Last checked at 27 Aug 2014 13:18
27 August2014
Anglo-Eastern Plantations Plc
("AEP", "Group" or "Company")
Announcement of interim results for six months ended 30 June 2014
Anglo-Eastern Plantations Plc, and its subsidiaries are a major producer of palm oil and rubber with plantations across Indonesia and Malaysia amounting to some 127,794 hectares, has today released its results for the six months ended 30 June 2014.
Financial Highlights
20146 monthsto 30 June$ m (unaudited) | 20136 monthsto 30 June$ m (unaudited & restated) | 201312 monthsto 31 Dec$ m (audited) | |||
Revenue | 130.0 | 83.5 | 201.9 | ||
Profit before tax | |||||
- before biological asset ("BA") adjustment | 43.2 | 15.8 | 59.7 | ||
- after BA adjustment | 66.3 | 18.3 | 153.4 | ||
EPS, after BA adjustment | 103.66cts | 21.11cts | 235.95cts | ||
Total Net Assets | 552.0 | 463.2 | 494.0 |
Enquiries:
Anglo-Eastern Plantations Plc | |
Dato' John Lim Ewe Chuan | 020 7216 4621 |
Charles Stanley Securities | |
Russell Cook / Karri Vuori | 020 7149 6000 |
Chairman's statement
I am pleased to present the interim results for the Company for the six months to 30 June 2014. The Group performance improved significantly compared to last year due to improved Crude Palm Oil ("CPO") prices, higher Fresh Fruit Bunches ("FFB") production and increased purchase of external crops by the mills.
Despite the relatively good performance in the first half the Board emphasises that challenging times are ahead for the Group and the palm oil industry in general. Of late CPO price has weakened mainly due to the prospect of a record soybean production in North and South America on the back of favourable weather expectations and increased planting acreage.
Demand remains soft as top buyers in India and China purchase a greater proportion of soybean as the price differential between the two edible oils continues to narrow. The spread was about $98 per metric tonne on 4 July 2014 down from an average of $244/mt on the same date in 2013. Pressure on the CPO price is exacerbated further by a good supply of sunflower oil in the market at very competitive prices. A slowly deflating energy market due to the poor infrastructure for oil distribution and biodiesel blending in some developing countries has also undermined earlier widely held expectations for biodiesel to absorb surplus CPO.
Operational and financial performance
For the six months ended 30 June 2014, revenue was $130.0 million, an increase of 56% (1H 2013: $83.5 million). Gross margins for the period increased from 25% to 35% reflecting a 6% increase in average CPO price in the first half of 2014 compared to the same period in the previous year. This was on top of 20% weakening of Indonesian Rupiah against the US Dollar for the same period.
The Group benefited from a $23.1 million revaluation of its biological assets ("BA valuation") (1H 2013: $2.5 million). With this contribution operating profits for the period increased by 259% to $63.9 million (1H 2013: $17.8 million) while profit before tax was $66.3 million, 262% higher than the $18.3 million achieved for the same period in 2013.
The resulting earnings per share for the period were up 391% at 103.66cts (1H 2013: 21.11cts).
During the first six months of 2014 the CPO price averaged at $895/mt compared to $847/mt for 1H 2013. FFB production for the first six months of 2014 was 393,900mt, 17% higher compared to 335,900mt for 1H 2013. Bought-in crops for the same period was 310,900mt, 62% higher than last year of 191,900mt due to better prices offered for external crops.
The Group's balance sheet remains strong and cash flow remains healthy even after our capital expenditure necessary to maintain immature trees and new planting.
The BA valuation is determined using discounted cash flow over the expected 20-year economic life of the assets. Among the assumption used in the valuation includes the 10-year average CPO price. The BA valuation increased by $23.1 million for 30 June 2014 was due primarily to the increase in the 10-year average CPO price from $700/mt to $725/mt.
As at 30 June 2014 the Group's total cash balance was $115.8 million (1H 2013: $98.7 million) with total borrowings of $35.0 million (1H 2013: $35.0 million), giving a net cash position of $80.8 million, compared to $63.7million as at 30 June 2013.
Operating costs
The operating costs for the Indonesian operations were higher in 1H 2014 compared to the same period in 2013 mainly due to the increase in wages, fertilisers, fuel and general upkeep of plantations. Higher operating costs were also partly attributed to 13% increase in matured areas.
Production and Sales | |||
2014 | 2013 | 2013 | |
6 months | 6 months | Year | |
to 30 June | to 30 June | to 31 December | |
(unaudited) | (unaudited) | (audited) | |
mt | mt | mt | |
Oil palm production | |||
FFB | |||
- all estates | 393,900 | 335,900 | 787,500 |
- bought-in or processed for third parties | 310,900 | 191,900 | 496,600 |
Saleable CPO | 141,700 | 109,900 | 262,600 |
Saleable palm kernels | 33,100 | 25,400 | 61,500 |
Oil palm sales | |||
CPO | 145,000 | 108,700 | 253,200 |
Palm kernels | 31,600 | 24,900 | 60,800 |
FFB sold outside | 37,300 | 12,300 | 54,300 |
Rubber production | 480 | 450 | 1,049 |
The Group's five mills processed a total of 667,500mt in FFB for the 1H 2014, a 29% increase compared to 515,500mt for the same period last year.
