LONDON &
ASSOCIATED
PROPERTIES
ANNUAL REPORT 2020
Contents
OVERVIEW
1
LAP at a glance
2 Chairman’s statement and Chief Executive’s review 2020
STRATEGIC REPORT
4
Financial and performance review
10 Principal activities, strategy & business model
10 Risks and uncertainties
11 Bisichi risks and uncertainties
12 Key performance indicators
13 Corporate responsibility
GOVERNANCE
15 Directors & advisors
16 Directors’ report
19 Corporate Governance
21 Governance Statement by the Chairman of The Remuneration Committee
22 Annual remuneration report
26 Remuneration Policy Summary
28 Audit committee report
29 Directors’ responsibilities statement
30
Independent auditor’s report
FINANCIAL STATEMENTS
35 Consolidated income statement
35 Consolidated statement of comprehensive income
36 Consolidated balance sheet
37 Consolidated statement of changes in shareholders’ equity
38 Consolidated cash flow statement
39 Group accounting policies
46 Notes to the financial statements
72 Five year financial summary
Financial calendar
Annual General Meeting
15 June 2021
Announcement of half year results to 30 June 2021
Late August 2021
Announcement of annual results for 2021
Late April 2022
OVERVIEW
OVERVIEW
LAP at a glance
London & Associated Properties PLC (“LAP”) is a main market listed group
which invests in industrial and retail property in the UK while also managing
property assets. LAP owns £71.0 million of property. As a property company
we look to create environments where tenants can thrive.
The Group also holds a substantial investment in Bisichi PLC, which operates
coal mines in South Africa and owns UK property. In accordance with IFRS 10
the results of Bisichi have been consolidated in the group accounts.
FINANCIAL HIGHLIGHTS
Fully diluted net
assets per share
34.99p
2019: 43.04p
KEY PROJECTS
IFRS net assets
£39.5m
2019: £49.1m
Properties portfolio
valuation*
£71.0m
2019: £74.8m
*Includes investment properties, head leases
assets held for sale and property inventory.
Excludes properties under management.
KEY PROJECTS
HIGHLIGHT
Directly owned
• Orchard Square, Sheffield
• Runcorn Manor Park Industrial Estate
• West Ealing development
• Kings Square, West Bromwich
• Repositioning of property focus continues
at Orchard Square, Sheffield
• Runcorn Industrial portfolio being actively
managed for rental growth
• Ealing development property achieved successful
planning application.
Coal production
• In South Africa, Black Wattle produced 1.18m metric tonnes of Run of Mine Coal in 2020
(2019: 1.27m metric tonnes)
London & Associated Properties PLC 2020 1
OVERVIEW
Chairman’s statement and
Chief Executive’s review 2020
We are pleased to present the Chairman’s and Chief Executive’s
review for 2020. Our first priority has remained the welfare of our
staff and tenants. We are pleased to report that while some of our
staff have been ill with COVID-19, all are now well again and
available for work.
Clearly the 12 months to 31 December 2020 have been extremely
challenging to the commercial real estate industry, especially for those
in the retail sector. However, through a wide range of initiatives taken
by LAP over the past two years the impact of COVID-19 on our
business has not been as dramatic as many feared.
In the past few years, we have taken some key steps aimed at lessening
LAP’s focus on retailing in general and fashion-led shopping in particular.
At the same time the Board has diversified the portfolio into industrial
and residential property, reduced head office costs and cut gearing levels.
The net result of these actions is that rent collection over the year
held up extremely well which, together with our diversification away
from retail, meant our property portfolio suffered far less dramatic
write-downs than has been witnessed elsewhere in the sector. We
are also experiencing a lower rate of voids within our portfolio than
might have been expected.
CONSOLIDATED RESULTS
The last 12 months have been as difficult for owners of retail property
as at any time in living memory. Shopping centres, department stores
and larger fashion-led shops have undergone such structural change
that previously prime assets are being revalued at a fraction of their
former worth. Our strategy has been to reduce our exposure to these
types of assets and consequently our property portfolio has not
suffered such severe write-downs. The portfolio was valued at the
year end at £71.0 million (2019: £74.8 million). This relatively modest
reduction should be seen in the context of the wider market, where
write-downs have been much more dramatic.
On a like-for-like basis rental income has held up at £5.8 million
compared to £6.2 million for 2019. We collected more than
three-quarters of our rent roll over the year which we regard as
an excellent achievement considering the climate. This is a pleasing
metric which is also reflected in our occupancy levels, which were
92.2% at the year end (2019: 91.6%). Two units, both within our
industrial property portfolio, are being refurbished and account
for more than half of the 2020 voids.
Company overheads have been reduced dramatically during the period
under review and now stand at £8.2 million compared to £10.1 million
in 2019. This has been achieved through a number of initiatives,
including a significant reduction in the head office count and associated
expenses as we outsourced all of our property management in
September 2019. We have, since the year end, outsourced our in-house
asset management roles which will lead to further annualised savings of
£0.2 million with no impairment to service or standards.
No head office staff (including the Directors) received a bonus during
2020, and the Chief Executive accepted only 65% of his salary to
reflect the extremely difficult trading conditions.
DEBT MANAGEMENT
Although no loans were refinanced in 2020, LAP has carefully
managed its relationships with lenders and no banking covenants
were breached. In April and July 2020, at the start of the lockdown,
LAP negotiated a waiver to one element of the income covenant on
our loan with Phoenix CRE S.à.r.l which is secured against Orchard
Square in Sheffield. This waiver was at zero cost to the company,
save the legal fees of documenting it, and is no longer required.
2 London & Associated Properties PLC 2020
This reflects a number of factors: LAP restricting the levels of gearing
with which it is comfortable; relatively high levels of rent collection;
and high levels of occupancy.
LAP PROPERTY ACTIVITIES
Orchard Square, Sheffield
During 2020 we continued to reposition this asset away from a
traditional shopping centre towards an experiential location with a
much greater emphasis on food and beverage. We completed the
management agreement on a 4,000 sq ft former fashion unit to
Market Asset Management, one of the UK’s foremost operators of
food halls. The unit is directly below the two new independent
restaurants that took leases at the end of 2019 at Orchard Terrace
and will complement their offering.
Enabling works are underway and will cost a total of £0.3 million. The
unit will house six food stalls, two bars and event space. The new
space is to be called Sheffield Plate and net income to LAP is
projected at £0.1 million per annum. Interest in the units has been
encouraging and works are expected to complete by June 2021.
During 2020, LAP worked closely with Sheffield Council to apply for
Future High Street Funding for the city. The Council was successful
and was awarded £16 million, of which £1.4 million is earmarked for
works to Orchard Square. These works will include the creation of 8
flats at first and second floors, refurbishment of the Square and the
introduction of large sails to weatherproof the Square. This will
enable Sheffield Plate as well as our other tenants to take advantage
of this exciting space in the centre of the UK’s fifth largest city to
host events and allow spill over of their customers.
LAP also carried out two lettings during lockdown with a combined
rent of £0.1 million per annum and the Centre is now fully let with
the exception of the units that are being redeveloped.
Manor Park, Runcorn
We successfully completed the refurbishment of Unit 10, the largest of
our eight industrial units at 38,500 sq ft, towards the end of 2020. It
was under offer for three months but the letting fell through at the
beginning of 2021 as the proposed international tenant scaled back its
investment in the UK. Ongoing interest in the unit remains strong and
we are at an advanced stage of negotiation with a new potential tenant.
We took back a 15,000 sq ft unit at the end of 2020 which is about
to be refurbished. Interest in this unit is also strong and we expect to
have pre-let it before the end of the refurbishment.
The remainder of our industrial units are fully let.
West Ealing
We are pleased to report that Broadway Regen Ltd, our joint venture
with Bisichi and Metroprop, obtained planning consent for 56 flats
and three ground floor shops on this development site. We are also
at an advanced stage of negotiating with a Registered Provider for
the affordable element.
The joint venture will decide in the next few months whether to sell
the consented land or build out the development, depending on
market conditions.
Remainder of portfolio
Our remaining properties continue to operate at a high level of
occupancy. This provides essential cash flow. However, we are
always prepared to sell these assets where we are approached by
special buyers to further our repositioning of the portfolio away from
retail. We have agreed the sale of one property and we are in
detailed negotiations on two others and we will update shareholders
following any successful completions.
OVERVIEW Chairman’s statement and Chief Executive’s review 2020
DRAGON RETAIL PROPERTIES
Dragon owns a property in Clifton, Bristol let partly to Boots the
Chemist and partly to one of Bristol’s longest standing and most
well-known nightclubs. Rent collection has been difficult, particularly as
Boots refused to pay notwithstanding its status as an essential retailer
throughout the various lockdowns. However, agreement has now been
reached and payments have resumed. The nightclub has not been
allowed to trade at all since March 2020 yet has still managed to make
some rental payments as the operator has received grants.
OTHER MATTERS
In accordance with current legislation the Company has to change its
present auditors. To meet the timetable, on behalf of the Board, the
Audit Committee invited tenders from prospective audit firms.
Following this process, the Board will propose to shareholders at the
forthcoming AGM that Kreston Reeves LLP are appointed as
auditors. The firm is based across London and the South East with
52 partners and received the 2020 ‘Large Firm of the Year’ award at
the Accounting Excellence Awards.
All of this has presented a difficult backdrop to find new funders to
replace Santander, whose loan of £1.2 million expired in September
2020. We have negotiated an extension during which time the
lending market will hopefully thaw to a level that allows us to
refinance. This remains a quality asset with a very high level of
income cover so we remain confident that a solution will be found.
BISICHI PLC
2020 has been a challenging year for Bisichi due to the impact of the
Covid-19 pandemic on all its operations. As a result, for the year
ended 31 December 2020, it made a loss before interest, tax,
depreciation and amortisation (EBITDA) of £2.4 million (2019: profit:
£5.9 million) and an operating loss before depreciation, fair value
adjustments and exchange movements (Adjusted EBITDA) of £1.1
million (2019: profit: £7.4 million).
In terms of business continuity, Bisichi’s South African coal mining and
processing operations were designated as essential business
operations by the South African Government, which allowed them to
continue during lockdown periods. In turn, this allowed Black Wattle
Colliery, the South African coal mining operation, to achieve consistent
production during the year of 1.18 million metric tonnes of coal by
comparison to 1.27 million metric tonnes achieved in 2019.
However, during the year the reduced global economic activity resulting
from the Covid-19 pandemic had a significant impact on demand for
coal in the international market. In January, the average weekly price of
Free on Board (FOB) Coal from Richard Bay Coal Terminal (API4 price)
peaked at US$92. By mid-April, as global economic activity slowed, the
weekly API4 price had fallen to US$44. Thereafter, coal prices remained
largely suppressed until the end of the year. The impact on Bisichi’s
operations was a build-up in coal stocks during the year and lower
overall prices achieved for coal. The overall decrease in Group revenue,
and the consequent financial performance during the year, can be
attributed mainly to this downturn.
Looking forward into 2021, although the overall impact of the Covid-19
pandemic on its South African operations and the coal markets remains
uncertain, to date there has been a significant improvement in coal
markets arising from improvements in global economic activity. Bisichi’s
management will continue to focus on keeping costs low at the South
African operations, in order to take the maximum financial performance
advantage of the higher prices achievable for coal.
In the UK, the Covid-19 pandemic had a significant impact on rental
revenue collections from the Group’s UK retail property portfolio and
property valuations. Although the overall impact of the pandemic on
the portfolio remains uncertain, Bisichi expect much of the portfolio,
including rental collections, to recover as lockdown is eased and
tenants resume full operations.
In light of the uncertainty arising from COVID-19, Bisichi’s Board
decided that it would not be wise to propose a final dividend
although they will review this when there is greater visibility of the
ongoing impact of COVID-19.
COVID-19 UPDATE
Certain of our retail tenants were forced to close for approaching
half of the year under review, which has had a significantly
detrimental impact on their businesses. However, we still collected
79% of contracted rents over the 12 month period to 31 March
2021, which we believe to be a strong result in the circumstances.
This reflects the hard work of our managing agents, who have been
in close contact with all tenants to ensure that either payment is
made or that payment plans are in place, while making the tenants
aware of all grants or other government assistance available to them.
Total COVID-19 related arrears, including deferrals and payment
plans, stand at £750,000 at the year end and we anticipate collecting
at least 75% of this money over the next 24 months. COVID-19
concessions provided to tenants so far stand at £100,000. The
response of tenants in these difficult and challenging conditions
remains pleasing.
Inevitably, as we have agreed tenant payment plans our cash
reserves have reduced and now stand at £7.2 million (2019: £13.5
million). This reduction also reflects capital expenditure on our
properties of some £0.3 million in LAP and £3.2 million of plant and
equipment capital expenditure in Bisichi.
We have, to date, suffered just one tenant (legally 2 separate
companies) utilising an insolvency procedure and our exposure is
limited to two shops with a combined rent roll of £75,000 per annum.
The newly-formed buyers of these businesses have agreed new leases
on both of the shops at rents within 10% of the historic level.
We continue to monitor all of our tenants, although the Government
imposed moratorium on normal rent collection procedures makes
pre-emptive action difficult. However, we have low void rates, we
have continued to let shops throughout the year under review and
we have limited exposure to mid-market fashion retailers. Our agents
also report much improved tenant demand since the reopening of
shops was announced.
SUMMARY
The last year has been particularly difficult for many owners with
exposure to the retail property market. However, the defensive
quality of our portfolio and modest rental levels per unit have held us
in good stead. The measures that we have taken to reduce costs and
preserve cash will continue to benefit LAP and we therefore face the
future with a certain level of confidence.
Sir Michael Heller,
Chairman
John Heller,
Chief Executive
6 May 2021
London & Associated Properties PLC 2020 3
STRATEGIC
REPORT
STRATEGIC
REPORT
Financial and performance review
The financial statements for 2020 have been
prepared to reflect the requirements of IFRS
10. This means that the accounts of Bisichi PLC
(a London Stock Exchange main market quoted
company – BISI) (“Bisichi”), have been
consolidated with those of LAP.
Bisichi continues to operate as a fully independent company and
currently LAP owns only 41.52% of the issued ordinary share capital.
However, because related parties also have shareholdings in Bisichi
and there is a wide disposition of other shareholdings, LAP is
deemed under IFRS 10 to have effective control of Bisichi for
accounting purposes. This treatment means that the income and net
assets of Bisichi are disclosed in full and the value attributable to the
“non-controlling interest” (58.48%) is shown separately in the equity
section as a non-controlling interest. There is no impact on the net
assets attributable to LAP shareholders.
Dragon Retail Properties Limited (“Dragon”) and West Ealing Projects
Limited (West Ealing), are both 50:50 joint ventures with Bisichi and
are also consolidated. Shareholders are aware that LAP is a property
business with a significant investment in a listed mining company.
The effect of consolidating the results, assets and liabilities of the
property business and the mining company make the figures complex
and less transparent. Property company accounts are already subject
to significant volatility as valuations of property assets as well as
derivative liabilities can be subject to major movements based on
market sentiment. Most of these changes, though, have little or no
effect on the cash position and it is, of course, self-evident that cash
flow is the most important factor influencing the success of a
property business. We explain the factors affecting the property
business first, clearly separating these from factors affecting the
mining business which we do not manage. Comments about Bisichi
(the mining business) are based on information provided by the
independent management of that company.
This report comments on the performance of each of the Group’s
segments separately.
LONDON & ASSOCIATED PROPERTIES PLC
LAP’s overarching objectives in 2020 remain to:
• Continue to provide environments in which tenants can thrive.
• Improve the business’ operating cashflow on an ongoing basis.
• Reduce exposure to the retail sector.
• Ensure gearing is at an appropriate level.
• Maintain sufficient cash in the business to enable it to react to
opportunities when they arise.
During 2020, management's attention has been focused on
supporting our tenants through the effects of rolling Covid
lockdowns. Where tenants’ income has been affected, we have
engaged with them to restructure their payments to LAP, to match
their future expected income.
4 London & Associated Properties PLC 2020
A number of rent deferment agreements have been reached with
tenants and £100,000 of rent has been forgiven in recognition of
tenants’ trading difficulties at this time.
In spite of the Government imposed moratorium on normal debt
enforcement procedures, the business has received a significant
proportion of rents due. Many of our tenants are owner managed
businesses serving their local community. We do not have a
significant exposure to large fashion led retailers who have been
hardest hit by changing customer buying patterns. The below table
outlines the proportion of rent receipts, by quarter billed, at the time
of publication of this report. It should be noted that a number of
tenants have entered into agreed monthly rent payments during
lockdown, the debt recovery of March quarter cannot therefore
be fully assessed until the end of June.
PERIOD
Q2 2020
Q3 2020
Q4 2020
Q1 2021
% RECOVERY
92%
91%
78%
53%
There have been no sales or acquisitions of property during the year.
2020 has been a time for the protection of cash reserves to enable
us to manage potential worst-case outcomes of Covid on the
business. Therefore LAP has not actively sought to acquire new
property and has delayed substantial development expenditure.
Whilst discussions are ongoing with buyers about acquiring elements
of our retail portfolio, to enable our ongoing diversification, none of
these were completed during 2020.
LAP has not required any additional funding from lenders or
shareholders to meet the challenges presented by Covid.
LAP’s earliest debt repayment event is in August 2022 and no
refinancing activities have taken place during 2020, with all loans
and debentures remaining in place throughout the year.
In the three to six months following the announcement of the first
Covid lockdown, and the uncertainty this brought, LAP experienced
a reduction in tenant rent receipts as businesses came to terms with
the commercial impact that restrictions would bring.
Even with the effects of Covid on rent recoveries, LAP has met all
of its debt covenants during 2020 and to date other than the income
covenant on the £14 million term loan with Phoenix CRE S.à.r.l in
April and July 2020. Working with the lender and major tenants,
the business secured waivers to the affected covenants with all
obligations of the loan being met in full.
During 2020 LAP finalised its property management outsourcing
arrangements, further reducing overheads.
Development of the largest asset, Orchard Square, Sheffield, reported
previously, has been slowed by Covid restrictions, with the opening of
a new street food hub being put back to early summer 2021.
STRATEGIC REPORT Financial and performance review
This is part of the business’ development activities to refocus the use
of the property, reflecting the changing ways in which the public
interacts with the city centre, to prepare the property for sale.
A new development proposal for eight first and second floor apartments
at Orchard Square, Sheffield, in space previously used for property
management activities and not rent producing, received planning
permission in 2020 and has also been allocated capital funding
through central government grants to Sheffield council.
Grants have also been allocated for enhancing the central square at
the property.
As the business moves into 2021, its key objectives remain consistent.
LAP continues to look for investment opportunities, particularly
within the industrial sector and is taking further actions to improve
its efficiency and its operating cashflow. The business continues to
develop and refurbish its properties to provide environments in
which tenants can thrive.
INCOME STATEMENT
BUSINESS ANALYSIS
Rental income
Service charge income
Proceeds from sale of trading properties
Management income from third party properties
LAP Revenue
Direct property costs
Impairment of inventory
Costs of sale of trading properties
Overheads
Depreciation
Operating loss
Finance income
Finance expenses
Result before valuation movements
Other segment items
Net decrease on revaluation of investment properties
Decrease in value of other investments
Adjustment to interest rate derivative
Revaluation and other movements
LAP loss for the year before taxation
Note: The figures exclude inter-company transactions.
2020
£’000
4,377
795
-
18
5,190
(2,192)
(2,300)
-
(2,317)
(258)
(1,877)
5
(2,200)
(4,072)
(664)
(20)
(200)
(884)
(4,956)
2019
£’000
4,813
628
9,500
607
15,548
(1,823)
(1,750)
(10,491)
(3,230)
(215)
(1,961)
58
(2,552)
(4,455)
(1,498)
(1,749)
169
(3,078)
(7,533)
LAP generates the majority of its income from property rentals,
property management fees and development activities.
These services were previously carried out in-house and disclosed as
overhead costs.
Rental income is down £436,000 year on year, with like for like rental
income down by £258,000 (5.3%). Rental income remained
consistent year on year for most properties in the portfolio. The
decrease in like for like rental income arose for two main reasons:
• A vacancy at a large industrial unit, with an agreed letting falling
through just prior to completion.
• An increase in provisions for doubtful debts this year, based on
expected credit losses, in response to uncertainty around tenant
debt recovery for debt that has accumulated during Covid
lockdowns.
In July 2019, part of our development property in Sheffield was sold
for £9.5 million. No further sales of development properties took
place in 2020. The value of the Sheffield property, which is held as
inventory, was reduced by £2.30 million at 31 December 2020
(2019: reduction of £1.75 million).
Management income from third parties has reduced significantly in
2020, following the cessation of services provided to the HRGT
Shopping Centres portfolio which was sold in 2019. Overheads
relating to the delivery of these services are no longer being incurred.
Net property costs after taking into account costs recovered through
service charges have increased by £0.2 million to £1.4 million, mostly
as a result of the reclassification of property management costs
following the outsourcing of property management services.
Overheads have reduced by £0.9 million in the year to £2.3 million.
Lower Directors’ remuneration in LAP of £0.2 million, lower staff and
associated office costs of £0.2 million due to outsourcing and lower
legal and professional fees of £0.2 million due to a reduced level of
property acquisitions and disposals accounted for the majority of
this. The reduction in overheads also reflects the cost of services
provided to the HRGT Shopping Centres portfolio.
Finance expenses have reduced by £0.4 million, due to the reduction
of LAP’s borrowings in September 2019, following the sale of part of
the Orchard Square, Sheffield property.
Investment property revaluation decreases of £0.7 million include a
decrease in retail property values of £1.9 million and an increase in
industrial property values of £1.2 million. Retail property value
reductions are driven by increased yields since 2019, with industrial
property value changes being driven by reduced yields and improving
rental values.
Excluding the impairment of trading properties and the loss on sale
in 2019, the adjusted loss before valuation movements was £1.8
million (2019: £1.7 million). This excludes management income and
dividends received from Bisichi. Reducing this loss through the
activities described above and generating more rental income
remains a key focus for the business.
London & Associated Properties PLC 2020 5
STRATEGIC REPORT Financial and performance review
BALANCE SHEET
SEGMENT ASSETS
- Non-current assets – property
- Non-current assets – property, plant & equipment
Trading assets
- Cash & cash equivalents
- Current assets – others
Total assets excluding investment in joint ventures, assets held for sale and trading
Segment liabilities
Borrowings
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Note: The figures exclude inter-company transactions.
2020
£’000
33,383
797
25,013
3,413
978
63,584
(30,889)
(5,898)
(3,526)
(40,313)
23,271
2019
£’000
33,718
946
26,915
5,709
686
67,974
(30,764)
(5,750)
(3,156)
(39,670)
28,304
The reduction in non-current property assets arises from a £0.66
million investment property revaluation deficit (2019: deficit £1.5
million) and property improvements of £0.33 million (2019: £nil).
The reduction in property, plant and equipment relates to the net
reduction in value of the rented head office building occupied by the
Company. The lease comes to an end in 2023 at which point the
asset will be fully depreciated. The present value of future rentals of
£0.73 million is included within liabilities.
Trading assets include Sheffield Orchard Square, which is currently
being developed for sale and a residential development property in
West Ealing. Both of these properties are held at the lower of cost
and net realisable value.
Borrowings have remained consistent year on year, with the same
facilities in place at the end of the year as were in place at the start
of the year. The slight increase in borrowings is brought about by the
amortization of loan costs.
LAP’s main borrowings consist of a £13.6 million term loan facility
expiring in September 2022, a debenture of £10 million repayable in
August 2022 a £3.6 million term loan facility expiring in 2028 and a
rolling development loan relating to West Ealing of £3.7 million
expiring in July 2021. As in previous years, all loans and debentures are
secured on core property and are covenant compliant at the year end.
GEARING
Total borrowings
Less cash and cash equivalents
Net borrowings
Total Equity
2020
£’000
30,889
(3,413)
27,476
23,271
118.1%
2019
£’000
30,764
(5,709)
25,055
28,340
88.5%
The business has not set a target gearing level but monitors its debt and asset values constantly to maintain an appropriate level, taking into
account market sentiment, the availability and cost of debt and cash flow forecasts.
CASH FLOW
CASH FLOW FROM OPERATIONS
Cash inflows from operating activities
Cash (outflows)/ inflows from investing activities
Cash outflows from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at 1 January
Cash and cash equivalents at 31 December
Note: The figures within the LAP cashflow include inter-company transactions.
2020
£’000
250
(300)
(2,246)
(2,296)
5,709
3,413
2019
£’000
9,295
2,471
(17,402)
(5,636)
11,345
5,709
6 London & Associated Properties PLC 2020
STRATEGIC REPORT Financial and performance review
Cash inflows from operating activities in 2019 include net sale
proceeds of £9.3 million from the part sale of the Sheffield
development property. There were no development sales in 2020.
Excluding development sales, in 2019, net cash inflows from
operating activities were £0.25 million (2019: outflows £0.1 million).
Investing activities include expenditure on property of £0.3 million.
In 2019 investing activities included the sale of a property for
£2.35 million.
No substantial sales or acquisitions were made in 2020.
Financing activities in 2020 largely related to interest payments for the
servicing of debt, no significant new finance has been put in place this
year. In 2019 there was a refinancing of a debt facility utilising
proceeds of part of the sale of the Sheffield development property.
WEST EALING PROJECTS LIMITED
West Ealing is a 50:50 joint venture between LAP and Bisichi created
with the purpose of delivering a primarily residential development in
West Ealing, London. The joint venture owns 90% of the property
which is under development and on which £7.06 million has been
spent to date, West Ealing is disclosed within LAP in the segmental
analysis in note 1 to the financial statements. There is a linked
development loan of £4.03 million, described further in note 18.
During the year planning permission was obtained for the creation of
56 new residential apartments and ground floor shops on the site.
BISICHI PLC
Although the results of Bisichi PLC have been consolidated in these
financial statements, the Board of LAP has no direct influence over
the management of Bisichi. The comments below are based on the
published accounts of Bisichi.
Bisichi’s cash and cash equivalents decreased during the year by £4.1
million (2019: £2.86 million). After taking into account an exchange
gain of £0.2 million (2019: £0.03 million) on the translation of the
group’s year end net balance of cash and cash equivalents that were
held in South African Rands, the group’s net balance of cash and
cash equivalents (including bank overdrafts) at year end was a cash
negative amount of £1.1 million (2019: cash positive of £2.8 million).
Bisichi has considerable financial resources available at short notice
including cash and cash equivalents (excluding bank overdrafts) of
£3.8 million (2019: £7.7 million) and listed investments of £2.6
million (2019: £1.4 million) as at year end. The above financial
resources total £6.4 million (2019: £9.1 million).
Bisichi’s net assets at 31st December 2020 were £14.9 million
(2019: £19.2 million), with a loss after tax of £3.8 million and
exchange losses of £0.5 million.
Bisichi continues to seek to expand its operations in South Africa
through the acquisition of additional coal reserves. In the UK, Bisichi
is looking forward to progressing its development in West Ealing and
is currently investigating other major investment opportunities in the
domestic property sector. This is in line with Bisichi’s overall strategy
of balancing the high risk of mining operations with a dependable cash
flow and capital appreciation from UK property investment operations.
DRAGON RETAIL PROPERTIES LIMITED
Dragon is a UK property investment company. The company has a
Santander bank loan of £1.2 million secured against its investment
property, see note 18. In November 2020 Dragon was not able to
meet its historical income cover loan covenant, due to non-payment
of rent by tenants. All payment abligations of the loan were met and
all subsequent covenants have been compliant.
The Bisichi group results are stated in full in its published 2020 financial
statements which are available on its website www.bisichi.co.uk.
The loan expired in January 2021 and is currently being rolled over
pending approval of an offer of extension from Santander.
Bisichi has two core revenue streams – investment in retail property
in the UK and coal mining in South Africa.
The Bisichi group’s loss before tax was £4.9 million (2019: profit £3.0
million). The movement compared to the prior year can be attributed
mainly to the operating loss before depreciation from mining activities
of £1.8 million (2019: profit £6.4 million). due to lower prices
achieved for coal, lower coal production and sales from Bisichi’s
South African operations and a weakening in the South African Rand
to UK Sterling. This offset the lower operating costs achieved in 2020.
