TIDMAEP
RNS Number : 4861N
Anglo-Eastern Plantations PLC
20 May 2020
Correction: The following amendment has been made to the 'Final
Results for year ended 31 December 2019' announcement released on
19 May 2020 at 16.26 under RNS No 3916N
The date in note 32 was not correct. The relevant sentence
should have read: ' The Annual Financial Report will be posted to
shareholders on or before 3 June 2020.'
In addition, the following text remains unchanged but is now
formatted in black text: 'The financial information does not
constitute the company's statutory accounts for the years ended 31
December 2019 or 2018. Statutory accounts for the years ended 31
December 2019 and 31 December 2018 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 2019 and 31 December 2018 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 2018 have been
filed with the Registrar of Companies. The statutory accounts for
the year ended 31 December 2019 will be delivered to the Registrar
in due course.'
All other details remain unchanged. The full amended text is
shown below.
Anglo-Eastern Plantations Plc
("AEP", "Group" or "Company")
Final results for year ended 31 December 2019
The group comprising Anglo-Eastern Plantations Plc and its
subsidiaries (the "Group"), a major producer of palm oil and rubber
with plantations across Indonesia and Malaysia amounting to some
128,200 hectares, has today released its results for the year ended
31 December 2019.
Financial Highlights
2019 2018
$m $m
Revenue 219.1 250.9
Profit before tax:
- before biological asset ("BA")
movement 15.6 33.2
- after BA movement 18.9 30.9
Basic Earnings per ordinary share
("EPS"):
- before BA movement 35.37cts 32.50cts
- after BA movement 40.61cts 28.79cts
Dividend (cents) 0.5cts 3.0cts
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
We are indeed facing unprecedented uncertainty as countries
around the world are trying to stop the spread of Coronavirus. My
Board and I would like to take this opportunity to show our
appreciation in saying a big thank you to the health workers in the
three countries we are in, i.e. the United Kingdom, Malaysia and
Indonesia for their selfless endeavours to continue to care and to
save lives during this pandemic. Our thoughts are also with those
who are infected and those who have lost loved ones from the
Coronavirus.
Although Malaysia and parts of Indonesia are in lockdown, our
plantations and mills are operating close to normal, albeit our
administration staff are working from home to comply with the Stay
At Home measures. As most of our plantation staff are continuing
working legitimately on sites, I would convey the Board's sentiment
to stay safe and observe social distancing at all times. We also
have precautionary measures in place to protect our staff and our
business in the event of serious Coronavirus infections in any of
our plantations.
The Group's fresh fruit bunches ("FFB") production in 2019 fell
1% to 1.03 million mt, from last year of 1.04 million mt due to
generally dry weather. Rainfalls were particularly poor across all
our plantations in Indonesia for a greater part of the year. A
sharp 10% decline in production in Riau on the back of a record
harvest last year also indicated that the palms were suffering from
biological stress. While in Bengkulu production was lower by 11%.
The lower crop appeared to be weather induced as a similar trend
was experienced by other plantations in the region. FFB bought-in
from surrounding smallholders was 0.91 million mt, 10% lower than
2018 of 1.01 million mt due to stiff competition from newly
commissioned mills on the purchase of external crops. Smallholders
which contributed the bulk of the Group's external crops also had
to endure lower yield, the direct effect of reduced fertiliser
application in the last two years due to low crude palm oil ("CPO")
prices. The mills, as a result, processed 7% less FFB with the CPO
production down by 6% to 394,700 mt (2018: 418,800mt).
The CPO prices for the first half of the year were weak tumbling
to a year low of $481/mt in July 2019. A turnaround in sentiment
from the second half of the year saw the prices rallied to a high
of $858/mt before the year end. The surge was in response to the
slowing palm oil production as well as to optimism over pick-up in
demand for palm in biodiesel and the increase in imports by China.
A successful implementation of B20 and B30 biodiesel blending
mandated in Malaysia and Indonesia respectively could drive demand
which reportedly could consume up to 4 million mt of palm oil
annually. Palm biodiesel after all is a renewable, biodegradable
and environmentally friendly fuel when compared to fossil fuel. The
average CPO price ex-Rotterdam in 2019 was nevertheless 5% lower at
$565/mt, compared to $595/mt in 2018.
With lower production and CPO prices the Group's revenue was
lower by 13% at $219.1 million, compared to $250.9 million achieved
in 2018. The operating profit for the Group in 2019, before
biological asset ("BA") movement was $12.2 million, 61% lower
compared to $30.9 million achieved in 2018. However, earnings per
share, before BA movement, increased by 9% to 35.37cts, from
32.50cts in 2018 due mainly to the impact of the write off of
significant intercompany loans within operating subsidiaries which
have non-controlling interest bearing part of this cost. The
Group's operating profit after BA movement for 2019 was at $15.4
million after an upward BA movement of $3.3 million as compared to
2018 operating profit of $28.6 million after a downward BA movement
of $2.3 million.
The Group's new planting including plasma for 2019 totalled
1,757ha compared to 1,563ha last year. The low rate of planting was
due to protracted land compensation negotiations. New planting in
Central Kalimantan was also delayed until the fourth quarter as the
Group awaits results of a peer review of the high carbon stock
sustainability study which will determine areas which cannot be
planted with oil palm due to high conservation and high carbon
stock values.
The three biogas plants with a combined capacity of four
megawatts generated over 17,200MWh of electricity in 2019 compared
to 13,800MWh last year. The revenue from the sale of surplus
electricity to the national grid was $0.91 million, 6% higher than
last year of $0.86 million, notwithstanding the long delay in
signing the renewal of contract for the sale of electricity to the
national grid by a plant in North Sumatera. The loss of revenue
during the seven months delay was estimated at $200,000. The
frequent breakdown and tripping in the state transmission lines
also affected the uptake of electricity production from the
Bengkulu plant. We expect there to be less disruption next year due
to a major upgrade being underway as old transmission lines are
being replaced. The Group's fourth biogas plant in North Sumatera
costing $2.8 million is expected to be commissioned by the second
quarter of 2020. The use of clean energy will further reduce the
mills' reliance on fossil fuels and improve the Group's carbon
footprint.
As the El Nino weather phenomena returns, lower rainfall and
soaring temperature were seen across Indonesia and Malaysia. It
brought wide spread forest fires and resulting haze not seen in
these regions since 2015. Several outbreaks of fire were reported
in the Group's plantations which were quickly put out by our
in-house fire team. It is not uncommon for economic-motivated fires
to rage out of control in this dry condition. The Group does not
practise open burning and it is inconceivable for a responsible
planter to risk doing so with the Indonesian government imposing
heavy fines, imprisonment and revocation of planting licenses. But
despite these stiff penalties, some smallholders and farmers of
cash crops continue to practise slash and burn given it is the
fastest way to clear their land resulting in the dreadful haze. The
pressure for palm oil companies to produce sustainably is only
going to grow.
In early 2019 the European Union ("EU") adopted the Renewable
Energy Directive II which classified palm oil as an unsustainable
source of biofuel. If this initiative is agreed by the EU
Parliament and the EU countries, the economic bloc will start to
reduce the use of palm oil for biofuel in 2024 and will completely
phase it out by the year 2030. The French government has started
the initiative by removing the tax breaks for palm oil in biofuel
from 2020. In addition, the EU also reintroduced tariffs on palm
oil imports from the second half of this year. The adverse
perception of palm oil as an environmentally unfriendly and
non-renewable source, particularly in EU, continues to feature in
recent years, touching on issues including deforestation, emission
of greenhouse gases, planting on peatland and land rights.
As I mentioned earlier, we are in a period of unprecedented
uncertainty caused by the Coronavirus pandemic. The prolonged
lockdown of most countries will no doubt have an economic and
social impact, possibly leading to a worldwide recession. It can
take anything from a year or more for economies to adjust and to
recover. The indications are , the Coronavirus pandemic is dragging
the major economies of the world into high unemployment and low
Gross Domestic Product ("GDP"), possibly trending towards a
worldwide recession which could have an adverse impact on the
consumption and usage of palm oil even when economic activities are
on their way to normality or near normality.
In determining the amount of dividends to be paid to our
shareholders, the Board in previous years had been consistent with
a balanced approach to the requirement of funds in the Company to
expand to enhance shareholders' value and at the same time
cognisant of shareholders' wish to have dividends as a form of
income. This year the Board has the added considerations of a
period of unprecedented uncertainty ahead and an obligation to
ensure that the Group has adequate funds to maintain it as a going
concern for the foreseeable future in a near worse case scenario,
not to mention the sentiments from some quarters that dividends
should be withheld in the current climate. With all these in mind,
the Board has declared a final dividend of 0.5cts per share, in
line with our reporting currency, in respect of the year to 31
December 2019 (2018: 3.0cts). In the absence of any specific
instructions up to the date of closing of the register on 12 June
2020, 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 17 July
2020 to those shareholders on the register on 12 June 2020.
