Source - LSE Regulatory
RNS Number : 7985Y
M. P. Evans Group PLC
14 September 2020
 

M.P. EVANS GROUP PLC

M.P. Evans Group PLC ("MP Evans" or "the Group"), a producer of Indonesian palm oil, announces its unaudited interim results for the six months ended 30 June 2020.

highlights

·    16% increase in first-half crop

·    31% increase of CPO produced, including fresh fruit bunches bought in

·    23% increase in average price of CPO cif Rotterdam to US$648 per tonne

·    Cost of palm product maintained at US$385 per tonne

·    Operating profit US$6.0 million (2019 US$1.0 million)

·    Interim dividend maintained at 5.00 pence per share

Post-period end

·    Agreement to dispose of 70 hectares of land in Malaysia for US$24.1 million


Commenting on the results, the chairman of M.P. Evans, Peter Hadsley-Chaplin, said: -

"Excellent crop growth during the first half of 2020, combined with a marked increase in the price of CPO, produced a healthy increase in profit. Operating profit for the period was US$6.0 million compared with US%1.0 million in 2019. World demand for CPO is recovering from the immediate effects of the Covid-19 pandemic and, given both the crop and price prospects for the coming months, the Group is maintaining its interim dividend."


14 September 2020

Enquires:

M.P. Evans Group PLC

020 7220 0500 on 14 September 2020 only


Thereafter telephone 01892 516333



Peter Hadsley-Chaplin

Chairman

Tristan Price

Chief executive

Matthew Coulson

Finance director



finnCap

020 7220 0500

Tim Redfern


Chris Raggett


Sunila de Silva




Peel Hunt LLP

020 7418 8900

Dan Webster


George Sellar


Guy Pengelley




Hudson Sandler

020 7796 4133

Charlie Jack


Elfie Kent


An analysts' meeting will be held remotely at 9.30 a.m. and those wishing to participate should contact mpevans@hudsonsandler.com for further details.

 

Overview

Operating profit for the first half of 2020 was US$6.0 million compared with US$1.0 million in the first half of 2019. This reflected an increase in gross profit from US$2.2 million to US$8.9 million as both prices and volumes increased. At the same time, cost per tonne remained the same. Overall, crop from the Group's areas rose by 16% during the first half of 2020 compared with the previous year, as did crop in the scheme-smallholder areas managed by the Group on behalf of smallholder co-operatives. There was a rather stronger increase, of 157%, in crop bought from third-parties following a decision in the middle of 2019 to promote purchases of outside crop. This increase occurred in all areas, but notably at Kota Bangun where the Group has been able to purchase fresh fruit bunches ("ffb") from other commercial operators who have not yet built their own mill. Altogether, therefore, the Group processed 34% more ffb than during the first half of 2019.

The Group holds itself to high operational standards in its plantations and its mills. This can be seen in the consistently high extraction rates that the Group achieves. This has continued to be the case in 2020: oil extraction in Group mills was 23.5%. By comparison with 2019, the Group's rate of oil extraction fell marginally, by 0.1%, as a result of a sharp increase in the proportion of independent smallholder fruit purchased by the Pangkatan mill. Whilst these purchases represent a profitable use of spare capacity at the mill, the quality of the bought-in ffb is lower than that produced in the Group's own areas and those of its scheme smallholders. This also affected the rate of palm-kernel extraction in Pangkatan.

The Group produced positive operating cash flow of US$4.5 million in the six months to June 2020 (2019 US$4.5 million) even after taking into account an increase in working capital of US$5.2 million. Capital investment of US$16.6 million was met through operating cash flows, planned use of the Group's cash balance and a small amount of additional debt. At the end of June, the Group's gross debt stood at US$97.7 million compared with US$94.5 million at the end of 2019. The Group continues to manage its debt in a careful and conservative manner. This has allowed it to continue its investment in new plantations and milling capacity at an optimal rate. The Group therefore expects substantially to complete the investment programme on its existing projects by the end of 2022, very significantly reducing demands on operating cash flow whilst crop and production levels are expected to continue to grow. If maintained, the recovery in CPO prices discussed under 'The palm-oil market' below would lead to a reduction in the Group's net debt position from its high point, funded from within existing facilities, reached during 2020.

