TIDMAEP
RNS Number : 0476X
Anglo-Eastern Plantations PLC
21 April 2023
Anglo-Eastern Plantations Plc
("AEP", "Group" or "Company")
Final results for year ended 31 December 2022
The group comprising Anglo-Eastern Plantations Plc ("AEP") and
its subsidiaries (the "Group"), is a major producer of palm oil and
to a lesser extent rubber with plantations across Indonesia and
Malaysia, amounting to approximately 128,000 hectares, has today
released its results for the year ended 31 December 2022.
Financial Highlights
The Group key performance indicators ("KPI") as required in
accordance with the requirements of s414C, Companies Act 2006 are
as follows:
Continuing operations 2022 2021 Change
$m $m %
Revenue 447.6 433.4 3%
Profit before tax:
- before biological asset ("BA")
movement 138.7 132.7 5%
- after BA movement 132.9 137.1 (3%)
Basic Earnings per ordinary share
("EPS"):
- before BA movement 221.86cts 235.25cts (6%)
- after BA movement 212.34cts 242.34cts (12%)
Dividend (cents) 25.0cts 5.0cts
Enquiries:
Anglo-Eastern Plantations Plc
Dato' John Lim Ewe Chuan +44 (0)20 7216 4621
Panmure Gordon (UK) Limited
Dominic Morley +44 (0)20 7886 2954
Chairman's Statement
I was honoured to be appointed the Non-Executive Chairman by the
Board of AEP on 8 July 2022, following the unexpected retirement of
the then Chairman, Madam Lim Siew Kim. Sadly, Madam Lim passed away
shortly after her retirement on 14 July 2022. Madam Lim was a board
member for 29 years and through her leadership, as the Chairman,
for the last 11 years has seen the Group grow in profitability and
the business expanded to what it is today. Madam Lim's significant
contributions to the Group were also acknowledged by many
shareholders, whom at the time, expressed their heartfelt
condolences as well as thanking Madam Lim for her leadership and
AEP's achievements and success during her tenure on the Board. AEP
will continue its strategy of expansion by increasing its planted
areas to enhance shareholders' value, continuing the Board's
strategy under Madam Lim's leadership. In addition, the Board is
looking to expand AEP's business by acquiring brownfields and
profitable plantations with its financial resources, as well as
improving its profitability within the Group through
rationalisation and divesting non performing estates and
consolidation of AEP's shareholdings in its subsidiaries.
Madam Lim's family interests in AEP continues with Genton
International Limited remaining a significant shareholder of AEP as
well as with the appointment of Mr. Marcus Chan Jau Chwen, the son
of Madam Lim, to AEP's Board as a Non-Independent Non-Executive
Director. Marcus's appointment, together with all his credentials
were announced to the market on 10 August 2022. Marcus's experience
in financial advisory as well as business development, together
with his youth and dynamism will add value to the Group.
During the year, the Board also appointed Ms. Farah Suhanah Tun
Ahmad Sarji to AEP's Board as an Independent Non-Executive Director
to replace me, as I was no longer deemed independent, after having
served 9 years as an Independent Non-Executive Director. Farah's
appointment, together with all her credentials were announced to
the market on 20 October 2022. The Board continues to observe the
need for diversity with the appointment of Farah who would add
value to the Group, with her previous involvement in the palm oil
plantation industry.
With two new appointments to the Board and its committees, the
composition of the 3 committees is now as follows:
Audit Committee:
Lim Tian Huat, Chairman. (Senior Independent Non-Executive
Director)
Farah Suhanah Tun Ahmad Sarji
Remuneration Committee:
Lim Tian Huat, Chairman
Farah Suhanah Tun Ahmad Sarji
Nomination and Corporate Governance Committee:
Farah Suhanah Tun Ahmad Sarji, Chairman
Lim Tian Huat
Marcus Chan Jau Chwen
Dato John Lim, the Executive Director, and I resigned from the
above mentioned committees in line with the UK Corporate Governance
Code.
The Group's FFB production from continuing operation s in 2022
reached 1.12 million mt, 3% lower than last year of 1.15 million
mt, mainly due to replanting ageing trees. Production in Bengkulu
registered a decline of 12% due to replanting programme in the last
two years which has reduced the matured plantings by 2,000 ha. The
withholding of fertilizers for trees earmarked for replanting also
contributed to a drop in yield. Normally we stop applying
fertilizers two years prior to replanting. Crop production in
Kalimantan was lower by 3% due to logistics problems and high
incidence of abnormal fruit bunches. Public roads in Kurun township
were closed for a month in the first quarter of 2022 because of
extremely bad weather which affected the transportation of crops,
which resulted in the temporary suspension of harvesting in KAP
plantation for about a month. The public roads are still closed
from time to time usually due to damages from incessant rain and
overloading, especially by heavy trucks carrying coals. The lack of
male flowers in SGM plantation also caused a higher incidence of
abnormal bunches resulting in a lower crop yield as abnormal fruit
bunches are stripped of its fruitlets before sending to the mill
for processing leaving behind the empty fruit bunches ("EFB") in
the field.
FFB bought-in from surrounding smallholders and plasma was 1.08
million mt (2021: 1.14 million mt), 5% lower than 2021. Our two
mills in Bengkulu experienced a significant drop of 21% in external
crop purchases. The reopening of a mill of one of our previous FFB
suppliers, together with competitions and transport problems caused
by heavy rain, which exceeded 500 mm a month, were the main reasons
for lower purchases. In addition, our Tasik mill had to prioritize
internal crops for processing leading to a reduction of external
crop purchases as its storage capacity for CPO reached its limit
during the export ban. The mills processed a combined 2.21 million
mt of FFB, 4% lower than last year of 2.31 million mt. CPO
production, as a result, was 4% lower at 455,600 mt, compared to
473,200 mt in 2021.
CPO prices experienced contrasting fortune in 2022. Prices
surged to record levels in the first half of the year following the
outbreak of the war in Ukraine, unfavourable weather conditions in
prime soybean producing countries and the export ban on CPO and
refined palm oil in Indonesia. Prices weakened in the second half
of the year after the export ban was lifted amidst a rise in global
inventory of vegetable oil. The fear of worldwide recession also
softened demand and dampened prices. A more detailed explanation is
provided in the Strategic Report under Commodity Prices. The yearly
average CPO price ex-Rotterdam, nevertheless, was 13% higher at
$1,369/mt, compared to $1,211/mt in 2021.
The Group's revenue from continuing operation reached a record
high of $447.6 million, 3% higher compared to $433.4 million
achieved in 2021, despite the lower CPO production, as a result of
the elevated CPO price for the first half of the year. The
operating profit for the Group from continuing operations in 2022,
before biological asset ("BA") movement, was higher at $132.9
million, from $129.3 million reported in 2021. The earnings per
share, before BA movement from continuing operations, decreased by
6% to 221.86cts, from 235.25cts in 2021. The Group's operating
profit after BA movement from continuing operation for 2022 was at
$127.1 million after a downward BA movement of $5.8 million as
compared to 2021 operating profit of $133.7 million after an upward
BA movement of $4.3 million.
The Group's new planting for oil palm including plasma for 2022
totalled 952 ha compared to 1,701 ha last year. The new planting
was mostly concentrated in the Kalimantan regions, where
negotiations with owners over land compensation were concluded
efficiently. Replanting of some 985 ha of oil palms in Bengkulu was
accelerated during the year to replace trees with poor yield.
Another 115 ha was replanted in North Sumatera. In 2023, the Group
plans to plant 2,500 ha of oil palm which includes replanting of
another 1,400 ha in Bengkulu and North Sumatera. Plasma planting
for 2023 is estimated at 300 ha.
The Group has four biogas plants with a combined capacity of
slightly above five megawatts. The Group sold 23,900 MWh of surplus
electricity in 2022 compared to 20,300 MWh last year. The biogas
plants help trap and burn the more toxic methane gas emission from
palm oil mill effluent ("POME") to generate green electricity and
produce less harmful carbon dioxide in our efforts to reduce our
carbon footprint. Methane has a higher heat-trapping potential than
carbon dioxide and cutting its emission can have a positive impact
on reining in global warming. The revenue from the sale of surplus
electricity to the national grid was $1.16 million (2021:
$999,000). Further investment in biogas plants in Indonesia is
dependent on regional demand. The Group also faces a unique
situation where buyers kept reducing electricity rates as well as
uptake. During the year, the Group reached a Build Own Operate
Transfer ("BOOT") agreement with a third party for the construction
of two BioCNG plants in North Sumatera. The BioCNG plants will draw
methane from our existing biogas plants, purified and further
compressed the gas for industrial use with an intention to replace
the natural gas or fossil fuel for their boilers. The third party
will fund the project costs estimated at $8.3 million and will
retain the right to operate the plants for fifteen years. It will
also pay the mills a share of the revenue from the sale of BioCNG.
The first BioCNG plant is expected to be operational in the third
quarter of 2023.
During the year, AEP bought back shares in six of its
subsidiaries in Indonesia for a consideration of $5.8 million,
which will enhance shareholders' value in 2023 and onwards,
together with a forgiveness of loans of $1.5 million to two
minority shareholders. AEP will continue to buy back shares from
its minority shareholders at a fair and competitive price as part
of its consolidation of its shareholdings in the subsidiaries in
Indonesia. The financial effect of a buy back going forward is to
enhance earnings per share.
As mentioned in the 2021 Annual Report, AEP was in the process
of selling three of its non-performing plantations in South
Sumatera. Following from that, a memorandum of understanding
("MOU") was signed with a potential buyer from Indonesia in
December 2022 for a period of exclusivity to conduct legal and
financial due diligence. However, the potential buyer decided not
to proceed following the completion of the due diligence. Since
this transaction did not materialise, the book value of the three
plantations for sale is further impaired by $5 million. The
management is currently in discussion with another interested buyer
and aimed to complete the sale of the three plantations as soon as
practicable.
In late 2022, the European Union ("EU") introduced a new law,
the Deforestation Regulation ("EUDR") which is aim at preventing
companies from placing products including commodities linked to
deforestation and forest degradation in the EU market. Companies
exporting their products to EU are required to provide proof that
their products are deforestation free and are legal. Palm oil
producers have over the years taken steps to meet EU requirements,
including stepping up their national sustainable palm-oil
certification standards and improving environmental protection. The
latest EUDR, in addition to an EU renewable-energy directives
announced in 2018, requires the phasing out of palm-based
transportation fuels by 2030 does not bode well for the future of
palm oil in EU, the third largest market for CPO. A stricter due
diligence process will also add to the administrative burden and
higher production costs.
AEP remains committed to No Deforestation, No Peatland, No
Exploitation ("NDPE") policies. All supplies of FFB to our mills
are traceable to their origins of supply chains and are not linked
to illegal deforestation. We are aware of growing pressure from
buyers to avoid CPO with NDPE and High Conservation Values ("HCV")
issues.
In determining the amount of dividends to be paid to our
shareholders, the Board has taken a balanced approach to the
requirement of funds in the Company in order to expand through the
acquisitions of brownfields, profitable plantations as well as
consolidating its shareholdings in the subsidiaries in Indonesia to
enhance shareholders' value but at the same time cognisant of
shareholders' wishes to have dividends as a form of income. It is
also a relief that the uncertainty caused by the Covid-19 pandemic
is over and we are back to normalcy, other than the ongoing war in
Ukraine, and therefore the Board's sentiments on added prudence and
contingency in the past can be less stringent. In the light of the
results achieved in the year, the Board has declared a final
dividend of 25.0cts per share, in line with our reporting currency,
in respect of the year to 31 December 2022 (2021: 5.0cts). In the
absence of any specific instructions up to the date of closing of
the register on 2 June 2023, shareholders with addresses in the UK
will be deemed to have elected to receive their dividends in Pounds
Sterling and those with addresses outside of UK will be deemed to
have elected to receive their dividends in US Dollars. Subject to
the approval by shareholders at the AGM, the final dividend will be
paid on 7 July 2023 to those shareholders on the register on 2 June
2023.
The Board has also been receiving increasing requests from
shareholders to buy back AEP's shares with the cash balance. The
Board has in the past been reticent on share buy backs because of
the lack of evidence that a buy back directly results in an
increased share price, especially with the lack of liquidity of the
Company's share and buy backs could cause the shares to be more
illiquid. Nevertheless, the Board has taken on board shareholders'
sentiments and will consider launching a modest buy back programme
in a timely manner and at a efficient price. Further details will
be communicated to shareholders in due course. The last time AEP
bought back its shares was in 2007 with a purchase of 50,000 shares
at GBP3.86 per share.
On behalf of the Board of Directors, I would like to convey our
sincere thanks to our management and employees of the Group for
their dedication, loyalty, resourcefulness, commitment and
contribution to the Group.
I would also like to take this opportunity to thank
shareholders, business associates, government authorities and all
other stakeholders for their continued confidence, understanding
and support for the Group.
Mr. Jonathan Law Ngee Song
Chairman
21 April 2023
Strategic Report
Introduction
The Strategic Report has been prepared to provide shareholders
with information to complement the financial statements. This
report may contain forward-looking statements, which have been
included by the Board in good faith based on information available
up to the time of approval of this report. Such statements should
be treated with caution going forward given the uncertainties
inherent with the economic and business risks faced by the
Group.
Business Model
The Group will continue to focus on its strength and expertise,
which is planting more oil palms sustainably and production of CPO.
This includes replanting low-yielding aging palms, replacing old
rubber trees with palm trees and building more mills to process the
FFB. The Group has, over the years, created value to shareholders
through expansion in a responsible manner.
The Group remains committed to use its available resources to
develop the land bank in Indonesia, together with acquisition of
profitable plantations at strategic locations, as regulatory
constraints permit. The Indonesian government has, in recent years,
passed laws to prioritise domestic investments and to limit foreign
direct investments over national interest, including a limit of
20,000 ha per province and a national total of 100,000 ha on the
licensed development of oil palms for companies that are not listed
in Indonesia or with less than a majority local ownership.
The Group's objectives are to provide returns to investors in
the long-term from its operations as well as through the expansion
of the Group's business, to foster economic progress in localities
of the Group's activities and to develop the Group's operations in
accordance with the best corporate social responsibility and
sustainability standards.
We believe that sustainable success for the Group is best
achieved by acting in the long-term interests of our shareholders,
our partners and society.
Our Strategy
One of the Group's objectives is to provide an appropriate level
of return to the investors and to enhance shareholder value.
Profitability, to a large extent, correlated to the CPO price,
which is volatile and determined by supply and demand as well as
the weather. The Group believes in the long-term viability of palm
oil as it can be produced more economically than other competing
oils and remains the most productive source of vegetable oil in a
growing population. Soybean crops would require up to ten times as
much land to produce an equivalent weight of palm oil. It has been
reported that one hectare of land can produce up to 4 mt of CPO,
much higher than rapeseed of 0.7 mt, sunflowers of 0.6 mt or even
soybeans of 0.4 mt. In this regard, palm oil is far more
sustainable than other edible vegetable oils.
The Group's strategies, therefore, focus on maximising yield per
hectare above 22 mt/ha, minimum mill production efficiency of 110%
, minimising production costs below $300/mt and streaml ining
estate management . For the year under review, the overall
Indonesian operations achieved an FFB yield of 19.3 mt/ha, 136%
mill efficiency and production cost of $349/mt. This compared
unfavourably to 2021 where the Group achieved a yield of 19.8
mt/ha, 155% mill efficiency and a lower production cost of $296/mt.
The drop in mill efficiency was due to the increase in milling
capacity from 310 mt/hr to 340 mt/hr. Despite stiff competition for
external crops from surrounding millers, the Group is committed to
purchasing more external crops from third parties at competitive,
yet fair prices, to maximise the production efficiency of the
mills. With higher throughput, the mills would achieve economies of
scale in production. A mill is deemed to achieve 100% mill
efficiency when it operates 16 hours a day for 300 days per
annum.
In line with the commitment to reduce its carbon footprint, the
Group plans to construct, in stages, biogas and/or BioCNG plants at
all its mills. The biogas plants will trap the methane gas emitted
from the treatment of palm mill effluents to generate electricity
to power its boilers which in turn reduces the consumption of
fossil fuel while BioCNG will produce compressed, purified biogas.
The mills plan to sell the surplus electricity. With more
industrial use of BioCNG, the consumption of fossil fuel is
expected to reduce and progressively reduce the greenhouse gas
emissions per metric ton of CPO produced in the next few years. It
is commonly accepted that failure to address growing calls to
reduce greenhouse gas emissions could threaten the long-term social
acceptability and profitability of a palm oil company. The Group
has also set metrics and targets to lower greenhouse gas emissions
over time as detailed in the Decarbonisation modelling and
high-level target setting.
The Group will continue to engage and offer competitive and fair
compensation to the villagers so that land can be cleared and be
planted.
Non-financial reporting statement
The Group has complied with the requirements of Section 414CB of
the Companies Act 2006 by providing a wide range of non-financial
information about employees, environmental and social matters in
the table below and in our website:
Non-financial Policies and standards which govern our approach
matter
----------------------------------------------------------
Business model Business model and strategy
Principal risks and uncertainties
----------------------------------------------------------
Environmental Principal risks and uncertainties: Country, regulatory
matters and governance practices
Principal risks and uncertainties: Weather and
Environmental and conservation practices
Indonesian Sustainable Palm Oil
Environmental, Social and Governance practices
Management of Climate Risks
Decarbonisation modelling and high level target
setting
Carbon Reporting
Corporate Governance: Environmental and corporate
responsibility
Other responsible agricultural practices and
sustainable policies can be found on our website
----------------------------------------------------------
Employees and Employees: Employment policies
Health & Safety Directors' Remuneration Report: Employees engagement
Workers are protected from exposure to occupational
health and safety hazards that are likely to
pose immediate risk of permanent injury, illness
or fatality. Proper signages are in place at
relevant spots to alert employees of safety.
Workshops and training sessions on occupational
safety and health care are regularly conducted.
----------------------------------------------------------
Social matters Principal risks and uncertainties: Covid-19 and
other contagious diseases
AEP has established clear policies and strict
protocols for the control and prevention of the
spread of Covid-19 and other contagious diseases
within the workplace environment. There are requirements
for mask wearing, social distancing and sanitising
of the workplace regularly. AEP also privately
funded vaccination programme within its plantations
and employees are required to be compulsorily
vaccinated. AEP also has strict procedures on
testing at work and self isolation of its employees
when necessary, together with home support for
the affected ones to ensure full recovery before
they resumed work.
----------------------------------------------------------
Respect for human AEP has clear policies of no exploitation of
rights its employees, including complying with paying
minimum wage. It does not practise child or forced
labour in line with the Modern Slavery Statement
referred to on its website. In addition, a whistle
blowing policy is in place to allow any employee
to raise concerns about unethical, illegal or
questionable practices, in full confidence, without
the risk of reprisal.
----------------------------------------------------------
Anti-corruption Anti-corruption and anti-bribery policies and
and anti-bribery procedures are explained in the Directors' Report.
matters
----------------------------------------------------------
Financial Review
Performance of the business during the year
For the year ended 31 December 2022, the revenue for the Group
from continuing operation was $447.6 million, 3% higher than $433.4
million reported in 2021 due primarily to the higher CPO
prices.
The Group's operating profit from continuing operation for 2022,
before biological asset movement, was $132.9 million, 3% higher
than last year of $129.3 million. The higher operating profit was
due to higher CPO prices which also absorbed the higher operational
costs. Transport and fertilizers costs in particular rose sharply
during the year.
FFB production for continuing operations for 2022 reached 1.12
million mt, 3% lower than the 1.15 million mt produced in 2021. The
yield for continuing operations from Indonesian plantations was
lower at 20.6 mt/ha (2021: 21.1 mt/ha) due to lower production in
Bengkulu and Kalimantan plantations. The reasons for the lower
production were explained on the Chairman's Statement.
FFB bought-in from local smallholders and plasma in 2022 was
1.08 million mt (2021: 1.14 million mt), 5% lower compared to 2021.
The reasons for reduction in external crops purchases were
explained on the Chairman's Statement. During the year, the Group's
mills processed a combined 2.21 million mt of FFB, 4% lower than
last year of 2.31 million mt. CPO production, as a result, was 4%
lower at 455,600 mt, compared to 473,200 mt in 2021. Kernel
production at 106,200 mt was 7% lower compared to 114,000 mt in
2021.
Profit before tax and after BA movement from continuing
operation for the Group was $132.9 million, 3% lower compared to a
profit of $137.1 million in 2021. The BA movement was a debit of
$5.8 million, compared to a credit of $4.3 million in 2021. The
debit BA movement was mainly due to the lower FFB price at 31
December 2022. The profit before tax included an impairment charge
on plantations and impairment of land amounting to $0.6 million
compared to a reversal of impairment charge on plantations and
impairment of land amounting to $5.0 million in 2021. Net finance
income recognised in the income statement increased from $3.2
million in 2021 to $4.9 million in 2022 due to higher deposits
income, without interest expense. The tax expense increased from
$25.7 million in 2021 to $31.5 million in 2022, notwithstanding the
slightly lower profit, because of the utilisation of available
losses in a few subsidiaries in Indonesia in 2021.