This year's AGM scheduled on 29 June 2020 will be held in Kuala
Lumpur instead of it being in London because of practical reasons
linked to this pandemic. The Board is conscious that shareholders
would want to interact with Board members, normally at the AGM, and
therefore a meeting will be organised in London when it is
appropriate to do so, with less formality, for shareholders to meet
with some of the Board members.
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 preservation of the Group's operation as a
going concern during this difficult and trying period. No doubt
they would continue to do so if local and global adversity
worsen.
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.
Madam Lim Siew Kim
Chairman
19 May 2020
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 economic and business risks of the Group.
Business Model
The Group will continue to focus on its strength and expertise,
which is planting more oil palms and production of CPO. This
includes replanting old palms with low yield, 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 way. The Group remains committed
to use its available resources to develop the land bank in
Indonesia 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 20,000ha per province and a national
total of 100,000ha 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 appropriate 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, however, is very much dependent on the CPO price,
which is volatile and is determined by supply and demand. 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 eight times as much
land to produce an equivalent weight of palm oil. It was reported
that amongst the major oilseeds, oil palm occupies about 10% of the
total agricultural land but contributes more than 40% of the
world's supply of oils and fats.
The Group's strategies, therefore, focus on maximising yield per
hectare above 22mt/ha, mill production efficiency of 110% ,
minimising production costs below $300/mt and streamlin ing estate
management . For the year under review, the Group achieved a yield
of 18.1mt/ha, 132% mill efficiency and production cost of $285/mt
on the Indonesian operations. This compared to 2018 where the Group
achieved a yield of 19.3mt/ha, 143% mill efficiency and production
cost of $284/mt. 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 achieves 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 plants at all of its
mills to trap the methane gas emitted from the treatment of palm
mill effluents to generate electrical power and at the same time
reduce the consumption of fossil fuel. It plans to sell the surplus
electricity and progressively reduce the greenhouse gas emissions
per metric ton of CPO produced in the next few years.
The Group will continue to follow-up and offer competitive and
fair compensation to villagers so that land can be cleared and be
planted.
Financial Review
The financial statements have been prepared in accordance with
International Financial Reporting Standards and its interpretations
(IFRS and IFRIC interpretations) issued by the International
Accounting Standards Board ("IASB") as adopted by the EU and with
those parts of the Companies Act 2006 applicable to companies
preparing their accounts under IFRS.
For the year ended 31 December 2019, revenue for the Group was
$219.1 million, 13% lower than $250.9 million reported in 2018 due
primarily to the lower CPO prices and lower production.
The Group's operating profit for 2019, before biological asset
movement, was $12.2 million, 61% less than $30.9 million in
2018.
FFB production for 2019 was 1.03 million mt, 1% lower than the
1.04 million mt produced in 2018. The overall yield for the
Indonesian plantations was lower at 18.1mt/ha due to the dry
weather which delayed the ripening of FFB bunches. In Riau palms
suffered from biological stress after a bumper harvest last year.
Bengkulu region appeared to suffer the most from the effect of dry
weather as production was down 11%. FFB bought-in from local
smallholders in 2019 was 0.91 million mt (2018: 1.01 million mt),
10% lower compared to 2018. The supply of external crops was
affected by greater competition from new mills and also lower
productivity amongst smaller plantations as they reduced the
fertilizer application during the period of low CPO prices. During
the year, the Group's mills processed 1.87 million mt of FFB, 7%
lower than last year of 2.02 million mt. CPO production, as a
result, was 6% lower at 394,700mt, compared to 418,800mt in
2018.
Profit before tax and after BA movement for the Group was $18.9
million, 39% lower compared to a profit of $30.9 million in 2018.
The BA movement was a credit of $3.3 million, compared to a debit
of $2.3 million in 2018. The BA movement was mainly due to a change
in FFB price which was higher in 2019. The profit before tax was
affected by reversal of impairment charge on the development cost
of the plantation amounting to $7.6 million and impairment on land
amounting to $1.0 million compared to an impairment charge
amounting to $4.3 million in 2018. The profit before tax was also
impacted by the expected credit loss from Plasma receivables
amounting to $6.1 million in 2019 (2018: $0.1 million) attributed
to the additional amounts allocated for plasma development during
the year. There was a gain of exchange in translation of foreign
operations totalling $18.7m for 2019 against an exchange loss of
$29.5m in the previous year due to the strengthening of Indonesian
rupiah at year end. The retirement benefits due to the employees
for 2019 calculated by the actuary increased to $11.3m from $8.2m
last year due to an increase in the number of full-time workers.
The cash movement including loan of the Group for 2019 is covered
under Going Concern in the Strategic Report.
The average CPO price ex-Rotterdam for 2019 was $565/mt, 5%
lower than 2018 of $595/mt.
Earnings per share before BA movement increased by 9% to
35.37cts compared to 32.50cts in 2018. Earnings per share after BA
movement increased from 28.79cts to 40.61cts. Earnings per share
have increased notwithstanding the decrease in profit after tax as
compared to 2018 due mainly to the impact of the write off of
significant intercompany loans within operating subsidiaries which
have non-controlling interest bearing part of this cost.
Going Concern
The Group's balance sheet remains strong. As at 31 December
2019, the Group had cash and cash equivalents of $84.8 million
(2018: $112.2 million) and borrowings of $8.2 million (2018: $19.3
million), giving it a net cash position of $76.6 million, compared
to $92.9 million in 2018. The net cash inflow from operating
activities during the year was lower at $14.6 million by 26%
compared to $19.8 million in 2018 due mainly to the lower CPO price
and higher operating expenses. The cash position was also lower in
2019 due to capex, development costs and loan repayment exceeding
profits during the year. The outstanding loan of $8.2 million is
scheduled for full repayment in 2020 in line with the terms and
conditions of the loan. As the result of the pandemic and the
uncertainty it causes on demand for palm oil and CPO price, we do
not expect a significant improved cash flow in 2020. The tax
recoverable for 2020 amounted to $49.5 million, a 12% increase over
the previous year of $44.3 million. The substantial increase is due
to the value added tax ("VAT") paid which is refundable by tax
authority after tax audit. A detailed description is provided in
note 8.
The Directors have a reasonable expectation, having made the
appropriate enquiries, that the Group has control of the monthly
cashflows and that the Group has sufficient cash resources to cover
the fixed cashflows for a period of at least 12 months from the
date of approval of these financial statements, including having to
make full repayment of the bank loan. For these reasons, the
Directors adopted a going concern basis in 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 if all the plantations are infected with
Coronavirus as well as the impact on the demand for palm oil due to
the Coronavirus pandemic. Stress testing of other identified
uncertainties was undertaken on primarily commodity prices and
currency exchange rates.
Business Review
Indonesia
The performance of the Indonesian operations is divided into
five 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 314,600mt in 2019 about 9%
above last year (2018: 289,700mt). The increase in matured areas to
15,025ha from 13,469ha contributed to a higher production. The
prolonged dry weather had affected the annual yield which dropped
to 20.9mt/ha from previous high of 21.1mt/ha. Rainfall in CPA, one
of the wettest parts in North Sumatera averaged 4,487mm, 11% lower
than the previous year of 5,019mm. Despite the lower rainfall,
occasional flash floods recurred due to a combination of seasonal
monsoon rain and high tide.
Rainfall in Tasik has steadily declined from an average of
3,100mm per annum in 2013 to 2,263mm in the last six years. Male
flowers were prevalent, an indication of moisture stress which is
likely to affect yield in the short term.
Rhinoceros beetle or Oryctes damage was observed in Tasik Raja
and Anak Tasik which is expected given the largescale replanting
undertaken in the last two years. It was also observed that the
average bunch weight for 2014 planting dropped due to relatively
high number of parthenocarpic bunches in newly matured fields
caused by poor pollination and fruit set. A variety of planting
materials would be considered in future to provide variability and
pollens. In the meantime, hand pollination was carried out to
reduce abnormal bunches.
Higher production can be expected in coming years as new
planting and replanted areas of 3,800 ha matured and bear fruits.
The entire Anak Tasik estate was replanted with more resistant
anti-Ganoderma material which hopefully would reduce the threat of
the stem rot disease prevalent in this area. In HPP, oil palms are
recovering from the desiccation of fronds as the affected area has
reduced to 185ha from about 1,500ha as water gates and canals
provide better water management. About 230ha of aged palms in CPA
will be replanted next year with raised platforms in flood prone
areas to improve growth and help in the evacuation of fruits.