Internal crop production was higher by 17% in line with an increase in matured plantations in the Bengkulu and Central Kalimantan.
Bought-in crops were 62% higher than last year due to additional sources of FFB supplies and improved pricing.
Capital outlay is required to improve road conditions in Bengkulu, easing the FFB transportation especially during rainy season. Significant capital expenditure is expected in the replanting of 1,029ha of old palms in North Sumatra.
Commodity prices
CPO price was fairly strong for the 1H 2014 and hit a high of $993/mt in March 2014. The average CPO price for 1H 2014 was $895/mt (1H 2013: $847/mt). The higher CPO price in the first three months of 2014 was due to initial concerns over dry weather that hit Peninsular Malaysia and parts of Indonesia which delayed the ripening of fruits.
Rubber price averaged $1,823/mt, 30% lower than 2013 (1H 2013: $2,599/mt).
Development
The Group's planted areas at 30 June 2014 comprised:
Total | Mature | Immature | |
ha | ha | ha | |
North Sumatra | 19,249 | 17,702 | 1,547 |
Bengkulu | 18,819 | 17,717 | 1,102 |
Riau | 4,873 | 4,873 | - |
South Sumatra | 3,969 | 159 | 3,810 |
Kalimantan | 10,391 | 4,651 | 5,740 |
Bangka | 307 | - | 307 |
Plasma | 734 | 510 | 224 |
Indonesia | 58,342 | 45,612 | 12,730 |
Malaysia | 3,695 | 3,379 | 316 |
Total : 30 June 2014 | 62,037 | 48,991 | 13,046 |
Total : 31 December 2013 | 61,099 | 43,236 | 17,863 |
Total : 30 June 2013 | 59,715 | 43,483 | 16,232 |
The Group's new planting for the first six months ended 30 June 2014 totalled 941ha. The slow rate of new planting is due to protracted land compensation negotiations.
The Group is optimistic that planting will pick up in the second half of 2014. The Group's total landholding comprises some 127,794ha, of which the planted area stands around 62,037ha (1H 2013: 59,715ha).
The biogas purification equipment and biomass plant for the mill in North Sumatra are in final stages of testing and commissioning in early Q3 2014. This mill will enhance the treatment of the effluent and at the same time mitigate the emission of biogas. Under this project, the empty fruit bunches will be processed into dried long fibres for export.
The earthworks for the construction of the 45mt/hr palm oil mill in Central Kalimantan are 85% completed while civil and mechanical works is progressing as scheduled with the mill expected to be completed and operational in Q2 2015.
Dividend
As in previous years no interim dividend has been declared. A final dividend of 3.0 pence per share in respect of the year to 31 December 2013 was paid on 17 June 2014.
Outlook
It has been reported in the Public Ledger that many buyers of refined palm oil in China struggled for funding as the country crackdown on commodity financing in the face of slowing domestic demand. This may lead to lower CPO imports as a result of tighter access to credit. However, the industry believe CPO price is expected to be resilient due to concerns on weaker FFB production in Malaysia and parts of Indonesia in the fourth quarter of 2014 due to a prolonged dry spell in the first three months of the year. Parts of some growing areas in Malaysia and Indonesia received less than 50 millimetres of rain in January and February, the driest period since 1997. El Nino weather phenomenon is also forecasted this year and if materialises could induce droughts which would curb production and yield.
The Board remains cautiously confident of reporting a satisfactory level of profitability. Cash generation is expected to remain strong and the Board looks forward to reporting further progress in its next Interim Management Statement.
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 2013.
A more detailed explanation of the risks relevant to the Group is on pages 18 to 20 and from pages 78 to 83 of the 2013 annual report which is available at www.angloeastern.co.uk.
Following the conclusion of the discussions with the Financial Reporting Council ("FRC") regarding the use of current market data to estimate notional rent for the use of land in its discounted cash flow for the determination of biological assets, details of which were set out in the 2013 Annual Report and Accounts, the Group has adopted a notional rent equivalent to 9% of the value of planted land in valuing its biological asset and resulted in the accounts for the period ended 30 June 2013 being restated. The details of the restatement are disclosed in Note 2 - Prior period restatement on page 15.
Madam Lim Siew Kim
Chairman
27 August 2014
Responsibility Statements
We confirm that to the best of our knowledge:
a) The unaudited interim financial statements have been prepared in accordance with IAS34: Interim Financial Reporting as adopted by the European Union;
b) The Chairman's statement includes a fair review of the information required by DTR 4.2.7R (an indication of important events during the first six months and a description of the principal risks and uncertainties for the remaining six months of the year); and
c) The interim financial statements include a fair review of the information required by DTR 4.2.8R (material related party transactions in the six months ended 30 June 2014 and any material changes in the related party transactions described in the last Annual Report) of the Disclosure and Transparency Rules of the United Kingdom Financial Services Authority.