The total loss on the discontinued operations was $5.8 million
(2021: $28.4 million), made up of operating loss of $0.8 million
(2021: $6.7 million). Based on the terms of the potential sale as
mentioned in the Chairman's Statement, there was further write down
of $5.0 million of the three plantations in South Sumatera in 2022
over and above of the write down of the three plantations' assets
net of liabilities of $21.8 million in 2021. The loss from the
discontinued operations was also impacted by the marginal changes
in expected credit loss from Plasma receivables in 2022 (2021: $1.2
million) attributed to the lower amounts allocated for plasma
development during the year.
The average CPO price ex-Rotterdam for 2022 was $1,369/mt, 13%
higher than 2021 of $1,211/mt. The ex-mill price for 2022 averaged
$845/mt, 9% higher than last year of $776/mt.
Earnings per share before BA movement from continuing operations
decreased by 6% to 221.86cts compared to 235.25cts in 2021.
Earnings per share after BA movement from continuing operations
decreased from 242.34cts to 212.34cts. Earnings per share have
decreased mainly due to the decrease in profit after tax.
There was a loss of exchange in translation of foreign
operations, recognised in other comprehensive income, totalling
$55.0 million for 2022 against an exchange loss of $5.4 million in
the previous year due to the weakening of the Indonesian rupiah at
the year end. The retirement benefits due to the employees at 31
December 2022, as calculated by a third party actuary, decreased to
$10.9 million from $11.5 million last year due to the impact from
the weakening of the Indonesia rupiah and change in attribution
method.
Position of the business at the end of the year
The Group's statement of financial position remains strong, with
a cash and cash equivalents balance including short-term
investments (see Note v) of $277.0 million and no external
borrowing at the end of 2022. All material changes in statement of
financial position and cash flows are listed in the following
table:
Note 31.12.2022 31.12.2021
$000 $000
Property, plant and equipment i 252,414 260,532
--------- ------------- ------------
Deferred tax assets ii 1,832 4,324
--------- ------------- ------------
Income tax liabilities iii (10,230) (13,139)
--------- ------------- ------------
v, vi,
Cash and cash equivalents vii 221,476 218,249
--------- ------------- ------------
v,vi,
Short-term investments vii 55,566 1,439
--------- ------------- ------------
Assets in disposal groups classified
as held for sale iv 9,000 13,210
--------- ------------- ------------
Net cash generated from operating
activities v 120,511 131,346
--------- ------------- ------------
Purchase of property, plant and
equipment vi (34,026) (26,374)
--------- ------------- ------------
Net cash used in financing activities vii (9,523) (1,028)
--------- ------------- ------------
i. The reduction in property, plant and equipment from $260.5
million in 2021 to $252.4 million was due to the loss in exchange
in the translation of foreign operations.
ii. The movement in deferred tax assets was due to the
utilisation of some of the losses against taxable profits during
the year.
iii. The income tax liabilities are lower principally as a
result of higher tax payment in 2022. A detailed explanation of
income tax, including other taxes, is provided in note 8.
iv. The assets in disposal groups classified as held for sale
was lower due to a further write down of $5.0 million in 2022.
v. As at 31 December 2022, the Group had cash and cash
equivalents of $221.5 million (2021: $218.2 million) and short-term
investments known as fixed deposits of $55.6 million (2021: $1.4
million). The cash position, including fixed deposits, was higher
in 2022 principally due to profits during the year and also to a
recovery of $29.4 million from the Indonesian tax authorities for
over payment of VAT. The net cash inflow from operating activities
during the year was lower at $120.5 million by 8% compared to
$131.3 million in 2021 mainly due to higher tax paid.
vi. The development costs for property, plant and equipment
("PPE") was higher in 2022 amounting to $34.0 million (2021: $26.4
million) due to higher capital expenditure and construction
costs.
vii. The net cash used in financing activities during the year
was higher at $9.5 million compared to $1.0 million in 2021 due to
the acquisition of non-controlling interests during the year and
higher dividend paid.
Viability Statement
The viability assessment considers solvency and liquidity over a
longer period than for the purposes of the going concern assessment
made. Inevitably, the degree of certainty reduces over a longer
period.
The Group's business activities, financial performance,
corporate development and principal risks associated with the local
operating environment are covered under the various sections of
this strategic report. In undertaking the review of the Group's
performance in 2022, the Board considered the prospects of the
Company, focusing on the strategy for growth via the expansion of
its planted area in tandem with forecasting demand for CPO, over
one to five-year periods. The process involved a detailed review of
the 2023 detailed budget and the five-year income and cash flow
projection. The one-year budget has a greater level of certainty
and is used to set detailed budgetary targets at all levels across
the Group. It is also used by the Remuneration Committee to set
targets for the annual incentive. The five-year income and cash
flow projection contains less certainty of the outcome but provides
a robust planning tool against which strategic decisions can be
made. The Board believes that to project beyond five years has more
elements of uncertainties and therefore less reliable for making
informed decisions.
The Board also considered the five-year cash flow projection
under various severe but plausible scenarios, including the
financial impact on the Group due to partial or total shutdown of
its operations and the contraction of demand for palm oil resulting
from the Coronavirus pandemic or any other contagious diseases, as
outlined in the Strategic Report under Going Concern, and the need
to support if any financially loss-making newly matured estates,
together with the projected capital expenditure. The Group also
factored in the impact of the price increase of materials and
fertilisers primarily as a result of the conflict in Ukraine. In
arriving at the conclusion that the Group has adequate resources to
continue in operation and meet its liabilities in the next five
years, the Board has assumed a worst case scenario of CPO price at
its lowest average of $500/mt and that demand for CPO dropped by
50%. The Board has also factored in that half of the total
plantations could be shut down for six months due to infectious
disease such as Covid-19. The assumptions applied are linked to
risk of CPO price fluctuation, risk of a substitute for oil palm
and a pandemic from an infectious disease. On this basis and other
matters considered and reviewed by the Board during the year, the
Board has a reasonable expectation that the Group has adequate
resources to continue in operation and meet its liabilities over
the five years from 2023 to 2027.
Going Concern
The Directors have carried out stress tests, factoring in the
identified uncertainties and risks such as commodity prices and
demands post pandemic, together with the current economic issues of
high inflation, rising interest rates and cost of living crisis, to
ensure that the Group has adequate resources in a worst-case
scenario to remain as a going concern for at least twelve months
from the date of this report.
The Directors have a reasonable expectation, having made the
appropriate enquiries, that the Group has sufficient cash resources
to cover the Group's operating expenses for a period of at least
twelve months from the date of approval of these financial
statements. For these reasons, the Directors adopted a going
concern basis in the preparation of the financial statements. The
Directors have made this assessment after consideration of the
Group's budgeted cash flows and related assumptions including
appropriate stress testing of identified uncertainties,
specifically on the potential shut down of the entire operations
from three to twelve months if all the plantations are infected
with an infectious disease as well as the impact on the demand for
palm oil with decreases of 50% to 100%. Stress testing of other
identified uncertainties and risks such as commodity prices and
currency exchange rates were also undertaken.
Business Review
Indonesia
The performance of the Indonesian operations was divided into
six geographical regions.
North Sumatera
FFB production in North Sumatera, which aggregates the estates
of Tasik, Anak Tasik, Labuhan Bilik ("HPP"), Blankahan, Rambung, Sg
Musam and Cahaya Pelita ("CPA") produced 423,900 mt in 2022 about
6% above last year (2021: 400,800 mt). The higher yield in newly
matured estates in Tasik and the increase in matured areas to
18,465 ha from 18,047 ha contributed to the higher production. All
plantations in North Sumatera performed better in 2022 except for
Musam and HPP where harvest was down by 11% and 5% respectively.
The withdrawal of fertilizers for areas meant for replanting has
resulted in a lower yield in Musam while 10% of the trees in HPP
were infected with Ganoderma which has affected the output of
fruits. Notwithstanding the lower yield in Musam and HPP, the
annual yield in North Sumatera improved to 22.8 mt/ha from the
previous year of 22.2 mt/ha. 115 ha was replanted in Musam in 2022.
Replanting in Blankahan is temporary deferred as the yield had been
consistently high in the past years averaging 26 mt/ha due to good
soil condition.
In 2022, the two mills in North Sumatera produced 148,100 mt of
CPO (2021:136,900 mt) from a throughput of 738,400 mt (2021:
698,800 mt). The Blankahan mill showed some improvement by
processing 24% more FFB in 2022 at 244,500 mt (2021: 196,900 mt)
due to higher external crop purchases, raising the mill utilization
to 127% from 103% in the previous year. OER, however, was low at
18.9% (2021: 18.8%) possibly due to the dura contamination from
external crops that made almost 70% of the total crops processed.
Dura crops with thinner mesocarp normally have an oil content of
18% or lower. The Tasik mill processed marginally lower crops at
493,900 mt (2021: 501,900 mt) as it prioritized its own crop for
processing during the export ban as the storage tanks reached their
maximum storage capacity. External crop purchases as a result
dropped to 144,700 mt from 177,600 mt in the previous year,
reducing mill utilization from 174% in 2021 to 171% in 2022. OER
for the Tasik mill improved to 20.6% (2021: 19.9%) as it processed
higher percentage of internal crop.
The two biogas plants in North Sumatera did not perform up to
their potential in 2022, due to the lack of demand and the
reduction in selling price to the National Grid by 9%. The
Blankahan plant sold about 6,500 MWh (2021: 1,900 MWh) of surplus
electricity and generated $354,100 (2021: $114,100) in revenue. The
Group has explored other opportunities for this plant and has
recently commissioned a BioCNG.
The sales from the biomass plant were lower in 2022 at $23,500
compared to $335,800 last year, with exports of 460 mt of dried
long fibres compared to 4,710 mt last year. The average selling
price had fallen by 25% due to the significant drop in demand
caused by the zero covid policy in China resulting in disruption in
productions and logistics. In view of the poor demand, the Group
decided to cease its biomass production from the second quarter of
2022 as it was no longer profitable to produce the fibres from
EFB.
Bengkulu
FFB production in Bengkulu, which aggregates the estates of
Puding Mas ("MPM") and Alno produced 269,500 mt (2021: 307,400 mt),
12% lower than 2021 mainly due to the reduction of matured palms as
a result of replanting. Rainfall was 3,600 mm in 2022 (2021: 3,500
mm) and was particularly heavy in the last quarter of the year
causing transportation problems and interrupting harvesting
activities culminating to a lower yield at 18.1 mt/ha from 19.6
mt/ha last year.
MPM and Sumindo mills processed a combined 668,500 mt (2021:
807,000 mt) of FFB in 2022, 17% lower than 2021 due to lower
internal crop production as well as lower external crop purchases.
External crop purchases decreased by 21% to 365,500 mt from 464,800
mt last year decreasing the mill utilization to 116% from 160% in
the prior year. The significant drop in utilization rate was due to
the increase of milling capacity of the Sumindo mill from 45 mt/hr
to 60 mt/hr. CPO production for the year was 17% lower at 136,000
mt (2021: 164,300 mt) with OER for the two mills averaging 20.3%
compared to 20.4% last year. External crops made up 55% of the
throughput compared to 58% in 2021. The remaining processed crop
was purchased from other group companies.
985 ha palms were replanted in 2022 with new generation planting
materials. Although the trees in Bengkulu averaged 17 to 18 years
of age, 5,500 ha of palms would need to be replanted from 2023 to
2026 due to the poor yield from Dura palms which formed a
significant portion of the planted areas. Fruits from dura palms
have thin mesocarp which ultimately produce less oil.
The MPM biogas plant sold over 10,500 MWh (2021: 10,300 MWh) of
surplus electricity, 2% higher and generated $474,700 in revenue
(2021: $484,900). The lower revenue was due to a weaker Indonesian
Rupiah when translated into dollar. The biogas plant was down for
almost a month as a severe storm in the second quarter of 2022
ripped off the membrane of the lagoon digester and technicians were
unavailable to repair the membrane due to the long festive
holidays.
Riau
FFB production in the Riau region, comprising Bina Pitri
estates, produced 135,000 mt in 2022 (2021: 139,600 mt), 3% lower
than 2021. Rainfall was lower at 2,480 mm (2021: 2,620 mm) and was
below 150 mm per month for three months. The yield for the year was
slightly lower at 28.0 mt/ha from last year of 28.7 mt/ha. Although
79% of the palms are between the ages of 25 to 28 years, the
planned replanting program for 2,800 ha is temporarily deferred due
to their high yield.
Although the mill external crop purchase was higher by 1% at
268,000 mt compared to 266,600 mt last year, the mill utilization
rate decreased slightly to 140% from 141% last year due to the
lower internal crop production. Overall, the CPO production was
marginally lower at 77,200 mt compared to 77,500 mt in 2021.
Despite the high yield, the region is contaminated by dura palms
which made up 66% of the crops processed by the mill. The mill
therefore had a low OER of 19.2% similarly low of 19.1% in the
previous year.
Bangka
FFB production in the Bangka region, comprising Bangka Malindo
Lestari estates, produced 12,900 mt in 2022 (2021: 11,100 mt), 16%
higher than 2021. The higher crop was due to a larger harvestable
area and more palms having reached peak maturity. Rainfall averaged
1,835 mm in the year with 5 months where rainfall was below 150 mm
per month compared to 2,370 mm previous year. The yield as a result
declined slightly from 13.4 mt/ha to 12.1 mt/ha in 2022. With new
planting in 2022 totalling 63 ha (2021: 160 ha), the total planting
including plasma in Bangka reached 3,099 ha (2021: 3,036 ha).
Kalimantan
FFB production in Kalimantan which comprises the Sawit Graha
Manunggal ("SGM") and Kahayan Agro Plantation ("KAP") estates was
273,800 mt in 2022 (2021: 281,500 mt), 3% lower than 2021. During
the year, 638 ha of palms matured in SGM and KAP leading to its
first harvest. Production in Kalimantan was lower due to logistics
problems and high incidence of abnormal fruit bunches as mentioned
on the Chairman's Statement. The abnormal fruit bunches were caused
by lack of male flowers and as a solution the estate has started
breeding and releasing weevils to help with the pollination. As
explained on the Chairman's Statement, abnormal fruit bunches were
stripped of its fruitlets leaving behind the EFB in the fields
resulting in a lower reported harvest. The yield in Kalimantan
declined to 18.4 mt/ha from 19.8 mt/ha last year. Wetter-than
normal weather prevailed in KAP at 4,794 mm (2021: 4,490 mm) while
rainfall in SGM was also higher at 2,438 mm (2021: 2,320 mm).
New planting in SGM and KAP is expected to reach 800 ha next
year. The long-term prospect for Kalimantan remains bright.
The purchase of external and plasma crops in SGM reached 132,200
mt in 2022 which was higher by 17% compared to 112,800 mt last
year. The total external and plasma crop at the SGM mill made up
33% of the total crops processed from 29% last year. With the
throughput at the mill reaching 402,400 mt (2021: 393,300 mt), the
mill utilization rate decreased to 140% from 182% last year
producing 94,300 mt of CPO, slightly lower than 2021 of 94,500 mt.
The decrease in utilization rate was due to the increase of milling
capacity from 45 mt/hr to 60 mt/hr. OER for the mill averaged 23.4%
for the year compared to 24.0% last year and continues to
outperform the rest of the mills in the Group.
The SGM biogas plant generated 15% less electricity in 2022 at
over 6,900 MWh (2021: 8,100 MWh) worth $331,000 (2021: $399,900).
The lower power generation was due to the shutdown of the gas
engine in the second quarter of 2022 for a major overhaul after
20,000 hours of operation. A delay in procuring of spare impeller
for the turbocharger further delayed the completion for over a
month. As in the case of Blankahan biogas plant, the National Grid
reduced the rate marginally for electricity purchased from the end
of first quarter of 2022.
South Sumatera - discontinued operations
FFB production in South Sumatera, which aggregates the estates
of Karya Kencana ("KKST"), Empat Lawang ("ELAP") and Riau Agrindo
("RAA") produced 46,300 mt (2021: 37,200 mt), 24% higher than 2021.
Better rainfall and more matured palms contributed to a higher
harvest. Low annual moisture remains a real threat in this region
which retards growth as the plantations are located behind a
mountain range sheltered from the Indian Ocean. Annual rainfall in
North ELAP increased to 1,399 mm (2021: 1,095 mm). The higher yield
of 7.6 mt/ha (2021: 6.5 mt/ha) in South Sumatera reflected improved
conditions but still below the commercially viable benchmark.
With higher CPO prices, more FFB thefts were reported in 2022 as
the region faced high unemployment during the pandemic. The
management has stepped-up security patrols to combat thefts and
transgression in the plantations in South Sumatera.
With the continuing problems of rainfall, sub-optimal terrains,
security and non productive dialogues with the local villages, the
Board arrived at a decision to discontinue its operations in South
Sumatera in 2021 and has put the three plantations for sale in the
open market as a going concern. The Board has arrived at its
decision as a result of the low crop yield which is unlikely to
improve and the continuing losses incurred in the region,
notwithstanding the significant investments and efforts over the
years.
Overall bought-in crops for the Indonesian operations, including
plasma, were 5% lower at 1.08 million mt in 2022 (2021: 1.14
million mt). The average OER for our mills was marginally higher at
20.6% in 2022 (2021: 20.5%).
Malaysia
FFB production in 2022 was 23% lower at 9,300 mt, compared to
12,000 mt in 2021. The plantation continued to experience a
substantial shortage of workers which hampered not only field
maintenance and application of fertilisers but harvesting,
resulting in crop losses. Although the international borders
reopened in April 2022, attrition of workers continued until the
last quarter of the year. Recruitment for new workers was bogged
down by bureaucracy in some government departments. New workers are
expected to arrive in the first quarter of next year. In addition,
the under application of fertilisers at 13% of the recommended
dosage resulted in undernourished plants and poor yield. The palms,
with an average age of 25 years, faced declining yield and stems
per hectare. The poor yield was also due to the damage caused by
wild elephants. The Malaysian plantation generated a profit before
tax after BA movement of $0.3 million in 2022, compared to a profit
before tax after BA movement of $0.4 million in 2021.
The financial performance of the various regions is reported in
note 6 on segmental information.
Commodity Prices
2022 was a year of two halves for CPO prices, with record prices
in the first half of the year followed by much lower prices for the
second half. The price trend was the complete opposite in 2021.
The CPO price ex-Rotterdam started the year strongly at
$1,350/mt (2021: $1,014/mt) and gradually trended upwards to peak
in March 2022 at $2,000/mt before dropping to a low of $930/mt in
early October 2022. It recovered slightly to end the year at
$1,020/mt. Ex-Rotterdam price averaged $1,369/mt for the year, 13%
higher than last year (2021: $1,211/mt). Our average ex-mill price
for 2022, which is lower than ex-Rotterdam price with the
attributed logistic costs, was at $845/mt, 9% higher than last year
of $776/mt.
The rally in the first three months of 2022 was partly due to
the unfavourable weather conditions in prime soybean-producing
countries which adversely affected the supply of soybean oil, of
which CPO is the closest substitute. The war in Ukraine contributed
significantly to the increase in CPO prices as it disrupted the
global supply of edible oil. Russia and Ukraine produced the
majority of the world's sunflower oil, which made up about 9% of
all vegetable oil consumed globally. Indonesia, the world largest
producer of CPO, imposed an export ban on CPO and refined palm oil
from 28 April 2022 to 22 May 2022, in its effort to bring down the
prices of its domestic cooking oil, added more volatility to CPO
prices.
CPO prices started to weaken after Indonesia reversed its export
ban in May 2022. The Indonesian government reduced export tax and
waived levies for several months in its effort to flush out and
reduce its stockpile of palm oil following the lifting of the
export ban also sent prices even lower. The movement in CPO prices
are greatly influenced by Indonesian government export policy. The
higher CPO production in the third quarter of 2022 led to a higher
oil inventories and with the declining soybean oil prices further
depressed CPO prices. The fear of worldwide recession caused by
inflationary pressure arising from higher commodity prices also
dampened demand for CPO in the second half of the year. The
softening of demand from China, as a result of Beijing's zero-Covid
policy to stop the spread of virus, weighed in on the commodity
prices. China is the second largest buyer of CPO after India.
Supply worries due to heavy rain and floods, disrupting harvest and
transport of crops in both Indonesia and Malaysia during the year
end monsoon season, pushed CPO price to close the year on a
positive note.