The Blankahan biogas plant had a disappointing year. It sold
about 2,200MWh (2018: 5,700MWh) of surplus electricity and
generated $0.14 million in revenue, 67% lower than previous year of
$0.42 million. It took seven months to conclude the renewal of
contract for the sale of electricity due to the change in procedure
which require approvals from various government departments from
Jakarta and very often government officers were not available. The
Indonesian Presidential election during the year further
exacerbated the delay. In the coming months biogas production is
likely to be affected as lower amount of FFB are processed in the
mill due to intense competition for external crops from the two new
surrounding mills. Outside crops currently made up about 73% of the
total crops processed by the mill. The sales from the biomass plant
were also lower in 2019 at $0.73 million compared to $0.91 million
last year, as the plant exported 4% less dried long fibres at
6,689mt compared to 6,959mt last year due to the lower FFB
processed and prices were also not favourable.
Bengkulu and South Sumatera
FFB production in Bengkulu and South Sumatera, which aggregates
the estates of Puding Mas ("MPM"), Alno, Karya Kencana ("KKST"),
Empat Lawang ("ELAP") and Riau Agrindo ("RAA") produced 326,700mt
(2018: 358,400mt), 9% lower than 2018. Production was badly
affected by lower rainfall. In Bengkulu rainfall was down 37% to
2,861mm from 4,550mm recorded last year. South Sumatera did not
fare any better as rainfall was below the minimum 150mm per month
for five months. The yield in Bengkulu as a result was lower at
16.9mt/ha from 19.1mt/ha last year while in South Sumatera the
yield was 7.4mt/ha compared to the previous year of 6.7mt/ha.
During the year about 25,000 new palms were spot planted in
South Sumatera which raised the stems count to 98 stems per
hectare. The objective is to improve the density to 105 stems,
highest possible under the steep terrain condition. The high
gradient cannot support a higher number of trees as terraces need
to be carved in the slopes.
Fire is common in the dry weather and fires from unknown sources
in third quarter of the year destroyed 107 palms and damaged 715
palms in ELAP and KKST. Our in-house fire-fighting team put out the
fires promptly and made police reports to facilitate
investigations. It is not uncommon for smallholders and farmers to
slash and burn and at times the fire may go out of control and
spread cross the estate boundary. The Group continues to encourage
and engage the smallholders to drive a change to sustainable
practices and prevent wildfire.
Lower rainfall provided opportunities to repair and realign the
roads to improve transport of crops. Good condition of main and
collection roads allowed single handling and minimised overnight
crops.
In the previous year the mills at MPM and Sumindo reported high
free fatty acids ("FFA') in their CPO production due to transport
and workforce problems resulting from late deliveries of FFB to the
mills. With the implementation of a new system, the management is
happy to report that the FFA at the two mills was kept below the 5%
level for the whole year. With external crops making up about 47%
of the crops processed by the two mills, they faced heated
competition from new mill as external crops dropped by 13.2% to
283,200mt from 326,100mt in 2018.
About 550ha of palms will be replanted from next year as the
palms in Alno and MPM reach the average age of 17 and 20 years
respectively. The replanting is also fast track as the dura palms
constituted 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 9,300MWh (2018: 8,100MWh) of
surplus electricity and generated $0.44million in revenue in 2019
similar to last year due to the lower electricity rate. The biogas
plant performed below its optimum two megawatt capacity as frequent
breakdowns in the old transmission lines disrupted the electricity
uptake.
MPM and Alno received their International Sustainability and
Carbon Certification ("ISCC") for its mill and three estates. There
was however no price advantage as the mill was unable to sell its
CPO at a premium due to the absence of buyers.
Riau
FFB production in the Riau region, comprising Bina Pitri
estates, produced 129,400mt in 2019 (2018: 143,200mt), 10% lower
than 2018. Although annual rainfall remained about the same as last
year at 2,649mm, rainfalls for four months in particular were below
the minimum level considered critical for fruits production. The
yield for the year dropped to 26.6mt/ha as the palms also show sign
of recovery following a record harvest last year at 29.4mt/ha.
Replanting is planned for the coming years as 78% of the palms are
between the age of 22 to 25 years.
External crop purchase at the mill was 7% lower at 208,600mt
compared to 225,400mt last year. Overall CPO production was lower
by 7% to 66,800mt compared to 72,100mt in 2018. Despite the high
yield, the region is contaminated by dura palms which made up 62%
of the crops processed by the mill. The mill therefore had a low
Oil Extraction Rate ("OER") of 19.8% slightly above last year of
19.6%.
Bangka
FFB production in the Bangka region, comprising Bangka Malindo
Lestari estates, produced 6,000mt in 2019 (2018: 3,300mt), 82%
higher than 2018. Higher crop was due to larger area in harvesting
and more palms reached peak maturity. Yield improved from 7.3mt/ha
to 11.2mt/ha in 2019. Planting in Bangka including plasma expanded
to 1,994ha from 1,227ha in 2018.
Kalimantan
FFB production in Kalimantan which comprises of the Sawit Graha
Manunggal ("SGM") and Kahayan Agro Plantation ("KAP") estates was
231,400mt in 2019 (2018: 222,700mt) 4% higher than 2018 as more
palms matured and reached the peak production age. The average age
of palms in SGM and KAP were eight and four years respectively.
During the year 860ha of palms matured in KAP leading to its first
harvest. The yield in Kalimantan reached 18.0mt/ha compared to
19.2mt/ha in 2018. Rainfall was 16% lower than last year of 3,151mm
and was below 90mm per month for three consecutive months in the
third quarter of the year.
During the dry weather wildfire damaged 4ha of the plantation.
Majority of the palms are however expected to recover.
SGM continued with its mechanization of infield collection of
harvested crops by the purchase of light all-terrain vehicles
called Quick which were cheaper and easier to maintain. Additional
units will be added to the current fleet to help with the crops
evacuation.
The purchase of external crops in SGM reached 49,000mt in 2019
which was lower by 11% compared to 55,000mt last year. The OER for
the mill averaged 24.1% for the year compared to 23.6% last year
and continue to outperform the rest of the mills in the Group.
The SGM biogas plant started commercial operation in February
2019 and generated over 5,700MWh of electricity worth $0.33
million.
Most of the Group's new planting will take place in SGM and KAP
next year. The long-term prospect for Kalimantan remains
bright.
During the year a Malaysian based agronomist made monthly field
visits to underperforming estates in Indonesia to provide advice on
optimizing field disciplines and improving crop yields. The Board
believes that the monitoring of field performance more closely has
resulted in improvements in the underperforming estates which
should further improve the crop yield in the coming years.
Overall bought-in crops for Indonesian operations were 10% lower
at 0.91 million mt for the year 2019 (2018: 1.01 million mt). The
average OER for our mills improved marginally to 21.1% in 2019
(2018: 20.7%).
Malaysia
FFB production in 2019 was 8% lower at 17,000mt, compared to
18,500mt in 2018. Aside from some improvement lately, the Malaysian
operations continued to face a severe shortage of workers due to
difficulty in recruiting foreign workers which hampered harvesting
and estate maintenance work such as fertilising, pruning, weeding
and replanting. The shortage of labour is the biggest challenge the
industry is facing in Malaysia. The palms with an average age of 22
years faced declining yield as fertiliser program was not followed.
The Malaysian plantation in 2019 generated a loss before tax after
BA movement of $0.9 million which included an impairment loss of
$0.3 million compared to loss before tax after BA movement of $0.5
million in 2018. The plantation has begun the process of obtaining
Malaysian Sustainable Palm Oil ("MSPO") certification. In order to
ensure compliance to national sustainability standard, the
Malaysian government from next year will impose fines and penalise
estates of more than 100 acres including cancellation of license to
operate if they are not MSPO certified.
The financial performances of the various regions are reported
in note 6 on segmental information.
Commodity Prices
The CPO ex-Rotterdam price started the year at $517/mt (2018:
$678/mt) and trended downwards for the first half of the year due
to high inventory and subdued demand. The price was lowest in July
2019 at $481/mt before a sharp turnaround due to positive
sentiments. The Chairman had explained in her statement the reasons
for the price rally in the second half of the year. The price
peaked towards the end of the year at $858/mt before ending the
year at $856/mt (2018: $506/mt), averaging $565/mt for the year, 5%
lower than last year (2018: $595/mt). CPO prices continued to push
higher at the start of year 2020 after India cut import duties on
CPO and refined CPO. The Indian tax revision has made palm oil
slightly more competitive against alternative soft oils like
soybean and sunflower oil. Prices have since retracted because of
the lockdown of major economies around the world due to the spread
of Coronavirus. Palm oil meteoric price rally from the second half
of the year will almost certainly come with a cost. Palm's discount
to top rival soybean oil has contracted to the smallest margin in
almost a decade reducing its traditional appeal as a cheaper
vegetable oil especially in price sensitive markets like India.
