68,509) (12,963) (9,125) (90,597) 46,826 1,805 48,631 – 14,543 – 14,543 UNITED KINGDOM £'000 8,025 3,441 111,117 43,916 164 SOUTH AFRICA £'000 21,679 (595) 8,517 4,715 2,858 2016 TOTAL £'000 29,704 2,846 119,634 48,631 3,022 Group revenue is external to the Group and the directors consider that inter segmental revenues are not material. Revenue includes contingent rents of £0.7 million (2016: £0.2 million). London & Associated Properties PLC 2017 43 FINANCIAL STATEMENTS Notes to the financial statements 2. PROFIT/(LOSS) BEFORE TAXATION Profit/(loss) before taxation is stated after charging/(crediting): Staff costs (see Note 29) Depreciation on tangible fixed assets - owned assets Operating lease rentals - land and buildings Exchange loss/(gain) Profit on disposal of motor vehicles and office equipment Amounts payable to the auditor in respect of both audit and non-audit services Audit services Statutory - Company and consolidation Subsidiaries - audited by RSM Subsidiaries - audited by other auditors Further assurance services Other services Staff costs are included in overheads. 3. LISTED INVESTMENTS HELD FOR TRADING Dividends receivable Net profit from listed investments 4. DIRECTORS’ EMOLUMENTS Emoluments Defined contribution pension scheme contributions Sir Michael Heller received £75,000 (2016: £75,000) as a Director of Bisichi Mining PLC. Details of directors’ emoluments and share options are set out in the remuneration report. 5. FINANCE INCOME AND EXPENSES Finance income Finance expenses Interest on bank loans and overdrafts Unwinding of discount (Bisichi) Other loans Interest on derivatives Interest on obligations under finance leases Total finance expenses 2017 £'000 8,113 1,804 411 256 (3) 83 17 51 4 5 160 2017 £'000 – – 2017 £'000 894 27 921 2017 £'000 105 (2,223) (92) (1,414) (337) (202) (4,268) (4,163) 2016 £'000 7,173 1,818 442 (449) (32) 88 20 50 4 32 194 2016 £'000 2 2 2016 £'000 988 45 1,033 2016 £'000 144 (2,243) (78) (1,420) (302) (249) (4,292) (4,148) 44 London & Associated Properties PLC 2017 FINANCIAL STATEMENTS Notes to the financial statements 6. INCOME TAX Current tax Corporation tax on profit of the period Corporation tax on profit/(loss) of previous periods Total current tax Deferred tax Origination of timing differences Revaluation of investment properties Accelerated capital allowances Fair value of interest derivatives Adjustment in respect of prior years Total deferred tax (Notes 24 and 25) Tax on profit on ordinary activities 2017 £'000 369 (5) 364 (35) 2,348 235 68 2 2,618 2,982 2016 £'000 73 – 73 874 472 (48) (40) (156) 1,102 1,175 Factors affecting tax charge for the year The corporation tax assessed for the year is different from that at the effective rate of corporation tax in the United Kingdom of 19.25 per cent (2016: 20 per cent). The differences are explained below: Profit/(loss) for the year before taxation Taxation at 19.25 per cent (2016: 20 per cent) Effects of: Capital gains Other differences Adjustment in respect of prior years Deferred tax rate adjustment Income tax charge for the year Analysis of United Kingdom and overseas tax: United Kingdom tax included in above: Corporation tax Adjustment in respect of prior years Current tax Deferred tax Overseas tax included above: Corporation tax Current tax Deferred tax Adjustment in respect of prior years Deferred tax 2017 £'000 11,278 2,171 1,792 (785) (3) (193) 2,982 2017 £'000 233 (5) 228 2,219 2,447 2017 £'000 136 136 397 2 399 535 2016 £'000 (974) (195) 800 506 (157) 221 1,175 2016 £'000 13 – 13 1,241 1,254 2016 £'000 60 60 (139) – (139) (79) Factors that may affect future tax charges: Based on current capital expenditure plans, the Group expects to continue to be able to claim capital allowances in excess of depreciation in future years, but at a slightly lower level than in the current year. A deferred tax provision has been made for gains on revaluing investment properties. The Finance Bill 2016 was substantively enacted on 7 September 2016. This includes a reduction in the rate of Corporation tax from 19% effective 1 April 2017 to 17% from 1 April 2020. The Finance (no. 2) Act 2017 was substantively enacted on 16 November 2017. This includes a restriction on the utilisation of brought forward tax losses and corporate interest in certain circumstances effective from 1 April 2017. London & Associated Properties PLC 2017 45 FINANCIAL STATEMENTS Notes to the financial statements 7. DISCONTINUED OPERATIONS As part of the Group's strategy to focus on core assets, the Group disposed of King Edward Court, Windsor in 2013. The profits and losses arising from this disposal were classified as discontinued operations. Contracts for the sale of King Edward Court had been exchanged in 2013 and completion took place in January 2014. Following the settlement of a dispute additional proceeds of £414,000 were received by the Group in 2016. 8. DIVIDEND Dividends paid during the year relating to the prior period Dividends to be paid: Proposed final dividend for the year Proposed special dividend for the year 9. PROFIT/(LOSS) PER SHARE AND NET ASSETS PER SHARE Profit/(loss) per share has been calculated as follows: 2017 2016 PER SHARE 0.165p 0.175p 0.125p £'000 141 149 107 PER SHARE 0.16p 0.165p – £'000 136 141 – Profit/(loss) for the year for the purposes of basic and diluted profit/(loss) per share (£'000) Weighted average number of ordinary shares in issue for the purpose of basic profit/(loss) per share ('000) Basic profit/(loss) per share Weighted average number of ordinary shares in issue for the purpose of diluted profit/(loss) per share ('000) Fully diluted profit/(loss) per share 2017 7,686 85,322 9.01p 85,322 2016 (2,357) 85,107 (2.77)p 85,107 9.01p (2.77)p Weighted average number of shares in issue is calculated after excluding treasury shares of 221,061 (2016: 221,061). 2017 45,854 85,322 53.74p 45,854 85,322 53.74p 2016 38,242 85,322 44.83p 38,242 85,322 44.83p TOTAL £'000 109,847 (36,441) 13 (1,534) 9,373 81,258 78,025 3,233 81,258 81,258 109,847 FREEHOLD £'000 88,585 (36,441) 13 – 10,268 62,425 LEASEHOLD OVER 50 YEARS £'000 19,620 – – (1,839) (925) 16,856 LEASEHOLD UNDER 50 YEARS £'000 1,642 – – 305 30 1,977 62,425 – 62,425 62,425 88,585 14,570 2,286 16,856 16,856 19,620 1,030 947 1,977 1,977 1,642 Net assets per share have been calculated as follows: Net assets (£'000) Shares in issue ('000) Basic net assets per share Net assets diluted (£'000) Shares in issue ('000) Diluted net assets per share 10. INVESTMENT PROPERTIES Cost or valuation at 1 January 2017 Transfer to assets held for sale (Note 14) Additions in year (Decrease)/increase in present value of head leases Increase/(decrease) on revaluation At 31 December 2017 Representing assets stated at: Valuation Present value of head leases At 31 December 2017 At 31 December 2016 46 London & Associated Properties PLC 2017 FINANCIAL STATEMENTS Notes to the financial statements 10. INVESTMENT PROPERTIES CONTINUED Cost or valuation at 1 January 2016 Additions in year Decrease in present value of head leases Increase/(decrease) on revaluation At 31 December 2016 Representing assets stated at: Valuation Present value of head leases At 31 December 2016 At 31 December 2015 TOTAL £'000 109,172 160 (17) 532 109,847 105,080 4,767 109,847 109,847 109,172 FREEHOLD £'000 86,468 160 – 1,957 88,585 LEASEHOLD OVER 50 YEARS £'000 21,060 – (15) (1,425) 19,620 88,585 – 88,585 88,585 86,468 15,495 4,125 19,620 19,620 21,060 LEASEHOLD UNDER 50 YEARS £'000 1,644 – (2) – 1,642 1,000 642 1,642 1,642 1,644 The leasehold and freehold properties, excluding the present value of head leases and directors' valuations, were valued as at 31 December 2017 by professional firms of chartered surveyors. The valuations were made at fair value. The directors' property valuations were made at fair value. Allsop LLP Carter Towler Directors' valuations Add: present value of headleases 2017 £'000 62,955 13,245 1,825 78,025 3,233 81,258 2016 £'000 90,010 13,245 1,825 105,080 4,767 109,847 The historical cost of investment properties, including total capitalised interest of £1,161,000 (2016: £1,161,000) was as follows: Cost at 1 January Transfer to assets held for sale (Note 14) Additions Cost at 31 December 2017 LEASEHOLD OVER 50 YEARS £'000 17,653 – – 17,653 LEASEHOLD UNDER 50 YEARS £'000 1,939 – – 1,939 FREEHOLD £'000 72,711 (5,022) 13 67,702 2016 LEASEHOLD OVER 50 YEARS £'000 17,653 – – 17,653 LEASEHOLD UNDER 50 YEARS £'000 1,939 – – 1,939 FREEHOLD £'000 72,551 – 160 72,711 Each year external valuers are appointed by the executive directors on behalf of the Board. The valuers are selected based upon their knowledge, independence and reputation for valuing assets such as those held by the Group. Valuations are performed annually and are performed consistently across all properties in the Group's portfolio. At each reporting date appropriately qualified employees of the Group verify all significant inputs and review the computational outputs. Valuers submit their report to the Board on the outcome of each valuation. Valuations take into account tenure, lease terms and structural condition. The inputs underlying the valuations include market rent or business profitability, likely incentives offered to tenants, forecast growth rates, yields, EBITDA, discount rates, construction costs including any specific site costs (for example section 106), professional fees, developer's profit including contingencies, planning and