Whilst not accounted for in the results to June 2020, following the end of the half the Group signed a conditional agreement to dispose of 70 hectares of land in Malaysia for US$23.5 million. This value was in line with the valuation published in its 2019 annual report. The proceeds will be paid over a three-year period and support investment in the Group's Indonesian oil-palm projects.

Covid-19 pandemic and other risks

The global Covid-19 pandemic has had little effect on the Group's operations. The wellbeing of our employees has remained a priority, and as soon as the widespread nature of the virus became known, preventative measures were quickly introduced to protect the Group's employees. These included restricting staff travel, limiting access to our plantations and putting the Jakarta office onto remote working. All estates and mills have continued to operate without interruption during the pandemic; its effect on the price of CPO is described in the section "The palm-oil market" below. In light of the potential for new risks to emerge as a result of the Covid-19 pandemic, the Group has reviewed its principal risks. It concluded there were no additional risks to those disclosed in the 2019 annual report.

Dividend

The board proposes to pay an interim dividend of 5.00 pence per share (2019 - 5.00 pence per share). As previously announced, the board intends, where possible, to increase or at least to maintain the level of normal dividends. The board plans to maintain this long-standing policy given the unusual circumstances leading to price weakness during the earlier part of the year, significant price increases since the middle of May, and strong increases in crop and production projected over the coming years.

The palm-oil market

The palm-oil price rose strongly at the end of 2019 and into the start of 2020. This rise was prompted by expectations of modest vegetable-oil supply increases during 2020 failing to match increased demand, combined with depleted stock levels compared with recent years. However, the price of crude palm oil fell sharply from the middle of February as the global Covid-19 pandemic took hold and bore down on demand and trade: exports of CPO during the first half of 2020 were 13% lower than a year earlier. Global CPO stocks began to build up again in the second quarter, having fallen in the first months of the year, but remain at a multi-year low. Hence, despite a background of tight supply of all major vegetable oils, the price reached a low point of US$510 per tonne cif Rotterdam in the middle of May. During June, trade in CPO picked up and the price recovered on a rising trend to reach US$585 at the end of the month. On average, the price of CPO cif Rotterdam during the first half of 2020 was US$648 per tonne, 23% higher than the US$528 per tonne recorded in the first half of 2019.

Palm-kernel-oil prices strengthened in 2020 compared with 2019. This was particularly noticeable at the beginning of the year, after which prices fell despite a sharp dip in production of its main competitor, coconut oil, during the second quarter.

Results for the period

Crops

In total, crops from the Group's own areas increased to 334,100 tonnes compared with 287,200 in the first half of 2019. The very high pace of crop growth during the first two months of the year moderated coming into the second quarter and then maintained a steady rate to finish the half 16% ahead of crops in the same period of 2019.

This increase in crop was due largely to continued strides being made at Bumi Mas, the Group's newest estate purchased in 2017, and at Musi Rawas. At Bumi Mas, improvements in agronomic standards as well as investment in the road network have allowed the Group to access, harvest and transport increasing ffb from this highly promising estate. In Musi Rawas, young areas continue to come into maturity and so are being harvested for the first time. The project is still young, so crop increase is coming off a low base at present but is expected to strengthen significantly over the coming years. Replanting carried out at the long-held Pangkatan group and Simpang Kiri estates is becoming visible in the crop figures.

Drier weather in the middle of 2019 affected the formation of ffb in Kota Bangun and, more acutely, in Bangka. Kota Bangun was able to achieve the same level of crop in 2020 as in 2019 whilst Bangka saw an 8% decline. Crop is expected to increase during the second half in both areas, but in Bangka over the year as a whole is likely to fall short of the levels achieved in 2019. In Kota Bangun, the second mill begins its commissioning later this month, and planting of areas previously affected by flooding, but now protected by bunds, is nearing completion. The mill at Bumi Mas is under construction.  There is a risk that its planned completion in mid 2021 will be delayed due to travel restrictions imposed as a result of the Covid-19 pandemic. 