Over a period of ten years, CPO price has touched a monthly
average high of $1,284/mt and a monthly average low of $472/mt. The
monthly average price over the ten years is about $790/mt. The
price remains volatile due to discriminatory actions in EU to
reduce and phase out the use of palm oil in biodiesel by 2030. EU '
s move and the potential weaker demand due to the global pandemic
of Coronavirus would likely put downward pressure on prices.
Rubber prices averaged $1,272/mt for 2019 (2018: $1,243/mt). Our
small area of 262ha of mature rubber contributed a revenue of $0.7
million in 2019 (2018: $0.8 million). Rubber continues to struggle
with low prices. Our rubber trees are also affected by fungus
disease called Pestalotiopasis sp fungus which causes abnormal
defoliation that severely lowers latex production.
Corporate Development
In 2019, the Group opened up new land and planted 1,757ha of oil
palm mainly in Kalimantan, boosting planted area including the
smallholder cooperative scheme, known as Plasma, by 2% to 71,481ha
(2018: 69,792ha). The Group continues to face difficulties in
concluding fair prices with some villagers over land compensation.
Nevertheless the pace of compensation settlement had picked up in
Bangka following positive feedback from the former land owners over
the progress of plasma development. In 2020, the Group plans to
plant 3,100ha of oil palm which includes replanting of 800ha in
Alno and CPA.
The construction of the fourth biogas plant in Rantau Prapat
costing $3.8 million was beset by delays following the collapse of
the embankment of the anaerobic reactor lagoon on two occasions.
The lagoon was finally relocated after a geotechnical study
suggested a safer and more economical option. The biogas engine of
1.2MW capacity had since been installed with all buildings,
electrical and piping works completed. Testing is expected to
commerce early next year. The inspection and certification by local
authorities may however take up to six months before the plant can
upload the electricity onto the national grid.
The earthworks for the seventh mill in North Sumatera costing
$19 million was completed after some setbacks due to inclement
weather and numerous soil investigations. Due to the nature of the
peat soil, concrete piles of up to 52-metre-long are now required
to support and house building, storage tanks and critical
machineries. It is currently evaluating the bids for civil and
structural works including the design of effluents treatment plant
for liquid and solid wastes to fully comply with environmental
impact assessment. The project is earmarked for completion by
2021.
FFB production in KAP in Kalimantan where 4,887ha had so far
been planted is projected to reach 33,000mt by next year and
190,000mt by the year 2030 as planting increases and more palms
come of age. FFB are now sent to SGM mill which is about 600km away
but during wet season, the FFB are instead sold to local millers.
This is because transport time more than doubles as lorries are
frequently stuck in mud as untarred public roads are easily damaged
by incessant rain and floods. The Group is conducting a feasibility
study to build a 45mt/hr mill in KAP to support its operation and
to reduce the current high logistic cost.
In 2019 the three mills in MPM, Sumindo and SGM completed their
expansion of storage facilities for palm kernels by constructing
additional bulking silos at a cost of $800,000 to meet storage
needs during peak harvest. A new boiler with a steaming capacity of
40 tph was added to the Sumindo mill at a cost of $800,000.
Corporate Social Responsibility
Corporate Social Responsibility ("CSR") is an integral part of
corporate self-regulation incorporated into our business model. Our
Group embraces responsibility for the impact of its activities on
the environment, consumers, employees, communities, stakeholders
and all other members of the public sphere. In engaging the social
dimension of CSR, the Group's business has taken cognizance of the
contribution and further enrichment of its employees while
continuing to make contributions to improve the well-being of the
surrounding community. The Group was awarded one of the best CSR
providers in 2019 by the Regent of North Bengkulu in recognition of
our significant contribution to road and bridge repairs and street
light maintenance.
The majority of employees and their dependents in the
plantations and mills are housed in self-contained communities
built by the Group. The employees and their dependents are provided
with free housing, clean water and electricity. The Group also
builds, provides and repairs places of worship for workers of
different religious faiths as well as schools and sports facilities
in these communities. Over the years, the Group has built a total
of seventy-five mosques and nineteen churches across its estates.
During the fasting month, the management team frequently broke fast
with the employees from the estates and mills as well as with
surrounding villagers. It also sponsored and donated cows for
sacrifice to celebrate religious festivals. The Group spent
$254,600 in 2019 to maintain these amenities and to support the
communal activities.
The Group p rovides free education for all employees ' children
in the local plantations and communities where they work. The
access to education and the spread of knowledge to hundreds of
children across remote locations provide a chance to overcome
poverty, whom otherwise may be deprived and without prospect for
the future. In addition, t he G roup provides computers and funding
to construct educational facilities including laboratories and
libraries. The salaries of teachers in the estates and the cost of
buying and running the school buses to transport employees' child
ren are provided by the Group . Over the years a total of
thirty-eight schools which comprised of twenty-one pre-schools,
eleven primary schools, five secondary schools and one high school
were built with a combined enrolment of over 4,300 students. It
currently employs one hundred and fifty-six teachers in the estates
. The Group operated forty vehicles and spent some $ 906,000 on
running the schools and operating the buses in 2019 .
As part of the Group's contribution to education, it provides
scholarships to qualified students from the communities as well as
our employees' children to pursue tertiary education. It started a
partnership with a university in North Bengkulu in 2013 to sponsor
and to provide students with the chance to pursue higher education.
Up to 2019, over three hundred and seventy-eight scholarships had
been awarded at a cost of $138,000. Similarly, one hundred and ten
children of our employees were sponsored, which cost over $119,300
since its introduction in 1999, to study in various universities in
Indonesia. The popular courses ranged from Engineering, Education,
Economics to Agriculture. Fifty-three of them had successfully
graduated from the universities with some of them now working for
the Group.
The Group continues to provide free comprehensive health care
for all its workers as we believe that every employee and their
dependents should have easy access to health services . We have
established twenty-three clinics operated by qualified doctors ,
nurses and hospital assistants in the estates. The Group upgraded
two of its clinics in North Sumatera and Bengkulu to meet the
minimum standard required by the government under the country's
Health and Social Security Agency. The upgraded clinics also
provided health care services to the surrounding community without
the need to travel to faraway cities for medical treatment. The
Group also operates 15 ambulances to support emergency
transportation needs within the estates, mills and surrounding
villages. In addition, the Group organised fogging to prevent the
spread of dengue mosquitoes.
In remote and isolated locations where piped water is not
available, the Group drilled tube wells to provide clean water.
Related healthcare expenses for full and part-time field workers
including monthly contributions to Health and Social Security
Agency in 2019 were $ 884 ,000 .
A strong commitment to CSR has a positive impact on employees'
attitudes and boosts employee recruitment. The Group realises that
employees are valuable assets in order to run an efficient,
effective, profitable and sustainable business and operations.
Selected employees are given the opportunity to attend seminars and
external training to enhance their working skills and capability.
The Group constantly recruits potential field employees who are now
sent to the Group's central training facilities in Blankahan, set
up in 2014, to undergo a rigorous twelve-month training programme
which includes theory and practical fieldwork. A total of four
hundred and ninety employees have participated in the programme
since its inception in 1993 with 33% of participants still working
for the Group. Over the years, one employee has successfully been
promoted to General Manager level with another twenty-one being
employed in various senior positions in the head office,
plantations and mills.
The Group also recognises its obligations to the wider farming
communities in which it operates. The Indonesian authorities have
established that not less than 20% of the newly planted areas
acquired from 2007 onwards are to be reserved for the benefit of
the smallholder cooperative scheme, known as Plasma, and the Group
is integrating such smallholder developments alongside its estates.
The Plasma development has commenced in stages for its estates in
Sumatera and Kalimantan. Out of the 7,479ha plasma commitment, the
Group has planted oil palm in 3,561ha. In 2019 the Group received
31,000mt of FFB from Plasma schemes compared to 25,800mt the
previous year. Total revenue generated by Plasma cooperatives was
$3.1 million in 2019 against $2.4 million in 2018.
In order to aid the development of Plasma schemes, the Group
provided corporate guarantees of over $17 million through its
subsidiaries to local banks to cover loans raised by the
cooperatives. The Group also assisted the cooperatives to obtain
the proper land rights certification from the local land office, in
which 1,097ha were approved and certified in 2019.
The Group supported the Kas Desa smallholder village development
programme to supplement the livelihood of the villages. The Group
has to-date financed, developed and managed twenty-three
smallholder village schemes of oil palm across four companies.
In addition, the Group also develops infrastructure such as the
construction and repair of bridges and maintained over 167km of
external roads in 2019. The Group also provides initial aid and
seed capital to villagers such as fruit seedlings, fish fry, cattle
and ducks to start community sustainable programs.
The Group started a vegetable farm in a one-hectare site in
North Sumatera in 2018 where it planted various organic vegetables.
The produce was sold to employees at subsidized prices to reduce
their cost of living as well as to promote heathy living. It also
donated some vegetables to local charitable homes.
