Anglo-Eastern Plantations Regulatory News (AEP)

Anglo-Eastern Plantations Plc

("AEP" or the "Group")

Interim results for the six months ended 30 June 2012

Anglo-Eastern Plantations Plc (AEP.L), which owns approximately 130,000 hectares of plantation land, primarily in Indonesia, and operates approximately 58,200 hectares of developed plantations, is pleased to announce the interims results for the six months to 30 June 2012.

Financial Highlights

·; Revenue of $116.0 million (1H 2011: $128.9 million), a decline of 10%;

·; Operating profit of $37.3 million (1H 2011: $52.1 million*), a fall of 28%;

·; Profit before tax $38.5 million (1H 2011: $54.1 million*) a reduction of 29%;

·; Basic earnings per share of 51.24 cts (1H 2011: 90.00 cts) down by 43%;

·; Total cash balance at 30 June 2012 was $71.5 million compared with $85.0 millionat 30 June 2011*;

·; Total borrowings at the period end of $1.6 million, compared to $15.4m at 30 June 2011.

* The 2011 figures have been restated following a review and amendment to the Company's accounting policies relating to the proportionate values attributed to the Group's biological and non-biological assets.

Commercial Highlights

·; The market average price for crude palm oil for the period was 9% lower at $1,095/mt compared to an average of $1,198/mt for the same period in 2011.

·; Total own crop production was 340,350mt, an increase of 8% compared to the same period last year.

·; Bought-in crop volumes was 2% lower at 255,386mt compared to the same period in 2011.

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Chairman's Interim Statement

Operational and financial performance

For the six months ended 30 June 2012, revenue was 10% lower at $116.0 million compared to $128.9 million for the same period in 2011. The operating profit was 28% lower at $37.3 million (1H 2011: $52.1 million) while profit before tax was $38.5 million, 29% lower compared to $54.1 million for the same period in 2011.

The revenue and operating profit were reported lower mainly due to a 9% drop in average Crude Palm Oil ("CPO") price for the 1H 2012 coupled with a 5% weakening of Indonesian Rupiah against U$ Dollar for the same period. CPO price averaged $1,095/mt for 1H 2012 compared to $1,198/mt for 1H 2011. However fresh fruit bunch ("FFB") production for the first six months of 2012 was 340,350mt, 8% higher compared to 315,787mt for 1H 2011. Bought-in crops for the same period was 255,386mt, 2% lower than last year of 258,956mt.

The Group's balance sheet remains strong and cash flow remains healthy despite considerable expenditure to maintain the immature trees and new planting. As at 30 June 2012 the Group's total cash balance was $71.5 million (1H 2011: $85.0 million) with total borrowings of $1.6 million (1H 2011: $15.4 million), giving a net cash position of $69.9 million, an improved position when compared to 30 June 2011 of $69.6 million.

Earnings per share were down 43% at 51.24cts (1H 2011: 90.00cts).

Operating costs

The operating costs for the Indonesian operations were higher in 1H 2012 compared to the same period in 2011 mainly due to increase in wages, fertilisers and general upkeep of plantations

Prior period adjustments

During the period the Company has revisited the bases of valuing and accounting for its estate assets. As a result of this review the directors have concluded that although the policy previously applied gave rise to a materially accurate valuation of the combined assets, the proportionate values attributed to the biological and non-biological assets need to be restated. Accordingly, the directors have concluded that prior period adjustments are required to restate the figures previously reported. Further details are provided in note 2.

The total FFB processed in 1H 2012 was 595,736mt, a 4% increase compared to 574,743mt for the same period last year.

Internal crop production was higher by 8% due mainly to a 6% increase in matured planted area to 39,771ha from 37,525ha.

Bought-in crops on the other hand was 2% lower than last year due to more intense competition for FFB supply from small holders.

Commodity prices

CPO price remains volatile for the 1H 2012. CPO price surged to a new 13-month high of US$1,195/mt in April 2012 from $1,045/mt at the beginning of the year. But the price has since dropped to around $1,000/mt on the back of concerns over a slowing economy in China and the European debt crisis which we anticipate may further reduce commodity demand. The average CPO price for 1H 2012 was $1,095/mt (1H 2011:$1,198/mt).

Rubber price averaged around $3,346/mt (1H 2011: $4,887/mt).