By order of the Board
Dato' John Lim Ewe Chuan
27 August 2014
Condensed Consolidated Income Statement
2014 6 months to 30 June (unaudited) | 2013 6 months to 30 June (unaudited & restated) | 2013 Year to 31 December (audited) | ||||||||
Continuing operations
| Notes
| Result before BA adjustment$000 | BA adjustment$000 | Total$000 | Result before BA adjustment$000 | BA adjustment$000 | Total$000 | Result before BA adjustment$000 | BA adjustment$000 | Total$000 |
Revenue | 130,006 | - | 130,006 | 83,528 | - | 83,528 | 201,917 | - | 201,917 | |
Cost of sales | (84,892) | - | (84,892) | (62,408) | - | (62,408) | (133,400) | - | (133,400) | |
Gross profit | 45,114 | - | 45,114 | 21,120 | - | 21,120 | 68,517 | - | 68,517 | |
Biological asset revaluation movement (BA adjustment) | - | 23,103 | 23,103 | - | 2,503 | 2,503 | - | 93,661 | 93,661 | |
Administration expenses | (4,300) | - | (4,300) | (5,795) | - | (5,795) | (8,898) | - | (8,898) | |
Operating profit | 40,814 | 23,103 | 63,917 | 15,325 | 2,503 | 17,828 | 59,619 | 93,661 | 153,280 | |
Exchange loss | 413 | - | 413 | (512) | - | (512) | (2,781) | - | (2,781) | |
Finance income | 2,942 | - | 2,942 | 1,763 | - | 1,763 | 4,676 | - | 4,676 | |
Finance expense | 4 | (1,003) | - | (1,003) | (784) | - | (784) | (1,774) | - | (1,774) |
Profit before tax | 5 | 43,166 | 23,103 | 66,269 | 15,792 | 2,503 | 18,295 | 59,740 | 93,661 | 153,401 |
Tax expense | 6 | (11,918) | (5,776) | (17,694) | (5,926) | (626) | (6,552) | (16,178) | (23,415) | (39,593) |
Profit for the period | 31,248 | 17,327 | 48,575 | 9,866 | 1,877 | 11,743 | 43,562 | 70,246 | 113,808 | |
Attributable to: | ||||||||||
- Owners of the parent | 25,879 | 15,209 | 41,088 | 6,859 | 1,509 | 8,368 | 35,950 | 57,571 | 93,521 | |
- Non-controlling interests | 5,369 | 2,118 | 7,487 | 3,007 | 368 | 3,375 | 7,612 | 12,675 | 20,287 | |
31,248 | 17,327 | 48,575 | 9,866 | 1,877 | 11,743 | 43,562 | 70,246 | 113,808 | ||
Earnings per share for profit attributable to the owners of the parent during the period |
|
|
| |||||||
- basic | 8 | 103.66cts | 21.11cts | 235.95cts | ||||||
- diluted | 8 | 103.54cts | 21.09cts | 235.67cts | ||||||
Condensed Consolidated Statement of Comprehensive Income
2014 |
2013 | 2013 | ||
6 months | 6 months | Year | ||
to 30 June | to 30 June | to 31 December | ||
(unaudited) | (unaudited & restated) | (audited) | ||
$000 | $000 | $000 | ||
Profit for the period | 48,575 | 11,743 | 113,808 | |
Other comprehensive income | ||||
Items may be reclassified to profit or loss in subsequent periods: | ||||
Profit / (Loss) on exchange translation of foreign operations | 12,403 | (13,845) | (112,824) | |
Net other comprehensive income may be reclassified to profit or loss in subsequent periods | 12,403 | (13,845) | (112,824) | |
Items not to be reclassified to profit or loss in subsequent periods: | ||||
Unrealised (loss) / gain on revaluation of the estates | (704) | (3,057) | 31,807 | |
Deferred tax on revaluation | 177 | 765 | (7,951) | |
Remeasurements of retirement benefit plan | - | (1,414) | 278 | |
Deferred tax on retirement benefit | - | - | (71) | |
Net other comprehensive (expense) / income not being reclassified to profit or loss in subsequent periods | (527) | (3,706) | 24,063 | |
Total other comprehensive income / (expenses) for the period, net of tax | 11,876 | (17,551) | (88,761) | |
Total comprehensive income / (expenses) for the period | 60,451 | (5,808) | 25,047 | |
Attributable to: | ||||
- Owners of the parent | 50,718 | (6,396) | 21,508 | |
- Non-controlling interests | 9,733 | 588 | 3,539 | |
60,451 | (5,808) | 25,047 |
Condensed Consolidated Statement of Financial Position
2014 | 2013 | 2013 | ||
as at 30 June | as at 30 June | as at 31 December | ||
Notes | (unaudited) | (unaudited & restated) | (audited) | |
$000 | $000 | $000 | ||
Non-current assets | ||||
Biological assets | 304,156 | 215,117 | 265,835 | |
Property, plant and equipment | 224,030 | 210,865 | 213,342 | |
Receivables | 5,857 | 5,216 | 5,649 | |
534,043 | 431,198 | 484,826 | ||
Current assets | ||||
Inventories | 9,817 | 6,987 | 8,448 | |
Tax receivables | 9,333 | 9,427 | 8,464 | |
Trade and other receivables | 10,261 | 12,181 | 7,271 | |
Cash and cash equivalents | 115,831 | 98,671 | 98,738 | |
145,242 | 127,266 | 122,921 | ||
Current liabilities | ||||
Loans and borrowings | (196) | (29) | (84) | |
Trade and other payables | (18,990) | (14,710) | (15,331) | |
