Anglo-Eastern Plantations Regulatory News (AEP)

7 Apr 2006 08:30

Anglo-Eastern Plantations PLC07 April 2006 ANGLO-EASTERN PLANTATIONS PLC - PRELIMINARY ANNOUNCEMENT Anglo-Eastern Plantations, which operates approximately 32,500 hectares (ha) ofdeveloped plantations, primarily oil palm in Indonesia, announces a pre-taxprofit of $21.4m - its second largest ever - and a 10% increase in dividend pershare to 8.8cts +---------------------------+---------+------------+-------------+| | 2005| 2004| Change|| | | | || | | | |+---------------------------+---------+------------+-------------+|Turnover ($000) | 64,321| 65,676| - 2%|+---------------------------+---------+------------+-------------+|Operating profit before | | | ||biological asset adjustment| | | ||($000) | 22,201| 24,934| - 11%|+---------------------------+---------+------------+-------------+|Pre-tax profit ($000) | 21,420| 26,744| - 20%|+---------------------------+---------+------------+-------------+|Basic earnings per share | 30.9| 37.4| - 17%||(cts) | | | |+---------------------------+---------+------------+-------------+|Dividend per share (cts) | 8.8| 8.0| + 10%|+---------------------------+---------+------------+-------------+ * Pre-tax profit and EPS were depressed by swings of $2.0m in the biological asset adjustment under IFRS and of $0.7m re exchange, so operating profit before these items is the best immediate indicator of trading performance. * Net cash increased to $5.2m from $3.8m. * The average price of crude palm oil (CPO) reduced by 8% to $422/mt from $460/mt. * Crops of oil palm fresh fruit bunches (FFB) increased by 7% to 459,080mt and bought-in FFB by 18% to 284,705mt - both records. * Bengkulu in Southern Sumatra, where planting began in 1996, should be fully planted at 15,900ha by 2007. Labuhan Bilik, c.4,200ha in Northern Sumatra acquired in December 2004, is scheduled to be fully planted by the end of 2008. The group is therefore actively looking to increase its land holdings for further expansion in 2009 onwards. Mr Chan Teik Huat, Chairman, commented: "The CPO price has continued to fluctuate in a narrow range in the first threemonths of 2006 and is currently $427/mt. Estate production is slightly ahead ofexpectations and 12% ahead of the same period last year. Barring unforeseen circumstances, total estate FFB production is targeted toincrease again in 2006 by about 10%. It is unlikely we shall maintain ourbought-in crop levels but, since this is lower margin business, the effect willbe limited. A larger factor in 2006 compared to previous years will be higherinflation in local costs in all the main components - wages, fertilisers anddiesel. This will offset to some extent the effect of the improvement in estatecrops. As always, the group's operating results depend heavily on movement inCPO prices. If the CPO price stays at present levels, then the group shouldimprove on the 2005 result." Enquiries: Anglo-Eastern Plantations Plc 020-7236 2838Rollo Barnes (Financial Director) Bankside Consultants Limited Charles Ponsonby 020-7367 8851 / 07789-202 312 Chairman's statement As indicated was likely in the interim announcement of 28 September 2005 theprofit for 2005 did not match the record achieved in 2004. Nevertheless this wasthe second highest recorded by the company. Group operating profit before biological asset (BA) adjustment was 11% lower at$22.2 million from $24.9 million in 2004 on revenue down 2% to $64.3 millionfrom $65.7 million in 2004. Although our estate crops of fresh fruit bunches(FFB) increased 7% and bought-in crops 18% - both to all time records - thesewere insufficient to compensate for the crude palm oil (CPO) prices whichaveraged some 8% less than in 2004, and for the increase in operating costs onour estates. I begin by mentioning operating profit before BA adjustment because, in commonwith all fully listed UK companies, we have had to apply International FinancialReporting Standards (IFRS) for the first time in 2005 and have adjusted our 2004comparatives onto the same basis. In our case the most significant of the IFRSchanges is the requirement for agricultural companies to charge or credit theincome statement with