Indonesian Sustainable Palm Oil ("ISPO")
The ISPO certification is legally mandatory for all plantations
in Indonesia. In March 2012, ISPO, which is fundamentally aligned
to Roundtable on Sustainable Palm Oil ("RSPO") principles, has
become the mandatory standard for Indonesian planters. In
comparison, RSPO has the most comprehensive social impact
assessment requirements and the strongest measures for biodiversity
protection. While ISPO may be less stringent, protection for
biodiversity was enhanced through the Presidential Decree 8/2018
that imposed a three-year moratorium on the clearance of primary
forest for plantations. It was reported that the Indonesia
forest-clearing ban was made permanent in 2019.
A Steering Committee was established to work out a roadmap to
support the ISPO implementation at mills and estates. Workshops and
training sessions on occupational safety and healthcare were
carried out to inculcate a safety culture in workplaces at all the
estates and mills. The Group compiles and reviews statistics on
work related accidents in its operations. Any incident resulting in
fatality or serious injury will be rigorously investigated to
identify the cause so that corrective action can be implemented to
prevent future incident. In 2019 the Ministry of Labour awarded
four operating companies the Zero Accident Awards in North Sumatera
in recognition of the companies' effort to reduce accidents at
workplaces. The Group continued to upgrad e its agricultural
chemical stores and diesel fuel storage tanks in various
plantations and mills to meet safety and environmental
standards.
Every estate under ISPO is required to have a fire team with
each personnel fully trained and equipped with certificate of
competence issued by the fire departments. Our Group conducts a
fire drill at least once a year. Watch towers are constructed in
every estate to monitor fire outbreaks. The watch towers are manned
constantly particularly during the dry weather. Standard operating
procedures were refined and documented based on sustainable oil
palm best practices. It also conducts internal audits using an
audit checklist adopted from the above practices to determine the
level of compliance.
The Group worked closely with appointed certification
consultants in the implementation of ISPO standard. SGM was awarded
the ISPO certification in 2019. To-date eleven companies have been
ISPO certified. The certification audits for the remaining five
companies have started. The second stage of certification process
however cannot proceed until the companies obtain their land titles
or Hak Guna Usaha ("HGU"). ISPO certification provides third party
verification and confirmation that the companies are operating
according to national and international standards. The Group
targets full ISPO compliance by 2020.
At the same time the Malaysian plantation has also begun the
process to obtain the MSPO certification which is expected to be
completed by 2020.
Environment Social and Governance Practices
Environmentally friendly plantation practices are a must to
maintain the industry's long-term prospects. The Group has been
consistently practising good agricultural practices such as zero
burning, integrated pest management, soil and water conservation
and recycling of biomass. When it comes to replanting, the old
palms felled are chipped and shredded and left to decompose at the
site. This mitigates the greenhouse gas emissions commonly
associated with open burning when land is cleared through the
traditional method of slash-and-burn. It also enriches the organic
matter in the soil and recycled nutrients back onto the soil. Where
the land is undulating, we build terraces for planting which helps
to prevent landslides, conserve the water and nutrients effectively
and provide better accessibility for operations. Legume cover crops
are planted to minimise soil erosion, preserve the soil moisture
and improve soil chemical and physical properties. In mature areas,
fronds and EFB are placed inter-rows to allow the slow release of
organic nutrients while minimising soil erosion especially sandy
soil and degradation. Estates with sandy areas use soft grass,
Nephrolepis biserrata ferns and cut fronds to cover bare ground
which increase soil moisture and improve organic matter contents.
Conservation pits and sumps are constructed to harvest and contain
rainwater.
The effluents discharged from the mills are fully treated in
anaerobic lagoons and in some mills, there are extended aeration
tanks for further treatment of the effluent to reduce its
biological oxygen demand ("BOD"). The final discharge is applied to
the estate's land where it is used as fertilisers. The BOD is
tested regularly to ensure that it is below the legal limit for
land application in Indonesia. The Group is working towards a
zero-effluent policy whereby no by-products from the production of
CPO is discharged into rivers.
The Group's three biogas plants will enhance the effluent
treatment in the mills and at the same time mitigate greenhouse
biogas emissions. The trapped biogas will be used to generate and
supply power to its biomass plant and national grid without
dependency on fossil fuel s . A fourth biogas plant is in the final
stage of construction. S imilar undertakings for the Group's mills
are planned and shall be implemented in stages . The Group intends
to sell the surplus power generated from future biogas plants.
The Group is committed to implementing good agricultural
practices as spelt out in its standard operating procedures for the
planting of oil palm. Integrated Pest Management has been adopted
to control the population of damaging pests and to improve
biological balance while reducing dependence on chemical
pesticides. Barn owls which are natural predators, were introduced
to control the rat population. We do not use rat baits to control
the rat population. Beneficial plants of Turnera subulata, Cassia
cobanensis and Antigonon leptopus were planted to attract natural
predators for biological control of bagworms and leaf-eating
caterpillars.
Weeds are controlled selectively by using more environmentally
friendly and broad spectrum weed control herbicides.
We are committed to minimiz e the usage of toxic pesticide and
herbicide and will not hesitate to phase them out once a suitable
substitute is available . The sprayers are also trained in safety
and spraying techniques by using judicious dosages . The chemicals
are kept in designated storage and examined at regular intervals.
Employees who handle the use of chemicals are provided with
convenient on-site washing facilities, and undergo medical
examination routinely. The Group reinforced the standard
occupational safety measures like the use of protective suits and
equipment when mixing, loading and applying the pesticides which is
mandatory by the Manpower and Transmigration Ministerial Decree No.
08/2010. Managers and employees risked being penalized and
disciplined as safety standards compliance are audited from time to
time. ISPO certified companies are also prohibited from using 36
banned active ingredients used in pesticides which can cause
various health issues in humans and the environment. Highly toxic
pesticides such as Paraquat have been completely eliminated in our
practice. Pesticides that fall under the WHO Class 1A and 1B
classification, as well as those that fall under the Stockholm and
Rotterdam Conventions are used only under exceptional circumstances
and under strict supervision. In the meantime, different cocktails
of safer pesticides are being evaluated as alternatives. The Group
has in place standard operating procedure that required the
management to be informed for instances of pesticides poisoning
among its pesticide applicators.
In order to minimize accidents at workplaces, regular training
and refresher courses are held to instill the importance of safe
working practices. Warnings and reminders are displayed at the
mills and estates to remind the workers on their safety. Warning
signs are placed at strategic locations such as speed limits in
housing estates and warning against crossing Irish bridges when
river water is at danger level.
The Group continues to comply and preserve the High Conservative
Value ( " HCV " ) areas recognised by the Department of Forestry.
All HCV areas were mapped with boundaries clearly indicated by
independent surveyors to ensure that the Group does not plant in
these sensitive areas. The Group patrols these protected areas to
ensure no encroachment and committed to zero deforestation and to
preserve the flora and fauna species in these areas. The Group has
identified about 7,831ha as riparian reserves and another 4,955ha
as areas of HCV within its land. N atural v egetation on
uncultivable land s such as deep peat, very steep area s and
riparian zones along watercourses are maintained to preserve biodi
v ersity and wildlife corridor s as well as to check erosion .
In Indonesia where drought occurs regularly, an emergency
response team is set up in every estate armed with proper equipment
and gear to put out fire and prevent them from spreading during the
dry months. Regular training on fire-fighting techniques and safety
is provided by the fire departments. The plantation had invested in
modern technology like drones. They help to pinpoint areas of fire
outbreak after security stationed at watchtowers detect smoke. The
drones are particularly useful in remote areas where accessibility
is restricted. In September 2019, HPP was awarded a certificate of
appreciation by the local government for assistance to put out a
fire outbreak in an adjacent estate. According to Indonesian Law
No. 41/1999 on forestry, a deliberate act of forest burning could
lead to 15 years imprisonment and a fine of up to Rp5 billion or
about $350,000, while negligence act that leads to a forest fire is
punishable by a 5 years imprisonment and a fine of up to Rp1.5
billion or $105,000 for environmental crime. The government is
stepping up its enforcement.
All sacred and customary lands are set aside and also preserved
by the Group out of respect for the local tribes and customs to
pray and conduct their ritual ceremonies. Some of these locations
are posted on the company's websites.
The six mills in the Group are operating in compliance with
criteria set by Program for Pollution Control Evaluation and Rating
("PROPER") overseen by the Indonesian Department of Environment.
Many of the criteria set by PROPER are also part of the ISPO
requirement. Five of the mills are officially graded Blue and rated
to adhere to the criteria set for the management of waste and
compliance to environmental conservation over water resources, land
development, air and sea pollution, dangerous and toxic waste
treatment which impact the environment. Although no official
grading is required for the remaining one mill, it is in full
compliance to the PROPER criteria.