Over a period of ten years, CPO price has touched a monthly
average low of $472/mt in November 2018 and a monthly average high
of $1,857/mt in March 2022. The monthly average price over the ten
years was about $816/mt.
Rubber prices averaged $1,431/mt for 2022 (2021: $1,637/mt). Our
small area of 262 ha of mature rubber contributed a revenue of $0.6
million in 2022 (2021: $0.7 million). Rubber continues to struggle
with low prices. Lower tappable trees due to wind damage and dry
bark were the main reasons for the low rubber production.
Corporate Development
In 2022, the Group opened up new land and planted 952 ha (2021:
1,701 ha) of oil palm mainly in Kalimantan and South Sumatera,
boosting planted area including the smallholder cooperative scheme,
known as Plasma, by 1% to 76,095 ha (2021: 75,204 ha). Another
1,100 ha was replanted in Bengkulu and North Sumatera. In 2023, the
Group plans to plant 2,500 ha of oil palm which includes replanting
of 1,400 ha in North Sumatera and Bengkulu. Opening of new land for
planting can be cumbersome and requires written approval from local
authorities, submission of environment impact assessments and
meetings with local communities. All new plantings are carried out
following the HCSA guidelines and are verified by accredited
consultants.
Old quarters for workers throughout the plantations were
progressively modernised in 2022 at a cost of $143,000. Another
$1.7 million is budgeted for 2023 for renovations and
refurbishments to provide better comfort for workers. The
management has also initiated talks with the relevant authorities
to speed up electrification of two remote locations in Bengkulu and
Kalimantan where our plantations are located. The number of users
in these locations may, however, be small and may not justify the
high cost of laying transmission lines. As an alternative solution,
the management is looking at the cost of installing solar panels to
provide electricity during the day when the generator sets are off
to ensure continuous electricity supply and to ensure comfort of
our employees and families. Some $300,000 has been set aside for
this purpose.
The construction of the seventh mill in HPP, North Sumatera has
been delayed by frequent lockdowns caused by the pandemic,
affecting the deployment of manpower at the construction site, as
well as fabrication of equipment. Unusual heavy rain in fourth
quarter caused flooding and soft soil condition delaying
mobilization of heavy machineries for the construction of effluent
treatment tanks. Construction work in exposed areas were stopped
frequently to ensure safety of workers during the periods of heavy
rainfall. Cost of construction has spiralled to about $23 million
as the mill, located on peat area has to be built according to
strict specifications laid out by environmental laws in Indonesia.
The conventional anaerobic lagoon constructed from earth is not
permitted on peat land due to possible seepage of effluent and
contamination of ground water. A purpose-built treatment plant is
required to treat the effluent from the mill to a quality specified
for discharge to the water course 7.5km away. The effluent plant
also includes two 4,000 mt anaerobic digesters and two 1,200 mt
aeration tanks. A decanter for solid removal and oil recovery was
also added to reduce the number of tanks required which in turn
reduced the high cost of concrete piles for its foundation. Steel,
cement, transport and equipment costs have increased substantially
driving up the project costs. The project is earmarked for
completion by the first half of 2023.
Our feasibility study concluded that it is more profitable to
build a mill in KAP in Kalimantan to support its operation due to
high logistic costs. KAP is currently transporting the FFB some
600km to SGM mill or, when this becomes too arduous during the
monsoon season, the fruits are sold locally to third parties. The
Group plans to build a 45 mt/hr mill with two storage tanks of
4,000 mt each with minimum spare machineries at an estimated cost
of $13 million. Due to the hilly terrain and steep ravines, the
choice for a mill site is limited. After careful consideration, a
potential site had been selected. The soil investigation was
completed and the Environmental Impact Assessment ("EIA") is now in
progress which is likely to be completed in the second quarter of
2023. The earthworks will commence after EIA approval.
To improve transport of FFB in our plantations and help deliver
the FFB to the mills, the Group purchased 54 units of dump trucks
costing $1,816,000 in 2022. In 2023 we have budgeted another
$741,000. This is necessary amidst rising logistic cost as
independent transport companies especially in Kalimantan cannot
supply adequate trucks to transport our harvest as many trucks are
diverted to carry coal which pay better transport rates. In
addition, the Group spent $699,000 to improve the field roads and
connectivity between estates and mills by building new bridges. The
Group has budgeted to spend a further $4.7 million in 2023 to
improve and maintain our roads for better connectivity.
Two old and worn-out vertical sterilisers/pressure vessels in
Bina Pitri mill are in stages of replacement from the third quarter
of 2022 and will be completed in the first half of 2023 at a cost
of $370,000. An additional two more units are scheduled for
replacement before the end of next year for the same cost. A
similar undertaking will also be conducted in Sumindo mill costing
$280,000 to replace the thinning of sterilizers shell. An
additional bulking silo for storing kernel with a capacity of 400
mt will be built at the Bina mill at a cost of $140,000.
The fabrication and installation of an additional 45,000 kg/hour
steam boiler in the SGM mill costing $980,000 was completed in the
third quarter of 2022. This second boiler is required to back-up
the mill operation to avoid any disruption as the mill enters its
seventh year of operation. The mill is projected to process up to
400,000 mt of FFB in 2023. Two additional units of vertical
sterilizers, complete with FFB feeding and discharge conveyors,
will be constructed in 2023 at an estimated cost of $650,000 to
cope with the increase throughput of crops. An additional oil
storage tank with a capacity of 4,000 mt estimated at $275,000 will
be added to the present four units to increase SGM storage capacity
to 13,000 mt to avoid over capacity in instances of delays in the
collection by tanker ships.
The export ban of CPO early this year has resulted in the costly
reduction of external crop purchases in Tasik mill as it had to
prioritise internal crop processing due to limited storage
facilities of 5,000 mt. Consequently, the Group has allocated
$275,000 to expand its storage facilities in Tasik mill in
2023.
The construction of the oil recovery system in MPM mill at a
cost of $1 million will be completed in the second quarter of 2023
after some delay in delivery of imported equipment. This system
extracts residual oil from raw effluent as well as reducing fine
solid contents in the effluent. The system, when fully operational,
is reportedly to be able to improve the OER by 0.2% to 0.3%. As the
mill processes up to 400,000 mt of FFB annually, it could
potentially recover up to 800 mt of CPO per year. The reduction of
solids in the raw effluent will result in less silting in the
effluent treatment ponds after extraction of biogas in the
anaerobic lagoon.
On behalf of the Board
Dato' John Lim Ewe Chuan
Executive Director
21 April 2023
Directors' Responsibilities
The Directors are responsible for preparing the annual report
and the financial statements in accordance with UK adopted
international accounting standards and applicable law and
regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
are required to prepare the Group financial statements in
accordance with UK adopted International Accounting Standards
("IAS") and have elected to prepare the company financial
statements in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards and
applicable law) ("UK GAAP"). Under company law, the Directors must
not approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the Group
and Company and of the profit or loss for the Group for that
period.
In preparing these financial statements, the Directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and accounting estimates that are reasonable and prudent;
-- state whether they have been prepared in accordance with UK
adopted international accounting standards, subject to any material
departures disclosed and explained in the financial statements;
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and the
Company will continue in business; and
-- prepare a Directors' Report, a Strategic Report and
Directors' Remuneration Report which comply with the requirements
of the Companies Act 2006.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with the Companies Act 2006.
They are also responsible for safeguarding the assets of the
company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities. The Directors are
responsible for ensuring that the annual report and accounts, taken
as a whole, are fair, balanced, and understandable and provides the
information necessary for shareholders to assess the group's
performance, business model and strategy.
Website publication
The Directors are responsible for ensuring the annual report and
the financial statements are made available on a website. Financial
statements are published on the Company's website in accordance
with the legislation in the UK governing the preparation and
dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and integrity
of the Company's website is the responsibility of the Directors.
The Directors' responsibility also extends to the ongoing integrity
of the financial statements contained therein.
Directors' responsibilities pursuant to Disclosure and
Transparency Rules 4 ("DTR4")
The Directors confirm to the best of their knowledge:
-- The financial statements have been prepared in accordance
with the applicable set of accounting standards, give a true and
fair view of the assets, liabilities, financial position and profit
and loss of the Group.
-- The annual report includes a fair review of the development
and performance of the business and the financial position of the
Group and Company, together with a description of the principal
risks and uncertainties that they face.
On behalf of the Board
Dato' John Lim Ewe Chuan
Executive Director
21 April 2023
Consolidated Income Statement
For the year ended 31 December 2022
2022 2021
Result Result
before before
BA BA BA BA
Note movement* movement Total movement* movement Total
$000 $000 $000 $000 $000 $000
------------------------- --------- ----------- ----------- ----------- ------------ ------------ ----------
Continuing operations
Revenue 3 447,619 - 447,619 433,421 - 433,421
Cost of sales (304,424) (5,792) (310,216) (300,354) 4,349 (296,005)
------------------------- --------- ----------- ----------- ----------- ------------ ------------ ----------
Gross profit 143,195 (5,792) 137,403 133,067 4,349 137,416
Administration
expenses (9,683) - (9,683) (8,587) - (8,587)
Reversal of impairment 5,12 - - - 5,437 - 5,437
Impairment losses 5,12 (617) - (617) (585) - (585)
Operating profit 132,895 (5,792) 127,103 129,332 4,349 133,681
Exchange gains 991 - 991 212 - 212
Finance income 4 4,859 - 4,859 3,214 - 3,214
Finance expense 4 (12) - (12) (24) - (24)
------------------------- --------- ----------- ----------- ----------- ------------ ------------ ----------
Profit before
tax 5 138,733 (5,792) 132,941 132,734 4,349 137,083
Tax expense 8 (32,737) 1,276 (31,461) (24,784) (958) (25,742)
------------------------- --------- ----------- ----------- ----------- ------------ ------------ ----------
Profit for the
year from continuing
operations 105,996 (4,516) 101,480 107,950 3,391 111,341
(Loss) / gain
on discontinued
operation, net
of tax 9 (5,684) (139) (5,823) (28,471) 50 (28,421)
100,312 (4,655) 95,657 79,479 3,441 82,920
Profit for the
year attributable
to:
- Owners of the
parent 83,548 (3,904) 79,644 65,485 2,856 68,341
- Non-controlling
interests 16,764 (751) 16,013 13,994 585 14,579
------------------------- --------- ----------- ----------- ----------- ------------ ------------ ----------
100,312 (4,655) 95,657 79,479 3,441 82,920
------------------------- --------- ----------- ----------- ----------- ------------ ------------ ----------
Profit for the
year from continuing
operations attributable
to:
- Owners of the
parent 87,937 (3,772) 84,165 93,245 2,809 96,054
- Non-controlling
interests 18,059 (744) 17,315 14,705 582 15,287
------------------------- --------- ----------- ----------- ----------- ------------ ------------ ----------
105,996 (4,516) 101,480 107,950 3,391 111,341
------------------------- --------- ----------- ----------- ----------- ------------ ------------ ----------
Earnings per
share attributable
to the owners
of the parent
during the year
Profit
10 200.94cts 172.42cts
* basic and diluted
Profit from continuing
operations
10 212.34cts 242.34cts
* basic and diluted
* The total column represents the IFRS figures and the result
before BA movement is an Alternative Performance Measure ("APM")
which reflects the Group's results before the movement in fair
value of biological assets has been applied. We have opted to
additionally disclose this APM as management do not use the fair
value of BA movement in assessing business performance.
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2022
2022 2021
$000 $000
----------------------------------------------- ---------- ---------
Profit for the year 95,657 82,920
----------------------------------------------- ---------- ---------
Other comprehensive expenses:
Items may be reclassified to profit or
loss:
Loss on exchange translation of foreign
operations (54,975) (5,429)
Net other comprehensive expenses may be
reclassified to profit or loss (54,975) (5,429)
----------------------------------------------- ---------- ---------
Items not to be reclassified to profit
or loss:
Remeasurement of retirement benefits plan,
net of tax 177 1,086
Net other comprehensive income not being
reclassified to profit or loss 177 1,086
----------------------------------------------- ---------- ---------
Total other comprehensive expenses for
the year, net of tax (54,798) (4,343)
----------------------------------------------- ---------- ---------
Total comprehensive income for the year 40,859 78,577
Total comprehensive income for the year
attributable to:
- Owners of the parent 34,343 64,993
- Non-controlling interests 6,516 13,584
----------------------------------------------- ---------- ---------
40,859 78,577
----------------------------------------------- ---------- ---------
Consolidated Statement of Financial Position
As at 31 December 2022
Company Number: 1884630
31.12.2022 31.12.2021
Note $000 $000
-------------------------------------- ------ ----------------- ------------------
Non-current assets
Property, plant and equipment 12 252,414 260,532
Investments 42 49
Receivables 13 18,963 22,000
Deferred tax assets 14 1,832 4,324
273,251 286,905
-------------------------------------- ------ ----------------- ------------------
Current assets
Inventories 15 19,590 14,316
Income tax receivables 8 4,122 5,060
Other tax receivable 8 37,576 45,435
Biological assets 16 6,161 12,803
Trade and other receivables 17 3,468 5,182
Short-term investments 18 55,566 1,439
Cash and cash equivalents 18 221,476 218,249
-------------------------------------- ------ ----------------- ------------------
347,959 302,484
Assets in disposal groups
classified as held for sale 9 9,000 13,210
356,959 315,694
-------------------------------------- ------ ----------------- ------------------
Current liabilities
Trade and other payables 19 (33,966) (32,533)
Income tax liabilities 8 (10,230) (13,139)
Other tax liabilities 8 (1,221) (1,615)
Dividend payables (32) (25)
Lease liabilities 20 (73) (240)
(45,522) (47,552)
-------------------------------------- ------ ----------------- ------------------
Net current assets 311,437 268,142
-------------------------------------- ------ ----------------- ------------------
Non-current liabilities
Deferred tax liabilities 14 (805) (1,330)
Retirement benefits - net
liabilities 21 (10,874) (11,499)
Lease liabilities 20 (31) (110)
-------------------------------------- ------ ----------------- ------------------
(11,710) (12,939)
-------------------------------------- ------ ----------------- ------------------
Net assets 572,978 542,108
-------------------------------------- ------ ----------------- ------------------
Issued capital and reserves
attributable to owners of
the parent
Share capital 22 15,504 15,504
Treasury shares 22 (1,171) (1,171)
Share premium 23,935 23,935
Capital redemption reserve 1,087 1,087
Exchange reserves (288,891) (241,907)
Retained earnings 712,919 642,582
-------------------------------------- ------ ----------------- ------------------
463,383 440,030
Non-controlling interests 109,595 102,078
-------------------------------------- ------ ----------------- ------------------
Total equity 572,978 542,108
-------------------------------------- ------ ----------------- ------------------
Consolidated Statement of Changes in Equity
For the year ended 31 December 2022
Capital
Share Treasury Share redemption Exchange Retained Non-controlling Total
Note capital shares premium reserve reserves earnings Total interests equity
$000 $000 $000 $000 $000 $000 $000 $000 $000
Balance at 31 December 2020 15,504 (1,171) 23,935 1,087 (237,599) 573,677 375,433 88,875 464,308
Items of other comprehensive
(expenses) / income
* Remeasurement of retirement benefit plan, net of t
ax 21 - - - - - 960 960 126 1,086
* Loss on exchange translation of foreign operations - - - - (4,308) - (4,308) (1,121) (5,429)
---------------------------------------------------------- ----- -------- --------- -------- ----------- ---------- --------- --------- ---------------- ---------
Total other comprehensive
(expenses) / income - - - - (4,308) 960 (3,348) (995) (4,343)
Profit for the year - - - - - 68,341 68,341 14,579 82,920
---------------------------------------------------------- ----- -------- --------- -------- ----------- ---------- --------- --------- ---------------- ---------
Total comprehensive (expenses)
/ income for the year - - - - (4,308) 69,301 64,993 13,584 78,577
Dividends paid - - - - - (396) (396) (381) (777)
Balance at 31 December 2021 15,504 (1,171) 23,935 1,087 (241,907) 642,582 440,030 102,078 542,108
---------------------------------------------------------- ----- -------- --------- -------- ----------- ---------- --------- --------- ---------------- ---------
Items of other comprehensive
(expenses) / income
-Remeasurement of retirement
benefit plan, net of tax 21 - - - - - 144 144 33 177
-Loss on exchange translation
of foreign operations - - - - (45,445) - (45,445) (9,530) (54,975)
Total other comprehensive
(expenses) / income - - - - (45,445) 144 (45,301) (9,497) (54,798)
Profit for the year - - - - - 79,644 79,644 16,013 95,657
---------------------------------------------------------- ----- -------- --------- -------- ----------- ---------- --------- --------- ---------------- ---------
Total comprehensive (expenses)
/ income for the year - - - - (45,445) 79,788 34,343 6,516 40,859
Acquisition of non-controlling
interests 30 - - - - (1,539) (7,469) (9,008) 3,175 (5,833)
Dividends paid - - - - - (1,982) (1,982) (2,174) (4,156)
---------------------------------------------------------- ----- -------- --------- -------- ----------- ---------- --------- --------- ---------------- ---------
Balance at 31 December 2022 15,504 (1,171) 23,935 1,087 (288,891) 712,919 463,383 109,595 572,978
---------------------------------------------------------- ----- -------- --------- -------- ----------- ---------- --------- --------- ---------------- ---------
Consolidated Statement of Cash Flows
For the year ended 31 December 2022
2022 2021
$000 $000
--------------------------------------------------- --- --------- ---------
Cash flows from operating activities
Profit before tax from continuing operations 132,941 137,083
Adjustments for:
BA movement 5,792 (4,349)
(Gain) / Loss on disposal of property,
plant and equipment (91) 24
Depreciation 16,724 16,994
Retirement benefit provisions 1,157 103
Net finance income (4,847) (3,190)
Unrealised gain in foreign exchange (991) (212)
Property, plant and equipment written
off 134 72
Impairment losses / (reversal of impairment) 617 (4,852)
Provision / (Reversal) for expected credit
loss 1,665 (177)
Operating cash flows before changes in
working capital 153,101 141,496
Increase in inventories (6,291) (2,649)
Increase in non-current, trade and other
receivables (896) (517)
Increase in trade and other payables 4,035 6,683
--------------------------------------------------- --- --------- ---------
Cash inflows from operations 149,949 145,013
Retirement benefits paid (612) (487)
Overseas tax paid (27,495) (12,359)
--------------------------------------------------- --- --------- ---------
Operating cash flows from continuing
operations 121,842 132,167
Operating cash flows used in discontinued
operations (1,331) (821)
--------------------------------------------------- --- --------- ---------
Net cash generated from operating activities 120,511 131,346
--------------------------------------------------- --- --------- ---------
Investing activities
Property, plant and equipment
* purchases (34,026) (26,374)
* sales 111 413
Interest received 4,859 3,214
Increase in receivables from cooperatives
under plasma scheme (2,570) (1,985)
Investment in share equity - (49)
Placement of fixed deposits with original
maturity of more than three months (55,566) (1,439)
Withdrawal of fixed deposits with original
maturity of more than three months 1,439 1,957
--------------------------------------------------- --- --------- ---------
Cash used in investing activities from
continuing operations (85,753) (24,263)
Cash used in investing activities from
discontinued operations (1,865) (1,594)
--------------------------------------------------- --- --------- ---------
Net cash used in investing activities (87,618) (25,857)
--------------------------------------------------- --- --------- ---------
Financing activities
Dividends paid to the holders of the
parent (1,975) (395)
Dividends paid to non-controlling interests (2,174) (381)
Repayment of lease liabilities - principal (220) (228)
Repayment of lease liabilities - interest (12) (24)
Acquisition of non-controlling interests (5,142) -
--------------------------------------------------- --- --------- ---------
Cash used in financing activities from
continuing operations (9,523) (1,028)
Cash used in financing activities from - -
discontinued operations
--------------------------------------------------- --- --------- ---------
Net cash used in financing activities (9,523) (1,028)
--------------------------------------------------- --- --------- ---------
Net increase in cash and cash equivalents 23,370 104,461
Cash and cash equivalents
At beginning of year 218,249 115,211
Exchange losses (20,143) (1,423)
--------------------------------------------------- --- --------- ---------
At end of year 221,476 218,249
--------------------------------------------------- --- --------- ---------
Comprising:
Cash at end of year 18 221,476 218,249
--------------------------------------------------- --- --------- ---------
Notes
1 Basis of preparation
AEP is a company incorporated in the UK under the Companies Act
2006 and is listed on the London Stock Exchange. The registered
office of AEP is located at Quadrant House, 6th Floor, 4 Thomas
More Square, London E1W 1YW, UK. The principal activity of the
Group is plantation agriculture, mainly in the cultivation of oil
palm in Indonesia and Malaysia, of which Indonesia is the principal
place of business.