construction timelines, lease regear costs, planning risk and sales prices based on known market transactions for similar properties to those being valued. Valuations are based on what is determined to be the highest and best use. When considering the highest and best use the valuer will consider, on a property by property basis, its actual and potential uses which are physically, legally and financially viable. Where the highest and best use differs from the existing use, the valuer will consider the cost and likelihood of achieving and implementing this change in arriving at the valuation. There are often restrictions on Freehold and Leasehold property which could have a material impact on the realisation of these assets. The most significant of these occur when planning permission or lease extension and renegotiation of use are required or when a credit facility is in place. These restrictions are factored into the property's valuation by the external valuer. London & Associated Properties PLC 2017 47 financial statements Notes to the financial statements 10. INVESTMENT PROPERTIES CONTINUED The methods of fair value measurement are classified into a hierarchy based on the reliability of the information used to determine the valuation, as follows: Level 1: valuation based on inputs on quoted market prices in active markets. Level 2: valuation based on inputs other than quoted prices included within level 1 that maximise the use of observable data directly or from market prices or indirectly derived from market prices. Level 3: where one or more significant inputs to valuations are not based on observable market data. class Of PROPeRtY leVel 3 Freehold – external valuation caRRYinG / faiR ValUe 2017 £'000 60,600 CARRYING/ FAIR VALUE 2016 £'000 ValUatiOn tecHniQUe 86,760 Income capitalisation KeY UnOBseRVaBle inPUts Estimated Rental Value Per sq ft p.a Equivalent Yield Leasehold over 50 years – external valuation 14,570 15,495 Income capitalisation Estimated Rental Value Per sq ft p.a RanGe (WEIGHTED AVERAGE) 2017 £5 – £39 (£19) 4.9% – 12.9% (8.4%) £5 – £10 (£9) Leasehold under 50 years – external valuation 1,030 1,000 Income capitalisation Freehold – Directors' valuation 1,825 1,825 Income capitalisation Equivalent Yield 5.8% – 17.6% Estimated Rental Value Per sq ft p.a Equivalent Yield Estimated Rental Value Per sq ft p.a Equivalent Yield (9%) £4 – £5 (£5) 25.4% – 25.8% (25.5%) £5 – £5 (£5) 6.1% – 6.1% (6.1%) RANGE (WEIGHTED AVERAGE) 2016 £5 – £37 (£19) 5% – 14% (8%) £5 – £11 (£9) 7% – 18% (11%) £3 – £5 (£4) 18% – 23% (19%) £5 – £5 (£5) 6% – 6% (6%) At 31 December 78,025 105,080 There are interrelationships between all these inputs as they are determined by market conditions. The existence of an increase in more than one input would be to magnify the input on the valuation. The impact on the valuation will be mitigated by the interrelationship of two inputs in opposite directions, for example, an increase in rent may be offset by an increase in yield. The table below illustrates the impact of changes in key unobservable inputs on the carrying / fair value of the Group's properties. ESTIMATED RENTAL ValUe 10% INCREASE OR (DECREASE) EQUIVALENT YIELD 25 BASIS POINT CONTRACTION OR (EXPANSION) 2016 £'000 2017 £'000 2016 £'000 6,055/(6,055) 8,671/(8,671) 2,095/(1,956) 3,585/(3,298) 394/(375) 1,457/(1,457) 1,545/(1,545) 13/(13) 100/(100) 78/(72) 183/(183) 355/(338) 10/(10) 78/(71) 103/(103) 183/(183) 2017 £'000 Freehold – external valuation Leasehold over 50 years – external valuation Leasehold under 50 years – external valuation Freehold – Directors' valuation 48 London & Associated Properties PLC 2017 FINANCIAL STATEMENTS Notes to the financial statements 11. MINING RESERVES, PLANT AND EQUIPMENT Cost at 1 January 2017 Exchange adjustment Additions Disposals At 31 December 2017 Accumulated depreciation at 1 January 2017 Exchange adjustment Charge for the year Disposals in year Accumulated depreciation at 31 December 2017 Net book value at 31 December 2017 Cost at 1 January 2016 Exchange adjustment Additions Disposals Cost at 31 December 2016 Accumulated depreciation at 1 January 2016 Exchange adjustment Charge for the year Disposals Accumulated depreciation at 31 December 2016 Net book value at 31 December 2016 12. INVESTMENT IN JOINT VENTURE Shares in joint venture: At 1 January Write off of investment Exchange adjustment At 31 December TOTAL £'000 25,817 474 1,758 (53) 27,996 17,164 332 1,804 (39) 19,261 8,735 17,188 6,273 2,862 (506) 25,817 11,636 4,202 1,818 (492) 17,164 8,653 MINING RESERVES £'000 1,344 22 – – 1,366 MINING EQUIPMENT £'000 23,724 447 1,731 – 25,902 OFFICE EQUIPMENT AND MOTOR VEHICLES £'000 749 5 27 (53) 728 1,287 21 1 (1) 1,308 58 995 349 – – 1,344 949 336 2 – 1,287 57 15,370 308 1,763 – 17,441 8,461 15,453 5,858 2,814 (401) 23,724 10,201 3,824 1,746 (401) 15,370 8,354 2017 £'000 455 (447) (8) – 507 3 40 (38) 512 216 740 66 48 (105) 749 486 42 70 (91) 507 242 2016 £'000 325 – 130 455 At 31 December 2017 the joint venture had non-current assets of £nil (2016: £1,346,000), current assets of £nil (2016: £3,000) and current liabilities of £nil (2016: £1,349,000). Bisichi owned 49% of the issued share capital of Ezimbokodweni (an unlisted coal production company in South Africa). The Directors of Bisichi have now concluded that the joint venture (which has not traded to date) is unlikely to generate income in the foreseeable future. For that reason, the investment and the loan (Note 13) have been written off. 13. LOAN TO JOINT VENTURE Loan to Ezimbokodweni Mining (Pty) Limited At 1 January Exchange adjustment Additions - interest Write-off At 31 December 14. ASSETS HELD FOR SALE At 1 January Transfer from investment property (Note 10) Disposal At 31 December 2017 JOINT VENTURES ASSETS £'000 2016 JOINT VENTURES ASSETS £'000 1,350 (16) 46 (1,380) – 2017 £'000 – 36,441 – 36,441 900 336 114 – 1,350 2016 £'000 2,335 – (2,335) – In March 2018 contracts were exchanged for the sale of both Brixton markets for a combined price of £37.25 million. The properties were held at a valuation of £24.52 million at 31 December 2016 and a revaluation gain of £11.92 million is recognised in note 10 prior to the transfer of the property to assets held for sale. Following the Market Row completion on 23 April 2018, £15.9 million of bank loans related to those properties have been repaid as required by the terms of the loan agreements. The Brixton Village completion was on 26 April 2018. As required under IFRS, these properties have been reclassified from investment properties to assets held for sale, at fair value less costs to sell of £36.44 million. Related loans are classified as non-current in Note 23. London & Associated Properties PLC 2017 49 FINANCIAL STATEMENTS Notes to the financial statements 15. SUBSIDIARY COMPANIES In accordance with Section 409 of the Companies Act 2006 a full list of subsidiaries, the principal activity, the country of incorporation and the percentage of equity owned, as at 31 December 2017 is disclosed below: ENTITY Analytical Investments Limited Analytical Portfolios Limited Analytical Properties Holdings Limited Analytical Properties Limited Analytical Ventures Limited 24 Bruton Place Limited 24 BPL (Harrogate) Limited 24 BPL (Harrogate ) Two Limited Brixton Village Limited Market Row Limited Newincco 1243 Limited Newincco 1244 Limited Newincco 1245 Limited ACTIVITY Dormant Dormant Property Property Property Dormant Investment Investment Property Property Property Property Property Management Services Property Newincco 1299 Limited Property Newincco 1300 Limited Property LAP Ocean Holdings Limited Property LAP Ocean Two Limited Dormant London & Associated Limited Dormant London & Associated (Rugeley) Limited Dormant London & Associated Securities Limited London & Associated Management Services Limited Property PERCENTAGE OF SHARE CAPITAL 100% 100% 100% 100% 100% 100% 88% 100% 100% 100% 100% 100% 100% COUNTRY OF INCORPORATION REGISTERED ADDRESS 24 Bruton Place, London, W1J 6NE England and Wales 24 Bruton Place, London, W1J 6NE England and Wales 24 Bruton Place, London, W1J 6NE England and Wales 24 Bruton Place, London, W1J 6NE England and Wales 24 Bruton Place, London, W1J 6NE England and Wales 24 Bruton Place, London, W1J 6NE England and Wales 24 Bruton Place, London, W1J 6NE England and Wales 24 Bruton Place, London, W1J 6NE England and Wales 24 Bruton Place, London, W1J 6NE England and Wales 24 Bruton Place, London, W1J 6NE England and Wales 24 Bruton Place, London, W1J 6NE England and Wales 24 Bruton Place, London, W1J 6NE England and Wales 24 Bruton Place, London, W1J 6NE England and Wales 100% 100% 100% 100% 100% 100% 100% 100% 24 Bruton Place, London, W1J 6NE England and Wales 24 Bruton Place, London, W1J 6NE England and Wales 24 Bruton Place, London, W1J 6NE England and Wales 24 Bruton Place, London, W1J 6NE England and Wales 24 Bruton Place, London, W1J 6NE England and Wales 24 Bruton Place, London, W1J 6NE England and Wales 24 Bruton Place, London, W1J 6NE England and Wales 24 Bruton Place, London, W1J 6NE England and Wales London & African Investments Limited Orchard Chambers Residential Limited Bisichi Mining PLC (Note D) Mineral Products Limited (Note A)(Note D) Bisichi (Properties) Limited (Note A)(Note D) Bisichi Mining (Exploration) Limited (Note A)(Note D) Black Wattle Colliery (Pty) Limited (Note A)(Note D) Coal mining 100% 100% 41.52% Management Services Dormant Dormant Coal