Tax liabilities | (7,845) | (2,794) | (4,988) | |
Dividend payables | (20) | (1,784) | - | |
(27,051) | (19,317) | (20,403) | ||
Net current assets | 118,191 | 107,949 | 102,518 | |
Non-current liabilities | ||||
Loans and borrowings | (34,813) | (35,010) | (34,937) | |
Deferred tax liabilities | (61,787) | (35,894) | (55,298) | |
Retirement benefits - net liabilities | (3,593) | (5,091) | (3,099) | |
(100,193) | (75,995) | (93,334) | ||
Net assets | 552,041 | 463,152 | 494,010 | |
|
2014 | 2013 | 2013 | ||
as at 30 June | as at 30 June | as at 31 December | ||
Notes | (unaudited) | (unaudited & restated) | (audited) | |
$000 | $000 | $000 | ||
Issued capital and reserves attributable to owners of the parent | ||||
Share capital | 15,504 | 15,504 | 15,504 | |
Treasury shares | (1,171) | (1,171) | (1,171) | |
Share premium reserve | 23,935 | 23,935 | 23,935 | |
Share capital redemption reserve | 1,087 | 1,087 | 1,087 | |
Revaluation reserves | 56,297 | 34,632 | 56,767 | |
Exchange reserves | (171,007) | (100,194) | (181,107) | |
Retained earnings | 532,121 | 406,349 | 493,031 | |
456,766 | 380,142 | 408,046 | ||
Non-controlling interests | 95,275 | 83,010 | 85,964 | |
Total equity | 552,041 | 463,152 | 494,010 |
Condensed Consolidated Statement of Changes in Equity
Attributable to owners of the parent |
| ||||||||||
Share capital | Treasury shares | Share premium | Share capital redemption reserve | Revaluation reserve | Foreign exchange reserve | Retained earnings | Total | Non-controlling interests | Total equity |
| |
$000 | $000 | $000 | $000 | $000 | $000 | $000 | $000 | $000 | $000 |
| |
| |||||||||||
Balance at 31 December 2012 | 15,504 | (1,171) | 23,935 | 1,087 | 36,799 | (88,838) | 401,006 | 388,322 | 83,043 | 471,365 | |
Items of other comprehensive income | |||||||||||
-Unrealised gain on revaluation of estates, net of tax |
- |
- |
- |
- |
20,062 |
- |
- |
20,062 |
3,794 |
23,856 | |
-Disposal of land | (94) | - | 94 | - | - | - | |||||
-Remeasurement of retirement benefit plan, net of tax |
- |
- |
- |
- |
- |
- |
194 |
194 |
13 |
207 | |
Loss on exchange translation of foreign operations |
- |
- |
- |
- |
- |
(92,269) |
- |
(92,269) |
(20,555) |
(112,824) | |
Total other comprehensive income / (expenses) |
- |
- |
- |
- |
19,968 |
(92,269) |
288 |
(72,013) |
(16,748) |
(88,761) | |
Profit for year | - | - | - | - | - | - | 93,521 | 93,521 | 20,287 | 113,808 | |
Total comprehensive income and expenses for the year |
- |
- |
- |
- |
19,968 |
(92,269) |
93,809 |
21,508 |
3,539 |
25,047 | |
Dividends paid | - | - | - | - | - | - | (1,784) | (1,784) | (618) | (2,402) | |
Balance at 31 December 2013 | 15,504 | (1,171) | 23,935 | 1,087 | 56,767 | (181,107) | 493,031 | 408,046 | 85,964 | 494,010 | |
Items of other comprehensive income | |||||||||||
-Unrealised loss on revaluation of estates, net of tax | - | - | - | - | (470) | - | - | (470) | (57) | (527) | |
-Gain on exchange translation of foreign operations | - | - | - | - | - | 10,100 | - | 10,100 | 2,303 | 12,403 | |
Total other comprehensive (expenses) / income | - | - | - | - | (470) | 10,100 | - | 9,630 | 2,246 | 11,876 | |
Profit for period | - | - | - | - | - | - | 41,088 | 41,088 | 7,487 | 48,575 | |
Total comprehensive income and expenses for the period | - | - | - | - | (470) | 10,100 | 41,088 | 50,718 | 9,733 | 60,451 | |
Dividend paid | - | - | - | - | - | - | (1,998) | (1,998) | (422) | (2,420) | |
Balance at 30 June 2014 | 15,504 | (1,171) | 23,935 | 1,087 | 56,297 | (171,007) | 532,121 | 456,766 | 95,275 | 552,041 | |
Balance at 31 December 2012 | 15,504 | (1,171) | 23,935 | 1,087 | 36,799 | (88,838) | 401,006 | 388,322 | 83,043 | 471,365 |
Items of other comprehensive income | ||||||||||
-Unrealised loss on revaluation of estates, net of tax | - | - | - | - | (2,167) | - | - | (2,167) | (125) | (2,292) |
-Remeasurement of retirement benefit plan, net of tax | - | - | - | - | - | - | (1,241) | (1,241) | (173) | (1,414) |
-Loss on exchange translation of foreign operations | - | - | - | - | - | (11,356) | - | (11,356) | (2,489) | (13,845) |
Total other comprehensive expenses | - | - | - | - | (2,167) | (11,356) | (1,241) | (14,764) | (2,787) | (17,551) |
Profit for period as restated | - | - | - | - | - | - | 8,368 | 8,368 | 3,375 | 11,743 |
Total comprehensive income and expenses for the period | - | - | - | - | (2,167) | (11,356) | 7,127 | (6,396) | 588 | (5,808) |