The financial information does not constitute the company's
statutory accounts for the years ended 31 December 2022 or 2021.
Statutory accounts for the years ended 31 December 2022 and 31
December 2021 have been reported on by the Independent Auditor. The
Independent Auditor's Reports on the Annual Report and Financial
Statements for the years ended 31 December 2022 and 31 December
2021 were 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.
Statutory accounts for the year ended 31 December 2021 have been
filed with the Registrar of Companies. The statutory accounts for
the year ended 31 December 2022 will be delivered to the Registrar
in due course.
The principal accounting policies applied in the preparation of
these consolidated financial statements are set out below. These
policies have been consistently applied to all years presented.
Basis of preparation
The consolidated financial statements have been prepared in
accordance with UK adopted International Accounting Standards and
with the requirements of the Companies Act 2006 as applicable to
companies reporting under those standards.
The Directors have carried out stress tests, factoring in the
identified uncertainties and risks such as commodity prices and
demands post pandemic, together with the current economic issues of
high inflation, rising interest rates and cost of living crisis, to
ensure that the Group has adequate resources in a worst-case
scenario to remain as a going concern for at least twelve months
from the date of this report.
The Directors have a reasonable expectation, having made the
appropriate enquiries, that the Group has sufficient cash resources
to cover the Group's operating expenses for a period of at least
twelve months from the date of approval of these financial
statements. For these reasons, the Directors adopted a going
concern basis in the preparation of the financial statements. The
Directors have made this assessment after consideration of the
Group's budgeted cash flows and related assumptions including
appropriate stress testing of identified uncertainties,
specifically on the potential shut down of the entire operations
from three to twelve months if all the plantations are infected
with an infectious disease as well as the impact on the demand for
palm oil with decreases of 50% to 100%. Stress testing of other
identified uncertainties and risks such as commodity prices and
currency exchange rates were also undertaken.
Changes in accounting standards
(a) New standards, interpretations and amendments effective for
the first time for the accounting periods beginning on or after 1
January 2022 in these financial statements in the current year
-- Annual improvements to IFRS Standards 2018-2020.
-- Conceptual Framework for Financial Reporting (Amendments to IFRS 3).
-- IAS 37 Provisions, Contingent Liabilities and Contingent
Assets (Amendment - Onerous Contracts - Cost of Fulfilling a
Contract).
-- IAS 16 Property, Plant and Equipment (Amendment - Proceeds before Intended Use).
(b) New standards, interpretations and amendments not yet effective.
T he following new standards, interpretations and amendments are
effective for future periods (as indicated) and have not been
applied in these financial statements:
-- IFRS 17 Insurance Contracts (1 January 2023, not yet adopted).
-- IAS 1 Presentation of Financial Statements and IFRS Practice
Statement 2, amendment related to Disclosure of Accounting Policies
(1 January 2023, not yet adopted).
-- IAS 8 Accounting policies, Changes in Accounting Estimates
and Errors, amendment related to Definition of Accounting Estimates
(1 January 2023, not yet adopted).
-- IAS 12 Income Taxes, amendment related to Deferred Tax
related to Assets and Liabilities arising from a Single Transaction
(1 January 2023, not yet adopted).
-- IFRS 16 Leases, amendment related to Liability in a Sale and
Leaseback (1 January 2024, not yet adopted)
-- IAS 1 Presentation of Financial Statements, amendment related
to Classification of Liabilities as Current or Non-Current (1
January 2024, not yet adopted).
-- IAS 1 Presentation of Financial Statements, amendment related
to Non-current Liabilities with Covenants (1 January 2024, not yet
adopted).
None of the above new standards, interpretations and amendments
are expected to have a material effect on the Group's future
financial statements.
2 Accounting policies
(a) Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries) made up to 31 December each year. The Company
controls a subsidiary if all three of the following elements are
present; power over the subsidiary, exposure to variable returns
from the subsidiary, and the ability of the investor to use its
power to affect those variable returns. The financial statements of
subsidiaries are included in the consolidated financial statements
from the date that control commences until the date control ceases.
In respect of cooperatives under the Plasma scheme, the Group has
not consolidated these results on the basis that all key decisions
are made by the cooperative and the Company has no voting rights
therefore does not have control over those entities.
(b) Business combinations
The consolidated financial statements incorporate the results of
business combinations using the purchase method. In the
consolidated statement of financial position, the acquiree's
identifiable assets, liabilities and contingent liabilities are
initially recognised at their fair values at the acquisition date.
Acquisitions of entities that comprise principally land with no
active plantation business do not represent business combinations,
in such cases, the amount paid for each acquisition is allocated
between the identifiable assets/liabilities at the acquisition
date.
(c) Foreign currency
The individual financial statements of each subsidiary are
presented in the currency of the country in which it operates (its
functional currency), being the currency in which the majority of
their transactions are denominated, with the exception of the
Company and its UK subsidiaries which are presented in US Dollar.
The presentation currency for the consolidated financial statements
is also US Dollar, chosen because, as internationally traded
commodities, the price of the bulk of the Group's products are
ultimately linked to the US Dollar.
On consolidation, the results of overseas operations are
translated into US Dollar at average exchange rates for the year
unless exchange rates fluctuate significantly in which case the
actual rate is used. All assets and liabilities of overseas
operations are translated at the rate ruling at the balance sheet
date. Exchange differences arising on re-translating the opening
net assets at opening rate and the results of overseas operations
at actual rate are recognised directly in equity (the "exchange
reserves"). Exchange differences recognised in the income statement
of Group entities' separate financial statements on the translation
of long-term monetary items forming part of the Group's net
investment in the overseas operation concerned are reclassified to
the exchange reserves if the item is denominated in the
presentational currency of the Group or of the overseas operation
concerned.
On disposal of a foreign operation, the cumulative exchange
differences recognised in the exchange reserves relating to that
operation up to the date of disposal are transferred to the income
statement as part of the profit or loss on disposal.
All other exchange profits or losses are credited or charged to
the income statement.
(d) Revenue recognition
The Group derives its revenue from the sale of CPO, palm kernel,
FFB, shell nut, biomass products, biogas products and rubber slab.
Revenue for CPO, palm kernel, FFB, shell nut, biomass and biogas
products are recorded net of sales and related taxes and levies,
including export taxes and recognised when the customer has taken
delivery of the goods. The collection/delivery of the goods will
not take place until the goods are paid for. Sales of rubber slab
are recognised on signing of the sales contract, this being the
point at which control is transferred to the buyer.
The transacted price for each product is based on the market
price or predetermined monthly contract value. There is no right of
return nor warranty provided to the customers on the sale of
products and services rendered.
Advance receipts represent the Group's obligation to transfer
goods to a customer for which the Group has received consideration
but the goods have yet to be delivered to/collected by the
customer.
(e) Tax
UK and foreign corporation tax are provided at amounts expected
to be paid or recovered using the tax rates and laws that have been
enacted or substantively enacted by the balance sheet date.
The directors consider that the carrying amount of tax
receivables approximates its fair value.
(f) Dividends
Equity dividends are recognised when they become legally
payable. The Company pays only one dividend each year as a final
dividend which becomes legally payable when approved by the
shareholders at the next annual general meeting.
(g) Property, plant and equipment
All items of property, plant and equipment are initially
measured at cost. Cost includes expenditure that is directly
attributable to the acquisition of the items. After initial
recognition, all items of property, plant and equipment except some
land and construction in progress, are stated at cost less
accumulated depreciation and any accumulated impairment losses.
Plantations comprise of the cost of planting and development of
oil palm and other plantation crops. Costs of new planting and
development of plantation crops are capitalised from the stage of
land clearing up to the stage of maturity. The costs of immature
plantations consist mainly of the accumulated cost of land
clearing, planting, fertilising and maintaining the plantation and
other indirect overhead costs up to the time the trees are
harvestable and to the extent appropriate. Oil palm plantations are
considered mature within three to four years after planting and
generating average annual CPO of four to six metric tons per
hectare. Immature plantations are not depreciated.
The Indonesian authorities have granted certain land
exploitation rights and operating permits for the estates. The land
rights are usually renewed without significant cost subject to
compliance with the laws and regulations of Indonesia therefore,
the Group has classified the land rights as leasehold land. The
leasehold land is recognised at cost initially and is not
depreciated except the leasehold land in Malaysia which is
depreciated over the term of the lease as its renewal cannot be
guaranteed. Costs include the initial cost of obtaining the
location permits and subsequent payments to compensate existing
land owners plus any legal costs incurred to acquire the necessary
land exploitation rights.
Construction in progress is stated at cost. The accumulated
costs will be reclassified to the appropriate class of assets when
construction is completed and the asset is ready for its intended
use. Construction in progress is also not depreciated until such
time when the asset is available for use.
Plantations, buildings and oil mills are depreciated using the
straight-line method. The yearly rates of depreciation are as
follows:
Leasehold land in Malaysia - over the term of the lease
Plantations - 5% per annum
Buildings - 5% to 10% per annum
Oil Mill - 5% per annum
Estate plant, equipment & vehicle - 12.5% to 50% per
annum
Office plant, equipment & vehicle - 25% to 50% per annum
(h) Biological assets
Biological assets comprise an estimation of the fair value less
costs to sell of unharvested FFB at balance sheet date. Changes in
the fair value of biological assets are charged or credited to the
income statement within the cost of sales.
(i) Leases
The Group assesses whether a contract is or contains a lease, at
inception of the contract. The Group recognises a right-of-use
asset and a corresponding lease liability with respect to all lease
arrangements in which it is the lessee, except for short-term
leases (defined as leases with a lease term of 12 months or less)
and leases of low value assets (such as tablets and personal
computers, small items of office furniture and telephones). For
these leases, the Group recognises the lease payments as an
operating expense on a straight-line basis over the term of the
lease unless another systematic basis is more representative of the
time pattern in which economic benefits from the leased assets are
consumed.
The lease liability is initially measured at the present value
of the lease payments that are not paid at the commencement date,
discounted by using the rate implicit in the lease. If this rate
cannot be readily determined, the lessee uses its incremental
borrowing rate.
Lease payments included in the measurement of the lease
liability comprise:
Fixed lease payments (including in-substance fixed payments),
less any lease incentives receivable.
The lease liability is presented as a separate line in the
consolidated statement of financial position.
The lease liability is subsequently measured by increasing the
carrying amount to reflect interest on the lease liability (using
the effective interest method) and by reducing the carrying amount
to reflect the lease payments made.
The right-of-use assets comprise the initial measurement of the
corresponding lease liability, lease payments made at or before the
commencement day, less any lease incentives received and any
initial direct costs. They are subsequently measured at cost less
accumulated depreciation and impairment losses.
Right-of-use assets are depreciated over the shorter period of
lease term and useful life of the underlying asset. If a lease
transfers ownership of the underlying asset or the cost of the
right-of-use asset reflects that the Group expects to exercise a
purchase option, the related right-of-use asset is depreciated over
the useful life of the underlying asset. The depreciation starts at
the commencement date of the lease.
The right-of-use assets are presented together in property,
plant and equipment in the consolidated statement of financial
position. The Group applies IAS 36 to determine whether a
right-of-use asset is impaired and accounts for any identified
impairment loss as described in the "Impairment" policy.
Land rights are recognised at historical cost without
depreciation at the balance sheet date except for leasehold land in
Malaysia where it is recognised at historical cost and depreciated
over the term of the lease.
(j) Impairment
An assessment of indicators of impairment over the Group's
assets is undertaken annually on 31 December. Where the carrying
value of an asset exceeds its recoverable amount (i.e. the higher
of value in use or fair value, less costs to sell), the asset is
written down accordingly. Impairment charges are included in the
income statement, except to the extent where they reverse gains
previously recognised in other comprehensive income. Reversal on
impairment loss would be recognised if, and only if, there has been
a change in the estimates used to determine the asset's recoverable
amount since the last impairment test was carried out. Reversal on
impairment losses will be immediately recognised in the income
statement.
(k) Inventories
Inventories are initially recognised at cost, and subsequently
at the lower of cost and net realisable value. In the case of
processed produce for sale which comprises palm oil and kernel,
cost represents the monthly weighted-average cost of production and
appropriate production overheads. Estate and mill consumables are
valued on a weighted average cost basis. Fresh fruit bunches are
measured on initial recognition at fair value less costs to sell at
the point of harvest, as this is considered to reflect its cost at
that date.
(l) Financial assets
The Group's financial assets measured at amortised cost comprise
trade and other receivables and cash and cash equivalents in the
consolidated statement of financial position. All the Group's
receivables and loans are non-derivative financial assets with cash
flows that are solely payments of principal and interest. They are
recognised at fair value at inception and subsequently at amortised
cost as this is what the Group considers to be most representative
of the business model for these assets.
Cash and cash equivalents consist of cash in hand and short-term
deposits at banks with an original maturity not exceeding three
months. Bank overdrafts are shown within loans and borrowings under
current liabilities on the statement of financial position.
The Group considers a trade receivable or other receivable as
credit impaired when one or more events that have a detrimental
impact on the estimated cash flow have occurred. Trade and other
receivables are written off when there is no expectation of
recovery based on the assessment performed. If the receivables are
subsequently recovered, these are recognised in income
statement.
The Group use three categories for those receivables which
reflect their credit risk and how the loss provision is determined
for those categories. These include trade receivables using the
simplified approach and debt instruments at amortised costs other
than trade receivables and financial guarantee contracts using the
three-stage approach.
(m) Financial liabilities
All the Group's financial liabilities are non-derivative
financial liabilities.
Bank borrowings and long-term development loans are initially
recognised at fair value and subsequently at amortised cost, which
is the total of proceeds received net of issue costs. Finance
charges are accounted for on an accruals basis and charged in the
income statement unless capitalised according to the policy as set
out in the property, plant and equipment policy.
Trade and other payables are shown at fair value at recognition
and subsequently at amortised cost.
(n) Deferred tax
Deferred tax assets and liabilities are recognised where the
carrying amount of an asset or liability in the statement of
financial position differs from its tax base except for differences
in the initial recognition of an asset or liability in a
transaction which is not a business combination and at the time of
the transaction affects neither accounting nor taxable profit.
The Group recognises deferred tax liabilities arising from
taxable temporary differences on investments in subsidiaries,
except where the Group is able to control the reversal of the
temporary differences and it is probable that the temporary
difference will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those
instances where it is possible that taxable profit will be
available against which the difference can be utilised.
Deferred tax is recognised on temporary differences arising from
property revaluation surpluses or deficits.
Deferred tax is determined using the tax rates that are enacted
or substantively enacted at the balance sheet date. Deferred tax is
charged or credited in the income statement, except when it relates
to items charged to other comprehensive income, such as
revaluations, in which case the deferred tax is also dealt with in
other comprehensive income.
(o) Retirement benefits
Defined contribution schemes
Contributions to defined contribution pension schemes are
charged to the consolidated income statement in the year to which
they relate.
Defined benefit schemes
The Group operates a number of defined benefit schemes in
respect of its Indonesian operations. The schemes' surpluses and
deficits are measured at:
-- The fair value of plan assets at the reporting date; less
-- Plan liabilities calculated using the projected unit credit
method discounted to its present value using yields available on
Indonesian Government bonds that have maturity dates approximating
to the terms of the liabilities; plus
-- Past service costs; less
-- The effect of minimum funding requirements agreed with scheme trustees.
Remeasurements of the net defined benefit obligation are
recognised in other comprehensive income. The remeasurements
include:
-- Actuarial gains and losses;
-- Return on plan assets (interest exclusive); and
-- Any asset ceiling effects (interest inclusive).
Service costs are recognised in the income statement and include
current and past service costs as well as gains and losses on
curtailments.
Net interest expense / (income) is recognised in the income
statement, and is calculated by applying the discount rate used to
measure the defined benefit obligation / (asset) at the beginning
of the annual period to the balance of the net defined benefit
obligation / (asset), considering the effects of contributions and
benefit payments during the period.
Gains or losses arising from changes to scheme benefits or
scheme curtailment are recognised immediately in the income
statement. Settlements of defined benefit schemes are recognised in
the period in which the settlement occurs.
(p) Treasury shares
Consideration paid or received for the purchase or sale of the
Company's own shares for holding in treasury is recognised directly
in equity, where the cost is presented as the treasury shares. Any
excess of the consideration received on the sale of treasury shares
over the weighted average cost of shares sold is taken to the share
premium account.
Any shares held in treasury are treated as cancelled for the
purpose of calculating earnings per share.
(q) Financial guarantee contracts
Where the Company and its subsidiaries enter into financial
guarantee contracts and guarantee the indebtedness of other
companies within the Group and/or third party entities, these are
accounted for under IFRS 9. The details of financial guarantee
contracts are disclosed in note 26.
(r) Non-current assets held for sale and disposal groups
Non-current assets and disposal groups are classified as held
for sale when:
-- they are available for immediate sale;
-- management is committed to a plan to sell;
-- it is unlikely that significant changes to the plan will be
made or that the plan will be withdrawn;
-- an active programme to locate a buyer has been initiated;
-- the asset or disposal group is being marketed at a reasonable
price in relation to its fair value; and
-- a sale is expected to complete within 12 months from the date of classification.
Non-current assets and disposal groups classified as held for
sale are measured at the lower of:
-- their carrying amount immediately prior to being classified
as held for sale in accordance with the group's accounting policy;
and
-- fair value less costs of disposal.
Following their classification as held for sale, non-current
assets (including those in a disposal group) are not
depreciated.
A discontinued operation is a component of the Group's business
that represents a separate major line of business or geographical
area of operations or is a subsidiary acquired exclusively with a
view to resale, that has been disposed of, has been abandoned or
that meets the criteria to be classified as held for sale.
Discontinued operations are presented in the consolidated
statement of comprehensive income as a single line which comprises
the profit or loss after tax of the discontinued operation along
with the gain or loss after tax recognised on the re-measurement to
fair value less costs to sell or on disposal of the assets or
disposal groups constituting discontinued operations.
The Group has made an accounting policy choice not to allocate
profit achieved on the related external transaction to the
discontinued operations.
(s) Critical accounting estimates and judgements
The Group makes certain estimates and assumptions regarding the
future. Estimates and judgements are continually evaluated based on
historical experience and other factors, including expectations of
future events that are believed to be reasonable under the
circumstances. In the future, actual experience may differ from
these estimates and assumptions. The estimates and assumptions that
have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next
financial year are discussed below.
Judgements
-- Assessment of de-facto control of cooperatives under Plasma
scheme (see note 2(a) and note 28).
-- Classification of land as leasehold with no depreciation charged (see note 12) .
-- Classification of assets as held for sale and discontinued operations (see note 9) .
Estimates and assumptions
-- Impairment of plantation assets - estimate of future cash
flows and determination of the discount rate and other assumptions
(see note 12).
-- Expected credit losses ("ECL") on amounts due from
cooperatives under Plasma scheme - determination of possible
outcomes and their weighted probability (see note 13).
-- Carrying value of income tax receivables - determination of
historic recovery rates (see note 8).
-- Income taxes and deferred tax - provisions for income taxes
in various jurisdictions (see note 8 and note 14).
-- Valuation of assets classified as held for sale (see note 9).
-- Recognition of deferred tax on losses - estimate of future
profitability of respective entities (see note 14).
-- Retirement benefits - actuarial assumptions (see note 21).
-- Fair value measurement - a number of assets and liabilities
included in the Group's financial statements require measurement
at, and/or disclosure of, fair value. The fair value measurement of
the Group's financial and non-financial assets and liabilities
utilises market observable inputs and data as far as possible.
Inputs used in determining fair value measurements are categorised
into different levels based on how observable the inputs used in
the valuation technique utilised are (the 'fair value
hierarchy'):
- 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; and
- Level 3 - unobservable inputs for the asset or liability.
The classification of an item into the above levels is based on
the lowest level of the inputs used that has a significant effect
on the fair value measurement of the item. Transfers of items
between levels are recognised in the period they occur.
The Group measures the following assets at fair value:
- Biological assets (note 16) .
The Group measures the following assets at amortised cost,
however disclosure of fair value is given in accordance with IFRS7
and IFRS 13:
- Non-current receivables due from non-controlling interests (note 13) .
- Non-current receivables due from cooperatives under Plasma scheme (note 13) .
For more detailed information in relation to the fair value
measurement of the items above, please refer to the applicable
notes.
3 Revenue
Disaggregation of Revenue
The Group has disaggregated revenue into various categories in
the following table which is intended to:
-- depict how the nature, amount and uncertainty of revenue and
cash flows are affected by timing of revenue recognition; and
-- enable users to understand the relationship with revenue
segment information provided in note 6.
There is no right of return and warranty provided to the
customers on the sale of products and services rendered. All
revenue in the table below is recognised at a point in time.