mining Share dealing 100% 100% Property 100% Holding company 62.5% Bisichi Coal Mining (Pty) Limited (Note A)(Note D) Coal mining 100% Dormant Urban First (Northampton) Limited (Note A)(Note D) Bisichi Trustee Limited (Note A)(Note D) Bisichi Mining Management Services Limited (Note A) (Note D) Ninghi Marketing Limited (Note A)(Note D) Bisichi Northampton Limited (Note A)(Note D) Amandla Ehtu Mineral Resource Development (Pty) Limited (Note A)(Note D) Black Wattle Klipfontein (Pty) Limited (Note A)(Note D) Coal mining Dormant Property Dormant Property Dormant 100% 100% 100% 90.1% 100% 70% 62.5% Dragon Retail Properties Limited (Note B)(Note D) Newincco 1338 Limited (Note C) Property 50% 24 Bruton Place, London, W1J 6NE England and Wales 24 Bruton Place, London, W1J 6NE England and Wales 24 Bruton Place, London, W1J 6NE England and Wales 24 Bruton Place, London, W1J 6NE England and Wales 24 Bruton Place, London, W1J 6NE England and Wales 24 Bruton Place, London, W1J 6NE England and Wales Samora Machel Street, Bethal Road, Middelburg, Mpumalanga, 1050 Samora Machel Street, Bethal Road, Middelburg, Mpumalanga, 1050 24 Bruton Place, London, W1J 6NE England and Wales South Africa South Africa 24 Bruton Place, London, W1J 6NE England and Wales 24 Bruton Place, London, W1J 6NE England and Wales 24 Bruton Place, London, W1J 6NE England and Wales 24 Bruton Place, London, W1J 6NE England and Wales Samora Machel Street, Bethal Road, Middelburg, Mpumalanga, 1050 Samora Machel Street, Bethal Road, Middelburg, Mpumalanga, 1050 24 Bruton Place, London, W1J 6NE England and Wales South Africa South Africa Property 100% 24 Bruton Place, London, W1J 6NE England and Wales Details on the non–controlling interest in subsidiaries are shown under Note 27. Note A: these companies are owned by Bisichi and the equity shareholdings disclosed relate to that company. Note B: this entity is a joint venture owned 50% by LAP and 50% by Bisichi. Note C: this company is owned by Dragon and the equity shareholdings disclosed relate to that company. Note D: Bisichi and Dragon and their subsidiaries are included in the consolidated financial statements in accordance with IFRS 10. 50 London & Associated Properties PLC 2017 FINANCIAL STATEMENTS Notes to the financial statements 16. INVENTORIES Coal Washed Mining production Work in progress Other 2017 £'000 301 286 227 14 828 17. HELD TO MATURITY INVESTMENTS AND OTHER INVESTMENTS Held to maturity investments: At 1 January Repayments At 31 December 2017 TOTAL £'000 1,874 (126) 1,748 UNLISTED SHARES £'000 1 – 1 LOAN STOCK £'000 1,873 (126) 1,747 2016 TOTAL £'000 1,995 (121) 1,874 UNLISTED SHARES £'000 1 – 1 2016 £'000 1,139 83 458 41 1,721 LOAN STOCK £'000 1,994 (121) 1,873 The Group owns a 3.17% (2016: 6.95%) interest in the equity and loans of HRGT Shopping Centres LP (HRGT), a limited partnership set up in England to acquire and own 3 shopping centres in Dunfermline, Kings Lynn and Loughborough. 96.4% (2016: 92.10%) of the equity and loans are owned by Oaktree Capital Management and 0.43% (2016: 0.95%) by Gooch Cunliffe Whale LLP. London & Associated Management Services Limited has a management contract to manage the properties on behalf of HRGT. Other investments: Net book and market value of investments listed on overseas stock exchange 18. TRADE AND OTHER RECEIVABLES Trade receivables Other receivables Prepayments and accrued income The directors consider that the carrying amount of trade and other receivables approximates to their fair value. 19. INVESTMENTS AVAILABLE FOR SALE AND HELD FOR TRADING Market bid value of the listed investment portfolio - available for sale Market bid value of the listed investment portfolio - held for trading Unrealised gain of market value over cost Listed investment portfolio at cost 2017 £'000 51 2017 £'000 4,920 736 1,476 7,132 2017 £'000 1,050 19 129 940 2016 £'000 32 2016 £'000 4,701 1,010 1,350 7,061 2016 £'000 781 19 45 755 Investments are listed on the London Stock Exchange with the exception of £47,000 (2016: £60,000) listed outside Great Britain. The directors have reviewed the individual investments for impairment and do not consider the investments which are below cost to be impaired. 20. TRADE AND OTHER PAYABLES Trade payables Other taxation and social security costs Other payables Accruals and deferred income The directors consider that the carrying amount of trade and other payables approximates to their fair value. 2017 £'000 3,937 629 2,842 5,501 12,909 2016 £'000 3,618 739 2,815 5,770 12,942 London & Associated Properties PLC 2017 51 FINANCIAL STATEMENTS Notes to the financial statements 21. BORROWINGS Other loans (Bisichi) £1.25 million term bank loan (secured) repayable by 2020 (Dragon)* £3.75 million first mortgage debenture stock 2018 at 11.6 per cent Bank overdrafts (secured) (Bisichi) Bank loan (secured)(Bisich) £10 million first mortgage debenture stock 2022 at 8.109 per cent* £5.876 million term bank loan (secured) repayable by 2019 (Bisichi)* £34.897 million term bank loan (secured) repayable by 2019* £10.105 million term bank loan (secured) repayable by 2019 at 9.5 per cent* Borrowings analysis by origin: United Kingdom South Africa 2017 £'000 CURRENT 26 – 3,000 1,262 – – – – – 4,288 2017 £'000 NON-CURRENT – 1,218 – – – 9,922 5,872 34,640 10,009 61,661 2016 £'000 CURRENT 24 – 750 3,334 – – – – – 4,108 2016 £'000 NON-CURRENT – 1,207 3,000 – 66 9,905 5,810 34,468 9,945 64,401 2017 £'000 64,621 1,328 65,949 2016 £'000 65,085 3,424 68,509 * The £10 million debenture and bank loans are shown after deduction of un-amortised issue costs. Interest payable on the term bank loans is variable being based upon the London inter–bank offered rate (LIBOR) plus margin. In June 2017, the Group repaid early £0.75 million of the £5 million first mortgage debenture stock 2018, at an additional cost of £14,000. First Mortgage Debenture Stocks August 2018 and 2022 and the Santander £34.897 million and Europa £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 £96.52 million. In addition, £0.12 million of cash deposits are charged as security to debenture stocks. The £34.897 million bank loan has an interest cost of 2 per cent above LIBOR. An interest rate swap and cap agreements are in place as detailed in Note 23. Santander bank loans of £12.8 million and Europa bank loans of £3.1m related to Brixton Markets sales are repayable on completion in accordance with the terms of the loan agreements. The Bisichi United Kingdom bank loans of £5.832 million (2016: £5.810 million) are secured by way of a first charge over the investment properties in the UK which are included in the financial statements at a value of £13.2 million. The interest cost of the bank loan is 2.35 per cent above LIBOR. The Bisichi South African bank loans and overdrafts of £1.328 million (2016: £3.424 million) are secured by way of a first charge over specific pieces of mining equipment, inventory and the debtors of the relevant company which holds the loan which are included in the financial statements at a value of £6.1 million. The bank loan of £1.25 million (Dragon) which is repayable in November 2020 is secured by way of a first charge on specific freehold property and which is included in the financial statements at a value of £2.58 million. The interest cost of the loan is 2 per cent above LIBOR. The Group's objectives when managing capital are: – To safeguard the Group's ability to continue as a going concern, so that it may provide returns for shareholders and benefits for other stakeholders; and – To provide adequate returns to shareholders by ensuring returns are commensurate with the risk. Analysis of the changes in liabilities arising from financing activities: Balance at 1 January Exchange adjustments Cash movements excluding exchange adjustments Valuation movements Balance at 31 December 2017 £'000 BORROWINGS 68,509 (4) (2,820) 264 65,949 2017 £'000 FINANCE LEASES 4,767 – – (1,534) 3,233 2016 £'000 BORROWINGS 67,218 854 173 264 68,509 2016 £'000 FINANCE LEASES 4,784 – – (17) 4,767 52 London & Associated Properties PLC 2017 FINANCIAL STATEMENTS Notes to the financial statements 22. PROVISIONS At 1 January Exchange adjustment Unwinding of discount At 31 December The above provision relates to mine rehabilitation costs in Bisichi. 