At 16%, the level of crop increase from scheme smallholders was the same as that for the Group, rising to 84,600 tonnes. The Group's mills are designed to handle the Group's and scheme smallholders' crop at the point these plantings reach peak yield; up to this point the mills have spare capacity, which is being profitably used by buying in ffb from third parties. The Group purchased a significantly higher volume of ffb from third parties, notably in Kota Bangun and Pangkatan. In Kota Bangun, purchases from independent sources had been reduced in 2019 as the Group searched for reliable sources of ffb. Taking this into account, total crop increased by 34%.

Crop on the Group's 38%-owned associated-company estate, Kerasaan, was 29,400 tonnes during the first half of 2020, 8% higher than in the previous year as the estate is gradually increasing yield following replanting carried out between 2008 and 2012.

Production

The Group produced 124,800 tonnes of CPO in the first half of 2020, and 27,800 tonnes of palm kernels. Production of CPO was 31% higher than in the previous year; that of palm kernels 28% higher. These rates were lower than the increase in total ffb processed since the crop from newer areas is sold to outside mills which offer lower rates of extraction than the Group's own mills. Efficiency in the Group's mills has remained high. Aggregated extraction in its own mills was 23.5%, notwithstanding the significant tonnage of ffb bought from independent smallholders that is of a lower quality than the Group's own ffb. At Kota Bangun, the rate of palm-kernel extraction fell due to the crop from very young palms being purchased from outside which, as expected, contains smaller kernels.

Whilst the Group does not have its own mills at Bumi Mas, Musi Rawas and Simpang Kiri, it sells its ffb to local mills based on the commodity price for CPO and an assumed rate of extraction. To reflect the substance of this arrangement, oil produced from the crop grown on these estates has been included in CPO production. The extraction rate offered by third-party mills fluctuates in line with their own capacity and availability of crop generally.

Of the Group's production, 53% is certified sustainable palm oil. Certification is awarded to mills rather than for the crop, so as the Group's crop increases in areas where it does not yet have its own mills, this percentage will fall in the short term. However, the percentage of sustainable production will then rise as the Group constructs its own mills. The Group is committed to achieving full traceability of the CPO it produces, so is working with independent smallholders who want to supply it with ffb to achieve Roundtable for Sustainable Palm Oil ("RSPO") certification. By 2024, the Group anticipates that all of its production, other than from Simpang Kiri, will be certified sustainable. In the meantime, all of the Group's crop and that of its scheme smallholders is produced in full accordance with RSPO standards.

Crops, production and selling-price details for the estates controlled by the Group are as follows:-


6 months ended 


6 months ended 

Year ended 


30 June 

Increase/

30 June 

31 December 


2020 

(decrease)

2019 

2019 


Tonnes 

%

Tonnes 

Tonnes 

Crop
Fresh fruit bunches





Own crops





Kota Bangun

86,300 

86,300 

194,000 

Bangka

52,000 

(8) 

56,600 

128,900 

Pangkatan group

79,000 

10 

71,500 

164,300 

Bumi Mas

78,900 

60 

49,300 

122,000 

Musi Rawas

15,800 

210 

5,100 

15,400 

Simpang Kiri

22,100 

20 

18,400 

38,700 


334,100 

16 

287,200 

663,300 

Scheme smallholder crops





Kota Bangun

38,900 

38,600 

87,300 

Bangka

24,900 

23,700 

57,500 

Bumi Mas

13,800 

68 

8,200 

19,600 

Musi Rawas

7,000 

192 

2,400 

7,700 


84,600 

16 

72,900 

172,100 

Independent smallholder crop





processed





Kota Bangun

53,600 

807 

5,900 

39,600 

Bangka

58,900 

63 

36,200 

105,200 

Pangkatan group

18,400 

109 

8,800 

21,300 


130,900 

157 

50,900 

166,100 


549,600 

34 

411,000 

1,001,500 

 