UK retail property investments were valued at the year end at
£10.47 million (2019: £11.75 million). The property portfolio is
actively managed by LAP and generated rental income of £0.9
million in the year (2019: £1.2 million).
Bisichi has a structured trade finance facility with Absa Bank Limited
for R85 million held by Sisonke Coal Processing (Pty) Limited, a 100%
subsidiary of Black Wattle Colliery (Pty) Limited. This facility comprises
of an R85 million revolving facility to cover the working capital
requirements of the group’s South African operations. The facility is
renewable annually at 25 January and is secured against inventory,
debtors and cash that are held in the group’s South African operations.
Bisichi holds a 5 year term facility of £3.9 million with Julian Hodge
Bank Limited at an initial LTV of 40%, with the loan being secured
against the company’s UK retail property portfolio. The amount
repayable on the loan at year end was £3.8 million. The debt package
has a five-year term and is repayable at the end of the term in
December 2024. The interest cost of the loan is 4.00% above
LIBOR. The loan is secured by way of a first charge over the
investment properties in the UK which are included in the financial
statements at a value of £10.47 million. No banking covenants were
breached by the group during the year.
It paid management fees of £72,000 (2019: £88,000) split equally
between the two joint venture partners. Dragon has net assets of
£1.3 million (2019: £1.6 million), following a £0.3 million reduction in
the valuation of its main property asset. Otherwise, it continues to
trade at near breakeven after tax.
ACCOUNTING JUDGEMENTS AND GOING CONCERN
The most significant judgements made in preparing these accounts
relate to the carrying value of the properties and investments. The
Group uses external property valuers to determine the fair value of
most of its properties.
Under IFRS10 the Group has included Bisichi PLC in the
consolidated accounts, as it is deemed to be under the effective
control of LAP and has therefore been treated as a subsidiary.
The Directors exercise their commercial judgement when reviewing
the Group’s cash flow forecasts and the underlying assumptions on
which the forecasts are based. The Group’s business activities,
together with the factors likely to affect its future development, are
set out in the Chairman’s Statement and Chief Executive’s Review
and in this Report. Further disclosure of specific factors affecting
going concern are discussed in more detail in the going concern
section of the group accounting policies section of the financial
statements. In addition, the Directors consider that Note 21 to the
financial statements sets out the Group’s objectives, policies and
processes for managing its capital; its financial risk management
objectives; details of its financial instruments and hedging activities;
and its exposure to credit risk, liquidity risk and other risks.
London & Associated Properties PLC 2020 7
STRATEGIC REPORT Financial and performance review
STATEMENT REGARDING SECTION 172 OF THE UK
COMPANIES ACT
Section 172 of the UK Companies Act requires the Board to report on
how the directors have had regard to the matters outlined below in
performing their duties. During the year, the Directors consider that
they have acted in a way, and have made decisions that would most
likely promote the success of the Group for the benefit of its members
as a whole as outlined in the matters below:
• The likely consequences of any decision in the long term: see
Principal Activity, Strategy & Business Model and Risks and
Uncertainties on pages 10 to 11;
LAP has no overdraft facility or undrawn credit lines and has three
existing borrowing arrangements all of which are secured against its
properties. All current banking covenants are being met. The
Directors see no impediment to LAP continuing to meet its
obligations to lenders in the future.
LAP currently has £5.0 million of unencumbered properties, as
valued at 31 December 2020.
To mitigate the cash impact of COVID-19 on the business, LAP is
managing its expenditure until such time as the Directors consider
the risks to have subsided sufficiently.
• The Directors are not recommending a final dividend for the
current financial year.
• The interests of the Group’s employees; ethics and compliance;
• A number of staff located at our properties have been furloughed
fostering of the Company’s business relationships with suppliers,
customers and others; and the impact of the Group’s operations on
the community and environment: see Corporate Responsibility and
Sustainability reports on pages 13 to 14;
• The need to act fairly between members of the Company: see the
Corporate Responsibility section on pages 13 to 14;
• The desirability of maintaining a reputation for high standards of
business conduct: see the Corporate Governance section on pages
19 to 20.
COVID-19 AND GOING CONCERN UPDATE
LAP
At this time, our main priority is the health and safety of our staff,
tenants and the public. For that reason properties have been closed
in line with government guidance, as described further in the
Chairman’s statement and Chief Executive’s review.
Up to the date of this report LAP has received 53% of all rent in
relation to the first quarter of 2021 and 79% of rent for last quarter of
2020 and continues to make progress on receiving historic arrears
arising during covid restrictions, when some tenants were not trading.
Understandings have been reached with a number of tenants who are
paying monthly in arrears against quarterly billings, which means that
recovery of the first quarters rent cannot be fully assessed until June.
We expect to recover most of the excess arrears that have built up
during this period which at 31 December 2020. amounted to about
£750,000 excluding VAT. An appropriate provision, of £524,000, has
been created to reflect our assessment of the credit risk.
LAP has unencumbered cash of £3.4 million at 31 December 2020,
all of which is held in UK bank accounts. There are no barriers, taxes
or other costs to be paid in accessing this cash. The cash is available
to meet any shortfalls brought about by the impacts on the business
of COVID -19. These may include:
• Delayed tenant payments
• Unpaid debt due to tenant insolvencies or trading difficulties
• Additional costs to ensure our properties are safe for use
We are working with our tenants to enable them to pay their
obligations to us when they are financially able. Many tenants have
been and are eligible for the various Government schemes set up in
the wake of the Coronavirus pandemic and we are supporting them
in accessing these, including:
• Coronavirus Job Retention Scheme
• Business Rates Relief
• Business Support Grant Funds
• Coronavirus Business Interruption Loan Scheme
• Coronavirus Bounce Back Loan
• Coronavirus Recovery Loan
• Deferral of VAT payments
LAP has conducted a range of cashflow scenario tests and believes
that its existing available cash resources are sufficient to meet its
obligations, even in what the Directors consider is the worst case
scenario. The Directors are of the opinion that LAP does not require
additional funding to meet the cash impact of COVID-19 on the
business.
8 London & Associated Properties PLC 2020
during the year.
• VAT payments have been deferred in line with the amended rules
• All uncommitted development capital expenditure was suspended
during 2020 and projects placed on hold. There was no material
additional cost to the business of doing this. As Covid restrictions
are lifted during 2021, we are cautiously restarting developments.
• We have actively reduced spending where possible following the
cessation of trading at our properties.
• Material property acquisitions remain on hold.
The Directors have produced a cashflow forecast to June 2022, with
varying scenarios examining the sensitivity of LAP’s liquidity to the
following variables:
• Duration of COVID-19’s impact on the business
• Value of delayed receipts from tenants over that period
• Duration of delay in recovering rents from tenants
• Loss in cash receipts from tenants who never settle their lease
obligations
• Volume of tenants going into insolvency or administration and the
length of time expected to re-let the property
• Value and timing of recovery of tenant debt arising as a result of
Covid restrictions.
The Directors have taken into consideration our experiences of
tenant payments to date, information received directly from tenants
about their financial position and expectations of our tenants’ future
trading. The Directors anticipate that the effects of the closure of
some of our properties will have a permanent effect on the results of
the business in 2021 although are unable to estimate the quantum
at this stage.
LAP has three principal loans, as described in note 18, with the
below maturity dates:
• £10 million Debenture
• £14 million term loan
• £3.9 million term loan
August 2022
September 2022
September 2028 (Bank break
September 2023)
The £10 million debenture and £3.9 million term loan were covenant
compliant during 2020 and to date and are anticipated to remain
compliant based on the scenario forecasting.
The £14 million term loan was compliant during 2020 other than
in April and July 2020. Due to lower tenant receipts following the
COVID-19 lockdown there was insufficient cash in the subsidiary
for it to meet its obligation to the lender. The Board agreed with
the lender that the LAP Group would fund its subsidiary’s obligations
under the loan agreement and the bank waived its remedies under
the agreement. The loan has been covenant compliant since July
2020 and the subsidiary has repaid the bulk of the bridging loan
from LAP Group.
The Directors are satisfied that LAP has sufficient liquidity to meet
its obligations under any of the scenarios examined and is committed
to doing so.
The Board continues to monitor the situation and our modelling is
updated continually.
STRATEGIC REPORT Financial and performance review
Bisichi
During this difficult period, Bisichi has consulted with the Government
authorities and its stakeholders in South Africa to determine and agree
the appropriate measures to be taken across its South African mining
and processing operations. Such measures have been focused on the
health and safety of our employees, assisting in the continuing provision
of coal as an essential raw material, the security and integrity of the
assets, and the ability to maintain operations at levels of activity that
are aligned with Government interests and the broader economic
interests of South Africa.
Bisichi continues to monitor and adhere to all of the South African
Government’s Covid-19 related guidelines and regulations including
all updates and advice from the National Department of Health, the
Department of Minerals Resources and Energy and the Office of
the President.
These measures include:
• Regular communications with employees on all guidelines,
Government restrictions and best practice hygiene and health
recommendations;
• Conducting various issue-based hazard identification and risk
assessments;
• Temperature screening of those entering certain of our offices
and sites;
• Working from home (in both the UK and South Africa), where
possible or required;
• Social distancing measures at operating sites;
• Restrictions on non-essential visits to operating sites; and
• Intensified cleaning and hygiene at offices and sites;
In particular Bisichi has endeavoured to follow the guidelines of the
10-point plan developed by the Department of Minerals Resources
and Energy in line with the guidelines of the Department of Health
and the National Institute of Communicable Diseases (NICD) as
follows:
• Educate employees on the virus, symptoms and prevention.
• Follow guidelines from the NICD, educate health workers on how
to manage Covid-19. Consider alternate arrangements for supply
of chronic medication to reduce crowds.
• Ensure that all health workers have access to protective clothing,
gloves, masks, cleaning materials and pharmaceutical agents.
• Vaccinate employees for seasonal influenza.
• All employees are encouraged to know their status, get onto ARVs
if positive for HIV.
• Manage suspected cases or contacts of cases using guidelines
from the NICD.
• Liaise with the NICD on procedure to be followed for suspected
and confirmed cases.
• Only essential travel to areas with Covid-19 should be undertaken.
• All suspected and confirmed cases in the mining industry should
be reported to the NICD.
• Monitor and stay aware of the latest information on the Covid-19
pandemic.
Bisichi’s South African coal mining and processing operations have
been designated essential business operations as they fall within the
supply chains of other essential businesses, as defined by the South
African Government. Since late March 2020, Bisichi’s South African
operations have continued, although with a reduced or socially
distanced workforce to safeguard the health and safety of employees.
Overall Position
With a quality property portfolio comprising a majority of tenants
with long leases supported by suitable financial arrangements, the
Directors believe that the group property operations (including
Bisichi and Dragon) are well placed to address the current business
risks successfully, despite the continuing uncertain economic climate.
The mining operations too, as a key industry in South Africa, have a
positive future despite the pandemic risks. It is also relevant that LAP
would be able to continue as a viable business if Bisichi were to face
unexpected problems as there are no cross guarantees and LAP is
not dependent on the income from Bisichi.
The Directors therefore have a reasonable expectation that the
Group and the Company have adequate resources to continue in
operational existence for the foreseeable future. Thus, they continue
to adopt the going concern basis of accounting in preparing the
annual financial statements.
TAXATION
The LAP Group tax strategy is to account for tax on an accurate and
timely basis. We only structure our affairs based on sound
commercial principles and wish to maintain a low tax risk position.
We do not engage in aggressive tax planning.
The LAP Group (excluding Bisichi and Dragon) has unused tax losses
and deductions with a potential value of £8.0 million (2019: £7.9
million). As LAP returns to profit, these tax losses and deductions
should be utilised.
DIVIDENDS AND FUTURE PROSPECTS
Due to the current economic uncertainties, the LAP Board has agreed
that it will not be recommending a dividend for the financial year
ending 31 December 2020 (2019: £nil).
The Group remains reasonably optimistic about our ability to weather
the COVID-19 pandemic. We have strong relations with our tenants,
many of whom are owner managed businesses, and we have
maintained good rent collections during 2020.
Looking forwards to medium term trading, we intend to pursue our
previously stated strategies. These include further reducing the
Group’s reliance on retail property although we feel that our value-
orientated properties with low reliance on fashion retailers have inbuilt
defensive qualities. We do not need to fire-sell assets therefore, but
we are prepared to enter into negotiations with parties that have
approached us to explore disposals or joint ventures to redevelop
certain assets within our portfolio. A number of these negotiations are
ongoing although we are not yet able to say if any will come to fruition.
We will also pursue our policy of investing in other asset classes,
including industrial property where we have enjoyed early success and
in further joint ventures to undertake residential development. Our
development in Ealing has received planning consent and options for
either building out the development or seeking to sell our shares in the
joint venture are being considered currently.
We continue to progress the development of the Sheffield shopping
centre. Planning permission has been granted for 8 apartments above
ground floor level to be built in a space previously used for property
management activities and not income producing. We are designing a
development of the central square to enable year-round activities to
further support all of the tenants at the property. Both of these
developments have been allocated funding by the local council through
the Future High Street Fund. The development of a new street food
concept is underway for a planned summer 2021 opening.
London & Associated Properties PLC 2020 9
STRATEGIC REPORT
STRATEGIC REPORT
Principal activities, strategy & business model
The LAP Group’s principal business model is the investment in and management and development of industrial and retail property through
direct investment and joint ventures.
The principal activity of Bisichi PLC is coal mining in South Africa. Further information is available in its 2020 Financial Statements which are
available on their web site: www.bisichi.co.uk
STRATEGIC PRIORITIES ARE
Maximising income
Creating quality property
Capital strength
Maintain the value of investment
in Bisichi
OUR STRATEGY IS
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.
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 policy 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
COVID-19 risk
DESCRIPTION OF IMPACT
Health and safety of employees and
stakeholders. Risks related to business
interruption and tenant failures as
outlined below.
MITIGATION
Strategies for mitigating the risks have been defined
and specific measures for achieving these are already
underway. These include the measures outlined in the
Chairman’s Statement and Financial & Performance
Review sections of this report.
ASSET MANAGEMENT:
Tenant failure
Financial loss.
Leases not renewed
Financial loss.
Asset liquidity (size and
geographical location)
PEOPLE:
Retention and
recruitment of staff
REPUTATION:
Business interruption
Initial and subsequent assessment of tenant covenant
strength combined with an active credit control function.
Lease expiries regularly reviewed. Experienced teams
with strong tenant and market knowledge who
manage appropriate tenant mix.
Regular reporting of current and projected position
to the Board with efficient treasury management.
Assets may be illiquid and affect flexing
of balance sheet.
Unable to retain and attract the best
people for the key roles.
Nomination Committee and senior staff review
skills gaps and succession planning. Training and
development offered.
Loss in revenue.
Impact on footfall.
Adverse publicity.
Documented Recovery Plan in place.
General and terrorism insurance policies in place
and risks monitored by trained security staff.
Potential for criminal/civil proceedings.
Health and Safety policies in place.
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.
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.
10 London & Associated Properties PLC 2020
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
COVID-19 risk
DESCRIPTION OF IMPACT
Health and safety of employees and
stakeholders and risks related to coal
prices and demand and the value of
UK property.
Coal prices can be impacted materially
by market and currency variations
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
Affects sales value and therefore
margins.
Loss of production causing loss
of revenue.
Affects realised sales value and
therefore margins.
Variations can deliver significant
shifts in cash flow.
There has been no change in the risks faced by either LAP or Bisichi.
MITIGATION
Strategies for mitigating the risks have
been defined and specific measures for
achieving these are already underway.
These include the measures outlined in
the Chairman’s Statement and Financial
& Performance Review sections of this
report.
Forward sales contracts are used to
manage value expectations.
Use of geology experts, careful
attention to regulations, health and
safety training, employee dialogue to
minimise controllable risks.
Regular monitoring and review of
forward currency situation.
UK property investments used to
offset high risk mining operations.
London & Associated Properties PLC 2020 11
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.
CHANGE IN LIKE-FOR-LIKE
INCOME*
500
250
0.0
-250
-500
9.0
8.0
6.0
4.0
2.0
0.0
75.0
50.0
25.0
0.0
2018
2019 2020
VOIDS
2018
2019
2020
NET ASSETS PER SHARE
2018
2019
2020
KPI
STRATEGIC PRIORITY
MAXIMISING INCOME – LIKE FOR LIKE PROPERTY INCOME
To increase the like-for-
like income from each
property year on year.
Like-for-like rental income
as a percentage of the
prior year rental.
PERFORMANCE
The like-for-like rental income by
property has decreased by £258,000
(5.3%) (2019: increase of £13,000
and 0.3%), with a larger industrial unit
in Runcorn being refurbished for let.
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 estimated rental value
("ERV") of the empty units
as a percentage of our
total income.
Void levels decreased to 7.85%
(2019: 8.38%). As 4.2% of the voids
are attributable to refurbishment
activities, this is considered
satisfactory.
Movement in the net
assets per share.
CAPITAL STRENGTH – GROWTH IN NET ASSET VALUE PER SHARE
The net assets per
share is the principal
measure used by the
group for monitoring its
performance and is an
indicator of the level of
reserves available for
distribution by way of
dividend.
The net assets per share reduced
by 8.05 pence per share (18.7%) to
34.99p (2019: 43.04p).
This is disappointing but the impact
of Covid-19 has had a material and
adverse impact on the business.
12 London & Associated Properties PLC 2020
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 2020:
• Black Wattle Colliery recorded one Lost Time Injury during 2020.
• No machines operating at Black Wattle exceeded the regulatory
noise level.
• 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 2020 Financial
Statements which are available on their web site: www.bisichi.co.uk
GREENHOUSE GAS REPORTING
As a quoted organisation incorporated in the UK, we have reported on
all emission sources required under the Companies (Directors’ Report)
and Limited Liability Partnerships (Energy and Carbon Report) Regulations
2018 for the period 1st January 2020 to 31st December 2020.
The emissions are detailed in Tables 1, 2 and 3 below.
We have employed the Financial Control definition to outline our
carbon footprint boundary, reporting Scope 1 & 2 emissions only for
both landlord & tenant-controlled areas of LAP owned shopping
centres and facilities.
LAP has landlord-controlled areas in Kings Square, Orchard Square,
Brewery Street, Shipley, and Bridgend. Properties that we manage on
behalf of others or are not wholly owned by LAP are excluded from our
footprint boundary. An estimate of the emissions associated with the
LAP offices on Bruton Place has been included in this year’s calculations.
Emissions for landlord-controlled areas have been calculated based
on actual consumption data collected from each shopping centre.
Emissions from tenant-controlled areas have been calculated based
on floor area and energy consumption benchmarks for general retail
services in the UK.
We have used the main requirements of the ISO14064-11 standard
and HM Government Environmental Reporting Guidelines (2019)
including streamlined energy and carbon reporting guidance.
Emission factors were from the UK Government’s GHG Conversion
Factors for Company Reporting 2020.
As well as reporting Scope 1 and Scope 2 emissions, the regulations
require that at least one intensity ratio is reported for the given
reporting period. The intensity figure below shows emissions in
tCO2e per thousand pounds revenue.
Energy efficiency
Due to the impacts of the Covid-19 pandemic, LAP have not
implemented any energy efficiency programs or specific measures
during the 2020 year.
1 ISO14064-1:2018 - Greenhouse gases - Part 1: Specification with guidance at
the organization level for quantification and reporting of greenhouse gas
emissions and removals
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)
Energy Consumption used to calculate above emissions /KWh
Table 2. LAP controlled areas
Scope 1 emissions
Scope 2 emissions
2 Totals differ due to rounding
Table 3. Tenant controlled areas
Scope 1 emissions
Scope 2 emissions
EMISSIONS SOURCE
Natural gas (tCO2e)
Refrigerants (tCO2e)
Electricity (tCO2e)
Total tCO2e
EMISSIONS SOURCE
Natural gas (tCO2e)
Refrigerants (tCO2e)
Electricity (tCO2e)
Total tCO2e
2020
38
0
1,523
1,561
0.299
6,737,030
2019
53
0
1,354
1,407
0.296
5,649,144
2020
38
0
64
1012
2020
0
0
1,459
1,459
2019
53
0
104
157
2019
0
0
1,250
1,250
London & Associated Properties PLC 2020 13
STRATEGIC REPORT Corporate responsibility
Table 4. Coal mining carbon footprint
Emissions source:
Emissions from the combustion of fuel or the operation of any facility including fugitive emissions from
refrigerants use
Emissions resulting from the purchase of electricity, heat, steam or cooling by the company for its own
use (location based)
Total gross emissions
Intensity:
Intensity 1 Tonnes of CO2 per pound sterling of revenue
Intensity 2 Tonnes of CO2 per pound of coal produced
2020
CO2E
TONNES
2019
CO2E
TONNES
46,162
49,061
12,482
13,153
58,644
62,213
0.0020
0.0497
0.0013
0.0486
KWH
99,450,585
5,571
KWH
N/A
N/A
Energy consumption used to calculate above emissions
Of which UK
ENVIRONMENT
United Kingdom
The Group’s principal UK activity is property investment, which involves
renting premises to commercial businesses. We seek to provide those
tenants with good quality premises from which they can operate in an
efficient and environmentally friendly manner. Where possible,
improvements, repairs and replacements are made in an environmentally
efficient manner and waste re-cycling arrangements are in place at all
the Company’s locations.
South Africa
The Bisichi group’s principal activity in South Africa is coal mining.
Under the terms of the mine’s Environmental Management
Programme approved by the Department of Mineral Resource
(“DMR”), Black Wattle undertakes a host of environmental protection
activities to ensure that the approved Environmental Management
Plan is fully implemented. A performance assessment audit was
conducted to verify compliance to their Environmental Management
Programme and no significant deviations were found.
EMPLOYEE, SOCIAL, COMMUNITY AND HUMAN
RIGHTS
The Group’s policy is to attract staff and motivate employees by
offering competitive terms of employment. The Group provides equal
opportunities to all employees and prospective employees including
those who are disabled and operates in compliance with all relevant
national legislation.
The Group believes that it is in the interest of shareholders to consider
social and human rights issues when conducting business. Various
policies and initiatives implemented by the Group that fall within these
areas are discussed within this report.
14 London & Associated Properties PLC 2020
ANTI-SLAVERY AND HUMAN TRAFFICKING
The Group is committed to the prevention of the use of forced labour
and has a zero tolerance policy for human trafficking and slavery.
The Group’s policies and initiatives in this area can be found within the
Group’s Anti-slavery and human trafficking statement found on the
Group’s website at www.lap.co.uk.
DIVERSITY AND EQUALITY
The Board recognises the importance of diversity, both in its
membership, and in the Group’s employees. It has a clear policy to
promote diversity across the business. The Board considers that
quotas are not appropriate in determining its composition and has
therefore chosen not to set targets. All aspects of diversity, including
but not limited to gender, are considered at every level of recruitment.
Gender diversity of the Board and the Group is set out below.
DIRECTORS, EMPLOYEES AND GENDER
REPRESENTATION
At the year end the LAP Group (excluding Bisichi and Dragon), had 6
directors (6 male, 0 female), 2 senior managers (2 male, 0 female) and
11 employees (6 male, 5 female).
BISICHI PLC
Bisichi PLC’s Group at the year end had 9 directors (8 male, 1 female),
6 senior managers (5 male, 1 female) and 236 employees (163 male,
73 female).
Detailed information relating to the Bisichi Strategic Report is available
in its 2020 financial statements.
Approved on behalf of the board of directors
Jonathan Mintz
Finance Director
6 May 2021
GOVERNANCE
Directors & advisors
EXECUTIVE DIRECTORS
Sir Michael Heller MA FCA*
(Chairman)
John A Heller LLB MBA
(Chief Executive)
Jonathan Mintz FCA
(Finance Director)
NON-EXECUTIVE DIRECTORS
Howard D Goldring BSC (ECON) ACA†
Howard Goldring is Executive Chairman of Alberon Holdings Limited
which specialises in the discretionary management of investment
portfolios for pension funds, charities, family trusts and private clients.
He also acts as an advisor providing high level asset allocation advice
to family offices and pension schemes. He has been a member of the
LAP Board since July 1992, and has almost 40 years’ experience of the
real estate market. He was a director of Baronsmead VCT 2 PLC from
2010-2016, and has specialised in providing many companies with
investor relations support.
Clive A Parritt FCA CF FIIA #†
Clive Parritt joined the board on 1 January 2006. He is a chartered
accountant with over 40 years’ experience of providing strategic,
financial and commercial advice to businesses of all sizes. He is a
director of Jupiter US Smaller Companies plc and a member of the
Performance, Audit and Risk Committee of Arts Council England.
Until April 2016 he was Group Finance Director of Audiotonix
Limited (an international manufacturer of audio mixing consoles). He
has chaired and been a director of a number of other public and
private companies. Clive Parritt was President of the Institute of
Chartered Accountants in England and Wales in 2011-12. He is
Chairman of the Audit Committee and as Senior Independent
Director he chairs the Nomination and Remuneration Committees.
Robin Priest MA
Robin Priest joined the board on 31 July 2013. He is a senior advisor
to Alvarez & Marsal LLP (“A&M”) and to a major listed German real
estate investment fund manager. He has more than 38 years’
experience in real estate and structured finance. He was formerly
Managing Director of A&M’s real estate practice, advising private
sector and public sector clients on both operational and financial real
estate matters. Prior to joining A&M, Robin was lead partner for Real
Estate Corporate Finance in London with Deloitte LLP and before
this he founded and ran a property company backed by private
equity. He is also a trustee of London’s Oval House Theatre.
* Member of the nomination committee
† Member of the audit, remuneration and nomination committees
# Senior independent director
SECRETARY & REGISTERED OFFICE
Jonathan Mintz FCA
24 Bruton Place
London W1J 6NE
AUDITOR
RSM UK Audit LLP
PRINCIPAL BANKERS
Phoenix CRE Sàrl
Santander UK plc
Metro Bank plc
SOLICITORS
Pinsent Masons LLP
Wake Smith Solicitors Limited
STOCKBROKER
Shore Capital Markets Limited
REGISTRARS & TRANSFER OFFICE
Link Group
Shareholder Services
The Registry
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
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
London & Associated Properties PLC 2020 15
GOVERNANCE
GOVERNANCE
Directors’ report
The Directors submit their report and the
audited financial statements for the year
ended 31 December 2020.
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's Statement and Chief
Executive’s Review and the Strategic Report. These reports can be found
on pages 2 to 14 and should be read in conjunction with this report.
PRINCIPAL ACTIVITIES
The principal activities of the Group during the year were property
investment and development, as well as investment in joint ventures
and an associated company. The associated company is Bisichi PLC
(Bisichi) in which the Company holds a 41.52 % interest. Bisichi is
listed on the main market of the London Stock Exchange and
operates in England and South Africa with subsidiaries which are
involved in overseas mining and mining investment. The results,
together with the assets and liabilities, of Bisichi are consolidated
with those of LAP in accordance with the terms of IFRS 10 even
though the Group only has a minority interest – under IFRS 10 the
58.48% majority interest is disclosed as a “non-controlling interest”.
BUSINESS REVIEW AND POST BALANCE SHEET EVENTS
Review of the Group’s development and performance
A review of the Group’s development and performance can be found
below and should be read in conjunction with the Strategic Report
on pages 4 to 14.
Details of any post balance sheet events are disclosed in Note 29 to
the financial statements.
FUTURE DEVELOPMENTS
The Group continues to look for new opportunities to acquire real estate
assets where it feels it can increase value by applying its intensive
management skills. At the same time, it seeks to reduce its interest
payments on its loans as they expire or where opportunities arise to
refinance on better terms. We also seek to improve our existing estate
through the continued pursuit of asset management initiatives.
PROPERTY ACTIVITIES
The Group is a long-term investor in property. It acquires properties,
actively manages those assets to improve rental income, and thus
seeks to enhance the value of its properties over time. In reviewing
performance, the principal areas regularly monitored by the Group
include:
• Rental income – the aim of the Group is to maximise the
maintainable income from each property by careful tenant
management supported by sympathetic and revenue enhancing
development. Income may be affected adversely by the inability of
tenants to pay their rent, but careful monitoring of rent collection
and tenant quality helps to mitigate this risk. Risk is also minimised
by a diversified tenant base, which should limit the impact of the
failure of any individual tenant.
• Developments – the Group develops customer-focused spaces to
generate returns and portfolio income growth above that available
from standing investments alone.