changes in the estimated values of biological assets. Thischarge or credit is likely to be quite volatile and unrelated to the tradingperformance of and cash generation by the company during any financial period.For example, the biological asset adjustment in our case in 2004 was a credit of$1,950,000 but in 2005 a charge of $35,000. Therefore operating profit before BAadjustment is in our view the best immediate indicator of our operatingperformance. Group profit before tax in 2005, as stated under IFRS, was $21.4 millioncompared to $26.7 million in 2004, a fall of 20% compared to the 11% fall intrading profit. The difference is accounted for by the biological adjustment andby an exchange loss of $550,000 arising from the effect on our dollar loans inIndonesia where the dollar strengthened some 5% against the rupiah. Earnings per share before biological adjustment, as shown in note 5, fell 10% to31.0cts in 2005 from 34.5cts in 2004. On the IFRS basis, EPS fell 17% to 30.9ctsfrom 37.4cts. Group cash net of all borrowings increased slightly from $3.8 million at thebeginning of the year to $5.2 million at the end of the year. This improvementwas achieved after repayment of bank loans during the year of $5.5 million. As aresult, the entire loan of $8 million used to fund the development in Bengkuluhas been repaid. Total group borrowings at the end of 2005 were $6.0 millioncompared to $11.1 million at the end of 2004. Cash generation in 2005, at $12.8 million, was lower than the $21.6 million in2004 not only because of the lower profits but because of high residual taxpayments in Indonesia relating to the record 2004 result and because of adeliberate increase in fertiliser inventories in anticipation of price rises.These factors, together with the loan repayments, meant that gross cash balancesfell from $14.9 million to $11.2 million. Capital expenditure of $7.6 million included extension of the Tasik millreferred to below, together with continued new planting and immature maintenancein Bengkulu and Bina Pitri. The other major effect of the introduction of IFRS has been to reduce thegroup's net asset value by a provision for deferred tax at the Indonesian taxrate of 30% on the surplus of estate valuations over their equivalent carryingvalue for tax purposes. The provision amounts to $17.2 million and reduces thegroup's net asset value per share from 159p under UK GAAP to 142p under IFRS. At first glance, this might be seen by readers as a provision for capital gainstax on the potential disposal of the relevant assets. In fact, the intention ofthe standard is to provide tax now on the future flow of value represented bythe valuation surplus. However, I should record that it is highly unlikely thegroup would sell any of its estates. The estates have been valued in total on the same basis as previous years. Therelatively small increase of $2.2 million in total value to $129.5 millionreflects our decision to allow for significantly higher operating costs infuture as the effect of current oil prices and other inflationary pressures workthrough. However, it would not be prudent to assume an equivalent increase inproduce prices. Biological assets have been estimated as a proportion of thesevaluations and as a result there is only a very small equivalent movement inthis item charged to the income statement in 2005 compared to the sizable creditin 2004. Commodity prices Unusually, CPO prices fluctuated in a narrow range through 2005 - between $390/mt to $450/mt - averaging about $422/mt. This compared with an average of about$460/mt in 2004. Another unusual feature was the sustained high price of palm kernel oil relativeto CPO in the last two years and therefore of our subsidiary product, palmkernels. The kernel price used to be between 45% and 55% of the CPO price, butfor 2005 and 2004 it has averaged 67% and 62% respectively. Rubber experienced strong demand through 2005 and the price rose from $1,180/mtto close at $1,750/mt, a 48% increase. Cocoa prices, by contrast, fell over the year from $1,560/mt to $1,470/mt. Indonesia At the half year, I reported that FFB production from Tasik in North Sumatra was17% down on the same period in