Dividends payable | - | - | - | - | - | - | (1,784) | (1,784) | (621) | (2,405) |
Balance at 30 June 2013 as restated | 15,504 | (1,171) | 23,935 | 1,087 | 34,632 | (100,194) | 406,349 | 380,142 | 83,010 | 463,152 |
Condensed Consolidated Statement Cash Flows
2014 | 2013 | 2013 |
| |
6 months | 6 months | Year |
| |
to 30 June | to 30 June | to 31 December |
| |
(unaudited) | (unaudited & restated) | (audited) |
| |
$000 | $000 | $000 |
| |
Cash flows from operating activities | ||||
Profit before tax | 66,269 | 18,295 | 153,401 | |
Adjustments for: | ||||
BA adjustment | (23,103) | (2,503) | (93,661) | |
Loss / (Profit) on disposal of tangible fixed assets | 2 | 91 | (319) | |
Depreciation | 3,107 | 4,143 | 6,406 | |
Retirement benefit provisions | 418 | 550 | 1,325 | |
Net finance income | (1,939) | (979) | (2,902) | |
Unrealised (gain) / loss in foreign exchange | (413) | 512 | 2,781 | |
Tangible fixed assets written off | 6 | 31 | 97 | |
Operating cash flow before changes in working capital | 44,347 | 20,140 | 67,128 | |
Increase in inventories | (1,145) | (1,089) | (3,591) | |
(Increase) / Decrease in trade and other receivables | (3,628) | (4,430) | 2,456 | |
Increase / (Decrease) in trade and other payables | 3,312 | (529) | 2,400 | |
Cash inflow from operations | 42,886 | 14,092 | 68,393 | |
Interest paid | (1,003) | (784) | (1,774) | |
Retirement benefit paid | (6) | (52) | (244) | |
Overseas tax paid | (10,309) | (15,113) | (23,981) | |
Net cash flow from / (used in) operations | 31,568 | (1,857) | 42,394 | |
Investing activities | ||||
Property, plant and equipment | ||||
- purchase | (17,589) | (23,583) | (49,938) | |
- sale | 34 | 87 | 641 | |
Interest received | 2,942 | 1,763 | 4,676 | |
Net cash used in investing activities | (14,613) | (21,733) | (44,621) | |
Financing activities | ||||
Dividends paid by Company | (1,998) | - | (1,784) | |
Drawdown of long term loans | - | 10,000 | 10,000 | |
Finance lease repayment | (12) | (36) | (30) | |
Dividends paid to non-controlling interests | (398) | (621) |
(618) | |
Net cash (used in) / from financing activities | (2,408) | 9,343 | 7,568 | |
Increase / (Decrease) in cash and cash equivalents | 14,547 | (14,247) | 5,341 | |
Cash and cash equivalents | ||||
At beginning of period | 98,738 | 116,250 | 116,250 | |
Foreign exchange | 2,546 | (3,332) | (22,853) | |
At end of period | 115,831 | 98,671 | 98,738 | |
Comprising: | ||||
Cash at end of period | 115,831 | 98,671 | 98,738 | |
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 2013 Annual Report. The financial information for the half years ended 30 June 2014 and 30 June 2013 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.
Basis of preparation
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 2013 included within this report does not constitute the full statutory accounts for that period. The statutory Annual Report and Financial Statements for 2013 have been filed with the Registrar of Companies. The Independent Auditors' Report on the Annual Report and Financial Statements for 2013 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.
Changes in accounting standards
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 except for the following new standards that have come into effect from the previous reporting date:
· IFRS 10 Consolidated Financial Statements
· IFRS 11 Joint Arrangements
· IFRS 12 Disclosures of Interest in Other Entities
· IAS 27 Separate Financial Statements
· IAS 28 Investments in Associates and Joint Ventures
· IAS 32 Amendments - Offsetting Financial Assets and Financial Liabilities
· IAS 36 Amendments - Recoverable Amounts Disclosures for Non-financial Assets
· IFRIC 21 Levies
None of the new standards, interpretations and amendments above have had a material effect on the Group's reporting.
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 period restatement
Following the conclusion of the discussions with the Financial Reporting Council ("FRC") regarding the use of current market data to estimate notional rent for the use of land in its discounted cash flow for the determination of biological assets, details of which were set out in the 2013 Annual Report and Accounts, the Group has adopted a notional rent equivalent to 9% of the value of planted land in valuing its biological asset and resulted in the accounts for the period ended 30 June 2013 being restated. The effect of the restatements is summarised in the following page.