• Cash flow – allowing for voids, acquisitions, development
expenditure, disposals and the impact of operating costs and
interest charges, the Group aims to maintain a positive cash flow
over time.
• Financing costs – the exposure of the Group to interest rate
movements is managed partly by the use of swap and cap
arrangements (see Note 21 for full details of the contracts in place)
and also by using loans with fixed terms and interest rates. These
arrangements are designed to ensure that our interest costs are
known in advance and are always covered by anticipated
rental income.
• Property valuations – market sentiment and economic conditions
have a direct effect on property valuations, which can vary
significantly (upwards or downwards) over time. Bearing in mind
the long term nature of the Group’s business, valuation changes
have little direct effect on the ongoing activities or the income and
expenditure of the Group. Tenants generally have long term leases,
so rents are unaffected by short term valuation changes.
Borrowings are secured against property values and if those values
fall very significantly, this could limit the ability of the Group to
develop the business using external borrowings. The risk is
minimised by trying to ensure that there is adequate cover to allow
for fluctuations in value on a short term basis.
It continues to be the policy of the Group to realise property assets
when the valuation of those assets reaches a level at which the
directors consider that the long-term rental yield has been reached.
The Group also seeks to acquire additional property investments on
an opportunistic basis when the potential rental yields offer scope
for future growth.
INVESTMENT ACTIVITIES
The investments in joint ventures and Bisichi are for the long term.
LAP manages the UK property assets of Bisichi. However, the
principal activity of Bisichi is overseas mining investment (in South
Africa). While IFRS 10 requires the consolidation of Bisichi, the
investment is held to generate income and capital growth over the
longer term. It is managed independently of LAP and should be
viewed by shareholders as an investment and not a subsidiary. The
other listed investments are held as current assets to provide the
liquidity needed to support the property activities while generating
income and capital growth.
Investments in property are made through joint ventures when the
financing alternatives and spreading of risk make such an approach
desirable.
DIVIDEND
In the light of the current uncertain economic environment, the
directors are not recommending payment of a final dividend for
2020 (2019: Nil per share).
16 London & Associated Properties PLC 2020
GOVERNANCE Directors’ report
THE COMPANY’S ORDINARY SHARES HELD IN TREASURY
At 31 December 2020, 218,197 (2019: 218,197) ordinary shares were
held in Treasury with a market value of £17,456 (2019: £47,349). At the
Annual General Meeting (AGM) in July 2020 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 15 June 2021.
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 25 in the Annual Remuneration Report. There has
been no change to the Directors' interests in the ordinary shares of
the Company in the year, or since the year end.
Substantial shareholdings
Treasury shares held at 1 January 2020 and
at 31 December 2020
218,197
Treasury shares are not included in issued share capital for the purposes
of calculating earnings per share or net assets per share and they do
not qualify for dividends payable.
INVESTMENT PROPERTIES
The freehold and long leasehold properties of the Company, its
subsidiaries and Bisichi were revalued as at 31 December 2020 by
independent professional firms of chartered surveyors – Allsop LLP,
London (74.2 per cent of the portfolio), Carter Towler, Leeds (24.1
per cent) – and by the Directors (1.7 per cent). The valuations, which
are reflected in the financial statements, amount to £42.6 million
(2019: £44.6 million).
Property of £25.0 million (2019: £26.9 million) is included under
current assets, as inventory, at the lower of cost or net realisable value.
Taking account of prevailing market conditions, the valuation of the
properties at 31 December 2020 resulted in a decrease of £2.3 million
(2019: decrease of £3.0 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 21 to the financial statements sets out the risks in respect of
financial instruments. The board reviews and agrees overall treasury
policies, delegating appropriate authority for applying these policies
to the Chief Executive and Finance Director. Financial instruments
are used to manage the financial risks facing the Group and speculative
transactions are prohibited. Treasury operations are reported at each
board meeting and are subject to weekly internal reporting. Hedging
arrangements are in place for the Company, its subsidiaries and joint
ventures in order to limit the effect of higher interest rates upon the
Group. Where appropriate, hedging arrangements are covered in the
Chairman and Chief Executive’s Statement and the Financial Review.
DIRECTORS
Sir Michael Heller, J A Heller, J Mintz, H D Goldring, C A Parritt and
R Priest were Directors of the company for the whole of 2020.
C A Parritt and J A Heller are retiring by rotation at the Annual
General Meeting in 2021 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.
31 DEC 2020
31 DEC 2019
NO.
%
48,080,511 56.35 48,080,511 56.35
NO.
%
0
8,211,044
9.62
5.73
4.12
8.98
4,886,258
3,323,383
0
5.73
3.89
0
0
Sir Michael Heller
and family
Cavendish Asset
Management Limited
James Hyslop
4,886,258
Maland Pension Fund 3,515,472
7,663,214
Stonehage Fleming
Investment
Management Ltd
The Company does not consider that the Heller family has a controlling
share interest irrespective of the number of shares held as no
individual party holds a majority and there is no legal obligation for
shareholders to act in concert. The Directors do not consider that
any single party has control.
The Company is not aware of any other holdings exceeding 3 per
cent of the issued share capital.
SHARE CAPITAL AND TAKEOVER DIRECTIVE
The Company has one class of share capital, namely ordinary shares.
Each ordinary share carries one vote. All the ordinary shares rank pari
passu. There are no securities issued by the Company which carry
special rights with regard to control of the Company.
The identity of all significant direct or indirect holders of securities in
the Company and the size and nature of their holdings is shown in
“Substantial Shareholdings” above.
The rights of the ordinary shares to which the HMRC approved
Share Incentive Plan relates are exercisable by the trustees on behalf
of the employees.
There are no restrictions on voting rights or on the transfer of ordinary
shares in the Company, save in respect of treasury shares. The rules
governing the appointment and replacement of Directors, alteration
of the articles of association of the Company and the powers of the
Company’s Directors accord with usual English company law provisions.
Each Director is subject to re-election at least every three years.
The Company is not party to any significant agreements that take
effect, alter or terminate upon a change of control of the Company
following a takeover bid. The Company is not aware of any
agreements between holders of its ordinary shares that may result in
restrictions on the transfer of its ordinary shares or on voting rights.
There are no agreements between the Company and its Directors or
employees providing for compensation for loss of office or
employment that occurs because of a takeover bid.
STATEMENT AS TO DISCLOSURE OF INFORMATION
TO THE AUDITOR
The Directors in office at the date of approval of the financial
statements have confirmed that, so far as they are aware, there is no
relevant audit information of which the auditor is unaware. Each of
the Directors has confirmed that they have taken all the steps that
they ought to have taken as a Director in order to make them aware
of any relevant audit information and to establish that it has been
communicated to the auditor.
London & Associated Properties PLC 2020 17
GOVERNANCE Directors' report
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 2020 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 (2019: £Nil). No
donations for charitable purposes were made during the year (2019:
£2,250).
CORPORATE RESPONSIBILITY
Environment
The environmental considerations of the group’s South African coal
mining operations are covered in the Bisichi PLC Strategic Report.
The group’s UK activities are principally property investment whereby
premises are provided for rent to commercial businesses. The group
seeks to provide those tenants with good quality premises from which
they can operate in an efficient and environmentally efficient manner and
waste re-cycling arrangements are in place at all the company’s locations.
Greenhouse gas emissions
Details of the group’s greenhouse gas emissions for the year ended
31 December 2020 can be found on pages 13 and 14 of the
Strategic Report.
Employment
The group’s policy is to attract staff and motivate employees by offering
competitive terms of employment. The group provides equal
opportunities to all employees and prospective employees including
those who are disabled. The Bisichi PLC Strategic Report gives details of
the Bisichi group’s activities and policies concerning the employment,
training, health and safety and community support and social
development concerning the Bisichi group’s employees in South Africa.
GOING CONCERN
The directors have reviewed the cash flow forecasts of the Group and
the underlying assumptions on which they are based. The directors
have also reviewed the COVID-19 scenario forecasts and the
underlying assumptions on which they are based, which are described
in more detail in the COVID-19 section of the Strategic Report. The
Group’s business activities, together with the factors likely to affect its
future development, are set out in the Chairman’s Statement and
Chief Executive’s Review and in the Financial and Performance
Review. In addition, Note 21 to the financial statements sets out the
Group’s objectives, policies and processes for managing its capital; its
financial risk management objectives; details of its financial
instruments and hedging activities; and its exposure to credit risk and
liquidity risk.
With secured long term banking facilities, sound financial resources
and long term leases in place the Directors believe it remains
appropriate to adopt the going concern basis of accounting in
preparing the annual financial statements.
The Bisichi directors continue to adopt the going concern basis of
accounting in preparing the Bisichi annual financial statements.
18 London & Associated Properties PLC 2020
CORPORATE GOVERNANCE
The Corporate governance report can be found on pages 19 and 20
of the annual report and accounts.
ANNUAL GENERAL MEETING
The Annual General Meeting will be held at 24 Bruton Place, London,
W1J 6NE on Tuesday 15 June 2021 at 10.30 a.m. Items 1 to 7 will be
proposed as ordinary resolutions. More than 50 per cent. of
shareholders’ votes cast at the meeting must be in favour for those
ordinary resolutions to be passed. The Directors consider that all of
the resolutions to be put to the meeting are in the best interests of
the Company and its shareholders as a whole and accordingly the
board unanimously recommends that shareholders vote in favour of all
of the resolutions as the Directors intend to do in respect of their own
beneficial holdings of ordinary shares. Please note that the following
paragraphs are only summaries of certain of the resolutions to be
proposed at the Annual General Meeting and do not represent the full
text of the resolutions. You should therefore read this section in
conjunction with the full text of the resolutions contained in the notice
of Annual General Meeting which accompanies this Directors’ Report.
ORDINARY RESOLUTIONS
Resolution 7 – Authority to allot securities
Paragraph 7.1.1 of Resolution 7 would give the Directors the authority
to allot shares in the Company and grant rights to subscribe for or
convert any security into shares in the Company up to an aggregate
nominal value of £2,836,478. This represents approximately 1/3 (one
third) of the ordinary share capital of the Company in issue (excluding
treasury shares) as at 4 May 2021 (being the last practicable date prior
to the publication of this Directors’ Report).
In line with guidance issued by the Institutional Voting Information
Service (IVIS), paragraph 7.1.2 of Resolution 7 would give the directors
the authority to allot shares in the Company and grant rights to
subscribe for or convert any security into shares in the Company up to
a further aggregate nominal value of £2,836,478, in connection with
an offer by way of a rights issue. This amount represents approximately
another 1/3 (one third) of the ordinary share capital of the Company in
issue (excluding treasury shares) as at 4 May 2021 (being the last
practicable date prior to the publication of this Directors’ Report).
The Directors’ authority will expire on the earlier of 31 August 2022 or
the next AGM. The Directors do not currently intend to make use of
this authority. However, if they do exercise the authority, the Directors
intend to follow best practice as recommended by the IVIS regarding
its use (including as regards the Directors standing for re-election in
certain cases).
OTHER MATTERS
RSM UK Audit LLP has acted as auditor throughout the year and will
retire due to the regulatory rules regarding rotation. A proposal will
be made at the Annual General Meeting for the appointment of a
new auditor.
By order of the board
Jonathan Mintz
Secretary
For and on behalf of London & Associated Properties PLC
6 May 2021
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 endeavours to apply corporate governance
principles in a sensible and pragmatic fashion having regard to the
circumstances of the business. The key objective is to enhance and
protect shareholder value.
BOARD STRUCTURE
During the year the board comprised the Chairman, the Chief Executive,
one other executive Director and three non-executive Directors. Their
details appear on page 15. The board is responsible to shareholders for
the proper management of the Group.
The Directors’ responsibilities statement in respect of the accounts is set
out on page 29. The non-executive Directors have a particular
responsibility to ensure that the strategies proposed by the executive
Directors are fully considered. To enable the board to discharge its
duties, all Directors have full and timely access to all relevant
information and there is a procedure for all Directors, in furtherance of
their duties, to take independent professional advice, if necessary, at the
expense of the Group. The board has a formal schedule of matters
reserved to it and normally has eleven regular meetings scheduled each
year. Additional meetings are held for special business when required.
The board is responsible for overall Group strategy, approval of major
capital expenditure and consideration of significant financial and
operational matters.
The board committees, which have written terms of reference, deal with
specific aspects of the Group’s affairs:
• The nomination committee is chaired by C A Parritt and comprises
one other non-executive Director and the executive Chairman.
The committee is responsible for proposing candidates for
appointment to the board, having regard to the balance and
structure of the board. In appropriate cases recruitment
consultants may be used to assist the process. All Directors are
subject to re-election at a maximum of every three years.
• The remuneration committee is responsible for making
recommendations to the board on the Company’s framework of
executive remuneration and its cost. The committee determines
the contract terms, remuneration and other benefits for each of
the executive directors, including performance related bonus
schemes, pension rights, option grants and compensation
payments. The board itself determines the remuneration of the
non-executive Directors. The committee comprises two non-
executive Directors and it is chaired by C A Parritt. The executive
Chairman of the board is normally invited to attend. The Annual
Remuneration Report is set out on pages 22 to 25.
• The audit committee comprises two non-executive Directors and
is chaired by C A Parritt. The audit committee report, with its terms
of reference, is set out on page 28. The Chief Executive and
Finance Director are normally invited to attend.
BOARD AND BOARD COMMITTEE MEETINGS HELD
IN 2020
The number of regular meetings during the year and attendance was
as follows:
Sir Michael Heller Board
Nomination committee
J A Heller*
J Mintz*
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
10
2
10
2
1
1
9
2
1
1
10
*Attended audit committee by invitation.
PERFORMANCE EVALUATION – BOARD,
BOARD COMMITTEES AND DIRECTORS
The performance of the board as a whole, its committees and the
non-executive Directors is assessed by the Chairman and the Chief
Executive and is discussed with the senior independent non-
executive Director. Their recommendations are discussed at the
nomination committee prior to proposals for re-election being
recommended to the board. The performance of executive Directors
is discussed and assessed by the remuneration committee. The
senior independent Director meets regularly with the Chairman,
executive and non-executive Directors individually outside of formal
meetings. The Directors will take outside advice in reviewing
performance but have not found this to be necessary to date.
London & Associated Properties PLC 2020 19
• 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 2020. Up
to the date of approval of this report and the financial statements,
the board has not been required to deal with any related material
internal control issues. The Directors confirm that the board has
reviewed the effectiveness of the system of internal control as
described during the period.
COMMUNICATION WITH SHAREHOLDERS
Prompt communication with shareholders is given high priority.
Extensive information about the Group and its activities is provided
in the Annual Report. In addition, a half-year report is produced for
each financial year and published on the Company’s website. The
Company’s website www.lap.co.uk is updated promptly with
announcements and Annual Reports upon publication. Copies from
previous years are also available on the website.
The share price history and market information can be found at
http://www.londonstockexchange.com/prices-and-markets/markets/
prices.htm. The company code is LAS.
There is a regular dialogue with the Company’s stockbrokers and
institutional investors. Enquiries from individuals on matters relating
to their shareholdings and the business of the Group are dealt with
promptly and informatively.
The Company’s website is under continuous development to enable
better communication with both existing and potential new
shareholders.
THE BRIBERY ACT 2010
The Company is committed to acting ethically, fairly and with integrity
in all its endeavours and compliance with the Company’s anti–bribery
code is monitored closely.
GOVERNANCE 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. Alberon Holdings Limited (Alberon) is a Company in which H
D Goldring is the majority shareholder and the Executive Chairman.
Alberon provides consultancy services to the Company on a fee
paying basis. R Priest provides services to the Company on a fee
paying basis. C A Parritt also provides some advisory services as part
of his accounting practice.
The board encourages all three non-executive Directors to act
independently and does not consider that length of service of any
individual non-executive Director, nor any connection with the
above mentioned consultancy and advisory companies, has resulted
in the inability or failure to act independently. In the opinion of the
board the three non-executive Directors continue to fulfil their roles
as independent non-executive Directors. Their background and skills
are set out on page 15.
The independent Directors exchange views regularly between board
meetings and meet when required to discuss corporate governance
and other issues concerning the Group.
INTERNAL CONTROL
The Directors are responsible for the Group’s system of internal control
and for reviewing its effectiveness at least annually, and for the
preparation and review of its financial statements. The board has
designed the Group’s system of internal control in order to provide the
Directors with reasonable assurance that assets are safeguarded, that
transactions are authorised and properly recorded and that material
errors and irregularities are either prevented or would be detected
within a timely period. However, no system of internal control can
eliminate the risk of failure to achieve business objectives or provide
absolute assurance against material misstatement or loss. The key
elements of the control system in operation are:
• The board meets regularly on full notice with a formal schedule of
matters reserved for its decision and has put in place an
organisational structure with clearly defined lines of responsibility
and with appropriate delegation of authority;
• There are established procedures for planning, approval and
monitoring of capital expenditure and information systems for
monitoring the Group’s financial performance against approved
budgets and forecasts;
• The departmental heads are required annually to undertake a full
assessment process to identify and quantify the risks that face
their departments and functions, and assess the adequacy of the
prevention, monitoring and modification practices in place for
those risks. In addition, regular reports about significant risks and
associated control and monitoring procedures are made to the
executive Directors. The process adopted by the Group accords
with the guidance contained in the document “Internal Control
Guidance for Directors on the Combined Code” issued by the
Institute of Chartered Accountants in England and Wales. The
audit committee receives reports from external auditors and from
executive Directors of the Group. During the period the audit
committee has reviewed the effectiveness of the system of
internal control as described above. The board receives periodic
reports from all committees.
20 London & Associated Properties PLC 2020
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 2020.
The report is presented in two parts in accordance
with the remuneration regulations.
The first part is the Annual Remuneration Report which details
remuneration awarded to Directors and non-executive Directors
during the year. The shareholders will be asked to approve the
Annual Remuneration Report as an ordinary resolution (as in
previous years) at the AGM in June 2021.
The second part is the Remuneration Policy which details the
remuneration policy for Directors, can be found at www.lap.co.uk.
The current remuneration policy was subject to a binding vote which
was approved by shareholders at the AGM in July 2020. The
approval will continue to apply 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
6 May 2021
London & Associated Properties PLC 2020 21
GOVERNANCE
Annual remuneration report
THE FOLLOWING INFORMATION HAS BEEN AUDITED
Single total figure of remuneration for the year ended 31 December 2020
SALARY
AND FEES
£’000
BONUSES
£’000
BENEFITS
£’000
LONG TERM
INCENTIVE
AWARDS
£’000
PENSIONS
£’000
TOTAL
2020
£’000
TOTAL FIXED
REMUNERA-
TION
£’000
TOTAL
VARIABLE
REMUNERA-
TION
£’000
Executive Directors
Sir Michael Heller*
Sir Michael Heller - Bisichi
J A Heller
J Mintz
Non-executive Directors
H D Goldring*+
C A Parritt*+
R Priest*
Total
7
83
348
160
598
18
37
35
90
688
-
-
-
-
-
-
-
-
-
-
62
-
40
4
106
11
-
-
11
117
-
-
-
-
-
-
-
-
-
-
-
-
30
15
45
-
-
-
-
45
69
83
418
179
749
29
37
35
101
850
69
83
418
179
749
29
37
35
101
850
-
-
-
-
-
-
-
-
-
-
J A Heller has an entitlement to an employer pension contribution of £30,000 for 2020 (2019: £72,000). He has elected for these not to be
paid at this time.
Single total figure of remuneration for the year ended 31 December 2019
SALARY
AND FEES
£’000
BONUSES
£’000
BENEFITS
£’000
LONG TERM
INCENTIVES
AWARDS
£’000
PENSIONS
£’000
TOTAL
2019
£’000
TOTAL FIXED
REMUNERA-
TION
£’000
TOTAL VARI-
ABLE REMU-
NERATION
£’000
Executive Directors
Sir Michael Heller*
Sir Michael Heller - Bisichi
J A Heller
J Mintz
Non-executive Directors
H D Goldring*+
C A Parritt*+
R Priest*
Total
* Note 25 “Related party transactions”
7
82
533
143
765
18
37
35
90
855
-
200
-
50
250
-
-
-
-
250
59
-
43
-
102
9
-
-
9
111
-
-
-
-
-
-
-
-
-
-
-
-
72
12
84
-
-
-
-
84
66
282
648
205
1,201
27
37
35
99
1,300
66
82
648
155
951
27
37
25
99
1,050
-
200
-
50
250
-
-
-
-
250
+ Members of the remuneration committee for years ended 31 December 2019 and 31 December 2020. C A Parritt was the chair of the remuneration committee
throughout both years.
Benefits include the provision of car, health and other insurance and
subscriptions.
Sir Michael Heller is a director of Bisichi PLC, (a subsidiary for IFRS
10 purposes) and received a salary from that company of £82,500
(2019: £82,500) for services. He did not receive a bonus in 2020
(2019: £200,000).
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 (2019: £300,000). Further details of these services are set
out in Note 25 to the financial statements “Related party transactions”.
22 London & Associated Properties PLC 2020
J A Heller is a director of Dragon Retail Properties Limited, (a
subsidiary for IFRS 10 purposes) and received benefits from that
company of £11,132 (2019: £9,632) 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, Alberon Holdings Limited for consultancy
services provided to the Group. This is detailed in Note 25 to the
financial statements.
The remuneration figures for C A Parritt include fees paid to his
accountancy practice for consultancy services provided to the
Group. This is detailed in Note 25 to the financial statements.
R Priest provides consultancy services to the Group. This is detailed
in Note 25 to the financial statements.
GOVERNANCE Annual remuneration report
Summary of directors’ terms
Executive Directors
Sir Michael Heller
John Heller
Jonathan Mintz
Non-executive Directors
H D Goldring
C A Parritt
R Priest
TOTAL PENSION ENTITLEMENTS
One director had benefits under money purchase schemes. Under
his contract of employment, he was entitled to a regular employer
contribution (currently £15,000 a year). One other director had
benefits under money purchase schemes. Under his contract of
employment he was entitled to a regular employer contribution
(currently £30,000 a year) but has elected not to receive it. There are
no final salary schemes in operation. No pension costs are incurred
on behalf of non-executive Directors. There are no additional
benefits payable to any Director in the event of early retirement.
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 in 2019 or 2020.
2. Partnership shares: No partnership shares were issued in 2019
or 2020.
3. Matching shares: The partnership share agreements for the year
to 31 October 2020 provide for two matching shares to be
awarded free of charge for each partnership share acquired. No
partnership shares were acquired in 2020 (2019: 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 2020 amounted
to £Nil (2019: £Nil).
DATE OF
CONTRACT
UNEXPIRED TERM
NOTICE PERIOD
1 January 1971
1 May 2003
11 February 2019
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
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 2020.
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 2020
there were no options to subscribe for ordinary shares outstanding.
The exercise of options under the Unapproved Scheme is subject to
the satisfaction of objective performance conditions specified by the
remuneration committee which conforms to institutional shareholder
guidelines and best practice provisions. Further details of this
scheme are set out in Note 23 “Share Capital” to the financial
statements.
PAYMENTS TO PAST DIRECTORS
No payments were made to past Directors in the year ended
31 December 2020 (2019: none).
PAYMENTS FOR LOSS OF OFFICE
No payments for loss of office were made in the year ended
31 December 2020 (2019: none).
STATEMENT OF DIRECTORS’ SHAREHOLDINGS AND SHARE INTERESTS
Directors’ interests
The interests of the Directors in the ordinary shares of the Company, including family and trustee holdings, where appropriate, were as follows:
Sir Michael Heller
H D Goldring
J A Heller
C A Parritt
R Priest
J Mintz
† These non-beneficial holdings are duplicated with those of Sir Michael Heller.
BENEFICIAL
INTERESTS
NON-BENEFICIAL
INTERESTS
31 DEC 20
5,749,341
19,819
1,872,041
36,168
-
-
1 JAN 20
5,749,341
19,819
1,872,041
36,168
-
-
31 DEC 20
19,277,931
-
†14,073,485
-
-
-
1 JAN 20
19,277,931
-
†14,073,485
-
-
-
London & Associated Properties PLC 2020 23
GOVERNANCE Annual remuneration report
The beneficial holdings of Directors shown above include their interests in the Share Incentive Plan.
No share awards were made to the Directors in the year, and accordingly no discretion was exercised in determining any award or bonus
payment as a result of any share price appreciation.
There are no requirements or guidelines for any Director to own shares in the Company.
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 2020 was 8.0p (2019: 21.7p). During the
year the share middle market price ranged between 21.7p and 8.0p.
Total Shareholder Return
150
130
110
90
70
50
30
01/01/2016
01/01/2017
01/01/2018
01/01/2019
01/01/2020
–– London & Associated Properties
–– FTSE All Share Index
REMUNERATION OF THE CHIEF EXECUTIVE OVER THE LAST TEN YEARS
YEAR
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
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
418
648
870
487
569
762
835
716
417
671
ANNUAL BONUS PAYMENT
AGAINST MAXIMUM
OPPORTUNITY*
%
0%
0%
20%
11%
18%
41%
49%
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.
In light of the current economic situation the Chief Executive did not draw £185,000 (35%) of his salary for the year.
PERCENTAGE CHANGE IN EXECUTIVE AND NON-EXECUTIVE DIRECTOR REMUNERATION (AUDITED)
The table below shows the percentage change in remuneration of the Directors undertaking the role of Chief Executive Officer, Finance
Director and Non-Executive Directors and the average of Company's colleagues in London & Associated Properties PLC on a full-time
equivalent basis.
24 London & Associated Properties PLC 2020
GOVERNANCE Annual remuneration report
DIRECTOR
Executive:
Sir Michael Heller
J A Heller
J Mintz
Non-Executive:
H D Goldring
C A Parritt
R Priest
Colleague pay
BASE SALARY %
CHANGE 2020 V 2019
BENEFITS %
CHANGE 2020 V 2019
BONUSES %
CHANGE 2020 V 2019
0%
-35%
12%
0%
0%
0%
6%
5%
-7%
N/A
22%
0%
0%
1%
-100%
0%
-100%
0%
0%
0%
-100%
2020
£’000
7,289
0
2019
£’000
9,614
0
RELATIVE IMPORTANCE OF SPEND ON PAY
The total expenditure of the Group on remuneration to all employees (Note 26 refers) is shown below:
Employee Remuneration
Distributions to shareholders
STATEMENT OF IMPLEMENTATION OF
REMUNERATION POLICY
The policy was approved at the AGM in July 2020 and was effective
from 1 August 2020. 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. During the year there were no deviations
from the procedure for the implementation of the remuneration
policy as set out in the policy.
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 2020. No increases were
awarded and no external advice was taken in reaching this decision. The
Company did not engage any consultants to provide advice or services
to materinally assist the remuneration committee's considerations.
SHAREHOLDER VOTING
At the Annual General Meeting on 30 July 2020, there was an
advisory vote on the resolution to approve the Remuneration Report,
other than the part containing the remuneration policy.
In addition, on 30 July 2020, there was a binding vote on the resolution to approve the Remuneration Policy. The results are detailed below:
Resolution to approve the Remuneration Report (30 July 2020)
Resolution to approve the Remuneration Policy (30 July 2020)
% OF VOTES
FOR
80.74
80.73
% OF VOTES
AGAINST
19.26
19.27
NUMBER OF
VOTES
WITHHELD
0
27,265
Although a number of shareholders voted against the approval of the remuneration report at the 2020 AGM, the Remuneration Committee
and the Board believe that the current remuneration policy (approved by shareholders in 2020) is still appropriate. They have noted that a
number of shareholders voted against the remuneration report. However, they believe that it is essential to reward executive directors at a
commercial rate and that the payments are in accordance with the agreed Policy.
London & Associated Properties PLC 2020 25
GOVERNANCE
Remuneration policy summary
The remuneration policy summary below is an
extract of the group’s current remuneration policy on
directors’ remuneration (excluding Bisichi PLC), which
was approved by a binding vote at the 2020 AGM.
The approved policy took effect from 1 August 2020.