The International Sustainability and Carbon Certification
("ISCC") is issued by ISCC System GmbH, a global certification body
based in Cologne, Germany. The criteria used in the certification
process are:
-- Implement social and ecological sustainability criteria
-- Monitor deforestation-free supply chains
-- Avoid conversion of biodiverse grassland
-- Calculate and reduce greenhouse gas ("GHG") emissions
-- Establish traceability in global supply chains
The mill in Alno together with its three estates were ISCC
certified in 2019.
A certification identifies a company as a responsible player in
the industry that has taken efforts to produce sustainable CPO.
During the year the Group has formalised a policy which
incorporates the requirement of sustainability standards and
regulations to which the Group is already practicing and committed.
More details may be obtained from the Company's website under our
Sustainability dashboard which covers the Environment, CSR,
Workers' rights and safety, Corporate Governance and Sustainability
certification.
Principal and emerging risks and uncertainties
The Group's business involves risks and uncertainties of which
the Directors currently consider the following to be material.
There are or may be other risks and uncertainties faced by the
Group that the Directors currently deem immaterial, or of which
they are unaware, that may have a material adverse impact on the
Group. The Board carries out a robust assessment of the principal
and emerging risks facing the Group on an annual basis.
Nature of the risk The likelihood and Mitigating or other
and its origin impact of the risk relevant considerations
and the circumstances
under which the risk
might be most relevant
to the Company
Country and regulatory
-------------------------------- ---------------------------------- ------------------------------------------------
The Group's operations Political upheaval The country has recently
are located substantially and deterioration benefited from a period
in Indonesia and therefore in the security situation of relative political
significantly rely may cause disruption stability, steady economic
on economic and political on the operation and growth and stable financial
stability in Indonesia. consequently financial system. But during the
loss. Asian financial crisis
in late 1990, there
was civil unrest attributed
to ethnic tensions in
some parts of Indonesia.
The Group's operations
were not interrupted
by the regional security
problems including occasional
racial conflicts.
---------------------------------- ------------------------------------------------
Introduction of measures Transfer of profit The Board is not aware
to rein in the country's from Indonesia to of any attempt by the
fiscal deficits. This the United Kingdom government to impose
included the exchange ("UK") will be restricted exchange controls that
controls and restriction affecting servicing would restrict the transfer
on repatriation of of UK obligations of profits from Indonesia
profit through payment and payment of dividends to the UK. The Board
of dividends. to shareholders. perceives that the Group
will be able to continue
to extract profits from
its subsidiaries in
Indonesia for the foreseeable
future.
---------------------------------- ------------------------------------------------
Changes in land legislation. Mandatory reduction The Group realises that
Based on National Land of foreign ownership there is a possibility
Agency Law 2 / 1999, in Indonesian plantations that foreign owners
mandatory restriction could force divestment may be required over
to land ownership by of interests in Indonesia time to partially divest
non-state plantation at below market values. ownership of Indonesia
companies and companies oil palm operations
not listed in Indonesia but has no reason to
to 20,000ha per province believe that such divestment
and a total of 100,000ha would be anything other
in Indonesia. than at market value.
---------------------------------- ------------------------------------------------
Group failure to meet Reputational damage The Group continues
the standards expected and criminal sanctions. to maintain strong controls
in relation to bribery in this area as Indonesia
and corruption. has been classified
as relatively high risk
by the International
Transparency Corruption
Perceptions index.
---------------------------------- ------------------------------------------------
Imposition of import Reduced revenue and The Indonesian government
controls or taxes in reduction in cash allows free export of
consuming and exporting flow and profit. The CPO but applies a sliding
countries. Efforts higher import levy scale of duties on exports
by EU to ban the use will raise the price which allows producers
of palm oil and palm of CPO and make it economic margins. Despite
biodiesel on sustainable less competitive in the imminent ban on
issues. the global oil market, use of palm biodiesel
thus reducing demand. in EU, CPO remains amongst
It will be more difficult the cheapest source
to export palm oil and most productive
to EU either for food of vegetable oil in
or palm biodiesel a growing population.
and will hurt the
demand of CPO in EU
which is the third
largest consumer of
CPO.
-------------------------------- ---------------------------------- ------------------------------------------------
Exchange rates
CPO is a US Dollar Adverse movements The Board has taken
denominated commodity of Rupiah against the view that these
and a significant proportion US Dollar can have risks are inherent in
of operating costs a negative effect the business and feels
in Indonesia (such on the operating costs that adopting hedging
as fertiliser and fuel) and raise funding mechanisms to counter
and development costs costs. the negative effects
(such as heavy machinery of foreign exchange
and mill equipment) volatility are both
are imported and are difficult to achieve
US Dollar related. and would not be cost
effective.
-------------------------------- ---------------------------------- ------------------------------------------------
Produce prices
----------------------------------------------------------------------------------------------------------------------
CPO is a primary commodity This may lead to significant Directors believe that
and is affected by price swings. The such swings should be
the world economy, profitability and moderated by continuous
levels of inflation, cash flow of the plantation demand in economies
and availability of operations depend like China, India and
alternative soft oils upon world prices Indonesia. Larger exports
such as soybean oil. of CPO and upon the would lead to a lower
CPO price also historically Group's ability to inventory of CPO which
moves in tandem with sell CPO at price augurs well for future
crude oil prices which levels comparable produce price. In the
determine the competitiveness with world prices, short term, the prices
of CPO as a source unlike soybean which and demand will be volatile
of biodiesel. is sown annually and due to the pandemic.
production can be
increased or decreased
to match demand and
prevailing prices.
------------------------------------ ----------------------------------------------
Social, community and human rights issues
----------------------------------------------------------------------------------------------------------------------
Any material breakdown Communication breakdown The Group mitigates
in relations between would cause disruption this risk by liaising
the Group and the host on the operation and regularly with village
population in the vicinity consequently financial representatives to mediate
of the operations could loss. Access to areas on disputes. It develops
disrupt the Group's of disputed compensation a close relationship
operations. The plantations is restricted due with villagers by improving
hire large numbers to blockages by the local living standards
of people and have communities. through mutually beneficial
significant economic economic and social
importance for local interaction with the
communities in the local villages. The
areas of the Group's Group, when possible,
operations. Disputes gives priority to applications
over compensation for for employment from
land allocated to the the local population
Group which were previously and supports specific
used by the communities initiatives to encourage
for their livelihood. local farmers and tradesmen
to act as suppliers
to the Group, its employees
and their dependents.
The Group spends considerable
money constructing new
roads and bridges and
maintaining existing
roads used by villagers.
The Group also provides
technical and management
expertise to villagers
to develop oil palm
plots or villages and
Plasma schemes surrounding
the operating estates.
The returns from these
plots are used to improve
villages' community
welfare.
------------------------------------ ----------------------------------------------
The COVID-19 pandemic Our plantations and The Group imposed travel
as we are experiencing mills could be seriously restriction and strict
has affected national infected which may movement on workers
and world economies. require a total shut housed in our mills
COVID-19 and similar down of the infected and estates. Workers
pandemics could disrupt part of our operations leaving the housing
the Group's operation. to contain and eradicate and workplace must seek
the infection. prior approval from
management and will
be subjected to 14-day
quarantine upon return.
All outside casual workers
hired are assigned to
different parts of the
estates isolated and
with no or minimum contact
with our regular workers.
Wearing a face mask
is mandatory. To maintain
the workers hygiene,
additional areas are
provided for them to
wash their hands with
soaps and apply sanitizers.
Temperatures of all
workers are taken daily
before they start work.
Workers with high temperature
will be required to
self quarantine and
necessary tests conducted
by qualified doctors
to determine their condition.
Administration and finance
staff in Medan are divided
into two teams with
each team working from
home on an alternative
basis to reduce exposure
to the virus and mitigate
disruption. The Group
The local governments also stock up on essential
where the Group operates goods and spare parts
could enforced a total to minimise disruption
lockdown requiring to estate and mills
a total shutdown of operation should the
the Group's operations. government order a lockdown
or impose further movement
control.
The Group has budgeted
cash requirement on
a minimum spend basis
that would sustained
the continuity of the
Group for at least twelve
months.