The impact of these prior period adjustments:
After Biological Assets
|
$000 | 2013 6 months to 30 June (unaudited & restated) $000 | |
Profit for the period before restatement | 22,317 | ||
Effect of change in restatement: | |||
Biological asset revaluation movement | (14,098) | ||
Tax expense | 3,524 | ||
(10,574) | |||
Profit for the period after restatement | 11,743 | ||
Other comprehensive expenses for the period before restatement | (18,573) | ||
Effect of change in restatement: | |||
Profit on exchange translation of foreign operations | 1,022 | ||
Other comprehensive expenses for the period after restatement | (17,551) |
The effect of these prior period adjustments had a negative impact on the earnings per share of 25.03cts for the period to 30 June 2013.
The following table summarises the impact of these prior period adjustments on the Consolidated Statement of Financial Position:
| Biological assets | Deferred tax liabilities | Exchange reserve | Retained earnings | Non-controlling interest |
$000 | $000 | $000 | $000 | $000 | |
Balance as reported 30 June 2013 | 265,487 | (48,486) | (102,827) | 442,449 | 87,321 |
Effect of restatement during the year | (50,370) | 12,592 | 2,633 | (36,100) | (4,311) |
Restated balance as at 30 June 2013 | 215,117 | (35,894) | (100,194) | 406,349 | 83,010 |
3. Foreign exchange
2014 | 2013 | 2013 | ||
6 months | 6 months | Year | ||
to 30 June | to 30 June | to 31 December | ||
(unaudited) | (unaudited) | (audited) | ||
Average exchange rates | ||||
Rp : $ | 11,725 | 9,732 | 10,445 | |
$ : £ | 1.67 | 1.54 | 1.56 | |
RM : $ | 3.27 | 3.07 | 3.15 | |
Closing exchange rates | ||||
Rp : $ | 11,855 | 9,925 | 12,170 | |
$ : £ | 1.71 | 1.52 | 1.66 | |
RM : $ | 3.21 | 3.16 | 3.28 |
4. Finance costs
2014 | 2013 | 2013 | ||
6 months | 6 months | Year | ||
to 30 June | to 30 June | to 31 December | ||
(unaudited) | (unaudited) | (audited) | ||
$000 | $000 | $000 | ||
Payable | 1,003 | 784 | 1,774 |
5. Segment information
| North Sumatra | Bengkulu | South Sumatra | Riau | Bangka | Kalimantan | Total Indonesia | Malaysia | UK | Total | |
| $000 | $000 | $000 | $000 | $000 | $000 | $000 | $000 | $000 | $000 | |
| 6 months to 30 June 2014 (unaudited) | ||||||||||
| Total sales revenue (all external) | 48,753 | 53,335 | 38 | 21,787 | - | 3,002 | 126,915 | 2,215 | - | 129,130 |
| Other income | 283 | 373 | - | 220 | - | - | 876 | - | - | 876 |
| Total revenue | 49,036 | 53,708 | 38 | 22,007 | - | 3,002 | 127,791 | 2,215 | - | 130,006 |
| |||||||||||
| Profit / (loss) before tax | 17,056 | 18,182 | (167) | 8,848 | (21) | (728) | 43,170 | 531 | (535) | 43,166 |
| BA Movement | 23,103 | |||||||||
| Profit for the period before tax per consolidated income statement | 66,269 | |||||||||
| |||||||||||
| Depreciation | (1,092) | (1,045) | (203) | (272) | (16) | (354) | (2,982) | (125) | - | (3,107) |
| Inter-segment transactions | 2,806 | (1,704) | (197) | (490) | - | (921) | (506) | 476 | 30 | - |
| Income tax | (7,289) | (3,722) | (1,581) | (2,095) | (7) | (2,653) | (17,347) | (66) | (281) | (17,694) |
| |||||||||||
| Total Assets | 214,804 | 155,588 | 70,765 | 80,644 | 13,283 | 109,770 | 644,854 | 29,996 | 4,435 | 679,285 |
| Non-Current Assets | 165,229 | 126,071 | 68,839 | 39,477 | 13,193 | 97,695 | 510,504 | 22,346 | 1,193 | 534,043 |
| Non-Current Assets - Additions | 3,298 | 1,615 | 2,466 | 605 | 420 | 9,138 | 17,542 | 47 | - | 17,589 |
| |||||||||||
| 6 months to 30 June 2013 (unaudited & restated) | ||||||||||
| Total sales revenue (all external) | 40,378 | 25,727 | 2 | 14,481 | - | 680 | 81,268 | 1,842 | - | 83,110 |
| Other income | 413 | (31) | - | 34 | - | 2 | 418 | - | - | 418 |
| Total revenue | 40,791 | 25,696 | 2 | 14,515 | - | 682 | 81,686 | 1,842 | - | 83,528 |
| |||||||||||