In setting the policy, the Remuneration Committee has taken
the following into account:
• The need to attract, retain and motivate individuals of a
calibre who will ensure successful leadership and
management of the company
• The LAP Group’s general aim of seeking to reward all
employees fairly according to the nature of their role and
their performance
POLICY TABLE
PURPOSE
ELEMENT
Executive directors
Base salary
To recognise:
Skills
Responsibility
Accountability
Experience
Value
To provide competitive retirement benefits
Pension
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, although any
of role or operational responsibility
Paid monthly in cash
increase in excess of inflation is unlikely, unless there are changes in responsibility
No individual director will be awarded a base salary in excess of £575,000 a year
No specific performance conditions are attached to base salaries
Company contribution offered at up to 10% of base salary as part
of overall remuneration package
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
Benefits
To provide a competitive benefits package
Contractual benefits include:
Annual
bonus
To reward and incentivise
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
Share
options
To provide executive directors with
a long-term interest in the company
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 in exchange for sacrificing fees.
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.
26 London & Associated Properties PLC 2020
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
annual basis
circumstances or where factors outside the
control of the Group lead to increased costs
(e.g. medical inflation)
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 is using its discretion
The current maximum bonus will not exceed 80% of base salary in any one year
to determine the level of bonus on an annual basis
but the remuneration committee reserves the power to award up to 150% 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, as well as NAV changes.
Achieved results are then compared with
expectation taking account of market conditions
Bonuses are generally offered in cash or shares
remuneration committee
Offered at appropriate times by the
The aggregate number of shares over which options may be granted under all of the
company’s option schemes (including any options and awards granted under the
company’s employee share plans) in any period of ten years, will not exceed, at the
time of grant, 10% of the ordinary share capital of the company from time to time
Share options will be offered by the remuneration committee at their discretion and
will be subject to appropriate performance criteria at the time.
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
GOVERNANCE Remuneration policy summary
• 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.
POLICY TABLE
ELEMENT
PURPOSE
Executive directors
Base salary
To recognise:
Skills
Responsibility
Accountability
Experience
Value
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, although any
increase in excess of inflation is unlikely, unless there are changes in responsibility
No individual director will be awarded a base salary in excess of £575,000 a year
No specific performance conditions are attached to base salaries
Pension
To provide competitive retirement benefits
Company contribution offered at up to 10% of base salary as part
of overall remuneration package
The contribution payable by the Company is
included in the director’s contract of employment
Company contribution offered at up to 10% of base salary as part of overall
remuneration package
Benefits
To provide a competitive benefits package
Contractual benefits include:
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
Where it is necessary to attract, retain, motivate and reward the right
a long-term interest in the company
individuals, the directors may establish new schemes to replace any
expired schemes
plan (SIP)
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
the individual
appointment
No pension offered
No benefits offered except in exchange for sacrificing fees.
Non-executive directors do not participate in the share option schemes
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)
The remuneration committee is using its discretion
to determine the level of bonus on an annual basis
In assessing performance consideration is given
to the level of net rental income, cash flow, voids,
realised development gains and income from
managing joint ventures, as well as NAV changes.
Achieved results are then compared with
expectation taking account of market conditions
Bonuses are generally offered in cash or shares
Offered at appropriate times by the
remuneration committee
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 current maximum bonus will not exceed 80% of base salary in any one year
but the remuneration committee reserves the power to award up to 150% in an
exceptional year
Performance conditions will be assessed on an annual basis
The performance measures applied may be financial, non-financial, corporate,
divisional or individual and in such proportion as the remuneration committee
considers appropriate
The aggregate number of shares over which options may be granted under all of the
company’s option schemes (including any options and awards granted under the
company’s employee share plans) in any period of ten years, will not exceed, at the
time of grant, 10% of the ordinary share capital of the company from time to time
Share options will be offered by the remuneration committee at their discretion and
will be subject to appropriate performance criteria at the time.
Share incentive
To offer a shorter term incentive in the
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
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
For details of remuneration of other company employees please see page 25
A copy of the full policy can be found at www.lap.co.uk.
London & Associated Properties PLC 2020 27
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.
The audit committee’s primary tasks are to:
• r eview the scope of external audit, to receive regular reports from
RSM UK Audit LLP and to review the half-yearly and annual
accounts before they are presented to the board, focusing in
particular on accounting policies and areas of management
judgement and estimation;
• monitor the controls which are in force to ensure the integrity
of the information reported to the shareholders;
• act as a forum for discussion of internal control issues and
contribute to the board’s review of the effectiveness of the Group’s
internal control and risk management systems and processes;
• to review the risk assessments made by management, consider key
risks with action taken to mitigate these and to act as a forum for
discussion of risk issues and contribute to the board’s review of the
effectiveness of the Group’s risk management control and
processes;
• consider once a year the need for an internal audit function;
• advise the board on the appointment of the external auditors,
the rotation of the audit partner every five years and on their
remuneration for both audit and non-audit work; discuss the nature
and scope of their audit work and undertake a formal assessment of
their independence each year, which includes:
i)
a review of non-audit services provided to the Group and
related fees;
ii) discussion with the auditors of their written report detailing
all relationships with the Company and any other parties that
could affect independence or the perception of independence;
iii) a review of the auditors’ own procedures for ensuring the
independence of the audit firm and partners and staff involved in
the audit, including the regular rotation of the audit partner; and
iv) obtaining a written confirmation from the auditors that,
in their professional judgement, they are independent.
MEETINGS
The committee meets at least twice a year prior to the publication
of the annual results and discusses and considers the half year results
prior to their approval by the board. The audit committee meetings are
attended by the external audit partner, chief executive, finance director
and company secretary. During the year the members of the committee
also meet on an informal basis to discuss any relevant matters which
may have arisen. Additional formal meetings may be held as necessary.
During the past year the committee:
• met with the external auditors, and discussed their reports to
the audit committee;
• approved the publication of annual and half year financial results;
• considered and approved the annual review of internal controls;
28 London & Associated Properties PLC 2020
• 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;
• noted the revised procedures applied by the auditors following the
FRC comments on the 2018 audit, concluded in March 2020;
• the chairman of the audit committee has also had separate meetings
and discussions with the external audit partner; and
• conducted a tender process to identify a successor auditor to RSM
UK Audit LLP.
FINANCIAL REPORTING
As part of its role, the Audit Committee assessed the audit findings
that were considered most significant to the financial statements,
including those areas requiring significant judgement and/or
estimation. When assessing the identified financial reporting matters,
the committee assessed quantitative materiality primarily by reference
to the carrying value of the group’s total assets, given that the group
operates a principally asset based business. When determining
quantitative materiality, the Board also gave consideration to the value
of revenues generated by the group and net asset value, given that
they are key trading and business KPIs. The qualitative aspects of any
financial reporting matters identified during the audit process were
also considered when assessing their materiality. Based on the
considerations set out above we have considered quantitative errors
individually or in aggregate in excess of approximately £1.25 million in
relation to the Group and £0.65 million in relation to the parent company
and £0.3 million for the Bisichi group to be material.
EXTERNAL AUDITOR
The 2020 financial year is the final year in which RSM UK Audit LLP is
able to act as auditor to London & Associated Properties PLC under the
mandatory audit firm rotation rules. There is also a rotation requirement
that audit partners rotate after five years. The audit partner, Geoff
Wightwick, had completed five years' audits after the 2019 financial
year audit. The audit committee, having regard to the FRC, FCA and
PRA's Covid-19 Joint Statement of 26 March 2020, considered that his
rotation and replacement with a new RSM UK Audit LLP partner for this
final year's audit would not be in the best interests of audit quality
during coronavirus and agreed that Mr Wightwick should serve an
additional year. Additional safeguards were applied by the audit firm to
ensure auditor independence was not compromised.
In the United Kingdom London & Associated Properties PLC provides
extensive administration and accounting services to Bisichi PLC, which
has its own audit committee and employs BDO LLP, a separate and
independent firm of registered auditor.
In accordance with current legislation both London & Associated
Properties PLC and Bisichi PLC have to change their current auditors.
Proposals to appoint Kreston Reeves LLP will be put forward at the
2021 AGM of both companies.
C A Parritt
Chairman – Audit Committee
6 May 2021
GOVERNANCE
Directors’ responsibilities statement
Directors are responsible for preparing the
Strategic Report and the Directors’ Report,
the Directors’ Remuneration Report and the
financial statements in accordance with
applicable law and regulations.
Company law requires the directors to prepare group and company
financial statements for each financial year. The directors have
elected under company law to prepare group financial statements in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006 and are
additionally required under the Disclosure Guidance and
Transparency Rules of the Financial Conduct Authority to prepare
the group financial statements in accordance with international
financial reporting standards adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union. The directors have
elected under company law to prepare the company financial
statements in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards and
applicable law).
The group financial statements are required by law and international
accounting standards in conformity with the requirements of the
Companies Act 2006 and international financial reporting standards
adopted pursuant to Regulation (EC) No 1606/2002 as it applies in
the European Union to present fairly the financial position and
performance of the group; the Companies Act 2006 provides in
relation to such financial statements that references in the relevant
part of that Act to financial statements giving a true and fair view are
references to their achieving a fair presentation.
Under company law the directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the group and the company and of the
profit or loss of the group for that period.
In preparing each of the group and company financial statements,
the directors are required to:
a. select suitable accounting policies and then apply them
consistently;
b. make judgements and accounting estimates that are reasonable
and prudent;
c. for the group financial statements, state whether they have been
prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006 and
international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European
Union.
d. for the company financial statements, state whether applicable UK
accounting standards have been followed, subject to any material
departures disclosed and explained in the company financial
statements;
e. prepare the financial statements on the going concern basis unless
it is inappropriate to presume that the group and the company will
continue in business.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the group’s and the
company’s transactions and disclose with reasonable accuracy at any
time the financial position of the group and the company and enable
them to ensure that the financial statements and the Directors’
Remuneration Report comply with the Companies Act 2006 and, as
regards the group financial statements, Article 4 of the IAS
Regulation.. They are also responsible for safeguarding the assets of
the group and the company and hence for taking reasonable steps
for the prevention and detection of fraud and other irregularities.
DIRECTORS’ STATEMENT PURSUANT TO THE
DISCLOSURE GUIDANCE AND TRANSPARENCY
RULES
Each of the directors, whose names and functions are listed on page
15 confirm that, to the best of each person’s knowledge:
a. the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view of
the assets, liabilities, financial position and loss 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 2020 29
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 2020
which comprise the consolidated income
statement, the consolidated statement of
comprehensive income, the consolidated
balance sheet, the consolidated statement of
changes in shareholders’ equity, the
consolidated cash flow statement, the company
balance sheet, the company statement of
changes in equity and notes to the financial
statements, including significant accounting
policies. The financial reporting framework that
has been applied in the preparation of the
group financial statements is applicable law and
International Accounting Standards in
conformity with the requirements of the
Companies Act 2006 and international financial
reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in
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
2020 and of the group’s loss for the year then ended;
• the group financial statements have been properly prepared in
accordance with International Accounting Standards in conformity
with the requirements of the Companies Act 2006 and
international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European
Union;
• the parent company financial statements have been properly
prepared in accordance with United Kingdom Generally Accepted
Accounting Practice; and
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
In auditing the financial statements, we have concluded that the
directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. For an
explanation of how we evaluated management’s assessment of the
group’s and parent company’s ability to continue to adopt the going
concern basis of accounting and our key observations arising in
respect to that evaluation, please see the going concern key audit
matter.
Based on the work we have performed, we have not identified any
material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the group’s
or the parent company’s ability to continue as a going concern for a
period of at least twelve months from when the financial statements
are authorised for issue.
Our responsibilities and the responsibilities of the directors with
respect to going concern are described in the relevant sections of
this report.
SUMMARY OF OUR AUDIT APPROACH
Key audit matters
Group
• Valuation of investment properties and
inventory
• Going concern and impact of COVID-19
Materiality
Parent Company
• None
Group
• Overall materiality: £1.25 million (2019:
£1.50 million)
• Performance materiality: £0.97 million
(2019: £1.13 million)
Parent Company
• Overall materiality: £0.65 million (2019:
£0.65 million)
• Performance materiality: £0.49 million
(2019: £0.49 million)
Our audit procedures covered 100% of
revenue, net assets and loss before tax.
• the financial statements have been prepared in accordance with
the requirements of the Companies Act 2006 and, as regards the
group financial statements, Article 4 of the IAS regulations.
Scope
30 London & Associated Properties PLC 2020
GOVERNANCE Independent auditor’s report
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the group
financial statements of the current period and include the most
significant assessed risks of material misstatement (whether or not
due to fraud) we identified, including those which had the greatest
effect on the overall audit strategy, the allocation of resources in the
audit and directing the efforts of the engagement team.
VALUATION OF INVESTMENT PROPERTIES AND INVENTORY
These matters were addressed in the context of our audit of the
group financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
We have determined the matters described below to be the key
audit matters to be communicated in our report.
Key audit matter
description
The group owns freehold and leasehold investment property held at fair value and
development property held as inventory and valued at the lower of cost and net
realisable value.
The majority of investment properties are valued by two firms of external independent
valuers and these valuations have been adopted in the financial statements. One
investment property is valued by an internal valuer.
At 31 December 2020 the carrying value of investment property (excluding head
leases) was £42.64 million (note 8). The carrying value of development property held as
inventory at the same date was £25.01 million (note 12).
The assessment of the value of properties is considered a key audit matter due to the
relative importance of these assets to the group's financial statements, the potential
impact of movements in the value of these assets, particularly in light of the impact of
Covid-19 on the real estate market, and the subjectivity and complexity of the valuation
process which involves significant judgements and estimates, as disclosed on page 40 of
the financial statements.
How the matter was
addressed in the audit
Investment properties
Our response included:
• agreeing the valuations of all properties recorded in the financial statements and
subject to the external valuation process to the valuation reports prepared by the
valuers. These reports covered all of the value of investment properties, except one
property valued at £0.75 million which was subject to internal valuation;
• assessing the qualifications and expertise of management’s valuers, considering their
objectivity and any threats to their independence. We concluded that there was no
threat which might impair the valuers’ independence and objectivity;
• meeting the valuers, both external and internal, to discuss and challenge the
assumptions used and the movements in valuations observed in the year;
• consulting an independent auditor’s expert on the valuation of certain properties in the
portfolio whose values fell outside our expectations; and
• comparing the key inputs to the valuation model to the underlying records of the
leases and records of rents received and against our knowledge of market yields,
including by comparison to publicly available market reports produced by independent
third parties.
Development properties
Our response included:
• agreeing the cost of properties held as inventory to underlying records;
• for the Sheffield property, held at a value of £17.95 million, assessing the value of the
related development project by
o reviewing and challenging the assumptions made by management in respect of
anticipated sales prices and development costs, and the forecast profit margin on the
project;
o consulting an independent auditor’s expert in respect of these assumptions; and
o considering the adequacy of the impairment charge made in the year.
The carrying values of the properties are consistent with the valuation reports provided
for the investment properties.
We noted that the independent auditor's expert considered the valuations were generally
at the higher end of the range of expected valuations for those properties reviewed by
them. We also noted that management's valuer had visited all the properties and has an
in depth knowledge of the properties and the tenants which supports the assumptions
made in their valuations.
Properties held in inventory are carried at the lower of cost and net realisable value.
London & Associated Properties PLC 2020 31
Key observations
GOVERNANCE Independent auditor’s report
GOING CONCERN AND IMPACT OF COVID-19
Key audit matter
description
How the matter was
addressed in the audit
Covid-19 was declared a global pandemic in the first quarter of the year and continues to
have a significant and unprecedented impact on all sections of the global economy, and
in particular the real estate sector. The potential risks to the Group include:
• tenants defaulting on, or deferring, rent payments resulting in cash flow difficulties for
the Group;
• reductions in asset values in the property market, which may cause the Group to
breach loan to value covenants; and
• tightening of lending conditions including covenants.
The financial statements are prepared on the going concern basis of accounting, and the
above factors have an impact on the assessment of the Group’s ability to continue as a
going concern. There is a risk, therefore, that the judgements involved in assessing going
concern in the current climate are inappropriate, resulting in a material misstatement.
There is also a risk that the disclosures made, including of whether there is a material
uncertainty in relation to going concern, are inadequate or incomplete.
Group management has set out its disclosures in relation to going concern and the
impact of Covid-19 on pages 18 and 39.
We discussed with management the process they undertook to assess going concern,
including the impact of Covid-19. We audited the Group’s assessment of going concern,
including cash flow projections and forecast covenant compliance based on normal
trading conditions, which was then sensitised to enable management to assess the
potential impact of non payment of rents by tenants under various scenarios.
The audit work included:
• reviewing the board paper prepared on going concern
• comparing the prior period forecasts to the actual outturn for 2020;
• reviewing the base case forecasts in detail for the period to June 2022. We checked
the mathematical accuracy of the model, and compared revenues and costs to the
actual results for 2020, taking account of known and reasonably foreseeable changes;
• considering the reasonableness of assumptions made in the forecasts and the
sensitivity analysis prepared by management;
• checking projected covenant compliance to the model under both the base case and
management's worst case scenario, and against the loan agreements;
• applying further sensitivity analysis to management's model, which included a
reduction in certain anticipated cash inflows in the forecast period;
• considering the likelihood and reasonableness of possible mitigating actions proposed
by management, including the provision of additional security to cure possible loan to
value covenant breaches, and alternative financing plans;
• reviewing the component auditor's assessment of going concern for Bisichi plc, and
discussing it with them. We considered the impact of Bisichi plc's going concern status
on the ability of the LAP group to continue operating as a going concern; and
• reviewing the disclosures made in the financial statements in respect of going concern.
Key observations
The conclusions in relation to going concern are set out in the “Conclusions relating to
going concern” paragraph above.
OUR APPLICATION OF MATERIALITY
When establishing our overall audit strategy, we set certain thresholds which help us to determine the nature, timing and extent of our audit
procedures. When evaluating whether the effects of misstatements, both individually and on the financial statements as a whole, could reasonably
influence the economic decisions of the users we take into account the qualitative nature and the size of the misstatements. Based on our
professional judgement, we determined materiality as follows:
Overall materiality
£1.25 million (2019: £1.50 million)
£0.65 million
GROUP
PARENT COMPANY
Basis for determining overall materiality
3.2% of net assets
(2019: £0.65 million)
3.3% of net assets
Rationale for benchmark applied
Net assets are the key criteria on which the performance of the group is measured, and the
group regularly reports net asset value per share as a metric to shareholders.
Performance materiality
£0.97 million (2019: £1.13 million)
£0.49 million (2019: £0.49 million)
Basis for determining performance
materiality
Reporting of misstatements to the Audit
Committee
75% of overall materiality
75% of overall materiality
Misstatements in excess of £63,000 and
misstatements below that threshold that, in
our view, warranted reporting on qualitative
grounds.
Misstatements in excess of £33,000 and
misstatements below that threshold that, in
our view, warranted reporting on qualitative
grounds.
32 London & Associated Properties PLC 2020
GOVERNANCE Independent auditor’s report
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
The group consists of 31 components. 27 of those are based in the UK with the other four based in South Africa.
The coverage achieved by our audit procedures was:
Full scope audit
Specific audit procedures
Total
NUMBER OF
COMPONENTS
28
1
29
REVENUE
99.5%
0.5%
100.0%
NET ASSETS
99.6%
0.4%
100.0%
LOSS BEFORE TAX
99.0%
1.0%
100.0%
Analytical procedures at group level were performed for the remaining
two components.
MATTERS ON WHICH WE ARE REQUIRED TO
REPORT BY EXCEPTION
Of the above, full scope audits for 8 components were undertaken by
component auditors.
One component was considered significant as it contained material
amounts of inventory, the recognition of which is a key audit matter for
the group. This component was subject to specific audit procedures in
respect of development properties.
OTHER INFORMATION
The other information comprises the information included in the
annual report other than the financial statements and our auditor’s
report thereon. The directors are responsible for the other
information contained within the annal report. 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.
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
course of 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 this gives rise
to a material misstatement in the financial statements themselves. If,
based on the work we have performed, we conclude that there is a
material misstatement of this other information, we are required to
report that fact.
We have nothing to report in this regard.
OPINIONS ON OTHER MATTERS PRESCRIBED BY
THE COMPANIES ACT 2006
In our opinion, the part of the directors’ remuneration report to be
audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of the
audit:
• the information given in the Strategic Report and the Directors’
Report for the financial year for which the financial statements are
prepared is consistent with the financial statements; and
• the Strategic Report and the Directors’ Report have been prepared
in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and
the parent company and their environment obtained in the course of
the audit, we have not identified material misstatements in the
Strategic Report or the Directors’ Report.
We have nothing to report in respect of the following matters in
relation to which the Companies Act 2006 requires us to report to
you if, in our opinion:
• adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been
received from branches not visited by us; or
• the parent company financial statements and the part of the
directors’ remuneration report to be audited are not in agreement
with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are
not made; or
• we have not received all the information and explanations we
require for our audit.
RESPONSIBILITIES OF DIRECTORS
As explained more fully in the directors’ responsibilities statement set
out on page 29, 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.
London & Associated Properties PLC 2020 33
GOVERNANCE Independent auditor’s report
THE EXTENT TO WHICH THE AUDIT WAS
CONSIDERED CAPABLE OF DETECTING
IRREGULARITIES, INCLUDING FRAUD
Irregularities are instances of non-compliance with laws and
regulations. The objectives of our audit are to obtain sufficient
appropriate audit evidence regarding compliance with laws and
regulations that have a direct effect on the determination of material
amounts and disclosures in the financial statements, to perform audit
procedures to help identify instances of non-compliance with other
laws and regulations that may have a material effect on the financial
statements, and to respond appropriately to identified or suspected
non-compliance with laws and regulations identified during the audit.
In relation to fraud, the objectives of our audit are to identify and
assess the risk of material misstatement of the financial statements
due to fraud, to obtain sufficient appropriate audit evidence regarding
the assessed risks of material misstatement due to fraud through
designing and implementing appropriate responses and to respond
appropriately to fraud or suspected fraud identified during the audit.
However, it is the primary responsibility of management, with the
oversight of those charged with governance, to ensure that the
entity's operations are conducted in accordance with the provisions of
laws and regulations and for the prevention and detection of fraud.
In identifying and assessing risks of material misstatement in respect
of irregularities, including fraud, the group audit engagement team
and component auditors:
• obtained an understanding of the nature of the industries and
sectors, including the legal and regulatory frameworks that the
group and parent company operate in and how the group and
parent company are complying with the legal and regulatory
frameworks;
• inquired of management, and those charged with governance,
about their own identification and assessment of the risks of
irregularities, including any known actual, suspected or alleged
instances of fraud;
• discussed matters about non-compliance with laws and regulations
and how fraud might occur including assessment of how and where
the financial statements may be susceptible to fraud.
All relevant laws and regulations identified at a Group level and areas
susceptible to fraud that could have a material effect on the financial
statements were communicated to component auditors. Any instances
of non-compliance with laws and regulations identified and communicated
by a component auditor were considered in our audit approach.
The most significant laws and regulations were determined as follows:
LEGISLATION /
REGULATION
ADDITIONAL AUDIT PROCEDURES PERFORMED BY
THE GROUP AUDIT ENGAGEMENT TEAM AND
COMPONENT AUDITORS INCLUDED:
IFRS, FRS 101
and Companies
Act 2006
Review of the financial statement disclosures
and testing to supporting documentation; and
completion of disclosure checklists to identify
areas of non-compliance.
Tax compliance
regulations
Inspection of advice received from external tax
advisors.
Mining laws
and regulations
Obtaining an understanding of the control
environment in monitoring compliance with laws
and regulations in Bisichi plc, which included
consideration of the South African Mining Charter.
34 London & Associated Properties PLC 2020
The areas that we identified as being susceptible to material
misstatement due to fraud were:
RISK
AUDIT PROCEDURES PERFORMED BY THE AUDIT
ENGAGEMENT TEAM AND COMPONENT AUDITORS:
Revenue
recognition in
coal sales
Management
override of
controls
Verification of the recognition point of coal sales
compared to the revenue recognition policy,
terms of contract and dispatch/delivery
documents for items pre and post year end.
Testing the appropriateness of journal entries
and other adjustments;
assessing whether the judgements made in
making accounting estimates are indicative
of a potential bias; and
evaluating the business rationale of any
significant transactions that are unusual or
outside the normal course of business.
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 ending 31 December 1987 and
subsequent financial periods.
The period of total uninterrupted consecutive appointments is
34 years, covering the years ended 31 December 1987 to 31
December 2020.
The non-audit services prohibited by the FRC’s Ethical Standard
were not provided to the group or the parent company and we
remain independent of the group and the parent company in
conducting our audit.
During the period under review agreed upon procedures were
completed in respect of a number of the group’s service charge
accounts.
Our audit opinion is consistent with the additional report to the
audit committee.
USE OF OUR REPORT
This report is made solely to the company’s members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
company’s members those matters we are required to state to them
in an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone
other than the company and the company’s members as a body, for
our audit work, for this report, or for the opinions we have formed.
Geoff Wightwick (Senior Statutory Auditor)
For and on behalf of RSM UK Audit LLP, Statutory Auditor
Chartered Accountants
25 Farringdon Street
London
EC4A 4AB
6 May 2021
financial state-
ments
FINANCIAL
STATEMENTS
Consolidated income statement
for the year ended 31 December 2020
Group revenue
Operating costs
Operating (loss)/profit
Finance income
Finance expenses
Result before revaluation and other movements
Non–cash changes in valuation of assets and liabilities and other movements
Exchange gains
Decrease in value of investment properties
Increase/(decrease) in value of trading investments
Decrease in value of other investments
Adjustment to interest rate derivative
Loss for the year before taxation
Income tax credit/(charge)
Loss for the year
Attributable to:
Equity holders of the Company
Non-controlling interest
Loss for the year
Earnings per share
Loss per share - basic and diluted
NOTES
1
4
4
8
21
2
5
24
2020
£’000
35,018
(39,942)
(4,924)
30
(2,869)
(7,763)
39
(2,269)
67
(20)
(200)
(10,146)
1,086
(9,060)
(6,704)
(2,356)
(9,060)
2019
£’000
63,966
(60,766)
3,200
86
(3,252)
34
–
(2,988)
(6)
(1,749)
169
(4,540)
(951)
(5,491)
(6,477)
986
(5,491)
7
(7.86)p
(7.59)p
Consolidated statement of comprehensive
income
for the year ended 31 December 2020
Loss for the year
Other comprehensive expense:
Items that may be subsequently recycled to the income statement:
Exchange differences on translation of Bisichi PLC foreign operations
Other comprehensive expense for the year net of tax
Total comprehensive expense for the year net of tax
Attributable to:
Equity shareholders
Non–controlling interest
Total comprehensive expense for the year net of tax
2020
£’000
2019
£’000
(9,060)
(5,491)
(464)
(464)
(9,524)
(6,866)
(2,658)
(9,524)
(49)
(49)
(5,540)
(6,493)
953
(5,540)
London & Associated Properties PLC 2020 35
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Consolidated balance sheet
at 31 December 2020
Non–current assets
Market value of properties attributable to Group
Present value of head leases
Property
Mining reserves, property, plant and equipment
Investments
Current assets
Inventories - Property
Inventories - Mining
Trade and other receivables
Corporation tax recoverable
Investments
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Borrowings
Lease liabilities
Current tax liabilities
Non–current liabilities
Borrowings
Interest rate derivatives
Lease liabilities
Provisions
Deferred tax liabilities
Total liabilities
Net assets
Equity attributable to the owners of the parent
Share capital
Share premium account
Translation reserve (Bisichi 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
NOTES
2020
£’000
2019
£’000
8
8
9
14
12
13
15
16
17
18
19
18
21
19
20
22
23
23
24
7
42,640
3,344
45,984
10,986
1,746
58,716
25,013
3,445
8,190
–
833
7,194
44,675
103,391
(16,133)
(10,274)
(514)
(209)
(27,130)
(30,853)
(200)
(3,865)
(1,442)
(355)
(36,715)
(63,845)
39,546
8,554
4,866
(1,030)
47
17,567
(144)
17,423
29,860
9,686
39,546
44,580
3,326
47,906
10,472
287
58,665
26,915
2,432
8,399
19
1,119
13,533
52,417
111,082
(12,835)
(10,120)
(424)
(457)
(23,836)
(31,063)
–
(3,842)
(1,554)
(1,654)
(38,113)
(61,949)
49,133
8,554
4,866
(868)
47
24,271
(144)
24,127
36,726
12,407
49,133
34.99p
43.04p
These financial statements were approved by the board of directors and authorised for issue on 6 May 2021 and signed on its behalf by:
Sir Michael Heller
Director
Jonathan Mintz
Director
Company Registration No. 341829
36 London & Associated Properties PLC 2020
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Consolidated statement of changes in
shareholders’ equity
for the year ended 31 December 2020
SHARE
CAPITAL
£’000
8,554
–
–
–
–
–
–
Balance at 1 January 2019
(Loss)/profit for year
Other comprehensive expense:
Currency translation
Total other comprehensive
expense
Total comprehensive
expense
Transactions with owners:
Dividends – equity holders
Dividends – non–controlling
interests
Transactions with owners
Balance at 31 December
2019
Loss for year
Other comprehensive
expense:
Currency translation
Total other comprehensive
expense
Total comprehensive
expense
Transactions with owners:
Dividends – non–controlling
interests
–
Transactions with owners
Balance at 31 December 2020 8,554
–
8,554
–
–
–
–
–
SHARE
PREMIUM
£’000
4,866
–
TRANSLA-
TION
RESERVES
£’000
(852)
–
CAPITAL
REDEMP-
TION
RESERVE
£’000
47
–
TREASURY
SHARES
£’000
(144)
–
RETAINED
EARNINGS
EXCLUDING
TREASURY
SHARES
£’000
30,906
(6,477)
TOTAL
EXCLUDING
NON–
CON-
TROLLING
INTERESTS
£’000
43,377
(6,477)
NON–
CON-
TROLLING
INTERESTS
£’000
12,309
986
TOTAL
EQUITY
£’000
55,686
(5,491)
–
–
–
–
–
–
4,866
–
–
–
–
–
(16)
(16)
(16)
–
–
–
(868)
–
(162)
(162)
(162)
–
–
–
–
–
–
–
–
–
–
–
–
–
(16)
(16)
(33)
(33)
(49)
(49)
(6,477)
(6,493)
953
(5,540)
(158)
–
(158)
–
–
(855)
(158)
(855)
–
47
–
(144)
(158)
24,271
(158)
36,726
(855)
12,407
(1,013)
49,133
–
–
–
–
–
–
(6,704)
(6,704)
(2,356)
(9,060)
–
–
–
–
–
–
(162)
(162)
(302)
(302)
(464)
(464)
(6,704)
(6,866)
(2,658)
(9,524)
–
–
(63)
(63)
–
4,866
–
(1,030)
–
47
–
(144)
–
17,567
–
29,860
(63)
9,686
(63)
39,546
London & Associated Properties PLC 2020 37
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Consolidated cash flow statement
for the year ended 31 December 2020
Operating activities
Loss for the year before taxation
Finance income
Finance expense
Decrease in value of investment properties
(Increase)/decrease in trading investments
Adjustment to interest rate derivative
Loss on sale of inventory - property
Depreciation
Development expenditure on inventories
Sale of inventory - property
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 assets held for sale
Acquisition of investment properties, mining reserves, plant and equipment
Disposal of other investments
Acquisition of other investments
Interest received
Cash outflows from investing activities
Financing activities
Interest paid
Interest obligation under finance leases
Repayment of lease liabilities
Receipt of bank loan - Bisichi PLC
Repayment of bank loan - Bisichi PLC
Receipt of bank loan - London & Associated Properties PLC
Repayment of bank loan - London & Associated Properties PLC
Equity dividends paid
Equity dividends paid - non-controlling interests
Cash outflows from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Exchange adjustment
Cash and cash equivalents at end of year
The cash flows above relate to continuing operations.