Development

The Group's planted areas at 30 June 2012 comprised:-

The Group's new planting for the first six months ended 30 June 2012 totalled 1,085 hectares. The slower rate of new planting is due to a host of reasons including delay in the issuance of land release permit (Izin Pelepasan) for two plantations in Indonesia.

The Group plans to plant 9,000ha over the next two years from 1 January 2012. The Group's total landholding comprises 130,000ha, of which the planted area now stands around 58,198ha (1H 2011: 54,506ha).

The construction of the two palm oil mills in North Sumatra and Central Kalimantan announced previously will commence by 3Q 2012.

A biogas and biomass project planned for the mill in North Sumatra costing $4.5m will also start in the 3Q 2012 upon conclusion of agreements with the selected contractor. This project will enhance our waste management treatment and at the same time mitigate the emissions of biogas.

Dividend

As in previous years no interim dividend has been declared. A final dividend of 6.0 cents per share in respect of the year to 31 December 2011 was paid on 9 July 2012.

Outlook

It is generally expected that the imminent El Nino weather phenomenon will lead to a weaker palm oil output in Southeast Asia and lift the CPO price from its current level during the second half of 2012. Furthermore with India's recent purchase of palm oil climbing to new levels and this year's soyabean output in North America affected by unfavourably hot weather, there is room for palm oil price to move higher still. The board remains cautiously confident of reporting a satisfactory level of profitability and cash flow for the second half of 2012.

Principal risks and uncertainties

The directors do not consider that the principal risks and uncertainties have changed since the publication of the annual report for the year ended 31 December 2011.

A more detailed explanation of the risks relevant to the Group is on pages 13 to 16 and from 50 to 53 of the 2011 annual report which is available at www.angloeastern.co.uk.

Madam Lim Siew Kim

Chairman

30 August 2012

Condensed Consolidated Income Statement

\* The 31 December 2011 comparative period is based on the audited financial statements for the year end as amended for prior year adjustments as set out in Note 2.

Condensed Consolidated Statement of Comprehensive Income

\* The 31 December 2011 comparative period is based on the audited financial statements for the year end as amended for prior year adjustments as set out in Note 2.

Condensed Consolidated Statement of Financial Position

\* The 31 December 2011 comparative period is based on the audited financial statements for the year end as amended for prior year adjustments as set out in Note 2.

Condensed Consolidated Statement of Changes in Equity

Condensed Consolidated Statement Cash Flows

\* The 31 December 2011 comparative period is based on the audited financial statements for the year end as amended for prior year adjustments as set out in Note 2.

Notes to the interim statements

1. Basis of preparation of interim financial statements

These interim consolidated financial statements have been prepared in accordance with IAS 34,"Interim Financial Reporting", as adopted by the European Union. They do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the 2011 Annual Report. The financial information for the half years ended 30 June 2012 and 30 June 2011 does not constitute statutory accounts within the meaning of Section 434(3) of the Companies Act 2006 and has been neither audited nor reviewed pursuant to guidance issued by the Auditing Practices Board.

The annual financial statements of Anglo-Eastern Plantations Plc are prepared in accordance with IFRSs as adopted by the European Union. The comparative financial information for the year ended 31 December 2011 included within this report does not constitute the full statutory accounts for that period. The statutory Annual Report and Financial Statements for 2011 have been filed with the Registrar of Companies. The Independent Auditors' Report on that Annual Report and Financial Statement for 2011 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

Other than noted below, the same accounting policies, presentation and methods of computation are followed in these condensed consolidated financial statements as were applied in the Group's latest annual audited financial statements.

After making enquiries, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue operations for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.

2. Prior year restatement

During the period the Company has revisited its policies and methodologies for valuing and accounting for its estate assets. As a result, the directors have concluded that although the policies and methodologies previously applied gave rise to a materially accurate valuation of the combined assets, the proportions of the total value attributed to the biological and non-biological assets need to be restated. Accordingly, the directors have concluded that in accordance with the requirements of IAS 8 (Accounting Policies, Changes in Accounting Estimates and Errors), prior period adjustments are required to restate the figures previously reported.