the previous year and from Bengkulu 19% ahead.This position then reversed and by the year end production from Tasik and AnakTasik was 170,000mt, only 2.5% down on the previous year and not far off therecord of 176,000mt set in 2000. By contrast, Bengkulu production ended at159,500mt, up only 10% on the year. We continue to hope and plan that we can defer replanting of Tasik until 2008and even then that we need only start in a modest way. Extension of the Tasik mill, from 45mt/hr to 60mt/hr, was completed at the yearend at a cost of about $1.8 million. Unfortunately, competition fromneighbouring mills for bought-in crop has become intense and FFB bought-in in2005 totalled 111,330mt, down 14% on the 129,120mt of the previous year.However, the Tasik mill is now 15 years old; the extended capacity is a welcomecover against breakdown and will reduce running costs. FFB production from the three smaller estates around Medan in North Sumatra was63,500mt, exceeding last year's record of 58,000mt by 8%. Crop from Sungei Musamwas the main contributor to this increase, where the yield was 24mt/ha.Blankahan continues to achieve yields of around 29mt/ha. The new mill at Blankahan, commissioned in December 2004, operated verysatisfactorily through the year, processing crop from the other two Medanestates, Sungei Musam and Rambung, as well as buying in 26,400mt of FFB. Thisoutside crop reduced the average extraction rates from an initial 25% to 23%. Itremains a continual struggle, as it does in the other mills, to maintainbought-in volume while insisting on high standards of FFB. The profitability ofBlankahan and Sungei Musam has been significantly improved by completion of thismill which was funded from the group's own resources. At Rambung, we have just begun to remove the 258ha of cocoa, which has alwaysbeen problematic, and replant with rubber: we expect to complete 120ha in 2006. Although 10% up on 2004, Bengkulu FFB production was 10% below target for 2005.The reason was a clear change in the flowering pattern in some areas and shouldbe temporary. Field standards are good and in most parts these properties arelooking well established estates, though the younger areas suffer from damagefrom wild pigs. The priority over the next few years is to increase yieldstowards those in North Sumatra. Of the 13,570ha planted so far, 3,830ha areimmature. New planting speeded up in the second half of 2005 to total 1,020hafor the year from only 310ha at the half year. This was still below expectationsbecause of a combination of continued negotiations with neighbouring villagers,difficulty in finding suitable contractors in what is a remote location, and theinstallation of metal collars round every young tree as protection from pigs. Asa consequence, we have revised to 2007 our target for completion of the Bengkuluplanting. In contrast to Tasik, we were able to increase bought-in crop in Bengkulu by 31%to 146,960mt to fill the mill capacity which had been increased to 60mt/hour in2004. But like Tasik, new stand alone mills have opened nearby and we shall behard pressed to maintain this volume at current levels of profitability. FFB crop from Bina Pitri increased 81% to 27,420mt. While this was below thelevel we had expected, the signs in early 2006 are that the crops are beginningto respond to the first fertiliser applications in May 2004 soon after ouracquisition of this run down property. Normally, the effect on crop takes twoyears and we remain optimistic about the prospects for this property. While itlost about $400,000 in 2005, it should be profitable in 2006 onwards. Newplanting amounted to 1,260ha, of which 960ha were in further land acquired in2004 and 300ha were in vacant areas acquired with the original estate. Thisproperty now has a planted area of 4,950ha. Foundations are now finished for a 40mt/hr mill which we expect to be completedin the first quarter of 2007 at a total cost of $6.2 million. Malaysia Production from the Cenderung estates totalled 38,520mt, an increase of 7% on2004 which itself was a disappointing year. With lower CPO prices, the estatesmade a loss of $600,000 compared to a profit of $70,000 in 2004. In 2004,operating