------------------------------------ ----------------------------------------------
Weather and natural disasters
----------------------------------------------------------------------------------------------------------------------
Oil palms rely on regular Dry periods, in particular, Where appropriate, bunding
sunshine and rainfall will affect yields is built around flood
but these weather patterns in the short and medium prone areas and canals/drainage/retention
can vary and extremes term. It may result ponds constructed and
such as unusual dry in wildfire that may adapted either to evacuate
periods or, conversely, damage and destroy surplus water or to
heavy rainfall leading the palms. Drought maintain water levels
to flooding in some induces moisture stress in areas quick to dry
locations can occur. in palm trees. High out. Where practical,
Indonesia, where most levels of rainfall natural disasters are
of its plantations can disrupt estate covered by insurance
are located, frequently operations and result policies. Certain risks
experience natural in harvesting delays (including the risk
disasters like earthquake, with loss of FFB or of crop loss through
forest fire and tsunami. deterioration in fruit fire, earthquake, flood
quality. Delay in and other perils potentially
collection of harvested affecting the planted
FFB could raise the areas on the Group's
level of free fatty estates) if they materialise
acid ("FFA") in the could dent the potential
CPO. CPO with high revenues, for which
FFA would be sold insurance cover is either
at a discount to market not available or would
prices. Low level in the opinion of the
of sunshine could Directors be disproportionately
result in delay in expensive, are not insured.
formation of FFB resulting These risks of floods,
in potential loss earthquake, fires or
of revenue. Any natural haze are mitigated by
disaster could result the geographical spread
in a shortage of workers of the plantations but
and incur temporary an occurrence of an
work stoppage due adverse uninsured event
to damage to the plantation could result in the
or mill. Group sustaining material
losses.
-------------------------------- -------------------------------- --------------------------------------------------
Hedging risk
----------------------------------------------------------------------------------------------------------------------
The Group's subsidiaries The Group could face The risk is partially
have borrowings in significant exchange mitigated by US Dollar
US Dollar. losses in the event denominated cash balances
of depreciation of and the higher average
their local currency interest rate on Rupiah
(i.e. strengthening deposits which is 4.44%
of US Dollar) and vice higher than on US Dollar
versa. deposits whereas the
interest rate for Rupiah
borrowings is about
2.72% higher compared
to US Dollar borrowings.
-------------------------------- -------------------------------------- --------------------------------------------
Information Technology ("IT") security risk
----------------------------------------------------------------------------------------------------------------------
The security threats Failure to combat cyberattack The Group has measures
faced by the Group could cause disruption in place including
include threats to to our business operations. appropriate tools and
its IT infrastructure, Potential loss of financial techniques to monitor
unlawful attempts to records leading to and mitigate this risk.
gain access to classified error or misstatement The Group through its
information and potential in financial statements. IT Consultant has in
for business disruptions place antivirus, threat
associated with IT detection, log analysis,
failures. DDOS protection and
Firewalls.
-------------------------------- -------------------------------------- --------------------------------------------
Gender diversity
The AEP Plc Board is composed of three men and one woman with
extensive knowledge in their respective fields of experience. The
Board has taken note of the recent legislative initiatives with
regard to the representation of women on the boards of Directors of
listed companies and will make every effort to conform based on
legislative requirement.
2019 average employed during
the year
Group Headcount Women Men Total
Board (Company and subsidiaries) 3 12 15
Senior Management (GM
and above) - 5 5
Managers & Executives 34 426 460
Full Time 245 6,200 6,445
Part-time Field Workers 3,969 5,316 9,285
Total 4,251 11,959 16,210
% 26% 74% 100%
2018 average employed during
the year
Group Headcount Women Men Total
Board (Company and subsidiaries) 3 13 16
Senior Management (GM
and above) - 6 6
Managers & Executives 33 380 413
Full Time 225 5,664 5,889
Part-time Field Workers 4,956 5,903 10,859
Total 5,217 11,966 17,183
% 30% 70% 100%
Although the Group provides equal opportunities for female
workers in the plantations, the male workers make up a majority of
the field workers due to the nature of work and the remote location
of plantations from the towns and cities. The number of female
part-time field workers decreased by 20% from 4,956 to 3,969 in
2019. Overall, the number of female workers within the Group
decreased from 5,217 (30%) in 2018 to 4,251 (26%) in 2019. The
reduction in female workers was mainly due to the termination of
fertiliser program for plantations which are scheduled for
replanting from 2020 to 2022.
Employees
Oil palm cultivation is a labour-intensive industry. In 2019,
the number of full-time workers averaged 6,925 (2018: 6,324) while
the part-time labour averaged 9,285 (2018: 10,859). The total
headcount in 2019 was lower by 5.7% due to a reduction of part-time
workers employed as explained above in the Gender diversity. The
Group has introduced mechanisation in the field to boost
productivity. Mechanisation though has its limits but where
possible could help relieve the acute shortage of labour and reduce
the cost pressure from rising minimum wages.
The Group has formal processes for recruitment, particularly for
key managerial positions, where psychometric testing is conducted
to support the selection and hiring decisions. Exit interviews are
also conducted with departing employees to ensure that management
can address any significant issues.
Existing employees are selected on a regular basis for training
programmes organised by the Group's training centre that provide
grounding and refresher courses in technical aspects of oil palm
estate and mill management. The training centre also conducts
regular programmes for all levels of employees to raise the
competency and quality of employees in general. These programmes
are often supplemented by external management development courses
including attending industry conferences for technical updates. A
wide variety of topics are covered including work ethics, motivat
ion , self-improvement , company values and health and safety. The
Group spent $106,700 on staff training and professional development
in 2019 against $131,300 for the previous year.
The Group operates a cadet program where graduates from local
universities are selected to undergo theory and field training over
a twelve-month period. On successful completion, they are assigned
as assistants to various mills and estates.
All the plantations are at various stages of introducing finger
printing to record and mark attendance of daily workers and to pay
all workers through bank transfer to improve the efficiency of
estate operations.
A large workforce and their families are housed across the
Group's plantations. The benefits provided to them were extensively
covered under CSR in the Strategic Report. On top of competitive
salaries and bonuses, these extensive benefits and privileges help
the Group to retain and motivate its employees. The Group complied
with the minimum wage policy issued by the Indonesian government.
It respects the rights of employees and does not exploit workers,
use child or forced labour and is not involved in human trafficking
as described in the UK's Modern Slavery Act 2015.
The employees are covered by Governmental mandatory personal
accident scheme with death benefits covering up to forty-eight
months of workers' monthly salaries. The employees' spouses and
children are also privately insured for death benefits by the
Group.
The rights of employees and their extensive benefits covering
every aspect of employment from salary review, allowance, bonus,
housing, study and training for improvement, work safety and health
and code of conduct are contained in the Company's handbook which
is available and accessible to all employees.
The Group promotes a policy for the creation of equal and
ethnically diverse employment opportunities including with respect
to gender.
The Group has in place key performance-linked indicators to
determine increment and bonus entitlements for its employees. The
human resources engage members of the labour unions representing
full-time workers at least once a year on their yearly performance
bonuses and grievances.
A whistle-blower policy was introduced this year to allow
workforce to raise concerns in confidence and if they wish
anonymously to the Board of the holding company for independent
investigations and follow-up actions. The full details of the
policy can be downloaded from the Company's website.
The Group promotes and encourages employee involvement in every
aspect wherever practical as it recognises employees as a valuable
asset and is one of the key contributions to the Group's success.
The employees contribute their ideas, feedback and voice out their
concerns through formal and informal meetings, discussions and
annual performance appraisals. In addition, various work related
and personal training programmes are carried out annually for
employees to promote employee engagement and interaction. The Group
organises an annual dinner to recognise high achievers in the
plantation and mill operations. It also has an annual family
gathering to foster camaraderie among its employees.
Although the Group does not have a specific policy on the
employment of disabled persons, it, however, employs disabled
persons as part of its workforce. The Group welcomes disabled
persons joining the Group based on their suitability.
Outlook
FFB production for the three months to March 2020 was 3% higher
against the same period in 2019 mainly due to the increase in
production from Bengkulu region. It is too early to forecast
whether the production will be better for the rest of the year.
The CPO price ex-Rotterdam opened the year at $878/mt and
averaged about $725 for the first three months of 2020. CPO prices
and export demand suffered temporary setback following the outbreak
of Coronavirus in China which has since spread to many parts of the
world. Depending on the length of economic lockdown amongst the
major consumers of palm oil, the common consensus amongst the
industrial experts is that CPO prices are expected to be fairly
better for 2020 due to higher demand from palm biodiesel mandates
in Indonesia and Malaysia, on top of a potential shortfall in FFB
production due to the dry weather in 2019 and the lower application
of fertiliser. New planting in palm oil industry has also slowed
from 2015, partly due to a forest moratorium imposed by the
Indonesian government that limits the conversion of forests and
peat land for oil palm development which also help to cap
supply.
The reported lower soybean output in United States in the coming
year further reinforced the positive sentiment for palm oil
price.
A rising CPO price may however discourage discretionary uptake
as cost of blending palm biodiesel may be more expensive than the
traditional fossil fuel. It is likely that at some point forward,
some demand may shift back to soybean oil as China's relationship
with United States improves and the demand of soybean meal picked
up as it recovered from the culling of hog population due to the
African swine flu.
The rising material costs and wages in Indonesia are expected to
increase the overall production cost in 2020. The Indonesian
government recently announced the 2020 national minimum wage
increase averaging 8.5%. These wage hikes will raise overall estate
costs and may erode profit margins.