Production





Crude palm oil





Kota Bangun

43,600 

37 

31,800 

79,000 

Bangka

31,400 

16 

27,000 

67,400 

Pangkatan group

22,000 

19 

18,500 

42,800 


97,000 

25 

77,300 

189,200 

Bumi Mas

18,400 

53 

12,000 

29,500 

Musi Rawas

4,600 

188 

1,600 

4,800 

Simpang Kiri

4,800 

17 

4,100 

8,400 


27,800 

57 

17,700 

42,700 


124,800 

31 

95,000 

231,900 

Palm kernels





Kota Bangun

8,600 

26 

6,800 

17,000 

Bangka

7,700 

18 

6,500 

16,200 

Pangkatan group

5,100 

13 

4,500 

10,100 


21,400 

20 

17,800 

43,300 

Bumi Mas

4,400 

63 

2,700 

6,800 

Musi Rawas

1,000 

150 

400 

1,100 

Simpang Kiri

1,000 

11 

900 

1,800 


6,400 

60 

4,000 

9,700 


27,800 

28 

21,800 

53,000 






Extraction rate


Crude palm oil





Kota Bangun

24.4 

24.3 

24.6 

Bangka

23.1 

23.1 

23.1 

Pangkatan group

22.6 

(2)

23.1 

23.1 


23.5 

23.6 

23.7 

Bumi Mas

19.9 

(4)

20.8 

20.9 

Musi Rawas

20.3 

(6)

21.5 

20.6 

Simpang Kiri

21.5 

(4)

22.3 

21.8 






Palm kernels





Kota Bangun

4.8 

(8)

5.2 

5.3 

Bangka

5.7 

5.6 

5.6 

Pangkatan group

5.2 

(5)

5.5 

5.4 


5.2 

(3)

5.4 

5.4 

Bumi Mas

4.8 

4.7 

4.8 

Musi Rawas

4.6 

 (4)

4.8 

4.6 

Simpang Kiri

4.5 

(10)

5.0 

4.8 






Average selling prices

US$


US$

US$ 

Crude palm oil (cif Rotterdam)

648 

19 

528 

556 

Palm-kernel oil

718 

16 

605 

668 

Costs

The cost per tonne of palm product (CPO and palm kernels) produced from the Group's estates was US$385, the same level as in the first half of 2019. There was a small increase in unit costs associated with additional labour deployed to maintain newly-mature areas, and there was a significant increase in depreciation on mature plantation hectarage. These were offset by efficiencies in other areas and higher volumes of crop processed. As is usual, the unit cost is expected to fall during the second half of the year.

The cost of palm product from ffb supplied by smallholders attached to the Group's projects is a little higher than US$385, reflecting the high level of the commodity price of CPO at the beginning of the year, to which purchases of their ffb are pegged. This also affected the cost of palm product milled from independent smallholders' ffb, which was higher again than scheme smallholder production on account of these ffb inherently yielding less oil than ffb produced under the Group's management.

The Group has experienced falling unit costs as the young palms on its new projects matured and so crop volume and average bunch weight rose, irrespective of the CPO price. The Group's ability to convert ffb to palm oil and kernels at a diminishing cost per tonne demonstrates its position as an efficient low-cost operator. The Group projects increasing crop volumes in future, but is reaching a point in its development where the benefit of this increased volume on unit costs will largely be absorbed by cost inflation in production.

Mill-gate price

Compared with the low CPO prices that held sway during the first half of 2019, prices were significantly higher in the first half of 2020, as described in the section 'The palm-oil market' above. The average cif Rotterdam price for the period was US$648 or 23% higher than in the first half of 2019. The rise in the palm-oil price fed quickly through to the mill-gate price received by the Group. During the first half of 2020, the Group received on average US$533 per tonne of CPO, US$80 more than in the first half of 2019. At the same time, the average sustainability premium additionally received by the Group diminished by US$1 to US$8 per tonne.

For palm kernels, the Group received US$289 per tonne, somewhat higher than the US$254 in the previous year, following a modest recovery in the price of palm-kernel oil. In addition, the Group received US$9 per tonne in both periods in sustainability premia available for suitably certificated kernels.

Planting

Essentially all of the Group's new planting is at Musi Rawas. Development here remains paused to allow the Group time to assess the new RSPO standards introduced in 2019 and obtain the RSPO's confirmation that it complies with them. This is necessary for the ffb from these areas to be certified as being produced sustainably. As a result of this, the only new planting was 28 hectares in Kota Bangun. In North Sumatra, no replanting is planned for 2020.

New land

The Group is exploring the acquisition of additional hectarage close to its existing projects to bring them to an optimal size. The Group's experience is that 10,000 hectares of oil palm with a 60-tonne mill provides a unit that is both big enough to provide economies of scale in production and administration, and small enough to allow the careful scrutiny by field management needed to maintain high standards. The Group's projects in Bangka and Musi Rawas, including scheme-smallholder areas, are of this size and the board is seeking eventually to extend the Kota Bangun project from the current 15,000 hectares towards the equivalent of two 10,000-hectare units.

