London & Associated Properties PLC
Annual Report 2023

Plain-text annual report

LONDON & ASSOCIATED PROPERTIES ANNUAL REPORT 2023 Contents OVERVIEW 1 LAP at a glance 2 Chairman and Chief Executive’s review 2023 STRATEGIC REPORT 4 Financial and performance review 9 Principal activities, strategy & business model 9 Risks and uncertainties 10 Bisichi risks and uncertainties 11 Key performance indicators 12 Corporate responsibility GOVERNANCE 20 Directors & advisors 21 Directors’ report 24 Corporate Governance 26 Governance statement by the Chairman of the remuneration committee 27 Annual remuneration report 32 Remuneration policy summary 34 Audit committee report 36 Directors’ responsibilities statement 37 Independent auditor’s report FINANCIAL STATEMENTS 44 Consolidated income statement 44 Consolidated statement of comprehensive income 45 Consolidated balance sheet 46 Consolidated statement of changes in shareholders’ equity 47 Consolidated cash flow statement 48 Group accounting policies 55 Notes to the financial statements 84 Five year financial summary Financial calendar Annual General Meeting 26 June 2024 Announcement of half year results to 30 June 2024 Late August 2024 Announcement of annual results for 2024 Late April 2025 OVERVIEW OVERVIEW LAP at a glance London & Associated Properties PLC (“LAP” or the "Group") is a main market listed group which invests in and manages UK industrial and retail property. LAP owns £46.1 million of property and seeks 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 equity share 33.38p 2022: 38.14p KEY PROJECTS IFRS net assets £48.3m 2022: £53.7m Properties portfolio valuation* £46.1m 2022: £60.0m * Includes investment properties, head leases, assets held for sale and property inventory. Excludes properties under management. KEY PROJECTS HIGHLIGHT Property • Runcorn Manor Park Industrial Estate • Adlington Court Industrial Estate • West Ealing development • Runcorn industrial portfolio strong rental growth • Warrington industrial portfolio strong rental growth • Residential development – construction to start Q3 2024 • Orchard Square, Sheffield • Interest in shopping centre relinquished during year Coal production • In South Africa, Black Wattle produced 0.81m metric tonnes of Run of Mine Coal in 2023 (2022: 0.82m metric tonnes) • The API4 price averaged $120 in 2023 compared to $273 in 2022 • Rail infrastructure constraints impacted export sales. Due to the lack of rail capacity 134,000 metric tonnes of coal were exported compared to 262,000 metric tonnes in 2022 • These factors had a material negative impact on the results for the year • Measures by local rail operator in place to improve rail capacity for 2024 and beyond • Total domestic and export sales of coal were 1.03 million metric tonnes in the year compared to 1.29 million metric tonnes in 2022 • Climate related risks being addressed for coal processing operations London & Associated Properties PLC 2023 1 STRATEGIC REPORT STRATEGIC REPORT Chairman and Chief Executive’s review 2023 I am pleased to present our accounts for the 12 months to 31 December 2023 CONSOLIDATED RESULTS Our consolidated property portfolio, excluding Orchard Square, Sheffield (see below) was valued at £46.08 million at 31 December 2023 compared to £45.27 million on a like-for-like basis a year earlier. This increase in valuation reflects £0.78 million in capital expenditure as well as a modest valuation increase (including head leases) of £0.03 million. Rental income for the Group (excluding sold properties and bad debt charges) increased by £0.05 million (1.9%) to £2.61 million (2022: £2.56 million). This result reflects the resilience of our assets; even in the current high interest rate environment we have achieved increased rents on many new lettings. Rental income resilience can also be seen in our occupancy levels, which were 97.3% at year end (2022: 96.4%). Rent collection levels have similarly remained strong, with an improved 92% of Q1 2023 rents received to date compared to 90% at the corresponding time last year. We continue to monitor our cost base following the outsourcing of our property management functions and our relocation to smaller offices. LAP’s overheads were £0.4 million (15%) lower than in 2022. LAP PROPERTY ACTIVITIES Industrial Industrial constitutes 27% of our investment property portfolio by value. At Manor Park, Runcorn, our 100,000 sq ft industrial estate, demand for units remains strong and we have continued to drive rental growth. Since the year end, we accepted a surrender of a 15,000 sq ft unit that had recently had a rent review and have relet the unit at a rent some 32% higher. This sets a useful rental tone for the rest of our units and we continue to seek opportunities to maximise rental income there. Similarly, at Warrington our 25,000 sq ft industrial estate, we have carried out two rent reviews since the year end that have confirmed the demand for units in this location. We achieved rental uplifts of 55% and 49% over passing rent. We remain optimistic about demand at both these locations. Essential Community Retail Essential community retail constitutes 73% of our investment property portfolio by value. The remainder of our portfolio has performed well and remains close to fully let. We continue to monitor each property’s performance closely and will look to dispose of any properties that we consider to be ex-growth or where we identify a special buyer. West Ealing As previously reported, we obtained a resolution to grant planning consent for 56 flats and four retail units at the end of 2020. During 2023, we have been finalising detailed designs for the project and working with contractors and designers to improve building efficiency and maximise potential returns. Currently we are in detailed negotiations to finance construction of this development and intend to commence work in Q3 2024, targeting apartments available for sale in Q1 2026. Purley We have also worked with the same joint venture partner to acquire options on six semi-detached houses with large gardens in Purley, London. A planning application submitted in 2022 for 44 flats and 4 town houses was rejected in January 2023 despite being recommended for approval by the planning officer. Our appeal, although we won on design and construction matters, was ultimately unsuccessful and we are currently considering whether to submit a new application. DEBT MANAGEMENT In September 2023 the £12.7 million loan with QSix on Orchard Square (in Sheffield) expired. The borrower on this loan is Orchard Square Limited, our 100% owned subsidiary, and the loan is secured solely against the asset itself with no recourse to the LAP Group. In May 2023, we instructed agents to sell Orchard Square in order to repay the loan. The decision to sell was taken as the lending market for shopping centres was too weak to support a debt refinancing. Several offers were received for the centre and heads of terms reached with one buyer, who was then unable to complete. Since the loan expired, we have been working collaboratively with QSix in an arrangement whereby LAP continues to manage the centre on their behalf, pending another approach to the investment market as and when sentiment improves; QSix controls the timing of the sale and approves asset management initiatives. Consequently, we have written off our investment in Orchard Square and have recognised in the accounts the maximum loss we can incur (£1.93 million). Orchard Square Limited is no longer consolidated within the LAP Group and the loan is not shown in our year end balance sheet. This is discussed further in note 6 to the accounts. Our £13.6 million 5-year term loan with QIB (UK) PLC is fully compliant and secured against a portfolio of retail and industrial properties. The interest rate on the loan with QIB is at the Bank of England base rate + 3.95% and there is no amortisation. DRAGON RETAIL PROPERTIES Since 2001, Dragon has owned a property in Clifton, Bristol let partly to Boots the Chemist and partly to Lizard Lounge, one of Bristol’s best-known nightclubs. Dragon’s loan of £0.95 million from Santander originally expired in September 2020, but has been extended to July 2024 and paid down to £0.8 million subsequent to the year end. Santander has indicated that it is willing to provide a new term loan, has recently completed a valuation, and we expect to complete this in the near future. 2 London & Associated Properties PLC 2023 STRATEGIC REPORT Chairman and Chief Executive’s review 2023 Bisichi continues to work closely with Vunani Mining, its Black Economic Empowerment (BEE) partner in Black Wattle and Sisonke Coal processing, to be responsible stewards of its legacy coal operations, taking into account the climate related risks outlined in our climate report and the impact these risks may have on all our stakeholders. We are pleased to include in our annual report our climate change report on page 12. Bisichi’s operations contribute over 97% of our CO2 emissions and are the operations on which we have focused in this report. Bisichi recognises that climate change represents one of the most significant challenges facing the world today and supports the goals of the Paris Agreement and the UN Framework Convention on Climate Change. While we remain confident in Bisichi’s ability to achieve significant value from its South African operations, the Company is committed to diversifying its future business activities into areas other than coal. Bisichi is continually looking at alternative independent mining and renewable energy related opportunities, as well as new opportunities to add to the existing UK property investment portfolios. In the UK, Bisichi saw its rental revenue from its retail property portfolio improve during 2023. Overall, Bisichi billed revenue from its directly owned property portfolio of £1.3 million (2022: £1.1 million) during the year. In light of the challenging year, the directors of Bisichi recommended a final dividend of 4p (2022: 12p, including special dividend) per share, of which LAP would receive £0.2 million. This would take the total dividends per share for the year to 7p (2022: 22p) if approved by its shareholders. Finally, we would like to thank employees, advisers and stakeholders for their ongoing efforts and support. John Heller, Chairman and Chief Executive 29 April 2024 BISICHI PLC For 2023, Bisichi plc, our 41.6% owned subsidiary, made a profit before interest, tax, depreciation and amortisation (EBITDA) of £3.4 million (2022: £40 million) and an operating profit before depreciation, fair value adjustments and exchange movements (Adjusted EBITDA) of £2.6 million (2022: £39.4 million). During 2022, Bisichi benefited from significantly higher prices of Free on Board (FOB) coal from Richards Bay Coal Terminal (API4 price). However, during 2023, the weekly API4 price averaged only US$120 compared to US$273 in 2022. In addition to the weaker international coal price, constraints on transporting coal for export on the South African rail network, which were largely beyond Bisichi’s control, significantly impacted export sales during the period. Due to the lack of available rail capacity, Bisichi only exported 134,000 metric tonnes in 2023, roughly half the 262,000 metric tonnes sold in 2022 and an even lower percentage of the 320,000 metric tonnes exported in 2021. Limited rail capacity in turn had a further impact on earnings during the period, as coal allocated for export was eventually sold into the domestic market at prices that were significantly lower than the export price achievable by rail through Richards Bay. Transnet, the South African state rail operator, and the wider South African coal industry are working hard and collectively to implement measures to increase rail capacity. Bisichi is pleased to report that in 2024, to date, there has been an improved performance in railed coal export volumes compared to the same period in 2023. Bisichi remains optimistic that the measures, once fully implemented, will have a significantly positive impact on both the export and domestic prices achievable for its coal. At Black Wattle, Bisichi’s South African coal mining operation, difficult mining conditions impacted profitability during the period. During the year, Bisichi achieved production of 354,000 metric tonnes (2022: 301,000 metric tonnes) in the first half of the year and 453,000 metric tonnes (2022: 523,000) in the second half of the year. For the majority of 2023, geological issues reduced production from the opencast mining area as well as increasing related mining and blasting costs. In order to mitigate these issues, the mine opened a lower cost second mining area in the third quarter of 2023. Since the commencement of this new mining area, Bisichi has seen a significant improvement in mining production and lower operating costs and expects the improved performance at Black Wattle to continue throughout 2024. The lower coal production levels at Black Wattle in 2023 had a knock-on effect on overall levels of coal processed at Sisonke Coal Processing. Bisichi sold 1.031 million metric tonnes during the year compared to 1.287 million metric tonnes in 2022. The decrease in Bisichi’s mining revenue during the period to £49.3 million (2022: £95.1 million) can mainly be attributed to the lower prices achievable for coal and the lower overall quantity of coal sold, particularly into the export market. Looking forward into 2024, Bisichi is expected to continue to see the benefits, both in terms of mining cost and production, from the new mining area at Black Wattle. London & Associated Properties PLC 2023 3   STRATEGIC REPORT Financial and performance review The financial statements for 2023 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 41.6% 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” (58.4%) 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. Another joint venture, Development Physics Limited (“DPL”) is owned 33% each by LAP, Bisichi and a third party. This too is 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 makes 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 We own industrial and community retail property and invest in and seek to develop housing for local communities. Our key objective is to ensure that we offer safe and secure environments in which people can live, work and visit. LAP’s core objectives in 2023 have continued to be: • Provide environments in which tenants can thrive. • Continually improve the business’ operating cashflow. • Reduce exposure to the fashion led or shopping centre retail sector. • Ensure gearing is at an appropriate level. • Maintain sufficient cash in the business to be able to take advantage of opportunities as they arise. 4 London & Associated Properties PLC 2023 Rental Income and Occupancy As at 19 April 2024 Q1 2024 collections were 92% (2023: 90%). We continue to engage with occupiers to ensure our properties contain a diversified mix of tenants to match customers’ evolving requirements. This is particularly applicable to our essential retail assets, that serve local communities. Like for like net rental income was up by £49,000 (1.9%), which particularly reflects rent increases being achieved at lease events within our industrial portfolio. Like for like gross rental income excluding sales was up £50,000 as shown below. There was £196,000 of net increases in rents from lease reviews, renewals and new lettings and a net decrease of £146,000 from rent lost due to expiries and subsequent vacant periods. Gross Rental Income (£'000) 50 { 196 5,337 (845) (146) 4,542 2022 Sales Leasing Expiries 2023 Void levels decreased to 2.7% (2023: 3.6%). Void levels remain low across the portfolio. Property Investment Activities There were no property disposals or acquisitions during 2023, apart from the relinquishing of our interest in Orchard Square Limited as described below and in note 19. LAP continues to look for investment opportunities, particularly within the industrial sector. LAP also continues to develop and refurbish all its properties as appropriate to provide environments in which tenants can thrive. Our joint venture residential developments are discussed later in this review. Funding & Refinancing Activities No loans were repaid, or new loans or other forms of finance taken out in 2023. Our 5-year, £13.6m term loan with QIB taken out in 2022 was covenant compliant throughout the year. During the year our term loan with Phoenix CRE S.à.r.l of £12.7 million became due. This loan is secured on a single property, Orchard Square, Sheffield, which is fully owned by Orchard Square Limited, a subsidiary of LAP. The loan is non-recourse to the rest of the LAP Group. The property was marketed for sale in 2023 with an agreement for sale being reached with a buyer who was then unable to complete. LAP is working collaboratively with and under the direction of the lender to manage the property, completing key asset management activities prior to remarketing the property for sale when sentiment improves. STRATEGIC REPORT Financial and performance review STRATEGIC REPORT As LAP has declined the opportunity to repay the loan and cure the breach arising as a result, LAP has effectively lost control of the asset. LAP no longer has exposure, or rights, to variable returns from its involvement with Orchard Square Limited. In accordance with IFRS10, the investment in Orchard Square Limited has been treated as having been relinquished during the year and neither the loan nor the asset is shown in the accounts at 31 December 2023. INCOME STATEMENT Further details can be found in note 19 to the accounts. The loan relating to our development joint venture is discussed later in this review. BUSINESS ANALYSIS Rental income Service charge income Management income from third party properties LAP Revenue Direct property costs Impairment of inventory Overheads Depreciation Operating (loss)/profit Finance income Finance expenses Result before valuation movements Other segment items Net decrease on revaluation of investment properties Loss on disposal of subsidiary (Loss)/profit on disposal of investment properties Profit/(loss) on disposal of fixed assets Adjustment to interest rate derivative Revaluation and other movements LAP loss for the year before taxation 2023 £’000 3,323 451 18 3,792 (1,553) - (2,254) (266) (281) 110 (2,094) (2,265) (150) (1,930) - 4 - (2,076) (4,341) 2022 £’000 4,175 788 18 4,981 (1,994) (3,098) (2,665) (265) (3,041) 24 (2,120) (5,137) (5) - (83) 36 70 18 (5,119) Note: The figures exclude inter-company transactions. The above figures for LAP and commentary below exclude the cash items of management fee income from Bisichi and Dragon of £236,000 (2022: £236,000) and dividend income from Bisichi of £666,000 (2022: £711,000). The non-cash item, loss on disposal relates to our decision not to cure the breach of Orchard Square Limited’s loan covenants and the subsequent loss of control as prescribed by IFRS10. We have again managed to reduce our overheads this year, even after adjusting for one off £0.2 million loan refinance charges in 2022, despite significant cost inflation. LAP generated an adjusted EBITDA of £0.9 million (2022: £1.3 million). EBITDA Operating (loss)/profit Excluding non-cash items: Depreciation & amortisation Impairment of Inventory EBITDA Income from subsidiaries: Management fees Dividend income Adjusted EBITDA 2023 £’000 (281) 266 - (15) 236 666 887 2022 £’000 (3,042) 265 3,098 321 236 711 1,268 LAP generates the majority of its income from property rentals, property management fees and development activities. Whilst there are increased interest costs on our unhedged loans during the year directly arising from increases in the Bank of England base rate, due to the removal of Orchard Square Limited in July 2023, total interest costs year on year are slightly lower. Excluding Orchard Square Limited, interest costs are £1.34 million (2022: £1.14 million) vacancy rates and are not as affected as other asset classes by recent increases in interest rates. This further strengthens our view that the market is differentiating between local essential retail investments and shopping centre or fashion focused retail investments. Whilst our industrial assets are lower yielding and have seen their yields more affected by rises in interest rates, this has been offset by several pleasing rent increases following lease events at these properties. Investment property valuation reductions of £0.15 million (2022: £nil) arose from a decrease in retail property values of £0.08 million (2022: £0.1 million) and a decrease in industrial property values of £0.07 million (2022: increase £0.1 million). Our retail assets entirely consisting of essential retail, are relatively high yielding, have low Producing a profit through ongoing asset management activities to generate further rental income, investing cash currently on deposit at the appropriate time into new property investments combined with generating returns from our existing investments, including Bisichi, remains the key focus of the business for the future. London & Associated Properties PLC 2023 5 STRATEGIC REPORT Financial and performance review BALANCE SHEET SEGMENT ASSETS Non-current assets – property Non-current assets – property, plant & equipment Trading assets Assets held for sale Cash & cash equivalents Current assets – others Total assets excluding investment in joint ventures Segment liabilities Borrowings Current liabilities Non-current liabilities Total liabilities Net assets 2023 £’000 23,801 268 8,889 545 3,799 1,237 38,539 (17,650) (3,238) (1,272) (22,160) 16,379 2022 £’000 28,386 543 22,862 - 4,685 1,328 53,915 (30,306) (4,253) (1,375) (35,934) 17,981 Note: The figures exclude inter-company transactions between LAP, Bisichi and Dragon. Total assets, consisting mainly of trading and investment properties, have reduced from £53.9 million to £38.6million, with the disposal of the Sheffield trading property held at £14.75 million. Total liabilities, consisting mainly of bank loans, have reduced from £35.9 million to £22.0 million following the removal of the Sheffield trading property and its associated bank loan of £12.6 million. Property, plant and equipment reduced by £0.3 million in the year due to depreciating right of use asset that represents the lease of our head office. The lease comes to an end in November 2024 at which point the asset will be fully depreciated. The present value of future rentals of £0.2 million is included within liabilities. LAP’s main borrowings consist of a £13.6 million term loan facility expiring in August 2027 and a rolling development loan relating to West Ealing of £4.4 million that expires in April 2024. As in previous years, all loans 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 2023 £’000 17,650 (3,799) 13,851 16,545 83.7% 2022 £’000 30,306 (4,685) 25,621 17,981 142.5% The business has not set a target gearing level but monitors its debt and asset values constantly to maintain an appropriate level, considering market sentiment, the availability and cost of debt and cash flow forecasts. CASH FLOW CASH FLOW FROM OPERATIONS Cash inflows/(outflows) from operating activities Cash 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 2023 £’000 1,121 641 (2,648) (886) 4,685 3,799 2022 £’000 (723) 3,458 (3,523) (788) 5,473 4,685 Note: The figures within the LAP cashflow include inter-company transactions such as management fee income of £236,000 (2022: £236,000) and dividends from Bisichi of £977,000 (2022: £711,000). Cash outflows from operating activities include expenditure on development properties of £0.8 million (2022: £0.7 million). Excluding this expenditure, adjusted cash inflows from operating expenditure were £1.9 million (2022: £Nil). Investing activities include net cash from property acquisitions and sales of £nil (2022: income of £2.6 million), along with dividend income from Bisichi of £0.7 million (2022: £0.7 million). Financing activities in 2023 include net loan repayments of £0.3 million (2022: 1.2 million) and interest payments on the servicing of debt of £2.3 million (2022: £2.3 million). Bank of England interest rate increases during the year resulted in a £0.5 million increase in interest payable compared to 2022, whilst the exclusion of Orchard Square and its loan from the consolidated results in July 2023 reduced interest payable by £0.5 million. Interest rate risk is discussed further in note 22. 6 London & Associated Properties PLC 2023 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 £8.9 million has been spent to date (2022: £8.1 million), West Ealing is disclosed within LAP in the segmental analysis in note 1 to the financial statements. There is a linked development loan of £4.4 million (2022: £4.4 million), described further in note 19. Planning permission is held for the creation of 56 new residential apartments and ground floor shops on the site. Construction start is planned for Q3 2024. STRATEGIC REPORT Financial and performance review DEVELOPMENT PHYSICS LIMITED Development Physics is a joint venture between LAP, Bisichi and Metroprop Real Estate, owned equally by the three parties, set up, with the purpose of delivering a residential development of 44 flats and 4 town houses in Purley, London. Development Physics acquired a series of options on the site and is progressing through the planning process for its development. £0.5 million (2022: £0.3 million) has been spent to date on the development. BISICHI PLC Although the results of Bisichi PLC have been consolidated in these financial statements, LAP has no direct influence over the management of Bisichi. The comments below are based on the published accounts of Bisichi. The Bisichi group results are stated in full in its published 2023 financial statements which are available on its website www.bisichi.co.uk. Bisichi has two core revenue streams – investment in retail property in the UK and coal mining in South Africa. 2023 was a difficult year for Bisichi’s South African coal mining and processing operations. Lower export coal prices and sales volumes of export coal significantly impacted their profitability. With more stability in the coal market going into 2024, Bisichi management will be focusing on improving production levels and keeping operating costs low. The Bisichi group’s profit before tax was £0.8 million (2022: £38.3 million). In South Africa, Black Wattle produced 0.80m metric tonnes of Run of Mine Coal in 2023 (2022: 0.82m metric tonnes). Geological issues in areas mined at Black Wattle, Bisichi’s South African mining operation, had a significant impact on production, particularly in the first half of 2023. During the second half of the year exports continued to be limited by constraints in transporting coal for export on the South African rail network. During the year 1.03 million metric tonnes of coal were sold compared to 1.29 million metric tonnes in 2022. Of this, 0.13 million metric tonnes were export sales (2022: 0.26 metric tonnes) and 0.90 million metric tonnes were domestic sales (2022: 1.03 million metric tonnes) The API4 price averaged $120 in 2023 compared to $273 in 2022. The stabilisation of global energy markets in 2023, compared to 2022, had a significant impact on prices achievable for coal over the year. UK retail property investments were valued at the year end at £10.610 million (2022: £10.465 million). The property portfolio is actively managed by LAP and generated rental income of £1.26 million in the year (2022: £1.11 million). During the year Bisichi’s total non-current and current listed equity related investments held at fair value through profit and loss increased to £15.0 million (2022: £13.5 million). The Group achieved dividend income from investments during the period of £0.56 million (2022: £0.59 million) and a gain in value from investments of £0.8 million (2022: £1.0 million). The Group’s listed equity related investment portfolios comprise primarily listed equities and listed equity related funds involved or invested in extractive and energy related business activities, including entities involved in the extraction of commodities needed for the clean energy transition. 