2020
£’000
2019
£’000
(10,146)
(30)
2,869
2,269
(47)
200
–
2,455
(398)
–
(39)
1,173
(380)
3,717
1,643
(198)
1,445
–
(3,515)
253
(1,379)
30
(4,611)
(2,675)
(178)
(231)
61
(200)
105
(169)
–
(63)
(3,350)
(6,516)
8,691
173
2,348
(4,540)
(86)
3,252
2,988
1,755
(169)
991
2,407
(409)
9,309
123
805
(448)
(994)
14,984
(1,199)
13,785
2,285
(3,350)
–
(490)
86
(1,469)
(2,932)
(259)
(193)
3,908
(6,011)
13,725
(28,482)
(154)
(375)
(20,773)
(8,457)
17,120
28
8,691
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
£nil of cash deposits at 31 December 2020 were charged as security to debenture stocks (2019: £340,000).
£nil of cash deposits at 31 December 2020 were charged as security to bank loans (2019: £2,271,000).
2020
£’000
7,194
(4,846)
2,348
2019
£’000
13,533
(4,842)
8,691
38 London & Associated Properties PLC 2020
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 accounting standards in conformity with the
requirements of the Companies Act 2006 and are additionally
required under the Disclosure Guidance and Transparency Rules of
the Financial Conduct Authority to prepare the group financial
statements in accordance with international financial reporting
standards adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in the European Union. The directors have elected under
company law to prepare the company financial statements in
accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards and applicable law)
and these are presented in Note 30.
The financial statements are prepared under the historical cost
convention, except for the revaluation of freehold and leasehold
properties and financial assets at fair value through profit and loss as
well as fair value of interest rate derivatives at fair value.
The Group financial statements are presented in Pounds Sterling and
all values are rounded to the nearest thousand pounds (£’000)
except when otherwise stated.
The functional currency for each entity in the Group is the currency
of the country in which the entity has been incorporated. Details of
the country in which each entity has been incorporated can be
found in note 11.
The exchange rates used in the accounts were as follows:
£1 STERLING: RAND
£1 STERLING: DOLLAR
Year-end rate
Annual average
2020
20.0145
21.0936
2019
18.5759
18.4326
2020
1.3663
1.2833
2019
1.3254
1.2781
London & Associated Properties PLC (“LAP”), the parent company, is
a public limited company incorporated and domiciled in England and
quoted on the London Stock Exchange. The Company registration
number is 341829. LAP and its subsidiaries (“the Group”) consist of
LAP, all of its subsidiary undertakings, including Bisichi PLC (“Bisichi”)
and Dragon Retail Properties Limited (“Dragon”). The Group without
Bisichi and Dragon is referred to as LAP Group.
GOING CONCERN
In reviewing going concern it is necessary to consider separately the
position of LAP Group and Bisichi. Although both are consolidated
into group accounts (as required by IFRS 10), they are managed
independently and in the unlikely event that Bisichi was unable to
continue trading this would not affect the ability of LAP Group to
continue operating as a going concern. The same would be true for
Bisichi in reverse.
The directors have reviewed the cash flow forecasts of the LAP
Group and the underlying assumptions on which they are based for
the period to 30 June 2022. The LAP Group’s business activities,
together with the factors likely to affect its future development, are
set out in the Chairman's Statement and Chief Executive’s Review
and Financial and Performance Review, including separate sections
discussing the potential impact of COVID-19 on the LAP Group. In
addition, Note 21 to the financial statements sets out the Group’s
objectives, policies and processes for managing its capital; its
financial risk management objectives; details of its financial
instruments and hedging activities; and its exposure to credit risk
and liquidity risk.
Given the significant impact of Covid-19 on the macro-economic
conditions in which LAP is operating, additional stress-testing has
been carried out on LAP’s ability to continue in operation under
extremely unfavourable operating conditions, including a scenario in
which the Group is unable to collect a significant proportion of its
rent for an extended period of time. While the assumptions applied
in these scenarios are possible, they do not represent the Group’s
view of the likely outturn. However, the results of these tests help to
inform the directors’ assessment of the viability of LAP. The Group
has assessed the impact of these assumptions on the key financial
metrics over a four year period, including the net cash position and
debt covenants. The majority of our properties serve local
communities with convenience retail and tenants therefore tend to
be sole traders, rather than large fashion retailers. Sole traders rely
on their property to serve the local community and are less affected
by the structural disruptions seen in the wider retail environment.
The group has over two hundred tenants and is not reliant on any
single large tenant.
Cash position
The worst-case scenario, which management consider a remote
possibility, assumes that for a period of nine months after the date of
these accounts:
• 60% of tenants delay payments by nine months
• rent accruing from 20% of tenants who remain in occupation is
never received
• rent accruing from a further 20% of tenants is never received as
they become insolvent
• empty units remain void for a period of 6 months before reletting
• No dividend is received from Bisichi for the duration of the
forecast
• 75% of tenant arears built up from March 2020 to date, above
normal levels, are never recovered
In the event of the above worst-case assumptions, in December
2021 LAP’s cash balances would fall to their lowest level of £1.0 million.
These estimates include discretionary spending that could be delayed
or stopped entirely and assume that no additional sources of funding
are sought, other than refinancing of existing debts at their end dates.
London & Associated Properties PLC 2020 39
group accounting policies
FINANCIAL STATEMENTS group accounting policies
Debt Covenants
The Group has examined potential falls in valuations across all properties
and assessed the effect on existing debt covenants. In all cases we
have the option to paydown the loans to cure Loan to Value covenants.
A reduction in property valuations would require LAP to repay loans
in order to meet Loan to Value covenants. This could be met from a
combination of existing cash reserves, by providing currently
unencumbered properties, valued at £5.0 million, as additional
security or by selling or leveraging other investments and assets. In
2020 there was a reduction in investment property values of
£2,269,000 (4.7%)
Some, but not all, loans are non-recourse to the group. The Group’s
largest loan, of £14 million with Phoenix CRE S.à r.l, is non-recourse
and could be called without a material impact on the wider group in
the short and medium term. Should properties secured against
London & Associated Properties PLC’s £10 million debenture with
Aviva suffer a fall in value, either currently unencumbered properties
or cash could be added to the existing security. The property mix of
the current security is 68% community retail and 32% industrial;
values of the latter are widely considered to be more resilient in the
current climate.
Loan debt service covenants react more immediately to short term
delays in rent payments than property values. For all loans, the group
is able, at its discretion, to provide assistance to match any shortfall
in rents received.
Debt Refinancing
Dragon has a £1.2 million loan that expired in January 2021 and is
currently rolling over. The lender has offered terms for a nine-month
extension to October 2021 to enable a longer term refinancing,
following the delays caused by COVID. Dragon is considering this
offer and is exploring options for longer term refinancing of this loan.
The LTV on this loan is 56% based on the lender's last valuation and
the security is considered attractive.
Broadway Regen has a development loan of £3.67 million (2019:
£3.61 million) expiring in July 2021. This is a residential development
which is expected to have strong returns. We expect that the lender
will continue to roll over this loan until such time as we dispose of
the project.
Both these loans are ring-fenced within the group’s joint venture
vehicles, where the major partner is Bisichi PLC. Although in both
cases we are confident that refinancing can be achieved satisfactorily,
we note that, were the loans to be called, there are sufficient assets
available to settle the obligations and their disposal would not affect
the ability of the group to continue to operate as a going concern.
In the longer term, the Group's £14 million loan with Phoenix CRE
S.a.r.l and its £10 million debenture with Aviva are due for repayment
in August and September of 2022 respectively. The Board will be
looking at options to refinance these loans closer to their expiry.
Bisichi PLC
The directors note the consideration of going concern by the Bisichi
board, but also note that any failure of Bisichi would not itself impact
on the going concern status of the LAP group for the reasons set out
on page 8 of the financial statements.
The directors believe that the LAP Group has adequate resources to
continue in operational existence for the foreseeable future and that
the LAP Group is well placed to manage its business risks. Thus they
continue to adopt the going concern basis of accounting in preparing
the annual financial statements.
40 London & Associated Properties PLC 2020
The Bisichi directors continue to adopt the going concern basis of
accounting in preparing the Bisichi annual financial statements.
INTERNATIONAL FINANCIAL REPORTING
STANDARDS (IFRS)
The Group has adopted all of the new and revised Standards and
Interpretations issued by the International Accounting Standards
Board (“IASB”) that are relevant to its operations and effective for
accounting periods beginning 1 January 2020.
The Group has not adopted any Standards or Interpretations in
advance of the required implementation dates.
We are committed to improving disclosure and transparency and will
continue to work with our different stakeholders to ensure they
understand the detail of these accounting changes. We continue to
remain committed to a robust financial policy.
KEY JUDGEMENTS AND ESTIMATES
The preparation of the financial statements requires management to
make assumptions and estimates that may affect the reported
amounts of assets and liabilities and the reported income and
expenses, further details of which are set out below. Although
management believes that the assumptions and estimates used are
reasonable, the actual results may differ from those estimates.
Further details of the estimates and judgements which may have a
material impact on next year’s financial statements are contained in
the Directors’ Report.
PROPERTY OPERATIONS
Fair value measurements of investment properties
An assessment of the fair value of these assets is undertaken
annually. The fair value measurements are estimated based on the
amounts for which the assets and liabilities could be exchanged
between market participants. To the extent possible, the
assumptions and inputs used take into account externally verifiable
inputs. However, such information is by nature subject to uncertainty
and is discussed further in the Directors’ Report and shown in note 8.
Inventories - Property
When the Group begins to redevelop an existing investment
property with a view to sale or when more management time is
spent on development activities with a view to recovering value
through the disposal of the property rather than managing it to
generate/receive rent.
The property is transferred to inventory and held as a current asset.
The property is re-measured to fair value as at the date of the
transfer with any gain or loss being taken to the income statement.
The re-measured amount becomes the deemed cost at which the
property is then carried at within Inventories - property, plus any
costs for asset management initiatives or development in preparation
for sale and subject to any provision required to reduce cost to net
realisable value.
In assessing the net realisable value of a property development, the
directors make significant estimates and judgements regarding, inter
alia, forecast sales and costs per square foot, gross internal area,
affordable housing allocations and appropriate rates of financing. The
degree to which these variables can be accurately forecast will
depend on the stage of development of the particular project and
the impact of changes in these assumptions to the net realisable
value could be material. Further detail is included in note 12.
FINANCIAL STATEMENTS group accounting policies
MINING OPERATIONS
Life of mine and reserves
The directors of Bisichi consider their judgements and estimates
surrounding the life of the mine and its reserves to have significant
effect on the amounts recognised in the financial statements and to
be an area where the financial statements are subject to significant
estimation uncertainty. The life of mine remaining is currently
estimated at 4 years. This life of mine is based on the group’s existing
coal reserves including reserves acquired but subject to regulatory
approval. The life of mine excludes future coal purchases and coal
reserve acquisitions. The group’s estimates of proven and probable
reserves are prepared utilising the South African code for the
reporting of exploration results, mineral resources and mineral
reserves (the SAMREC code) and are subject to assessment by an
independent Competent Person experienced in the field of coal
geology and specifically opencast and pillar coal extraction. Estimates
of coal reserves impact assessments of the carrying value of
property, plant and equipment, depreciation calculations and
rehabilitation and decommissioning provisions. There are numerous
uncertainties inherent in estimating coal reserves and changes to
these assumptions may result in restatement of reserves. These
assumptions include geotechnical factors as well as economic factors
such as commodity prices, production costs and yield.
DEPRECIATION, AMORTISATION OF MINERAL
RIGHTS, MINING DEVELOPMENT COSTS AND PLANT
& EQUIPMENT
The annual depreciation/amortisation charge is dependent on
estimates, including coal reserves and the related life of the mine,
expected development expenditure for probable reserves, the
allocation of certain assets to relevant ore reserves and estimates of
residual values of the processing plant. The charge can fluctuate
when there are significant changes in any of the factors or
assumptions used, such as estimating mineral reserves which in turn
affects the life of mine or the expected life of reserves. Estimates of
proven and probable reserves are prepared by an independent
Competent Person. Assessments of depreciation/amortisation rates
against the estimated reserve base are performed regularly. Details
of the depreciation/amortisation charge can be found in note 9.
PROVISION FOR MINING REHABILITATION
INCLUDING RESTORATION AND DE-
COMMISSIONING COSTS
A provision for future rehabilitation including restoration and
decommissioning costs requires estimates and assumptions to be
made around the relevant regulatory framework, the timing, extent
and costs of the rehabilitation activities and of the risk free rates
used to determine the present value of the future cash outflows. The
provisions, including the estimates and assumptions contained
therein, are reviewed regularly by management. The Group engages
an independent expert to assess the cost of restoration and
decommissioning annually as part of management’s assessment of
the provision. Details of the provision for mining rehabilitation can be
found in note 20.
MINING IMPAIRMENT
Property, plant and equipment representing the Group’s mining
assets in South Africa are reviewed for impairment at each reporting
date. The impairment test is performed using the approved Life of
Mine plan and those future cash flow estimates are discounted using
asset specific discount rates and are based on expectations about
future operations. The impairment test requires estimates about
production and sales volumes, commodity prices, proven and
probable reserves (as assessed by the Competent Person), operating
costs and capital expenditures necessary to extract reserves in the
approved Life of Mine plan. Changes in such estimates could impact
recoverable values of these assets. Details of the carrying value of
property, plant and equipment can be found in note 9.
The impairment test indicated significant headroom as at 31
December 2020 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. An 8% reduction in average
forecast coal prices or a 10% reduction in yield would give rise to a
breakeven scenario. However, the Bisichi directors consider the
forecasted yield levels and pricing to be appropriate and supportable
best estimates.
BASIS OF CONSOLIDATION
The Group accounts incorporate the accounts of LAP and all of its
subsidiary undertakings, together with the Group’s share of the
results and net assets of its joint ventures.
Non–controlling interests in subsidiaries are presented separately
from the equity attributable to equity owners of the parent company.
When changes in ownership in a subsidiary do not result in a loss of
control, the non–controlling shareholders’ interests are initially
measured at the non–controlling interests’ proportionate share of
the subsidiaries’ net assets. Subsequent to this, the carrying amount
of non–controlling interests is the amount of those interests at initial
recognition plus the non–controlling interests’ share of subsequent
changes in equity. Total comprehensive income is attributed to
non–controlling interests even if this results in the non–controlling
interests having a deficit balance.
SUBSIDIARIES
Subsidiaries are entities controlled by the Group. The Group controls
an entity when it is exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability to affect those
returns through its power over the entity. Subsidiaries acquired
during the year are consolidated using the acquisition method. Their
results are incorporated from the date that control passes.
All intra Group transactions, balances, income and expenses are
eliminated on consolidation. Details of the Group’s trading subsidiary
companies are set out in Note 11.
The directors are required to consider the implications of IFRS 10 on
the LAP investment in Bisichi PLC (“Bisichi”). Related parties also
have shareholdings in Bisichi. When combined with the 42% held by
LAP and, taking account of the wide disposition of other
shareholders, there is potential for LAP and these related parties to
exercise voting control over Bisichi. IFRS 10 makes it clear that
possible voting control is of more significance than actual
management control.
For this reason the directors have concluded that there is a
requirement to consolidate Bisichi with LAP. While, in theory, they
could achieve control, in practice they do not get involved in the day
to day operations of Bisichi. The directors have presented
consolidated accounts using the published accounts of Bisichi but it
is important to note that any figures, risks and assumptions
attributable to that company are the responsibility of the Bisichi
Board of directors who are independent from LAP.
As a result of treating Bisichi as a subsidiary, Dragon Retail Properties
Limited and West Ealing Properties Limited are also subsidiaries for
accounting purposes, as LAP and Bisichi each own 50% of these
joint venture businesses.
London & Associated Properties PLC 2020 41
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 and property rental and service
charge.
Rental income
Rental income arises from properties where leases have granted tenants
a right of occupation and use of the properties. Rental income is
recognised in the Group income statement on a straight–line basis over
the term of the lease. This includes the effect of lease incentives to
tenants, which are normally in the form of rent free periods. Contingent
rents, being the difference between the rent currently receivable and
the minimum lease payments, are recognised in property income in the
periods in which they are receivable. Rent reviews are recognised when
such reviews have been agreed with tenants.
Service charge income
Service charge income and management fees are recorded as income
in the period in which they are earned.
Reverse surrender premiums
Payments received from tenants to surrender their lease obligations
are recognised immediately in the income statement.
Dilapidations
Dilapidations monies received from tenants in respect of their lease
obligations are recognised immediately in the income statement.
Other revenue
Revenue in respect of listed investments held for trading represents
investment dividends received and profit or loss recognised on
realisation. Dividends are recognised in the income statement when
the dividend is received.
PROPERTY OPERATING EXPENSES
Operating expenses are expensed as incurred and any property
operating expenditure not recovered from tenants through service
charges is charged to the income statement.
EMPLOYEE BENEFITS
Share based remuneration
The Company operates a long–term incentive plan and two share
option schemes. The fair value of the conditional awards on shares
granted under the long–term incentive plan and the options granted
under the share option scheme is determined at the date of grant.
This fair value is then expensed on a straight–line basis over the
vesting period, based on an estimate of the number of shares that
will eventually vest. At each reporting date, the fair value of the
non–market based performance criteria of the long–term incentive
plan is recalculated and the expense is revised. In respect of the
share option scheme, the fair value of options granted is calculated
using the binomial method.
42 London & Associated Properties PLC 2020
PENSIONS
The Company operates a defined contribution pension scheme. The
contributions payable to the scheme are expensed in the period to
which they relate.
FOREIGN CURRENCIES
Monetary assets and liabilities are translated at year end exchange
rates and the resulting exchange rate differences are included in the
consolidated income statement within the results of operating
activities if arising from trading activities, including inter-company
trading balances and within finance cost / income if arising from
financing.
For consolidation purposes, income and expense items are included
in the consolidated income statement at average rates, and assets
and liabilities are translated at year end exchange rates. Translation
differences arising on consolidation are recognised in other
comprehensive income. Foreign exchange differences on
intercompany loans are recorded in other comprehensive income
when the loans are not considered trading balances and are not
expected to be repaid in the foreseeable future. Where foreign
operations are sold or closed, the cumulative exchange differences
attributable to that foreign operation are recognised in the
consolidated income statement when the gain or loss on disposal is
recognised.
Transactions in foreign currencies are translated at the exchange rate
ruling on transaction date.
FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are recognised in the Group’s
consolidated statement of financial position when the group
becomes a party to the contractual provisions of the instrument.
Financial assets
Financial assets are classified as either financial assets at amortised
cost, at fair value through other comprehensive income (“FVTOCI”)
or at fair value through profit or loss (“FVPL”) depending upon the
business model for managing the financial assets and the nature of
the contractual cash flow characteristics of the financial asset.
A loss allowance for expected credit losses is determined for all
financial assets, other than those at FVPL, at the end of each
reporting period. The Group applies a simplified approach to
measure the credit loss allowance for trade receivables using the
lifetime expected credit loss provision. The lifetime expected credit
loss is evaluated for each trade receivable taking into account
payment history, payments made subsequent to year end and prior
to reporting, past default experience and the impact of any other
relevant and current observable data. The group applies a general
approach on all other receivables classified as financial assets. The
general approach recognises lifetime expected credit losses when
there has been a significant increase in credit risk since initial
recognition.
The Group no longer recognises a financial asset when the
contractual rights to the cash flows from the asset expire, or when it
transfers the financial asset and substantially all the risks and rewards
of ownership of the asset to another party. The Group does not
recognise financial liabilities when the Group’s obligations are
discharged, cancelled, or have expired.
Investments
Current financial asset investments and other investments classified
as non-current (“The investments”) comprise of shares in listed
companies. The investments are measured at fair value. Any changes
in fair value are measured at fair value through profit or loss account
and accumulated in retained earnings.
FINANCIAL STATEMENTS group accounting policies
Trade and other receivables
Trade receivables are recorded at amortised cost. As the interest that
would be recognised from discounting future cash payments over
the short payment period is not considered to be material, trade
receivables which do not carry any interest are stated at their
nominal value as reduced by credit loss allowances for estimated
recoverable amounts.
Trade and other payables
Trade and other payables are non-interest bearing and are stated at
their nominal value, as the interest that would be recognised from
discounting future cash payments over the short payment period is
not considered to be material.
Bank loans and overdrafts
Bank loans and overdrafts are included as financial liabilities on the
Group balance sheet net of the unamortised costs of issue. The cost
of issue is recognised in the Group income Statement over the life of
the bank loan. Interest payable on those facilities is expensed as a
finance cost in the period to which it relates.
Debenture loans
The debenture loan is included as a financial liability on the balance
sheet net of the unamortised costs on issue. The cost of issue is
recognised in the Group income statement over the life of the
debenture. Interest payable to debenture holders is expensed in the
period to which it relates.
Leases
At inception, the Group assesses whether a contract is or contains a
lease. This assessment involves the exercise of judgement about
whether the Group obtains substantially all the economic benefits from
the use of that asset, and whether the Group has the right to direct the
use of the asset. The Group recognises a right-of-use (“ROU”) asset and
the lease liability at the commencement date of the lease.
Lease liabilities include the present value of payments which
generally include fixed payments and variable payments that depend
on an index (such as an inflation index). Each lease payment is
allocated between the liability and finance cost. The lease payments
are discounted using the interest rate implicit in the lease if that rate
can be readily determined or if not, the incremental borrowing rate is
used. The finance cost is charged to profit or loss over the lease
period so as to produce a constant rate of interest on the remaining
balance of the liability for each period. In the cashflow statement the
principal and interest portions of the lease payments are classified
within financing activities.
The ROU asset is measured at a cost based on the amount of the
initial measurement of the lease liability, plus initial direct costs and
the cost of obligations to refurbish the asset, less any incentives
received. The ROU asset (other than the ROU assets that relate to
land or property that meets the definition of investment property
under IAS 40) is depreciated over the shorter of the lease term or
the useful life of the underlying asset. The ROU asset is subject to
testing for impairment if there is an indicator of impairment. ROU
assets are included in the heading Property, plant and equipment,
and the lease liability is included in the headings current and
non-current lease labilities on the Balance Sheet
Lease liabilities arise for those investment properties held under a
leasehold interest and recorded as investment property. The liability
is calculated as the present value of the minimum lease payments,
reducing in subsequent reporting periods by the apportionment of
payments to the lessor. Lease payments are allocated between the
liability and finance charges to achieve a constant financing rate.
Contingent rents payable, such as rent reviews or those related to
rental income, are charged as an expense in the period in which they
are incurred.
The Group has elected not to recognise ROU assets and liabilities for
leases where the total lease term is less than or equal to 12 months,
or for low value leases. The payments for such leases are recognised
in the Income Statement on a straight-line basis over the lease term.
Interest rate derivatives
The Group uses derivative financial instruments to hedge the
interest rate risk associated with the financing of the Group’s
business. No trading in such financial instruments is undertaken. At
each reporting date, these interest rate derivatives are recognised at
their fair value to the business, being the Net Present Value of the
difference between the hedged rate of interest and the market rate
of interest for the remaining period of the hedge.
Ordinary shares
Shares are classified as equity when there is no obligation to transfer
cash or other assets. Incremental costs directly attributable to the
issue of new shares are shown in equity as a deduction, net of tax,
from the proceeds.
Treasury shares
When the Group’s own equity instruments are repurchased,
consideration paid is deducted from equity as treasury shares until
they are cancelled. When such shares are subsequently sold or
reissued, any consideration received is included in equity.
INVESTMENT PROPERTIES
Valuation
Investment properties are those that are held either to earn rental
income or for capital appreciation or both, including those that are
undergoing redevelopment for future use as an investment property.
They are reported on the Group balance sheet at fair value, being
the amount for which an investment property could be exchanged
between knowledgeable and willing parties in an arm’s length
transaction. The directors’ property valuation is at fair value.
The external valuation of properties is undertaken by independent
valuers who hold recognised and relevant professional qualifications
and have recent experience in the locations and categories of
properties being valued. Surpluses or deficits resulting from changes
in the fair value of investment properties are reported in the Group
income statement in the period in which they arise.
Capital expenditure
Investment properties are measured initially at cost, including related
transaction costs. Additional expenditure of a capital nature, directly
attributable to the redevelopment or refurbishment of an investment
property held for future use as an investment property, up to the
point of it being completed for its intended use, is capitalised in the
carrying value of that property. Where there is a change of use, such
as commencement of development with a view to sale, the property
is transferred to inventory at deemed cost, which is its fair value on
the date of the change in use. Capitalised interest is calculated with
reference to the actual rate payable on borrowings for development
purposes, or for that part of the development costs financed out of
borrowings the capitalised interest is calculated on the basis of the
average rate of interest paid on the relevant debt outstanding.
Disposal
The disposal of investment properties is recorded on completion of
the contract. On disposal, any gain or loss is calculated as the
difference between the net disposal proceeds and the valuation at the
last year end plus subsequent capitalised expenditure in the period.