Associated company: Malaysia

Bertam Properties Sdn. Berhad ("Bertam Properties"), 40% held, broke even in the six months to June 2020 compared with the Group's share in profit of US$0.5 million for the equivalent period in 2019. A break-even result for 2020 demonstrates a certain continuing resilience in the market for the types of properties developed by Bertam Properties, and of the Penang region, as compared with the general slowdown in the Malaysian property market overall.

Result

As a result of the operational outcomes described above, gross profit for the first half of 2020 was US$8.9 million, US$6.7 million higher than the US$2.2 million recorded for the same period in 2019. Operating profit for the period was US$6.0 million, six times higher than that recorded for the first half of 2019. Net finance costs of US$1.6 million were similar to the previous year. The rate of corporation tax in Indonesia decreased on 1 January 2020 from 25% to 22%, and will decrease to 20% from 2021 onwards. After interest, tax and its share in the profits of associated companies, the Group made a profit of US$4.3 million compared with a loss of US$0.5 million in 2019.

CURRENT TRADING AND PROSPECTS

During July 2020, CPO prices strengthened from just below US$600 per tonne to reach a high point of US$740 per tonne. Since then the price has fluctuated, mainly trading within a band of US$700 to US$720 per tonne. At the end of the first week of September, the price stood at US$720 per tonne against the anticipated background of tight supply of all major vegetable oils and recovery in demand, notably in India and China, following the shock of the Covid-19 pandemic. Overall, production increase in palm oil is expected to slow compared with 2019. The likely positive impact of this on prices may be at least partly counterbalanced by a lower demand for palm biodiesel in the face of low mineral-oil prices. The forward markets for CPO anticipate further price increases before the end of the year and a price holding firm into 2021.

The strong pace of the Group's crop growth during the first half of the year abated somewhat during the third quarter. This was as its estates in Bangka and Kota Bangun felt the effects of a dry period in, respectively, the middle quarters of 2019, and the end of 2019 and the early months of 2020. The conditions in these areas have also had some impact on the availability of crop to buy from third parties, so the Group will not in the second half of 2020 match the volume of third-party crop purchased in the equivalent period in 2019.Crop volumes are, however, expected to improve during the fourth quarter. The Group has put measures in place in respect of Covid-19, and does not expect the pandemic to affect its ability to harvest ffb or produce CPO. The increasing maturity of the Group's palms in all areas provide the basis for significant growth in crop into the middle of decade, and hence rising revenue, even without the acquisition of any further hectarage. The Group anticipates increasing production of certified sustainable palm oil as it completes the development of its new projects.

The board remains confident that the fundamentals of the palm-oil market continue to be encouraging. Vegetable oil is a basic foodstuff and increasing demand from a growing world population looks likely to persist. In the longer term, insufficient levels of replanting in Malaysia and a reduction in new Indonesian planting are likely to curb growth in production. Palm oil delivers by far the highest yield per hectare of all the vegetable oils and has the lowest cost of production. Hence, the board remains of the view that palm oil is well placed to benefit from rising global demand for vegetable oil and, therefore, that the outlook for the Group remains positive.

UNAUDITED CONSOLIDATED INCOME STATEMENT

FOR THE SIX MONTHS ENDED 30 JUNE 2020



6 months 

6 months 




ended 

ended 

Year ended 



30 June 

30 June 

31 December 



2020 

2019 

2019 


Note 

US$'000 

US$'000 

US$'000 

Continuing operations





Revenue

3

75,894 

46,249 

119,341 

Cost of sales


(67,023)

(44,086)

(102,297)

Gross profit

3

8,871 

2,163 

17,044 

(Loss)/gain on biological assets


(647)

408 

927 

Foreign-exchange losses


(799)

(72)

1,161 

Other administrative expenses


(2,207)

(1,689)

(3,466)

Other income


824 

230 

458 

Operating profit


6,042 

1,040 

16,124 

Finance income


308 

108 

403 

Finance costs


(1,928)

(1,705)

(3,747)

Profit/(loss) before taxation


4,422 

(557)