23. FINANCIAL INSTRUMENTS Total financial assets and liabilities The Group's financial assets and liabilities and their fair values are as follows: 2017 £'000 1,236 21 92 1,349 2016 £'000 847 311 78 1,236 Cash and cash equivalents Assets held for sale Investments held to maturity Loan to joint venture Other investments Investments held for trading Available for sale investments Derivative assets Other assets Derivative liabilities Bank overdrafts Bank loans Present value of head leases on properties Other liabilities Total financial liabilities before debentures Fair value of debenture stocks Fair value of the Group's debenture liabilities: Debenture stocks Tax at 19.25 per cent (2016: 20 per cent) Post tax fair value adjustment Post tax fair value adjustment – basic pence per share FAIR VALUE £'000 7,528 36,441 1,748 – 51 19 1,050 1 5,656 (435) (1,262) (52,218) (3,233) (6,779) (11,433) BOOK VALUE £'000 (13,000) – – – 2017 2016 CARRYING VALUE £'000 7,528 36,441 1,748 – 51 19 1,050 1 5,656 (435) (1,262) (51,765) (3,233) (6,779) (10,980) FAIR VALUE £'000 6,265 – 1,874 1,350 32 19 781 4 5,711 (793) (3,334) (52,218) (4,767) (6,432) (51,508) CARRYING VALUE £'000 6,265 – 1,874 1,350 32 19 781 4 5,711 (793) (3,334) (51,520) (4,767) (6,432) (50,810) FAIR VALUE £'000 (15,686) – – – 2017 FAIR VALUE ADJUSTMENT £'000 (2,686) 517 (2,169) (2.54)p 2016 FAIR VALUE ADJUSTMENT £'000 (3,526) 705 (2,821) (3.3)p There is no material difference in respect of other financial liabilities or any financial assets. The fair values were calculated by the directors as at 31 December 2017 and reflect the replacement value of the financial instruments used to manage the Group's exposure to adverse rate movements. The fair values of the debentures are based on the net present value at the relevant gilt interest rate of the future payments of interest on the debentures. The bank loans and overdrafts are at variable rates and there is no material difference between book values and fair values. Investments held for trading and available for sale fall under level 1 of the fair value hierarchy into which fair value measurements are recognised in accordance with the levels set out in IFRS 7. Held to maturity investments are held at cost and other investments are held at fair value. The directors are of the opinion that the difference in value between cost and fair value of other investments is not significant or material. The comparative figures for 2016 fall under the same category of financial instrument as 2017. The carrying amount of short term (less than 12 months) trade receivable and other liabilities approximates its fair values. The fair value of non-current borrowings in Note 21 approximates its carrying value and was determined under level 2 of the fair value hierarchy and is estimated by discounting the future contractual cash flows at the current market interest rates for UK borrowings and for the South African overdraft facility. The fair value of the finance lease liabilities in Note 31 approximates its carrying value and was determined under level 2 of the fair value hierarchy and is estimated by discounting the future contractual cash flows at the current market interest rates. London & Associated Properties PLC 2017 53 FINANCIAL STATEMENTS Notes to the financial statements 23. FINANCIAL INSTRUMENTS CONTINUED Treasury policy The Group enters into derivative transactions such as interest rate swaps and forward exchange contracts in order to help manage the financial risks arising from the Group's activities. The main risks arising from the Group's financing structure are interest rate risk, liquidity risk and market price risk, credit risk, commodity price risk and foreign exchange risk. The policies for managing each of these risks and the principal effects of these policies on the results are summarised below. Sensitivity analysis LAP and Dragon have variable interest term debts which are covered by derivatives. Additionally, LAP has variable interest term debt covered by interest caps. At 31 December 2017, with other variables unchanged, a 1% increase in interest rates would change the profit/ loss for the year by £175,000 (2016: £173,000). Bisichi has variable loans and a 1% increase in interest rates would change the profit/ loss for the year by £82,000 (2016: £56,000). The Bisichi South African bank loans are secured by way of a first charge over specific pieces of mining equipment, inventory and the debtors of the relevant company which holds the loan. The rates of interest vary based on PRIME in South Africa. The £1.25 million bank loan (Dragon) is secured by way of a first charge on specific freehold property. The rate of interest varies based on LIBOR in the UK. Liquidity risk The Group's policy is to minimise refinancing risk by balancing its exposure to interest risk and to refinancing risk. In effect the Group seeks to borrow for as long as possible at the lowest acceptable cost. Efficient treasury management and strict credit control minimise the costs and risks associated with this policy which ensures that funds are available to meet commitments as they fall due. Cash and cash equivalents earn interest at rates based on LIBOR in the UK. These facilities are considered adequate to meet the Group's anticipated cash flow requirements for the foreseeable future. Interest rate risk Treasury activities take place under procedures and policies approved and monitored by the Board to minimise the financial risk faced by the Group. The £34.897 million bank loan and Bisichi United Kingdom bank loans and overdraft are secured by way of a first charge on certain fixed assets. The rates of interest vary based on LIBOR in the UK. In South Africa, an increased structured trade finance facility for R100million was signed by Black Wattle Colliery (Pty) Limited in July 2017 with Absa Bank Limited. The facility is renewable annually at 30 June and is secured against inventory, debtors and cash that are held by Black Wattle Colliery (Pty) Limited. The trade facility, which is repayable on demand, is included in cash and cash equivalents within the cashflow statement. The £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 table below analyses the Group's financial liabilities (excluding interest rate derivatives) into maturity Groupings and also provides details of the liabilities that bear interest at fixed, floating and non–interest bearing rates. Bank overdrafts (floating) Debentures (fixed) Bank loans (fixed) Bank loans (floating)* Trade and other payables (non–interest) Bank overdrafts (floating) Debentures (fixed) Bank loans (fixed) Bank loans (floating)* Trade and other payables (non–interest) 2017 TOTAL £'000 1,262 12,922 10,009 41,756 6,779 72,728 2016 TOTAL £'000 3,334 13,655 9,945 41,575 6,432 74,941 LESS THAN 1 YEAR £'000 1,262 3,000 – 26 6,779 11,067 LESS THAN 1 YEAR £'000 3,334 750 – 24 6,432 10,540 2-5 YEARS £'000 – 9,922 10,009 41,730 – 61,661 2-5 YEARS £'000 – 3,000 9,945 41,551 – 54,496 OVER 5 YEARS £'000 – – – – – – OVER 5 YEARS £'000 – 9,905 – – – 9,905 The Group would normally expect that sufficient cash is generated in the operating cycle to meet the contractual cash flows as disclosed above through effective cash management. *Certain bank loans are fully hedged with appropriate interest derivatives. Details of all hedges are shown below. 54 London & Associated Properties PLC 2017 FINANCIAL STATEMENTS Notes to the financial statements 23. FINANCIAL INSTRUMENTS CONTINUED Market price risk The Group is exposed to market price risk through interest rate and currency fluctuations. Credit risk At the balance sheet date there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet. The Group only deposits surplus cash with well–established financial institutions of high quality credit standing. Foreign exchange risk Only Bisichi is subject to this risk. All trading is undertaken in the local currencies except for certain export sales which are invoiced in US Dollars. It is not the Bisichi Group's policy to obtain forward contracts to mitigate foreign exchange risk on these contracts as payment terms are within 15 days of invoice or earlier. Funding is also in local currencies other than inter-company investments and loans and it is also not the Bisichi Group's policy to obtain forward contracts to mitigate foreign exchange risk on these amounts. During 2017 and 2016 the Bisichi Group did not hedge its exposure of foreign investments held in foreign currencies. The Bisichi directors consider there to be no significant risk from exchange rate movements of foreign currencies against the functional currencies of the reporting companies within the Bisichi Group, excluding inter-company balances. The principal currency risk to which the Bisichi Group is exposed in regard to inter-company balances is the exchange rate between Pounds Sterling and South African Rand. It arises as a result of the retranslation of Rand denominated inter-company trade receivable balances held within the UK which are payable by South African Rand functional currency subsidiaries. Based on the Bisichi Group's net financial assets and liabilities as at 31 December 2017, a 25% strengthening of Sterling against the South African Rand, with all other variables held constant, would decrease the Bisichi Group's profit after taxation by £34,000 (2016: £435,000). A 25% weakening of Sterling against the South African Rand, with all other variables held constant would increase the Bisichi Group's profit after taxation by £56,000 (2016: £725,000). The 25% sensitivity has been determined based on the average historic volatility of the exchange rate for 2016 and 2017. The table below shows the Bisichi currency profiles of cash and cash equivalents: Sterling South African Rand US Dollar Cash and cash equivalents earn interest at rates based on LIBOR in Sterling and Prime in Rand. The tables below shows the Bisichi currency profiles of net monetary assets and liabilities by functional currency: 2017: Sterling South African Rand US Dollar 2016: Sterling South African Rand US Dollar 2017 £'000 3,402 1,923 2 5,327 2016 £'000 1,717 725 2 2,444 UK £'000 (832) 54 13 (765) SOUTH AFRICA £'000 – (1,304) – (1,304) UK £'000 (2,522) 36 35 (2,451) SOUTH AFRICA £'000 – (2,262) – (2,262) Borrowing facilities At 31 December 2017 the Group was within its bank borrowing facilities and was not in breach of any of the covenants. Term loan repayments are as set out on next page. Details of other financial liabilities are shown in Notes 20 and 21. London & Associated Properties PLC 2017 55 FINANCIAL STATEMENTS Notes to the financial statements 