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 an R85 million revolving facility to cover the working capital requirements of Bisichi’s South African operations. The facility is renewable annually and is secured against inventory, debtors and cash that are held in Bisichi’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 £3.9 million (2022: £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 Bank of England base rate. 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 £10.6 million. No banking covenants were breached by Bisichi during the year. Bisichi’s cash and cash equivalents decreased during the year by £7.8million (2022: increase of £6.9million). The net balance of cash and cash equivalents (including bank overdrafts) at year end was a cash negative amount of £0.3 million (2022: positive net cash of £7.4 million). Bisichi has considerable financial resources available at short notice including cash and cash equivalents (excluding bank overdrafts) of £3.2 million (2022: £10.6 million) and listed investments of £15.0 million (2022: £13.5 million) as at year end. The above financial resources total £18.2 million (2022: £24.1 million). Bisichi’s net assets at 31st December 2023 were £33.6 million (2022: £35.6 million). Bisichi recognises the need, and is committed to, diversifying its future business activities. Bisichi is continually looking at alternative mining, commodity and renewable energy related opportunities, as well as new opportunities to add to their existing UK property investment portfolios. In the interim, Bisichi continue to work closely with Vunani Mining, their BEE partner in Black Wattle and Sisonke Coal processing, in being responsible stewards of their legacy coal operations taking into account the climate-related risks outlined in Bisichi’s climate report in their 2023 report and accounts and the impact these risks may have on all stakeholders. DRAGON RETAIL PROPERTIES LIMITED Dragon is a UK property investment company, owned 50:50 by LAP and Bisichi. The company has a Santander bank loan of £0.95 million secured against its investment property, which is covenant compliant, see note 19. The loan originally expired in October 2020 but has been extended to July 2024 and we are negotiating a new longer term loan with the existing lender. Dragon incurred management fees of £72,000 (2022: £72,000) split equally between the two joint venture partners. Dragon has net assets of £1.2 million (2022: £1.2 million). Dragon continues to trade at near break-even, excluding property revaluations. 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 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 7 years. 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 22 to the financial statements sets out the Group’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; London & Associated Properties PLC 2023 7 STRATEGIC REPORT Financial and performance review Overall position With a quality property portfolio comprising tenants with a mix of short and 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. The mining operations too, as a key industry in South Africa, have a positive future. 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. Having made enquiries and having considered the principal risks facing the Group, including liquidity and solvency risks, and material uncertainties, the Directors 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 £12.3 million (2022: £11.6 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 2023 (2022: £nil). Looking forwards to medium term trading, we intend to pursue our previously stated strategies. These include investing in both our essential community retail properties which have inbuilt defensive qualities and industrial property where we have enjoyed success. We will recycle properties where we feel asset management opportunities are limited and 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. Our development in Ealing has received planning consent and construction work is due to commence shortly, with completed apartments being available to purchase in Q1 2026. We will continue to consider further joint venture opportunities to undertake residential development. Bisichi In the first quarter of the 2024, Bisichi have seen improved production from Black Wattle, their coal mining operation. Coal prices have stabilised and the availability of rail for export has improved for the year to date in comparison to 2023. In light of this, Bisichi management will be focusing on sustaining production levels, maintaining a diversified sales market and keeping operating costs low. Bisichi continues to seek and evaluate opportunities to transition into alternative mining, commodity and renewable energy related opportunities through new commercial arrangements. and its exposure to credit risk, liquidity risk and other risks. STATEMENT REGARDING SECTION 172 OF THE UK COMPANIES ACT Section 172 of the UK Companies Act requires the Board to report on how the directors have had regard to the matters outlined below in performing their duties. During the year, the Directors consider that they have acted in a way, and have made decisions that would most likely promote the success of the Group for the benefit of its members as a whole as outlined in the matters below: • The likely consequences of any decision in the long term: see Principal Activity, Strategy & Business Model and Risks and Uncertainties on pages 9 to 10; • The interests of the Group’s employees; ethics and compliance; fostering of the Company’s business relationships with suppliers, customers and others; and the impact of the Group’s operations on the community and environment: see Corporate Responsibility and Sustainability reports on pages 12 to 19; • The need to act fairly between members of the Company: see the Corporate Responsibility section on pages 13 to 22; • The desirability of maintaining a reputation for high standards of business conduct: see the Corporate Governance section on pages 27 to 28. GOING CONCERN LAP In reviewing going concern it is necessary to consider separately the position of LAP Group and Bisichi. Although both are consolidated into group accounts (as required by IFRS 10), they are managed independently and in the unlikely event that Bisichi was unable to continue trading this would not affect the ability of LAP Group to continue operating as a going concern. The same would be true for Bisichi in reverse. The directors have reviewed the cash flow forecasts of the LAP Group and the underlying assumptions on which they are based for the 15 months from the date of signing. The LAP Group’s business activities, together with the factors likely to affect its future development, are set out in the Chairman and Chief Executive’s Statement and Financial Review. In addition, Note 22 to the financial statements sets out the Group’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposure to credit risk and liquidity risk. Directors assess the longer term prospects of the business over a four year time horizon as covered by the Group’s annual rolling four-year strategic financial plan. This is considered to be the optimum balance between our need to plan for the long term, recognising that property investment is a long-term business, and the progressively unreliable nature of forecasting in later years. Geo-political events in Ukraine and the Middle East are no longer significantly impacting global energy prices. Although the outcome of these events is uncertain, the Directors at present do not foresee the events having a significant negative impact on the Group’s UK and South African operations’ ability to remain in operation for the foreseeable future. Bisichi Detailed budget and cash flow forecasts for Bisichi’s operations demonstrate that Bisichi has sufficient resources to meet its liabilities as they fall due for at least the next 12 months and that Bisichi will be able to manage its business risks and have adequate cash resources to continue in operational existence for the foreseeable future. Further details can be found in the Bisichi plc 2023 Financial Statements which are available on their web site: www.bisichi.co.uk. 8 London & Associated Properties PLC 2023 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 and coal processing in South Africa. Further information is available in its 2023 Financial Statements which are available on their web site: www.bisichi.co.uk STRATEGIC PRIORITIES ARE OUR STRATEGY IS Maximising income Creating quality property Capital strength Maintain the value of investment in Bisichi By achieving an appropriate tenant mix and providing vibrant environments with excellent facilities we can increase tenant demand for space and enhance income. We look to improve the tenant experience at all our properties 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 ASSET MANAGEMENT: DESCRIPTION OF IMPACT MITIGATION Tenant failure Financial loss. Leases not renewed Financial loss. Initial and subsequent assessment of tenant covenant strength combined with an active credit control function. Lease expiries regularly reviewed. Experienced teams with strong tenant and market knowledge who manage appropriate tenant mix. Asset liquidity (size and geographical location) PEOPLE: Assets may be illiquid and affect flexing of balance sheet. Regular reporting of current and projected position to the Board with efficient treasury management. Retention and recruitment of staff Unable to retain and attract the best people for the key roles. Nomination Committee and senior staff review skills gaps and succession planning. Training and development offered. REPUTATION: Business interruption Loss in revenue. Impact on footfall. Adverse publicity. 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. London & Associated Properties PLC 2023 9 STRATEGIC REPORT STRATEGIC REPORT Bisichi risks and uncertainties Bisichi (although it is consolidated into group accounts as required by IFRS 10) is managed independently of LAP. The risks outlined below are an abbreviated summary of the risks reported by the Directors of Bisichi to the shareholders of that Company. Full details are available in the published accounts of Bisichi (www.bisichi.co.uk). These risks, although critical to Bisichi, are of less significance to LAP which only has a minority investment of 41.6% in the company. In the unlikely event that Bisichi was unable to continue trading, it would not affect the ability of LAP to continue operating as a going concern. DESCRIPTION OF RISK DESCRIPTION OF IMPACT MITIGATION Coal prices can be impacted materially by market and currency variations and geopolitical factors Affects sales value and therefore margins. Bisichi primarily focuses on managing its underlying production and processing costs to mitigate coal price volatility as well as from time to time entering into forward sales contracts with the goal of preserving future revenue streams. Bisichi has not entered into any such contracts in 2022 and 2023. Bisichi assesses on an ongoing basis the impact of volatility in global energy markets, economic volatility and climate change related risks may have on the Group’s mining operations and future investment decisions Use of independent geology experts, careful attention to regulations, health and safety training, employee dialogue to minimise controllable risks. Mining operations are inherently risky. Mineral reserves, regulations, licensing, power availability, health and safety can all damage operations Currency risk Loss of production causing loss of revenue. Affects realised sales value and therefore margins. Regular monitoring and review of forward currency situation. Cashflow variation because of mining risks, commodity price or currency variations Variations can deliver significant shifts in cash flow. UK property investments used to offset high risk mining operations. Socio-economic, political instability & regulatory environment risk The Bisichi Group is exposed to a wide range of political, economic, regulatory, social and tax environments, particularly in South Africa. Bisichi’s assets and investments are diversified across various countries which reduces its exposure to any particular country. Its Board regularly assesses the political and socio- economic environment and related risks of the countries it operates and invests in. There has been no change in the risks faced by either LAP or Bisichi. 10 London & Associated Properties PLC 2023 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. KPI STRATEGIC PRIORITY MAXIMISING INCOME – LIKE FOR LIKE PROPERTY INCOME PERFORMANCE To increase the like-for- like income from each property year on year. Like-for-like rental income as a percentage of the prior year rental. The like-for-like rental income of the group by property has increased by £49,000 (1.9%) (2022: increase of £15,000 and 0.4%). In the continuing difficult trading environment, this is considered positive. 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 2.7% (2022: 3.6%). There continue to be minimal voids across the portfolio which is positive. CAPITAL STRENGTH – GROWTH IN NET ASSET VALUE PER SHARE The net assets per share is the principal measure used by the group for monitoring its performance and is an indicator of the level of reserves available for distribution by way of dividend. Movement in the net assets per share. The net assets per share decreased by 4.76 pence per share (12.5%) to 33.38p (2022: 38.14p). While this is a poor result, it reflects the impact of a weak lending market on property valuations. 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 2021 2022 2023 VOIDS 2021 2022 2023 NET ASSETS PER SHARE 2021 2022 2023 London & Associated Properties PLC 2023 11 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 during 2023: • Black Wattle Colliery recorded 2 Lost time Injuries during CLIMATE CHANGE REPORTING The Group recognises that climate change represents one of the most significant challenges facing the world today and supports the goals of the Paris Agreement and the UN Framework Convention on Climate Change. 2023 (2022: 2). Our aim is to: • One case of Occupational Diseases were recorded. • minimize our contribution to greenhouse gas emissions; • One claim for the Compensation for Occupational Diseases • to consider and plan for the physical and transitional risks of were submitted. In South Africa, the Broad-Based Socio-Economic Empowerment Charter for the Mining and Minerals Industry (New Mining Charter) is a regulatory instrument that facilitates sustainable transformation, growth and development of the mining industry. Bisichi is committed to fully complying with the New Mining Charter and providing adequate resources to this area in order to ensure opportunities are expanded for historically disadvantaged South Africans (HDSAs) to enter the mining and minerals industry. In addition, Bisichi continues to adhere to and make progress in terms of their Social and Labour Plan and various BEE initiatives. A fuller explanation of these can be found in Bisichi’s 2023 Financial Statements which are available on their web site: www.bisichi.co.uk climate change on our operations; and • to work with stakeholders, including local government and communities, to mitigate the impact of climate-related challenges. In the current year, the Group has aligned climate disclosures in this Strategic Report to the four Task force on Climate-related Financial Disclosure (“TCFD”) recommendations as follows: TCFD AREA TCFD CONSIDERATION LONDON & ASSOCIATED PROPERTIES PLC & BISICHI PLC Governance Board’s oversight of climate risk and opportunities The LAP & Bisichi Boards have ultimate responsibility for the monitoring and development of the Groups’ approach to climate risk and opportunities. In light of the size of the Group, ESG matters are considered as part of the Group’s regular board meetings and at other appropriate points during the year. The Board has developed and implemented a Climate Change Policy and monitor the content, effectiveness and implementation of this Policy on a regular basis. The Group’s Climate Change Policy can be found on the Group’s website at www.lap.co.uk. Short, medium and long term strategic decisions, including those on capital allocation and portfolio management, are considered by Group management who make recommendations to the Board. Climate related issues and policy are included as significant factors for consideration in the decision making process, both in the management recommendation and in the Board’s consideration of the relevant issue. On-going climate related issues are integrated into the Group’s business risk management process and reporting thereof to the Board and Audit Committee. The Group has regard to best practice in its area of operations, its health and safety and environmental obligations and seeks to ensure high standards of business conduct in its operations. It will review compliance with the TCFD Recommendations on an ongoing basis, and report on its performance on a yearly basis. Responsibility for the application of this Policy rests with, but is not limited to, all employees and contractors engaged in relevant activities under the Group’s operational control. The Group’s managers are responsible for promoting and ensuring compliance with this Policy and any related individual site-level policies and practices. At Bisichi’s South African operations, management have commenced engagement with key stakeholders in order to ensure awareness of our climate change policy as well as the potential impact of climate change on our environment and operations. We continue our collaboration with our contractors on GHG Emission Reporting and we are actively looking for opportunities to partner with our stakeholders to drive the uptake of carbon neutral solutions. For material strategic or financial decisions, the Group may consider procuring expert advice from third party consultants on the impact in the short, medium and long term of the decision, and ensure that such information is fully considered as part of the evaluation of the relevant matter. Management’s role in assessing and managing climate-related risks and opportunities 12 London & Associated Properties PLC 2023 STRATEGIC REPORT Corporate responsibility TCFD AREA TCFD CONSIDERATION LONDON & ASSOCIATED PROPERTIES PLC & BISICHI PLC Strategy Climate-related risks and opportunities the Group has identified over the short, medium, and long run Bisichi considers the current life of mine of its South African operations to fall within a short to medium term horizon. Within this horizon, climate change transition risks may impact their South African coal mining and processing operations. Risks include: • coal price and demand volatility; • availability and cost of financing and third party services such as insurance; • delays or restrictions to regulatory approvals; • early retirement of our coal processing and mining operations; and • Carbon pricing and taxes, that may create additional costs through the value ch ain. The Group have assessed physical climate risk profiles produced by the World Bank, particularly in relation to the South African operations. Bisichi considers the physical risks of variations in climate over the current life of mine of the South African operations to be mainly limited to an increased risk of seasonal flooding that may impact the operating efficiency, costs and revenues of the mining and processing operations. In a longer term horizon, and in a scenario where the useful life of Bisichi’s South African operations is extended, the above short to medium term transitional risks are expected to continue to apply. In addition, in a scenario, such as the International Energy Association’s (“IEA”) Pathway to Net Zero by 2050 (“NZE 2050”), where climate policies are effectively implemented that support a transformation to net zero emissions by 2050 and limiting the rise of global temperatures to 1.5°C by the end of the century, policies will lead to significant coal demand decline over the longer term. This in turn will impact the carrying value and long term viability of Bisichi’s South African coal operations as well as the stakeholders and communities reliant on our operations. Extreme weather events, over the long term in South Africa, such as floods, and droughts, as well as changes in rainfall patterns, temperature, and storm frequency will also affect the operating efficiency, costs and revenues of the mining and processing operations, supply chains and impact the communities living close to the operations. Clean coal research and technology initiatives such as carbon capture may result in opportunities to increase the useful life of Bisichi’s South African coal mining and processing operations. In addition, the clean energy transition provides opportunities for Bisichi to diversify its business activities and equity investment portfolio into renewable and extractive industries that will benefit from and are critical to the transition to a clean energy system. The main sources of scope 1 & 2 Green House Gas (GHG) emissions for the Group have been associated with the South African coal mining and processing operations, namely due to fuel combustion and electricity usage. Improvements in the cost competitiveness of lower emission sources of energy provide opportunities to lower overall operating costs at our operations as well as reduce overall GHG Emissions. In the UK we have identified the following material physical and transitional risks related to our UK property portfolio: • Long term physical risk through changes in climate, flood risk and extreme weather; and • Short-term transition risk from emerging regulation related to energy performance (“EPC”) and enhanced disclosures London & Associated Properties PLC 2023 13 STRATEGIC REPORT Corporate responsibility TCFD AREA TCFD CONSIDERATION LONDON & ASSOCIATED PROPERTIES PLC & BISICHI PLC Strategy Impact of climate-related risks and opportunities on businesses, strategy, and financial planning Bisichi’s management have incorporated and regularly review the following strategies and procedures in relation to their South African coal operations: • Review of the impact of climate change and the global transition to clean energy, particularly in relation to the current life of mine of Bisichi’s coal operations; • Regular research and analysis of the coal market demand outlook; • Regular research and analysis on the outlook of the South African coal mining industry and climate change regulation including mining regulation, energy procurement and licensing, and carbon taxing; • Regular communication with financial service providers and suppliers on any future changes to availability and cost of services. • Regular research and analysis on the progress of clean coal technology and related regulatory initiatives; and • Regular dialogue and seeking collaboration with governments and local communities and other stakeholders on climate change-related challenges. Bisichi have identified the need to mitigate GHG emission heavy sources of electricity usage at our coal washing plant. Management are currently in the process of evaluating opportunities to reduce these emissions taking into particular consideration the financial viability and long term sustainability of the projects. The below areas have been identified where GHG emissions can be further reduced through: • Minimising land clearance for new project facilities; • Adoption of mitigation strategies for preserving integrity of environment; • Minimising tree felling; • The use of modern, energy and fuel efficient equipment; • The inclusion of the impact of GHG emissions as an evaluation criteria in the selection of mining contractors, suppliers and equipment. Particular consideration will be given to the choice of vehicles used for the mine fleet, employee transportation and the haulage fleet. Where possible energy and fuel efficiency will be a factor in the selection of vehicles as this will not only reduce GHG emissions but also reduce operating costs. In addition to the efficiency of the fleet itself, opportunities will be sought for improving the use of the vehicles. • Scheduling of excavation and haulage activities to optimise activities and avoid double handling, where this is operationally practical; and • The upgrading of energy-intensive machinery over time will be used to improve efficiency and reduce CO2 emissions compared to machinery that has been removed. Further energy efficiency opportunities will also be investigated. Potential water scarcity has increased management focus on opportunities to increase the usage efficiency of our existing water supply and water recycling systems. The introduction of a closed loop filter press system for coal fines in 2019 and additional other work concluded or planned on our water recycling systems at our coal processing facility will result in a lowering of our overall cost of water and the environmental footprint of our operations. Increased risks of flooding have been incorporated at planning stage in new opencast mining areas that have been opened. Transition and physical risks related to climate change are regularly discussed at Bisichi’s Board level, particularly those related to the long term viability of Bisichi’s South African coal operations and the future allocation of capital. Bisichi regularly considers the need for coal as an energy source both globally and in South Africa over the life of mine of our operations and in its long term planning. Bisichi is committed to responsible stewardship of their legacy South African coal assets taking into account the impact climate change related risks may have on all our local stakeholders. Bisichi recognise the need to collaborate with government, employees and communities, to ensure a just transition for our stakeholders through the transition to a low carbon economy. Bisichi regularly evaluates and continues to seek opportunities to diversify its business activities and equity investment portfolio, particularly into renewable and extractive industries that predominantly mine commodities identified by the IEA as critical in the transition to a clean energy system. Any significant developments will be reported to shareholders in due course. The Board continue to monitor and regularly review adherence by the Group to changes to UK EPC. The Group have incorporated the ongoing impact of EPC regulatory standards into its decision making process. 