12,780 

Tax on profit/(loss) on ordinary activities


(749)

(868)

(7,183)

Profit/(loss) after tax


3,673 

(1,425)

5,597 

Share of associated companies' profit after tax

3

635 

907 

1,873 

Profit/(loss) for the period


4,308 

(518)

7,470 






Attributable to:





Owners of M.P.Evans Group PLC


3,896 

(884)

6,333 

Non-controlling interests


412 

366 

1,137 



4,308 

(518)

7,470 













US cents 

US cents 

US cents 

Continuing operations





Basic earnings/(loss) per 10p share


7.2 

(1.6)

11.6 

Diluted earnings/(loss) per 10p share


7.1 

(1.6)

11.5 








Pence 

Pence 

Pence 

Basic earnings/(loss) per 10p share





Continuing operations


5.7 

(1.2)

9.0 

UNAUDITED CONSOLIDATED BALANCE SHEET

AS AT 30 JUNE 2020



30 June 

30 June 

31 December 



2020 

2019* 

2019 


Note 

US$'000 

US$'000 

US$'000 

Non-current assets





Goodwill


11,767 

11,767 

11,767 

Other intangible assets


1,453 

1,450 

1,433 

Property, plant and equipment


376,199 

349,611 

368,744 

Investments in associates


21,272 

21,349 

21,553 

Investments


63 

62 

66 

Deferred-tax asset


4,985 

6,195 

5,284 

Trade and other receivables


11,555 

11,555 



427,294 

390,434 

420,402 

Current assets





Biological assets


1,419 

1,547 

2,067 

Inventories


12,359 

14,442 

11,072 

Trade and other receivables


44,970 

48,613 

45,117 

Current-tax asset


3,430 

4,414 

4,245 

Current-asset investments


329 

2,547 

1,160 

Cash and cash equivalents


11,822 

34,201 

25,947 



74,329 

105,764 

89,608 

Total assets


501,623 

496,198 

510,010 

Current liabilities





Borrowings


37,426 

18,578 

28,337 

Trade and other payables


21,374 

19,021 

22,215 

Current-tax liabilities


715 

623 

3,657 



59,515 

38,222 

54,209 

Net current assets


14,814 

67,542 

35,399 

Non-current liabilities





Borrowings


60,296 

48,231 

66,137 

Trade and other payables


151 

265 

Deferred-tax liability


10,173 

11,799 

12,312 

Retirement-benefit obligations


10,091 

9,525 

9,401 



80,711 

69,555 

88,115 

Total liabilities


140,226 

107,777 

142,324 

Net assets


361,397 

388,421 

367,686 

Equity





Share capital

5

9,204 

9,220 

9,200 

Other reserves


55,514 

54,832 

55,385 

Retained earnings


287,305 

300,644 

294,139 

Equity attributable to the





  owners of M.P.Evans Group PLC


352,023 

364,696 

358,724 

Non-controlling interests


9,374 

23,725 

8,962 

Total equity


361,397 

388,421 

367,686 

*restated - see note 2

UNAUDITED STATEMENT OF CHANGES IN CONSOLIDATED TOTAL EQUITY

FOR THE SIX MONTHS ENDED 30 JUNE 2020








6 months 

6 months 

Year 



ended 

ended 

ended 



30 June 

30 June 

31 December 



2020 

2019* 

2019 


Note 

US$'000 

US$'000 

US$'000 

Profit/(loss) for the period


4,308 

(518)

7,470 

Other comprehensive (loss)/gain for the period


(979)

1,086 

Total comprehensive income/(loss) for the period


3,329 

(515)

8,556 

Issue of share capital


23 

218 

218 

Share buy-backs


(1,155)

(957)

(2,286)

Dividends paid

(8,594)

(8,845)

(12,364)

Credit to equity for equity-settled share-based payments


 

108 

 

184 

 

643 

Acquisition


(25,417)

Transactions with owners


(9,618)

(9,400)

(39,206)

At 1 January


367,686 

398,336 

398,336 

Balance at period end


361,397 

388,421 

367,686 

*restated - see note 2

UNAUDITED CONSOLIDATED CASH-FLOW STATEMENT

FOR THE SIX MONTHS ENDED 30 JUNE 2020



6 months 

6 months 

Year 



ended 

ended 

ended 



30 June 

30 June 

31 December 



2020 

2019* 

2019 


Note 

US$'000 

US$'000 

US$'000 

Net cash generated by operating activities

4,514 

4,522 

32,002 

Investing activities





Purchase of property, plant and equipment


(16,459)