| Profit / (loss) before tax | 12,110 | 1,879 | (292) | 4,374 | (10) | (1,271) | 16,790 | (284) | (714) | 15,792 |
| BA Movement | 2,503 | |||||||||
| Profit for the period before tax per consolidated income statement | 18,295 | |||||||||
| |||||||||||
| Depreciation | (1,378) | (1,653) | (236) | (502) | (15) | (230) | (4,014) | (129) | - | (4,143) |
| Inter-segment transactions | 664 | (858) | (84) | (252) | - | (457) | (987) | 957 | 30 | - |
| Income tax | (6,771) | (2,202) | 2,071 | (1,216) | 107 | 787 | (7,224) | 892 | (220) | (6,552) |
| |||||||||||
| Total Assets | 176,750 | 144,251 | 50,404 | 65,872 | 11,260 | 84,184 | 532,721 | 19,196 | 6,547 | 558,464 |
| Non-Current Assets | 129,532 | 124,531 | 48,113 | 37,974 | 10,662 | 67,136 | 417,948 | 11,887 | 1,363 | 431,198 |
| Non-Current Assets - Additions | 4,738 | 3,120 | 6,180 | 625 | 488 | 8,262 | 23,413 | 170 | - | 23,583 |
North Sumatra | Bengkulu | South Sumatra | Riau | Bangka | Kalimantan | Total Indonesia | Malaysia | UK | Total | ||
$000 | $000 | $000 | $000 | $000 | $000 | $000 | $000 | $000 | $000 | ||
Year to 31 December 2013 (audited) | |||||||||||
Total sales revenue (all external) | 93,261 | 63,019 | 18 | 38,166 | - | 2,516 | 196,980 | 4,318 | 2 | 201,300 | |
Other income | 827 | 112 | 6 | 91 | - | (419) | 617 | - | - | 617 | |
Total revenue | 94,088 | 63,131 | 24 | 38,257 | - | 2,097 | 197,597 | 4,318 | 2 | 201,917 | |
Profit / (loss) before tax | 33,879 | 15,700 | (443) | 19,017 | 1 | (6,633) | 61,521 | 206 | (1,987) | 59,740 | |
BA Movement | 93,661 | ||||||||||
Profit for the period before tax per | |||||||||||
consolidated income statement | 153,401 | ||||||||||
Depreciation | (2,248) | (2,268) | (475) | (585) | (32) | (540) | (6,148) | (258) | - | (6,406) | |
Inter-Segment Transactions | 2,821 | (2,236) | (242) | (656) | - | (1,512) | (1,825) | 845 | 980 | - | |
Income tax | (24,567) | (8,086) | (554) | (6,542) | 79 | (288) | (39,958) | 585 | (220) | (39,593) | |
Total Assets | 195,447 | 148,268 | 59,285 | 67,739 | 12,744 | 89,882 | 573,365 | 29,720 | 4,662 | 607,747 | |
Non-Current Assets | 153,524 | 122,485 | 57,673 | 38,726 | 12,462 | 76,259 | 461,129 | 22,334 | 1,363 | 484,826 | |
Non-Current Assets - Additions | 13,164 | 5,952 | 10,172 | 1,513 | 1,069 | 17,828 | 49,698 | 240 | - | 49,938 | |
In the 6 months to 30 June 2014, revenues from 4 customers of the Indonesian segment represent approximately $87.7m of the Group's total revenues. In year 2013, revenues from 4 customers of the Indonesian segment represent approximately $110.1m of the Group's total revenues. An analysis of these revenues is provided below:
2014 | 2013 | 2013 | ||||
6 months | 6 months | Year | ||||
to 30 June | to 30 June | to 31 December | ||||
(unaudited) | (unaudited) | (audited) | ||||
$m | % | $m | % | $m | % | |
Major Customers | ||||||
Customer 1 | 28.9 | 22.2 | 14.6 | 17.4 | 31.4 | 15.6 |
Customer 2 | 21.3 | 16.4 | 13.7 | 16.3 | 30.5 | 15.1 |
Customer 3 | 19.6 | 15.2 | 9.4 | 11.3 | 25.6 | 12.7 |
Customer 4 | 17.9 | 13.7 | 8.1 | 9.6 | 22.6 | 11.1 |
Total | 87.7 | 67.5 | 45.8 | 54.6 | 110.1 | 54.5 |
6. Tax
2014 | 2013 | 2013 | ||
6 months | 6 months | Year | ||
to 30 June | to 30 June | to 31 December | ||
(unaudited) | (unaudited & restated) | (audited) | ||
$000 | $000 | $000 | ||
Foreign corporation tax - current year | 12,415 | 6,090 | 17,804 | |
Foreign corporation tax - prior year | - | - | (61) | |
Deferred tax adjustment - current year | 5,279 | 462 | 22,143 | |
Deferred tax adjustment - prior year | - | - | (293) | |
17,694 | 6,552 | 39,593 | ||
7. Dividend
The final and only dividend in respect of 2013, amounting to 3.0p per share, or $1,997,614 was paid on 17 June 2014 (2012: 4.5cts per share, or $1,783,637, paid on 5 July 2013). As in previous years no interim dividend has been declared.