23. FINANCIAL INSTRUMENTS CONTINUED Interest rate and hedge profile Fixed rate borrowings Floating rate borrowings – Subject to interest rate swap – Other borrowings Average fixed interest rate Weighted average swapped interest rate Weighted average cost of debt on overdrafts, bank loans and debentures Average period for which borrowing rate is fixed Average period for which borrowing rate is swapped 2017 £'000 23,105 36,147 7,160 66,412 9.17% 3.32% 5.45% 2.9 years 1.5 years 2016 £'000 23,855 36,147 9,300 69,302 9.24% 3.30% 5.80% 3.8 years 2.5 years The Group's floating rate debt bears interest based on LIBOR for the term bank loans and bank base rate for the overdraft. At 31 December 2017 the Group had hedges totalling £34.897 million to cover the £34.9 million bank loan. These consisted of a 5 year swap for £17.5 million, at 2.25% and a £17.397 million cap agreement at 2.25% to July 2019. At the year end the fair value liability in the accounts was £435,000 (2016: £793,000) as valued by the hedge provider. At 31 December 2017, Dragon had hedges of £1.25 million to cover the £1.25 million bank loan. This consists of a 5 year £1.25 million cap agreement taken out in November 2016 at 2.5%. At the year end, the fair value asset in the accounts was £1,000 (2016: £4,000), as valued by the hedge provider. Fair value of financial instruments Fair value estimation The Group has adopted the amendment to IFRS 7 for financial instruments that are measured in the balance sheet at fair value. This requires the methods of fair value measurement to be classified into a hierarchy based on the reliability of the information used to determine the valuation, as follows: – Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1). – Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2). – Inputs for the asset or liability that are not based on observable market data (that is unobservable inputs) (level 3). LEVEL 1 £'000 LEVEL 2 £'000 LEVEL 3 £'000 TOTAL £'000 2017 GAIN/(LOSS) TO INCOME STATEMENT £'000 1,069 – – – 1 435 – – – 1,069 1 - (3) 435 358 LEVEL 1 £'000 LEVEL 2 £'000 LEVEL 3 £'000 TOTAL £'000 2016 GAIN/(LOSS) TO INCOME STATEMENT £'000 832 – – – 4 793 – – – 832 4 13 (11) 793 (206) Financial assets Other financial assets held for trading and available for sale Quoted equities Derivative financial instruments Interest rate swaps Financial liabilities Derivative financial instruments Interest rate swaps Financial assets Other financial assets held for trading and available for sale Quoted equities Derivative financial instruments Interest rate swaps Financial liabilities Derivative financial instruments Interest rate swaps 56 London & Associated Properties PLC 2017 FINANCIAL STATEMENTS Notes to the financial statements 23. FINANCIAL INSTRUMENTS CONTINUED Capital structure The Group sets the amount of capital in proportion to risk. It ensures that the capital structure is commensurate to the economic conditions and risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may vary the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The Group considers its capital to include share capital, share premium, capital redemption reserve, translation reserve and retained earnings, but excluding the interest rate derivatives. Consistent with others in the industry, the Group monitors its capital by its debt to equity ratio (gearing levels). This is calculated as the net debt (loans less cash and cash equivalents) as a percentage of the equity calculated as follows: Total debt Less cash and cash equivalents Net debt Total equity 2017 £'000 65,949 (7,528) 58,421 56,710 103.0% 2016 £'000 68,509 (6,265) 62,244 48,631 128.0% The Group does not have any externally imposed capital requirements. Financial assets The Group's principal financial assets are bank balances and cash, trade and other receivables, investments and assets held for sale. The Group has no significant concentration of credit risk as exposure is spread over a large number of counterparties and customers. The credit risk in liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit ratings assigned by international credit–rating agencies. The Group's credit risk is primarily attributable to its trade receivables. The amounts presented in the balance sheet are net of allowances for doubtful receivables, estimated by the Group's management based on prior experience and the current economic environment. Financial assets maturity Cash and cash equivalents all have a maturity of less than three months. Cash at bank and in hand 2017 £'000 7,528 2016 £'000 6,265 These funds are primarily invested in short term bank deposits maturing within one year bearing interest at the bank's variable rates. Financial liabilities maturity The following table sets out the maturity profile of contractual undiscounted cashflows of financial liabilities as at 31 December: Repayment of borrowings Bank loans and overdrafts: Repayable on demand or within one year Repayable between two and five years Debentures: Repayable within one year Repayable between two and five years Repayable in more than five years 2017 £'000 2016 £'000 1,288 51,739 53,027 3,000 9,922 – 65,949 3,358 51,496 54,854 750 3,000 9,905 68,509 Certain borrowing agreements contain financial and other conditions that if contravened by the Group, could alter the repayment profile. Bank loans of £15.9 million currently shown as repayable between two and five years related to Brixton markets sales are repayable on completion. 24. DEFERRED TAX ASSET Balance at 1 January Transferred to consolidated income statement Balance at 31 December The deferred tax balance comprises the following: Revaluation of properties Accelerated capital allowances Fair value of interest derivatives Short-term timing differences Loss relief Deferred tax asset at end of year: 2017 £'000 1,134 (1,134) – – – – – – – 2016 £'000 2,390 (1,256) 1,134 (2,719) (904) 151 (124) 4,730 1,134 London & Associated Properties PLC 2017 57 FINANCIAL STATEMENTS Notes to the financial statements 25. DEFERRED TAX LIABILITIES Balance at 1 January Transferred from/(to) consolidated income statement Transferred from other comprehensive income Exchange adjustment Balance at 31 December The deferred tax balance comprises the following: Revaluation of properties Accelerated capital allowances Short-term timing differences Unredeemed capital deductions Losses and other deductions Deferred tax liability provision at end of year: 2017 £'000 2,329 1,484 – 35 3,848 5,836 2,522 144 (83) (4,571) 3,848 2016 £'000 2,106 (154) 13 364 2,329 793 1,347 191 (642) 640 2,329 The directors consider the temporary differences arising in connection with the interests in joint ventures are insignificant. There is no time limit in respect of the Group tax loss relief. In addition, the Group has unused losses and reliefs with a potential value of £5,427,000 (2016: £5,455,000), which have not been recognised as a deferred tax asset. As the Group returns to profit, these losses and reliefs can be utilised. 26. SHARE CAPITAL The Company has one class of ordinary shares which carry no right to fixed income. Authorised: ordinary shares of 10p each Allotted, issued and fully paid share capital Less: held in Treasury (see below) “Issued share capital” for reporting purposes Treasury shares Shares held in Treasury at 1 January Issued for share incentive plan -dividends investment (Jan 2016 - 25p) Issued to meet directors bonuses (Jan 2016 - 24.50p) Issued to meet staff bonuses (Jan 2016 - 24.50p) Issued for new directors share incentive plan (Jan 2016 - 24.50p) Issued for new staff share incentive plan (Jan 2016 - 24.50p) Issued for share incentive plan -dividends investment (Nov 2016 - 21.25p) Issued to meet directors bonuses (Nov 2016 - 21.25p) Shares held in Treasury at 31 December Share Option Schemes NUMBER OF ORDINARY 10P SHARES 2017 110,000,000 85,542,711 (221,061) 85,321,650 NUMBER OF ORDINARY 10P SHARES 2016 110,000,000 85,542,711 (221,061) 85,321,650 2017 £'000 11,000 8,554 (22) 8,532 2016 £'000 11,000 8,554 (22) 8,532 NUMBER OF ORDINARY 10P SHARES COST/ISSUE VALUE 2017 221,061 – – – – – – – 221,061 2016 734,816 (1,936) (69,225) (154,073) (24,488) (36,732) (2,831) (224,470) 221,061 2017 £'000 145 – – – – – – – 145 2016 £'000 482 (1) (45) (101) (16) (24) (2) (148) 145 Employees' share option scheme (Approved scheme) At 31 December 2017 there were no options to subscribe for ordinary shares outstanding, issued under the terms of the Employees' Share Option Scheme. This share option scheme was approved by members in 1986, and has been approved by Her Majesty's Revenue and Customs (HMRC). There are no performance criteria for the exercise of options under the Approved scheme, as this was set up before such requirements were considered to be necessary. A summary of the shares allocated and options issued under the scheme up to 31 December 2017 is as follows: AT 1 JANUARY 2017 Shares issued to date 2,367,604 1,549,955 Shares allocated over which options have not been granted Total shares allocated for issue to employees under the scheme 3,917,559 OPTIONS EXERCISED – – – OPTIONS GRANTED – – – OPTIONS LAPSED – – – AT 31 DECEMBER 2017 2,367,604 1,549,955 3,917,559 CHANGES DURING THE YEAR 58 London & Associated Properties PLC 2017 FINANCIAL STATEMENTS Notes to the financial statements 26. SHARE CAPITAL CONTINUED Non–approved Executive Share Option Scheme (Unapproved scheme) A share option scheme known as the “Non–approved Executive Share