(20,326)

(46,531)

Purchase of intangible assets


(102)

(211)

(721)

Interest received


308 

108 

210 

Decrease/(increase) in bank deposits treated as





  current asset investments*


831 

(45)

1,342 

Decrease in receivables from smallholder





  co-operatives*


3,172 

1,106 

4,690 

Proceeds on disposal of property, plant and equipment


206 

97 

489 

Loan related to party


(11,747)

Net cash used by investing activities


(12,044)

(19,271)

(52,268)

Financing activities





New borrowings


10,000 

75,000 

110,419 

Repayment of borrowings


(6,752)

(38,247)

(46,134)

Lease liability payments

(104)

(167)

Dividends paid to Company shareholders


(8,594)

(8,845)

(12,364)

Purchase of non-controlling interests


(25,417)

Exercise of Company share options


218 

218 

Buy-back of Company shares


(1,155)

(957)

(2,286)

Net cash (used)/generated by financing activities


(6,605)

27,169 

24,269 

Net (decrease)/increase in cash and cash equivalents


(14,135)

12,420 

4,003 

Cash and cash equivalents at 1 January


25,947 

21,626 

21,626 

Effect of foreign-exchange rates on cash and cash equivalents

10 

155 

318 

Net cash and cash equivalents at period end


11,822 

34,201 

25,947 

*restated - see note 2

NOTES TO THE INTERIM STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2020

 

Note 1                        General information

 

The financial information for the six-month periods ended 30 June 2020 and 2019 has been neither audited nor reviewed by the Group's auditors and does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006.  The financial information for the year ended 31 December 2019 is abridged from the statutory accounts.  The 31 December 2019 statutory accounts have been reported on by the Group's auditors for that year, BDO LLP, and have been filed with the Registrar of Companies.  The report of the auditors thereon was unqualified and did not contain a statement under section 498(2) or (3) of the Companies Act 2006, nor did it contain any matters to which the auditors drew attention without qualifying their audit report.

 

Note 2                        Accounting policies

 

The consolidated financial results have been prepared in accordance with International Financial Reporting Standards (IFRS and IFRIC interpretations) issued by the International Accounting Standards Board (IASB) as adopted by the EU, and with those parts of the Companies Act 2006 applicable to companies preparing accounts under IFRS.

 

The accounting policies of the Group follow those set out in the annual financial statements at 31 December 2019. The Group has made a number of critical accounting judgements and key estimates in the preparation of this interim report, and they remain consistent with those set out in note 3(r) to the 2019 annual financial statements.

 

In the 2019 annual financial statements, adjustments were made to the treatment of certain financial reporting items, without any impact on reported profit or cash. For consistency, the same adjustments have been made to the comparative figures reported here for the six months to 30 June 2019. Specifically:

·    US$1.4 million of software has been adjusted from property, plant and equipment to intangible assets;

·    US$2.6 million of deferred profit relating to land previously sold to an associate has been adjusted from revaluation reserve to investments in associates, and at the same time a US$1.3 million debit has been adjusted from the revaluation reserve to retained earnings; and

·    In the cash flow statement movements in receivables from smallholder co-operatives and changes in bank deposits treated as current-asset investments have been included in investing activities, having previously been included in operating and financing activities respectively.

 

Note 3                        Segment information

 

The Group's reportable segments are distinguished by location and product: palm-oil plantation crops in Indonesia and property development in Malaysia.