Depreciation and amortisation
In applying the fair value model to the measurement of investment
properties, depreciation and amortisation are not provided.
London & Associated Properties PLC 2020 43
FINANCIAL STATEMENTS group accounting policies
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
Right of use assets
25–33 per cent per annum
10–33 per cent per annum
Over term of lease
ASSETS HELD FOR SALE
Non-current assets are classified as held-for-sale if it is highly
probable that they will be recovered primarily through sale rather
through continuing use. Such assets are generally measured at the
lower of their carrying amount and fair value less costs of sale.
Impairment losses on initial classification as assets held-for-sale and
subsequent gains and losses on remeasurement are recognised in
profit or loss. Once classified as held-for-sale, intangible assets and
property, plant and equipment are no longer amortised or
depreciated, and any equity-accounted investment is no longer
equity accounted.
INVENTORIES–PROPERTY
Properties held as trading inventory are those which are being
developed with a view to sale. Inventories are recorded at the lower
of cost and net realisable value. If the net realisable value of
inventory is lower than its carrying value, an impairment loss is
recorded in the income statement. If, in subsequent periods, the net
realisable value of inventory that was previously impaired increases
above its carrying value, the impairment is reversed to align the
carrying value of the property with the net realisable value. Inventory
is presented on the balance sheet within current assets.
The Company's properties held as inventory may take longer than
one year to convert to cash, but are shown as current assets as they
will be converted to cash within the Company's operating cycle.
INCOME TAXES
The charge for current taxation is based on the results for the year as
adjusted for disallowed or non–assessable items. Tax payable upon
realisation of revaluation gains recognised in prior periods is recorded
as a current tax charge with a release of the associated deferred tax.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities in
the financial statements and the corresponding tax bases used in the
tax computations and is recorded using the balance sheet liability
method. Deferred tax liabilities are generally recognised for all
taxable temporary differences and deferred tax assets are recognised
to the extent that it is probable that taxable profits will be available
against which deductible temporary differences can be utilised. In
respect of the deferred tax on the revaluation surplus, this is
calculated on the basis of the chargeable gains that would crystallise
on the sale of the investment portfolio as at the reporting date. The
calculation takes account of indexation on the historic cost of
properties and any available capital losses. Deferred tax is calculated
at the tax rates that are expected to apply in the period when the
liability is settled or the asset is realised. Deferred tax is charged or
credited in the Group income statement, except when it relates to
items charged or credited directly to equity, in which case it is also
dealt with in equity.
44 London & Associated Properties PLC 2020
DIVIDENDS
Dividends payable on the ordinary share capital are recognised as a
liability in the period in which they are approved.
CASH AND CASH EQUIVALENTS
Cash comprises cash in hand and on-demand deposits. Cash and
cash equivalents comprise short-term, highly liquid investments that
are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value and original
maturities of three months or less.
The cash and cash equivalents shown in the cashflow statement are
stated net of bank overdrafts that are repayable on demand in
accordance with IAS 7. This includes the structured trade finance
facility held in South Africa as detailed in note 21. These facilities are
considered to form an integral part of the treasury management of
the Group and can fluctuate from positive to negative balances
during the period.
BISICHI PLC
Mining revenue
Revenue is recognised when the customer has a legally binding
obligation to settle under the terms of the contract when the
performance obligations have been satisfied, which is once control of
the goods and/or services have transferred to the buyer. Revenue is
measured based on consideration specified in the contract with a
customer on a per metric tonne basis.
Export revenue is generally recognised when the product is delivered
to the export terminal location specified in the customer contract, at
which point control of the goods have been transferred to the
customer. Domestic coal revenues are generally recognised on
collection by the customer from the mine or when loaded into
transport from the mine’s rail sidings, where the customer pays the
transportation costs. Fulfilment costs to satisfy the performance
obligations of coal revenues such as transport and loading costs
borne by the group from the mine to the delivery point are recoded
in operating costs.
Mining costs
Expenditure is recognised in respect of goods and services received.
Where coal is purchased from third parties at point of extraction the
expenditure is only recognised when the coal is extracted and all of
the significant risks and rewards of ownership have been transferred.
Mining reserves, plant and equipment
The cost of property, plant and equipment comprises its purchase
price and any costs directly attributable to bringing the asset to the
location and condition necessary for it to be capable of operating in
accordance with agreed specifications. Freehold land is not
depreciated. Other property, plant and equipment is stated at
historical cost less accumulated depreciation. The cost recognised
includes the recognition of any decommissioning assets related to
property, plant and equipment.
Heavy surface mining and other plant and equipment is depreciated
at varying rates depending upon its expected usage. The
depreciation rates generally applied are between 5-10 per cent per
annum, but limited to the shorter of its useful life or the life of the
mine.
Other non–current assets, comprising motor vehicles and office
equipment, are depreciated at a rate of between 10% and 33% per
annum which is calculated to write off the cost, less estimated
residual value of the assets, on a straight line basis over their
expected useful lives.
FINANCIAL STATEMENTS group accounting policies
Mine inventories
Inventories are stated at the lower of cost and net realisable value.
Cost includes materials, direct labour and overheads relevant to the
stage of production. Cost is determined using the weighted average
method. Net realisable value is based on estimated selling price less
all further costs to completion and all relevant marketing, selling and
distribution costs.
Mine provisions
Provisions are recognised when the Group has a present obligation
as a result of a past event which it is probable will result in an
outflow of economic benefits that can be reliably estimated.
A provision for rehabilitation of the mine is initially recorded at
present value and the discounting effect is unwound over time as a
finance cost. Changes to the provision as a result of changes in
estimates are recorded as an increase/decrease in the provision and
associated decommissioning asset. The decommissioning asset is
depreciated in line with the Group’s depreciation policy over the life
of mine. The provision includes the restoration of the underground,
opencast, surface operations and de-commissioning of plant and
equipment. The timing and final cost of the rehabilitation is uncertain
and will depend on the duration of the mine life and the quantities
of coal extracted from the reserves.
Mine impairment
Whenever events or changes in circumstance indicate that the
carrying amount of an asset may not be recoverable that asset is
reviewed for impairment. This includes mining reserves, plant and
equipment and net investments in joint ventures. A review involves
determining whether the carrying amounts are in excess of the
recoverable amounts.
An asset’s recoverable amount is determined as the higher of its fair
value less costs of disposal and its value in use. Such reviews are
undertaken on an asset-by-asset basis, except where assets do not
generate cash flows independent of other assets, in which case the
review is undertaken on a company or Group level.
If the carrying amount of an asset exceeds its recoverable amount
the carrying value is written down to its estimated recoverable
amount (being the higher of the fair value less cost to sell and value
in use). Any change in carrying value is recognised in the
comprehensive income statement.
Mine reserves and development cost
The purpose of mine development is to establish secure working
conditions and infrastructure to allow the safe and efficient
extraction of recoverable reserves. Depreciation on mine
development is not charged until production commences or the
assets are put to use. On commencement of full commercial
production, depreciation is charged over the life of the associated
mine reserves extractable using the asset on a unit of production
basis. The unit of production calculation is based on tonnes mined as
a ratio to proven and probable reserves and also includes future
forecast capital expenditure. The cost recognised includes the
recognition of any decommissioning assets related to mine
development.
Post production stripping
In surface mining operations, the Group may find it necessary to
remove waste materials to gain access to coal reserves prior to and
after production commences. Prior to production commencing,
stripping costs are capitalised until the point where the overburden
has been removed and access to the coal seam commences.
Subsequent to production, waste stripping continues as part of the
extraction process as a run of mine activity. There are two benefits
accruing to the Group from stripping activity during the production
phase: extraction of coal that can be used to produce inventory and
improved access to further quantities of material that will be mined
in future periods. Economic coal extracted is accounted for as
inventory. The production stripping costs relating to improved access
to further quantities in future periods are capitalised as a stripping
activity asset, if and only if, all of the following are met:
• it is probable that the future economic benefit associated with the
stripping activity will flow to the Group;
• the Group can identify the component of the ore body for which
access has been improved; and
• the costs relating to the stripping activity associated with that
component or components can be measured reliably.
In determining the relevant component of the coal reserve for which
access is improved, the Group separates its mine into geographically
distinct sections or phases to which the stripping activities being
undertaken within that component are allocated. Such phases are
determined based on assessment of factors such as geology and
mine planning.
The Group depreciates deferred costs capitalised as stripping assets
on a unit of production method, with reference to the tons mined
and reserve of the relevant ore body component or phase.
SEGMENTAL REPORTING
For management reporting purposes, the Group is organised into
business segments distinguishable by economic activity. The Group’s
business segments are LAP operations, Bisichi operations and
Dragon operations. These business segments are subject to risks and
returns that are different from those of other business segments and
are the primary basis on which the Group reports its segmental
information. This is consistent with the way the Group is managed
and with the format of the Group’s internal financial reporting.
Significant revenue from transactions with any individual customer,
which makes up 10 per cent or more of the total revenue of the
Group, is separately disclosed within each segment. All coal exports
are sales to coal traders at Richard Bay’s terminal in South Africa with
the risks and rewards passing to the coal trader at the terminal.
Whilst the coal traders will ultimately sell the coal on the
international markets the Group has no visibility over the ultimate
destination of the coal. Accordingly, the export sales are recorded as
South Africa revenue.
London & Associated Properties PLC 2020 45
FINANCIAL STATEMENTS
Notes to the financial statements
for the year ended 31 December 2020
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
Service charge income
Management income from third party properties
Mining
Group Revenue
Direct property costs
Impairment of inventory - property
Direct mining costs
Overheads
Exchange losses
Depreciation
Operating (loss)/profit
Finance income
Finance expenses
Result before valuation movements
Other segment items
Net decrease on revaluation of investment properties
(Decrease)/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 for the year before taxation
Segment assets
- Non-current assets - property
- Non-current assets - plant & equipment
- Cash & cash equivalents
- Inventories - property
- Non-current assets - other
- Current assets - others
Total assets excluding investment in joint ventures, assets held for sale and trading
Segment liabilities
Borrowings
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Major customers
Customer A
Customer B
Customer C
These customers are for mining revenue in South Africa.
GEOGRAPHIC ANALYSIS
Revenue
Operating loss
Non-current assets excluding investments
Total net assets
Capital expenditure
46 London & Associated Properties PLC 2020
LAP
£’000
4,377
795
18
–
5,190
(2,192)
(2,300)
–
(2,317)
–
(258)
(1,877)
5
(2,200)
(4,072)
(664)
(20)
–
(200)
(884)
(4,956)
33,383
797
3,413
25,013
–
978
63,584
(30,889)
(5,898)
(3,526)
(40,313)
23,271
BISICHI
£’000
919
156
–
28,624
29,699
(142)
–
(24,645)
(5,820)
(38)
(2,193)
(3,139)
25
(641)
(3,755)
(1,295)
39
67
–
(1,189)
(4,944)
10,471
10,174
3,768
–
1,746
11,037
37,196
(9,053)
(10,866)
(2,343)
(22,262)
14,934
–
–
–
9,042
7,588
6,291
DRAGON
£’000
108
21
–
–
129
(5)
–
–
(28)
–
(4)
92
–
(28)
64
(310)
–
–
–
(310)
(246)
2020
TOTAL
£’000
5,404
972
18
28,624
35,018
(2,339)
(2,300)
(24,645)
(8,165)
(38)
(2,455)
(4,924)
30
(2,869)
(7,763)
(2,269)
19
67
(200)
(2,383)
(10,146)
2,130
15
13
–
–
453
2,611
(1,185)
(92)
7
(1,270)
1,341
–
–
–
45,984
10,986
7,194
25,013
1,746
12,468
103,391
(41,127)
(16,856)
(5,862)
(63,845)
39,546
9,042
7,588
6,291
UNITED
KINGDOM
£’000
6,521
(1,323)
46,842
36,636
365
SOUTH
AFRICA
£’000
28,497
(3,601)
10,128
2,910
3,435
2020
TOTAL
£’000
35,018
(4,924)
56,970
39,546
3,800
FINANCIAL STATEMENTS Notes to the financial statements
1. RESULTS FOR THE YEAR AND SEGMENTAL ANALYSIS CONTINUED
BUSINESS ANALYSIS
Rental income
Service charge income
Proceeds from sale of trading properties
Management income from third party properties
Mining
Group Revenue
Direct property costs
Impairment of inventory
Cost of sale of trading properties
Direct mining costs
Overheads
Exchange losses
Depreciation
Operating profit/(loss)
Finance income
Finance expenses
Result before valuation movements
Other segment items
Net decrease on revaluation of investment properties
Decrease in value of other investments
Net decrease 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 & equipment
- Cash & cash equivalents
- Non-current assets - other
- Inventories - property
- Current assets - others
Total assets excluding investment in joint ventures, assets held for
sale and property inventories
Segment liabilities
Borrowings
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Major customers
Customer A
Customer B
Customer C
These customers are for mining revenue in South Africa.
GEOGRAPHIC ANALYSIS
Revenue
Operating profit/(loss)
Non-current assets excluding investments
Total net assets
Capital expenditure
LAP
£’000
4,813
628
9,500
607
–
15,548
(1,823)
(1,750)
(10,491)
–
(3,230)
–
(215)
(1,961)
58
(2,552)
(4,455)
(1,498)
(1,749)
–
169
(3,078)
(7,533)
33,718
946
5,709
–
26,915
686
67,974
(30,764)
(5,750)
(3,156)
(39,670)
28,304
–
–
–
BISICHI
£’000
1,249
181
–
–
46,816
48,246
(572)
–
–
(33,484)
(6,745)
(123)
(2,190)
5,132
28
(667)
4,493
(1,480)
–
(6)
–
(1,486)
3,007
11,748
9,508
7,720
287
–
10,940
40,203
(9,244)
(7,887)
(3,857)
(20,988)
19,215
32,424
10,985
989
DRAGON
£’000
172
–
–
–
–
172
–
–
–
–
(143)
–
–
29
–
(33)
(4)
(10)
–
–
–
(10)
(14)
2,440
18
104
–
–
343
2,905
(1,175)
(79)
(37)
(1,291)
1,614
–
–
–
UNITED
KINGDOM
£’000
17,303
(1,074)
48,901
44,081
582
SOUTH
AFRICA
£’000
46,663
4,274
9,477
5,052
3,177
2019
TOTAL
£’000
6,234
809
9,500
607
46,816
63,966
(2,395)
(1,750)
(10,491)
(33,484)
(10,118)
(123)
(2,405)
3,200
86
(3,252)
34
(2,988)
(1,749)
(6)
169
(4,574)
(4,540)
47,906
10,472
13,533
287
26,915
11,969
111,082
(41,183)
(13,716)
(7,050)
(61,949)
49,133
32,424
10,985
989
2019
TOTAL
£’000
63,966
3,200
58,378
49,133
3,759
Group revenue is external to the Group and the directors consider that inter segmental revenues are not material.
London & Associated Properties PLC 2020 47
FINANCIAL STATEMENTS Notes to the financial statements
2. LOSS BEFORE TAXATION
Loss before taxation is stated after charging/(crediting):
Staff costs (see note 26)
Depreciation on tangible fixed assets - owned assets
Depreciation on tangible fixed assets - right of use
Exchange loss
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. DIRECTORS’ EMOLUMENTS
Emoluments
Defined contribution pension scheme contributions
Sir Michael Heller received £83,000 (2019: £283,000) as a Director of Bisichi PLC.
Details of directors’ emoluments and share options are set out in the remuneration report.
4. FINANCE INCOME AND EXPENSES
Finance income
Finance expenses
Interest on bank loans and overdrafts
Other loans
Interest on derivatives
Interest on lease obligations
Total finance expenses
2020
£’000
7,289
2,200
255
39
88
19
110
4
9
230
2020
£’000
805
45
850
2020
£’000
30
(1,615)
(968)
–
(286)
(2,869)
2019
£’000
9,614
2,185
224
123
88
19
89
4
11
211
2019
£’000
1,216
84
1,300
2019
£’000
86
(1,963)
(915)
(122)
(252)
(3,252)
Interest of £282,000 (2019: £282,000) has been capitalised in relation to the Broadway Regen loan, interest accrues at a rate of 7% (2019:
7%) per annum
5. INCOME TAX
Current tax
Corporation tax on profit of the period
Corporation tax on profit of previous periods
Total current tax
Deferred tax
Loss relief
Origination of timing differences
Revaluation of investment properties
Accelerated capital allowances
Fair value of interest derivatives
Total deferred tax (note 22)
Tax on profit on ordinary activities
48 London & Associated Properties PLC 2020
2020
£’000
30
2
32
109
117
(201)
(1,143)
–
(1,118)
(1,086)
2019
£’000
1,584
(2)
1,582
44
75
(412)
(370)
32
(631)
951
FINANCIAL STATEMENTS Notes to the financial statements
5. INCOME TAX CONTINUED
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 per cent
(2019: 19 per cent). The differences are explained below:
Loss for the year before taxation
Taxation at 19 per cent (2019: 19 per cent)
Effects of:
Capital gains / (losses) on disposal
Other differences
Losses not recognised
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
Adjustments in respect of prior years
Current tax
Deferred tax
2020
£’000
(10,146)
(1,927)
–
334
973
2
(468)
(1,086)
2020
£’000
18
-
18
(14)
4
2020
£’000
12
2
14
(1,104)
(1,090)
2019
£’000
(4,540)
(863)
54
386
913
(2)
463
951
2019
£’000
14
-
14
(671)
(657)
2019
£’000
1,570
(2)
1,568
40
1,608
Factors that may affect future tax charges:
Based on current capital expenditure plans, the Group expects to continue to be able to claim capital allowances in excess of depreciation in
future years, but at a slightly lower level than in the current year.
A deferred tax provision has been made for gains on revaluing investment properties.
The Finance (no. 2) Act 2017 was substantively enacted on 16 November 2017. This includes a restriction on the utilisation of brought
forward tax losses and corporate interest in certain circumstances effective from 1 April 2017.
Following the year end, in the Budget of 3 March 2021, the Chancellor announced an increase in the rate of corporation tax to 25% from
April 2023. The impact of this increase in the Corporation Tax rate, which will be recognised in 2023, is likely to be negligible.
6. DIVIDEND
Dividends paid during the year relating to the prior period
Dividends to be paid:
Proposed final dividend for the year
2020
PER SHARE
0.000p
2020
£’000
–
2019
PER SHARE
0.180p
2019
£’000
154
0.000p
–
0.000p
–
The Directors are not recommending a final dividend for 2020, because of the uncertain state of the global economy.
London & Associated Properties PLC 2020 49
FINANCIAL STATEMENTS Notes to the financial statements
7. LOSS PER SHARE AND NET ASSETS PER SHARE
Basic and diluted loss per share has been calculated as follows:
Loss for the year (£’000)
Weighted average number of ordinary shares in issue (’000)
Loss per share
2020
(6,704)
85,325
(7.86)p
2019
(6,477)
85,325
(7.59)p
Weighted average number of shares in issue is calculated after excluding treasury shares of 218,197 (2019: 218,197).
Basic and diluted net assets per share have been calculated as follows:
Net assets (£’000)
Shares in issue (’000)
Net assets per share
8. INVESTMENT PROPERTIES
Cost or valuation at 1 January 2020
Acquisition of property
Increase in present value of head leases
Decrease on revaluation
At 31 December 2020
Representing assets stated at:
Valuation
Present value of head leases
At 31 December 2020
Cost or valuation at 1 January 2019
Reclassification
Decrease on revaluation
Acquisition of property
Increase in present value of head leases
At 31 December 2019
Representing assets stated at:
Valuation
Present value of head leases
At 31 December 2019
2020
29,860
85,325
34.99p
2019
36,726
85,325
43.04p
TOTAL
£’000
47,906
329
18
(2,269)
45,984
42,640
3,344
45,984
TOTAL
£’000
50,691
–
(2,988)
138
65
47,906
44,580
3,326
47,906
FREEHOLD
£’000
30,658
329
–
(1,034)
29,953
LEASEHOLD
OVER 50 YEARS
£’000
17,041
–
18
(1,225)
15,834
LEASEHOLD
UNDER 50
YEARS
£’000
207
–
–
(10)
197
29,953
–
29,953
12,497
3,337
15,834
190
7
197
FREEHOLD
£’000
32,318
–
(1,722)
62
–
30,658
30,658
–
30,658
LEASEHOLD
OVER
50 YEARS
£’000
16,314
1,802
(1,216)
76
65
17,041
13,722
3,319
17,041
LEASEHOLD
UNDER
50 YEARS
£’000
2,059
(1,802)
(50)
–
–
207
200
7
207
The leasehold and freehold properties, excluding the present value of head leases and directors’ valuations, were valued as at 31 December
2020 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
2020
£’000
31,620
10,270
750
42,640
3,344
45,984
2019
£’000
31,715
11,565
1,300
44,580
3,326
47,906
Head leases on investment property represent the right-of-use asset on certain investment property that has a head lease interest. In the
current year total cash outflow for head leases and other lease liabilities is £0.2 million (2019: £0.2 million). A number of these leases provide
for payment of contingent rent, usually a proportion of net rental income, in addition to fixed rents.
50 London & Associated Properties PLC 2020
FINANCIAL STATEMENTS Notes to the financial statements
8. INVESTMENT PROPERTIES CONTINUED
The historical cost of investment properties, including total capitalised interest of £1,161,000 (2019: £1,161,000) was as follows:
Cost at 1 January
Reclassification
Additions
Cost at 31 December
2020
LEASEHOLD
OVER 50
YEARS
£’000
18,883
–
–
18,883
LEASEHOLD
UNDER 50
YEARS
£’000
785
–
–
785
FREEHOLD
£’000
35,213
–
329
35,542
2019
LEASEHOLD
OVER 50
YEARS
£’000
17,653
1,154
76
18,883
LEASEHOLD
UNDER 50
YEARS
£’000
1,939
(1,154)
–
785
FREEHOLD
£’000
35,151
–
62
35,213
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 experienced employees of the Group verify all significant inputs and review the computational outputs. Valuers submit their
report to the Board on the outcome of each valuation.
Valuations take into account tenure, lease terms and structural condition. The inputs underlying the valuations include market rent or
business profitability, likely incentives offered to tenants, forecast growth rates, yields, EBITDA, discount rates, construction costs including
any specific site costs (for example section 106), professional fees, developer’s profit including contingencies, planning and construction
timelines, lease regear costs, planning risk and sales prices based on known market transactions for similar properties to those being valued.
Valuations are based on what is determined to be the highest and best use. When considering the highest and best use the valuer will
consider, on a property by property basis, its actual and potential uses which are physically, legally and financially viable. Where the highest
and best use differs from the existing use, the valuer will consider the cost and likelihood of achieving and implementing this change in
arriving at the valuation.
There are often restrictions on Freehold and Leasehold property which could have a material impact on the realisation of these assets. The
most significant of these occur when planning permission or lease extension and renegotiation of use are required or when a credit facility is
in place. These restrictions are factored into the property’s valuation by the external valuer.
The methods of fair value measurement are classified into a hierarchy based on the reliability of the information used to determine the
valuation, as follows:
Level 1:
valuation based on inputs on quoted market prices in active markets.
Level 2:
valuation based on inputs other than quoted prices included within level 1 that maximise the use of observable data directly or
from market prices or indirectly derived from market prices.
Level 3:
where one or more significant inputs to valuations are not based on observable market data.
CLASS OF PROPERTY
LEVEL 3
Freehold –
external valuation
Leasehold over
50 years –
external valuation
Leasehold under 50
years –
external valuation
Freehold –
Directors’ valuation
CARRYING /
FAIR VALUE
2020
£’000
29,203
CARRYING/
FAIR VALUE
2019
£’000
VALUATION
TECHNIQUE
29,358 Income capitalisation
12,497
13,722 Income capitalisation
190
200 Income capitalisation
750
1,300 Income capitalisation
KEY UNOBSERVABLE
INPUTS
Estimated Rental Value
Per sq ft p.a
Equivalent Yield
Estimated Rental Value
Per sq ft p.a
Equivalent Yield
Estimated Rental Value
Per sq ft p.a
Equivalent Yield
Estimated Rental Value
Per sq ft p.a
Equivalent Yield
RANGE
(WEIGHTED
AVERAGE)
2020
£5 – £33
(£15)
5.5% – 16.7%
(10.3%)
£5 – £10
(£7)
5.8% – 22.7%
RANGE
(WEIGHTED
AVERAGE)
2019
£3 – £37
(£15)
5.5% – 13.3%
(9.8%)
£4 – £10
(£8)
5.8% – 21.4%
(15.6%)
£5 – £5
(£5)
31.6% – 31.6%
(31.6%)
£4 – £4
(£4)
12.1% – 12.1%
(12.1%)
(14.9%)
£5 – £5
(£5)
30.5% – 30.5%
(30.5%)
£4 – £4
(£4)
7.0% – 7.0%
(7.0%)
At 31 December
42,640
44,580
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.