CPO,
palm
Year to 31 December kernel Rubber Shell Biomass Biogas Others
2022 and FFB nut products products Total
$000 $000 $000 $000 $000 $000 $000
Contract counterparties
Government - - - - 1,160 - 1,160
Non-government
* Wholesalers 437,247 630 5,438 24 - 3,120 446,459
437,247 630 5,438 24 1,160 3,120 447,619
---------- --------- -------- ------------ ------------ --------- ------------
Timing of transfer
of goods
Delivery to customer
premises 5,359 630 - - - - 5,989
Delivery to port of
departure - - - 24 - - 24
Customer collect from
our mills / estates 431,888 - 5,438 - - - 437,326
Upon generation /
others - - - - 1,160 3,120 4,280
437,247 630 5,438 24 1,160 3,120 447,619
---------- --------- -------- ------------ ------------ --------- ------------
Year to 31 December 2021
Contract counterparties
Government - - - - 999 - 999
Non-government
* Wholesalers 426,436 695 4,036 336 - 919 432,422
426,436 695 4,036 336 999 919 433,421
---------- ------ -------- -------- ------ ------ --------------
Timing of transfer
of goods
Delivery to customer
premises 4,995 695 - - - - 5,690
Delivery to port of
departure - - - 336 - - 336
Customer collect from
our mills / estates 421,441 - 4,036 - - - 425,477
Upon generation / others - - - - 999 919 1,918
426,436 695 4,036 336 999 919 433,421
---------- ------ -------- -------- ------ ------ --------------
4 Finance income and expense
2022 2021
$000 $000
Finance income
Interest receivable on:
Credit bank balances and time deposits 4,859 3,214
Finance expense
Interest payable on:
Interest expense on lease liabilities (note
20) (12) (24)
-------- --------
Net finance income recognised in income statement 4,847 3,190
-------- --------
5 Expenses by nature
2022 2021
$000 $000
Expenses by nature:
Purchase of FFB 182,715 191,915
Depreciation (note 12):
- continuing operations 16,724 16,994
- discontinued operations - 1,978
---------- ---------
16,724 18,972
---------- ---------
Reversal of impairment (note 12):
- continuing operations - (5,437)
- discontinued operations - -
---------- ---------
- (5,437)
---------- ---------
Impairment losses (note 12):
- continuing operations 617 585
- discontinued operations - 716
---------- ---------
617 1,301
---------- ---------
Impairment loss on adjustment to fair value 5,034 21,772
Provision / (Reversal) for expected credit
loss (note 17):
- continuing operations 1,665 (177)
- discontinued operations (91) 1,231
---------- ---------
1,574 1,054
---------- ---------
Exchange gains (994) (213)
Legal and professional fees 1,289 945
Staff costs (note 7) 62,390 55,996
Remuneration received by the Group's auditor
or associates of the Group's auditor:
- Audit of parent company 5 5
- Audit of consolidated financial statements 205 209
- Audit related assurance service 9 7
- Audit of UK subsidiaries 13 13
---------- ---------
Total audit services 232 234
---------- ---------
Audit of overseas subsidiaries
- Malaysia 22 22
- Indonesia 147 116
---------- ---------
Total audit services 169 138
---------- ---------
Total auditor's remuneration 401 372
---------- ---------
6 Segment information
Description of the types of products and services from which
each reportable segment derives its revenues
In the opinion of the Directors, the operations of the Group
comprise one class of business which is the cultivation of
plantation in Indonesia and Malaysia. From the cultivation of
plantation, the Group produced the crude palm oil and associated
products such as palm kernel, shell nut, biomass products, biogas
products and rubber.
Factors that management used to identify reportable segments in
the Group
The reportable segments in the Group are strategic business
units based on the geographical spread. Operating segments are
consistent with the internal reporting provided to the Board of
Directors. The Board of Directors is responsible for allocating
resources and assessing the performance of the operating segments.
The Board decision is implemented by the Management Committee, that
is made up of a Senior General Manager and Group Accountant in
Malaysia, the President Director, the Chief Operating Officer,
Finance Director and the Engineering Director in Indonesia.
Measurement of operating segment profit or loss, assets and
liabilities
The Group evaluates segmental performance on the basis of profit
or loss before tax calculated in accordance with IFRS but excluding
BA movement.
Inter-segment transactions are made based on terms mutually
agreed by the parties to maximise the utilisation of Group's
resources at a rate acceptable to local tax authorities. This
policy was applied consistently throughout the current and prior
period.
The Group's assets are allocated to segments based on
geographical location.
North Total Total South*
Sumatera Indonesia from Sumatera
continuing
Bengkulu Riau Bangka Kalimantan Malaysia UK operations
$000 $000 $000 $000 $000 $000 $000 $000 $000 $000
2022
Total sales revenue
(all
external)
* CPO, palm kernel
and FFB 146,044 124,480 77,688 2,554 84,198 434,964 2,283 - 437,247 9,192
* Rubber 630 - - - - 630 - - 630 -
* Shell nut 2,056 1,197 2,067 - 118 5,438 - - 5,438 -
* Biomass products 24 - - - - 24 - - 24 -
* Biogas products 354 475 - - 331 1,160 - - 1,160 -
* Others 141 - 2,662 33 264 3,100 20 - 3,120 114
--------- --------- --------- ------- ----------- ---------- --------- ---------- ----------- ----------
Total revenue 149,249 126,152 82,417 2,587 84,911 445,316 2,303 - 447,619 9,306
--------- --------- --------- ------- ----------- ---------- --------- ---------- ----------- ----------
Profit / (loss) before
tax 51,210 35,809 26,166 433 29,079 142,697 (721) (3,243) 138,733 (1,105)
BA movement (1,845) (1,571) (846) (106) (1,354) (5,722) (70) - (5,792) (178)
--------- --------- --------- ------- ----------- ---------- --------- ---------- ----------- ----------
Profit / (loss) for
the
year before tax per
consolidated
income statement 49,365 34,238 25,320 327 27,725 136,975 (791) (3,243) 132,941 (1,283)
--------- --------- --------- ------- ----------- ---------- --------- ---------- ----------- ----------
Interest income 3,149 1,321 320 - 31 4,821 38 - 4,859 4
Interest expense (5) - - - - (5) (7) - (12) -
Depreciation (5,295) (3,942) (813) (374) (5,922) (16,346) (378) - (16,724) -
Impairment losses - - - - (185) (185) (432) - (617) -
(Provision) /
Reversal
for expected
credit loss (169) (57) - - 12 (214) - (1,451) (1,665) 91
Inter-segment
transactions 4,654 (1,927) (551) (291) (1,960) (75) 589 53 567 (567)
Inter-segmental
revenue 44,080 2,711 - - 9,628 56,419 - - 56,419 7,305
Tax expense (12,022) (7,262) (5,499) (26) (5,414) (30,223) (98) (1,140) (31,461) 494
Total assets 258,237 138,272 52,321 17,469 139,914 606,213 11,540 2,602 620,355 9,855
Non-current assets 79,119 41,193 7,820 14,901 101,780 244,813 7601 - 252,414 5,704
Non-current assets
- additions 15,007 7,283 709 1,788 9,376 34,163 107 - 34,270 793
North Total Total South*
Sumatera Indonesia from Sumatera
continuing
Bengkulu Riau Bangka Kalimantan Malaysia UK operations
$000 $000 $000 $000 $000 $000 $000 $000 $000 $000
2021
Total sales revenue
(all
external)
* CPO, palm kernel
and FFB 127,216 141,070 73,827 2,178 79,470 423,761 2,675 - 426,436 7,999
* Rubber 695 - - - - 695 - - 695 -
* Shell nut 1,173 1,191 1,440 - 232 4,036 - - 4,036 -
* Biomass products 336 - - - - 336 - - 336 -
* Biogas products 114 485 - - 400 999 - - 999 -
* Others 93 20 89 16 583 801 27 91 919 270
--------- --------- --------- ------- ----------- ---------- --------- ---------- ----------- ------------
Total revenue 129,627 142,766 75,356 2,194 80,685 430,628 2,702 91 433,421 8,269
--------- --------- --------- ------- ----------- ---------- --------- ---------- ----------- ------------
Profit / (loss) before
tax 40,160 35,769 20,555 553 37,539 134,576 (517) (1,325) 132,734 (4,786)
BA movement 1,660 700 574 111 1,273 4,318 31 - 4,349 64
--------- --------- --------- ------- ----------- ---------- --------- ---------- ----------- ------------
Profit / (loss) for the
year before tax per
consolidated
income statement 41,820 36,469 21,129 664 38,812 138,894 (486) (1,325) 137,083 (4,722)
--------- --------- --------- ------- ----------- ---------- --------- ---------- ----------- ------------
Interest income 2,323 720 133 1 22 3,199 15 - 3,214 5
Interest expense (15) - - - - (15) (9) - (24) -
Depreciation (5,270) (4,132) (905) (356) (5,660) (16,323) (671) - (16,994) (1,978)
Reversal of
impairment - - - - 5,437 5,437 - - 5,437 -
Impairment losses - - - - (452) (452) (133) - (585) (716)
(Provision) /
Reversal
for expected credit
loss (4) - - - 180 176 - 1 177 (1,231)
Inter-segment
transactions 902 (2,001) (11,754) (282) (1,934) (15,069) 476 74 (14,519) 14,519
Inter-segmental
revenue 42,566 2,641 - - 9,431 54,638 - - 54,638 7,438
Tax expense (8,939) (7,831) (2,153) (109) (6,379) (25,411) (112) (219) (25,742) (1,927)
Total assets 252,633 117,748 34,580 17,095 145,578 567,634 13,758 7,152 588,544 14,055
Non-current assets 77,170 42,027 8,751 14,960 108,844 251,752 8,780 - 260,532 5,653
Non-current assets -
additions 8,490 4,727 608 1,600 7,072 22,497 517 - 23,014 3,424
* South Sumatera represents the operations which have been
discontinued and have therefore been separated from the continuing
operations. The details of discontinued operations for South
Sumatera are disclosed in note 9.
Below is an analysis of revenue from the Group's top 4
customers, incorporating all those contributing greater than 10% of
the Group's external revenue in accordance with the requirements of
IFRS 8. In year 2022, revenue from top 4 customers of the
Indonesian segment represents approximately $263.0m (2021: $266.3m)
of the Group's total revenue for continuing operations. Although
Customer 1 to 4 made up over 10% of the Group's total revenue,
there was no over reliance on these Customers as tenders were
performed on a weekly basis. Three of the top four customers were
the same as in the prior year.
North Total South
Sumatera Bengkulu Riau Bangka Kalimantan Indonesia Malaysia UK Total Sumatera
$000 $000 $000 $000 $000 $000 $000 $000 $000 $000
2022
Customer 1 8,694 46,280 30,750 - 60,630 146,354 - - 146,354 -
Customer 2 51,854 4,039 - - - 55,893 - - 55,893 -
Customer 3 - 33,151 - - - 33,151 - - 33,151 -
Customer 4 27,583 - - - - 27,583 - - 27,583 -
---------- --------- ------- ------- ----------- ----------- --------- ----- -------- ----------
88,131 83,470 30,750 - 60,630 262,981 - - 262,981 -
---------- --------- ------- ------- ----------- ----------- --------- ----- -------- ----------
2021
Customer 1 2,203 36,104 36,909 - 45,655 120,871 - - 120,871 -
Customer 2 - 31,431 - - 19,335 50,766 - - 50,766 -
Customer 3 48,333 - - - - 48,333 - - 48,333 -
Customer 4 - 46,324 - - - 46,324 - - 46,324 -
---------- --------- ------- ------- ----------- ----------- --------- ----- -------- ----------
50,536 113,859 36,909 - 64,990 266,294 - - 266,294 -
---------- --------- ------- ------- ----------- ----------- --------- ----- -------- ----------
% % % % % % % % % %
2022
Customer 1 1.9 10.3 6.9 - 13.5 32.6 - - 32.6 -
Customer 2 11.6 0.9 - - - 12.5 - - 12.5 -
Customer 3 - 7.4 - - - 7.4 - - 7.4 -
Customer 4 6.2 - - - - 6.2 - - 6.2 -
---------- --------- ------- ------- ----------- ----------- --------- ----- -------- ----------
19.7 18.6 6.9 - 13.5 58.7 - - 58.7 -
---------- --------- ------- ------- ----------- ----------- --------- ----- -------- ----------
2021
Customer 1 0.5 8.3 8.5 - 10.5 27.8 - - 27.8 -
Customer 2 - 7.3 - - 4.5 11.8 - - 11.8 -
Customer 3 11.2 - - - - 11.2 - - 11.2 -
Customer 4 - 10.7 - - - 10.7 - - 10.7 -
---------- --------- ------- ------- ----------- ----------- --------- ----- -------- ----------
11.7 26.3 8.5 - 15.0 61.5 - - 61.5 -
---------- --------- ------- ------- ----------- ----------- --------- ----- -------- ----------
Save for a small amount of rubber, all the Group's operations
are devoted to oil palm. The Group's report is by geographical
area, as each area tends to have different agricultural
conditions.
7 Employees' and Directors' remuneration
2022 2021
Number Number
Average numbers employed (primarily overseas)
during the year:
- full time 7,873 7,618
- part-time field workers* 8,384 7,941
--------- ---------
16,257 15,559
--------- ---------
* Part-time field workers headcounts based
on full time equivalent of 8 hours per day
are 6,657 (2021: 6,191).
2022 2021
$000 $000
Staff costs (including Directors and discontinued
operations) comprise:
Wages and salaries 55,775 51,736
Social security costs 3,826 3,799
Retirement benefit costs
- United Kingdom - -
- Indonesia (note 21) 2,736 411
- Malaysia 53 50
--------- ---------
62,390 55,996
--------- ---------
2022 2021
$000 $000
Directors emoluments 194 187
2022 2021
$000 $000
Remuneration expense for key management personnel
comprise:
Short-term employee benefits 1,656 1,835
Post-employment benefits - -
-------- --------
1,656 1,835
-------- --------
The Executive Director, Non-Executive Directors and senior
management (general managers and above) are considered to be the
key management personnel.
8 Tax expense
2022 2021
$000 $000
Foreign corporation tax - current year 29,727 20,404
Foreign corporation tax - prior year 7 258
Deferred tax adjustment - origination and
reversal of temporary differences (note 14) 832 5,080
Deferred tax - prior year (note 14) 895 -
Total tax charge for year 31,461 25,742
--------- --------
Corporation tax rate in Indonesia is at 22% (2021: 22%) whereas
Malaysia is at 24% (2021: 24%). The standard rate of corporation
tax in the UK for the current year is 19% (2021: 19%). The Group's
charge for the year differs from the standard Indonesian rate of
corporation tax as explained below:
2022 2021
$000 $000
Profit before tax from continuing operations 132,941 137,083
--------- ----------
Profit before tax multiplied by standard rate
of Indonesia corporation tax of 22% (2021:
22%) 29,247 30,158
Effects of:
Rate adjustment relating to overseas profits 1,205 (30)
Group accounting adjustments not subject to
tax (237) (1,023)
Expenses not allowable for tax 1,213 263
Deferred tax assets not recognised 69 (10)
Income not subject to tax (1,063) (659)
Under provision of prior year income tax 7 258
Utilisation of tax losses not previously recognised 125 (3,215)
Under provision of prior year deferred tax 895 -
Change in tax rate - -
--------- ----------
Total tax charge for year 31,461 25,742
--------- ----------
The above reconciliation has been prepared by reference to the
Indonesian tax rate rather than the UK tax rate as, in accordance
with IAS 12, this is the applicable tax rate that provides the most
meaningful information, given this is the country in which the
majority of tax arises.
The tax receivables represent the corporate income tax ("CIT")
and value added tax ("VAT") that have yet to be refunded by the
Indonesia tax authority. The tax receivables relating to CIT arose
due to over payment of tax. The tax receivables relating to VAT
arose because the majority of the Groups' CPO was sold to bonded
zones which do not attract output VAT and thus the input VAT
incurred is claimable. Upon submission of a tax return (for CIT) or
a request letter (for VAT refund), a tax audit will be conducted by
the tax authority and whilst every effort is made to resolve this
quickly, the process can sometimes take more than 12 months.
The breakdown of the tax receivables and tax liabilities is as
follows:
2022 2021
$000 $000
Tax Receivables
Income tax 4,122 5,072
Transfer to assets held for sale (note 9) - (12)
----------- ----------
4,122 5,060
----------- ----------
Other taxes 37,576 45,481
Transfer to assets held for sale (note 9) - (46)
37,576 45,435
41,698 50,495
Tax Liabilities
Income tax (10,230) (13,139)
Other taxes (1,221) (1,615)
----------- ----------
(11,451) (14,754)
----------- ----------
9 Assets held for sale and discontinued operations
AEP is in the process of selling three of its non performing
plantations in South Sumatera following the Board's approval to
dispose the operation of RAA, KKST and ELAP to cut losses. A MOU
was signed with a potential buyer from Indonesia in December 2022
for a period of exclusivity to conduct legal and financial due
diligence. However, the potential buyer decided not to proceed
following the completion of the due diligence. Since this
transaction did not materialise, the book value of the three
plantations for sale is further impaired by $5 million. The
management is currently in discussion with another interested buyer
and aimed to complete the sale of the three plantations as soon as
practicable.
The entire operations of the disposal group are presented within
the South Sumatera operating segment disclosed in Note 7 and
represent a separate geographical area of operations. The
activities for the financial years ending 31 December 2022 and 31
December 2021 have been classified as discontinued operations in
the consolidated income statement as a single line.
The post-tax loss on disposal of discontinued operations was
determined as follows:
2022 2021
Result Result
before before
BA movement BA BA movement BA
movement Total movement Total
$000 $000 $000 $000 $000 $000
------------------ --- ------------ ------------ ----------- ------------- ------------ -------------
Discontinued
operations
Revenue 6 9,306 - 9,306 8,269 - 8,269
Cost of sales (10,389) (178) (10,567) (11,052) 64 (10,988)
------------------ --- ------------ ------------ ----------- ------------- ------------ -----------------
Gross (loss)
/ profit (1,083) (178) (1,261) (2,783) 64 (2,719)
Administration
expenses (120) - (120) (62) - (62)
Impairment loss 12 - - - (716) - (716)
Reversal /
(Provision)
for expected
credit
loss 17 91 - 91 (1,231) - (1,231)
------------------ --- ------------ ------------ ----------- ------------- ------------ -----------------
Operating (loss)
/ profit (1,112) (178) (1,290) (4,792) 64 (4,728)
Exchange gains 3 - 3 1 - 1
Finance income 4 - 4 5 - 5
Finance expense - - - - - -
------------------ --- ------------ ------------ ----------- ------------- ------------ -----------------
(Loss) / Profit
before tax 5 (1,105) (178) (1,283) (4,786) 64 (4,722)
Tax expense 455 39 494 (1,913) (14) (1,927)
------------------ --- ------------ ------------ ----------- ------------- ------------ -----------------
(Loss) / Profit
for the year
from
discontinued
operations (650) (139) (789) (6,699) 50 (6,649)
Impairment loss
on adjustment
to fair value (5,034) - (5,034) (21,772) - (21,772)
(5,684) (139) (5,823) (28,471) 50 (28,421)
Attributable to:
- Owners of the
parent (4,389) (132) (4,521) (27,760) 47 (27,713)
-
Non-controlling
interests (1,295) (7) (1,302) (711) 3 (708)
------------------ --- ------------ ------------ ----------- ------------- ------------ -----------------
(5,684) (139) (5,823) (28,471) 50 (28,421)
------------------ --- ------------ ------------ ----------- ------------- ------------ -----------------
Earnings per
share
attributable
to the owners
of the parent
during the year
- Basic and diluted EPS before (11.41)cts (69.92)cts
BA movement
- Basic and diluted EPS after (11.41)cts (69.92)cts
BA movement
Statement of cash flows
The statement of cash flows includes the following amounts
relating to discontinued operations:
2022 2021
$000 $000
Operating activities (1,332) (821)
Investing activities (1,865) (1,594)
Financing activities - -
Net decrease in cash and cash equivalents
from discontinued operations (3,197) (2,415)
--------- ---------
The following major classes of assets relating to the
discontinued operations have been classified as held for sale in
the consolidated statement of financial position on 31
December:
2022 2021
$000 $000
Property, plant and equipment (note 12) 25,512 27,425
Impairment loss on adjustment to fair value (24,547) (21,772)
-------- ----------
Property, plant and equipment net of impairment
losses 965 5,653
Non-current receivables (note 13) 4,128 3,338
Deferred tax assets (note 14) 3,306 3,124
Inventories (note 15) 213 729
Income tax receivable (note 8) 49 46
Other tax receivable (note 8) - 12
Biological assets (note 16) 107 303
Trade and other receivables (note 17) 232 68
Exchange differences - (63)
--------
Total assets held for sale 9,000 13,210
-------- ----------
An impairment loss of $24,547,000 (2021: $21,772,000) on the
measurement of the disposal group to fair value less cost to sell
has been recognised and was included in discontinued operations.