cash flow was sufficient to meet capital expenditure and local loanrepayments. But at recent prices there is a small cash requirement which caneasily be met from current Malaysian bank facilities or by the group. In spiteof the physical problems, we remain committed to bring these properties toreasonable yields and profitabillity. Group development At Labuhan Bilik, an area of about 4,200ha in North Sumatra acquired in December2004, we are now preparing about 1,100ha for planting towards the end of 2006.The terrain is flat and we have high hopes that this will eventually be a veryproductive estate. We hope to complete planting by the end of 2008. We are therefore looking actively to increase our land bank for furtherexpansion from 2009 onwards - but with caution, for it is now not easy to findproblem free land or plantations in Indonesia. Community development Our management continues to place great importance on good relations with, andassistance to, local communities. In addition to maintaining some rural roadsand communal buildings in neighbouring villages to our estates, our schemes toestablish communal oil palm plantings in some of those villages are progressingsmoothly. I am also pleased to report, despite their heavy workload, our staff havesupervised the construction, at the company's expense, of two primary schools inthe tsunami affected areas of Aceh in Northern Sumatra and are in the process ofcompleting a fresh water supply facility in another earthquake affected area. Directors In September 2005, Mr Foo San Kan resigned as a non-executive director and wethank him for his contribution. In August 2005, Mr Kee Lian Yong was appointed as an executive director. Mr Keewas formerly chief executive for ten years of Kumpulan Mas Bhd, a company quotedon the Kuala Lumpur Stock Exchange with interests in plantations, waterengineering and education. He therefore brings with him wide experience ofbusiness in Asia. Outlook The CPO price has continued to fluctuate in a narrow range in the first threemonths of 2006 and is currently $427/mt. Weather in both Indonesia and Malaysiain the same period has been exceptionally wet, which has hampered operations.Nevertheless, our management and workforce have done well. Estate production isslightly ahead of expectations and 12% ahead of the same period last year.Bought-in crop is suffering from the competition mentioned earlier and is 10%down on the same period in 2005. Barring unforeseen circumstances, total estate FFB production is targeted toincrease again in 2006 by about 10%. It is unlikely we shall maintain ourbought-in crop levels but, since this is lower margin business, the effect willbe limited. A larger factor in 2006 compared to previous years will be higherinflation in local costs in all the main components - wages, fertilisers, anddiesel. This will offset to some extent the effect of the improvement in estatecrops. As always, the group's trading results depend heavily on movement in CPOprices. If the CPO price stays at present levels, then the group should improveon the 2005 results. Dividend The dividend has been increased more than 400% over the four years to 2004 -from a low of 1.5cts per share in 2000 to 8.0cts per share in respect of 2004. We intend to try to keep the dividend increasing, but from now on at a muchslower rate, which we hope can be maintained as long as there is no sustainedfall in CPO prices. Accordingly, the board is proposing a dividend of 8.8cts pershare, an increase of 10% over 2004. This dividend is covered 3.5 times by basicearnings per share. CHAN TEIK HUAT 7 April 2006 Chairman Consolidated income statement 2005 2004 (unaudited) (audited) Restated for IFRS Result BA Total Result BA Total before BA adjustment before adjust- adjustment BA ment adjustment Continuing $'000 $'000 $'000 $'000 $'000 $'000 operations Revenue 64,321 64,321 65,676 65,676 Cost of sales (39,514) (39,514) (38,468) (38,468)Gross profit 24,807 24,807 27,208 27,208 Biological asset (35) (35) 1,950 1,950 revaluation movement (BA adjustment) Other income 115 115 124 124 Administration (2,721) (2,721) (2,398) (2,398) expenses Operating profit 22,201 (35) 22,166 24,934 1,950 