London & Associated Properties PLC 2020 51
FINANCIAL STATEMENTS Notes to the financial statements
8. INVESTMENT PROPERTIES CONTINUED
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)
Freehold – external valuation
Leasehold over 50 years – external valuation
Leasehold under 50 years – external valuation
Freehold – Directors’ valuation
9. MINING RESERVES, PLANT AND EQUIPMENT
2020
£’000
2019
£’000
2,918/(2,918) 2,932/(2,932)
1,250/(1,250) 1,372/(1,372)
20/(20)
130/(130)
19/(19)
75/(75)
Cost at 1 January 2020
Exchange adjustment
Valuation increase
Additions
At 31 December 2020
Accumulated depreciation at 1 January 2020
Exchange adjustment
Charge for the year
Accumulated depreciation at 31 December 2020
Net book value at 31 December 2020
Cost at 1 January 2019
Exchange adjustment
IFRS 16 reclassification
Additions
Disposals
Cost at 31 December 2019
Accumulated depreciation at 1 January 2019
Exchange adjustment
Charge for the year
Disposals
Accumulated depreciation at 31 December 2019
Net book value at 31 December 2019
TOTAL
£’000
29,860
(1,852)
110
3,471
31,589
19,388
(1,240)
2,455
20,603
10,986
28,173
(310)
1,111
3,212
(2,326)
29,860
19,514
(209)
2,409
(2,326)
19,388
10,472
MINING
RESERVES
£’000
1,226
(88)
–
–
1,138
MINING
EQUIPMENT
£’000
26,674
(1,733)
–
3,430
28,371
1,212
(89)
–
1,123
15
1,240
(14)
–
–
–
1,226
1,213
(14)
13
–
1,212
14
17,405
(1,136)
2,130
18,399
9,972
26,148
(293)
57
3,074
(2,312)
26,674
17,777
(193)
2,133
(2,312)
17,405
9,269
Included in the above line items are right-of-use assets over the following:
2020
£’000
859/(809)
255/(244)
2/(1)
16/(15)
2019
£’000
884/(831)
302/(289)
2/(2)
48/(45)
OFFICE
BUILDING
£’000
1,054
–
110
–
1,164
OFFICE
EQUIPMENT
AND MOTOR
VEHICLES
£’000
906
(31)
–
41
916
211
–
255
466
698
–
–
1,054
–
–
1,054
–
–
211
–
211
843
560
(15)
70
615
301
785
(3)
–
138
(14)
906
524
(2)
52
(14)
560
346
TOTAL
£’000
924
109
284
(18)
(293)
1,006
MINING
EQUIPMENT
£’000
52
-
248
(18)
(19)
263
OFFICE
BUILDING
£’000
843
109
-
-
(254)
698
OFFICE
EQUIPMENT
AND MOTOR
VEHICLES
£’000
29
-
36
-
(20)
45
2020
£’000
–
–
–
2019
£’000
2,285
(2,285)
–
Net book value at 1 January 2020
Revaluation
Additions
Exchange adjustment
Depreciation
Net book value at 31 December 2020
10. ASSETS HELD FOR SALE
At 1 January
Disposal
At 31 December
52 London & Associated Properties PLC 2020
FINANCIAL STATEMENTS Notes to the financial statements
11. SUBSIDIARY COMPANIES
In accordance with Section 409 of the Companies Act 2006 a full list of subsidiaries, the principal activity, the country of incorporation and
the percentage of equity owned, as at 31 December 2020 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
London & Associated Securities Limited
Dormant
London & Associated Management Services Limited Property
Management
Services
Dormant
London & African Investments Limited
Dormant
Orchard Chambers Residential Limited
Property
Orchard Square Limited
Coal mining
Bisichi PLC (note D)
Share dealing
Mineral Products Limited (note A)(note D)
Bisichi (Properties) Limited (note A)(note D)
Property
Bisichi Mining (Exploration) Limited (note A)(note D) Holding
company
Coal
processing
Black Wattle Colliery (Pty) Limited (note A)(note D) Coal mining
Sisonke Coal Processing (pty) Limited
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
41.52%
100%
100%
100%
62.5%
62.5%
Bisichi Coal Mining (Pty) Limited (note A)(note D)
Coal mining
100%
Urban First (Northampton) Limited (note A)(note D) Dormant
Property
Bisichi Trustee Limited (note A)(note D)
Dormant
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)
Dragon Retail Properties Limited (note B)(note D)
Newincco 1338 Limited (note C)
West Ealing Projects Limited (note B)(note D)
Broadway Regen Limited (note E)
Property
Property
Property
Property
Dormant
Property
Dormant
Coal mining
100%
100%
100%
90.1%
100%
70%
62.5%
50%
100%
50%
90%
PERCENTAGE
OF SHARE
CAPITAL
100%
100%
100%
100%
100%
100%
88%
100%
100%
100%
100%
100%
100%
REGISTERED ADDRESS
24 Bruton Place, London, W1J 6NE
24 Bruton Place, London, W1J 6NE
24 Bruton Place, London, W1J 6NE
24 Bruton Place, London, W1J 6NE
24 Bruton Place, London, W1J 6NE
24 Bruton Place, London, W1J 6NE
24 Bruton Place, London, W1J 6NE
24 Bruton Place, London, W1J 6NE
24 Bruton Place, London, W1J 6NE
24 Bruton Place, London, W1J 6NE
24 Bruton Place, London, W1J 6NE
24 Bruton Place, London, W1J 6NE
24 Bruton Place, London, W1J 6NE
COUNTRY OF
INCORPORATION
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
24 Bruton Place, London, W1J 6NE
24 Bruton Place, London, W1J 6NE
24 Bruton Place, London, W1J 6NE
24 Bruton Place, London, W1J 6NE
24 Bruton Place, London, W1J 6NE
24 Bruton Place, London, W1J 6NE
24 Bruton Place, London, W1J 6NE
24 Bruton Place, London, W1J 6NE
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
24 Bruton Place, London, W1J 6NE
24 Bruton Place, London, W1J 6NE
24 Bruton Place, London, W1J 6NE
24 Bruton Place, London, W1J 6NE
24 Bruton Place, London, W1J 6NE
24 Bruton Place, London, W1J 6NE
24 Bruton Place, London, W1J 6NE
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
Samora Machel Street, Bethal Road,
Middelburg, Mpumalanga, 1050
Samora Machel Street, Bethal Road,
Middelburg, Mpumalanga, 1050
Samora Machel Street, Bethal Road,
Middelburg, Mpumalanga, 1050
24 Bruton Place, London, W1J 6NE
24 Bruton Place, London, W1J 6NE
24 Bruton Place, London, W1J 6NE
24 Bruton Place, London, W1J 6NE
24 Bruton Place, London, W1J 6NE
Samora Machel Street, Bethal Road,
Middelburg, Mpumalanga, 1050
Samora Machel Street, Bethal Road,
Middelburg, Mpumalanga, 1050
24 Bruton Place, London, W1J 6NE
24 Bruton Place, London, W1J 6NE
24 Bruton Place, London, W1J 6NE
73 Cornhill, London, EC3V 3QQ
South Africa
South Africa
South Africa
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
South Africa
South Africa
England and Wales
England and Wales
England and Wales
England and Wales
Details on the non–controlling interest in subsidiaries are shown under note 25.
Note A: these companies are owned by Bisichi and the equity shareholdings disclosed relate to that company.
Note B: this entity is a joint venture owned 50% by LAP and 50% by Bisichi.
Note C: this company is owned by Dragon and the equity shareholdings disclosed relate to that company.
Note D: Bisichi, Dragon and West Ealing Projects and their subsidiaries are included in the consolidated financial statements in accordance
with IFRS 10.
Note E: This company is 90% owned by West Ealing Projects and the equity shareholdings disclosed relate to that company.
London & Associated Properties PLC 2020 53
FINANCIAL STATEMENTS Notes to the financial statements
12. INVENTORIES - PROPERTY
Development property and infrastructure:
At 1 January
Capitalised expenditure
Capitalised interest
Sales
Impairments
At 31 December
2020
£’000
26,915
116
282
–
(2,300)
25,013
2019
£’000
38,556
127
282
(10,300)
(1,750)
26,915
The net realisable value of developments is assessed by the directors and is subject to key estimates made in respect of future sales prices
and build costs. Variations in these assumptions can have significant effects on the net realisable value of developments.
In 2018 the Group acquired a development property through West Ealing Projects Limited a 50:50 joint venture with Bisichi. This property is
held at cost of £7.056 million (2019: £6.665 million) and is currently being developed for sale.
In 2018 the Group decided to develop for sale Orchard Square, Sheffield and transferred the asset to inventory. In 2019 part of this property
was sold. The remainder of the property is held at a value of £17.95 million, being cost of £22 million less an impairment provision of £4.05
million, and is being developed for sale. A 5% movement in the estimated sales price of this development would have an effect of £2.4 million
(2019: £2.6 million) on its net realisable value. A 5% movement in the estimated build costs of this development would have an effect of £1.8
million (2019: £1.8 million) on its net realisable value. The uncertainties in the assumptions used to calculate the net realisable value of this
development will reduce over time, but will not resolve within the next 12 months due to the duration of this project.
£25,013,000 (2019: £26,915,000) of the inventory is expected to be recovered after more than 12 months.
13. INVENTORIES - MINING
Coal
Washed
Mining production
Work in progress
Other
2020
£’000
2,924
394
111
16
3,445
14. NON-CURRENT ASSET INVESTMENTS
At 1 January
Additions
Gain / loss
Disposals
Impairments
At 31 December
2020
TOTAL
£’000
287
1,379
201
(101)
(20)
1,746
LISTED
SHARES
£’000
287
1,359
201
(101)
–
1,746
UNLISTED
SHARES
£’000
–
20
–
–
(20)
–
2019
TOTAL
£’000
1,783
255
–
–
(1,751)
287
LISTED
SHARES
£’000
35
255
–
–
(3)
287
UNLISTED
SHARES
£’000
1
–
–
–
(1)
–
The listed shares are all listed on overseas stock exchanges (Level 1 hierarchy).
15. TRADE AND OTHER RECEIVABLES
Trade receivables
Other receivables
Prepayments and accrued income
2020
£’000
6,610
940
640
8,190
2019
£’000
2,037
135
215
45
2,432
LOAN
STOCK
£’000
1,747
–
–
–
(1,747)
–
2019
£’000
6,609
1,143
647
8,399
Financial assets falling due within one year are held at amortised cost. The fair value of trade and other receivables approximates their
carrying amounts. The Group applies a simplified approach to measure the credit loss allowance for trade receivables using the lifetime
expected credit loss provision. The lifetime expected credit loss is evaluated for each trade receivable taking into account payment history,
payments made subsequent to year end and prior to reporting, past default experience and the impact of any other relevant and current
observable data. The group applies a general approach on all other receivables classified as financial assets. At year end, the group allowance
for impairment of trade receivables was £658,000 (2019: £301,000), with the increase being attributable to increased credit risk on property
trade receivables arising due to Covid.
54 London & Associated Properties PLC 2020
FINANCIAL STATEMENTS Notes to the financial statements
16. INVESTMENTS IN LISTED SECURITIES HELD AT FVPL
Market value of listed Investments:
Listed in Great Britain
Listed outside Great Britain
Original cost of listed investments
Unrealised surplus / deficit of market value versus cost
2020
£’000
567
266
833
1,098
(265)
2019
£’000
863
256
1,119
1,150
(31)
The market value of listed investments is derived from their quoted share price on public markets (Level 1 hierarchy).
17. 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.
18. BORROWINGS
Other loans (Bisichi)
£1.25 million term bank loan (secured) repayable by 2021 (Dragon)*
Bank overdrafts (secured) (Bisichi)
£14 million term bank loan (secured) repayable by 2022 at 6.95 per cent*
£0.04 million term loan (unsecured) repayable by 2026 at 2.5 per cent
£10 million first mortgage debenture stock 2022 at 8.109 per cent*
£3.96 million term bank loan (secured) repayable by 2024 (Bisichi)*
£4.026 million term loan (secured) - repayable by 2021 (Broadway Regen)
£3.932 million term loan (secured) repayable by 2028*
2020
£’000
CURRENT
264
1,185
4,846
193
4
–
–
3,670
112
10,274
2020
£’000
NON-CURRENT
144
–
–
13,449
36
9,973
3,799
–
3,452
30,853
Borrowings analysis by origin:
United Kingdom
South Africa
2020
£’000
7,191
618
3,570
4,754
16,133
2019
£’000
3,996
427
3,894
4,518
12,835
2019
£’000
CURRENT
261
1,175
4,842
96
–
–
–
3,605
141
10,120
2019
£’000
NON-CURRENT
382
–
–
13,502
–
9,956
3,759
–
3,464
31,063
2020
£’000
35,873
5,254
41,127
2019
£’000
35,698
5,485
41,183
* The £10 million debenture and bank loans are shown after deduction of un-amortised issue costs.
Interest payable on the term bank loans is variable being based upon the London inter–bank offered rate (LIBOR) plus margin.
No banking covenants were breached by the group during the year, although some temporary waivers were obtained as described below.
The £14 million term loan taken out in September 2019, with Phoenix CRE S.à r.l., is secured by way of a charge on a single freehold
property, included in the financial statements as inventory at a value of £17.95 million. This loan has an interest rate of 5.95% above LIBOR,
where LIBOR has a minimum and maximum rate of 1.0% and 1.5%, respectively. Certain banking covenants were breached during the year
due to the cashflow effects of the first Covid lockdown on rent receipts from tenants. The breaches were waived by the lender and all
payment obligations to the lender were met by the Group. No banking covenants have been breached since July 2020.
The Aviva First Mortgage Debenture Stock August 2022 is secured by way of a charge on specific freehold and leasehold properties which
are included in the financial statements at a value of £17.72 million.
In September 2018 a 10 year term loan of £3.932 million was taken out with Metro Bank secured by way of a charge on freehold and
leasehold properties which are included in the financial statements at a value of £7.5 million. The interest cost of the loan is 2.95 per cent
above the bank’s base rate and the loan is amortised over a 20 year repayment profile, with a final bullet payment after 10 years. An
amortisation holiday of 1 year from May 2020 was arranged in the year.
London & Associated Properties PLC 2020 55
FINANCIAL STATEMENTS Notes to the financial statements
18.
BORROWINGS CONTINUED
In South Africa, an R85million trade facility is held with Absa Bank Limited by Sisonke Coal Processing (Pty) Limited (“Sisonke Coal
Processing”) in order to cover the working capital requirements of Bisichi’s South African operations. The interest cost of the loan is at the
South African prime lending rate plus 3.8% The facility is renewable annually each January, is repayable on demand and is 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 £11,25 million. All banking covenants were either adhered to or waived by Absa Bank
Limited during the year.
Bisichi holds a £3.96million term loan facility with Julian Hodge Bank Limited. The loan is secured against Bisichi’s UK retail property portfolio.
The debt package has a five year term and is repayable at the end of the term in December 2024. The interest cost of the loan is 4.00%
above LIBOR. The loan is secured by way of a first charge over the investment properties in the UK which are included in the financial
statements at a value of £10.27 million. No banking covenants were breached during the year.
The bank loan of £1.25 million (Dragon) which was repayable in January 2021 is secured by way of a first charge on specific freehold
property which is included in the financial statements at a value of £2.13 million. The interest cost of the loan is 2 per cent above LIBOR. A
refinancing of this loan is currently underway. An extension of the existing loan is available, if required, to allow time for refinancing
discussions to be concluded.
The bank loan of £4.026 million (Broadway Regen) which is repayable in July 2021, following an extension of the facility, is secured by way of
a first charge on a specific freehold development property, which is included in the financial statements at £7.1 million. The interest cost of
the loan is fixed at 7.0% per annum.
The Group’s objectives when managing capital are:
– To safeguard the Group’s ability to continue as a going concern, so that it may provide returns for shareholders and benefits for other
stakeholders; and
– To provide adequate returns to shareholders by ensuring returns are commensurate with the risk.
Analysis of the changes in liabilities arising from financing activities:
Balance at 1 January
Exchange adjustments
Cash movements excluding exchange adjustments
Valuation movements
Balance at 31 December
19. LEASE LIABILITIES
Minimum lease payments fall due:
Within one year
Second to fifth year
After five years
Future finance charges on lease liabilities
Present value of lease liabilities
Present value of lease liabilities:
Within one year
Second to fifth year
After five years
2020
£’000
BANK
BORROWINGS
41,183
(386)
131
199
41,127
2020
£’000
LEASE
OBLIGATIONS
4,266
(18)
(329)
460
4,379
2019
£’000
BANK
BORROWINGS
56,643
(57)
(15,583)
180
41,183
2019
£’000
LEASE
OBLIGATIONS
3,261
–
(456)
1,461
4,266
2020
HEAD
LEASES ON
INVESTMENT
PROPERTY
£’000
214
853
20,101
21,168
(17,824)
3,344
214
786
2,344
3,344
2020
TOTAL
£’000
550
1,569
20,233
22,352
(17,973)
4,379
514
1,438
2,427
4,379
2020
OFFICE
£’000
2020
OTHER
£’000
265
530
-
795
(67)
728
232
496
-
728
71
186
132
389
(82)
307
68
156
83
307
2019
TOTAL
£’000
476
1,639
20,105
22,220
(17,954)
4,266
424
1,511
2,331
4,266
Lease liabilities greater than one year are £3,865,000 (2019: £3,842,000).
Many head leases on investment properties provide for contingent rent in addition to the rents above, usually a proportion of rental income.
Lease liabilities are effectively secured as the rights to the leased asset revert to the lessor in the event of default.
56 London & Associated Properties PLC 2020
FINANCIAL STATEMENTS Notes to the financial statements
20. PROVISIONS
At 1 January
Exchange adjustment
At 31 December
The above provision relates to mine rehabilitation costs in Bisichi.
21. FINANCIAL INSTRUMENTS
Total financial assets and liabilities
The Group’s financial assets and liabilities and their fair values are as follows:
2020
£’000
1,554
(112)
1,442
2019
£’000
1,571
(17)
1,554
Cash and cash equivalents
Investments - non-current assets
Investments - current assets
Other assets
Derivative liabilities
Bank overdrafts
Bank loans
Lease liabilities
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 per cent (2019: 19 per cent)
Post tax fair value adjustment
Post tax fair value adjustment – basic pence per share
2020
2019
FAIR
VALUE
£’000
7,194
1,746
833
7,550
(200)
(4,846)
(26,308)
(4,379)
(11,262)
(29,672)
CARRYING
VALUE
£’000
7,194
1,746
833
7,550
(200)
(4,846)
(26,308)
(4,379)
(11,262)
(29,672)
FAIR
VALUE
£’000
13,533
287
1,119
7,793
–
(4,842)
(26,385)
(4,266)
(7,923)
(20,684)
CARRYING
VALUE
£’000
13,533
287
1,119
7,793
–
(4,842)
(26,385)
(4,266)
(7,923)
(20,684)
NOMINAL
VALUE
£’000
(10,000)
–
–
–
FAIR
VALUE
£’000
(10,315)
–
–
–
2020
FAIR VALUE
ADJUSTMENT
£’000
(315)
60
(255)
(0.30p)
2019
FAIR VALUE
ADJUSTMENT
£’000
(497)
94
(403)
(0.47p)
Except for debenture stocks there is no material difference between the carrying value and fair value of financial liabilities or financial assets.
The fair values of the debentures are based on the net present value at the relevant gilt interest rate of the future payments of interest on the
debentures.
Treasury policy
The Group enters derivative transactions such as interest rate swaps, interest rate collars and forward exchange contracts in order to help
manage the financial risks arising from the Group’s activities. The main risks arising from the Group’s financing structure are interest rate risk,
liquidity risk and market price risk, credit risk, commodity price risk and foreign exchange risk. The policies for managing each of these risks
and the principal effects of these policies on the results are summarised below.
Sensitivity analysis
The LAP Group has a variable interest term debt with minimum and maximum rates. At 31 December 2020, with other variables unchanged,
a 1% increase in interest rates would change the profit/loss for the year by £155,000 (2019: £119,000). Bisichi has variable loans and a 1%
increase in interest rates would change the profit/loss for the year by £37,000 (2019: £107,000).
London & Associated Properties PLC 2020 57
FINANCIAL STATEMENTS Notes to the financial statements
21.
FINANCIAL INSTRUMENTS CONTINUED
Interest rate risk
Treasury activities take place under procedures and policies approved and monitored by the Board to minimise the financial risk faced by the
Group.
The Bisichi United Kingdom bank loans and overdraft are secured by way of a first charge on certain fixed assets. The rates of interest vary
based on LIBOR in the UK.
The Bisichi South African bank loans are secured by way of a first charge over specific pieces of mining equipment, inventory and the debtors
of the relevant company which holds the loan. The rates of interest vary based on PRIME in South Africa.
The £3.932 million bank loan is secured by way of a first charge on specific freehold and leasehold property. The rate of interest varies based
on the bank’s base rate.
The £1.25 million bank loan (Dragon) is secured by way of a first charge on specific freehold property. The rate of interest varies based on
LIBOR in the UK.
The £4.026 million bank loan (Broadway Regen) is secured by way of first charge on a specific freehold development property. This loan is
based on a fixed interest rate of 7.0%.
The £14 million bank loan is secured by way of first charge on a specific freehold development property held in inventory. The rates of
interest vary based on LIBOR in the UK, with a minimum LIBOR of 1% and a maximum LIBOR of 1.5%.
Liquidity risk
The Group’s policy is to minimise refinancing risk by balancing its exposure to interest risk and to refinancing risk. In effect the Group seeks to
borrow for as long as possible at the lowest acceptable cost. Efficient treasury management and strict credit control minimise the costs and
risks associated with this policy which ensures that funds are available to meet commitments as they fall due. Cash and cash equivalents earn
interest at rates based on LIBOR in the UK. The cash resources and funding facilities together are considered adequate to meet the Group’s
anticipated cash flow requirements for the foreseeable future.
In South Africa, an R85million trade facility is held with Absa Bank Limited by Sisonke Coal Processing (Pty) Limited (“Sisonke Coal Processing”) in
order to cover the working capital requirements of Bisichi’s South African operations. The interest cost of the loan is at the South African prime
lending rate plus 3.8% The facility is renewable annually each January, is repayable on demand and is secured against inventory, debtors and cash
that are held by Sisonke Coal Processing (Pty) Limited. The facility is included in cash and cash equivalents within the cashflow statement.
In the UK, Bisichi holds a £3.96million term loan facility with Julian Hodge Bank Limited. The loan is secured against the group’s UK retail
property portfolio. The debt package has a five year term and is repayable at the end of the term in December 2024. The interest cost of the
loan is 4.00% above LIBOR.
The £14 million term loan with Pheonix CRE S.à r.l. is secured on a single freehold property and is repayable in September 2022. The interest
cost is 5.95% above LIBOR, where LIBOR has a minimum and maximum rate of 1.0% and 1.5%, respectively.
The table below analyses the Group’s financial liabilities (excluding interest rate derivatives) into maturity groupings and also provides details
of the liabilities that bear interest at fixed, floating and non–interest bearing rates. The amounts below relate to gross contractual
undiscounted cashflows.
Bank overdrafts (floating)
Debentures (fixed)
Bank loans (fixed)
Bank loans (floating)*
Lease liabilities
Trade and other payables (non-interest)
Bank overdrafts (floating)
Debentures (fixed)
Bank loans (fixed)
Bank loans (floating)*
Lease liabilities
Trade and other payables (non-interest)
2020
TOTAL
£’000
4,846
10,000
3,710
23,108
22,352
16,016
80,032
2019
TOTAL
£’000
4,842
10,000
3,605
23,558
22,220
12,408
76,633
LESS THAN
1 YEAR
£’000
4,846
–
3,674
1,754
550
16,016
26,840
LESS THAN
1 YEAR
£’000
4,842
–
3,605
1,673
476
12,408
23,004
2-5 YEARS
£’000
–
10,000
36
18,619
1,569
–
30,224
2-5 YEARS
£’000
–
10,000
–
19,047
1,639
–
30,686
OVER
5 YEARS
£’000
–
–
–
2,735
20,233
–
22,968
OVER
5 YEARS
£’000
–
–
–
2,838
20,105
–
22,943
CARRYING
VALUES
£’000
4,846
9,973
3,710
22,598
4,379
16,016
61,522
CARRYING
VALUES
£’000
4,842
9,956
3,605
22,780
4,266
12,408
57,857
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.
* Details of all hedges are shown on the next page.
58 London & Associated Properties PLC 2020
FINANCIAL STATEMENTS Notes to the financial statements
21.
FINANCIAL INSTRUMENTS CONTINUED
Market price risk
The Group is exposed to market price risk through interest rate and currency fluctuations.
Credit risk
The Group is mainly exposed to credit risk on its cash and cash equivalents, trade and other receivables. The maximum exposure to credit risk is
represented by the carrying amount of each financial asset in the balance sheet which at year end amounted to £17,323,000 (2019: £22,691,000).
To mitigate risk on its cash and cash equivalents, the group only deposits surplus cash with well-established financial institutions of high
quality credit standing.
The Group’s credit risk is primarily attributable to its trade receivables. Customers’ credit ratings are reviewed regularly. The Group’s review
includes measures such as the use of external ratings and establishing purchase limits for each customer. The Group’s approach to measure
the credit loss allowance for trade receivables is outlined in note 15. At year end, the group impairment provision for expected credit losses
provided against trade receivables was £658,000 (2019: £301,000).
The Group exposure to credit risk on its other receivables is mitigated through ongoing review of the underlying performance and resources
of the counterparty including evaluation of different scenarios of probability of default and expected loss applicable to each of the underlying
balances.
Foreign exchange risk
Only Bisichi is subject to this risk. All trading is undertaken in the local currencies except for certain export sales which are invoiced in US
Dollars. It is not the Bisichi Group’s policy to obtain forward contracts to mitigate foreign exchange risk on these contracts as payment terms
are within 15 days of invoice or earlier. Funding is also in local currencies other than inter-company investments and loans and it is also not
the Bisichi Group’s policy to obtain forward contracts to mitigate foreign exchange risk on these amounts. During 2020 and 2019 the Bisichi
Group did not hedge its exposure of foreign investments held in foreign currencies.
The principal currency risk to which the Bisichi Group is exposed in regard to inter-company balances is the exchange rate between Pounds
Sterling and South African Rand. It arises as a result of the retranslation of Rand denominated inter-company trade receivable balances held
within the UK which are payable by South African Rand functional currency subsidiaries.
Based on the Bisichi Group’s net financial assets and liabilities as at 31 December 2020, 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 £360,000 (2019: £176,000).
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 £601,000 (2019: £294,000).
The 25% sensitivity has been determined based on the average historic volatility of the exchange rate for 2019 and 2020.
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:
2020:
Sterling
South African Rand
US Dollar
2019:
Sterling
South African Rand
US Dollar
2020
£’000
1,641
809
1,318
3,768
2019
£’000
4,741
1,672
1,307
7,720
UK
£’000
(70)
39
1,736
1,705
SOUTH AFRICA
£’000
-
(8,878)
-
(8,878)
UK
£’000
1,151
40
1,582
2,773
SOUTH AFRICA
£’000
-
(3,510)
-
(3,510)
Borrowing facilities
At 31 December 2020 the Group was within its bank borrowing facilities and was not in breach of any of the covenants. Term loan
repayments are as set out at the end of this note. Details of other financial liabilities are shown in Notes 17, 18 and 19.
London & Associated Properties PLC 2020 59
FINANCIAL STATEMENTS Notes to the financial statements
21.
FINANCIAL INSTRUMENTS CONTINUED
Interest rate and hedge profile
Fixed rate borrowings
Floating rate borrowings
– Subject to interest rate collar
– Other borrowings
Average fixed interest rate
Weighted average collared 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
2020
£’000
13,683
13,642
13,802
41,127
7.80%
6.95%
7.04%
2.1 years
1.7 years
2019
£’000
13,561
14,773
12,849
41,183
7.82%
6.63%
7.06%
2.1 years
2.6 years
The Group’s floating rate debt bears interest based on LIBOR for the term bank loans and bank base rate for the overdraft.
At 31 December 2020 the Group had a £14 million floating rate loan to September 2022, where LIBOR has a minimum and maximum rate
of 1.0% and 1.5%, respectively. At the year end the fair value liability of this interest rate collar in the accounts was £200,000 (2019: £nil), as
valued by Group.
Dragon had an interest rate hedge of £1.25 million to cover the £1.25 million bank loan. This consisted of a 5 year £1.25 million cap
agreement taken out in November 2015 at 2.5%, which expired in October 2020.
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).
Financial assets
Quoted equities – non-current assets
Quoted equities – current assets
Financial liabilities
Interest rate collar
Financial assets
Quoted equities – non-current assets
Quoted equities – current assets
Financial liabilities
Interest rate swaps
LEVEL 1
£’000
LEVEL 2
£’000
LEVEL 3
£’000
1,746
833
–
–
–
200
–
–
–
LEVEL 1
£’000
LEVEL 2
£’000
LEVEL 3
£’000
287
1,119
–
–
–
–
–
–
–
2020
GAIN/(LOSS)
TO INCOME
STATEMENT
£’000
201
(135)
(200)
2019
GAIN/(LOSS)
TO INCOME
STATEMENT
£’000
(3)
(2)
TOTAL
£’000
1,746
833
200
TOTAL
£’000
287
1,119
–
169
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.
60 London & Associated Properties PLC 2020
FINANCIAL STATEMENTS Notes to the financial statements
21.
FINANCIAL INSTRUMENTS CONTINUED
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
2020
£’000
45,506
(7,194)
38,312
39,748
96.4%
2019
£’000
45,449
(13,533)
31,916
49,133
65.0%
The Group does not have any externally imposed capital requirements.
Following the introduction of IFRS 16 total debt now includes lease liabilities.
Financial assets
The Group’s principal financial assets are bank balances and cash, trade and other receivables, investments and assets held for sale. The
Group has no significant concentration of credit risk as exposure is spread over a large number of counterparties and customers. The credit
risk in liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit ratings assigned by
international credit–rating agencies. The Group’s credit risk is primarily attributable to its trade receivables. The amounts presented in the
balance sheet are net of allowances for doubtful receivables, estimated by the Group’s management based on prior experience and the
current economic environment.
Financial assets maturity
Cash and cash equivalents all have a maturity of less than three months.
Cash at bank and in hand
2020
£’000
7,194
2019
£’000
13,533
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
Repayable after five years
Debentures:
Repayable between two and five years
2020
£’000
2019
£’000
10,274
18,145
2,735
31,154
9,973
41,127
10,120
18,269
2,838
31,227
9,956
41,183
Certain borrowing agreements contain financial and other conditions that if contravened by the Group, could alter the repayment profile.
22. DEFERRED TAX LIABILITIES
Balance at 1 January
Transferred to consolidated income statement
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:
There is no time limit in respect of the Group tax loss relief.
2020
£’000
1,654
(1,118)
(181)
355
113
2,916
(486)
(645)
(1,543)
355
2019
£’000
2,305
(631)
(20)
1,654
314
2,810
(532)
–
(938)
1,654
In addition, the Group has unused losses and reliefs with a potential value of £8,022,000 (2019: £7,339,000), which have not been
recognised as a deferred tax asset. As the Group returns to profit, these losses and reliefs can be utilised.