Option Scheme” which does not have HMRC approval was set up during 2000. At 31 December 2017 there were no options to subscribe for ordinary shares outstanding. The exercise of options under the Unapproved scheme is subject to the satisfaction of objective performance conditions specified by the remuneration committee which confirms to institutional shareholder guidelines and best practice provisions. A summary of the shares allocated and options issued under the scheme up to 31 December 2017 is as follows: AT 1 JANUARY 2017 450,000 Shares issued to date Shares allocated over which options have not yet been granted 550,000 Total shares allocated for issue to employees under the scheme 1,000,000 OPTIONS EXERCISED – – – OPTIONS GRANTED – – – OPTIONS LAPSED – – – AT 31 DECEMBER 2017 450,000 550,000 1,000,000 CHANGES DURING THE YEAR The Bisichi Mining PLC Unapproved Option Schemes Details of the share option schemes in Bisichi are as follows: YEAR OF GRANT 2010 2015 SUBSCRIPTION PRICE PER SHARE PERIOD WITHIN WHICH OPTIONS EXERCISABLE 202.5p Aug 2013 – Aug 2020 87.0p Sep 2015 – Sep 2025 NUMBER OF SHARES FOR WHICH OPTIONS OUTSTANDING AT 31 DECEMBER 2016 80,000 300,000 NUMBER OF SHARE OPTIONS ISSUED/EXERCISED/ (CANCELLED) DURING YEAR – – NUMBER OF SHARES FOR WHICH OPTIONS OUTSTANDING AT 31 DECEMBER 2017 80,000 300,000 The exercise of options under the Unapproved Share Option Schemes, for certain option issues, is subject to the satisfaction of the objective performance conditions specified by the remuneration committee, which will conform to institutional shareholder guidelines and best practice provisions in force from time to time. On the 5 February 2018 Bisichi entered into an agreement with G.Casey to surrender the 80,000 options which were granted in 2010. The aggregate consideration paid by the Group to effect the cancellation was £1. There are no performance or service conditions attached to 2015 options which are outstanding at 31 December 2017 which vested in 2015. On 6 February 2018 Bisichi granted additional options to the following directors: • A.Heller 150,000 options at an exercise price of 73.50p per share. • G.Casey 230,000 options at an exercise price of 73.50p per share. The above options vest on date of grant and are exercisable within a period of 10 years from date of grant. There are no performance or service conditions attached to the options. Outstanding at 1 January Lapsed during the year Outstanding at 31 December Exercisable at 31 December 27. NON–CONTROLLING INTEREST (“NCI”) As at 1 January Share of profit for the year Share of gain on available for sale investments Dividends received Shares issued Exchange movement As at 31 December The following subsidiaries had material NCI: Bisichi Mining PLC Black Wattle Colliery (Pty) Ltd 2017 WEIGHTED AVERAGE EXERCISE PRICE 111.3p – 111.3p 111.3p 2017 NUMBER 380,000 – 380,000 380,000 2016 WEIGHTED AVERAGE EXERCISE PRICE 133.1p 237.5p 111.3p 111.3p 2016 NUMBER 705,000 (325,000) 380,000 380,000 2017 £'000 10,389 610 49 (250) – 58 10,856 2016 £'000 9,574 208 104 (250) 64 689 10,389 London & Associated Properties PLC 2017 59 FINANCIAL STATEMENTS Notes to the financial statements 27. NON–CONTROLLING INTEREST (“NCI”) CONTINUED 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 Revenue Profit for the year attributable to owners of the parent Profit/(loss) for the year attributable to NCI Profit for the year Other comprehensive income attributable to owners of the parent Other comprehensive income attributable to NCI Other comprehensive income for the year Balance sheet Non–current assets Current assets Total assets Current liabilities Non–current liabilities Total liabilities Net current assets at 31 December Cash flows From operating activities From investing activities From financing activities Net cash flows 2017 £'000 37,446 749 172 921 163 11 174 22,935 13,622 36,557 (9,025) (9,858) (18,883) 17,674 7,692 (1,812) (975) 4,905 2016 £'000 22,791 479 (72) 407 1,186 100 1,286 24,649 12,224 36,873 (10,326) (9,541) (19,867) 17,006 2,941 (1,570) (969) 402 The non–controlling interest comprises of a 37.5% shareholding in Black Wattle Colliery (Pty) Ltd, a coal mining company incorporated in South Africa. Summarised financial information reflecting 100% of the underlying subsidiary's relevant figures, is set out below. BLACK WATTLE COLLIERY (PTY) LIMITED (“BLACK WATTLE”) Revenue Expenses Profit/(loss) for the year Total comprehensive income/(expense) for the year Balance sheet Non–current assets Current assets Current liabilities Non–current liabilities Net assets at 31 December 2017 £'000 36,300 (35,150) 1,150 1,150 8,613 6,747 (8,652) (3,155) 3,553 2016 £'000 21,703 (22,185) (482) (482) 8,516 8,600 (12,151) (2,635) 2,330 The non–controlling interest relates to the disposal of a 37.5% shareholding in Black Wattle in 2010. The total issued share capital in Black Wattle Colliery (Pty) Ltd was increased from 136 shares to 1,000 shares at par of ZAR1 (South African Rand) through the following shares issue: – a subscription for 489 ordinary shares at par by Bisichi Mining (Exploration) Limited increasing the number of shares held from 136 ordinary shares to a total of 625 ordinary shares; – a subscription for 110 ordinary shares at par by Vunani Mining (Pty) Ltd; – a subscription for 265 “A” shares at par by Vunani Mining (Pty) Ltd Bisichi Mining (Exploration) Limited is a wholly owned subsidiary of Bisichi Mining PLC incorporated in England and Wales. Vunani Mining (Pty) Ltd is a South African Black Economic Empowerment company and minority shareholder in Black Wattle. The “A” shares rank pari passu with the ordinary shares save that they will have no dividend rights until such time as the dividends paid by Black Wattle Colliery (Pty) Ltd on the ordinary shares subsequent to 30 October 2008 will equate to ZAR832,075,000. A non–controlling interest of 15% in Black Wattle is recognised for all profits distributable to the 110 ordinary shares held by Vunani Mining (Pty) Ltd from the date of issue of the shares (18 October 2010). An additional non–controlling interest will be recognised for all profits distributable to the 265 “A” shares held by Vunani Mining (Pty) Ltd after such time as the profits available for distribution, in Black Wattle Colliery (Pty) Ltd, before any payment of dividends after 30 October 2008, exceeds ZAR832,075,000. 60 London & Associated Properties PLC 2017 FINANCIAL STATEMENTS Notes to the financial statements 28. RELATED PARTY TRANSACTIONS Related party: Dragon Retail Properties Limited Current account Loan account Bisichi Mining PLC Current account Simon Heller Charitable Trust Current account Loan account Directors and key management M A Heller and J A Heller H D Goldring (Delmore Holdings Limited) C A Parritt R Priest Ezimbokodweni Mining (pty) Limited - see Note 12 Totals at 31 December 2017 Totals at 31 December 2016 COST RE- CHARGED TO (BY) RELATED PARTY £'000 AMOUNTS OWED BY (TO) RELATED PARTY £'000 ADVANCED TO (BY) RELATED PARTY £'000 – (1) – (63) – 15 (15) (18) (35) 46 (71) 53 24 – – – (700) 1 – (4) – – (679) 340 (84) – – – – – – – – – (84) (208) (i) (ii) (ii) (ii) Nature of costs recharged – (i) Property management fees (ii) Consultancy fees. Directors London & Associated Properties PLC provides office premises, property management, general management, accounting and administration services for a number of private property companies in which Sir Michael Heller and J A Heller have an interest. Under an agreement with Sir Michael Heller no charge is made for these services on the basis that he reduces by an equivalent amount the charge for his services to London & Associated Properties PLC. The board estimates that the value of these services, if supplied to a third party, would have been £300,000 for the year (2016: £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 receives management fees of £10,000 (2016: £10,000) for work done for two charitable foundations, the Michael & Morven Heller Charitable Foundation and the Simon Heller Charitable Trust. The Simon Heller Trust has placed on deposit with LAP £700,000 at an interest rate of 9% which is refundable on demand. Delmore Holdings Limited (Delmore) is a Company in which H D Goldring is a majority shareholder and director. Delmore provides consultancy services to the Company on an invoiced fee basis. R Priest provided consultancy services to the Company on an invoiced fee basis. In 2012 a loan of £116,000 was made by Bisichi to one of the Bisichi directors - A R Heller. The loan amount outstanding at the year end was £56,000 (2016: £71,000) and a repayment of £15,000 (2016: £15,000) was made during the year. Interest is payable on the loan at a rate of 6.14 percent. There is no fixed repayment date for the loan. The directors are considered to be the only key management personnel and their remuneration including employer's national insurance for the year were £949,000 (2016: £1,103,000). All other disclosures required including interest in share options in respect of those directors are included within the remuneration report. 