Former policy and methodology

Estates comprise biological assets and non-biological plantation assets including land, infrastructure and mills. In previous periods, an overall estate valuation was determined based upon a valuation of the planted and unplanted areas using a discounted cash flow method. The value of the biological assets was estimated as a proportion of the overall estate value using percentages derived from historic data. For a plantation with a mill, the biological asset portion was estimated at 18% of the estate value while for a plantation without a mill, it was estimated at 23%. The movement in valuation of biological assets was charged or credited to the income statement for the relevant period. The movement in valuation of non-biological assets (excluding mills which were carried at depreciated cost) was transferred to the revaluation reserve.

Revised policy and methodology

For the current period, rather than valuing the entire estate and then estimate the amount attributable to its biological and non-biological components using the percentages noted above, the group has changed to an approach of valuing and accounting for the components separately, as follows:

·; Biological assets - are carried at fair value less costs to sell determined on the basis of the net present value of cash flows arising in producing FFB. Areas are included in the valuation once they are planted, however oil palm which are not yet mature at the accounting date, and hence are not producing FFB, are valued on a similar basis but with the discounted value of the estimated cost to complete planting and to maintain the assets to maturity being deducted from the discounted FFB value. No account is taken in the valuation of future replanting. As in previous periods, the movement in valuation surplus of biological assets is charged or credited to the income statement for the relevant period.

·; Estate land - is initially recognised at cost, including related transaction costs. It is subsequently carried at fair value on an open market basis. Land is not depreciated. As in previous periods, any surplus or deficit on revaluation of estate land is transferred to the revaluation reserve, except that a deficit which is in excess of any previously recognised surplus relating to the same property is charged to the income statement. On the disposal of a revalued estate, any balance remaining in the revaluation reserve is transferred to retained earnings as a movement in reserves.

·; Non-biological assets (excluding land) comprise oil mills, plant, machinery and estate infrastructure - the group's historic accounting policy in respect of oil mills was to carry them at depreciated cost and there has been no change to that policy. However, under the group's former policy plant, machinery and estate infrastructure was valued as an integral part of the estate and, along with estate land, carried at valuation in the consolidated balance sheet as 'non-biological assets'. As noted above, the group has now moved to a methodology whereby the biological assets and estate land are valued as separate components. In the opinion of the directors, it is not possible to measure reliably the fair value of plant, machinery and estate infrastructure as separate components. The group has therefore changed to a policy of carrying plant, machinery and estate infrastructure at cost less depreciation which they believe is a more appropriate policy for the nature of the assets. Depreciation is calculated on a straight line basis.

The Company has obtained independent valuations of its biological assets as at 31 December 2011 and as at those relevant period ends to support the reflection of the prior year adjustments. In addition, the Company has obtained independent valuations of its estate land as at 31 December 2011 on an open market basis.

The change to a methodology of obtaining separate valuations of the biological assets and estate land has highlighted that biological assets and estate land need to be restated in prior periods as a consequence of using the percentage allocation method. A prior period adjustment has therefore been made to restate the comparative figures to reflect the revised methodology.

Revised policy and methodology

The impact of this prior period adjustment :-

The consequential change to carrying non-biological assets excluding land and oil mills at cost less depreciation rather than at a valuation represents a change in accounting policy. A prior period adjustment has therefore been made to restate the comparative figures in accordance with the new policy. 

The impact of this prior period adjustment:-

This change of accounting policy had a positive impact on the earnings per share of 15.05cts for the period to 30 June 2011 and 32.81cts for the year to 31 December 2011.

The following table summarises the impact of these prior period adjustments due to the implementation of the new accounting policy:-

3. Foreign exchange

4. Finance costs

5. Segment information

\* The 31 December 2011 comparative period is based on the audited financial statements for the year end as amended for prior year adjustments as set out in note 2.

In the 6 months to 30 June 2012, revenues from 4 customers of the Indonesian segment represent approximately $62.0m of the Group's total revenues. An analysis of these revenues is provided below:

In year 2011, revenues from 4 customers of the Indonesian segment represent approximately $139.4m of the Group's total revenues. An analysis of these revenues is provided below:

6. Tax

\* The 31 December 2011 comparative period is based on the audited financial statements for the year end as amended for prior year adjustments as set out in Note 2.

7. Dividend

The final and only dividend in respect of 2011, amounting to 6.0cts per share, or $2,372,344, was paid on 9 July 2012 (2010: 5.0cts per share, or $1,976,954, paid on 28 June 2011). As in previous years no interim dividend has been declared.

8. Earnings per ordinary share (EPS)