The difference of impairment loss was due to exchange in
translation and further impairment of $5,034,000 in 2022. The fair
value less cost to sell has been determined from a valuation range
obtained through the sales marketing process, through discussion
with potential buyers and review of internal forecasts. Management
do not expect the final amount realised to be materially different
from this. They are categorised as level 3 non-recurring fair value
measurements. The fair value measurement is based on the above
items' highest and best uses, which do not differ from their actual
use.
At 31 December 2022, the expected loss provision for receivables
in assets held for sale as follows:
Gross Loss Net carrying
carrying provision amount
amount $000 $000
$000
2022
Trade receivable 188 - 188
Other receivables (note 17) 31 - 31
Receivables: non-current (note
13)
- Due from cooperatives under
Plasma scheme 12,020 (7,892) 4,128
12,239 (7,892) 4,347
----------- ------------ --------------
Gross Loss Net carrying
carrying provision amount
amount $000 $000
$000
2021
Trade receivable 12 - 12
Other receivables (note 17) 23 - 23
Receivables: non-current (note
13)
- Due from cooperatives under
Plasma scheme 12,136 (8,798) 3,338
12,171 (8,798) 3,373
----------- ------------ --------------
10 Earnings per ordinary share ("EPS")
2022 2021
$000 $000
Total operations
Profit for the year attributable to owners
of the Company before BA movement 83,548 65,485
BA movement (3,904) 2,856
------------ ------------
Earnings used in basic and diluted EPS 79,644 68,341
------------ ------------
Continuing operations
Profit for the year attributable to owners
of the Company before BA movement 87,937 93,245
BA movement (3,772) 2,809
------------ ------------
Earnings used in basic and diluted EPS 84,165 96,054
------------ ------------
Discontinued operations
Loss for the year attributable to owners of
the Company before BA movement (4,389) (27,760)
BA movement (132) 47
------------ ------------
Earnings used in basic and diluted EPS (4,521) (27,713)
------------ ------------
Number Number
'000 '000
Weighted average number of shares in issue
in the year
* used in basic EPS 39,636 39,636
- -
* dilutive effect of outstanding share options
------------ ------------
* used in diluted EPS 39,636 39,636
------------ ------------
Total operations
- Basic and diluted EPS before BA movement 210.79cts 165.22cts
- Basic and diluted EPS after BA movement 200.94cts 172.42cts
Continuing operations
- Basic and diluted EPS before BA movement 221.86cts 235.25cts
- Basic and diluted EPS after BA movement 212.34cts 242.34cts
Discontinued operations
- Basic and diluted EPS before BA movement (11.07)cts (70.04)cts
- Basic and diluted EPS after BA movement (11.41)cts (69.92)cts
11 Dividends
2022 2021
$000 $000
Paid during the year
Final dividend of 5.0cts per ordinary share
for the year ended 31 December 2021
(2020: 1.0cts) 1,982 396
--------- ---------
Proposed final dividend of 25.0cts per ordinary
share for the year ended 31 December 2022 (2021:
5.0cts) 9,909 1,982
--------- ---------
The proposed dividend for 2022 is subject to shareholders'
approval at the forthcoming annual general meeting and has not been
included as a liability in these financial statements.
12 Property, plant and equipment
Estate Office Right-of-use
Plantations plant, plant, assets*
Leasehold equipment equipment Construction
Mill land Buildings & vehicle & vehicle in progress Total
$000 $000 $000 $000 $000 $000 $000 $000 $000
Cost
At 1 January 2021 219,735 78,780 61,272 64,883 18,034 1,405 841 642 445,592
Exchange translations (2,753) (899) (957) (768) (242) (30) (15) 7 (5,657)
Reclassification - (19) - 2,909 19 - - (2,909) -
Additions - 2,495 3,512 114 1,041 592 133 8,095 15,982
Development costs
capitalised 10,456 - - - - - - - 10,456
Disposal / Written off (1,684) (700) (379) (208) (814) (5) - - (3,790)
Transfer to assets held
for sale (note 9) (31,888) - (10,963) (6,067) (2,191) - - (127) (51,236)
At 31 December 2021 193,866 79,657 52,485 60,863 15,847 1,962 959 5,708 411,347
Exchange translations (18,178) (7,626) (4,563) (5,731) (1,500) (163) (76) (1,264) (39,101)
Reclassification - (31) - 2,191 31 - - (2,191) -
Additions - 4,430 1,889 156 2,397 210 - 14,733 23,815
Development costs
capitalised 10,455 - - - - - - - 10,455
Disposals / Written off (697) (597) (8) (217) (666) (83) - - (2,268)
At 31 December 2022 185,446 75,833 49,803 57,262 16,109 1,926 883 16,986 404,248
------------- -------- ----------- ---------- ---------- ---------- ------------- ------------- ---------
Accumulated depreciation
and impairment
At 1 January 2021 92,479 28,649 3,518 24,456 14,034 1,091 534 - 164,761
Exchange translations (1,297) (318) (108) (296) (191) (24) (11) - (2,245)
Charge for the year 9,907 3,873 125 3,523 1,309 82 153 - 18,972
(Reversal of impairment)
/ Impairment losses (5,437) - 1,168 - - - 133 - (4,136)
Disposal / Written off (1,313) (455) - (155) (798) (5) - - (2,726)
Transfer to assets held
for sale (note 9) (19,225) - (957) (1,782) (1,847) - - - (23,811)
At 31 December 2021 75,114 31,749 3,746 25,746 12,507 1,144 809 - 150,815
Exchange translations (7,002) (3,146) (240) (2,522) (1,144) (84) (70) - (14,208)
Reclassification - (31) - - 31 - - - -
Charge for the year 8,168 3,933 118 3,107 1,146 108 144 - 16,724
Impairment losses - - 185 - 432 - - - 617
Disposal / Written off (674) (577) - (164) (619) (80) - - (2,114)
At 31 December 2022 75,606 31,928 3,809 26,167 12,353 1,088 883 - 151,834
------------- -------- ----------- ---------- ---------- ---------- ------------- ------------- ---------
Carrying amount
At 31 December 2020 127,256 50,131 57,754 40,427 4,000 314 307 642 280,831
At 31 December 2021 118,752 47,908 48,739 35,117 3,340 818 150 5,708 260,532
At 31 December 2022 109,840 43,905 45,994 31,095 3,756 838 - 16,986 252,414
*Right-of-use assets had been disclosed in note 20.
The average capitalisation rate was 0% (2021: 0%) as there was
no borrowing cost in 2022 and 2021. The estates included $nil
(2021: $nil) of interest and $1,198,000 (2021: $1,966,000) of
overheads capitalised during the year in respect of expenditure on
estates under development.
The Indonesian authorities have granted certain land
exploitation rights and operating permits for the estates. In the
case of established estates in North Sumatera, these rights and
permits expire between 2023 and 2056 with rights of renewal
thereafter. As of estates in Bengkulu land titles were issued
between 1994 and 2016 and the titles expire between 2028 and 2051
with rights of renewal thereafter for two consecutive periods of 25
and 35 years respectively. In Riau, land titles were issued in 2003
and expire in 2033 with rights of renewal thereafter. In
Kalimantan, land titles were issued between 2015 and 2020 and
expire between 2049 and 2054 with rights of renewal thereafter. In
Bangka, land titles were issued in 2018 and expire in 2053. The
rights and permits for South Sumatera plantations were renewed in
2020. Application to obtain the land title is temporary stopped due
to the Group's intention to dispose the South Sumatera
operations.
Subject to compliance with the laws and regulations of
Indonesia, land rights are usually renewed. The cost of renewing
the land rights is not significant. On the basis that the Group has
an indefinite right to renew, leasehold land is not depreciated
except leasehold land in Malaysia. The land title of the estate in
Malaysia is a long-term lease expiring in 2084.
An impairment loss of $432,000 (2021: $nil) related to estate
plant, equipment and vehicle was provided in 2022 as the
recoverable amounts based on its value-in-use were lower than the
carrying amounts and the reason of acquisition of the plant and
equipment was for corporate social responsibility purposes. The
total value of the Group's right-of-use assets carried at value in
use was lower than original cost by $305,000 (2021: $322,000). The
impairment of right-of-use assets was recognised at $nil (2021:
$133,000) due to no future economic benefits.
Impairment for land and plantations is measured by comparing its
carrying amount with its recoverable amount, which is the higher of
the fair value less cost to sell and its value in use. The
impairment assessment is performed against the combined cost of
land and plantations for each estate which represents the cash
generating unit ("CGU"). Recoverable amount is, in most cases,
based on value in use calculations as, due to the nature of the
cashflows, this will be higher than fair value less costs to sell.
Where this has been determined not to be the case, fair value less
costs to sell have also been considered.
In 2022, an impairment loss of $185,000 has been recognised
against one CGU due to additional expenditure recognised in the
year above its recoverable amount. The reversal of impairment loss
of $5,437,000 recognised in 2021 was primarily due to the increase
in CPO price. The total value of the Group's land and plantations
for continuing operations which is carried at its recoverable
amount is $41,158,000 (2021: $42,803,000).
In 2021, the plantations cost of $12,663,000 and land cost of
$10,006,000 had been transferred to assets held for sale, the
details are disclosed in note 9.
The value in use, computed by the professional valuer MBPRU
using a discounted cash flow ("DCF") model, is the net present
value of the projected future cash flows over the expected 20-year
economic life of the asset discounted at 15.4% (2021: 14.8%).
Projected future cash flows are calculated based on historical
data, industry performance, economic conditions and any other
readily available information including the impact of climate
change. The compliance with changing regulations, changes in buyer
preferences, development of new products and use of lower emission
sources of energy will affect the FFB production, CPO price and its
growth. Heavy rainfall & flooding, droughts and fires will have
an effect on company specific risk within the calculation of our
discount rate as well as potential impacts on the ability of our
plants to produce FFB. Pests & disease will impact the
upkeeping cost.
The sensitivity analysis below has been performed to show the
reasonably possible changes in the key assumptions which would have
a material impact on the impairment losses:
2022
---------------------
Assumption Increase
applied in impairment
$000
CPO CIF-Rotterdam price - decrease of 18% $1,200/mt 5,657
Pre-tax discount rate - increase by 600 bps 15.37% 6,082
Inflation rate - increase by 400 bps 2.81% 6,330
2021
------------------- -------
Assumption Increase
applied in impairment
$000
CPO CIF-Rotterdam price - decrease of 8% $1,000/mt 1,325
Pre-tax discount rate - increase by 300 bps 14.76% 1,771
Inflation rate - increase by 200 bps 2.73% 1,152
13 Receivables: non-current
2022 2021
-------------------- --------------------
Book value Fair Book value Fair
value value
$000 $000 $000 $000
Due from non-controlling interests 1,549 797 5,459 3,042
Due from cooperatives under
Plasma scheme 17,414 11,729 19,879 13,122
18,963 12,526 25,338 16,164
Transfer to assets held for
sale (note 9) - - (3,338) (2,079)
---------- -------- ------------- -------
18,963 12,526 22,000 14,085
---------- -------- ------------- -------
The non-controlling parties in PT Sawit Graha Manunggal and PT
Kahayan Agro Plantation have acquired their interests on deferred
terms (see note 27, Credit risk).
Plasma scheme is an initiative by the Indonesian Government that
mandated plantation owners to allocate a percentage of their land
acquired to the surrounding community and to further provide
financial and technical assistance to cultivate oil palm on that
land to improve the income and welfare of the community or
cooperatives. During the year, certain subsidiary companies have
funded plasma with a cumulative gross amount before ECL for
$17,489,000 (2021: $16,612,000) which is recoverable from the
cooperatives, the details with ECL are disclosed in note 9 and note
17.
The fair values disclosed above are for disclosure purposes and
all non-current receivables are classified as Level 3 in the fair
value hierarchy.
The valuation techniques and significant unobservable inputs
used in determining the fair value measurement of non-current
receivables, as well as the inter-relationship between key
unobservable inputs and fair value, are set out in the table
below:
Item Valuation approach Inputs Inter-relationship
used between key unobservable
inputs and fair value
Due from non-controlling Based on cash flows Discount The higher the discount
interests discounted using rate rate, the lower the
current lending rate fair value.
of 6% (2021: 6%).
----------------------- --------- --------------------------
Due from cooperatives Based on cash flows Discount The higher the discount
under Plasma discounted using rate rate, the lower the
scheme an estimated current fair value.
lending rate of 8.50%
(2021: 7.00%).
----------------------- --------- --------------------------
14 Deferred tax
The movement on the deferred tax account as shown below:
2022 2021
$000 $000
At 1 January 2,994 13,607
Recognised in income statement from continuing
operations (1,727) (7,005)
Recognised in other comprehensive income (41) (306)
Transfer to assets held for sale (note 9) - (3,124)
Exchange differences (199) (178)
At 31 December 1,027 2,994
--------- ---------
The most significant movement in deferred tax was due to the
utilisation of some of the losses against taxable profits during
the year.
The deferred tax asset and liability, together with the amounts
recognised in income statement and other comprehensive income are
detailed as follows:
(Charged)/
credited (Charged)/
to credited
Asset Liability Net income to equity
$000 $000 $000 statement $000
$000
2022
Impairment of land 164 - 164 41 -
Retirement benefits 1,495 - 1,495 (591) (41)
BA movement - (1,356) (1,356) 1,276 -
Unutilised tax losses 1,318 - 1,318 (2,177) -
Unremitted earnings - (331) (331) - -
Other temporary differences - (263) (263) (276) -
-------- ------------ -------- ------------ -------------
Tax assets / (liabilities) 2,977 (1,950) 1,027 (1,727) (41)
Set off of tax (1,145) 1,145 - - -
-------- ------------ -------- ------------ -------------
Net tax assets / (liabilities) 1,832 (805) 1,027 (1,727) (41)
-------- ------------ -------- ------------ -------------
2021
Impairment of land 139 - 139 100 -
Retirement benefits 2,304 - 2,304 (78) (280)
BA movement - (2,819) (2,819) (957) -
Unutilised tax losses 3,713 - 3,713 (4,303) -
Unremitted earnings - (132) (132) - -
Other temporary differences - (211) (211) 158 -
-------- ------------ -------- ------------ -------------
Tax assets / (liabilities) 6,156 (3,162) 2,994 (5,080) (280)
Set off of tax (1,832) 1,832 - - -
-------- ------------ -------- ------------ -------------
Net tax assets / (liabilities) 4,324 (1,330) 2,994 (5,080) (280)
-------- ------------ -------- ------------ -------------
2022 2021
$000 $000
A deferred tax asset has not been recognised
for the following items:
Unutilised tax losses 19,995 16,780
The Group had recognised tax assets arising from the unutilised
tax losses of certain subsidiaries as the Group believes that the
tax assets of these subsidiaries can be realised in the future
periods based on their budget, as their respective plantation
assets becoming more mature and historically resulting in the
companies becoming profitable. However, the Group does not
recognise the tax losses in certain companies within the Group as
tax assets in UK and Malaysia as the future recoverability of
losses of these companies cannot be certain and insufficient
forecast future taxable profits. The time limit on utilisation of
tax losses is subject to the tax laws in various countries. As of
31 December 2022, the relevant time limits are 5 years in
Indonesia, 7 years in Malaysia and unlimited in UK. At 31 December
2022, all unutilised tax losses were recognised in Indonesia. The
unutilised tax losses will expire as per below:
Year $000
2023 587
2025 388
2027 343
1,318
--------
At the balance sheet date, the aggregate amount of temporary
differences associated with undistributed earnings of subsidiaries
for which deferred tax liabilities have not been recognised was
$834,433,000 (2021: $750,462,000). No liability has been recognised
in respect of these differences because either the Group is in a
position to control the timing of the reversal of the temporary
differences and does not expect such a reversal to occur in the
foreseeable future, or such a reversal would not give rise to an
additional tax liability. The deferred tax liability on unremitted
earnings recognised at the balance sheet date was related to the
estimated dividend declared for 2022 by the subsidiaries.
15 Inventories
2022 2021
$000 $000
Estate and mill consumables 10,719 8,433
Processed produce for sale 8,871 6,612
-------- --------
19,590 15,045
Transfer to assets held for sale (note 9) - (729)
-------- --------
19,590 14,316
-------- --------
16 Biological assets
2022 2021
$000 $000
At 1 January 12,803 8,783
Fair value (loss) / gain recognised in the income
statement for continuing operations (5,792) 4,349
Fair value gain recognised in the income statement
for discontinued operations - 64
Transfer to assets held for sale (note 9) - (303)
Exchange translations (850) (90)
--------
At 31 December 6,161 12,803
--------- --------
The valuation of the unharvested FFB was carried out internally
for each plantation of the Group. It involved an estimation of the
weight of unharvested FFB at balance sheet date multiplied by the
sum of average FFB selling price less average harvesting cost of
the last month prior to the balance sheet date. The weight was
derived from the computation of the percentage of growth based on
the data extracted from the research reference "The Reflection of
Moisture Content on Palm Oil Development during the Ripening
Process of Fresh Fruits" multiplied with the estimated FFB
harvested one month after the balance sheet date. Climate change on
the weather will impact the levels and quality of production of
FFB, so this has been taken into consideration when determining the
fair value of biological assets.
The fair value of biological assets is classified as Level 3 in
the fair value hierarchy.
The valuation techniques and significant unobservable inputs
used in determining the fair value measurement of biological
assets, as well as the inter-relationship between key unobservable
inputs and fair value, are set out in the table below:
Item Valuation approach Inputs used Inter-relationship between
key unobservable inputs
and fair value
Biological Based on FFB FFB weight The higher the weight, the
assets - weight multiplied higher the fair value
Unharvested by the sum of
produce FFB selling FFB selling The higher the selling price,
price less harvesting price the higher the fair value
cost
Harvesting The higher the harvesting
cost cost, the lower the fair
value
----------------------- --------------- -------------------------------
The key assumptions are considered to be FFB weight, selling
price less harvesting costs and FFB production and a decrease of 1%
in any of these would result in an $62,000 decrease in the
valuation.
17 Trade and other receivables
2022 2021
$000 $000
Trade receivables 461 1,308
Other receivables 1,750 1,457
Prepayments and accrued income 1,257 2,485
-------- --------
3,468 5,250
Transfer to assets held for sale (note 9) - (68)
--------
3,468 5,182
-------- --------
The carrying amount of trade and other receivables classified as
amortised cost approximates fair value.
Trade receivables
The Group applies the IFRS 9 simplified approach to measure ECL
using a lifetime ECL provision for trade receivables. To measure
ECL on a collective basis, trade receivables are grouped based on
similar credit risk and age.
The expected loss rate is based on a combination of the Group's
historical credit losses experienced over the 5-year period prior
to the year end and forward-looking information on macroeconomic
factors affecting the Group's customers. The ECL has been
calculated at 1% on trade receivables balances.
Other receivables
The Group assesses the ECL associated with its debt instruments
carried at amortised cost on a forward-looking basis using the
three stage approach. The impairment methodology applied depends on
whether there has been a significant increase in credit risk.
The Group considers the probability of default upon initial
recognition of an asset and whether there has been significant
increase in credit risk on an on-going basis at each reporting
date. To assess whether there is a significant increase in credit
risk, the Group compares the risk of default occurring on the asset
as at the reporting date with the risk of default as at the date of
initial recognition. The Group considers available, reasonable and
supportable forward-looking information, such as:
- internal credit rating;
- external credit rating (as far as available);
- actual or expected significant adverse changes in business,
financial or economic conditions that are expected to cause a
significant change to the debtor's ability to meet its
obligation;
- significant changes in the value of the collateral supporting
the obligation or in the quality of third-party guarantees or
credit enhancements; and
- significant changes in the expected performance or behaviour
of the debtor, including changes in the payment status of the
debtor.
There has not been a significant increase in credit risk since
initial recognition on any of the group's financial assets
therefore 12-month ECL have continued to be recognised on all
balances other than trade receivables which are discussed
above.
Due from cooperatives under Plasma scheme
The Group assesses the ECL on amounts due from cooperatives
under Plasma scheme by considering various probability weighted
outcomes. The three possible outcomes are considered to be:
- recovery is limited to the value of the land and bearer plants
on which the plantation is situated;
- recovery is limited to the future cashflows of the
cooperative, being the FFB revenue less development costs; and
- recovery in full via bank financing obtained by the cooperative.