14 London & Associated Properties PLC 2023 STRATEGIC REPORT Corporate responsibility TCFD AREA TCFD CONSIDERATION LONDON & ASSOCIATED PROPERTIES PLC & BISICHI PLC Strategy Resilience of strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario. Risk management Processes for identifying and assessing climate related risks. Processes for managing climate-related risks. Bisichi’s management have incorporated climate scenarios into their strategic operational planning and review process. Bisichi have assessed the resilience of our coal operations compared to the IEA’s NZE2050 Scenario, which sets out what additional measures would be required over the next ten years to put the world as a whole on track for net zero emissions by mid-century. The Scenario indicates a significant coal demand decline over the longer term impacting the potential commercial longevity of Bisichi’s South African operations. In addition Bisichi have assessed physical climate risk profiles for their South African operations obtained via the World Bank Group’s Climate Change Knowledge Portal. The outcomes of scenario testing and physical climate profiling have been incorporated into the long term strategic planning and decision making processes of Bisichi. Over the short to medium term, considering the potential impact of transitional climate risks on Bisichi Group’s South African operations, the Group’s climate strategy and policy is regularly scrutinised by Bisichi’s senior management and Board in regard to any changes in coal demand outlook and climate regulatory policy that may impact our operations over the current life of mine. A recent example being the Just Energy Transition Investment Plan (“JET IP”) announced by the South African Government for 2023-2027. The Board encourages senior and local management to assess principal and emerging climate-related risks on a regular basis. Risks identified are to be reported to and discussed at Board level and incorporated into the strategy and planning of the Group. The Group’s risk management processes are developed, implemented and reviewed by the Board, who retain ultimate responsibility for them. In addition to the Group’s management of its principal risks and uncertainties, climate change impacts are mainly considered from two environmental perspectives, the impact of our South African coal mining and processing operations on the climate and the effect of global climate change on our operations and stakeholders. Heavy sources of GHG emissions have been identified from our annual Greenhouse Gas emissions recording and reporting. The Bisichi Board and Senior management remain in regular communication with local regulatory bodies, climate research providers, coal market analysts, suppliers, and services providers to ensure climate related risks and changes in regulatory policy are identified and assessed on a regular basis. Bisichi’s senior and local management in South Africa are encouraged by the Board to identify local climate related risks and changes in regulatory policy that may impact our South African coal operations. Bisichi’s management continually engage with governments and local communities and other stakeholders on climate change-related challenges impacting the local area and the South African coal industry at large. The Board and Senior management co-ordinate the Group’s analysis and planning of the effects of climate change on our business. The Board discuss regularly the impact of any risks identified through the organisation, particularly in relation to material matters that may impact the viability of the Group’s coal operations. The Bisichi Board regularly review and analyse coal market and outlook research, particularly in relation to targets set out in local climate policy such as JET IP and global climate scenarios such as NZE 2050. The mitigation of GHG emissions and identification of climate related risks has been integrated into our corporate policy, project and procurement evaluation criteria at Bisichi’s South African operations to ensure it is consistently applied and managed. The Group continuously monitors and reports key performance indications relating to environmental matters, including the location of CO2 emissions, their levels and intensity. On an ongoing basis, the Group assesses the impact of carbon pricing, climate regulation and taxation on going concern assumptions, the Group’s current and future strategy and operations. London & Associated Properties PLC 2023 15 STRATEGIC REPORT Corporate responsibility TCFD AREA TCFD CONSIDERATION LONDON & ASSOCIATED PROPERTIES PLC & BISICHI PLC Risk management Metrics and targets Processes for identifying, assessing, and managing climate-related risks are integrated into the overall risk management. Metrics used by the Group to assess climate related risks and opportunities in line with its strategy and risk management process Scope 1, Scope 2 and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks. Targets used by the Group to manage climate-related risks and opportunities and performance against targets. New or evolving climate change risks identified by both senior and local management are to be reported to and discussed at Board level and incorporated into the strategy, planning and climate policy of the Group. Where possible, plans to mitigate the effect of climate change on Bisichi’s operations and local communities will be integrated into the mines regulatory environmental management and social and labour plans. A financial segmentation of the Group’s South African coal mining and processing assets that are impacted by the climate related risks and opportunities outlined above can be found in Bisichi’s 2023 Financial Statements which are available on their website: www.bisichi.co.uk. Bisichi recognises that its ability to reduce overall carbon emissions is constrained at present by the main segment of it business activities, being coal mining and processing in South Africa. Bisichi has, however, sought to appropriately target its emission reduction strategy to the elements of its operations where a meaningful reduction in greenhouse gas emissions can be effected, and this will be reflected in the targets set by the Group in due course. The Group measures and report our CO2 emissions across the Group including a breakdown of UK and South African operations. See below for disclosure of emissions during the year. The Group is committed to measuring and reporting our scope 1 and 2 greenhouse gas emissions, see below for disclosure of emissions during the year. Scope 3 emissions are not currently measured given the size and life of mine of the Group’s South African coal operations and the uncertainty and impracticality in accurately measuring such emissions throughout the value chain. The Group will continue to assess the above approach as part of its continued review of compliance with the TCFD Recommendations and taking into account any material changes in future business activities. Over 99% of the Group’s GHG Emissions relate to Bisichi’s South African coal operations which has a current life of mine of 7 years. In the short term, the Group’s continues to evaluate areas where GHG emissions can be further reduced, particularly scope 2 emissions related to the heavy sources of electricity usage at Bisichi’s coal washing plant. Once the Group has identified the scope of further potential reductions, their time, capital cost and practicability of implementation, short term targets for the Group will be reassessed. Over the long term, as part of the Group’s business strategy, the Board continues to evaluate opportunities to diversify its business activities. In turn, targets related to GHG emissions will be re-evaluated in line with any future changes in the Group’s planned operating activities. 16 London & Associated Properties PLC 2023 STRATEGIC REPORT Corporate responsibility 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 2023 to 31st December 2023. 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. During the year LAP had landlord-controlled areas in Orchard Square, Brewery Street, Shipley and Bridgend, Bedworth, and Little Portland Street. Properties that LAP 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 Little Portland Street has been included in this year’s calculations, as in the previous year. Table 1. Landlord & tenant controlled areas Scope 1 emissions Scope 2 emissions Table 2. LAP controlled areas Scope 1 emissions Scope 2 emissions Table 3. Tenant controlled areas Scope 1 emissions Scope 2 emissions EMISSIONS SOURCE tCO2e Natural gas Refrigerants Electricity Total tCO2e Intensity ratio (tCO2e/£k) EMISSIONS SOURCE TCO2E Natural gas Refrigerants Electricity Total tCO2e EMISSIONS SOURCE TCO2E Natural gas Refrigerants Electricity Total tCO2e Table 4. Coal mining carbon footprint Emissions for landlord-controlled areas have been calculated based on actual consumption data collected from each site. 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 ISO14064-1 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 2023. 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. 2023 29 0 1,152 1,182 0.25 2023 29 0 97 126 2023 0 0 1,055 1,055 2022 35 0 1,265 1,300 0.24 2022 35 0 39 74 2022 0 0 1,226 1,226 CHANGE -15% n/a -9% -9% 6% CHANGE -15% n/a 149% 72% CHANGE n/a n/a -14% -14% 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/tCO2e Intensity: Intensity 1 Tonnes of CO2 per pound sterling of revenue Intensity 2 Tonnes of CO2 per pound of coal produced Energy consumption used to calculate above emissions Of which UK 2023 CO2E TONNES 2022 CO2E TONNES 39,709 39,564 7,601 12,267 47,310 51,831 0.0010 0.0587 0.0005 0.0629 kWh 90,218,230 7,601 kWh 87,292,816 12,341 London & Associated Properties PLC 2023 17 STRATEGIC REPORT Corporate responsibility 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 Group’s locations. South Africa Under the terms of the mine’s Environmental Management Programme approved by the Department of Mineral Resource and Energy (“DMRE”), Black Wattle undertakes a host of environmental protection activities to ensure that the approved Environmental Management Plan is fully implemented. In addition to these routine activities, Black Wattle regularly carries out environmental monitoring activities on and around the mine, including evaluation of ground water quality, air quality, noise and lighting levels, ground vibrations, air blast monitoring, and assessment of visual impacts. In addition to this Black Wattle also performs quarterly monitoring of all boreholes around the mine to ensure that no contaminated water filters through to the surrounding communities. Black Wattle is fully compliant with the regulatory requirements of the Department of Water Affairs and Forestry and has an approved water use licence. Black Wattle Colliery has substantially improved its water management by erecting and upgrading all its pollution control dams in consultation with the Department of Water Affairs and Forestry. A performance assessment audit was conducted to verify compliance to our Environmental Management Programme and no significant deviations were found. EMPLOYEE, SOCIAL, COMMUNITY AND HUMAN RIGHTS The Group’s policy is to attract staff and motivate employees by offering competitive terms of employment. The Group provides equal opportunities to all employees and prospective employees including those who are disabled and operates in compliance with all relevant national legislation. The Group believes that it is in the interest of shareholders to consider social and human rights issues when conducting business. Various policies and initiatives implemented by the Group that fall within these areas are discussed within this report. ANTI-SLAVERY AND HUMAN TRAFFICKING The Group is committed to the prevention of the use of forced labour and has a zero tolerance policy for human trafficking and slavery. The Group’s policies and initiatives in this area can be found within the Group’s Anti-slavery and human trafficking statement found on the Group’s website at www.lap.co.uk. EMPLOYMENT AND DIVERSITY The Board of London & Associated Properties PLC at 31 December 2023 comprised: Men Women Not specified/prefer not to say NUMBER OF BOARD MEMBERS 6 0 0 PERCENTAGE OF THE BOARD 100% 0% 0% NUMBER OF SENIOR POSITIONS ON THE BOARD 3 0 0 NUMBER OF SENIOR POSITIONS ON THE BOARD 3 NUMBER IN EXECUTIVE MANAGEMENT 3 0 0 PERCENTAGE OF EXECUTIVE MANAGEMENT 100% 0% 0% NUMBER IN EXECUTIVE MANAGEMENT 3 PERCENTAGE OF EXECUTIVE MANAGEMENT 100% NUMBER OF BOARD MEMBERS 6 PERCENTAGE OF THE BOARD 100% White British or other White (including minority white groups) Mixed/Multiple Ethnic Groups Asian/Asian British Black/African/Caribbean/Black British Other ethnic group, including Arab 0 0 0 0 0% 0% 0% 0% 0 0 0 0 0 0 0 0 0% 0% 0% 0% The above data has been collected through self-reporting by the Board members. Questions asked include gender identity or sex and ethnic background. The Company notes the diversity targets included in the Listing Rules, being: • at least 40% of the individuals on the Board are women; • at least one of the specified senior positions is held by a woman; and • at least one individual on the Board is from a minority ethnic background. At 31 December 2023 the Company did not meet the target that at least 40% of the individuals on its board of directors are women and at least one of the senior positions on the Board is held by a women. Should the Board look to appoint further directors in the future, the Company will give due consideration to how it may 18 London & Associated Properties PLC 2023 achieve the diversity targets while ensuring the appropriate structure of the Board and mix of skills and expertise relevant to the Company’s operations. As part of its recruitment processes, the Company gives careful consideration to all potential applicants. The Company will keep this under ongoing review. The Group is committed to improving upon its gender and diversity targets at all employment levels within the Group through a required build-up of sufficient talent pools, training up of employees and targeted recruitment policies. The Company will keep the requirement for a formal diversity policy under review and will give serious consideration to the adoption of a policy, tailored to the nature of the Company’s business, its operations and resources at the appropriate point. STRATEGIC REPORT Corporate responsibility BISICHI PLC In terms of directors, employees and gender representation, at the year end the Group had 9 directors (8 male and 2 from a minority ethnic or HDSA Background, 1 female from a minority ethnic or HDSA Background), 5 senior managers (5 male and 2 from a minority ethnic or HDSA Background) and 212 other employees (143 male and 118 from a minority ethnic or HDSA Background, 69 female and 66 from a minority ethnic or HDSA Background). The Group’s South African operations are committed to achieving the goals of the South African Employment Equity Act and is pleased to report the following: • Black Wattle Colliery has exceeded the 10 percent women in management and core mining target. • Black Wattle Colliery has achieved over 15 percent women in core mining. • 95 percent of the women at Black Wattle Colliery are HDSA females. Black Wattle Colliery has successfully submitted their annual Employment Equity Report to the Department of Labour. In terms of staff training some highlights for 2023 were: • One employee was trained in ABET (Adult Basic Educational Training) on various levels. • An additional eight disabled HDSA women continued their training on ABET levels one to four. • Four HDSA persons were enrolled for apprenticeships in 2023; • Two HDSA females were allocated new Bursaries for 2023. Further to the above, we confirm that one HDSA Male completed his bursary studies in 2023, while two HDSA females continued their bursary studies in 2023. Highlights for 2023 for Sisonke Coal Processing: • One employee was trained in ABET (Adult Basic Educational Training) on various levels Employment terms and conditions for the employees based at Bisichi’s UK office and at their South African mining operations are regulated by and are operated in compliance with all relevant prevailing national and local legislation. Employment terms and conditions provided to mining staff meet or exceed the national average. Bisichi’s mining operations and coal washing plant facility are labour intensive and unionised. During the year no labour disputes, strikes or wage negotiations disrupted production or had a significant impact on earnings. Bisichi’s relations to date with labour representatives and labour related unions continue to remain strong. Detailed information relating to the Bisichi Strategic Report is available in its 2023 financial statements. Approved on behalf of the board of directors. Jonathan Mintz Finance Director 29 April 2024 London & Associated Properties PLC 2023 19 GOVERNANCE GOVERNANCE SECRETARY & REGISTERED OFFICE Jonathan Mintz FCA 2nd Floor, 12 Little Portland Street, London W1W 8BJ AUDITOR Kreston Reeves LLP PRINCIPAL BANKERS Santander UK plc Metro Bank plc QIB (UK) plc SOLICITORS Pinsent Masons LLP Wake Smith Solicitors Limited STOCKBROKER Shore Capital Markets Limited REGISTRARS & TRANSFER OFFICE Link Group Central Square 29 Wellington Street Leeds LS1 4DL UK telephone: 0371 664 0300 International telephone: +44 371 664 0300 (Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate). Lines are open between 8.00am to 5.30pm, Monday to Friday, excluding public holidays in England and Wales. Website: www.linkgroup.eu Email: shareholderenquiries@linkgroup.co.uk Company registration number 341829 (England and Wales) WEBSITE www.lap.co.uk E-MAIL admin@lap.co.uk Directors & advisors EXECUTIVE DIRECTORS John A Heller LLB MBA (Chairman and Chief Executive) Jonathan Mintz FCA (Finance Director) NON-EXECUTIVE DIRECTORS Howard D Goldring BSC (ECON) ACA † Howard Goldring was, until 2020, 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 acted 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 over 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 Brown Advisory US Smaller Companies plc and a member of the Performance, Audit and Risk Committee of Arts Council England. Previously 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 Brixton House Theatre. Andrew R Heller MA, ACA Andrew Heller joined the board on 29 March 2023. He is a qualified Chartered Accountant, serves as Chairman & Managing Director of Bisichi PLC and has nearly 30 years’ experience in the mining industry. † Member of the audit, remuneration and nomination committees # Senior independent director 20 London & Associated Properties PLC 2023 GOVERNANCE GOVERNANCE Directors’ report The Directors submit their report and the audited financial statements for the year ended 31 December 2023. STRATEGIC REPORT A comprehensive review and assessment of the Group’s activities during the year as well as its position at the year end and prospects for the forthcoming year are included in the Chairman and Chief Executive’s Review and the Strategic Report. These reports can be found on pages 2 to 19 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 41.6% 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 58.4% majority interest is disclosed as a “non-controlling interest”. BUSINESS REVIEW AND POST BALANCE SHEET EVENTS 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 19. Details of any post balance sheet events are disclosed in Note 30 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, where appropriate (see Note 22 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 2023 (2022: Nil per share). London & Associated Properties PLC 2023 21 GOVERNANCE Directors’ report GOVERNANCE Directors’ report THE COMPANY’S ORDINARY SHARES HELD IN TREASURY At 31 December 2023, 216,715 (2022: 216,715) ordinary shares were held in Treasury with a market value of £27,089 (2022: £43,343). Treasury shares held at 1 January 2023 and 31 December 2023 216,715 No shares (2022: nil) were issued to employees in the year in place of cash for dividends associated with shares held within the share incentive plan. 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. PROPERTIES The freehold and long leasehold investment properties of the Company, its subsidiaries, Dragon and Bisichi were revalued as at 31 December 2023 by independent professional firms of chartered surveyors – Allsop LLP, London (70.2 per cent of the portfolio), Carter Towler, Leeds (29.8 per cent). The valuations, which are reflected in the financial statements, amount to £35.1 million (2022: £35.6 million). Property of £8.9 million (2022: £22.9 million) is included under inventory, current assets, at the lower of cost or net realisable value, Orchard Square Sheffield which was held at £14.75 million in 2022 was disposed in 2023. Taking account of prevailing market conditions, there was no material change to the valuation of the properties at 31 December 2023 (2022: decrease of £0.1 million). The proportion of this revaluation attributable to the Group (net of taxation) is reflected in the consolidated income statement and the consolidated balance sheet. FINANCIAL INSTRUMENTS Note 22 to the financial statements sets out the risks in respect of financial instruments. The board reviews and agrees overall treasury policies, delegating appropriate authority for applying these policies to the Chief Executive and Finance Director. Financial instruments are used to manage the financial risks facing the Group and speculative transactions are prohibited. Treasury operations are reported at each board meeting and are subject to weekly internal reporting. Hedging arrangements are in place for the Company, its subsidiaries and joint ventures in order to limit the effect of higher interest rates upon the Group. Where appropriate, hedging arrangements are covered in the Chairman and Chief Executive’s Statement and the Financial Review. DIRECTORS J A Heller, J Mintz, H D Goldring, C A Parritt and R Priest were Directors of the company for the whole of 2023. Sir Michael Heller was a Director of the company until his death on 30 January 2023. A R Heller was appointed as a non-executive by the Board on 29 March 2023. Andrew Heller is the Chairman and Managing Director of Bisichi PLC in which LAP holds a 41.6% stake and has valuable mining expertise which strengthens the skill base of the Board. His knowledge and experience bring a vital perspective to an important investment for the Group. C A Parritt and J A Heller are retiring by rotation at the Annual General Meeting in 2024 and offer themselves for re-election. 22 London & Associated Properties PLC 2023 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. 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 29 in the Annual Remuneration Report. Substantial shareholdings 31 DEC 2023 31 DEC 2022 NO. 48,080,880 7,513,214 Heller family Stonehage Fleming Investment Management Ltd James Hyslop 5,136,258 Maland Pension Fund 3,000,000 % NO. % 56.35 48,080,880 56.35 8.81 7,513,214 8.81 6.02 3.52 5,136,258 2,885,000 6.02 3.38 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. GOVERNANCE Directors’ report STATEMENT AS TO DISCLOSURE OF INFORMATION TO THE AUDITOR The Directors in office at the date of approval of the financial statements have confirmed that, so far as they are aware, there is no relevant audit information of which the auditor is unaware. Each of the Directors has confirmed that they have taken all the steps that they ought to have taken as a Director in order to make them aware of any relevant audit information and to establish that it has been communicated to the auditor. INDEMNITIES AND INSURANCE The Articles of Association of the company provide for it to indemnify, to the extent permitted by law, directors and officers (excluding the Auditor) of the company, including officers of subsidiaries and associated companies, against liabilities arising from the conduct of the Group’s business. The indemnities are qualifying third party indemnity provisions of the Companies Act 2006 and each of these qualifying third party indemnities was in force during the course of the financial year ended 31 December 2023 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 (2022: £Nil). No donations for charitable purposes were made during the year (2022: £Nil). 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 2023 can be found on page 17 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. Section 172 statement This is contained within the Strategic Report on page 8. GOING CONCERN The directors have reviewed the cash flow forecasts of the Group and the underlying assumptions on which they are based. The Group’s business activities, together with the factors likely to affect its future development, are set out in the Chairman’s Statement and Chief Executive’s Review and in the Financial and Performance Review. In addition, note 22 to the financial statements sets out the Group’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposure to credit risk and liquidity risk. With secured banking facilities, sound financial resources, low void rates and long term leases in place the Directors believe it remains appropriate to adopt the going concern basis of accounting in preparing the annual financial statements. The Bisichi directors continue to adopt the going concern basis of accounting in preparing the Bisichi annual financial statements. CORPORATE GOVERNANCE The Corporate governance report can be found on pages 24 and 25 of the annual report and accounts. ANNUAL GENERAL MEETING The Annual General Meeting will be held at Meeting Room 2, 12 Charles II Street, St James, London SW1Y 4QU on Wednesday 26 June 2024 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 £2,844,200. This represents approximately 1/3 (one third) of the ordinary share capital of the Company in issue (excluding treasury shares) as at 24 April 2024 (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 £2,844,200, 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 24 April 2024 (being the last practicable date prior to the publication of this Directors’ Report). The Directors’ authority will expire on the earlier of 31 August 2025 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 Kreston Reeves LLP has acted as auditor throughout the year and has expressed its willingness to continue in office. A proposal will be made at the Annual General Meeting for its reappointment. By order of the board Jonathan Mintz Secretary For and on behalf of London & Associated Properties PLC 2nd Floor, 12 Little Portland Street London, W1W 8BJ London & Associated Properties PLC 2023 23 GOVERNANCE 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 22. 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 36. 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 27 to 31. 24 London & Associated Properties PLC 2023 • 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 pages 34 to 35. The Chief Executive and Finance Director are normally invited to attend. BOARD AND BOARD COMMITTEE MEETINGS HELD IN 2023 The number of regular meetings during the year and attendance was as follows: Sir Michael Heller (resigned 30 January 2023) J A Heller* J Mintz* C A Parritt H D Goldring R Priest A Heller (appointed 29 March 2023) Board Nomination committee Remuneration committee Board Audit committee Board Audit committee Board Audit committee Nomination committee Remuneration committee Board Audit committee Nomination committee Remuneration committee Board Board MEETINGS HELD 1 MEETINGS ATTENDED 0 0 0 10 2 10 2 10 2 1 2 10 2 1 2 10 8 0 0 10 2 10 2 10 2 1 2 9 2 1 2 10 8 *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. 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 https://www.londonstockexchange.com/stock/LAS/london- associated-properties-plc/company-page. 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 NON-EXECUTIVE DIRECTORS The senior independent non-executive Director is C A Parritt. The other non-executive Directors are H D Goldring, R Priest and A R Heller. 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 four non-executive Directors to act independently and does not consider that length of service of any individual non-executive Director, has resulted in the inability or failure to act independently. In the opinion of the board C A Parritt, H D Goldring and R Priest continue to fulfil their roles as independent non-executive Directors. The background and skills of all non-executive directors are set out on page 20. 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 responsible executives are required regularly to undertake a full assessment process to identify and quantify the risks that face the functional activities for which they are responsible and assess the adequacy of the prevention, monitoring and modification practices in place for those risks. In addition, regular reports about significant risks and associated control and monitoring procedures are made to the executive Directors. The process adopted by the Group accords with the guidance contained in the document “Internal Control Guidance for Directors on the Combined Code” issued by the Institute of Chartered Accountants in England and Wales. The audit committee receives reports from external auditors and from executive Directors of the Group. During the period the audit committee has reviewed the effectiveness of the system of internal control as described above. The board receives periodic reports from all committees. • There are established procedures for the presentation and review of the financial statements and the Group has in place an organisational structure with clearly defined lines of responsibility and with appropriate delegation of authority. There are no internal control issues to report in the annual report and financial statements for the year ended 31 December 2023. 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. London & Associated Properties PLC 2023 25 GOVERNANCE 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 2023. 