29. EMPLOYEES The average number of employees, including directors, of the Group during the year was as follows: Production Administration Staff costs during the year were as follows: Salaries and other costs Social security costs Pension costs Share based payments 2017 192 45 237 2017 £'000 7,426 327 360 - 8,113 2016 185 46 231 2016 £'000 6,397 332 335 109 7,173 London & Associated Properties PLC 2017 61 FINANCIAL STATEMENTS Notes to the financial statements 30. CAPITAL COMMITMENTS Commitments for capital expenditure approved and contracted for at the year end Share of commitment of capital expenditure in joint venture All the above relates to Bisichi Mining PLC. 31. OPERATING AND FINANCE LEASES 2017 £'000 – – 2016 £'000 762 1,489 Operating leases on land and buildings At 31 December 2017 the Group had commitments under non–cancellable operating leases on land and buildings expiring as follows: Within one year Second to fifth year After five years 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 2017 £'000 240 960 240 2016 £'000 240 960 480 Within one year Second to fifth year After five years Future finance charges on finance leases Present value of finance lease liabilities MINIMUM LEASE PAYMENTS PRSENT VALUE OF MINIMUM LEASE PAYMENTS 2017 £'000 211 841 16,682 17,734 (14,501) 3,233 2016 £'000 305 1,222 29,734 31,261 (26,494) 4,767 2017 £'000 211 776 2,246 3,233 – 3,233 2016 £'000 305 1,130 3,332 4,767 – 4,767 Finance lease liabilities are in respect of leased investment property. Many leases provide for contingent rent in addition to the rents above, usually a proportion of rental income. Finance lease liabilities are effectively secured as the rights to the leased asset revert to the lessor in the event of default. Future aggregate minimum rentals receivable The Group leases out its investment properties to tenants under operating leases. The future aggregate minimum rentals receivable under non–cancellable operating leases are as follows: Within one year Second to fifth year After five years 2017 £'000 5,088 14,597 18,519 38,204 2016 £'000 6,684 20,104 36,736 63,524 32. CONTINGENT LIABILITIES AND EVENTS AFTER THE REPORTING PERIOD There were no contingent liabilities at 31 December 2017 (2016: £Nil), except as disclosed in Note 23. Bank guarantees have been issued by the bankers of Black Wattle Colliery (Pty) Limited on behalf of the Company to third parties. The guarantees are secured against the assets of the Company and have been issued in respect of the following: Rail siding & transportation Rehabilitation of mining land Water & electricity 2017 £'000 64 1,387 58 1,509 2016 £'000 63 1,364 57 1,484 In March 2018 contracts were exchanged for the sale of both Brixton markets for a combined sale price of £37.25 million. Following the Market Row completion on 23 April 2018, £15.9 million of bank loans related to those properties have been repaid. The Brixton Village completion was on 26 April 2018. As required under IFRS, these properties have been reclassified from Investment properties to Assets held for sale at their net disposal value of £36.44 million. 62 London & Associated Properties PLC 2017 FINANCIAL STATEMENTS Notes to the financial statements 33. COMPANY FINANCIAL STATEMENTS Company balance sheet at 31 December 2017 Fixed assets Tangible assets Other investments: Associated company – Bisichi Mining PLC Subsidiaries and others including Dragon Retail Properties Limited Current assets Debtors Deferred tax due after more than one year Investments Bank balances Creditors Amounts falling due within one year Borrowings Net current liabilities Total assets less current liabilities Creditors Amounts falling due after more than one year Net assets Capital and reserves Share capital Share premium account Capital redemption reserve Treasury shares Retained earnings Shareholders' funds NOTES 33.3 33.4 33.4 33.5 33.9 33.6 33.7 33.8 33.8 33.10 33.10 2017 £'000 2016 £'000 25,397 27,383 489 42,598 43,087 68,484 1,025 2,059 19 1,233 4,336 (35,540) (3,000) (34,204) 34,280 489 42,492 42,981 70,364 1,130 2,082 19 2,625 5,856 (34,790) (750) (29,684) 40,680 (13,003) 21,277 (17,491) 23,189 8,554 4,866 47 (145) 7,955 21,277 8,554 4,866 47 (145) 9,867 23,189 The loss for the financial year, before dividends was £1,771,000 (2016: profit of £1,418,000) These financial statements were approved by the board of directors and authorised for issue on 27 April 2018 and signed on its behalf by: Sir Michael Heller Director Anil Thapar Director Company Registration No. 341829 London & Associated Properties PLC 2017 63 FINANCIAL STATEMENTS Notes to the financial statements 33. COMPANY FINANCIAL STATEMENTS CONTINUED Company statement of changes in equity for the year ended 31 december 2017 Balance at 1 January 2016 Profit for the year Total comprehensive income Transactions with owners: Dividends – equity holders Disposal of own shares Loss on transfer of own shares Transactions with owners Balance at 31 December 2016 Loss for the year Total comprehensive expense Transaction with owners: Dividends – equity holders Transactions with owners Balance at 31 December 2017 SHARE CAPITAL £'000 8,554 – – – – – – 8,554 – – – – 8,554 SHARE PREMIUM £'000 4,866 – – CAPITAL REDEMPTION RESERVE £'000 47 – – TREASURY SHARES £'000 (482) – – – – – – 4,866 – – – – 4,866 – – – – 47 – – – – 47 – 119 218 337 (145) – – – – (145) RETAINED EARNINGS EXCLUDING TREASURY SHARES £'000 8,803 1,418 1,418 (136) – (218) (354) 9,867 (1,771) (1,771) (141) (141) 7,955 TOTAL EQUITY £'000 21,788 1,418 1,418 (136) 119 – (17) 23,189 (1,771) (1,771) (141) (141) 21,277 £6.5 million (2016: £7.9 million) of retained earnings (excluding treasury shares) is distributable. 33.1. COMPANY Accounting policies The following are the main accounting policies of the Company: Basis of preparation The financial statements have been prepared on a going concern basis and in accordance with Financial Reporting Standard 101 'Reduced Disclosure Framework' (FRS 101) and Companies Act 2006. The financial statements are prepared under the historical cost convention as modified to include the revaluation of freehold and leasehold properties and fair value adjustments in respect of current asset investments and interest rate hedges. The results of the Company are included in the consolidated financial statements. No profit or loss is presented by the Company as permitted by Section 408 of the Companies Act 2006. In these financial statements, the company has applied the exemptions available under FRS 101 in respect of the following disclosures: • Cash Flow Statement and related notes; • Comparative period reconciliations for share capital, tangible fixed assets and intangible assets; • Disclosures in respect of transactions with wholly owned subsidiaries; • Disclosures in respect of capital management; • The effects of new but not yet effective IFRSs; • Disclosures in respect of the compensation of Key Management Personnel. As the consolidated financial statements include the equivalent disclosures, the Company has also taken the exemptions under FRS 101 available in respect of the following disclosures: • IFRS 2 Share Based Payments in respect of Group settled share based payments; • The disclosures required by IFRS 7 and IFRS 13 regarding financial instrument disclosures have not been provided apart from those which are relevant for the financial instruments which are held at fair value and are not either held as part of trading portfolio or derivatives. Key judgements and estimates The preparation of the financial statements requires management to make assumptions and estimates that may affect the reported amounts of assets and liabilities and the reported income and expenses, further details of which are set out below. Although management believes that the assumptions and estimates used are reasonable, the actual results may differ from those estimates. Further details of the estimates are contained in the Directors' Report and in the Group accounting policies. Investments in subsidiaries, associated undertakings and joint ventures Investments in subsidiaries, associated undertakings and joint ventures are held at cost less accumulated impairment losses. 64 London & Associated Properties PLC 2017 FINANCIAL STATEMENTS Notes to the financial statements 33.1. COMPANY CONTINUED Fair value measurements of investment properties and investments An assessment of the fair value of certain assets and liabilities, in particular investment properties, is required to be performed. In such instances, fair value measurements are estimated based on the amounts for which the assets and liabilities could be exchanged between market participants. To the extent possible, the assumptions and inputs used take into account externally verifiable inputs. However, such information is by nature subject to uncertainty. The fair value measurement of the investment properties may be considered to be less judgemental where external valuers have been used as is the case with the Company. The following accounting policies are consistent with those of the Group and are disclosed on page 36 to 41 of the Group financial statements. • Revenue • Property operating expenses • Employee benefits • Financial instruments • Investment properties • Other assets and depreciation • Assets held for sale • Income taxes • Leases 33.2. RESULT FOR THE FINANCIAL YEAR The Company's result for the year was a loss of £1,771,000 (2016: profit of £1,418,000). In accordance with the exemption conferred by Section 408 of the Companies Act 2006, the Company has not presented its own profit and loss account. 