26,884 Exchange (losses)/ (550) (550) 147 147 profits Finance income 302 302 251 251 Finance costs (498) (498) (538) (538) Profit before tax 21,455 (35) 21,420 24,794 1,950 26,744 Tax (7,107) 10 (7,097) (8,449) (585) (9,034) Profit for year 14,348 (25) 14,323 16,345 1,365 17,710 Attributable to: - Equity holders of 12,235 (52) 12,183 13,651 1,158 14,809 the parent - Minority interest 2,113 27 2,140 2,694 207 2,901 14,348 (25) 14,323 16,345 1,365 17,710 Earnings per share - basic 30.9 cts 37.4 cts- diluted 30.9 cts 37.3 cts Consolidated statement of total recognised income and expenses 2005 2004 (unaudited) (audited) restated for IFRS US$'000 US$'000 Profit for the year 14,323 17,710 Unrealised surplus on revaluation of the estates 3,112 9,955 Loss on exchange translation (5,703) (7,880) Deferred tax on revaluation (176) (2,730) Total recognised income and expense for the year 11,556 17,055 Attributable to: - Equity holders of the parent 9,736 14,179 - Minority interest 1,820 2,876 11,556 17,055 Consolidated balance sheet 2005 2004 (unaudited) (audited) restated for IFRS US$'000 US$'000 Non-current assets Biological assets 26,975 26,558 Property, plant and equipment 102,543 100,744 Receivables 1,071 1,071 130,589 128,373 Current assets Inventories 2,499 1,535 Investments 259 405 Trade and other receivables 3,109 2,707 Cash and cash equivalents 11,194 14,933 17,061 19,580 Current liabilities Bank loans and other financial liabilities (2,103) (5,576) Trade and other payables (3,487) (4,438) Tax liabilities (2,594) (4,518) (8,184) (14,532) Net current assets 8,877 5,048 Non-current liabilities Bank loans and other financial liabilities (3,940) (5,558) Deferred tax liabilities (16,941) (16,698) Retirement benefit net liabilities (602) (1,103) Net assets 117,983 110,062 Equity Share capital 15,481 15,424 Treasury shares (1,387) (1,387) Share premium reserve 23,868 23,825 Share capital redemption reserve 1,087 1,087 Revaluation and exchange reserve (9,121) (6,674) Retained earnings 67,536 58,511 Equity attributable to equity holders of the parent 97,464 90,786 Minority interests 20,519 19,276 117,983 110,062 Consolidated cash flow statement 2005 2004 (unaudited) (audited) restated for IFRS US$000 US$000 Operating profit 22,166 26,884 Adjustments for: BA adjustment 35 (1,950) Income from current asset investments (77) (17) Depreciation 3,243 2,917 Share-based remuneration expense 14 14 Retirement benefit provisions (491) 339 Foreign exchange (994) 310 Operating cash flow before changes in working capital 23,896 28,497 (Increase)/decrease in inventories (964) 178 (Increase)/decrease in trade and other receivables (258) 43 Increase in trade and other payables 542 380 Cash inflow from operations 23,216 29,098 Interest paid (600) (612) Overseas tax paid (9,809) (6,928) Net cash flow from operations 12,807 21,558 Investing activities Property, plant and equipment - purchase (7,596) (11,247) - sale 116 112 Purchase of subsidiary - (4,777) Interest received 302 251 Net cash used in investing activities (7,178) (15,661) Financing activities Dividends paid by parent company (3,158) (2,375) Share options exercised 100 251 Purchase of own shares - (1,387) Repayment of existing long term loans (5,531) (2,023) Repayment of loans in newly acquired subsidiary - (4,154) Drawdown of new long term loan - 5,000 Finance lease drawdown/(repayment) 74 (15) Dividends paid to minority shareholders (2,587) (699) Repayment by/(advance to) minority shareholders 693 (693) Subscriptions to subsidiary share capital by minority 448 - shareholders Receipt from sale of portfolio investment 227 - Net cash used in financing activities (9,734) (6,095) Decrease in cash and cash equivalents (4,105) (198) Cash and cash equivalents less overdrafts At beginning of year 14,910 15,108 At end of year 10,805 14,910 Comprising: Cash at end of period 11,194 14,933 Overdraft at end of period (389) (23) 10,805 14,910 1 Basis of accounts preparation These financial statements have been prepared in accordance with InternationalFinancial Reporting Standards including International Accounting Standards andInterpretations (collectively 'IFRS') issued by the International AccountingStandards Board ('IASB') and endorsed for use by companies in the EU, and withthose parts of the UK Companies Act 1985 applicable to companies reporting underIFRS. Full details of IFRS policies applied and reconciliations of comparative figuresbetween UK GAAP and IFRS are available in our Interim Statement, a copy of whichis available from our website www.angloeastern.co.uk. A brief reconciliation ofthe main changes is detailed in note 9. 