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 2024 The second part is the Remuneration Policy which details the remuneration policy for Directors, and it can be found at www.lap. co.uk. The current remuneration policy was subject to a binding vote which was approved by shareholders at the AGM in June 2023. 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 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, Kreston Reeves LLP is required by law to audit certain disclosures and where disclosures have been audited that is indicated in the independent auditor’s report. C A Parritt Chairman, Remuneration Committee 29 April 2024 26 London & Associated Properties PLC 2023 GOVERNANCE Annual remuneration report THE FOLLOWING INFORMATION HAS BEEN AUDITED Single total figure of remuneration for the year ended 31 December 2023 SALARY AND FEES £’000 BONUSES £’000 BENEFITS £’000 LONG TERM INCENTIVE AWARDS £’000 PENSIONS £’000 TOTAL 2023 £’000 TOTAL FIXED REMUNERA- TION £’000 TOTAL VARIABLE REMUNERA- TION £’000 Executive Directors Sir Michael Heller* (resigned 30 January 2023) Sir Michael Heller - Bisichi J A Heller* J A Heller - Bisichi J Mintz Non-executive Directors H D Goldring*+ C A Parritt*+ R Priest* A R Heller* A R Heller - Bisichi Total 1 17 558 - 179 755 18 38 35 - 850 941 1,694 - - - - 70 70 - - - - - - 70 7 - 45 9 13 74 - - - - 50 50 124 - - - - - - - - - - - - - - - 36 - 17 53 - - - - 85 85 138 8 17 639 9 279 952 18 38 35 - 985 1,076 2,028 8 17 639 9 209 882 18 38 35 - 985 1,076 1,958 - - - - 70 70 - - - - - - 17 J A Heller has an entitlement to an employer pension contribution of £33,075 for 2023 (2022: £33,075). He has elected for this not to be paid at this time. Single total figure of remuneration for the year ended 31 December 2022 SALARY AND FEES £’000 BONUSES £’000 BENEFITS £’000 LONG TERM INCENTIVES AWARDS £’000 PENSIONS £’000 TOTAL 2022 £’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 7 200 558 168 933 17 37 35 89 1,022 - 580 - 70 650 - - - - 650 74 - 38 10 122 - - - - 122 - - - - - - - - - - - - 33 16 49 - - - - 49 81 780 629 264 1,754 17 37 35 89 1,843 81 200 629 194 1,104 17 37 35 89 1,193 - 580 - 70 650 - - - - 650 * Note 26 “Related party transactions” + Members of the remuneration committee for years ended 31 December 2022 and 31 December 2023. C A Parritt was the chair of the remuneration committee throughout both years. London & Associated Properties PLC 2023 27 GOVERNANCE Governance statement by the Chairman of the remuneration committee Benefits include the provision of car, health and other insurance and subscriptions. JA Heller and AR Heller are interested in a number of private property companies that receive services from the Company’s property agents – see Note 25 to the financial statements “Related party transactions”. Sir Michael Heller received reduced remuneration in respect of his services to LAP. However the Company supplied services to a number of companies in which Sir Michael Heller had an interest. The Board estimates that the value of these services, if supplied to a third party would have been £25,000 (2022 - £300,000). J A Heller is a director of Dragon Retail Properties Limited, (a subsidiary for IFRS 10 purposes) and received benefits from that company of £10,404 (2022: £3,404) for services. This is included in the remuneration figures disclosed above. Summary of directors’ terms In March 2023, J A Heller became a non-executive director of Bisichi PLC, (a subsidiary for IFRS 10 purposes) and received a benefit from that company of £9,333 (2022: £Nil). He didn’t receive any other remuneration or a bonus from Bisichi PLC. 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 26 to the financial statements. R Priest provides consultancy services to the Group. This is detailed in Note 26 to the financial statements. A R Heller, who is the Chairman & Managing Director of Bisichi PLC, (a subsidiary for IFRS 10 purposes) became a non-executive director of LAP on 29 March 2023 but he did not receive any remuneration from LAP during 2023. DATE OF CONTRACT UNEXPIRED TERM NOTICE PERIOD 1 May 2003 11 February 2019 1 July 1992 1 January 2006 31 July 2013 29 March 2023 Continuous Continuous Continuous Continuous Continuous Continuous 12 months 3 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 2023. 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 2023 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 24 “Share Capital” to the financial statements. PAYMENTS TO PAST DIRECTORS No payments were made to past Directors in the year ended 31 December 2023 (2022: none). PAYMENTS FOR LOSS OF OFFICE No payments for loss of office were made in the year ended 31 December 2023 (2022: none). Executive Directors John Heller Jonathan Mintz Non-executive Directors H D Goldring C A Parritt R Priest A R Heller TOTAL PENSION ENTITLEMENTS Two directors had benefits under money purchase schemes. Under his contract of employment, one Director was entitled to a regular employer contribution (currently £16,853 a year). Under his contract of employment, the other Director was entitled to a regular employer contribution (currently £33,075 a year) but has elected to defer the payment into his pension scheme. 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 2022 or 2023. 2. Partnership shares: No partnership shares were issued in 2022 or 2023. 3. Matching shares: The partnership share agreements for the year to 31 October 2023 provide for two matching shares to be awarded free of charge for each partnership share acquired. No partnership shares were acquired in 2023 (2022: 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 2023 amounted to £nil (2022: £nil). J A Heller received no shares (2022: nil shares) and no other Directors received dividend shares. 28 London & Associated Properties PLC 2023 GOVERNANCE Governance statement by the Chairman of the remuneration committee 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* J A Heller J Mintz H D Goldring C A Parritt R Priest A R Heller * Resigned 30 January 2023 † These non-beneficial holdings are duplicated with those of Sir Michael Heller. # These non-beneficial holdings are duplicated with those of J A Heller. BENEFICIAL INTERESTS NON-BENEFICIAL INTERESTS 31 DEC 23 - 1,872,410 100,000 19,819 36,168 - 816,874 1 JAN 23 5,749,341 1,872,410 100,000 19,819 36,168 - 816,874 31 DEC 22 - 19,277,931 - - - - #19,277,931 1 JAN 22 19,277,931 †14,073,485 - - - - #14,073,485 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 2023 was 12.5p (2022: 20.0p). During the year the share middle market price ranged between 20.5p and 8.5p. Total Shareholder Return 130 120 110 100 90 80 70 60 50 40 30 20 10 Jan 1 9 M ar 1 9 M ay 1 9 Jul 1 9 Sep 1 9 N ov 1 9 Jan 2 0 M ar 2 0 M ay 2 0 Jul 2 0 Sep 2 0 N ov 2 0 Jan 2 1 M ar 2 1 M ay 2 1 Jul 2 1 Sep 2 1 N ov 2 1 Jan 2 2 M ar 2 2 M ay 2 2 Jul 2 2 Sep 2 2 N ov 2 2 Jan 2 3 M ar 2 3 M ay 2 3 Jul 2 3 Sep 2 3 N ov 2 3 Jan 2 4 London & Associated Properties FTSE All Share Index London & Associated Properties PLC 2023 29 GOVERNANCE Governance statement by the Chairman of the remuneration committee REMUNERATION OF THE CHIEF EXECUTIVE OVER THE LAST TEN YEARS YEAR 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 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 £’000 648 628 590 418 648 870 487 569 762 835 ANNUAL BONUS PAYMENT AGAINST MAXIMUM OPPORTUNITY* % 0% 0% 0% 0% 0% 20% 11% 18% 41% 49% 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. Considering the prevailing economic situation at the time the Chief Executive did not draw £185,000 (35%) of his salary in 2020. 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. DIRECTOR Executive: Sir Michael Heller J A Heller J Mintz Non-Executive: H D Goldring C A Parritt R Priest A R Heller Colleague pay BASE SALARY % CHANGE 2023 2022 BENEFITS % CHANGE BONUSES % CHANGE 2023 2022 2023 2022 N/A 0% 7% 0% 0% 0% N/A 7% 0% 5% 5% 0% 0% 0% N/A 5% N/A 42% 30% 0% 0% 0% N/A 0% 9% 52% 25% 0% 0% 0% N/A 7% N/A 0% 0% 0% 0% 0% N/A 8% 0% 0% 40% 0% 0% 0% N/A 15% RELATIVE IMPORTANCE OF SPEND ON PAY The total expenditure of the Group on remuneration to all employees (Note 27 refers) is shown below: Employee Remuneration Distributions to shareholders 2023 £’000 8,590 0 2022 £’000 13,676 0 30 London & Associated Properties PLC 2023 GOVERNANCE Governance statement by the Chairman of the remuneration committee STATEMENT OF IMPLEMENTATION OF REMUNERATION POLICY The policy was approved at the AGM in June 2023 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. It is to be presented for approval at the forthcoming AGM. 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 2023. 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 materially assist the remuneration committee’s considerations. SHAREHOLDER VOTING At the Annual General Meeting on 9 June 2023, there was an advisory vote on the resolution to approve the Remuneration Report, other than the part containing the remuneration policy. In addition, on 9 June 2023, there was a binding vote on the resolution to approve the Remuneration Policy. The results are detailed below: Resolution to approve the Remuneration Report (9 June 2023) Resolution to approve the Remuneration Policy (9 June 2023) % OF VOTES FOR 99.04 94.20 % OF VOTES AGAINST 0.96 5.80 NUMBER OF VOTES WITHHELD 2,912,265 2,452,265 London & Associated Properties PLC 2023 31 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 2023 AGM. The approved policy took effect from 9 June 2023. A copy of the full policy can be found at www.lap.co.uk. 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 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 £675,000 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 Annual bonus To reward and incentivise Contractual benefits include: Car or car allowance Group health cover Death in service cover Permanent health insurance In assessing the performance of the executive team, and in particular to determine whether bonuses are merited the remuneration committee takes into account the overall performance of the business, as well as individual contribution to the business in the period 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 32 London & Associated Properties PLC 2023 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 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 The current maximum bonus will not exceed 80% of base salary in any one year discretion to determine the level of bonus on an but the remuneration committee reserves the power to award up to 150% in an annual basis exceptional year In assessing performance consideration is given 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 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 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 £50,000 a year No performance conditions are attached to base salaries GOVERNANCE Remuneration policy summary In setting the policy, the Remuneration Committee has taken the following into account: • The need to attract, retain and motivate individuals of a calibre who will ensure successful leadership and management of the company • The LAP Group’s general aim of seeking to reward all employees fairly according to the nature of their role and their performance • Remuneration packages offered to similar companies within the treated as a subsidiary of the Group under the Companies Act 2006, shall be entitled to pay, and any executive director of Bisichi PLC who is also a director of the Company, shall be entitled to retain, any remuneration permissible in accordance with Bisichi PLC’s remuneration policy. Any such remuneration will be (i) to the extent required, permitted by this remuneration policy and (ii) excluded from the calculation of any limits on remuneration under this remuneration policy. 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 In addition to the entitlements set out above, Bisichi PLC, which is 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. For details of remuneration of other company employees please see page 30. POLICY TABLE ELEMENT PURPOSE Executive directors Base salary To recognise: Skills Responsibility Accountability Experience Value Pension To provide competitive retirement benefits Company contribution offered at up to 10% of base salary as part of 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 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 To offer a shorter term incentive in the 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 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 £675,000 a year No specific performance conditions are attached to base salaries The contribution payable by the Company is included in the director’s contract of employment Paid into money purchase schemes The committee retains the discretion to approve changes in contractual benefits in exceptional circumstances or where factors outside the control of the Group lead to increased costs (e.g. medical inflation) 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 Company contribution offered at up to 10% of base salary as part of overall remuneration package No specific performance conditions are attached to pension contributions The costs associated with benefits offered are closely controlled and reviewed on an annual basis No director will receive benefits of a value in excess of 30% of their base salary No specific performance conditions are attached to contractual benefits The 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. 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 £50,000 a year No performance conditions are attached to base salaries London & Associated Properties PLC 2023 33 GOVERNANCE 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: • review the scope of external audit, to receive regular reports from Kreston Reeves 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; 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 • monitor the controls which are in force to ensure the integrity of audit committee; 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 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. • approved the publication of annual and half year financial results; • considered and approved the annual review of internal controls; • discussed the findings of the FRC’s Audit Quality Review (AQR) Inspection Report of the external auditor’s audit for 31 December 2021, and noted the external auditor’s proposed actions; • decided that there was no current need for an internal audit function due to the scale of the business and processes in place; • agreed the independence of the auditors and approved their fees for audit services as set out in Note 2 to the financial statements; • the chairman of the audit committee has also had separate meetings and discussions with the external audit partner; and 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 £1.479 million in relation to the Group and £0.545 million in relation to the parent company and £1.0 million for the Bisichi group to be material. 34 London & Associated Properties PLC 2023 GOVERNANCE Audit committee report EFFECTIVENESS OF THE EXTERNAL AUDIT PROCESS Receiving high-quality and effective audit services is of paramount importance to the Committee. We continue to monitor carefully the effectiveness of the external auditor as well as their independence. We have full regard to the FRC’s Ethical Standard and ensure that our procedures and safeguards meet these standards. The FRC’s AQR team completed an inspection of the audit of the financial statements of London & Associated Properties PLC for the year ended 31 December 2021. The Committee has carefully considered the findings that were raised in the AQR’s report and has concluded that these do not present any significant concerns on overall external audit effectiveness when taken with the external auditor’s response and proposed actions. None of the FRC comments suggest that the accounts for 2021 were in any way incorrect. The external auditor produced a detailed audit planning report in preparation for the year-end financial statements, which included appropriate consideration of improvements to address the AQR findings. The effectiveness review of the external auditor is considered as part of the Committee’s annual performance evaluation, which also examines the relationship and communications between the Committee and the external auditor. No issues were raised during that review. The Committee concluded that the Auditor was effective during the year and that the relationship and communications were open and constructive. EXTERNAL AUDITOR Kreston Reeves LLP has held office throughout the period under review. In the United Kingdom London & Associated Properties PLC provides extensive administration and accounting services to Bisichi PLC, which has its own audit committee and employs Kreston Reeves LLP as its auditor. C A Parritt Chairman – Audit Committee 29 April 2024 London & Associated Properties PLC 2023 35 GOVERNANCE Directors’ responsibilities statement DIRECTORS’ STATEMENT PURSUANT TO THE DISCLOSURE GUIDANCE AND TRANSPARENCY RULES The Directors consider that the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s and Company’s position and performance, business model and strategy Each of the directors, whose names and functions are listed on page 22 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. 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 UK-adopted international accounting standards. 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) including FRS 101 “Reduced Disclosure Framework”. The group financial statements are required by law and international accounting standards in conformity with the requirements of the Companies Act 2006 and UK-adopted international financial reporting standards 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 applicable UK-adopted international accounting standards have been followed, subject to any material departures disclosed and explained in the Financial Statements; d. for the company financial statements, state whether applicable UK accounting standards, comprising FRS101, 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. 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. 36 London & Associated Properties PLC 2023 GOVERNANCE Independent auditor’s report TO THE SHAREHOLDERS OF LONDON & ASSOCIATED PROPERTIES PLC FOR THE YEAR ENDED 31 DECEMBER 2023 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 2023 which comprise the consolidated income statement, consolidated statement of other comprehensive income, consolidated and company balance sheets, consolidated and company statements of changes in equity, consolidated cash flow statement and notes to the financial statements, including a summary of significant Group accounting policies. The financial reporting framework that has been applied in their preparation of the group financial statements is applicable law and UK adopted international accounting standards. 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: • 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 2023 and of the Group’s profit for the year then ended; • the group financial statements have been properly prepared in accordance with UK adopted international accounting standards; • the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. 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 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 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. Our evaluation of the directors’ assessment of the Group and Parent companies ability to continue to adopt the going concern basis of accounting including the following: • We gained an understanding of the systems and controls around managements’ going concern assessment, including for the preparation and review process for forecasts and budgets. • We obtained evidence that management have undertaken a formal going concern assessment, including sensitivity analysis of cash flow forecasts, clear consideration of significant external factors including the impact of the war in Ukraine and the potential liquidity impact of such factors on cash balances including available facilities. • We have analysed the financial strength of the business at the year-end date. • We tested the mechanical integrity of the forecast model by checking the accuracy and completeness of the model, including challenging the appropriateness of estimates and assumptions with reference to empirical data and external evidence. • Based on our above assessment we performed our own sensitivity analysis in respect of the key assumptions underpinning the forecasts. • We considered the post year-end performance of the business, comparing this to budget as well as considering the development of key liquidity ratios in the business. • The group's banking facility documentation was reviewed to ensure that any covenants in place have not been breached. • We reviewed the adequacy and completeness of the disclosure included within the financial statements in respect of going concern. 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 entity'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. In relation to the Group and Parent Company’s reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the directors’ statement in the financial statements about whether the directors considered it appropriate to adopt the going concern basis of accounting. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group’s and Parent Company’s ability to continue as a going concern. London & Associated Properties PLC 2023 37 Independent auditor’s report GOVERNANCE Independent auditor’s report CORPORATE GOVERNANCE STATEMENT The Listing Rules require us to review the directors’ statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement relating to the Group’s and Parent Company’s compliance with the provisions of the UK Corporate Governance Code specified for our review. • Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on pages 9 to 10; • The section of the Annual Report that describes the review of effectiveness of risk management and internal control systems set out on page 25 and • The section describing the work of the Audit Committee set out Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit: • Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertainties identified set out on page 23; • Directors’ explanation as to its assessment of the company’s prospects, the period this assessment covers and why the period is appropriate set out on page 8; • Directors’ statement on whether it has a reasonable expectation that the group will be able to continue in operation and meets its liabilities set out on page 8; • Directors’ statement that the annual report and accounts are fair, balanced and understandable set out on page 36; OUR APPLICATION OF MATERIALITY on page 35. AN OVERVIEW OF THE SCOPE OF OUR AUDIT As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we looked at where the directors made subjective judgements, for example in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits we also addressed the risk of management override of internal controls, including evaluating whether there was evidence of bias by the directors that represented a risk of material misstatement due to fraud. GROUP FINANCIAL STATEMENTS PARENT COMPANY FINANCIAL STATEMENTS Materiality £1,479,000 (2022: £1,611,000) £545,000 (2022: £548,000) Basis for determining materiality ~3% of net assets ~3% of net assets Rationale for benchmark applied The group's principal activity is that of investment, management and development of industrial and retail property and, exploration and mining operation. To this end, the business is highly asset focused. Therefore, a benchmark for materiality of the net assets of the group is considered to be appropriate. The parent company’s principal activity is that of investment, management and development of industrial and retail property. To this end, the business is highly asset focused. Therefore, a benchmark for materiality of the net assets of the group is considered to be appropriate. Performance materiality £1,035,000 (2022: £1,128,000) £381,000 (2022: £383,000) Basis for determining performance materiality Rationale for performance materiality applied 70% of materiality 70% of materiality On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgement was that performance materiality was 70% of our planning materiality. In assessing the appropriate level, we consider the nature of the group and our previous experience of auditing the Group. On the basis of our risk assessments, together with our assessment of the Company’s overall control environment, our judgement was that performance materiality was 70% of our planning materiality. In assessing the appropriate level, we consider the nature of the group and our previous experience of auditing the Company. Triviality threshold £73,000 (2022: £81,000) £27,000 (2022: £27,000) Basis for determining triviality threshold 5% of materiality 5% of materiality 38 London & Associated Properties PLC 2023 GOVERNANCE Independent auditor’s report We reported all audit differences found in excess of our triviality threshold to the directors and the Audit Committee. For each Group company within the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The range of materiality allocated across each Group company was between £46,000 and £828,761. The scope of our audit was influenced by our application of materiality as we set certain quantitative thresholds for performance materiality and use these thresholds as a consideration tool to help to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole. We determined component materiality for the parent company to be capped at below group materiality. This was also the case for group subsidiaries registered outside of the UK. For the subsidiaries, 3% of that subsidiary’s gross assets or net assets was used. The gross assets or net assets have been used to calculate materiality for the subsidiaries as this is considered to be more appropriate in the circumstances. Performance materiality was calculated at 70% of component materiality. For the subsidiaries, their materiality and performance materiality were capped by group materiality and group performance materiality where appropriate. COVERAGE OVERVIEW GROUP REVENUE GROUP PROFIT/ (LOSS) BEFORE TAX GROUP NET ASSETS 100% 99.7% 99.8% 0.0% 100% 0.3% 100% 0.2% 100% Full statutory audit (Kreston Reeves and BDO) Limited procedures Totals at 31 December 2023: We tailored the scope of our audit to ensure that we performed sufficient work to be able to give an opinion on the financial statements as a whole, taking into account the structure of the Group and the parent company, the accounting processes and controls, and the industry in which they operate. Our scoping considerations for the Group audit were based both on financial information and risk. As noted above limited assurance audit work – which is to say the audit of balances and transactions material at a group level – was only applied in respect of a small element of the group. The below table summarises for the parent company, and its subsidiaries, the level of assurance gained: GROUP COMPONENT LEVEL OF ASSURANCE London & Associated Properties PLC Full statutory audit Analytical Properties Limited Orchard Square Limited Dragon Retail Limited West Ealing Projects Limited Broadway Regen Limited DP Pampisford Limited Development Physics Limited Bisichi PLC Mineral Products Limited Bisichi (Properties) Limited Bisichi Northampton Limited Bisichi Mining (Exploration) Limited (Kreston Reeves LLP) Full statutory audit (Kreston Reeves LLP) Full statutory audit (Kreston Reeves LLP) Full statutory audit (Kreston Reeves LLP) Full statutory audit (Kreston Reeves LLP) Full statutory audit (Kreston Reeves LLP) Full statutory audit (Kreston Reeves LLP) Full statutory audit (Kreston Reeves LLP) Full statutory audit (Kreston Reeves LLP) Full statutory audit (Kreston Reeves LLP) Full statutory audit (Kreston Reeves LLP) Full statutory audit (Kreston Reeves LLP) Full statutory audit (Kreston Reeves LLP) Black Wattle Colliery (Pty) Limited Full statutory audit (BDO South Africa Incorporated) Sisonke Coal Processing (Pty) Limited Full statutory audit (BDO South Africa Incorporated) All other group undertakings Limited assurance London & Associated Properties PLC 2023 39 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 financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. This is not a complete list of all risks identified by our audit. REVENUE RECOGNITION: Significance and nature of key risk How our audit addressed the key risk Revenue is a key performance indicator for users in assessing the group’s financial statements. Revenue generated has a significant impact on cash inflows and profit before tax for the group. As such revenue is a key determinant in profitability and the group’s ability to generate cash. Rental income revenue was recalculated based on the terms included in signed lease agreements. The recognition stages detailed in the relevant standards were carefully considered to ensure revenue recognised was in line with these and a substantive approach was taken. Revenue comprises two key revenue streams: the property rental income and sale of coal. Rental income is recognised in the Group income statement on a straight-line basis over the term of the lease. Coal revenue is recognised when the customer has a legally binding obligation to settle under the terms of the contract. Sales of coal and coal processing services in the period were tested from the trigger point of the sale to the point of recognition in the financial statements, corroborating this to contract sales or service terms and the recognition stages detailed in IFRS 15. Cut-off of revenue was reviewed for sales of coal by analysing sales recorded during the period, before and after the financial year end and determining if the recognition applied was appropriate, whilst rental income cut-off has also been reviewed by analysing revenue recorded during the period, before and after the financial year end and determining if the recognition of the deferred income applied was appropriate. This also includes generating a proof in total of the income from the tenancy agreements and comparing to the income per the nominal ledger. Walkthrough testing was performed to ensure that key systems and controls in place around the revenue cycle operated as designed. The accuracy of revenue disclosures in the accounts were confirmed to be consistent with the revenue cycle observed and audited. The completeness of these disclosures was confirmed by reference to the full disclosure requirements as detailed in IFRS 15. KEY OBSERVATIONS COMMUNICATED TO THE AUDIT COMMITTEE We have no concerns over the material accuracy of revenue recognised in the financial statements. VALUATION/IMPAIRMENT OF INVESTMENT PROPERTIES AND INVENTORY: Significance and nature of key risk How our audit addressed the key risk Investment properties comprise freehold and long leasehold land and buildings, whilst properties classified as inventory are properties which are currently being developed. Investment properties are carried at fair value in accordance with IAS 40 and are revalued annually by professional external surveyors and included in the balance sheet at their fair value. Gains or losses arising from changes in the fair values of assets are recognised in the consolidated income statement in the period to which they relate. In accordance with IAS 40, investment properties are not depreciated. Appropriate classification of each property was considered, IAS 40 for investment properties, IAS 2 for inventory and IFRS 5 for non- current assets held for sale, to ensure each property has been classified correctly and therefore accounted for and disclosed within these financial statements in accordance with the relevant standard. External valuation reports were obtained and vouched to stated fair values. The competence and independence of the valuation experts was carefully considered to ensure that the reports they produce can be relied upon. The fair value of the head leases is the net present value of the current head rent payable on leasehold properties until the expiry of the lease. A meeting was held with the valuers to challenge the assumptions in their report and discuss the movements in the values of specific properties. Supporting calculations for the long leasehold land and buildings were reviewed to ensure they are materiality accurate, and any assumptions are considered to be reasonable. KEY OBSERVATIONS COMMUNICATED TO THE AUDIT COMMITTEE We have no concerns over the material accuracy of investment properties and inventory values recognised in the financial statements. 40 London & Associated Properties PLC 2023 GOVERNANCE Independent auditor’s report ORCHARD SQUARE LIMITED EXCLUSION FROM THE GROUP CONSOLIDATION AS AT YEAR END: Significance and nature of key risk How our audit addressed the key risk Orchard Square Limited was one of the group’s subsidiaries whose operating results have historically been consolidated as part of the LAP Group accounts. During the year, it was established that Orchard Square Limited breached the Income cover ratio covenant on its £12.7 million loan with Phoenix CRE. This loan is non-recourse to the rest of the LAP Group. While the group had the option to address the breach, there was little prospect of recouping any equity, so it decided not to do so. Management decided that the LAP group no longer has exposure, or rights, to variable returns from its involvement with Orchard Square Limited and cannot be obliged to provide any further funds to Orchard Square Limited. On this basis, the investment in Orchard Square Limited has been treated as being relinquished in accordance with IFRS 10. This event has a significant impact on the group’s net assets as at year end. We obtained management’s assessment demonstrating how the group lost effective control of Orchard Square Limited during the year and the rationale justifying the exclusion of the subsidiary from the consolidated accounts as at year end. A meeting was held with management to understand and challenge their assessment on the exclusion of Orchard Square Limited from consolidation on the basis that LAP Group no longer has exposure, or rights, to variable returns from its involvement with the subsidiary and cannot be obliged to provide any further funds to Orchard Square Limited. On that basis, in accordance with IFRS10, the investment in Orchard Square Limited has been treated as having been relinquished during the year and neither the loan nor the asset is shown in the accounts as at 31 December 2023. We reviewed the position of LAP Group in accordance with the requirements of IFRS 10. Supporting facility documentation between the company and the lender were obtained and reviewed to ensure that the client’s treatment is deemed appropriate and reasonable. We have corroborated the data used by management in consolidating the results of Orchard Square Limited as part of the LAP Group accounts up till the point that control was deemed lost during the year. We have also ensured that this event has been fully disclosed in the LAP Consolidated accounts. KEY OBSERVATIONS COMMUNICATED TO THE AUDIT COMMITTEE We have no concerns over the exclusion of Orchard Square Limited from the group consolidation as at year end. VALUATION/IMPAIRMENT OF MINING RESERVES: Significance and nature of key risk How our audit addressed the key risk The valuation of the mine is material to the financial statements and is considered to be a key accounting estimate. 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 costs 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. The accounting requirements of IFRS 6 and IAS 16 were considered to ensure capitalisation of costs to mine development under IAS 16 was appropriate. In considering impairment indicators, as governed by IAS 36, the life of mine assessment was obtained. All significant input variables were considered and stress-tested to assess headroom between modelling and the value of mine development. Consideration was given to the competence and independence of the technical expert involved with the production of historic technical reports on which the life of mine assessment is partially built. Depreciation of mine development was recalculated based on the unit of production basis to ensure it was accurately recorded. This basis was also considered for reasonableness by reference to the accounting policies of industry peers. The accuracy and appropriateness of mine development disclosures in the accounts were confirmed to be consistent with the mine development accounting cycle observed and audited. KEY OBSERVATIONS COMMUNICATED TO THE AUDIT COMMITTEE We have no concerns over the material accuracy of mining reserves and development values recognised in the financial statements. London & Associated Properties PLC 2023 41 GOVERNANCE Independent auditor’s report 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 annual 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. OUR OPINION ON THE REMUNERATION REPORT Kreston Reeves has audited the Annual remuneration report set out on pages 27 to 31 of the Annual Report for the year ended 31 December 2023. The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with the Companies Act 2006. Kreston Reeves’ responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with International Accounting Standards. In Kreston Reeves’ opinion, the Remuneration Report of the Group for the year, complies with the requirements of the Companies Act 2006. OUR CONSIDERATION OF CLIMATE CHANGE RELATED RISKS The financial impacts on the Group of climate change and the transition to a low carbon economy (“climate change”) were considered in our audit where they have the potential to directly or indirectly impact key judgements and estimates within the financial statements. The Group continues to develop its assessment of the potential impacts of climate change. Climate risks have the potential to materially impact the key judgements and estimates within the financial report. Our audit considered those risks that could be material to the key judgement and estimates in the assessment of the carrying value of non-current assets and closure and rehabilitation provisions. OPINIONS ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006 In our opinion, based on the work undertaken in the course of the audit: • the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and • the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements. MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION In the light of our knowledge and understanding of the Group and parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors’ report. 42 London & Associated Properties PLC 2023 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 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 36), 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 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 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. Capability of the audit in detecting irregularities, including fraud Based on our understanding of the group and industry, and through discussion with the directors and other management (as required by auditing standards), we identified that the principal risks of non- compliance with laws and regulations related to health and safety, anti-bribery and employment law. We considered the extent to which non-compliance might have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the preparation of the financial statements such as the Companies Act 2006. We communicated identified laws and regulations throughout our team and remained alert to any indications of non-compliance throughout the audit. We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls) and determined that the principal risks were related to: posting inappropriate journal entries to increase revenue or reduce expenditure, management bias in accounting estimates and judgemental areas of the financial statements such as the valuation of investment properties. Audit procedures performed by the group engagement team and component auditors included: • Obtaining an understanding of the legal and regulatory frameworks that are applicable to the Group and determined that the most significant are those that relate to the reporting framework and the relevant tax compliance regulations in the GOVERNANCE Independent auditor’s report jurisdictions in which London & Associated Properties PLC operates. In addition, we concluded that there are certain significant laws and regulations that may have an effect on the determination of the amounts and disclosures in the financial statements, mainly relating to health and safety, employee matters, bribery and corruption practices, environmental and certain aspects of company legislation recognising the regulated nature of the Group’s mining activities and its legal form. • Detailed discussions were held with management to identify any known or suspected instances of non- compliance with laws and regulations. • Identifying and assessing the design effectiveness of controls that management has in place to prevent and detect fraud. • Challenging assumptions and judgements made by management in its significant accounting estimates, including assessing the capabilities of the property valuers and discussing with the valuers how their valuations were calculated and the data and assumptions they have used to calculate these. For the impairment review of the mines, we have undertaken a sensitivity analysis on the life of the mine model and challenged the assumptions made by management. • Performing analytical procedures to identify any unusual or unexpected relationships, including related party transactions, that may indicate risks of material misstatement due to fraud. • Confirmation of related parties with management, and review of transactions throughout the period to identify any previously undisclosed transactions with related parties outside the normal course of business. • Reading minutes of meetings of those charged with governance, and reviewing correspondence with relevant tax and regulatory authorities. • Performing integrity testing to verify the legitimacy of banking records obtained from management. • Review of significant and unusual transactions and evaluation of the underlying financial rationale supporting the transactions. • Identifying and testing journal entries, in particular any manual entries made at the year-end for financial statement preparation. • We ensured our global audit team (including Kreston Reeves and our component auditors) has industry experience through working for many years on relevant audits, including experience of mining and investment property management. Our audit planning included considering external market factors, for example geopolitical risk, the potential impact of climate change, commodity price risk and major trends in the relevant industries. Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. As part of an audit in accordance with ISAs (UK), we exercise professional judgment and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. • Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s or the parent company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group or the parent company to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. OTHER MATTERS WHICH WE ARE REQUIRED TO ADDRESS We were reappointed by the audit committee in the year to audit the financial statements. Our total uninterrupted period of engagement is 3 years, covering the years ended 31 December 2021 and 31 December 2023. 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 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. Stephen Tanner BSc(Econ) FCA (Senior Statutory Auditor) For and on behalf of Kreston Reeves LLP Chartered Accountants Statutory Auditor London Date: 29 April 2024 London & Associated Properties PLC 2023 43 financial state- ments FINANCIAL STATEMENTS Consolidated income statement for the year ended 31 December 2023 Group revenue Operating costs Operating profit Finance income Finance expenses Result before revaluation and other movements Non–cash changes in valuation of assets and liabilities and other movements Exchange losses Decrease in value of investment properties Loss on disposal of investment properties Profit on disposal of fixed assets Gain on investments held at fair value (Bisichi) Loss on disposal of subsidiary Decrease in value of other investments Adjustment to interest rate derivative (Loss)/profit for the year before taxation Income tax charge (Loss)/profit for the year Attributable to: Equity holders of the Company Non-controlling interest (Loss)/profit for the year Earnings per share (Loss)/profit per equity share - basic and diluted NOTES 1 1 4 4 9 6 20 2 5 25 2023 £'000 53,183 (52,017) 1,166 332 (3,646) (2,148) (158) (5) – 4 759 (1,930) (6) – (3,484) (307) (3,791) (3,861) 70 (3,791) 2022 £'000 100,243 (64,730) 35,513 199 (3,218) 32,494 (270) (115) (83) 36 1,036 – – 70 33,168 (12,002) 21,166 2,704 18,462 21,166 8 (4.52)p 3.17p Consolidated statement of comprehensive income for the year ended 31 December 2023 (Loss)/profit 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)/income for the year net of tax Attributable to: Equity shareholders Non–controlling interest Total comprehensive (expense)/income for the year net of tax 44 London & Associated Properties PLC 2023 2023 £'000 2022 £'000 (3,791) 21,166 (675) (675) (4,466) (4,056) (410) (4,466) (43) (43) 21,123 2,696 18,427 21,123 FINANCIAL STATEMENTS Consolidated balance sheet at 31 December 2023 Non–current assets Market value of properties attributable to Group Present value of head leases Property Mining reserves, property, plant and equipment Other investments at fair value through profit and loss (“FVPL”) Deferred tax Current assets Inventories - Property Inventories - Mining Assets held for sale Trade and other receivables Investments in listed securities held at FVPL Cash and cash equivalents Total assets Current liabilities Trade and other payables Borrowings Lease liabilities Current tax liabilities Non–current liabilities Borrowings 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 attributable to equity shareholders Diluted net assets per share NOTES 2023 £'000 2022 £'000 9 9 10 15 23 13 14 11 16 17 18 19 20 19 20 21 23 24 24 25 8 8 35,060 1,589 36,649 19,164 14,258 432 70,503 8,889 2,579 545 7,413 734 6,978 27,138 97,641 (14,463) (12,792) (394) (5,191) (32,840) (13,291) (1,582) (1,615) – (16,488) (49,328) 48,313 8,554 4,866 (1,258) 47 16,425 (144) 16,281 28,490 19,823 48,313 33.38p 35,610 1,552 37,162 16,928 12,590 – 66,680 22,862 5,199 – 7,915 886 15,382 52,244 118,924 (17,058) (22,061) (414) (4,256) (43,789) (17,113) (1,839) (1,716) (752) (21,420) (65,209) 53,715 8,554 4,866 (1,063) 47 20,286 (144) 20,142 32,546 21,169 53,715 38.14p 33.38p 38.14p These financial statements were approved by the board of directors and authorised for issue on 29 April 2024 and signed on its behalf by: John Heller Director Jonathan Mintz Director Company Registration No. 341829 London & Associated Properties PLC 2023 45 FINANCIAL STATEMENTS FINANCIAL STATEMENTS Consolidated statement of changes in shareholders’ equity for the year ended 31 December 2023 SHARE CAPITAL £’000 SHARE PREMIUM £’000 TRANSLA- TION RESERVES £’000 CAPITAL REDEMP- TION RESERVE £’000 TREASURY SHARES £’000 RETAINED EARNINGS EXCLUDING TREASURY SHARES £’000 TOTAL EXCLUDING NON– CONTROLLING INTERESTS £’000 NON– CON- TROLLING INTERESTS £’000 TOTAL EQUITY £’000 Balance at 1 January 2022 Profit for year 8,554 – 4,866 – (1,055) – 47 – (144) – 17,415 2,704 29,683 2,704 10,536 40,219 18,462 21,166 Other comprehensive expense: Currency translation Total other comprehensive expense Total comprehensive income Transactions with owners: Share options charge Dividends – equity holders Dividends – non–controlling interests Transactions with owners Balance at 31 December 2022 (Loss)/profit 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 2023 – – – – – – (8) (8) (8) – – – – 8,554 – – – – – 4,866 – – – – – (1,063) – – – – – – – (195) (195) (195) – – 8,554 – – 4,866 – – (1,258) – – – – – – – 47 – – – – – – 47 – – – – – 2,704 (8) (8) 2,696 (35) (35) (43) (43) 18,427 21,123 – – – – (144) – 167 – – 167 20,286 (3,861) 167 – – 167 32,546 (3,861) 237 404 (7,034) (7,034) (997) (997) (7,627) (7,794) 21,169 53,715 (3,791) 70 – – – – – (3,861) (195) (195) (4,056) (480) (480) (410) (675) (675) (4,466) – – (144) – – 16,425 – – 28,490 (936) (936) (936) (936) 19,823 48,313 46 London & Associated Properties PLC 2023 Group accounting policies FINANCIAL STATEMENTS FINANCIAL STATEMENTS Consolidated cash flow statement for the year ended 31 December 2023 Operating activities (Loss)/profit for the year before taxation Finance income Finance expense Decrease in value of investment properties Gain on investments held at FVPL (Bisichi) Loss on disposal of subsidiary Decrease in value of other investments Adjustment to interest rate derivative Loss on sale of investment properties Depreciation Profit on disposal of non-current assets Share based payment expense Development expenditure on inventories Exchange adjustments Change in inventories Change in receivables Change in payables Cash generated from operations Income tax refunded / (paid) Cash inflows from operating activities Investing activities Disposal of subsidiary Acquisition of investment properties, mining reserves, plant and equipment Sale of plant and equipment Sale of investment properties 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 liability Lease assignment costs paid Receipt of bank loan - Bisichi PLC Repayment of bank loan - Bisichi PLC Repayment of bank loan - Dragon Retail Properties Ltd 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)/increase 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. NOTES 2023 £’000 2022 £’000 4 4 9 6 22 10 13 (3,484) (332) 3,646 5 (759) 1,930 6 – – 1,761 (4) – (777) 158 2,046 (933) 429 3,692 137 3,829 (148) (5,952) 21 – 432 (1,189) 332 (6,504) (3,557) (185) (251) – 99 (624) (193) – (95) (1,372) – (6,178) (8,853) 12,157 140 3,444 33,168 (199) 3,218 115 (1,036) – – (70) 83 1,362 (36) 405 (747) 270 (911) 2,194 811 38,627 (7,946) 30,681 – (11,011) 102 5,171 2,083 (10,207) 199 (13,663) (2,751) (353) (236) (52) 524 (55) (21) 13,337 (14,247) (641) (6,323) (10,818) 6,200 5,982 (25) 12,157 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 2023 £’000 6,978 (3,534) 3,444 2022 £’000 15,382 (3,225) 12,157 19 £195,000 of cash deposits at 31 December 2023 were charged as security to bank loans (2022: £349,000). London & Associated Properties PLC 2023 47 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 UK adopted international accounting standards and 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 UK adopted international financial reporting. 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) including FRS 101 Reduced Disclosure Framework and these are presented in note 31. 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 including interest rate derivatives. The Group financial statements are presented in Pounds Sterling and all values are rounded to the nearest thousand pounds (£’000) except when otherwise stated. The functional currency for each entity in the Group 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 12. The exchange rates used in the accounts were as follows: Year-end rate Annual average £1 STERLING: RAND £1 STERLING: DOLLAR 2023 23.3014 22.9364 2022 20.5785 20.1929 2023 1.2732 1.2389 2022 1.2102 1.2967 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 00341829. LAP and its subsidiaries (“the Group”) consist of LAP and all its subsidiary undertakings, including Bisichi PLC (“Bisichi”) and Dragon Retail Properties Limited (“Dragon”). The Group without Bisichi and Dragon is referred to as LAP Group. GOING CONCERN In reviewing going concern it is necessary to consider separately the position of LAP Group and Bisichi. Although both are consolidated into group accounts (as required by IFRS 10), they are managed independently and in the unlikely event that Bisichi was unable to continue trading this would not affect the ability of LAP Group to continue operating as a going concern. The same would be true for Bisichi in reverse. The directors have reviewed the cash flow forecasts of the LAP Group and the underlying assumptions on which they are based for the 15 months from the date of signing. The LAP Group’s business activities, together with the factors likely to affect its future development, are set out in the Chairman and Chief Executive’s Statement and Financial Review. In addition, note 22 to the financial statements sets out the Group’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposure to credit risk and liquidity risk. 48 London & Associated Properties PLC 2023 The directors have reviewed the debt covenants on existing loans and the effects that a wide range of property valuation movements would have on these and the Group’s ability to mitigate these effects. Geo-political events in Ukraine and the Middle East are currently having a reduced impact on global energy prices. Although the outcome of the events in these regions is uncertain, the Directors at present do not foresee the events having a significant negative effect on the Group’s UK and South African operations. These risks are discussed further in Bisichi’s risks and uncertainties on page 10. Debt Refinancing The £12.7 million, Phoenix CRE S.à r.l. term loan expired in September 2023 and was not repaid. It is secured against a subsidiary of the Group, Orchard Square Limited, whose only asset is the Orchard Square, Sheffield property. This loan is non-recourse to the rest of the LAP Group and the LAP Group has no obligation to provide any further funds to repay this loan. LAP has chosen not to refinance this loan. As a result, from July 2023, the Group no longer has effective control of Orchard Square Limited and as required by IFRS10, from this date it no longer presents the results of Orchard Square Limited in the consolidated accounts. The assets and liabilities of Orchard Square Limited, including this term loan are not, therefore, included in the Balance Sheet as at 31 December 2023. LAP’s £13.6 million 5-year term loan with QIB (UK) PLC, at a margin of 3.95% above the BoE base rate, expires in 2027. The loan is covenant compliant and the Directors do not consider that this presents a going concern risk to the Group. Dragon has a £0.95 million Santander term loan (at 4.2% + bank base rate) that expires on 31 July 2024. Subsequent to the year end this loan was paid down to £0.8 million and an offer has been received from Santander to refinance this loan on similar terms for a period of two or three years. We expect this refinance to be completed in 2024. The loan is covenant compliant and the Directors do not consider that this presents a going concern risk to the Group. Broadway Regen has a £4.4 million 11.0% development loan expiring in April 2024 which we intend to extend until construction commencement at which point it will be replaced by a new development loan. This is a residential development for 56 flats and four retail units which is expected to have good returns. Currently we are in detailed negotiations to finance construction of this development and intend to commence work in Q3 2024. Apartments will be available for sale in Q1 2026. Cash flow forecasts on which going concern judgements are made include a range of outcomes for this development and the Directors do not consider that this presents a going concern risk to the Group. 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. The directors believe that the LAP Group has adequate resources to continue in operational existence for the foreseeable future and that the LAP Group is well placed to manage its business risks. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements. The Bisichi directors continue to adopt the going concern basis of accounting in preparing the Bisichi annual financial statements. FINANCIAL STATEMENTS Group accounting policies 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 2023. Trade Debtors An estimate of lifetime expected credit losses under IFRS 9 using the simplified approach has been made by the Directors considering historic trade debtor recoveries, specific knowledge of individual debtors and forward looking macro-economic factors. Further detail is included in note 22. The Group has not adopted any Standards or Interpretations in advance of the required implementation dates. MINING OPERATIONS The following standards, amendments and interpretations were in issue at the date of approval of these financial statements but were not yet effective for the current accounting period and have not been adopted early. Based on the Group’s current circumstances, the Directors do not anticipate that their adoption in future periods will have a material impact on the financial statements of the Group. • IAS 1 (amended) – Classification of liabilities as current or non-current, Non-current Liabilities with Covenants; • IFRS 10 and IAS 28 (amended) – Sale or Contribution of Assets between an investor and its Associate or Joint Venture; • IFRS 16 (amended) – Lease Liability in a Sale and Leaseback; • IAS 7 and IFRS 7 (amended) – Supplier Finance Arrangements; • IAS 21 (amended) – Lack of Exchangeability. 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 9. Inventories - Property When the Group begins to redevelop an existing investment property with a view to sale, the property is transferred to inventory and held as a current asset. The property is re-measured to fair value as at the date of the transfer with any gain or loss being taken to the income statement. The re-measured amount becomes the deemed cost at which the property is then carried in trading properties plus any costs for asset management initiatives or development in preparation for sale and subject to any provision required to reduce cost to net realisable value. In assessing the net realisable value of a property development, the directors make significant estimates and judgements regarding, inter alia, forecast sales and costs per square foot, gross internal area, affordable housing allocations and appropriate rates of financing. The degree to which these variables can be accurately forecast will depend on the stage of development of the particular project and the impact of changes in these assumptions to the net realisable value could be material. Further detail is included in note 13. 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 6 years. This life of mine is based on Bisichi’s existing coal reserves including reserves acquired but subject to regulatory approval. Bisichi actively seeks and evaluates new opportunities to extend the life of its existing mining and processing operations in South Africa. The life of mine excludes future coal purchases and coal reserve acquisitions. Bisichi’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, coal demand outlook 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 10. 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 21. London & Associated Properties PLC 2023 49 FINANCIAL STATEMENTS Group accounting policies 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 10. The impairment test indicated significant headroom as at 31 December 2023 and therefore no impairment is considered appropriate. The key assumptions include: coal prices, including domestic coal prices based on recent pricing and assessment of market forecasts for export coal; production based on proven and probable reserves assessed by the independent Competent Person and yields associated with mining areas based on assessments by the Competent Person and empirical data. A 9% reduction in average forecast coal prices or an 8% 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 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 subsidiary companies are set out in note 12. 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 41.6% 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 50 London & Associated Properties PLC 2023 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. As a result of treating Bisichi as a subsidiary, Dragon Retail Properties Limited, West Ealing Projects Limited and Development Physics Limited are also subsidiaries for accounting purposes, as LAP and Bisichi’s combined ownership in these entities exceeds 50%. As discussed in note 6 the Group no longer has effective control of Orchard Square Limited and as required by IFRS10 it no longer includes the results of that company in the consolidation. The results of Orchard Square Limited are included until control was lost in July 2023. The maximum loss that can be suffered by the LAP group has been recognised in the accounts and the assets and liabilities of Orchard Square Limited have been eliminated. 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 The Group’s revenue from contracts with customers, as defined under IFRS 15, includes sales of coal and property income from rents, service charge and management fees. Rental income Rental income arises from properties where leases have granted tenants a right of occupation and use of the properties. Rental income and lease incentives are recognised in accordance with IFRS 16 Leases. Rental income from investment property is recognised as revenue on a straight-line basis over the lease term. Lease incentives and costs associated with entering into tenant leases are amortised over the lease term. Rent reviews are recognised when such reviews have been agreed with tenants. Changes in the scope or the consideration for a lease, that was not part of the original terms and conditions, which might arise as a result of lease concessions, are accounted as a lease modification. Lease modifications are accounted for as a new lease from the effective date of the modification, considering any prepaid or accrued lease payments relating to the original lease as part of the lease payments for the new lease. Service charge income This includes income in relation to service charges, directly recoverable expenditure and management fees, which is recognised in accordance with IFRS 15. Revenue from providing services is recognised in the accounting period in which the services are rendered. Revenue from services is recognised based on the actual service provided to the end of the reporting period as a proportion of the total services to be provided and recognised over time. The Group generally acts as the principal in service charge transactions as it directly controls the delivery of the services at the point they are provided to the tenant. Where the Group acts as a principal, service charge income is presented gross within revenue and service charge expense presented gross within costs. FINANCIAL STATEMENTS Group accounting policies 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 right to receive the payment is established. 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 Group operates a long–term incentive plan and two share option schemes. The fair value of the conditional awards on shares granted under the long–term incentive plan and the options granted under the share option scheme is determined at the date of grant. This fair value is then expensed on a straight–line basis over the vesting period, based on an estimate of the number of shares that will eventually vest. At each reporting date, the fair value of the non–market based performance criteria of the long–term incentive plan is recalculated and the expense is revised. In respect of the share option scheme, the fair value of options granted is calculated using the binomial method. PENSIONS The Company operates a defined contribution pension scheme. The contributions payable to the scheme are expensed in the period to which they relate. FOREIGN CURRENCIES Monetary assets and liabilities are translated at year end exchange rates and the resulting exchange rate differences are included in the consolidated income statement within the results of operating activities if arising from trading activities, including inter-company trading balances and within finance cost / income if arising from financing. For consolidation purposes, income and expense items are included in the consolidated income statement at average rates, and assets and liabilities are translated at year end exchange rates. Translation differences arising on consolidation are recognised in other comprehensive income. Foreign exchange differences on intercompany loans are recorded in other comprehensive income when the loans are not considered trading balances and are not expected to be repaid in the foreseeable future. Where foreign operations are sold or closed, the cumulative exchange differences attributable to that foreign operation are recognised in the consolidated income statement when the gain or loss on disposal is recognised. Transactions in foreign currencies are translated at the exchange rate ruling on transaction date. FINANCIAL INSTRUMENTS Financial assets and financial liabilities are recognised in the Group’s consolidated statement of financial position when the group becomes a party to the contractual provisions of the instrument. Financial assets Financial assets are classified as either financial assets at amortised cost, at fair value through other comprehensive income (“FVTOCI”) or at fair value through profit or loss (“FVPL”) depending upon the business model for managing the financial assets and the nature of the contractual cash flow characteristics of the financial asset. A loss allowance for expected credit losses is determined for all financial assets, other than those at FVPL, at the end of each reporting period. The Group applies a simplified approach to measure the credit loss allowance for trade receivables using the lifetime expected credit loss provision. The lifetime expected credit loss is evaluated for each trade receivable taking into account payment history, payments made subsequent to year end and prior to reporting, past default experience and the impact of any other relevant and current observable data. The group applies a general approach on all other receivables classified as financial assets. The general approach recognises lifetime expected credit losses when there has been a significant increase in credit risk since initial recognition. The Group no longer recognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. The Group does not recognise financial liabilities when the Group’s obligations are discharged, cancelled, or have expired. Investments Current financial asset investments and other investments classified as non-current (“The investments”) comprise shares in listed companies. The investments are measured at fair value. Any changes in fair value are recognised in the consolidated income statement and accumulated in retained earnings. Trade and other receivables Trade receivables are recorded at amortised cost. As the interest that would be recognised from discounting future cash payments over the short payment period is not considered to be material, trade receivables which do not carry any interest are stated at their nominal value as reduced by credit loss allowances for estimated recoverable amounts. Trade and other payables Trade and other payables are non-interest bearing and are stated at their nominal value, as the interest that would be recognised from discounting future cash payments over the short payment period is not considered to be material. Bank loans and overdrafts Bank loans and overdrafts are included as financial liabilities on the Group balance sheet net of the unamortised costs of issue. The cost of issue is recognised in the consolidated 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. London & Associated Properties PLC 2023 51 FINANCIAL STATEMENTS Group accounting policies 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. The Group owns a number of properties on long term and short- term leaseholds. These are leased out to tenants under operating leases, are classified as investment properties or development properties as appropriate and included in the balance sheet at fair value. The obligation to the freeholder or superior leaseholder for the buildings element of the leasehold is included in the balance sheet at the present value of the minimum lease payments at inception. Capital expenditure Investment properties are measured initially at cost, including related transaction costs. Additional expenditure of a capital nature, directly attributable to the redevelopment or refurbishment of an investment property held for future use as an investment property, up to the point of it being completed for its intended use, is capitalised in the carrying value of that property. Where there is a change of use, such as commencement of development with a view to sale, the property is transferred to inventory at deemed cost, which is its fair value on the date of the change in use. Capitalised interest is calculated with reference to the actual rate payable on borrowings for development purposes, or for that part of the development costs financed out of borrowings the capitalised interest is calculated on the basis of the average rate of interest paid on the relevant debt outstanding. Disposal The disposal of investment properties is recorded on completion of the contract. On disposal, any gain or loss is calculated as the difference between the net disposal proceeds and the valuation at the last year end plus subsequent capitalised expenditure in the period. Depreciation and amortisation In applying the fair value model to the measurement of investment properties, depreciation and amortisation are not provided. OTHER ASSETS AND DEPRECIATION The cost, less estimated residual value, of other property, plant and equipment is written off on a straight–line basis over the asset’s expected useful life. Residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. Changes to the estimated residual values or useful lives are accounted for prospectively. The depreciation rates generally applied are: Motor vehicles Office equipment 25–33 per cent per annum 10–33 per cent per annum 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 under £20,000. 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 where appropriate. 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. 52 London & Associated Properties PLC 2023 FINANCIAL STATEMENTS Group accounting policies 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 than through continuing use. Such assets are generally measured at the lower of their carrying amount and fair value less costs of sale. Impairment losses on initial classification as assets held-for-sale and subsequent gains and losses on remeasurement are recognised in profit or loss. Once classified as held-for-sale, intangible assets and property, plant and equipment are no longer amortised or depreciated, and any equity-accounted investment is no longer equity accounted. INVENTORIES–PROPERTY Properties held as trading inventory are those which are being developed with a view to sale. Inventories are recorded at the lower of cost and net realisable value. If the net realisable value of inventory is lower than its carrying value, an impairment loss is recorded in the income statement. If, in subsequent periods, the net realisable value of inventory that was previously impaired increases above its carrying value, the impairment is reversed to align the carrying value of the property with the net realisable value. Inventory is presented on the balance sheet within current assets. INCOME TAXES The charge for current taxation is based on the results for the year as adjusted for disallowed or non–assessable items. Tax payable upon realisation of revaluation gains recognised in prior periods is recorded as a current tax charge with a release of the associated deferred tax. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the tax computations and is recorded using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. In respect of the deferred tax on the revaluation surplus, this is calculated on the basis of the chargeable gains that would crystallise on the sale of the investment portfolio as at the reporting date. The calculation takes account of indexation on the historic cost of properties and any available capital losses. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the Group income statement, except when it relates to items charged or credited directly to equity, in which case it is also dealt with in equity. DIVIDENDS Dividends payable on the ordinary share capital are recognised as a liability in the period in which they are approved. CASH AND CASH EQUIVALENTS Cash comprises cash in hand and on-demand deposits. Cash and cash equivalents comprise short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value and original maturities of three months or less. The cash and cash equivalents shown in the cashflow statement are stated net of bank overdrafts that are repayable on demand in accordance with IAS 7. This includes the structured trade finance facility held in South Africa as detailed in note 22. 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 Coal revenue is derived principally from export revenue and domestic revenue. Both export revenue and domestic 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 has transferred to the buyer at the delivery point. For export revenue this 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. For domestic coal revenues this is generally recognised on collection by the customer from the mine or from the mine’s rail siding when loaded into transport, 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. Coal revenue is measured based on consideration specified in the contract with a customer on a per metric tonne basis. Both export and domestic contracts are typically on a specified coal volume basis and less than a year in duration. Export contracts are typically linked to the price of Free on Board (FOB) Coal from Richards Bay Coal Terminal (API4 price). Domestic contracts are typically linked to a contractual price agreed. Mining costs Expenditure is recognised in respect of goods and services received. Where coal is purchased from third parties at point of extraction the expenditure is only recognised when the coal is extracted and all of the significant risks and rewards of ownership have been transferred. Mining reserves, plant and equipment The cost of property, plant and equipment comprises its purchase price and any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in accordance with agreed specifications. Freehold land is not depreciated. Other property, plant and equipment is stated at historical cost less accumulated depreciation. The cost recognised includes the recognition of any decommissioning assets related to property, plant and equipment. Heavy surface mining and other plant and equipment is depreciated at varying rates depending upon its expected usage. The depreciation rates generally applied are between 5-10 per cent per annum, but limited to the shorter of its useful life or the life of the mine. Other non–current assets, comprising motor vehicles and office equipment, are depreciated at a rate of between 10% and 33% per annum which is calculated to write off the cost, less estimated residual value of the assets, on a straight line basis over their expected useful lives. Mine inventories Inventories are stated at the lower of cost and net realisable value. Cost includes materials, direct labour and overheads relevant to the stage of production. Cost is determined using the weighted average method. Net realisable value is based on estimated selling price less all further costs to completion and all relevant marketing, selling and distribution costs. London & Associated Properties PLC 2023 53 FINANCIAL STATEMENTS Group accounting policies 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 their recoverable amounts. An asset’s recoverable amount is determined as the higher of its fair value less costs of disposal and its value in use. Such reviews are undertaken on an asset-by-asset basis, except where assets do not generate cash flows independent of other assets, in which case the review is undertaken on a cash generating unit basis. If the carrying amount of an asset exceeds its recoverable amount an asset’s carrying value is written down to its estimated recoverable amount (being the higher of the fair value less cost to sell and value in use) if that is less than the asset’s carrying amount. 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: • i t 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. The cost is recognised within Mine development costs within the balance sheet. 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. 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. 54 London & Associated Properties PLC 2023 FINANCIAL STATEMENTS FINANCIAL STATEMENTS Notes to the financial statements for the year ended 31 December 2023 1. RESULTS FOR THE YEAR AND SEGMENTAL ANALYSIS 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 Direct mining costs Overheads Depreciation Operating (loss)/profit Finance income Finance expenses Result before valuation movements Other segment items Net (decrease)/increase on revaluation of investment properties Exchange losses Decrease in value of other investments Net increase on revaluation of investments held for trading Profit on disposal of fixed assets Loss on disposal of subsidiary Revaluation and other movements (Loss)/profit for the year before taxation Segment assets - Non-current assets - property - Non-current assets - plant & equipment - Non-current assets - other - Non-current assets - deferred tax asset - Inventory - property - Current assets - others - Assets held for sale - Cash & cash equivalents Total assets 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)/profit Non-current assets excluding investments Total net assets Capital expenditure LAP £’000 3,323 451 18 – 3,792 (1,553) – (2,254) (266) (281) 110 (2,094) (2,265) (150) – – – 4 (1,930) (2,076) (4,341) 23,801 268 – 114 8,889 1,123 545 3,799 38,539 (17,650) (3,238) (1,272) (22,160) 16,379 – – – BISICHI £’000 1,051 181 – 47,985 49,217 (209) (38,548) (7,649) (1,493) 1,318 222 (1,473) 67 145 (158) – 759 – – 746 813 10,818 18,896 14,258 318 – 9,490 – 3,123 56,903 (7,483) (16,748) (1,925) (26,156) 30,747 22,283 10,659 4,854 UNITED KINGDOM £’000 5,760 (481) 37,086 40,747 81 DRAGON £’000 168 6 – – 174 (10) – (33) (2) 129 – (79) 50 – – (6) – – – (6) 44 2,030 – – – – 113 – 56 2,199 (950) (62) – (1,012) 1,187 – – – SOUTH AFRICA £’000 47,423 1,647 19,159 7,566 5,909 2023 TOTAL £’000 4,542 638 18 47,985 53,183 (1,772) (38,548) (9,936) (1,761) 1,166 332 (3,646) (2,148) (5) (158) (6) 759 4 (1,930) (1,336) (3,484) 36,649 19,164 14,258 432 8,889 10,726 545 6,978 97,641 (26,083) (20,048) (3,197) (49,328) 48,313 22,283 10,659 4,854 2023 TOTAL £’000 53,183 1,166 56,245 48,313 5,990 London & Associated Properties PLC 2023 55 FINANCIAL STATEMENTS Notes to the financial statements 1. RESULTS FOR THE YEAR AND SEGMENTAL ANALYSIS CONTINUED 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 Depreciation Operating profit Finance income Finance expenses Result before valuation movements Other segment items Net decrease on revaluation of investment properties Loss on disposal of investment properties Exchange losses Net increase on revaluation of investments held for trading Profit on disposal of fixed assets 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 Other investments at fair value through profit and loss account Inventory - property Current assets - others Cash & cash equivalents Total assets 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)/profit Non-current assets excluding investments Total net assets Capital expenditure LAP £’000 4,175 788 18 – 4,981 (1,994) (3,098) – (2,665) (265) (3,041) 24 (2,120) (5,137) (5) (83) – – 36 70 18 (5,119) 24,497 543 – 22,862 1,328 4,685 53,915 (30,306) (4,253) (1,375) (35,934) 17,981 – – – BISICHI £’000 955 98 – 94,002 95,055 (69) – (43,209) (12,251) (1,093) 38,433 175 (1,047) 37,561 (60) – (270) 1,036 – – 706 38,267 10,635 16,377 12,590 – 12,280 10,712 62,594 (7,725) (17,418) (2,932) (28,075) 34,519 57,381 29,934 2,167 UNITED KINGDOM £’000 6,849 (7,429) 37,767 46,439 2,629 DRAGON £’000 207 – – – 207 (18) – – (65) (3) 121 – (51) 70 (50) – – – – – (50) 20 2,030 8 – – 270 107 2,415 (1,143) (57) – (1,200) 1,215 – – – SOUTH AFRICA £’000 93,394 42,942 16,323 7,276 8,434 2022 TOTAL £’000 5,337 886 18 94,002 100,243 (2,081) (3,098) (43,209) (14,981) (1,361) 35,513 199 (3,218) 32,494 (115) (83) (270) 1,036 36 70 674 33,168 37,162 16,928 12,590 22,862 13,878 15,504 118,924 (39,174) (21,728) (4,307) (65,209) 53,715 57,381 29,934 2,167 2022 TOTAL £’000 100,243 35,513 54,090 53,715 11,063 Group revenue is external to the Group and the directors consider that inter segmental revenues are not material. 56 London & Associated Properties PLC 2023 FINANCIAL STATEMENTS Notes to the financial statements 2. PROFIT BEFORE TAXATION Profit before taxation is stated after charging/(crediting): Staff costs (see note 25) Depreciation on tangible fixed assets - owned assets Depreciation on tangible fixed assets - right of use Exchange loss Impairment of inventory Inventories recognised as an expense Amounts payable to the auditor in respect of both audit and non-audit services Audit services Statutory - Company and consolidation Subsidiaries - audited by KR Subsidiaries - audited by other auditors Staff costs are included in overheads. 3. DIRECTORS’ EMOLUMENTS Emoluments Defined contribution pension scheme contributions Sir Michael Heller received £17,000 (2022: £780,000) as a Director of Bisichi PLC. Mr J A Heller received £9,000 (2022: £nil) as a Director of Bisichi PLC Mr A R Heller received £985,000 (2022: £1,910,000) 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 Unwinding of discount (Bisichi) Other loans Interest on lease obligations Total finance expenses 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 Unredeemed capital reductions Total deferred tax (note 23) Tax on profit on ordinary activities 2023 £’000 2022 £’000 8,860 1,495 266 (158) – 777 30 129 40 199 2023 £’000 1,890 138 2,028 2023 £’000 332 (2,658) (112) (705) (171) (3,646) 13,676 1,099 263 (270) 3,098 747 35 102 43 180 2022 £’000 1,794 49 1,843 2022 £’000 199 (1,862) (319) (837) (200) (3,218) 2023 £’000 2022 £’000 1,318 – 1,318 (313) (131) 124 725 (1,416) (1,011) 307 11,522 15 11,537 (1,563) 21 794 1,592 (379) 465 12,002 London & Associated Properties PLC 2023 57 FINANCIAL STATEMENTS Notes to the financial statements 5. INCOME TAX CONTINUED Factors affecting tax charge for the year The corporation tax charge differs from the amount which would be due at the effective rate of corporation tax in the United Kingdom of 23.50 per cent (2022: 19.00 per cent). The differences are explained below: (Loss)/profit for the year before taxation Taxation at 23.5 per cent (2022: 19 per cent) Effects of: Capital losses on disposal Other differences Disallowable expenses (Bisichi) Impairment of Investment Losses not recognised Non-taxable income Changes in fair values of properties not subject to tax Adjustment in respect of prior years Deferred tax rate adjustment Income tax charge for the year Analysis of United Kingdom and overseas tax: United Kingdom tax included in above: Corporation tax Adjustment in respect of prior years Current tax Deferred tax Overseas tax included above: Corporation tax Current tax Deferred tax 2023 £’000 (3,484) (819) – 94 241 367 968 (224) (391) – 71 307 2023 £'000 - - - (86) (86) 2023 £'000 1,318 1,318 (925) 393 2022 £’000 33,168 6,302 (308) 543 – – 155 (255) 1,060 15 4,490 12,002 2022 £’000 2 15 17 (860) (843) 2022 £’000 11,520 11,520 1,325 12,845 1 Overseas tax is derived from Bisichi’s South African mining operation. The adjustment to tax rate arises due to the tax rate used in the UK for the year of 23.5% (2022: 19%) and the corporation tax rate assessed in South Africa for the year of 28% (2022: 28%). 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. 58 London & Associated Properties PLC 2023 FINANCIAL STATEMENTS Notes to the financial statements 6. DISPOSAL OF SUBSIDIARY In July 2023 Orchard Square Limited breached the Income Cover Ratio covenant on its £12.7 million loan with Phoenix CRE S.