33.3. TANGIBLE ASSETS Cost or valuation at 1 January 2017 Additions (Decrease)/increase in present value of head leases (Decrease)/increase on revaluation Cost or valuation at 31 December 2017 Representing assets stated at: Valuation Cost Depreciation at 1 January 2017 Charge for the year Depreciation at 31 December 2017 Net book value at 1 January 2017 Net book value at 31 December 2017 INVESTMENT PROPERTIES FREEHOLD £'000 8,885 – – 410 9,295 LEASEHOLD OVER 50 YEARS £'000 16,744 – (1,810) (895) 14,039 LEASEHOLD UNDER 50 YEARS £'000 1,642 – 305 – 1,947 OFFICE EQUIPMENT AND MOTOR VEHICLES £'000 347 17 – – 364 9,295 – 9,295 – – – 8,885 9,295 14,039 – 14,039 – – – 16,744 14,039 1,947 – 1,947 – – – 1,642 1,947 – 364 364 235 13 248 112 116 TOTAL £'000 27,618 17 (1,505) (485) 25,645 25,281 364 25,645 235 13 248 27,383 25,397 The freehold and leasehold properties, excluding the present value of head leases and directors' valuations, were valued as at 31 December 2017 by professional firms of chartered surveyors. The valuations were made at fair value. The directors' property valuations were made at fair value. Allsop LLP Directors' valuation Add: Present value of headleases The historical cost of investment properties was as follows: Cost at 1 January 2017 Cost at 31 December 2017 2017 £'000 20,375 1,825 22,200 3,081 25,281 2016 £'000 20,860 1,825 22,685 4,586 27,271 FREEHOLD £'000 4,889 4,889 LEASEHOLD OVER 50 YEARS £'000 13,966 13,966 LEASEHOLD UNDER 50 YEARS £'000 1,939 1,939 Long leasehold properties are held on leases with an unexpired term of more than fifty years at the balance sheet date. London & Associated Properties PLC 2017 65 FINANCIAL STATEMENTS Notes to the financial statements 33.4. OTHER INVESTMENTS COST OR VALUATION At 1 January 2017 Impairment provision At 31 December 2017 SHARES IN SUBSIDIARY COMPANIES £'000 42,328 106 42,434 SHARES IN JOINT VENTURES £'000 164 – 164 TOTAL £'000 42,981 106 43,087 £'000 489 – 489 Subsidiary companies Details of the Company's subsidiaries are set out in Note 15. Under IFRS 10, Bisichi Mining PLC and its subsidiaries and Dragon Retail Properties Limited are treated in the financial statements as subsidiaries of the Company. Impairment reflects reduction in value of investment due to receipt of dividend of £15 million from a subsidiary. In the opinion of the directors the value of the investment in subsidiaries is not less than the amount shown in these financial statements. Details of the joint ventures are set out in Notes 12 and 13. 33.5. DEBTORS Trade debtors Amounts due from associate and joint ventures Amounts due from subsidiary companies Other debtors Prepayments and accrued income 33.6. INVESTMENTS Market value of the listed investment portfolio Unrealised gain of market value over cost Listed investment portfolio at cost All investments are listed on the London Stock Exchange. 33.7. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR Amounts owed to subsidiary companies Amounts owed to joint ventures Other taxation and social security costs Other creditors Accruals and deferred income 33.8. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR Present value of head leases on properties Term Debenture stocks: £3.75 million First Mortgage Debenture Stock 2018 at 11.6 per cent £10 million First Mortgage Debenture Stock 2022 at 8.109 per cent* *The £10 million debenture is shown after deduction of un–amortised issue costs. Details of terms and security of overdrafts, loans and loan renewal and debentures are set out in Note 21. REPAYMENT OF BORROWINGS: Debentures: Repayable within one year Repayable between two and five years Repayable in more than five years 66 London & Associated Properties PLC 2017 2017 £'000 366 33 100 118 408 1,025 2017 £'000 19 1 18 2017 £'000 29,775 2,214 278 1,400 1,873 35,540 2017 £'000 3,081 – 9,922 9,922 13,003 2017 £'000 3,000 9,922 – 12,922 2016 £'000 343 35 150 173 429 1,130 2016 £'000 19 1 18 2016 £'000 28,750 2,190 388 1,323 2,139 34,790 2016 £'000 4,586 3,000 9,905 12,905 17,491 2016 £'000 750 3,000 9,905 13,655 FINANCIAL STATEMENTS Notes to the financial statements 33.9. DEFERRED TAX ASSET Deferred Taxation Balance at 1 January Transfer to profit and loss account Balance at 31 December The deferred tax balance comprises the following: Accelerated capital allowances Short–term timing differences Revaluation of investment properties Loss relief Deferred tax asset at year end 33.10. SHARE CAPITAL Details of share capital, treasury shares and share options are set out in Note 26. 33.11. RELATED PARTY TRANSACTIONS 2017 £'000 2,082 (23) 2,059 (833) (124) 66 2,950 2,059 2016 £'000 3,055 (973) 2,082 (823) (124) 100 2,929 2,082 Related party: Dragon Retail Properties Limited Current account Loan account Bisichi Mining PLC Current account Simon Heller Charitable Trust Current account Loan account Directors and key management M A Heller and J A Heller H D Goldring (Delmore Holdings Limited) C A Parritt R Priest Totals at 31 December 2017 Totals at 31 December 2016 COST RE- CHARGED TO (BY) RELAT- ED PARTY £'000 AMOUNTS OWED BY (TO) RELAT- ED PARTY £'000 ADVANCED TO (BY) RELATED PARTY £'000 (95) – 138 (63) – 15 (15) (18) (35) (73) (84) (i) (ii) (i) (iii) (iii) (iii) (214) (2,000) 33 – (700) 1 – (4) – (2,884) (2,916) – – – – – – – – – – (34) Nature of costs recharged – (i) Management fees (ii) Property management fees (iii) Consultancy fees During the period, the Company entered into transactions, in the ordinary course of business, with other related parties. The company has taken advantage of the exemption under paragraph 8(k) of FRS101 not to disclose transactions with wholly owned subsidiaries. Dragon Retail Properties Limited – ‘Dragon' is owned equally by the Company and Bisichi Mining PLC. During 2013 Dragon lent the company £2 million at 6.875 per cent annual interest. Bisichi Mining PLC – The company has 41.52 per cent ownership of ‘Bisichi'. Other details of related party transactions are given in Note 28. London & Associated Properties PLC 2017 67 FINANCIAL STATEMENTS Notes to the financial statements 33.12. EMPLOYEES THE AVERAGE WEEKLY NUMBER OF EMPLOYEES OF THE COMPANY DURING THE YEAR WERE AS FOLLOWS: Directors & Administration STAFF COSTS DURING THE YEAR WERE AS FOLLOWS: Salaries Social Security costs Pension costs 2017 24 2017 £'000 1,375 163 119 1,657 2016 25 2016 £'000 1,474 178 135 1,787 33.13. CAPITAL COMMITMENTS There were no capital commitments at 31 December 2017 (2016: £Nil). 33.14. OPERATING AND FINANCE LEASES At 31 December 2017 the Company had commitments under non–cancellable operating leases on land and buildings as follows: Expiring in more than five years 2017 £'000 1,440 2016 £'000 1,680 In addition, the Company has an annual commitment to pay ground rents on its leasehold investment properties which amount to £201,000 (2016: £246,000). Present value of head leases on properties Within one year Second to fifth year After five years Future finance charges on finance leases Present value of finance lease liabilities MINIMUM LEASE PAYMENTS PRESENT VALUE OF MINIMUM LEASE PAYMENTS 2017 £'000 201 803 15,483 16,487 (13,406) 3,081 2016 £'000 294 1,177 28,298 29,769 (25,183) 4,586 2017 £'000 201 746 2,134 3,081 – 3,081 2016 £'000 294 1,094 3,198 4,586 – 4,586 Finance lease liabilities are in respect of leased investment property. A few leases provide for contingent rent in addition to the rents above, usually a proportion of rental income. Finance lease liabilities are effectively secured as the rights to the leased asset revert to the lessor in the event of default. Future aggregate minimum rentals receivable The Company leases out its investment properties to tenants under operating leases. The future aggregate minimum rentals receivable under non–cancellable operating leases are as follows: Within one year Second to fifth year After five years 33.15. CONTINGENT LIABILITIES AND POST BALANCE SHEET EVENTS There were no contingent liabilities at 31 December 2017 (2016: £Nil). 2017 £'000 1,758 4,178 1,934 7,870 2016 £'000 1,661 4,446 2,393 8,500 68 London & Associated Properties PLC 2017 Five year financial summary Portfolio size Investment properties–LAP^ Investment properties–joint ventures Investment properties–Dragon Retail Properties Investment properties–Bisichi Mining^ Portfolio activity Acquisitions Disposals Capital Expenditure Consolidated income statement Group income Profit/(loss) before tax Taxation Profit/(loss) attributable to shareholders Earnings/(loss) per share – basic and diluted Dividend per share Consolidated balance sheet Shareholders' funds attributable to equity shareholders Net borrowings Net assets per share – basic – fully diluted Consolidated cash flow statement Cash generated from operations Capital investment and financial investment Notes: ^ Excluding the present value of head leases 2017 £M 62 – 3 13 78 £M – – – – £M 44.98 11.28 (2.98) 7.69 9.01p 0.300p £M 45.86 58.42 53.74p 53.74p £M 10.29 (1.80) 2016 £M 89 – 3 13 105 £M – – 0.16 0.16 £M 29.70 (0.97) (1.18) (2.36) (2.77)p 0.165p £M 38.24 62.22 44.83p 44.83p £M 5.59 (0.18) 2015 £M 89 19 3 13 124 £M 1.00 (0.40) 0.36 0.96 £M 32.67 (2.09) 0.04 (1.90) (2.24)p 0.160p £M 40.08 62.39 47.26p 47.26p £M 4.37 (2.77) 2014 £M 89 20 3 12 124 £M 0.68 – – 0.68 £M 33.53 (2.69) (3.70) (7.14) (8.45)p 0.156p £M 42.55 59.71 50.35p 50.35p £M 2.96 100.42 2013 £M 87 16 3 12 118 £M – (9.47) – (9.47) £M 43.29 1.14 2.55 3.47 4.12p 0.125p £M 49.73 53.96 59.00p 59.00p £M 12.23 4.35 London & Associated Properties PLC 2017 69 www.lap.co.uk LONDON & ASSOCIATED PROPERTIES PLC 24 BRUTON PLACE LONDON W1J 6NE EMAIL: ADMIN@LAP.CO.UK 

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