London & Associated Properties PLC 2020 61
FINANCIAL STATEMENTS Notes to the financial statements
23. 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
Shares held in Treasury at 31 December
NUMBER OF
ORDINARY 10P
SHARES
2020
110,000,000
85,542,711
(218,197)
85,324,514
NUMBER OF
ORDINARY 10P
SHARES
2019
110,000,000
85,542,711
(218,197)
85,324,514
2020
£’000
11,000
8,554
(22)
8,532
2019
£’000
11,000
8,554
(22)
8,532
NUMBER OF ORDINARY
10P SHARES
COST /ISSUE VALUE
2020
218,197
218,197
2019
218,197
218,197
2020
£’000
144
144
2019
£’000
144
144
Share Option Schemes
Employees’ share option scheme (Approved scheme)
At 31 December 2020 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 2020 is as follows:
Shares issued to date
Shares allocated over which options have not been granted
Total shares allocated for issue to employees under the scheme
CHANGES DURING THE YEAR
AT 1
JANUARY
2020
2,367,604
1,549,955
3,917,559
OPTIONS
EXERCISED
–
–
–
OPTIONS
GRANTED
–
–
–
OPTIONS
LAPSED
–
–
–
AT 31
DECEMBER
2020
2,367,604
1,549,955
3,917,559
Non–approved Executive Share Option Scheme (Unapproved scheme)
A share option scheme known as the “Non–approved Executive Share Option Scheme” which does not have HMRC approval was set up
during 2000. At 31 December 2020 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 2020 is as follows:
Shares issued to date
Shares allocated over which options have not yet been granted
Total shares allocated for issue to employees under the scheme
CHANGES DURING THE YEAR
AT 1
JANUARY
2020
450,000
550,000
1,000,000
OPTIONS
EXERCISED
–
–
–
OPTIONS
GRANTED
–
–
–
OPTIONS
LAPSED
–
–
–
AT 31
DECEMBER
2020
450,000
550,000
1,000,000
62 London & Associated Properties PLC 2020
FINANCIAL STATEMENTS Notes to the financial statements
23.
SHARE CAPITAL CONTINUED
The Bisichi PLC Unapproved Option Schemes
Details of the share option schemes in Bisichi are as follows:
YEAR OF GRANT
2015
2018
SUBSCRIPTION
PRICE PER SHARE
PERIOD WITHIN
WHICH OPTIONS
EXERCISABLE
87.0p Sep 2015 – Sep 2025
73.5p Feb 2018 - Feb 2028
NUMBER OF SHARES
FOR WHICH OPTIONS
OUTSTANDING AT
31 DECEMBER 2019
300,000
380,000
NUMBER OF
SHARE OPTIONS
ISSUED/EXERCISED/
(CANCELLED)
DURING YEAR
–
–
NUMBER OF SHARES
FOR WHICH OPTIONS
OUTSTANDING AT
31 DECEMBER 2020
300,000
380,000
The exercise of options under the Unapproved Share Option Schemes, for certain option issues, is subject to the satisfaction of the objective
performance conditions specified by the remuneration committee, which will conform to institutional shareholder guidelines and best
practice provisions in force from time to time.
There are no performance or service conditions attached to 2015 and 2018 options which are outstanding at 31 December 2019.
Outstanding at 1 January
Outstanding at 31 December
Exercisable at 31 December
24. NON–CONTROLLING INTEREST (“NCI”)
As at 1 January
Share of (loss)/profit for the year
Dividends received
Exchange movement
As at 31 December
The following subsidiaries had material NCI:
Bisichi PLC
Black Wattle Colliery (Pty) Ltd
2020
WEIGHTED
AVERAGE
EXERCISE PRICE
79.5p
79.5p
79.5p
2020
NUMBER
680,000
680,000
680,000
2019
WEIGHTED
AVERAGE
EXERCISE PRICE
79.5p
79.5p
79.5p
2019
NUMBER
680,000
680,000
680,000
2020
£’000
12,407
(2,356)
(63)
(302)
9,686
2019
£’000
12,309
986
(858)
(30)
12,407
Summarised financial information for these subsidiaries is set out below. The information is before inter–company eliminations with other
companies in the Group.
BISICHI PLC
Revenue
(Loss)/profitfor the year attributable to owners of the parent
(Loss)/profit for the year attributable to NCI
(Loss)/profit for the year
Other comprehensive expense attributable to owners of the parent
Other comprehensive expense attributable to NCI
Other comprehensive expense for the year
Balance sheet
Non–current assets
Current assets
Total assets
Current liabilities
Non–current liabilities
Total liabilities
Net assets at 31 December
Cash flows
From operating activities
From investing activities
From financing activities
Net cash flows
2020
£’000
29,805
(3,354)
(440)
(3,794)
(395)
(69)
(464)
23,646
15,004
38,650
(16,175)
(6,286)
(22,461)
16,189
1,065
(4,267)
(926)
(4,128)
2019
£’000
48,274
1,046
549
1,595
(42)
(7)
(49)
22,885
18,849
41,734
(13,179)
(7,998)
(21,177)
20,557
4,305
(3,730)
(3,411)
(2,836)
The non–controlling interest comprises of a 37.5% shareholding in Black Wattle Colliery (Pty) Ltd, a coal mining company incorporated in
South Africa.
London & Associated Properties PLC 2020 63
FINANCIAL STATEMENTS Notes to the financial statements
24.
NON–CONTROLLING INTEREST (“NCI”) CONTINUED
Summarised financial information reflecting 100% of the underlying subsidiary’s relevant figures, is set out below.
BLACK WATTLE COLLIERY (PTY) LIMITED (“BLACK WATTLE”)
Revenue
Expenses
(Loss)/profit for the year
Other comprehensive income
Total comprehensive income for the year
Balance sheet
Non–current assets
Current assets
Current liabilities
Non–current liabilities
Net assets at 31 December
2020
£’000
28,555
(31,498)
(2,943)
–
(2,943)
10,130
9,781
(16,915)
(2,224)
772
2019
£’000
46,706
(43,040)
3,666
–
3,666
9,480
10,462
(12,087)
(3,682)
4,173
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 share issue:
– a subscription for 489 ordinary shares at par by Bisichi Mining (Exploration) Limited increasing the number of shares held from 136
ordinary shares to a total of 625 ordinary shares;
– a subscription for 110 ordinary shares at par by Vunani Mining (Pty) Ltd;
– a subscription for 265 “A” shares at par by Vunani Mining (Pty) Ltd
Bisichi Mining (Exploration) Limited is a wholly owned subsidiary of Bisichi PLC incorporated in England and Wales.
Vunani Mining (Pty) Ltd is a South African Black Economic Empowerment company and minority shareholder in Black Wattle.
The “A” shares rank pari passu with the ordinary shares save that they will have no dividend rights until such time as the dividends paid by
Black Wattle Colliery (Pty) Ltd on the ordinary shares subsequent to 30 October 2008 will equate to ZAR832,075,000.
A non–controlling interest of 15% in Black Wattle is recognised for all profits distributable to the 110 ordinary shares held by Vunani Mining
(Pty) Ltd from the date of issue of the shares (18 October 2010). An additional non–controlling interest will be recognised for all profits
distributable to the 265 “A” shares held by Vunani Mining (Pty) Ltd after such time as the profits available for distribution, in Black Wattle
Colliery (Pty) Ltd, before any payment of dividends after 30 October 2008, exceeds ZAR832,075,000.
25. RELATED PARTY TRANSACTIONS
Related party:
Simon Heller Charitable Trust
Current account
Loan account
Directors and key management
M A Heller and J A Heller
H D Goldring (Alberon Holdings Limited)
C A Parritt
R Priest
Totals at 31 December 2020
Totals at 31 December 2019
COST
RECHARGED
TO (BY)
RELATED
PARTY
£’000
(63)
–
18
(10)
(18)
(35)
(108)
(115)
AMOUNTS
OWED
BY (TO)
RELATED
PARTY
£’000
ADVANCED TO
(BY) RELATED
PARTY
£’000
(i)
(ii)
(ii)
(ii)
–
(700)
–
–
–
(9)
(709)
(707)
–
–
–
–
–
–
–
–
Nature of costs recharged – (i) Property management fees (ii) Consultancy fees.
Directors
London & Associated Properties PLC provides office premises, property management, general management, accounting and administration
services for a number of private property companies in which Sir Michael Heller and J A Heller have an interest. Under an agreement with Sir
Michael Heller no charge is made for these services on the basis that he reduces by an equivalent amount the charge for his services to
London & Associated Properties PLC. The board estimates that the value of these services, if supplied to a third party, would have been
£300,000 for the year (2019: £300,000).
The companies for which services are provided are: Barmik Properties Limited, Cawgate Limited, Clerewell Limited, Cloathgate Limited,
Ken–Crav Investments Limited, London & South Yorkshire Securities Limited, Metroc Limited, Penrith Retail Limited, Shop.com Limited,
South Yorkshire Property Trust Limited, Wasdon Investments Limited, Wasdon (Dover) Limited, and Wasdon (Leeds) Limited.
In addition the Company received management fees of £10,000 (2019: £10,000) for work done for two charitable foundations, the
Michael & Morven Heller Charitable Foundation and the Simon Heller Charitable Trust.
64 London & Associated Properties PLC 2020
FINANCIAL STATEMENTS Notes to the financial statements
25.
RELATED PARTY TRANSACTIONS CONTINUED
The Simon Heller Trust has placed on deposit with LAP £700,000 at an interest rate of 9% which is refundable on demand.
Alberon Holdings Limited (Alberon) is a Company in which H D Goldring is a majority shareholder and director. Alberon provides consultancy
services to the Company on an invoiced fee basis.
R Priest provided consultancy services to the Company on an invoiced fee basis.
In 2012 a loan was made by Bisichi to one of the Bisichi directors, Mr A R Heller, for £116,000. Interest is payable on the director’s loan at a
rate of 6.14 per cent. There is no fixed repayment date for the director’s Loan. The loan amount outstanding at year end was £41,000 (2019:
£41,000) and no repayment (2019: £nil) was made during the year.
The directors are considered to be the only key management personnel and their remuneration including employer’s national insurance for
the year was £920,000 (2019: £1,464,000). All other disclosures required, including interest in share options in respect of those directors, are
included within the remuneration report.
26. EMPLOYEES
The average number of employees, including directors, of the Group during the year was as follows:
Production
Administration
Staff costs during the year were as follows:
Salaries and other costs
Social security costs
Pension costs
27. CAPITAL COMMITMENTS
Commitments for capital expenditure approved and contracted for at the year end
All the above relates to Bisichi PLC.
2020
221
34
255
2020
£’000
6,651
236
402
7,289
2020
£’000
485
2019
204
44
248
2019
£’000
8,741
386
487
9,614
2019
£’000
–
28. LEASE 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:
2021
2022
2023
2024
2025 +
2020
£’000
5,013
4,418
3,637
2,829
18,553
34,450
2019
£’000
4,997
4,247
3,583
2,854
18,327
34,008
29. CONTINGENT LIABILITIES AND EVENTS AFTER THE REPORTING PERIOD
There were no contingent liabilities at 31 December 2020 (2019: £Nil), except as disclosed in Note 21.
COVID-19 and the consequent lockdown of many of our tenants’ businesses will have had a short and medium term effect on asset values as
tenants’ ability to meet their obligations to landlords has been affected in some cases. In the longer term asset values may be affected if there
is a more permanent deterioration in our tenants’ trading due to a wider slowdown in the economy. The directors are unable to give guidance
on how this might affect asset values due to the level of uncertainty at this time. This is discussed further in the COVID-19 update in the
Strategic Report on page 8 and in the Going Concern section of the Group Accounting Policies on page 39.
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
2020
£’000
50
1,441
48
1,539
2019
£’000
54
1,553
52
1,659
London & Associated Properties PLC 2020 65
FINANCIAL STATEMENTS Notes to the financial statements
29. CONTINGENT LIABILITIES AND EVENTS AFTER THE REPORTING PERIOD CONTINUED
The interpretation of laws and regulations in South Africa where Bisichi operates can be complex and can lead to challenges from or disputes
with regulatory authorities. Such situations often take significant time to resolve. Where there is a dispute and where a reliable estimate of
the potential liability cannot be made, or where Bisichi, based on legal advice, considers that it is improbable that there will be an outflow of
economic resources, no provision is recognised.
Black Wattle Colliery (Pty) Ltd is currently involved in a tax dispute in South Africa related to VAT. The dispute arose during the year and is
related to events which occurred during and prior to the years ended 31 December 2019. As at the date of this report, Bisichi has been
advised that it has a strong legal case, that it has complied fully with the legislation and, therefore, no economic outflow is expected to occur.
Because of the nature and complexity of the dispute, the possible financial effect of a negative decision cannot be measured reliably.
Accordingly, no provision has been booked at the year end. At this stage, Bisichi believes that the dispute will be resolved in its favour.
30. COMPANY FINANCIAL STATEMENTS
Company balance sheet at 31 December 2020
Fixed assets
Tangible assets
Other investments:
Associated company – Bisichi PLC
Subsidiaries and others including Dragon Retail Properties Limited
Current assets
Debtors
Cash and cash equivalents
Current liabilities
Amounts falling due within one year
Net current liabilities
Total assets less current liabilities
Non-current liabilities
Amounts falling due after more than one year
Deferred tax 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
30.3
30.4
30.4
30.5
30.6
30.7
30.9
30.9
2020
£’000
2019
£’000
24,582
23,341
489
45,459
45,948
70,530
6,170
2,557
8,727
(47,592)
(38,865)
31,665
(11,448)
(671)
19,546
8,554
4,866
47
(144)
6,223
19,546
489
47,922
48,411
71,752
5,848
2,359
8,207
(44,043)
(36,181)
35,571
(11,604)
(345)
23,967
8,554
4,866
47
(144)
10,644
23,967
The loss for the financial year, before dividends was £4,421,000 (2019: profit of £9,904,000)
These financial statements were approved by the board of directors and authorised for issue on 6 May 2021 and signed on its behalf by:
Sir Michael Heller
Director
Jonathan Mintz
Director
Company Registration No. 341829
66 London & Associated Properties PLC 2020
FINANCIAL STATEMENTS Notes to the financial statements
30.
COMPANY FINANCIAL STATEMENTS CONTINUED
COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2020
Balance at 1 January 2019
Profit for the year
Total comprehensive income
Transactions with owners:
Dividends – equity holders
Transactions with owners
Balance at 31 December 2019
Loss for the year
Total comprehensive expense
Balance at 31 December 2020
SHARE
CAPITAL
£’000
8,554
–
–
–
–
8,554
–
–
8,554
SHARE
PREMIUM
£’000
4,866
–
–
CAPITAL
REDEMPTION
RESERVE
£’000
47
–
–
TREASURY
SHARES
£’000
(144)
–
–
–
–
4,866
–
–
4,866
–
–
47
–
–
47
–
–
(144)
–
–
(144)
RETAINED
EARNINGS
EXCLUDING
TREASURY
SHARES
£’000
894
9,904
9,904
(154)
(154)
10,644
(4,421)
(4,421)
6,223
TOTAL
EQUITY
£’000
14,217
9,904
9,904
(154)
(154)
23,967
(4,421)
(4,421)
19,546
£6.8 million (2019: £11.3 million) of retained earnings (excluding treasury shares) is distributable.
30.1. COMPANY
Accounting policies
The following are the main accounting policies of the Company:
Basis of preparation
The financial statements have been prepared on a going concern basis and in accordance with Financial Reporting Standard 101 ’Reduced
Disclosure Framework’ (FRS 101) and Companies Act 2006. The financial statements are prepared under the historical cost convention as
modified to include the revaluation of freehold and leasehold properties and fair value adjustments in respect of current asset investments
and interest rate hedges.
The results of the Company are included in the consolidated financial statements. No profit or loss is presented by the Company as permitted
by Section 408 of the Companies Act 2006.
In these financial statements, the company has applied the exemptions available under FRS 101 in respect of the following disclosures:
• Cash Flow Statement and related notes;
• Comparative period reconciliations for share capital, tangible fixed assets and intangible assets;
• Disclosures in respect of transactions with wholly owned subsidiaries;
• Disclosures in respect of capital management;
• The effects of new but not yet effective IFRSs;
• Disclosures in respect of the compensation of Key Management Personnel.
As the consolidated financial statements include the equivalent disclosures, the Company has also taken the exemptions under FRS 101
available in respect of the following disclosures:
• IFRS 2 Share Based Payments in respect of Group settled share based payments;
• The disclosures required by IFRS 7 and IFRS 13 regarding financial instrument disclosures have not been provided apart from those which
are relevant for the financial instruments which are held at fair value and are not either held as part of the trading portfolio or derivatives.
Key judgements and estimates
The preparation of the financial statements requires management to make assumptions and estimates that may affect the reported amounts
of assets and liabilities and the reported income and expenses, further details of which are set out below. Although management believes
that the assumptions and estimates used are reasonable, the actual results may differ from those estimates. Further details of the estimates
are contained in the Directors’ Report and in the Group accounting policies.
Investments in subsidiaries, associated undertakings and joint ventures
Investments in subsidiaries, associated undertakings and joint ventures are held at cost less accumulated impairment losses.
Management undertake an annual impairment assessment of the company's investment in subsidiary undertakings. In making their
assessment management are required to make a number of estimates and assumptions regarding the future performance of the Group and in
particular the valuation of its property portfolio. Further detail on the valuation of the group's investment properties is contained in note 8.
The impairment assessment therefore includes a significant degree of management estimation and judgement.
London & Associated Properties PLC 2020 67
FINANCIAL STATEMENTS Notes to the financial statements
30.1. 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. 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 39 to 45 of the Group financial
statements.
• Revenue
• Property operating expenses
• Employee benefits
• Financial instruments
• Investment properties
• Other assets and depreciation
• Assets held for sale
• Income taxes
• Leases
30.2. RESULT FOR THE FINANCIAL YEAR
The Company’s result for the year was a loss of £4,421,000 (2019: profit of £9,904,000). In accordance with the exemption conferred by
Section 408 of the Companies Act 2006, the Company has not presented its own profit and loss account.
30.3. TANGIBLE ASSETS
Cost or valuation at 1 January 2020
Additions in the year
Increase/(decrease) on revaluation
Cost or valuation at 31 December 2020
Representing assets stated at:
Valuation
Cost
Depreciation at 1 January 2020
Charge for the year
Depreciation at 31 December 2020
Net book value at 1 January 2020
Net book value at 31 December 2020
INVESTMENT PROPERTIES
TOTAL
£’000
23,796
1,435
65
25,296
23,785
1,511
25,296
455
259
714
23,341
24,582
FREEHOLD
£’000
13,650
1,325
1,075
16,050
LEASEHOLD
OVER 50 YEARS
£’000
8,539
–
(1,000)
7,539
16,050
–
16,050
–
–
–
13,650
16,050
7,539
–
7,539
–
–
–
8,539
7,539
LEASEHOLD
UNDER 50
YEARS
£’000
206
–
(10)
196
OFFICE
EQUIPMENT
AND MOTOR
VEHICLES
£’000
347
–
–
347
196
–
196
–
–
–
206
196
–
347
347
244
4
248
103
99
OFFICE
BUILDING
£’000
1,054
110
–
1,164
–
1,164
1,164
211
255
466
843
698
The freehold and leasehold properties, excluding the present value of head leases and directors’ valuations, were valued as at 31 December
2020 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
68 London & Associated Properties PLC 2020
2020
£’000
21,990
750
22,740
1,045
23,785
2019
£’000
20,050
1,300
21,350
1,045
22,395
FINANCIAL STATEMENTS Notes to the financial statements
30.3. TANGIBLE ASSETS CONTINUED
The historical cost of investment properties was as follows:
Cost at 1 January 2020
Additions
Cost at 31 December 2020
FREEHOLD
£’000
10,228
1,325
11,553
LEASEHOLD
OVER 50 YEARS
£’000
9,333
–
9,333
LEASEHOLD
UNDER 50
YEARS
£’000
785
–
785
Head leases on investment property represent the value attributed to the right of the Company to occupy and use investment property that
has a head lease interest. In the current year total cash outflow for head leases is £0.1 million (2019: £0.1 million). A number of these leases
provide for payment of contingent rent, usually a proportion of net rental income, in addition to fixed rents.
Office building represents the value attributed under IFRS 16 to the right of the Company to occupy its sole office building. In the current
year total cash outflow for the office lease liability is £0.2 million (2019: £0.2 million).
30.4. OTHER INVESTMENTS
COST OR VALUATION
At 1 January 2020
Impairment provision
At 31 December 2020
SHARES IN
SUBSIDIARY
COMPANIES
£’000
47,758
(2,463)
45,295
SHARES IN
JOINT
VENTURES
£’000
164
–
164
SHARES IN
ASSOCIATE
£’000
489
–
489
TOTAL
£’000
48,411
(2,463)
45,948
Subsidiary companies
Details of the Company’s subsidiaries are set out in Note 11. Under IFRS 10 Bisichi PLC and its subsidiaries, West Ealing Projects Limited and
its subsidiary and Dragon Retail Properties Limited are treated in the financial statements as subsidiaries of the Company.
During the year the Company impaired its investment in Orchard Square Limited by £2,463,000 (2019: impairment of £1,761,000), following
a reduction in the carrying value of the Orchard Square, Sheffield development property.
30.5. DEBTORS
Trade debtors
Amounts due from associate and joint ventures
Amounts due from subsidiary companies
Other debtors
Prepayments and accrued income
30.6. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Trade payables
Amounts owed to subsidiary companies
Amounts owed to joint ventures
Other taxation and social security costs
Lease liabilities
Other creditors
Accruals and deferred income
30.7. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
Lease liabilities
Term Debenture stocks:
£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 18.
2020
£’000
598
995
4,154
102
321
6,170
2020
£’000
48
43,632
156
117
298
1,397
1,944
47,592
2020
£’000
1,475
9,973
11,448
2019
£’000
352
872
4,049
139
436
5,848
2019
£’000
-
40,223
156
267
258
1,393
1,746
44,043
2019
£’000
1,648
9,956
11,604
London & Associated Properties PLC 2020 69
FINANCIAL STATEMENTS Notes to the financial statements
30.7. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR CONTINUED
REPAYMENT OF BORROWINGS:
Debentures:
Repayable within one year
Repayable between two and five years
Repayable in more than five years
LEASE LIABILITIES
Minimum lease payments fall due:
Within one year
Second to fifth year
After five years
Future finance charges on lease liabilities
Present value of lease liabilities
Present value of lease liabilities:
Within one year
Second to fifth year
After five years
2020
£’000
-
9,973
–
9,973
2020
OFFICE
£’000
265
530
-
795
(67)
728
232
496
-
728
2019
£’000
-
9,956
–
9,956
2019
TOTAL
£’000
306
986
8,000
9,292
(7,386)
1,906
258
916
732
1,906
2020
HEAD LEASES
ON INVESTMENT
PROPERTY
£’000
66
266
7,933
8,265
(7,220)
1,045
66
247
732
1,045
2020
TOTAL
£’000
331
796
7,933
9,060
(7,287)
1,773
298
743
732
1,773
Lease liabilities are effectively secured as the rights to the leased asset revert to the lessor in the event of default.
Many head leases on investment properties provide for contingent rent in addition to the rents above, usually a proportion of rental income.
30.8. DEFERRED TAX LIABILITY
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
Deferred tax asset at year end
30.9. SHARE CAPITAL
Details of share capital, treasury shares and share options are set out in Note 24.
30.10. RELATED PARTY TRANSACTIONS
2020
£’000
(345)
(326)
(671)
(438)
(208)
(25)
(671)
2019
£’000
(744)
399
(345)
(391)
(181)
227
(345)
Related party:
Dragon Retail Properties Limited
Current account
Bisichi 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 (Alberon Holdings Limited)
C A Parritt
R Priest
Totals at 31 December 2020
Totals at 31 December 2019
70 London & Associated Properties PLC 2020
COST
RECHARGED
TO (BY)
RELATED
PARTY
£’000
AMOUNTS
OWED
BY (TO)
RELATED
PARTY
£’000
ADVANCED TO
(BY) RELATED
PARTY
£’000
36
200
(63)
–
18
(10)
(18)
(35)
128
129
(i)
(ii)
(i)
(iii)
(iii)
(iii)
(156)
43
–
(700)
–
–
–
(9)
(822)
(838)
–
–
–
–
–
–
–
–
–
–
FINANCIAL STATEMENTS Notes to the financial statements
30.10. RELATED PARTY TRANSACTIONS CONTINUED
Nature of costs recharged – (i) Management fees (ii) Property management fees (iii) Consultancy fees
During the period, the Company entered into transactions, in the ordinary course of business, with other related parties. The company has
taken advantage of the exemption under paragraph 8(k) of FRS101 not to disclose transactions with wholly owned subsidiaries.
Dragon Retail Properties Limited – ‘Dragon’ is owned equally by the Company and Bisichi PLC.
Bisichi PLC – The company has 41.52 per cent ownership of ‘Bisichi’.
Other details of related party transactions are given in note 25.
30.11. EMPLOYEES
THE AVERAGE WEEKLY NUMBER OF EMPLOYEES OF THE COMPANY DURING THE YEAR WERE AS FOLLOWS:
Directors & Administration
STAFF COSTS DURING THE YEAR WERE AS FOLLOWS:
Salaries
Social Security costs
Pension costs
30.12. CAPITAL COMMITMENTS
There were no capital commitments at 31 December 2020 (2019: £Nil).
2020
£’000
19
2020
£’000
1,139
139
121
1,399
2019
£’000
22
2019
£’000
1,490
163
178
1,831
30.13. FUTURE AGGREGATE MINIMUM RENTALS RECEIVABLE
The Company leases out its investment properties to tenants under operating leases. The future aggregate minimum rentals receivable under
non–cancellable operating leases are as follows:
2021
2022
2023
2024
2025 +
2020
£’000
1,623
1,372
1,115
878
2,737
7,725
2019
£’000
1,524
1,155
896
666
1,680
5,921
30.14. CONTINGENT LIABILITIES AND POST BALANCE SHEET EVENTS
There were no contingent liabilities at 31 December 2020 (2019: £Nil).
COVID-19 and the subsequent lockdown of many of our tenants’ businesses will have had a short and medium term effect on asset values as
tenants’ ability to meet their obligations to landlords has been affected in some cases. In the longer term asset values may be affected if there
is a more permanent deterioration in our tenants’ trading due to a wider slowdown in the economy. The Directors are unable to give
guidance on how this might affect asset values due to the level of uncertainty at this time.
London & Associated Properties PLC 2020 71
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Five year financial summary
Portfolio size
Investment properties–LAP^
Investment properties–joint ventures
Investment properties–Dragon Retail Properties
Investment properties–Bisichi ^
Assets held for sale-LAP
Inventories-LAP
Portfolio activity
Acquisitions
Disposals
Additions to inventory at cost
Consolidated income statement
Group income
(Loss)/profit before tax
Taxation
(Loss)/profit attributable to shareholders
(Loss)/earnings per share – basic and diluted
Dividend per share
Consolidated balance sheet
Shareholders’ funds attributable to equity shareholders
Net borrowings, excluding lease obligations
Net assets per share
– basic
– fully diluted
Consolidated cash flow statement
Cash generated from operations
Notes:
^ Excluding the present value of head leases
2020
£M
2019
£M
2018
£M
31
-
2
10
-
25
68
£M
0.33
–
0.39
0.72
£M
35.02
(10.15)
1.09
(6.70)
(7.86)p
0.00p
£M
29.86
33.93
34.99p
34.99p
£M
1.64
31
-
2
12
-
27
72
£M
0.14
(12.59)
0.41
0.14
£M
63.97
(4.54)
(0.95)
(6.48)
(7.59)p
0.00p
£M
36.73
27.65
43.04p
43.04p
£M
14.98
32
–
2
13
2
39
88
£M
6.55
(36.44)
6.26
(23.63
£M
56.65
1.27
(0.68)
(2.08)
(2.44)p
0.18p
£M
43.38
35.99
50.83p
50.83p
£M
1.92
2017
£M
62
–
3
13
36
-
114
£M
–
–
–
–
£M
47.87
11.28
(2.98)
7.69
9.01p
0.300p
£M
45.86
58.42
53.74p
53.74p
£M
10.29
2016
£M
89
–
3
13
-
-
105
£M
–
–
0.16
0.16
£M
31.81
(0.97)
(1.18)
(2.36)
(2.77)p
0.165p
£M
38.24
62.22
44.83p
44.83p
£M
5.59
72 London & Associated Properties PLC 2020
www.lap.co.uk
FSC® C001785
LONDON & ASSOCIATED PROPERTIES PLC
24 BRUTON PLACE
LONDON W1J 6NE
EMAIL: ADMIN@LAP.CO.UK