2 Status of financial information The financial information contained in this preliminary announcement does notconstitute the company's consolidated statutory financial statements for theyears ended 31 December 2005 or 2004, but is derived from those financialstatements. The financial statements for the year ended 31 December 2004, whichwere prepared under UK GAAP, have been delivered to the Registrar of Companies.The auditors' report on those financial statements was unqualified and did notcontain statements under section 237 (2) or (3) of the Companies Act 1985. Theauditors have not yet reported on the financial statements for the year ended 31December 2005. The financial statements for the year ended 31 December 2005 havebeen prepared under IFRS and will be delivered to the Registrar of Companies atthe same time as their despatch to shareholders. 3 Exchange rates ($ : £) 2005 2004 Year end Rp : $ 9,830 9,290$ : £ 1.72 1.92 Average Rp : $ 9,751 9,001$ : £ 1.81 1.84 4 Tax 2005 2004 (unaudited) (audited) restated for IFRS US$000 US$000 Foreign corporation tax - current year 6,509 7,003 Foreign withholding tax on remittances 539 866 Deferred tax adjustment - current year 49 1,165 7,097 9,034 5 Earnings per share 2005 2004 (unaudited) (audited) restated for IFRS US$ US$ Earnings per share before biological adjustment: - basic 31.0cts 34.5cts 5 Earnings per share - continued Weighted average number of shares in issue 2005 2004 Number of Number of shares shares '000 '000Used in basic EPS 39,411 39,609Dilutive effect of outstanding employee share options 50 137Used in diluted EPS 39,461 39,746 6 Dividend 2005 2004 2005 2004 (unaudited) (audited) (unaudited) (audited) US$'000 US$'000 Paid during the year 8.0cts 6.0cts 3,158 2,375 Proposed final dividend in respect of the year ended 31 December 8.8cts 8.0cts 3,514 3,147 Shareholders electing to receive sterling 5.02p 4.26p The proposed dividend for 2005 is subject to shareholder approval at theforthcoming annual general meeting and has not been included as a liability.Assuming shareholder approval the proposed dividend will be paid on 28 June 2006to shareholders on the register on 26 May 2005. 7 Crops 2005 2004 Tonnes TonnesOil palm fresh fruit bunches - ex estates 459,080 428,657- bought-in or processed for third parties 284,705 241,359- mill throughput 677,845 562,134Saleable CPO 145,820 118,197Saleable palm kernels 35,049 28,526Rubber 946 1,370Cocoa 157 208 8 Areas Total Mature ImmaturePlanted Ha Ha HaOil palm 31,874 26,393 5,481Rubber 434 434 -Cocoa 258 258 - 32,566 27,085 5,481Reserves 7,114 Land rights 4,240 Total 43,920 9 Reconciliation of net assets and profit under UK GAAP to IFRS Profit Tax Profit Minority Profit before after Interests for tax tax year Results for year ended 31 December 2004 US$'000 US$'000 US$'000 US$'000 US$'000 As previously reported under UK GAAP 24,808 (8,450) 16,358 (2,694) 13,664 Share based remuneration (14) - (14) - (14) BA adjustment 1,950 (584) 1,366 (207) 1,159 Group profit for 2004 reported under IFRS 26,744 (9,034) 17,710 (2,901) 14,809 Consolidated balance sheet At 31 Dec At 1 Jan 2004 2004 US$'000 US$'000 Net assets 123,986 108,391 Share based remuneration (14) - Dividend write back 3,147 2,375 Deferred tax (17,057) (13,742) 110,062 97,024 A full explanation of the above adjustments was given in the interim statement.It should be noted that the biological adjustment for 2004 was reported in theinterim statement as a net credit of $1,366,000 instead of $1,159,000 above andthe deferred tax adjustment as $17,920,000 instead of $17,057,000 above. Theseamendments reflect revised management judgements on estate valuations. This information is provided by RNS The company news service from the London Stock Exchange