à.r.l. This loan is non-recourse to the rest of the LAP Group. While the LAP Group had the option to cure the breach, there was such little prospect of recouping any equity, it decided not to do so. LAP Group no longer has exposure, or rights, to variable returns from its involvement with Orchard Square Limited and cannot be obliged to provide any further funds to Orchard Square Limited. In accordance with IFRS10, the investment in Orchard Square Limited has been treated as having been relinquished during the year and neither the loan nor the asset is shown in the accounts at 31 December 2023. The financial results of Orchard Square Limited for the period to 31 July 2023 and for the full year of 2022 are presented below. In addition to the results of Orchard Square Limited, losses attributable to our ownership of this subsidiary are also presented below. As the loan associated with Orchard Square Limited is non-recourse to the LAP Group, there will be no future losses to be attributed to this subsidiary. All potential losses have been fully provided in the current year. Result of Orchard Square Limited for the year Gross property income Direct property costs Impairment of Inventory Net property income Overheads Net revenue from property Net finance expenses Interest rate derivatives Income tax Profit before tax attributable to shareholders Cash flows from Orchard Square Limited Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Net cash (outflow) / inflow 7 MONTHS TO JULY 2023 £’000 1,258 (646) – 612 (34) 578 (750) – (19) (191) 7 MONTHS TO JULY 2023 £’000 474 (12) (882) (420) 2022 £’000 2,104 (1,064) (2,750) (1,710) (234) (1,944) (978) 70 19 (2,833) 2022 £’000 1,044 (10) (1,023) 11 Orchard Square Limited has been in cash trap since September 2022. No cash has been distributed to the Group from Orchard Square Limited since this time. Summary of assets and liabilities of Orchard Square Limited Inventory - property Trade and other receivables Cash and cash equivalents Total assets Current borrowings Trade and other payables Balances owed to other group companies Total liabilities Net assets Effects on consolidation of investment in Orchard Square Limited Loss on disposal of subsidiary JULY 2023 £’000 14,750 262 148 15,160 (12,654) (565) (1,317) (14,536) 624 2022 £’000 14,750 375 569 15,694 (12,715) (947) (1,217) (14,879) 815 2023 £’000 (1,930) 2022 £’000 – This loss on disposal is shown in the consolidated results of the Group for the year and includes a full provision for the net assets of Orchard Square Limited as at 31 July 2023 and a full provision for the intercompany balances between Orchard Square Limited and the LAP Group at 31 December 2023. London & Associated Properties PLC 2023 59 FINANCIAL STATEMENTS Notes to the financial statements 7. DIVIDEND No dividends were paid in the year relating to the current or prior period (2022: Nil) The Directors are not recommending a final dividend for 2023 (2022: Nil). 8. (LOSS)/PROFIT PER EQUITY SHARE AND NET ASSETS PER EQUITY SHARE (Loss)/profit per equity share has been calculated as follows: (Loss) / profit attributable to equity shareholders for the year (£’000) Weighted average number of ordinary shares in issue (’000) (Loss) / profit per equity share Weighted average number of ordinary shares in issue for the purpose of diluted (loss)/profit per share (’000) Fully diluted (loss) / profit per share 2023 2022 (3,861) 85,326 (4.52)p 85,326 (4.52)p 2,704 85,326 3.17p 85,326 3.17p Weighted average number of shares in issue is calculated after excluding treasury shares of 216,715 (2022: 216,715). Net assets per equity share have been calculated as follows: Net assets attributable to equity shareholders (£’000) Shares in issue (’000) Net assets per equity share Net assets diluted (£’000) Shares in issue (’000) Diluted net assets per share 9. INVESTMENT PROPERTIES Cost or valuation at 1 January 2023 Transfer to assets held for sale (note 11) Additions Decrease in present value of head leases (Decrease)/increase on revaluation At 31 December 2023 Representing assets stated at: Valuation Present value of head leases At 31 December 2023 At 31 December 2022 2023 2022 28,490 85,326 33.38p 28,490 85,326 33.38p 32,546 85,326 38.14p 32,546 85,326 38.14p LEASEHOLD LEASEHOLD TOTAL £’000 FREEHOLD £’000 OVER 50 YEARS £’000 UNDER 50 YEARS £’000 37,162 (545) 38 (1) (5) 36,649 35,060 1,589 36,649 36,649 37,162 29,679 (545) – – 116 29,250 29,250 – 29,250 29,250 29,679 7,298 – 38 (1) (111) 7,224 5,640 1,584 7,224 7,224 7,298 185 – – – (10) 175 170 5 175 175 185 60 London & Associated Properties PLC 2023 FINANCIAL STATEMENTS Notes to the financial statements 9. INVESTMENT PROPERTIES CONTINUED Cost or valuation at 1 January 2022 Additions Disposals Decrease in present value of head leases (Decrease)/increase on revaluation At 31 December 2022 Representing assets stated at: Valuation Present value of head leases TOTAL £’000 FREEHOLD £’000 LEASEHOLD OVER 50 YEARS £’000 LEASEHOLD UNDER 50 YEARS £’000 41,166 2,531 (5,695) (725) (115) 37,162 35,610 1,552 37,162 27,023 2,531 – – 125 29,679 29,679 – 29,679 13,936 – (5,695) (724) (219) 7,298 5,751 1,547 7,298 207 – – (1) (21) 185 180 5 185 The leasehold and freehold properties, excluding the present value of head leases, were valued as at 31 December 2023 by professionally qualified independent firms of chartered surveyors. The valuations were made at fair value. Allsop LLP Carter Towler Add: present value of headleases1 2023 £’000 24,450 10,610 35,060 1,589 36,649 2022 £’000 25,145 10,465 35,610 1,552 37,162 1 At 31 December 2023 investment properties included £1.6 million (2022: £1.6 million) for the head lease liabilities recognised under IFRS 16. In the current year total cash outflow for head leases and other lease liabilities is £0.1 million (2022: £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. The historical cost of investment properties, including total capitalised interest of £1,161,000 (2022: £1,161,000) was as follows: 2023 LEASEHOLD OVER 50 YEARS £’000 LEASEHOLD UNDER 50 YEARS £’000 FREEHOLD £’000 2022 LEASEHOLD OVER 50 YEARS £’000 LEASEHOLD UNDER 50 YEARS £’000 FREEHOLD £’000 Cost at 1 January Transfer to assets held for sale (note 11) Additions Disposals Cost at 31 December 33,283 9,551 785 30,753 18,883 (581) – – 32,702 – – – 9,551 – – – 785 – 2,530 – 33,283 – – (9,332) 9,551 785 – – – 785 Each year external valuers are appointed by the executive directors on behalf of the Board. The valuers are selected based upon their knowledge, independence and reputation for valuing assets such as those held by the Group. Valuations are performed annually and are performed consistently across all properties in the Group’s portfolio. At each reporting date appropriately qualified employees of the Group verify all significant inputs and review the computational outputs. Valuers submit their report to the Board on the outcome of each valuation. Valuations take into account tenure, lease terms and structural condition. The inputs underlying the valuations include market rent or business profitability, likely incentives offered to tenants, forecast growth rates, yields, EBITDA, discount rates, construction costs including any specific site costs (for example section 106), professional fees, developer’s profit including contingencies, planning and construction timelines, lease regear costs, planning risk and sales prices based on known market transactions for similar properties to those being valued. Valuations are based on what is determined to be the highest and best use. When considering the highest and best use the valuer will consider, on a property by property basis, its actual and potential uses which are physically, legally and financially viable. Where the highest and best use differs from the existing use, the valuer will consider the cost and likelihood of achieving and implementing this change in arriving at the valuation. London & Associated Properties PLC 2023 61 FINANCIAL STATEMENTS Notes to the financial statements 9. INVESTMENT PROPERTIES CONTINUED 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. CARRYING / FAIR VALUE 2023 £'000 CARRYING/ FAIR VALUE 2022 £’000 VALUATION TECHNIQUE 29,795 29,679 Income capitalisation 5,640 5,751 Income capitalisation 170 180 Income capitalisation CLASS OF PROPERTY LEVEL 3 Freehold – external valuation Leasehold over 50 years – external valuation Leasehold under 50 years – external valuation 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 RANGE (WEIGHTED AVERAGE) 2023 RANGE (WEIGHTED AVERAGE) 2022 £4 – £34 (£16) 5.3% – 14.3% (9.2%) £5 – £10 (£7) 5.8% – 23.7% (18.6%) £5 – £5 (£5) 32.6% – 32.6% (32.6%) £4 – £33 (£17) 5.3% – 15.7% (8.9%) £5 – £10 (£6) 5.8% – 22.5% (17.8%) £5 - £5 (£5) 31.1% – 31.1% (31.1%) At 31 December 35,605 35,610 There are interrelationships between all these inputs as they are determined by market conditions. The existence of an increase in more than one input would be to magnify the input on the valuation. The impact on the valuation will be mitigated by the interrelationship of two inputs in opposite directions, for example, an increase in rent may be offset by an increase in yield. The table below illustrates the impact of changes in key unobservable inputs on the carrying / fair value of the Group’s properties. Freehold – external valuation Leasehold over 50 years – external valuation Leasehold under 50 years – external valuation ESTIMATED RENTAL VALUE 10% INCREASE OR (DECREASE) EQUIVALENT YIELD 25 BASIS POINT CONTRACTION OR (EXPANSION) 2023 £'000 2022 £'000 2,977 (2,977) 564 (564) 17 (17) 2,965(2,965) 575(575) 18(18) 2023 £'000 925 (868) 99 (96) 1 (1) 2022 £'000 950(890) 106(102) 1/(1) 62 London & Associated Properties PLC 2023 FINANCIAL STATEMENTS Notes to the financial statements 10. MINING RESERVES, PLANT AND EQUIPMENT Cost at 1 January 2023 Exchange adjustment Valuation decrease Additions Disposals in year At 31 December 2023 Accumulated depreciation at 1 January 2023 Exchange adjustment Charge for the year Disposals in year Accumulated depreciation at 31 December 2023 Net book value at 31 December 2023 Cost at 1 January 2022 Exchange adjustment Valuation increase Additions Disposals Cost at 31 December 2022 Accumulated depreciation at 1 January 2022 Exchange adjustment Charge for the year Disposals in year Accumulated depreciation at 31 December 2022 Net book value at 31 December 2022 TOTAL £’000 40,072 (4,653) (6) 5,952 (19) 41,346 23,144 (2,721) 1,761 (2) 22,182 19,164 31,669 125 (38) 8,532 (216) 40,072 21,752 180 1,362 (150) 23,144 16,928 Included in the above line items are right-of-use assets over the following: Net book value at 1 January 2023 Additions Disposals Depreciation Net book value at 31 December 2023 Net book value at 1 January 2022 Exchange adjustment Revaluation Depreciation Net book value at 31 December 2022 11. ASSETS HELD FOR SALE At 1 January Transfer from investment property (note 9) Disposal At 31 December MINING RESERVES £’000 MINING EQUIPMENT £’000 RIGHT OF USE ASSET - OFFICE BUILDING £’000 OFFICE EQUIPMENT AND MOTOR VEHICLES £’000 2,332 (273) – – – 2,059 1,099 (174) – – 925 1,134 1,097 (13) – 1,248 – 2,332 1,089 10 – – 1,099 1,233 TOTAL £’000 664 27 (26) (295) 370 1,011 5 (38) (314) 664 36,291 (4,333) – 5,903 – 37,861 21,347 (2,517) 1,443 – 20,273 17,588 29,063 134 – 7,117 (23) 36,291 20,166 166 1,038 (23) 21,347 14,944 796 – – – – 796 307 – 266 – 573 223 788 – (38) 46 – 796 44 – 263 – 307 489 653 (47) (6) 49 (19) 630 391 (30) 52 (2) 411 219 721 4 – 121 (193) 653 453 4 61 (127) 391 262 MINING EQUIPMENT £’000 OFFICE BUILDING £’000 OFFICE EQUIPMENT AND MOTOR VEHICLES £’000 186 - (26) (29) 131 219 5 – (38) 186 457 - - (249) 208 744 – (38) (249) 457 2023 £’000 – 545 – 545 21 27 - (17) 31 48 – – (27) 21 2022 £’000 504 – (504) – A decision to sell our retail and residential property in Rugeley was made in 2023 which will now go to auction in Q2 2024. The property was therefore reclassified as an asset held for sale at 31 December 2023. London & Associated Properties PLC 2023 63 FINANCIAL STATEMENTS Notes to the financial statements 12. 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 2023 is disclosed below: ENTITY ACTIVITY PERCENTAGE OF SHARE CAPITAL Analytical Properties Holdings Limited * Property 100% Analytical Properties Limited Property 100% LAP Ocean Holdings Limited * Property 100% London & Associated (Rugeley) Limited Dormant 100% London & Associated Securities Limited Dormant 100% London & Associated Management Services Limited* Orchard Chambers Residential Limited Orchard Square Limited Bisichi PLC (note C) Property Management Services Dormant 100% 100% Property 100% Coal mining 41.602% Mineral Products Limited (notes A, C) Share dealing 100% Bisichi (Properties) Limited (notes A, C) Property 100% Bisichi Mining (Exploration) Limited (notes A, C) Sisonke Coal Processing (pty) Limited (notes A, C) Holding company Coal processing 100% 62.5% Black Wattle Colliery (Pty) Limited (notes A, C) Coal mining 62.5% Bisichi Coal Mining (Pty) Limited (notes A, C) Coal mining 100% Urban First (Northampton) Limited (notes A, C) Dormant 100% Bisichi Trustee Limited (notes A, C) Property 100% Bisichi Mining Management Services Limited (notes A, C) Ninghi Marketing Limited (notes A, C) Dormant 100% Dormant 90.1% Bisichi Northampton Limited (notes A, C) Property 100% Amandla Ehtu Mineral Resource Development (Pty) Limited (notes A, C) Dormant 70% Black Wattle Klipfontein (Pty) Limited (notes A, C) Coal mining 62.5% Dragon Retail Properties Limited (notes B, C) Property West Ealing Projects Limited (notes B, C) Broadway Regen Limited (notes C, D) Property Property 50% 50% 90% Development Physics Limited (notes C, E) Property 33.3% DP (Pampisford) Limited (notes D, F) Property 100% REGISTERED ADDRESS 12 Little Portland Street, London W1W 8BJ 12 Little Portland Street, London W1W 8BJ 12 Little Portland Street, London W1W 8BJ 12 Little Portland Street, London W1W 8BJ 12 Little Portland Street, London W1W 8BJ 12 Little Portland Street, London W1W 8BJ 12 Little Portland Street, London W1W 8BJ 12 Little Portland Street, London W1W 8BJ 12 Little Portland Street, London W1W 8BJ 12 Little Portland Street, London W1W 8BJ 12 Little Portland Street, London W1W 8BJ 12 Little Portland Street, London W1W 8BJ Samora Machel Street, Bethal Road, Middelburg, Mpumalanga, 1050 Samora Machel Street, Bethal Road, Middelburg, Mpumalanga, 1050 Samora Machel Street, Bethal Road, Middelburg, Mpumalanga, 1050 12 Little Portland Street, London W1W 8BJ 12 Little Portland Street, London W1W 8BJ 12 Little Portland Street, London W1W 8BJ 12 Little Portland Street, London W1W 8BJ 12 Little Portland Street, London W1W 8BJ Samora Machel Street, Bethal Road, Middelburg, Mpumalanga, 1050 Samora Machel Street, Bethal Road, Middelburg, Mpumalanga, 1050 12 Little Portland Street, London W1W 8BJ 12 Little Portland Street, London W1W 8BJ 73 Cornhill, London, EC3V 3QQ 12 Little Portland Street, London W1W 8BJ 12 Little Portland Street, London W1W 8BJ 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 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 England and Wales Details on the non–controlling interest in subsidiaries are shown under note 25. Companies shown as Dormant and those marked with an asterisk(*) are exempt from audit by virtue of s479A Companies Act 2006. 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: Bisichi, Dragon, West Ealing Projects, Development Physics and their subsidiaries are included in the consolidated financial statements in accordance with IFRS 10. Note D: This company is 90% owned by West Ealing Projects Limited and the equity shareholdings disclosed relate to that company. Note E: This entity is a joint venture owned 33.33% by LAP and 33.33% by Bisichi Note F: This company is 100% owned by Development Physics Limited and the equity shareholdings disclosed relate to that company. 64 London & Associated Properties PLC 2023 FINANCIAL STATEMENTS Notes to the financial statements 13. INVENTORIES - PROPERTY Development land and infrastructure: At 1 January Capitalised expenditure Capitalised interest Disposal Impairments At 31 December 2023 £’000 22,862 360 417 (14,750) - 8,889 2022 £’000 25,213 443 304 - (3,098) 22,862 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 £8.889 million (2022: £8.112 million) and is currently being developed for sale. In 2021 the Group acquired an option over a residential development opportunity in Purley, London through a joint venture held 33:33:33 with Bisichi and an external partner. This property is held at cost of £nil (2022: £nil), with a full provision being made for development expenditure, until such time as a decision is made to submit a new application following an initial unsuccessful planning application. The Group has relinquished its interest in the Orchard Square, Sheffield development property. Note 6 explains this in more detail, including its financial effect. 14. INVENTORIES - MINING Coal Washed Mining production Work in progress Other 15. INVESTMENTS HELD AS NON-CURRENT ASSETS At 1 January Additions Gain Disposals At 31 December 2023 £’000 2022 £’000 1,949 542 85 3 2,579 2023 TOTAL £’000 12,590 1,189 856 (377) 14,258 4,758 162 221 58 5,199 2022 TOTAL £’000 3,631 9,758 718 (1,517) 12,590 The non-current asset investments belong to Bisichi and are all listed on UK and overseas stock exchanges (Level 1 hierarchy) as follows: Market value of readily realisable investments listed on stock exchanges in the United Kingdom Market value of readily realisable investments listed on overseas stock exchanges 16. TRADE AND OTHER RECEIVABLES Trade receivables Other receivables Prepayments and accrued income Note 22 details the group’s credit risk management and loss allowances held for trade receivables. 2023 £'000 6,843 7,415 14,258 2023 £’000 4,695 2,285 433 7,413 2022 £’000 6,782 5,808 12,590 2022 £’000 4,978 2,290 647 7,915 London & Associated Properties PLC 2023 65 FINANCIAL STATEMENTS Notes to the financial statements 17. INVESTMENTS IN LISTED SECURITIES HELD AT FVPL Market value of listed Investments: Listed in United Kingdom Listed outside United Kingdom Original cost of listed investments Unrealised (deficit) / surplus of market value versus cost 2023 £'000 618 116 734 760 (26) 2022 £’000 686 200 886 846 40 The investments in listed securities held at FVPL belong to Bisichi and the market value of listed investments is derived from their quoted share price on public markets (Level 1 hierarchy). 18. TRADE AND OTHER PAYABLES Trade payables Other taxation and social security costs Other payables Accruals and deferred income 2023 £’000 8,752 118 3,563 2,030 14,463 2022 £’000 8,621 39 3,828 4,570 17,058 The directors consider that the carrying amount of trade and other payables approximates to their fair value. 19. BORROWINGS 2023 £’000 CURRENT 2023 £’000 NON-CURRENT 2022 £’000 CURRENT 2022 £’000 NON-CURRENT Other loans (Bisichi) £1.25 million term bank loan (secured) repayable by 2024 (Dragon)* Bank overdrafts (secured) (Bisichi) £12.7 million term bank loan (secured) repayable by 2023 at 6.95 per cent* (note 6) £0.04 million term loan (unsecured) repayable by 2026 at 2.5 per cent £3.96 million term bank loan (secured) repayable by 2024 (Bisichi)* £4.4 million term loan (secured) - repayable by 2024 (Broadway Regen) £13.60 million term bank loan (secured) repayable by 2027 at 7.45%* 7 950 3,534 – 8 3,920 4,373 – 12,792 22 – – – 12 – – 13,257 13,291 Borrowings analysis by origin: United Kingdom South Africa 570 1,143 3,225 12,715 9 – 4,399 – 22,061 2023 £'000 22,520 3,563 26,083 50 – – – 20 3,880 – 13,163 17,113 2022 £’000 35,329 3,845 39,174 * Shown after deduction of un-amortised issue costs. Interest payable on the term bank loans is variable being based upon the relevant bank’s base rate. The Bank of England base rate or the Sterling Overnight Index Average (SONIA). No banking covenants were breached by the group during the year, other than mentioned below. The £12.7 million term loan with Phoenix CRE S.à r.l., is no longer included with the Group accounts following the loss of effective control by LAP of its subsidiary Orchard Square Limited. The £13.6 million term loan was taken out in August 2022 with QIB (UK) plc and is secured on specific freehold and leasehold properties, with a secondary charge of £2 million over the assets of LAP the company. The loan has an interest rate of 3.95% above the Bank of England base rate. This loan is covenant compliant. In South Africa, the bank overdraft 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 borrowing 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 £9.37 million (2022: £11.48 million). All banking covenants were either adhered to or waived by Absa Bank Limited during the year. 66 London & Associated Properties PLC 2023 FINANCIAL STATEMENTS Notes to the financial statements 19. BORROWINGS CONTINUED Bisichi holds a £3.96 million 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 the Bank of England base rate. 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 £10.61 million (2022: £10.47 million). No banking covenants were breached during the year. Bisichi intends to renew or refinance the loan prior to the end of its term. The bank loan of £0.95 million (Dragon) which is repayable in July 2024 is secured by way of a first charge on specific freehold property which is included in the financial statements at a value of £2.03 million. The interest cost of the loan is 4.2 per cent above the bank’s base rate. An offer with the existing lender to refinance this loan with a new term loan has been received and the refinance is expected to complete before July 2024. The bank loan of £4.4 million (Broadway Regen) which is repayable in April 2024, is secured by way of a first charge on a specific freehold development property, which is included in the financial statements at £8.1 million. The interest cost of the loan is fixed at 11.0% per annum. Detailed discussions to convert this into a full development loan prior to the commencement of construction activities are taking place and are expected to conclude in Q3 2024. 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 Disposal of subsidiary Valuation movements Balance at 31 December 20. 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 2023 £’000 BANK BORROWINGS 2023 £’000 LEASE OBLIGATIONS 2022 £’000 BANK BORROWINGS 2022 £’000 LEASE OBLIGATIONS 39,174 (453) (138) (12,654) 154 26,083 2,253 (24) (290) – 37 1,976 38,664 3 272 – 235 39,174 2023 HEAD LEASES ON INVESTMENT PROPERTY 1 £’000 121 486 10,029 10,636 (9,048) 1,588 121 437 1,030 1,588 2023 TOTAL £’000 410 622 10,038 11,070 (9,094) 1,976 394 547 1,035 1,976 2023 OFFICE £’000 2023 OTHER £’000 239 - - 239 (16) 223 223 - - 223 50 136 9 195 (30) 165 50 110 5 165 4,247 5 (1,235) – (764) 2,253 2022 TOTAL £’000 467 882 9,914 11,263 (9,010) 2,253 414 787 1,052 2,253 1 Many head leases on investment properties provide for contingent rent in addition to the rents above, usually a proportion of rental income. Lease liabilities greater than one year are £1,592,000 (2022: £1,839,000). Lease liabilities are effectively secured as the rights to the leased asset revert to the lessor in the event of default. 21. PROVISIONS At 1 January Exchange adjustment Unwinding of discount At 31 December The above provision relates to mine rehabilitation costs in Bisichi. 2023 £’000 1,716 (213) 112 1,615 2022 £’000 1,391 6 319 1,716 London & Associated Properties PLC 2023 67 FINANCIAL STATEMENTS Notes to the financial statements 22. FINANCIAL INSTRUMENTS Total financial assets and liabilities The Group’s financial assets and liabilities and their fair values are as follows: Cash and cash equivalents Investments - non-current assets Investments - current assets Trade and other receivables Other assets Bank overdrafts Bank loans Lease liabilities Other liabilities Total financial liabilities before debentures FAIR VALUE £’000 6,978 14,258 734 8,889 6,875 (3,534) (22,571) (1,976) (12,315) (2,662) 2023 CARRYING VALUE £’000 6,978 14,258 734 8,889 6,875 (3,534) (22,549) (1,976) (12,315) (2,640) FAIR VALUE £’000 15,382 12,590 886 8,887 7,268 (3,225) (35,945) (2,253) (12,449) (8,859) 2022 CARRYING VALUE £’000 15,382 12,590 886 8,887 7,268 (3,225) (35,949) (2,253) (12,449) (8,863) Treasury policy The Group enters derivative transactions such as interest rate swaps and forward exchange contracts in order to help manage the financial risks arising from the Group’s activities. The main risks arising from the Group’s financing structure are interest rate risk, liquidity risk, 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 Group has no variable interest term debts which are covered by derivatives. At 31 December 2023, with other variables unchanged, a 1% increase in interest rates would change the profit/loss for the year by £220,000 (2022: £352,000). Interest rate risk Treasury activities take place under procedures and policies approved and monitored by the Board to minimise the financial risk faced by the Group. The £13.6 million bank loan is secured by way of first charge on specific freehold and leasehold properties. The rates of interest vary based on Bank of England base rate in the UK. 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 Bank of England base rate 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 £1.17 million bank loan (Dragon) is secured by way of a first charge on specific freehold property. The rate of interest varies based on the bank’s base rate. The £4.4 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 11.0%. 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 banks’ base rates 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. The £13.6 million bank loan with QIB (UK) plc is secured against properties within LAP’s retail and industrial portfolio. The debt package has a five-year term and is repayable in 2027. The interest cost of the loan is 3.95% above the Bank of England base rate in the UK. In South Africa, a R85 million 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. Bisichi holds a £3.96 million 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 the Bank of England base rate. Bisichi intends to renew or refinance the loan prior to the end of its term. 68 London & Associated Properties PLC 2023 FINANCIAL STATEMENTS Notes to the financial statements 22. FINANCIAL INSTRUMENTS CONTINUED The table below analyses the Group’s financial liabilities (excluding interest rate derivatives) into maturity groupings and also provides details of the liabilities that bear interest at fixed, floating and non–interest bearing rates. Bank overdrafts (floating) Bank loans (fixed) Bank loans (floating) Lease liabilities Trade and other payables (non-interest) Bank overdrafts (floating) Bank loans (fixed) Bank loans (floating) Lease liabilities Trade and other payables (non-interest) 2023 TOTAL £’000 3,534 4,393 14,617 11,070 12,315 45,929 2022 TOTAL £’000 3,225 4,428 32,036 11,263 12,449 63,401 LESS THAN 1 YEAR £’000 3,534 4,381 957 410 12,315 21,597 LESS THAN 1 YEAR £’000 3,225 4,408 14,428 467 12,449 34,977 2-5 YEARS £’000 – 12 13,660 622 – 14,294 2-5 YEARS £’000 – 20 17,608 882 – 18,510 OVER 5 YEARS £’000 – – – 10,038 – 10,038 OVER 5 YEARS £’000 – – – 9,914 – 9,914 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. Market price risk The Group is exposed to market price risk through interest rate and currency fluctuations. Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. 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 £27,671,000 (2022: £35,686,000). 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. Ageing of past due gross trade receivables and the carrying amount net of loss allowances is set out below. 