 


Plantation 

Property 




Indonesia 

Malaysia 

Other 

Total 


US$'000 

US$'000 

US$'000 

US$'000 

6 months ended 30 June 2020





Revenue

75,863 

31 

75,894 

Gross profit/(loss)

8,915 

(44)

8,871 

Share of associated companies' profit after tax





  Kerasaan

592 

592 

  Bertam Properties

43 

43 


592 

43 

635 

6 months ended 30 June 2019





Revenue

46,212 

37 

46,249 

Gross profit/(loss)

2,201 

(38)

2,163 

Share of associated companies' profit after tax





  Kerasaan

372 

372 

  Bertam Properties

535 

535 


372 

535 

907 

Year ended 31 December 2019





Revenue

119,250 

91 

119,341 

Gross profit/(loss)

17,100 

(56)

17,044 

Share of associated companies' profit after tax





  Kerasaan

799 

799 

  Bertam Properties

1,074 

1,074 


799 

1,074 


1,873 

 

 

Note 4                        Dividends

 


6 months ended 

6 months ended 

Year ended 


30 June 

30 June 

31 December 


2020 

2019 

2019 


US$'000 

US$'000 

US$'000 





2018 final dividend - 12.75p per 10p share

8,845

8,845

2019 interim dividend - 5.00p per 10p share

3,519

2019 final dividend - 12.75p per 10p share

8,594 


8,594 

8,845

12,364

 

Subsequent to 30 June 2020, the board has declared an interim dividend of 5.00p per 10p share. The dividend will be paid on or after 6 November 2020 to those shareholders on the register at the close of business on 16 October 2020.

 

Note 5                        Share capital

 


30 June 

30 June 

31 December 

30 June 

30 June 

31 December 


2020 

2019 

2019 

2020 

2019 

2019 


Number 

Number 

Number 

US$'000 

US$'000 

US$'000 

Shares of 10p each






At 1 January

54,461,220 

54,677,872 

54,677,872 

9,200 

9,228 

9,228 

Issued

182,320 

50,000 

50,000 

23 

Redeemed

(153,287)

(109,680)

(266,652)

(19)

(14)

(34)

At period end

54,490,253 

54,618,192 

54,461,220 

9,204 

9,220 

9,200 

 

During the period the Company issued 182,320 10p shares for US$23,000 cash consideration with the intention to satisfy the exercise of share options. In addition, the Company bought back and cancelled 153,287 10p shares for a total cost of US$1,155,000.

 

Note 6                        Analysis of movements in cash flow

 


6 months ended 

6 months ended 

Year ended 


30 June 

30 June 

31 December 


2020 

2019 

2019 


US$'000 

US$'000 

US$'000 

Operating profit

6,042 

1,040 

16,124 

Biological loss/(gain)

647 

(408)

(927)

Disposal of property, plant and equipment

194 

10 

(7)

Release of deferred profit

(21)

(128)

(204)

Depreciation of property, plant and equipment

8,580 

7,549 

15,340 

Amortisation of intangible assets

82 

45 

112 

Remeasurement of investment

(1)

Retirement-benefit obligation

690 

1,121 

1,846 

Share-based payments

108 

184 

643 

Dividends from associated companies

580 

Operating cash flows before movements




  in working capital

16,322 

9,413 

33,506 

(Increase)/decrease in inventories

(1,287)

(1,559)

1,811 

Increase in receivables

(3,025)

(1,298)

(545)

(Decrease)/increase in payables

(851)

3,992 

6,986 

Cash generated by operating activities

11,159 

10,548 

41,758 

Income tax paid

(4,717)

(4,321)

(6,009)

Interest paid

(1,928)

(1,705)

(3,747)

Net cash generated by operating activities

4,514 

4,522 

32,002 

 

Note 7                        Exchange rates

 



30 June 

30 June 

31 December 



2020 

2019 

2019 

US$1=Indonesian Rupiah

-     average

14,579 

14,194 

14,142


-     period end

14,285 

14,128 

13,883

US$1=Malaysian Ringgit

-     average

4.25 

4.12 

4.14


-     period end

4.29 

4.13 

4.09

£1=US Dollar

-     average

1.26 

1.29 

1.28


-     period end

1.24 

1.27 

1.32

 

Note 8                        Post-balance sheet event

 

On 20 July 2020, the Group entered into a conditional agreement to sell 70 hectares of land owned by its wholly-owned subsidiary, Bertam Consolidated Rubber Limited, to Bertam Properties Sdn Berhad, a Malaysian property-development company in which the Group has a 40% shareholding. Total consideration is 99.9 million Malaysian Ringgit (approximately US$24.1 million at current exchange rates), with 10% paid on signing of the agreement, 50% paid once the sale conditions are completed (expected to be March 2021), and the remaining balance over the next two years.

 

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