Movements on the Group's loss provision on current and
non-current other receivables and financial guarantee contracts are
as follows:
2022 2021
$000 $000
At 1 January 180 8,011
Loss provision during the year 1,665 1,054
Written off during the year (215) -
Transfer to assets held for sale (note 9) - (8,798)
Exchange difference (8) (87)
At 31 December 1,622 180
-------- ----------
At 31 December 2022, the expected loss provision for receivables
and financial guarantee contracts is as follows:
Gross Net carrying
carrying Loss amount
amount provision $000
$000 $000
2022
Trade receivable 466 (5) 461
Other receivables (note 17) 1,756 (6) 1,750
Receivables: non-current (note
13)
- Due from non-controlling interests 3,063 (1,514) 1,549
- Due from cooperatives under
Plasma scheme 17,489 (75) 17,414
22,774 (1,600) 21,174
----------- ------------- --------------
Financial guarantee contracts
(note 26) - (22) (22)
----------- ------------- --------------
22,774 (1,622) 21,152
----------- ------------- --------------
Gross Net carrying
carrying Loss amount
amount provision $000
$000 $000
2021
Trade receivables 1,301 (5) 1,296
Other receivables (note 17) 1,448 (14) 1,434
Receivables: non-current (note
13)
- Due from non-controlling
interests 5,514 (55) 5,459
- Due from cooperatives under
Plasma scheme 16,612 (71) 16,541
24,875 (145) 24,730
----------- ------------- --------------
Financial guarantee contracts
(note 26) - (35) (35)
----------- ------------- --------------
24,875 (180) 24,695
----------- ------------- --------------
18 Notes supporting statement of cash flows
Cash and cash equivalents for purposes of the statement of cash
flows comprised:
2022 2021
$000 $000
Cash at bank available on demand 47,658 43,464
Short-term deposits 173,802 174,766
Cash in hand 16 19
-------- --------
As reported in statement of financial position 221,476 218,249
Short-term investments 55,566 1,439
-------- --------
277,042 219,688
-------- --------
The short-term investments refer to the deposits with a licensed
bank with maturity of over three months.
Significant non-cash transactions from investing
activities are as follows:
2022 2021
$000 $000
Property, plant and equipment purchased
but not yet paid at year end 466 222
Repayment of amounts due from cooperatives
under the plasma scheme through the purchase
of FFB 7,401 6,374
Non-cash transactions from financing activities are shown in the
reconciliation of liabilities from financing transactions as
follows:
Non-current Current
lease liabilities lease
liabilities Total
$000 $000 $000
At 1 January 2022 (110) (240) (350)
Cash Flows - 231 231
Non-cash flows
- Effect of foreign exchange 6 20 26
- New lease - - -
- Lease liabilities classified
as non-current at 31 December
2021 becoming current during
2022 73 (73) -
- Interest accruing during
the year - (11) (11)
- Write off - - -
------------------- ------------- --------
(31) (73) (104)
------------------- ------------- --------
Non-current Current
lease liabilities lease
liabilities Total
$000 $000 $000
At 1 January 2021 (217) (236) (453)
Cash Flows 167 85 252
Non-cash flows
- Effect of foreign exchange 4 4 8
- New lease (110) (113) (223)
- Lease liabilities classified
as non-current at 31 December
2020 becoming current during
2021 46 (46) -
- Interest accruing during
the year - (24) (24)
- Write off - 90 90
(110) (240) (350)
------------------- ------------- --------
19 Trade and other payables
2022 2021
$000 $000
Trade payables 11,487 8,821
Other payables 3,321 1,305
Advance receipts 9,424 10,237
Accruals 9,734 12,170
--------- ---------
33,966 32,533
--------- ---------
The carrying amount of trade and other payables classified as
financial liabilities measured at amortised cost approximates fair
value. Advance receipts from customers are expected to be
recognised in full as revenue in the subsequent year. The advance
receipts at 31 December 2021 have been recognised in revenue in the
current period.
20 Leases
2022 2021
$000 $000
Lease liabilities analysed as:
Non-current (31) (110)
Current (73) (240)
------ ------
(104) (350)
------ ------
The weighted average incremental borrowing rate per annum was
5.5% (2021: 5.5%).
Maturity analysis for the lease liabilities has been given in
note 27.
Amounts recognised in income statement:
2022 2021
$000 $000
Depreciation expense on right-of-use assets (note
12) (144) (153)
Interest expense on lease liabilities (12) (24)
Expense relating to short-term leases (352) (353)
Expense relating to leases of low value assets (4) (6)
----------
(512) (536)
---------- -------
At 31 December 2022, the Group was committed to $0.01 million
(2021: $0.01 million) for short-term leases.
All the leases are fixed payments. The total cash outflow for
leases amount to $0.59 million (2021: $0.62 million).
The Group leases a piece of land and office under the
right-of-use assets. The remaining lease term is between 1.4 years.
(2021: 3 to 4 years). On expiry the Group has the options to renew
based on mutually agreed future rental. The right-of-use assets is
classified as part of property, plant and equipment in note 12.
Right-of-Use assets
Land Building Total
$000 $000 $000
At 1 January 2022 - 150 150
Additions - - -
Amortisation - (144) (144)
Impairment losses - - -
Effect of foreign exchange - (6) (6)
At 31 December 2022 - - -
---------- ----------- ----------
Land Building Total
$000 $000 $000
At 1 January 2021 - 307 307
Additions 133 - 133
Amortisation - (153) (153)
Impairment losses (133) - (133)
Effect of foreign exchange - (4) (4)
---------- ----------- ----------
At 31 December 2021 - 150 150
---------- ----------- ----------
Lease liabilities
Land Building Total
$000 $000 $000
At 1 January 2022 (183) (167) (350)
Additions - - -
Interest expense (8) (4) (12)
Lease payments 76 155 231
Effect of foreign exchange 11 16 27
At 31 December 2022 (104) - (104)
------ --------- ------
Land Building Total
$000 $000 $000
At 1 January 2021 (126) (327) (453)
Additions (133) - (133)
Interest expense (9) (15) (24)
Lease payments 81 171 252
Effect of foreign exchange 4 4 8
------ --------- ------
At 31 December 2021 (183) (167) (350)
------ --------- ------
The tables above do not include the leasehold land which is also
classified as a right of use asset as this information is already
presented in note 12.
21 Retirement benefits
The Group provides Post-Employment Benefit plans to its
employees in Indonesia in accordance with Job Creation Law
No.11/2020, Government Regulation No.35/2021 effective since
February 2021 and Collective Labour Agreements. These are defined
benefit plans and provide lump sum benefits to employees on
retirement, death, disability and voluntary resignation. There is
no requirement for the Group to advance fund these benefits.
The Group has set up a separate fund with PT Asuransi Allianz
Life Indonesia to fund the Post-Employment Benefit plan obligation
for Staff employees. The assets in the fund can only be used to pay
the employees' benefits.
Defined contribution plan managed by Dana Pension Lembaga
Keuangan AIA Financial ("DPLK AIAF") and allocated to the
individual participants. From 2020 onwards, these employees will
receive the higher of the benefit from DPLK AIAF and the
Post-Employment Benefit plan. The DPLK AIAF plan covers a smaller
proportion of the overall Post-Employment Benefit obligation.
The Group provides other long-term employee benefits in the form
of Long Service Awards for Staff and Non-Staff employees in
Indonesia. The Long Service Awards are for amounts of up to 2
months of basic salary, paid on completion of 10 or 20 years'
continuous service (Staff) and on completion of 25, 30, 35, and 40
years' continuous service (Non-Staff). These benefits are
unfunded.
The defined benefit plans are valued by an actuary at the end of
each financial year. The major assumptions used by the actuary
were:
2022 2021
Rate of increase in wages 8.0% 8.0%
Discount rate 7.3% 7.5%
Mortality rate* 100% 100% TMI4
TMI4
Disability rate 10% TMI4 10% TMI4
2022 2021
$000 $000
Service cost
Current service cost 1,522 1,660
Past service cost - (2,121)
Adjustment due to change in attribution (1,556) -
method
Cost of termination 780 -
Net interest expense 687 735
Remeasurements on net defined benefit
liability (26) (102)
-------- --------
Total employee benefits expense 1,407 172
-------- --------
The reconciliation on the remeasurement of retirement benefit
plan as shown below:
2022 2021
$000 $000
Included in other comprehensive income:
Continuing operations 147 995
Discontinued operations 30 91
-------- ---------
Remeasurement of retirement benefit plan,
net of tax recognised in other comprehensive
income 177 1,086
-------- ---------
Included in other comprehensive income:
Remeasurement of retirement benefit
plan 225 1,392
Deferred tax on retirement benefits (48) (306)
-------- -------------
Remeasurement of retirement benefit plan,
net of tax recognised in other comprehensive
(expenses) / income 177 1,086
-------- -------------
(i) Reconciliation of defined benefit obligation and fair value
of scheme assets including discontinued operations
Defined benefit obligation Fair value of scheme Net defined scheme liability
assets
Funded Unfunded Funded Unfunded Funded Unfunded
scheme scheme Total scheme scheme Total scheme scheme Total
$000 $000 $000 $000 $000 $000 $000 $000 $000
At 1 January 2021 (4,674) (9,943) (14,617) 1,234 - 1,234 (3,440) (9,943) (13,383)
Service cost -
current (439) (1,221) (1,660) - - - (439) (1,221) (1,660)
Service cost -
past (91) 2,212 2,121 - - - (91) 2,212 2,121
Interest (cost)
/ income (290) (532) (822) 87 - 87 (203) (532) (735)
Remeasurements
on net defined
benefit
liability - 102 102 - - - - 102 102
-------- --------- --------- ------- --------- -------- -------- --------- ----------
Included in income
statement (820) 561 (259) 87 - 87 (733) 561 (172)
Remeasurement gain
/ (loss)
Actuarial gain /
(loss)
from:
-------- --------- --------- ------- --------- -------- -------- --------- ----------
Adjustments
(experience) 452 370 822 - - - 452 370 822
Financial
assumptions 180 450 630 - - - 180 450 630
Return on plan
assets
(exclude
interest) - - - (60) - (60) (60) - (60)
-------- --------- --------- ------- --------- -------- -------- --------- ----------
Included in other
comprehensive
income 632 820 1,452 (60) - (60) 572 820 1,392
Effect of
movements in
exchange rates 54 119 173 (14) - (14) 40 119 159
Benefits paid 239 266 505 - - - 239 266 505
Other movements 293 385 678 (14) - (14) 279 385 664
At 31 December 2021 (4,569) (8,177) (12,746) 1,247 - 1,247 (3,322) (8,177) (11,499)
-------- --------- --------- ------- --------- -------- -------- --------- ----------
Defined benefit obligation Fair value of scheme Net defined scheme
assets liability
Funded Unfunded Funded Unfunded Funded Unfunded
scheme scheme Total scheme scheme Total scheme scheme Total
$000 $000 $000 $000 $000 $000 $000 $000 $000
At 1 January 2022 (4,569) (8,177) (12,746) 1,247 - 1,247 (3,322) (8,177) (11,499)
Service cost -
current (377) (1,145) (1,522) - - - (377) (1,145) (1,522)
Service cost - past - - - - - - - - -
Adjustment due to
change
in attribution
method 444 1,112 1,556 - - - 444 1,112 1,556
Cost of termination - (780) (780) - - - - (780) (780)
Interest (cost) /
income (272) (507) (779) 92 - 92 (180) (507) (687)
Remeasurements on
net
defined benefit
liability - 26 26 - - - - 26 26
-------- --------- --------- ------- --------- -------- -------- --------- ---------
Included in income
statement (205) (1,294) (1,499) 92 - 92 (113) (1,294) (1,407)
Remeasurement gain /
(loss)
Actuarial gain /
(loss)
from:
-------- --------- --------- ------- --------- -------- -------- --------- ---------
Adjustments
(experience) 89 428 517 - - - 89 428 517
Financial
assumptions (72) (172) (244) - - - (72) (172) (244)
Return on plan
assets
(exclude interest) - - - (48) - (48) (48) - (48)
-------- --------- --------- ------- --------- -------- -------- --------- ---------
Included in other
comprehensive
income 17 256 273 (48) - (48) (31) 256 225
Effect of movements
in
exchange rates 429 803 1,232 (135) - (135) 294 803 1,097
Employer
contribution - - - 317 - 317 317 - 317
Benefits paid 117 314 431 (38) - (38) 79 314 393
Other movements 546 1,117 1,663 144 - 144 690 1,117 1,807
At 31 December 2022 (4,211) (8,098) (12,309) 1,435 - 1,435 (2,776) (8,098) (10,874)
-------- --------- --------- ------- --------- -------- -------- --------- ---------
(ii) Disaggregation of defined benefit scheme assets
The fair value of the funded assets is analysed as follows:
2022 2021
$000 $000
Bonds
- Government bonds 556 275
- Corporate bonds - 2
556 277
Cash / deposits 879 970
------ ------
1,435 1,247
------ ------
None of the plan assets are invested in the Group's own
financial instruments, property or other assets used by the Group.
All plan assets invested in bonds which have a quoted market price
in an active market.
(iii) Defined benefit obligation - sensitivity analysis
The following table exhibits the sensitivity of the Group's
retirement benefits to the fluctuation in the discount rate, wages
and mortality rate:
Reasonably Defined benefit obligation
Possible Increase Decrease
Change $000 $000
(+ / -
Discount rate 1%) (941) 1,061
(+ / -
Growth in wages 1%) 1,094 (987)
(+ / -
Future mortality rate 10%) 64 (65)
The weighted average duration of the defined benefit obligation
is 8.85 years (2021: 11.10 years).
The total contribution paid into the defined contribution plan
in 2022 amounted to $223,000 (2021: $239,000). The Group expects to
pay contributions of $431,000 to the funded plans in 2023. For the
unfunded plans, the Group pays the benefits directly to the
individuals; the Group expects to make direct benefit payments of
$1,731,000 for defined benefit plan and $230,000 for defined
contribution plan in 2023.
22 Share capital and treasury shares
Issued Issued Issued
Authorised and Authorised and Authorised and
Number fully GBP000 fully $000 fully
paid paid paid
Number GBP000 $000
Ordinary shares of
25p each
Beginning and end of
year 60,000,000 39,976,272 15,000 9,994 23,865 15,504
------------ ---------- ------------ ------- ------------ ---------
Cost Cost
2022 2021 2022 2021
Treasury shares: Number Number $'000 $'000
Beginning of year 339,900 339,900 (1,171) (1,171)
Share options exercised - - - -
---------- ------------ ------------ ---------
End of year 339,900 339,900 (1,171) (1,171)
---------- ------------ ------------ ---------
Market value of treasury $'000
shares:
Beginning of year (720.0p/share) 3,298
End of year (800.0p/share) 3,274
No treasury share was purchased in 2022 (2021: Nil).
All fully paid ordinary shares have full voting rights, as well
as to receive the distribution of dividends and repayment of
capital upon winding up of company.
23 Ultimate controlling shareholder
At 31 December 2022, Genton International Limited ("Genton"), a
company registered in Hong Kong, held 20,247,814 (2021: 20,247,814)
shares of the Company representing 51.1% (2021: 51.1%) of the
issued share capital of the Company. Together with other deemed
interested parties, Genton's shareholding totals 20,551,914 or
51.9%. The ultimate beneficial shareholders of Genton International
Limited are vested in the estates of Madam Lim with the application
for probate in progress.
24 Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note.
An office premises lease agreement was entered with Infra Sari
Sdn Bhd, a company controlled by late Madam Lim Siew Kim. The
rental paid during the year was $339,140 (2021: $352,180). There
was no balance outstanding at the year end (2021: Nil).
In 2021, a land lease agreement was entered with Hana Bestari
Sdn Bhd, company controlled by late Madam Lim Siew Kim. The rental
paid during the year was $78,405 (2021: $46,325). There was no
balance outstanding at the year end.
In 2022, the final dividend paid to Genton International
Limited, a company controlled by late Madam Lim Siew Kim, was
$1,012,391 for the year ended 31 December 2021 (2021: $202,478 for
the year ended 31 December 2020). The final dividend paid to other
companies controlled by late Madam Lim Siew Kim was $15,205 for the
year ended 31 December 2021 (2021: $3,041 for the year ended 31
December 2020). There was no balance outstanding at the year end
(2021: Nil).
25 Reserves
Nature and purpose of each reserve:
Share capital Amount of shares subscribed at nominal value.
Share premium Amount subscribed for share capital in excess of
nominal value.
Capital redemption reserve Amounts transferred from share
capital on redemption of issued shares.
Treasury shares Cost of own shares held in treasury.
Revaluation reserves Gains/losses arising on the revaluation of
the Group's property, net of tax.
Exchange reserves Gains/losses arising from translating the net
assets of overseas operations into US Dollar.
Retained earnings Cumulative net gains and losses recognised in
the consolidated income statement.
26 Guarantees and other financial commitments
2022 2021
$000 $000
Capital commitments at 31 December
Contracted but not provided - normal estate
operations 1,310 979
Contracted but not provided - mill development 16,058 22,352
Authorised but not contracted - plantation
and mill development 28,558 26,517
A subsidiary company, PT Sawit Graha Manunggal ("SGM") has
provided a corporate guarantee to Koperasi Bartim Sawit Sejahtera
("KBSS"), a party under Plasma scheme as disclosed in note 13, in
relation to a loan taken by KBSS from PT Bank Mandiri (Persero)
Tbk. of Rp226.02 billion ($14.4million) (2021: Rp226.02 billion,
$15.8 million). The corporate guarantee remains until the loan is
fully settled by 23 December 2027. The HGU (land usage right) that
belongs to the Plasma scheme is currently held under SGM's master
title. An application to separate the HGU was submitted to the Land
Office and the land and its plantation with a total carrying amount
of $11.1 million as at 31 December 2022 (31 December 2021: $11.7
million) will be pledged to the bank as security once the title
separation approval is obtained. In addition, the terms and
conditions of the loan agreement also require KBSS to sell all its
FFB produce to SGM and the plantation estate is to be managed by
SGM. In view of these, the Group exposure to this contingent
liability is minimised.
On 3 February 2017, a subsidiary company, PT Alno Agro Utama and
Koperasi Perkebunan Plasma Maju Sejahtera ("KPPM") signed a
Refinancing Agreement with PT Bank Syariah Mandiri ("BSM") to fund
its plasma development. The Agreement provides a loan of Rp 8.75
billion ($0.6 million) (2021: Rp8.75 billion, $0.6 million), with
10 (Ten) years maturity period effective from 24 July 2017 with an
interest rate of 13.25% per annum and in 2021 decreased to 12.5%
per annum. This loan is collateralized by 125.4 hectares of KPPM's
land located in Desa Serami Baru, Kecamatan Malin Deman, Kabupaten
Mukomuko, Bengkulu and its plantation with a carrying amount of
$0.6 million as at 31 December 2022 (31 December 2021: $0.7
million) as security under the agreement while the Company provides
corporate guarantee amounting to Rp 8.75 billion ($0.6
million).
The Group's loss provision on these financial guarantee
contracts was $22,000 (2021: $35,000). The details of the ECL were
disclosed in note 17.
27 Disclosure of financial instruments and other risks
The Group's principal financial instruments comprised cash,
short and long-term bank loans, trade receivables excluding
prepayments and payables excluding advance receipts and receivables
from local partners in respect of their investments.
The Group's accounting classification of each class of financial
asset and liability at 31 December 2022 and 2021 were:
Financial
assets Financial Total
at amortised liabilities carrying
cost at value
$000 amortised $000
cost
$000
2022
Non-current receivables 18,963 - 18,963
Trade and other receivables 2,211 - 2,211
Short-term investments 55,566 - 55,566
Cash and cash equivalent 221,476 - 221,476
Trade and other payables - (24,542) (24,542)
298,216 (24,542) 273,674
------------- ------------- --------------
Financial Financial Total carrying
assets liabilities value
at amortised at amortised $000
cost cost
$000 $000
2021
Non-current receivables 22,000 - 22,000
Trade and other receivables 2,730 - 2,730
Short-term investments 1,439 - 1,439
Cash and cash equivalent 218,249 - 218,249
Trade and other payables - (22,296) (22,296)
244,418 (22,296) 222,122
------------- ------------- --------------
Financial instruments not measured at fair value
Financial instruments not measured at fair value include cash
and cash equivalents, trade and other receivables, trade and other
payables, borrowings due within one year and non-current
receivables.
Due to their short-term nature, the carrying value of cash and
cash equivalents, trade and other receivables, trade and other
payables approximates their fair value. The non-current receivables
were measured at cost less ECL however disclosure of fair value has
been given in note 13 for comparison purposes.
Please refer to the applicable notes for details of the fair
value hierarchy, valuation techniques, and significant unobservable
inputs related to determining the fair value of the following
items:
- Non-current receivables (note 13); and
The principal financial risks to which the Group is exposed
are:
- commodity selling price changes; and
- exchange movements;
which, in turn, can affect financial instruments and/or
operating performance.
The Company does not hedge any of its risks. Its trade credit
risks are low. There are no financial assets or liabilities that
are held at fair value through the profit or loss.