0-30 days 30-60 days 60-90 days 90+ days Total Being: Mining Property 2023 2022 GROSS AMOUNT £’000 LOSS ALLOWANCE £’000 NET CARRYING AMOUNT £’000 GROSS AMOUNT £’000 LOSS ALLOWANCE £’000 NET CARRYING AMOUNT £’000 3,433 - 9 489 3,931 2,951 980 3,931 (308) - (3) (205) (516) (301) (215) (516) 3,125 - 6 284 3,415 2,650 765 3,415 4,438 18 15 932 5,403 3,878 1,525 5,403 - (4) (5) (417) (426) - (426) (426) 4,438 14 10 515 4,977 3,878 1,099 4,977 Gross trade receivables mainly consist of amounts invoiced for rent, service charge and management fees and the sales of coal and all are inclusive of VAT and form part of Revenue (see note 1). Trade receivables are presented in the balance sheet net of loss allowances. The Group applies the IFRS 9 simplified approach to measuring expected credit losses (ECLs) which uses a lifetime expected loss allowance for all trade receivables. Expected loss rates are based on the historic credit loss experienced and adjusted for current and forward information affecting the ability of the individual customers to settle receivables. Trade receivables are written off when there is no reasonable expectation of recovery. In determining the ECLs an analysis of various factors has been performed on a customer by customer basis and considers the impact of economic conditions. These factors include an assessment of the customer’s default risk based on: industry and geographic location; and payment record, which includes how many days past due the receivable is, payment concessions granted and credit rating. ECLs are recognised net of securities held for the customer. London & Associated Properties PLC 2023 69 FINANCIAL STATEMENTS Notes to the financial statements 22. FINANCIAL INSTRUMENTS CONTINUED Potential customers are evaluated for creditworthiness and where necessary collateral is secured. There is no concentration of credit risk within the lease portfolio to either business sector or individual company as the Group has a diverse customer base with no one customer accounting for more than eight per cent of property rental income. The loss allowances for trade receivables as at 31 December reconcile to the opening allowances as follows: Opening loss allowance at 1 January Increase/(decrease) in loan loss allowance recognised in profit and loss during the year Receivables written off during the year as uncollectable Unused amount reversed Closing loss allowance at 31 December 2023 £’000 426 341 (251) - 516 2022 £’000 636 (42) (128) (40) 426 As at 31 December 2023, the Group held a loss allowance provision for trade receivables of £516,000 (2022: £426,000) and the impairment risk remains low with the loss allowance of £516,000 representing 1.0% of total income for the year (2022: 0.4%). The loss allowance at 31 December 2023 relating to property income is £215,000 (2022: £426,000) representing 4.1% of gross property income in the year (2022: 6.8%). 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 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 2023 and 2022 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 at 31 December 2023, 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 £280,000 (2022: £121,000). 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 £466,000 (2022: £201,000). The 25% sensitivity has been determined based on the average historic volatility of the exchange rate. 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 show the Bisichi currency profiles of net monetary assets and liabilities by functional currency: 2023: Sterling South African Rand US Dollar 2022: Sterling South African Rand US Dollar 70 London & Associated Properties PLC 2023 2023 £'000 1,570 1,109 563 3,242 2022 £’000 7,779 2,238 573 10,590 UK £'000 SOUTH AFRICA £'000 12,082 40 2,095 14,217 - (12,583) - (12,583) UK £’000 SOUTH AFRICA £’000 14,715 45 1,971 16,731 - (11,743) - (11,743) FINANCIAL STATEMENTS Notes to the financial statements 22. FINANCIAL INSTRUMENTS CONTINUED Borrowing facilities At 31 December 2023 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 18, 19 and 20. Interest rate and hedge profile Fixed rate borrowings Floating rate borrowings – Other borrowings Average fixed interest rate Weighted average cost of debt on overdrafts, bank loans and debentures Average period for which borrowing rate is fixed 2023 £’000 2022 £’000 4,393 4,428 17,770 22,163 10.96% 10.34% 0.3 years 34,746 39,174 6.97% 8.63% 0.4 years The Group’s floating rate debt bears interest based on Bank of England base rate, banks’ base rate for the term bank loans and bank base rate for the overdraft. 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 swaps 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 TOTAL £'000 14,258 734 - - - - - - - 14,258 734 - LEVEL 1 £’000 LEVEL 2 £’000 LEVEL 3 £’000 TOTAL £’000 2023 GAIN/(LOSS) TO INCOME STATEMENT £’000 856 (26) - 2022 GAIN TO INCOME STATEMENT £’000 12,590 886 - - - - - - - 12,590 886 - 718 40 69 Capital structure The Group sets the amount of capital in proportion to risk. It ensures that the capital structure is commensurate to the economic conditions and risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may vary the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The Group considers its capital to include share capital, share premium, capital redemption reserve, translation reserve and retained earnings, but excluding the interest rate derivatives. Consistent with others in the industry, the Group monitors its capital by its debt to equity ratio (gearing levels). This is calculated as the net debt (loans less cash and cash equivalents) as a percentage of the equity calculated as follows: Total debt Less cash and cash equivalents Net debt Total equity 2023 £'000 28,060 (6,978) 21,082 48,313 43.6% 2022 £’000 41,427 (15,382) 26,045 53,715 48.5% The Group does not have any externally imposed capital requirements. Following the introduction of IFRS 16 total debt includes lease liabilities. London & Associated Properties PLC 2023 71 FINANCIAL STATEMENTS Notes to the financial statements 22. FINANCIAL INSTRUMENTS CONTINUED 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 2023 £'000 6,978 2022 £’000 15,382 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 2023 £'000 2022 £’000 8,873 17,211 26,084 22,061 17,113 39,174 Certain borrowing agreements contain financial and other conditions that if contravened by the Group, could alter the repayment profile. 23. DEFERRED TAX ASSET / (LIABILITY) 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 asset / (liability) at end of year: There is no time limit in respect of the Group tax loss relief. 2023 £’000 (752) 1,011 173 432 (1,265) (4,558) 560 2,665 3,030 432 2022 £’000 (309) (465) 22 (752) (1,140) (4,302) 544 1,439 2,707 (752) In addition, the Group has unused losses and reliefs with a potential value of £12,345,000 (2022: £11,605,000), which have not been recognised as a deferred tax asset. As the Group returns to profit, these losses and reliefs can be utilised. The valuation of losses is based on a 25% tax rate (2022: 25%). 24. SHARE CAPITAL The Company has one class of ordinary shares which carry no right to fixed income. NUMBER OF ORDINARY 10P SHARES 2023 NUMBER OF ORDINARY 10P SHARES 2022 110,000,000 85,542,711 (216,715) 85,325,996 110,000,000 85,542,711 (216,715) 85,325,996 2023 £’000 11,000 8,554 (22) 8,532 2022 £’000 11,000 8,554 (22) 8,532 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 72 London & Associated Properties PLC 2023 FINANCIAL STATEMENTS Notes to the financial statements FINANCIAL STATEMENTS Notes to the financial statements 24. SHARE CAPITAL CONTINUED Treasury shares NUMBER OF ORDINARY 10P SHARES COST / ISSUE VALUE Shares held in Treasury at 1 January Issued for share incentive plan - dividends investment (Dec 2020 - 10.5p) Shares held in Treasury at 31 December 216,715 – 216,715 218,197 (1,482) 216,715 2023 2022 2023 £’000 144 – 144 2022 £’000 144 – 144 Share Option Schemes Employees’ share option scheme (Approved scheme) At 31 December 2023 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 His 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 2023 is as follows: CHANGES DURING THE YEAR AT 1 JANUARY 2023 OPTIONS EXERCISED OPTIONS GRANTED OPTIONS LAPSED 2,367,604 Shares issued to date Shares allocated over which options have not been granted 1,549,955 Total shares allocated for issue to employees under the scheme 3,917,559 – – – – – – – – – AT 31 DECEMBER 2023 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 2023 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 2023 is as follows: CHANGES DURING THE YEAR AT 1 JANUARY 2023 OPTIONS EXERCISED OPTIONS GRANTED OPTIONS LAPSED 450,000 Shares issued to date 550,000 Shares allocated over which options have not yet been granted Total shares allocated for issue to employees under the scheme 1,000,000 – – – – – – – – – The Bisichi PLC Unapproved Option Schemes Details of the share option schemes in Bisichi are as follows: AT 31 DECEMBER 2023 450,000 550,000 1,000,000 YEAR OF GRANT 2022 SUBSCRIPTION PRICE PER SHARE PERIOD WITHIN WHICH OPTIONS EXERCISABLE NUMBER OF SHARES FOR WHICH OPTIONS OUTSTANDING AT 31 DECEMBER 2022 NUMBER OF SHARE OPTIONS ISSUED/EXERCISED/ (CANCELLED) DURING YEAR NUMBER OF SHARES FOR WHICH OPTIONS OUTSTANDING AT 31 DECEMBER 2023 352.0p Feb 2022 - Feb 2032 760,000 – 760,000 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 Bisichi 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 2022 options which are outstanding at 31 December 2023. Outstanding at 1 January Cancelled during the year Issued during the year Outstanding at 31 December Exercisable at 31 December 2023 WEIGHTED AVERAGE EXERCISE PRICE 352.0p - - 352.0p 352.0p 2023 NUMBER 760,000 – – 760,000 760,000 2022 WEIGHTED AVERAGE EXERCISE PRICE 79.5p 79.5p 352.0p 352.0p 352.0p 2022 NUMBER 680,000 (680,000) 760,000 760,000 760,000 London & Associated Properties PLC 2023 73 FINANCIAL STATEMENTS Notes to the financial statements 25. NON–CONTROLLING INTEREST (“NCI”) As at 1 January Share of profit for the year Dividends paid Shares issued Exchange movement As at 31 December The following subsidiaries had material NCI: Bisichi PLC Black Wattle Colliery (Pty) Ltd 2023 £’000 21,169 70 (936) – (480) 19,823 2022 £’000 10,536 18,462 (8,031) 237 (35) 21,169 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 Profit for the year attributable to owners of the parent Profit for the year attributable to NCI 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 current assets at 31 December Cash flows From operating activities From investing activities From financing activities Net cash flows 2023 £’000 49,253 259 51 310 (469) (206) (675) 45,292 14,489 59,781 (24,241) (1,946) (26,187) 33,594 2,798 (6,479) (4,235) (7,916) 2022 £’000 95,111 17,612 8,494 26,106 (19) (24) (43) 40,643 23,112 63,755 (21,333) (6,861) (28,194) 35,561 31,252 (16,410) (7,934) 6,908 The non–controlling interest comprises of a 37.5% shareholding in Black Wattle Colliery (Pty) Ltd, a coal mining company incorporated in South Africa. Summarised financial information reflecting 100% of the underlying subsidiary’s relevant figures, is set out below. BLACK WATTLE COLLIERY (PTY) LIMITED (“BLACK WATTLE”) Revenue Expenses Profit 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 74 London & Associated Properties PLC 2023 2023 £’000 47,423 (47,275) 148 – 148 18,843 9,033 (20,460) (2,252) 5,164 2022 £’000 93,356 (63,289) 30,067 – 30,067 16,325 11,752 (18,873) (3,522) 5,682 FINANCIAL STATEMENTS Notes to the financial statements 25. NON–CONTROLLING INTEREST (“NCI”) CONTINUED The non-controlling interest originates from the disposal of a 37.5% shareholding in Black Wattle Colliery (Pty) Ltd in 2010 when the total issued share capital in Black Wattle Colliery (Pty) Ltd was increased from 136 shares to 1,000 shares at par of R1 (South African Rand) through the following shares issue: • a subscription for 489 ordinary shares at par by Bisichi Mining (Exploration) Limited increasing the number of shares held from 136 ordinary shares to a total of 625 ordinary shares; • a subscription for 110 ordinary shares at par by Vunani Mining (Pty) Ltd; • a subscription for 265 “A” shares at par by Vunani Mining (Pty) Ltd On 12 April 2022 the total issued share capital in Black Wattle Colliery (Pty) Ltd was increased further from 1000 shares to 1002 shares at par of R1 through the following share issue: • a subscription of 1 “B” Share at par by Bisichi Mining (Exploration Limited); • a subscription of 1 “B” Share 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 Colliery (Pty) Ltd. 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 R832,075,000. A non-controlling interest of 15% in Black Wattle Colliery (Pty) Ltd 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 R832,075,000. The “B” shares rank pari passu with the ordinary shares save that they have sole rights to the distributable profits attributable to certain mining reserves held by Black Wattle Colliery (Pty) Ltd. A non-controlling interest is recognised for all profits distributable to the “B” shares held by Vunani Mining (Pty) Ltd from the date of issue of the shares (12 April 2022). 26. RELATED PARTY TRANSACTIONS Related party: Simon Heller Charitable Trust Current account Loan account Directors and key management M A Heller, J A Heller and A R Heller J Mintz C A Parritt R Priest Totals at 31 December 2023 Totals at 31 December 2022 COST RECHARGED (BY) / TO RELATED PARTY £’000 AMOUNTS OWED (TO) / BY RELATED PARTY £’000 ADVANCED BY RELATED PARTY £’000 (63) – 18 – (18) (35) (98) (98) (i) (ii) (ii) – (700) – 10 – (9) (699) (699) – – – – – – – – Nature of costs recharged – (i) Property management fees (ii) Consultancy fees. Directors JA Heller and AR Heller have an interest in a number of private property companies. London & Associated Properties PLC uses agents to assist with day to day property management matters. In their agency capacity those agents also provide support to these private property companies. The approximate value of the services amounted to £70,000 (2022 £70,000). In addition the Company received management fees of £10,000 (2022: £10,000) for work done for two charitable foundations, the Michael & Morven Heller Charitable Foundation and the Simon Heller Charitable Trust. Until his death Sir Michael Heller was also interested in the private property companies in which JA Heller and AR Heller are interested. The Simon Heller Trust has placed on deposit with LAP £700,000 at an interest rate of 9% which is refundable on demand. An interest free loan of £10,000 made to J Mintz remained outstanding at year end. C A Parritt provided 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 (2022: £41,000) and no repayment (2022: £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 £2,279,000 (2022: £1,981,000). All other disclosures required, including interest in share options in respect of those directors, are included within the remuneration report. London & Associated Properties PLC 2023 75 FINANCIAL STATEMENTS Notes to the financial statements 27. EMPLOYEES The average number of employees, including directors, of the Group during the year was as follows: Production Administration Staff costs during the year were as follows: Salaries and other costs Social security costs Pension costs Share based payments 2023 209 39 248 2023 £’000 7,825 497 538 – 8,860 2022 213 33 246 2022 £’000 10,323 751 382 2,220 13,676 28. CAPITAL COMMITMENTS There are no commitments for capital expenditure approved or contracted for at the year end (2022: £nil). 29. 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: 2023 2024 2025 2026 2027 + 2023 £’000 2,920 2,569 2,206 1,756 12,679 22,130 2022 £’000 4,245 3,555 3,022 2,601 15,253 28,676 30. CONTINGENT LIABILITIES AND EVENTS AFTER THE REPORTING PERIOD An exit fee of £220,000 is due to Paragon bank, the lender to our development in West Ealing when this loan is repaid. Details of any other contingent liabilities are disclosed in note 22. (2022: £Nil), 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 2023 £’000 43 1,614 41 1,698 2022 £’000 49 1,715 47 1,811 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 ended 31 December 2020 and is related to events which occurred prior to the years ended 31 December 2020. As at 26 April 2024, the Group 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, the Group believes that the dispute will be resolved in its favour. There have been no events or transaction that require adjustment or disclosure. 76 London & Associated Properties PLC 2023 FINANCIAL STATEMENTS Notes to the financial statements 31. COMPANY FINANCIAL STATEMENTS Company balance sheet at 31 December 2023 Fixed assets Tangible assets Other investments: Associated company Subsidiaries and others Current assets Debtors Bank balances Creditors Amounts falling due within one year Net current liabilities Total assets less current liabilities Creditors Amounts falling due after more than one year Net assets Capital and reserves Share capital Share premium account Capital redemption reserve Treasury shares Retained earnings Shareholders’ funds NOTES 31.3 31.4 31.4 31.5 31.6 31.7 31.9 31.9 2023 £’000 2022 £’000 443 728 489 672 1,161 1,604 13,444 3,398 16,842 (1,897) 14,945 16,549 489 672 1,161 1,889 15,346 3,867 19,213 (1,976) 17,237 19,126 (5) 16,544 (227) 18,899 8,554 4,866 47 (144) 3,221 16,544 8,554 4,866 47 (144) 5,576 18,899 The loss for the financial year was £2,355,000 (2022: loss £2,651,000) These financial statements were approved by the board of directors and authorised for issue on 29 April 2024 and signed on its behalf by: John Heller Director Jonathan Mintz Director Company Registration No. 341829 London & Associated Properties PLC 2023 77 FINANCIAL STATEMENTS Notes to the financial statements 31. COMPANY FINANCIAL STATEMENTS CONTINUED COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2023 Balance at 1 January 2022 Loss for the year Total comprehensive expense Balance at 31 December 2022 Loss for the year Total comprehensive expense Balance at 31 December 2023 SHARE CAPITAL £’000 SHARE PREMIUM £’000 CAPITAL REDEMPTION RESERVE £’000 TREASURY SHARES £’000 8,554 – – 8,554 – – 8,554 4,866 – – 4,866 – – 4,866 47 – – 47 – – 47 (144) – – (144) – – (144) RETAINED EARNINGS EXCLUDING TREASURY SHARES £’000 8,227 (2,651) (2,651) 5,576 (2,355) (2,355) 3,221 TOTAL EQUITY £’000 21,550 (2,651) (2,651) 18,899 (2,355) (2,355) 16,544 £3.2 million (2022: £5.6 million) of retained earnings (excluding treasury shares) is distributable. 31.1. COMPANY Accounting policies The following are the main accounting policies of the Company: Basis of preparation The financial statements have been prepared on a going concern basis and in accordance with Financial Reporting Standard 101 ’Reduced Disclosure Framework’ (FRS 101) and Companies Act 2006. The financial statements are prepared under the historical cost convention as modified to include the revaluation of freehold and leasehold properties and fair value adjustments in respect of current asset investments and interest rate hedges. The results of the Company are included in the consolidated financial statements. No profit or loss is presented by the Company as permitted by Section 408 of the Companies Act 2006. In these financial statements, the company has applied the exemptions available under FRS 101 in respect of the following disclosures: • Cash Flow Statement and related notes; • Comparative period reconciliations for share capital, tangible fixed assets and intangible assets; • Disclosures in respect of transactions with wholly owned subsidiaries; • Disclosures in respect of capital management; • The effects of new but not yet effective IFRSs; • Disclosures in respect of the compensation of Key Management Personnel. As the consolidated financial statements include the equivalent disclosures, the Company has also taken the exemptions under FRS 101 available in respect of the following disclosures: • IFRS 2 Share Based Payments in respect of Group settled share based payments; • The disclosures required by IFRS 7 and IFRS 13 regarding financial instrument disclosures have not been provided apart from those which are relevant for the financial instruments which are held at fair value and are not either held as part of the trading portfolio or derivatives. Key judgements and estimates The preparation of the financial statements requires management to make assumptions and estimates that may affect the reported amounts of assets and liabilities and the reported income and expenses, further details of which are set out below. Although management believes that the assumptions and estimates used are reasonable, the actual results may differ from those estimates. Further details of the estimates are contained in the Directors’ Report and in the Group accounting policies. INVESTMENTS IN SUBSIDIARIES, ASSOCIATED UNDERTAKINGS AND JOINT VENTURES Investments in subsidiaries, associated undertakings and joint ventures are held at cost less accumulated impairment losses. Fair value measurements of investment properties and investments An assessment of the fair value of certain assets and liabilities, in particular investment properties, is required. In such instances, fair value measurements are estimated based on the amounts for which the assets and liabilities could be exchanged between market participants. To the extent possible, the assumptions and inputs used take into account externally verifiable inputs. However, such information is by nature subject to uncertainty. The fair value measurement of the investment properties may be considered to be less judgemental where external valuers have been used as is the case with the Company. 78 London & Associated Properties PLC 2023 FINANCIAL STATEMENTS Notes to the financial statements 31.1. COMPANY CONTINUED The following accounting policies are consistent with those of the Group and are disclosed on page 48 to 54 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 31.2. RESULT FOR THE FINANCIAL YEAR The Company’s result for the year was a loss of £2,355,000 (2022: loss of £2,651,000). 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. 31.3. TANGIBLE ASSETS INVESTMENT PROPERTIES OFFICE FREEHOLD £’000 LEASEHOLD OVER 50 YEARS £’000 LEASEHOLD UNDER 50 YEARS £’000 EQUIPMENT AND MOTOR VEHICLES £’000 OFFICE BUILDING £’000 – – – – – – – – – – – – – – – – – – – – – – – – – – – – 185 – – (10) 175 175 – 175 – – – – 185 175 77 8 (19) – 66 – 66 66 23 – (2) 21 54 45 796 – – – 796 – 796 796 307 266 – 573 489 223 TOTAL £’000 1,058 8 (19) (10) 1,037 175 862 1,037 330 266 (2) 594 728 443 Cost or valuation at 1 January 2023 Additions in the year Disposals Decrease on revaluation Cost or valuation at 31 December 2023 Representing assets stated at: Valuation Cost Depreciation at 1 January 2023 Charge for the year Disposals Depreciation at 31 December 2023 Net book value at 1 January 2023 Net book value at 31 December 2023 The freehold and leasehold properties, excluding the present value of head leases and directors’ valuations, were valued as at 31 December 2023 by professional firms of chartered surveyors. The valuations were made at fair value. The directors’ property valuations were made at fair value. Allsop LLP Add: Present value of headleases 2023 £’000 170 170 5 175 2022 £’000 180 180 5 185 London & Associated Properties PLC 2023 79 FINANCIAL STATEMENTS Notes to the financial statements 31.3. TANGIBLE ASSETS CONTINUED The historical cost of investment properties was as follows: Cost at 1 January 2023 Cost at 31 December 2023 FREEHOLD £’000 LEASEHOLD OVER 50 YEARS £’000 – – – – 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 £nil (2022: £nil). 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 £0.3 million (2022: £0.3 million). 31.4. OTHER INVESTMENTS COST OR VALUATION At 1 January 2023 At 31 December 2023 SHARES IN SUBSIDIARY COMPANIES £’000 SHARES IN JOINT VENTURES £’000 508 508 164 164 TOTAL £’000 1,161 1,161 SHARES IN ASSOCIATE £’000 489 489 Subsidiary companies Details of the Company’s subsidiaries, joint ventures and associates are set out in note 12. Dragon is a joint venture and Bisichi and Development Physics are associates of the Company. In 2022 the Company’s investment Orchard Square Limited investment was impaired to a carrying value of £nil and, as explained in note 6, following the loss of effective control of this subsidiary, no value is attributed to it at 31 December 2023. 31.5. DEBTORS Trade debtors Amounts due from associate and joint ventures Amounts due from subsidiary companies Other debtors Prepayments and accrued income 31.6. CURRENT LIABILITIES 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 Borrowings The company has no bank borrowings. 80 London & Associated Properties PLC 2023 2023 £’000 27 1,978 11,138 157 144 13,444 2022 £’000 66 1,380 12,931 818 151 15,346 2023 £’000 45 382 33 118 223 738 358 2022 £’000 57 384 120 39 252 786 338 1,897 1,976 FINANCIAL STATEMENTS Notes to the financial statements 31.7. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR Lease liabilities 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 1 Many head leases on investment properties provide for contingent rent in addition to the rents above, usually a proportion of rental income. Lease liabilities greater than one year are £5,000 (2022: £226,000). Lease liabilities are effectively secured as the rights to the leased asset revert to the lessor in the event of default. 31.8. 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 Loss relief Deferred tax asset at year end 2023 £’000 – – – (132) 290 (4) (154) – 2023 £’000 5 5 2022 £’000 227 227 2023 HEAD LEASES ON INVESTMENT PROPERTY 1 £’000 2023 TOTAL £’000 2023 OFFICE £’000 2022 TOTAL £’000 239 2 12 253 (25) 228 223 2 3 228 - 2 12 14 (9) 5 - 2 3 5 239 - - 239 (16) 223 223 - - 223 287 241 12 540 (62) 478 251 224 3 478 2022 £’000 (451) 451 – (39) 290 447 (698) – London & Associated Properties PLC 2023 81 FINANCIAL STATEMENTS Notes to the financial statements 31.9. SHARE CAPITAL Details of share capital, treasury shares and share options are set out in note 24. 31.10. RELATED PARTY TRANSACTIONS Related party: Development Physics Limited Current account Dragon Retail Properties Limited Current account West Ealing Projects Limited Current account Bisichi Mining PLC Current account Simon Heller Charitable Trust Current account Loan account Directors and key management M A Heller, J A Heller and A R Heller J Mintz C A Parritt R Priest London & Associated Securities Totals at 31 December 2023 Totals at 31 December 2022 COST RECHARGED TO (BY) RELATED PARTY £’000 – 36 – 200 (63) – 18 – (18) (35) – 138 138 AMOUNTS OWED BY (TO) RELATED PARTY £’000 ADVANCED TO (BY) RELATED PARTY £’000 226 (33) 84 – 1,619 381 – – (700) – 10 – (9) – 1,113 561 – – – – – – – – 465 306 (i) (ii) (i) (iii) (iii) 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 41.602 per cent ownership of ‘Bisichi’. Other details of related party transactions are given in note 26. 31.11. 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 31.12. CAPITAL COMMITMENTS There was a capital commitment of £nil at 31 December 2023, being approved and contracted for (2022: £nil). 2023 2022 24 18 2023 £’000 1,330 171 89 1,590 2022 £’000 1,432 171 82 1,685 82 London & Associated Properties PLC 2023 FINANCIAL STATEMENTS Notes to the financial statements 31.13. 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: 2023 2024 2025 31.14. CONTINGENT LIABILITIES AND POST BALANCE SHEET EVENTS There were no contingent liabilities at 31 December 2023 (2022: £Nil). There have been no events or transaction that require adjustment or disclosure. 2023 £’000 7 5 - 12 2022 £’000 7 7 5 19 London & Associated Properties PLC 2023 83 FINANCIAL STATEMENTS FINANCIAL STATEMENTS Five year financial summary Portfolio size Investment properties–LAP^ Investment properties–Dragon Retail Properties Investment properties–Bisichi^ Assets held for sale-LAP Inventories-LAP PORTFOLIO ACTIVITY Acquisitions Disposals (note 6, 13) Additions to inventory at cost CONSOLIDATED INCOME STATEMENT Group income (Loss)/profit before tax Taxation (Loss)/profit attributable to shareholders (Loss)/profit per equity 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 Consolidated cash flow statement Cash generated from operations ^ Excluding the present value of head leases 2023 £M 2022 £M 2021 £M 2020 £M 2019 £M 22 2 11 1 9 45 £M - (14.75) 0.78 (13.97) £M 53.18 (3.48) (0.31) (3.86) (4.52)p 0.00p £M 28.49 19.11 43.92p £M 3.69 23 2 10 – 23 58 £M 2.53 (5.70) 0.75 (2.42) £M 100.24 33.17 (12.00) 2.70 3.17p 0.00p £M 32.55 23.47 38.14p £M 39.39 25 2 11 1 25 64 £M 0.09 (4.17) 1.02 (3.06) £M 56.48 1.52 (0.70) (0.15) (0.18)p 0.00p £M 29.70 30.15 34.78p £M 5.82 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 £M 1.64 31 2 12 – 27 72 £M 0.14 (12.59) 0.41 (12.04) £M 63.97 (4.54) (0.95) (6.48) (7.59)p 0.00p £M 36.73 27.65 43.04p £M 14.98 84 London & Associated Properties PLC 2023 www.lap.co.uk FSC® C001785 LONDON & ASSOCIATED PROPERTIES PLC 12 LITTLE PORTLAND STREET LONDON W1W 8BJ EMAIL: ADMIN@LAP.CO.UK 

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