8. Earnings per ordinary share (EPS)
2014 | 2013 | 2013 | ||
6 months | 6 months | Year | ||
to 30 June | to 30 June | to 31 December | ||
(unaudited) | (unaudited & restated) | (audited) | ||
Profit for the period attributable to owners of the Company before BA adjustment | 25,879 | 6,859 |
35,950 | |
Net BA adjustment | 15,209 | 1,509 | 57,571 | |
Earnings used in basic and diluted EPS | 41,088 | 8,368 |
93,521 | |
Number | Number | Number | ||
'000 | '000 | '000 | ||
Weighted average number of shares in issue in period | ||||
- used in basic EPS | 39,636 | 39,636 | 39,636 | |
- dilutive effect of outstanding share options | 48 | 48 |
48 | |
- used in diluted EPS | 39,684 | 39,684 | 39,684 | |
Shares in issue at period end | 39,976 | 39,976 | 39,976 | |
Less: Treasury shares | (340) | (340) | (340) | |
Shares in issue at period end excluding treasury shares | 39,636 | 39,636 | 39,636 | |
Basic EPS before BA adjustment | 65.29cts | 17.30cts | 90.70cts | |
Basic EPS after BA adjustment | 103.66cts | 21.11cts | 235.95cts | |
Dilutive EPS before BA adjustment | 65.21cts | 17.28cts | 90.59cts | |
Dilutive EPS after BA adjustment | 103.54cts | 21.09cts | 235.67cts |
9. Fair value measurement of financial instruments
IAS 34 requires that interim financial statements include certain of the disclosures about fair value of financial instruments set out in IFRS 13 and IFRS 7. These disclosures include the classification of fair values within a three-level hierarchy. The three levels are defined based on the observability of significant inputs to the measurement, as follows:
· Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities;
· Level 2 - inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly;
· Level 3 - unobservable inputs for the asset or liability.
The following tables show the Levels within the hierarchy of Group's assets measured at fair value on a recurring basis at 30 June 2014, 30 June 2013 and 30 December 2013:
Level 1 | Level 2 | Level 3 | Total | |
30 June 2014 | $000 | $000 | $000 | $000 |
Biological assets | - | - | 304,156 | 304,156 |
Land | - | - | 153,756 | 153,756 |
Level 1 | Level 2 | Level 3 | Total | |
30 June 2013 | $000 | $000 | $000 | $000 |
Biological assets | - | - | 215,117 | 215,117 |
Land | - | - | 143,792 | 143,792 |
Level 1 | Level 2 | Level 3 | Total | |
31 December 2013 | $000 | $000 | $000 | $000 |
Biological assets | - | - | 265,835 | 265,835 |
Land | - | - | 149,871 | 149,871 |
There were no items classified under Level 1 and Level 2 and thus no transfers between Level 1 and Level 2 during the periods.
The methodology used for biological asset valuations is using discounted cash flow ("DCF") over the expected 20-year economic life of the asset. The assumption applied in the valuation were, inter alia, an assumed CPO selling price of $725/mt (30 June 2013 and 31 December 2013: $700/mt), discount rate of 15.8% (30 June 2013: 17.5%, 31 December 2013: 15.8%) and notional rent equivalent to 9% (30 June 2013 and 31 December 2013: 9%) of the value of planted land. The discount rates were determined by the Directors based on their assessment of various risks including financial, business and country risk of where the plantations are located as well as taking into account the Company's weighted average cost of capital. The CPO price is taken to be the 10-year average (30 June 2013 and 31 December 2013: 10-year average) rounded to the nearest $25 based on historical widely-quoted commodity price for CPO and represents the Directors' best estimate of the price sustainable over the longer term. An inflation rate of 5% (30 June 2013 and 31 December 2013: 5%) was applied to the second to sixth years of the DCF. The notional rent charge is based on key capital market and property indicators in the countries and regions of operations.
There were no changes in valuation techniques during the periods.
The significant unobservable inputs used in the fair value measurement of biological assets and its relationship to fair value are exhibited below:
Significant unobservable inputs |
Relationship of unobservable inputs to fair value |
CPO selling price | The higher the CPO selling price, the higher the fair value |
Discount rate | The higher the discount rate, the lower the fair value |
Notional rent | The higher the notional rent, the lower the fair value |
For the six months ended 30 June 2014, the directors are of the opinion the fair value movements of the land are insignificant as compared to the land value at 31 December 2013 and therefore the land value at 31 December 2013 is adopted as fair value of land at 30 June 2014 except for the adjustment of exchange differences. The fair values of the land at 31 December 2013 for five major companies in Indonesia and a Malaysia company are derived using the sale comparison approach. Although there is observable market data, there is a significant degree of judgement in determining the adjustments required in deriving at the final land valuation. Sale prices of comparable land in similar location are adjusted for differences in key attributes such as location, legal title, land area, land type and topography. The valuation model is based on price per hectare. The growth rates per hectare obtained by comparing the current valuation against the valuation undertaken in year 2011 were then applied to the 2011 land value of the remaining companies in the same geographical location to derive year 2013 fair value of land. Unplantable land was excluded in this exercise since it has zero value.
The fair value of the following financial assets and liabilities approximate their carrying amount:
· Non-current receivables
· Trade and other receivables
· Cash and cash equivalents
· Borrowings
· Trade and other payables
10. Report and financial information
Copies of the interim report for the Group for the period ended 30 June 2014 are available on the AEP website at www.angloeastern.co.uk.