The Board is directly responsible for setting policies in
relation to financial risk management and monitors the levels of
the main risks through review of regular operational reports.
Commodity selling prices
The Group does not normally contract to sell produce more than
one month ahead.
Currency risk
Most of the Group's operations are in Indonesia. The Company and
Group accounts are prepared in US Dollar which is not the
functional currency of the operating subsidiaries. The Group does
not hedge its net investment in its overseas subsidiaries and is
therefore exposed to a currency risk on that investment. The
historical cost of investment (including intercompany loans) by the
parent in its subsidiaries amounted to $50,746,000 (2021:
$52,710,000), while the statement of financial position value of
the Group's share of underlying assets at 31 December 2022 amounted
to $463,383,000 (2021: $440,030,000).
All the Group's sales are made in local currency and any trade
receivables are therefore denominated in local currency. No hedging
is therefore necessary.
Selling prices of the Group's produce are directly related to
the US Dollar denominated world prices. Appreciation of local
currencies, therefore, reduces profits and cash flow of the
Indonesian and Malaysian subsidiaries in US Dollar terms and vice
versa.
There are no borrowings in the Group and therefore there is no
longer any currency risk for the Group in respect of this. The
average interest rate on local currency deposits was 0.88% higher
(2021: 2.74% higher) than on US Dollar deposits. The unmatched
balance at 31 December 2022 was represented by the $13,142,000
shown in the table below (2021: $13,504,000).
The table below shows the net monetary assets and liabilities of
the Group as at 31 December 2022 and 2021 that were not denominated
in the operating or functional currency of the operating unit
involved.
Net foreign currency assets/(liabilities)
--------------------------------------------------
US Dollar Sterling Total
Functional currency of Group $000 $000 $000
operation
2022
Rupiah 12,976 - 12,976
US Dollar - 355 355
Ringgit 166 - 166
----------------- -------------- -----------
Total 13,142 355 13,497
----------------- -------------- -----------
2021
Rupiah 12,397 - 12,397
US Dollar - 996 996
Ringgit 1,107 - 1,107
----------------- -------------- -----------
Total 13,504 996 14,500
----------------- -------------- -----------
The following table summarises the sensitivity of the Group's
financial assets and financial liabilities to foreign exchange
risk. The impact on profit before tax and equity if Ringgit or
Rupiah strengthen or weaken by 10% against US Dollar:
2022 2021
----------------- -----------------
-10% +10% Carrying -10% +10% in
Carrying in in in
Rp : Rp : Amount Rp : Rp : $
$ and $ and US$ $ and and
Amount RM : RM : RM : RM : $
US$ $ $ $
$000 $000 $000 $000 $000 $000
Financial Assets
Non-current receivables 18,963 (1,583) 1,935 22,000 (1,504) 1,838
Trade and other
receivables 2,211 (196) 239 2,730 (244) 298
Short-term investments 55,566 (5,051) 6,174 1,439 (131) 160
Cash and cash equivalents 221,476 (20,047) 24,502 218,249 (19,695) 24,072
Financial Liabilities
Trade and other
payables (24,542) 2,142 (2,618) (22,296) 1,914 (2,339)
Total (decrease)
/ increase (24,735) 30,232 (19,660) 24,029
-------- ------- -------- -------
Liquidity risk
Profitability of new sizable plantations normally requires a
period of between six and seven years before cash flow turns
positive. Because oil palms do not begin yielding significantly
until four years after planting, this development period and the
cash requirement is affected by changes in commodity prices.
The Group attempts to ensure that it is likely to have either
self-generated funds or further loan/equity capital to complete its
development plans and to meet loan repayments. Long-term forecasts
are updated twice a year for review by the Board. In the event that
falling commodity prices reduce self-generated funds below
expectations and to a level where Group resources may be
insufficient, further new planting may be restricted. Consideration
is given to the funds required to bring existing immature plantings
to maturity.
The Group's trade and tax payables are all due for settlement
within a year. At 31 December 2022, the Group had no external loans
and facilities.
The following table sets out the undiscounted contractual
cashflows of financial liabilities:
Less than Between Between More than
1 year 1 and 2 2 and 5 5 years Total
years years
$000 $000 $000 $000 $000
At 31 December 2022
Trade and other
payables (14,808) - - - (14,808)
Accruals (9,734) - - - (9,734)
Lease liabilities (76) (32) - - (108)
(24,618) (32) - - (24,650)
Financial guarantee
contracts
provided to Plasma
- loan repayment
by Plasma (1,238) (677) (251) - (2,166)
(25,856) (709) (251) - (26,816)
At 31 December 2021
Trade and other payables (10,013) (31) (22) (60) (10,126)
Accruals (8,450) (135) (243) (3,342) (12,170)
Lease liabilities (252) (81) (34) - (367)
---------- --------- --------- ---------- ---------
(18,715) (247) (299) (3,402) (22,663)
Financial guarantee
contracts provided
to Plasma
- loan repayment
by Plasma (1,142) (1,759) (628) - (3,529)
---------- --------- --------- ---------- ---------
(19,857) (2,006) (927) (3,402) (26,192)
---------- --------- --------- ---------- ---------
The figures for trade and other payables excludes accruals and
advance receipts.
The Group does not face a significant liquidity risk with regard
to its financial liabilities.
Interest rate risk
The Group's surplus cash is subject to variable interest rates.
The Group had net cash throughout 2022. A 1% change in the deposit
interest rate would not have a significant impact on the Group's
reported results as shown in the table below.
2022 2021
-------------------- --------------------
Carrying -1% in +1% in Carrying -1% in +1% in
amount interest interest amount interest interest
rate rate rate rate
$000 $000 $000 $000 $000 $000
Financial Assets
Short-term investments 55,566 (811) 300 1,439 (12) 14
Cash and cash equivalents 221,476 (1,904) 2,422 218,249 (2,112) 2,135
Total (decrease)
/ increase (2,715) 2,722 (2,124) 2,149
--------- --------- --------- -----------
There is no policy to hedge interest rates, partly because of
the net cash position and the net interest income position of the
Group.
Interest rate profiles of the Group's financial assets
(comprising non-current receivables, trade and other receivables,
cash and cash equivalent and short-term investments) at 31 December
were:
Variable No interest
Total Fixed rate
rate
$000 $000 $000 $000
2022
Sterling 658 - 56 602
US Dollar 15,181 1,549 9,341 4,291
Rupiah 278,685 - 259,439 19,246
Ringgit 3,692 - 3,370 322
------- ------- -------- -----------
Total 298,216 1,549 272,206 24,461
------- ------- -------- -----------
2021
Sterling 996 - 63 933
US Dollar 18,504 5,459 9,131 3,914
Rupiah 220,238 - 202,442 17,796
Ringgit 4,680 - 3,250 1,430
------- ------- -------- -----------
Total 244,418 5,459 214,886 24,073
------- ------- -------- -----------
Long-term receivables before ECL of $3,063,000 (2021:
$5,514,000) comprise US Dollar denominated amounts due from
non-controlling interests as described in note 13 on which interest
is due at a fixed rate of 6%.
Average US Dollar deposit rate in 2022 was 2.75% (2021: 0.30%)
and Rupiah deposit rate was 3.63% (2021: 3.04%).
Interest rate profiles of the Group's financial liabilities
(comprising other payables excluding advance receipts) at 31
December were:
Variable No interest
Total Fixed rate
rate
$000 $000 $000 $000
2022
Sterling - - - -
US Dollar (841) - - (841)
Rupiah (23,500) - - (23,500)
Ringgit (201) - - (201)
-------- ------- -------- -----------
Total (24,542) - - (24,542)
-------- ------- -------- -----------
2021
Sterling - - - -
US Dollar (1,110) - - (1,110)
Rupiah (20,864) - - (20,864)
Ringgit (322) - - (322)
-------- ------- -------- -----------
Total (22,296) - - (22,296)
-------- ------- -------- -----------
Weighted average interest rate on variable rate borrowings was
nil in 2022 (2021: nil).
Credit risk
The Group has two types of financial assets that are subject to
the ECL model:
-- trade receivables for sales of goods and services; and
-- current and non-current receivables carried at amortised cost.
The Group also has financial guarantee contracts for which the
ECL model is also applicable.
While cash and cash equivalents are also subject to the
impairment requirements as set out in IFRS 9, there is no
impairment loss identified given the financial strength of the
financial institutions in which the Group have a relationship with.
Credit risk arises from cash and cash equivalents and deposits with
banks and financial institutions. The Group has taken necessary
steps and precautions in minimising the credit risk by lodging cash
and cash equivalents only with reputable licensed banks, and
particularly in Indonesia, independently rated banks with a minimum
rating of "A". The cash and cash equivalents are in US dollars,
Rupiah, Ringgit and Sterling according to the requirements of the
Group. The list of the principal banks used by the Group is given
on the inside of the back cover of this report.
The Group use three categories for those receivables which
reflect their credit risk and how the loss provision is determined
for those categories.
(i) Trade receivables using the simplified approach
The Group applies the simplified approach under IFRS 9 to
measure ECL, which uses a lifetime expected loss provision for all
trade receivables. To measure the expected losses, trade
receivables have been grouped based on shared credit risk
characteristics and days past due.
The expected loss rates are based on historical payment profiles
of sales and the corresponding historical credit losses experienced
during these periods. The historical loss rates are adjusted to
reflect current and forward-looking information on macroeconomic
factors (such as palm product prices and crude oil price) affecting
the ability of the customers to settle the receivables. The
historical loss rates will be adjusted based on the expected
changes in these factors. No significant changes to estimation
techniques or assumptions were made during the reporting
period.
In determining the expected loss rates, the Group also takes
into consideration the collateral or payments received in advance,
as set out below:
Receivables are generally collected within the credit term and
therefore there is minimal exposure to doubtful debts. Upfront
payments are also collected for certain sales made by the Group's
subsidiaries in Indonesia.
The Group's maximum exposure to credit risk and loss provision
recognised as at 31 December 2022 is disclosed in note 17. The ECL
has been calculated at 1% on trade receivables balances while the
remaining amount in which no ECL provision was recognised is deemed
to be recoverable, with low probability of default. Default is
defined by the management as the non-repayment of the balance.
(ii) Debt instruments at amortised costs other than trade
receivables using the three-stage approach
All of the Group's debt instruments at amortised costs other
than trade receivables are considered to have a low credit risk,
except amount due from cooperatives under Plasma scheme are
considered to have higher credit risk, as these were considered to
be performing, have low risks of default and historically there
were minimal instances where contractual cash flow obligations have
not been met. There has not been a significant increase in credit
risk since initial recognition.
The 12-month ECL has been calculated at 1% on the majority of
balances (unless it has been considered there to be no ECL), with
the exception of amounts due from cooperatives under Plasma scheme
where the ECL is largely calculated, having considered various
probability weighted outcomes, as being the balance of the
receivable in excess of the value of the associated land and
plantation assets on which the Plasma land resides which
effectively would be returned to the Company if the receivable is
not repaid.
The maximum exposure to credit risks for debt instruments at
amortised cost other than trade receivables are represented by the
carrying amounts recognised in the statements of financial
position.
(iii) Financial guarantee contracts using the three-stage approach
All of the financial guarantee contracts are considered to be
performing, have low risks of default and historically there were
no instances where these financial guarantee contracts were called
upon by the parties of which the financial guarantee contracts were
issued. Accordingly,12-month ECL have been recognised at 1% on the
financial guarantee contracts and disclosed in note 26.
Information regarding other non-current assets and trade and
other receivables is disclosed in notes 13 and 17 respectively.
Amounts receivable from local partners before ECL, amounting to
$3,063,000 (2021: $5,514,000), in relation to their investments in
operating subsidiaries are secured on those investments and are
repayable from their share of dividends from those
subsidiaries.
Amounts receivable due from cooperatives under Plasma scheme, as
disclosed in note 13, are unsecured and are to be repaid from FFB
supplied by the cooperatives. The provision of ECL for amounts
receivable due from cooperatives under Plasma scheme had been
disclosed in note 17 and note 9.
Deposits with banks and other financial institutions and
investment securities are placed, or entered into, with reputable
financial institutions or companies with high credit ratings and no
history of default.
As the Group does not hold any collateral, the maximum exposure
to credit risk for each class of financial instrument is the
carrying amount presented on the statement of financial position,
except in the case of the financial guarantee contracts offered by
two subsidiaries to cooperatives in order for them to obtain bank
loans in 2013 and 2017, which are not held on the statement of
financial position of the Group. See note 26.
Capital
The Group defines its Capital as Share capital and Reserves,
shown in the statement of financial position as "Issued capital
attributable to owners of the parent" and amounting to $467,134,000
at 31 December 2022 (2021: $440,030,000).
Group policy presently attempts to fund development from
self-generated funds and loans and not from the issue of new share
capital. At 31 December 2022, the Group had no borrowings (2021:
nil) but, depending on market conditions, the Board is prepared for
the Group to have net borrowings.
Plantation industry risk
Please refer to principal and emerging risks and uncertainties
in the Strategic Report.
28 Subsidiary companies
The principal subsidiaries of the Company all of which have been
included in these consolidated financial statements are as
follows:
Country Non-controlling
of incorporation Proportion interests
and principal of ownership ownership
place of interest / voting interest
Name business at 31 December at 31 December
2022 2021 2022 2021
Principal sub-holding company
United
Anglo-Indonesian Oil Palms Limited Kingdom 100% 100% - -
Management company
Anglo-Eastern Plantations Management
Sdn Bhd Malaysia 100% 100% - -
PT Anglo-Eastern Plantations
Management Indonesia Indonesia 100% 100% - -
Operating companies
Anglo-Eastern Plantations (M)
Sdn Bhd Malaysia 55% 55% 45% 45%
All For You Sdn Bhd Malaysia 100% 100% - -
PT Alno Agro Utama Indonesia 90% 90% 10% 10%
PT Anak Tasik Indonesia 100% 100% - -
PT Bangka Malindo Lestari Indonesia 95% 95% 5% 5%
PT Bina Pitri Jaya Indonesia 80% 80% 20% 20%
PT Cahaya Pelita Andhika* Indonesia 100% 90% - 10%
PT Empat Lawang Agro Perkasa** Indonesia 80% 95% 20% 5%
PT Hijau Pryan Perdana Indonesia 80% 80% 20% 20%
PT Kahayan Agro Plantation Indonesia 78% 78% 22% 22%
PT Karya Kencana Sentosa Tiga** Indonesia 81% 95% 19% 5%
PT Mitra Puding Mas Indonesia 90% 90% 10% 10%
PT Musam Utjing Indonesia 75% 75% 25% 25%
PT Riau Agrindo Agung** Indonesia 76% 95% 24% 5%
PT Sawit Graha Manunggal* Indonesia 86% 82% 14% 18%
PT Simpang Ampat Indonesia 100% 100% - -
PT Tasik Raja Indonesia 80% 80% 20% 20%
PT United Kingdom Indonesia
Plantations Indonesia 75% 75% 25% 25%
Dormant companies
The Ampat (Sumatra) Rubber Estate United
(1913) Limited Kingdom 100% 100% - -
United
Gadek Indonesia (1975) Limited Kingdom 100% 100% - -
United
Mergerset (1980) Limited Kingdom 100% 100% - -
United
Musam Indonesia Limited Kingdom 100% 100% - -
United
Indopalm Services Limited Kingdom 100% 100% - -
*The Group purchased some of the shares from non-controlling
interest during the year. Hence, the Company's effective ownership
has increased.
**The decrease in the Company's effective ownership of these
subsidiaries is due to group restructuring.
The principal United Kingdom sub-holding company, UK management
company and UK dormant companies are registered in England and
Wales and are direct subsidiaries of the Company. The Malaysian
operating companies and management company are incorporated in
Malaysia and are direct subsidiaries of the Company. The Indonesian
operating companies and management company are incorporated in
Indonesia and are direct subsidiaries of the principal sub-holding
company. The principal activity of the operating companies is
plantation agriculture. The registered office of the principal
subsidiaries are disclosed below:
Subsidiaries by country Registered address
UK registered subsidiaries Quadrant House, 6(th) Floor
4 Thomas More Square
London E1W 1YW
United Kingdom
Malaysia registered subsidiaries 7(th) Floor, Wisma Equity
150 Jalan Ampang
50450 Kuala Lumpur
Malaysia
Indonesia registered subsidiaries 3(rd) Floor, Wisma HSBC, Jalan Diponegoro,
Kav 11
Medan 20152
North Sumatera
Indonesia
29 Non-controlling interests
The Group identified subsidiaries with material non-controlling
interests ("NCI") based on the total assets in relation to the
Group. A subsidiary's NCI is material if the subsidiary contributed
more than 10% of the Group's total assets. The subsidiaries
identified and their summarised financial information, before
intra-group eliminations, are presented below:
Entity PT Tasik Raja PT Mitra PT Alno Agro PT Bina Pitri PT Sawit Graha
Puding Mas Utama Jaya Manunggal
14%
NCI percentage 20% 10% 10% 20%
Summarised income
statement
For the year ended 31
December 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021
$000 $000 $000 $000 $000 $000 $000 $000 $000 $000
Revenue 98,634 91,945 52,774 64,374 82,196 87,259 77,688 73,827 84,008 79,728
Profit after tax 20,520 16,771 9,965 12,276 16,142 15,747 19,309 7,192 20,236 22,384
Other comprehensive
(expense)
/ income (17,198) (1,623) (9,075) (878) (9,752) (695) (16,980) (1,722) (4,468) 15
Total comprehensive
income 3,322 15,148 890 11,398 6,390 15,052 2,329 5,470 15,768 22,399
Profit allocated to
NCI 4,104 3,354 997 1,228 1,614 1,575 3,862 1,438 3,668 4,075
Other comprehensive
(expenses)
/ income allocated to
NCI (3,440) (325) (908) (88) (975) (70) (3,396) (344) (610) 3
Total comprehensive
income
allocated to NCI 664 3,029 89 1,140 639 1,505 466 1,094 3,058 4,078
Dividends paid to NCI 570 17 372 144 247 12 621 46 - -
Summarised statement of
financial
position
As at 31 December 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021
$000 $000 $000 $000 $000 $000 $000 $000 $000 $000
Non-current assets 79,864 73,334 41,958 64,458 48,883 51,237 105,308 123,967 73,771 80,093
Current assets 79,622 78,140 46,189 27,153 50,828 48,527 46,071 25,392 18,820 19,394
Non-current liabilities (704) (749) (1,116) (1,329) (2,280) (2,759) (1,077) (1,251) (28,647) (52,557)
Current liabilities (12,273) (7,555) (5,010) (6,263) (5,442) (9,829) (6,007) (5,873) (10,948) (9,567)
Net assets 146,509 143,170 82,021 84,019 91,989 87,176 144,295 142,235 52,996 37,363
Accumulated NCI 29,302 28,634 8,202 8,402 9,199 8,718 28,859 28,447 7,232 6,800
Summarised cash flows
For the year ended 31
December 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021
$000 $000 $000 $000 $000 $000 $000 $000 $000 $000
Cash flows from
operating
activities 16,391 25,736 8,357 19,297 14,688 16,547 100,500 7,282 27,631 27,075
Cash flows used in
investing
activities (2,373) (1,221) (8,645) (1,707) (14,328) (3,028) (75,523) (587) (5,514) (4,355)
Cash flows (used in) /
from
financing activities (19,623) 22,413 17,369 (1,553) (2,468) (41) (2,620) (150) (20,037) (21,689)
Net cash (outflows) /
inflows (5,605) 46,928 17,081 16,037 (2,108) 13,478 22,357 6,545 2,080 1,031
30 Acquisition of non-controlling interests
Acquisition of additional interest in RAA, KKST, ELAP, CPA and
SGM.
On 10 October 2022, the Group acquired an additional 10%
interest in the voting shares of CPA, increasing its ownership
interest from 90% to 100%. At the same financial year on 30
November 2022, the Group also acquired an additional 5% interest in
the voting shares of RAA, KKST, ELAP and SGM, increasing its
ownership interest between 86% and 100%. Total consideration of
$5,883,000 was paid to the non-controlling shareholders. The
carrying value of the net assets of RAA, KKST, ELAP, CPA and SGM
was $63,270,000. Following is the schedule of additional interest
acquired in RAA, KKST, ELAP, CPA and SGM:
$000
Consideration paid to non-controlling shareholders 5,833
Carrying value of the additional interest 3,175
Difference recognised in retained earnings 9,008
31 Events after the reporting period
There were no events after the reporting period which would be
required to be disclosed in these financial statements.
Note: The information communicated in this announcement is
inside information for the purposes of Article 7 of Market Abuse
Regulation 596/2014.
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END
FR FIFSDSVILFIV
(END) Dow Jones Newswires
April 21, 2023 04:00 ET (08:00 GMT)
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