Nevertheless, barring any unforeseen circumstances, the Group is
confident that CPO demand will be sustainable in the long-term and
we can expect a satisfactory trading outturn and cash flow for
2020.
Statement by directors in performance of their statutory duties
in accordance with Sec 172 (1) of the Companies Act 2006.
The Board of Directors of Anglo-Eastern Plantations Plc
consider, both individually and collectively, that they have acted
in good faith, in the way they consider would be most likely to
promote the success of the Company for the benefit of its members
as a whole, having regard to the stakeholders and matters set out
in Sec 172 (1) (a) to (f) of the Act in decisions taken during the
year ended 31 December 2019.
-- Our business model and strategy as highlighted in the
Strategic Report are designed to have a long-term beneficial impact
on the Company and contribute to its success in delivering
consistent and appropriate returns to the shareholders. We will
continue to operate our business within tight budgetary controls
and regulatory targets. To deliver these goals, the Company
continues to work in close partnership with local communities to
bring development and economic progress as well as generate
goodwill in the localities in which it operates.
-- Our employees are fundamental to the delivery of our business
goals. We aim to be a responsible employer in our approach to the
pay and benefits our employees receive. The health, safety and
well-being of our employees is one of our primary considerations in
the way we do business. Many of these continuing efforts are
covered under CSR and Employees sections of the Strategic
Report.
-- We aim to act responsibly and fairly in how we engage with
our suppliers, creditors and customers, all of whom are integral to
the successful delivery of our business plan. The Company adopts a
transparent approach in price negotiation, tenders and observe the
credit terms. The Board provides a channel of communication and
feedback from suppliers and customers to voice their concerns
through the whistle-blowers policy which is displayed in the
Company's website.
-- Our business plan takes into account the impact of the
Company's operations on the community and environment and our wider
social responsibilities, and in particular how we impact the
regions we operate. CSR is part of the Company's culture which
includes responsibility to safeguard the environment and is
highlighted in the Strategic Report. Several of our measures to
deliver environmental improvements are covered in detail in the
Sustainable Palm Oil Certification and Environmental Social and
Governance Practices sections of the same report.
-- As the Board of Directors, our intention is to behave
responsibly and ensure that management operates the business in a
responsible manner, operating within the high standards of business
conduct and good governance expected for a business such as ours
and in doing so, will contribute to the delivery of our business
goals. See Corporate Governance and Audit Committee Report. The
intention is to nurture our reputation that reflects our
responsible behaviour.
-- It is the intention of the Board of Directors, to behave
responsibly toward our shareholders and treat them fairly and
equally, so that they too may benefit from the successful delivery
of our business plan.
Restructuring within the Group
During 2019 there was restructuring in the Group involving a few
subsidiaries, principally relating to intercompany loans and
interest charges so that more cash is retained in the Group. The
exercise was diligently put together by the Group's senior
management, having had consultations with a reputable firm of
accountants in Jakarta, Indonesia. The proposal to restructure was
then put forward to the Board to evaluate and approved. As the
impact of the restructuring affected the non-controlling interests
in those subsidiaries, a process of consultation with those
non-controlling interests took place prior to restructuring.
On behalf of the Board
Dato' John Lim Ewe Chuan
Executive Director, Corporate Finance and Corporate Affairs
19 May 2020
Directors' Responsibilities
The Directors are responsible for preparing the annual report
and the financial statements in accordance with 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 International Financial Reporting Standards
("IFRSs") as adopted by the EU. The Directors have elected to
prepare the Company financial statements in accordance with FRS 101
Reduced Disclosure Framework under the UK Generally Accepted
Accounting Practice ("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 income statement 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
applicable accounting standards, subject to any material departures
disclosed and explained in the financial statements;
-- prepare a Strategic Report, a Director's Report and
Director's Remuneration report which comply with the requirements
of the Companies Act 2006; and
-- make an assessment of the Company and Group's ability to continue as a going concern.
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 and, as
regards the Group financial statements, Article 4 of the IAS
Regulation. 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.
After making enquiries, the Directors have a reasonable
expectation that the Company and the Group have adequate resources
to continue operations for the foreseeable future.
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 DTR4
All of the Directors confirm to the best of their knowledge:
-- The Group financial statements have been prepared in
accordance with IFRSs as adopted by the EU and Article 4 of the IAS
Regulation and give a true and fair view of the assets,
liabilities, financial position and income statement of the
Group.
-- The Strategic Report in the annual report includes a fair
review of the development and performance of the business and the
financial position of the Group, together with a description of the
principal risks and uncertainties that they face.
-- The annual report and financial statements, taken as a whole,
are fair, balanced and understandable and provide the information
necessary for shareholders to assess the Company's performance,
business model and strategy.
On behalf of the Board
Dato' John Lim Ewe Chuan
Executive Director, Corporate Finance and Corporate Affairs
19 May 2020
Consolidated Income Statement
For the year ended 31 December 2019
2019 2018
Result Result
before before
Continuing BA movement BA movement BA movement BA movement
operations Note Total Total
$000 $000 $000 $000 $000 $000
--------------------- ------- ------------- ------------- ---------- ------------- ------------- ----------
Revenue 3 219,136 - 219,136 250,859 - 250,859
Cost of sales (199,515) 3,255 (196,260) (206,224) (2,286) (208,510)
--------------------- ------- ------------- ------------- ---------- ------------- ------------- ------------
Gross profit 19,621 3,255 22,876 44,635 (2,286) 42,349
Administration
expenses (8,068) - (8,068) (9,060) - (9,060)
Reversal of
impairment
/ (Impairment
losses) 11 6,590 - 6,590 (4,339) - (4,339)
Provision for
expected
credit loss 15 (5,965) - (5,965) (308) - (308)
--------------------- ------- ------------- ------------- ---------- ------------- ------------- ------------
Operating profit 12,178 3,255 15,433 30,928 (2,286) 28,642
Exchange gains /
(losses) 251 - 251 (1,250) - (1,250)
Finance income 4 4,169 - 4,169 5,048 - 5,048
Finance expense 4 (980) - (980) (1,511) - (1,511)
--------------------- ------- ------------- ------------- ---------- ------------- ------------- ------------
Profit before tax 5 15,618 3,255 18,873 33,215 (2,286) 30,929
Tax (expense) /
credit 8 (1,885) (814) (2,699) (13,633) 571 (13,062)
--------------------- ------- ------------- ------------- ---------- ------------- ------------- ------------
Profit for the year 13,733 2,441 16,174 19,582 (1,715) 17,867
--------------------- ------- ------------- ------------- ---------- ------------- ------------- ------------
Attributable to:
- Owners of the
parent 14,019 2,077 16,096 12,882 (1,469) 11,413
- Non-controlling
interests (286) 364 78 6,700 (246) 6,454
--------------------- ------- ------------- ------------- ---------- ------------- ------------- ------------
13,733 2,441 16,174 19,582 (1,715) 17,867
--------------------- ------- ------------- ------------- ---------- ------------- ------------- ------------
Earnings per share
for profit
attributable
to the owners of
the parent during
the year
9 40.61cts 28.79cts
* basic
9 40.61cts 28.79cts
* diluted
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2019
2019 2018
$000 $000
------------------------------------------------ ---------- ------------
Profit for the year 16,174 17,867
------------------------------------------------ ---------- ------------
Other comprehensive expenses:
Items may be reclassified to profit or loss:
Gain / (Loss) on exchange translation of
foreign operations 18,680 (29,550)
Net other comprehensive income / (expenses)
may be reclassified to profit or loss 18,680 (29,550)
------------------------------------------------ ---------- ------------
Items not to be reclassified to profit or
loss:
Unrealised (loss) / gain on revaluation
of leasehold land, net of tax (1,715) 137
Remeasurement of retirement benefits plan,
net of tax (768) 894
Net other comprehensive (expenses) / income
not being reclassified to profit or loss (2,483) 1,031
------------------------------------------------ ---------- ------------
Total other comprehensive income / (expenses)
for the year, net of tax 16,197 (28,519)
Total comprehensive income / (expenses)
for the year 32,371 (10,652)
Attributable to:
- Owners of the parent 28,550 (11,527)
- Non-controlling interests 3,821 875
------------------------------------------------ ---------- ------------
32,371 (10,652)
------------------------------------------------ ---------- ------------
Consolidated Statement of Financial Position
As at 31 December 2019
Company Number: 1884630
31.12.2019 31.12.2018
Note $000 $000
------------------------------------------- ------ ------------- -------------
Non-current assets
Property, plant and equipment 11 367,891 340,367
Receivables 12 16,500 11,020
Deferred tax assets 18 11,251 11,147
395,642 362,534
------------------------------------------- ------ ------------- -------------
Current assets
Inventories 13 8,752 9,540
Tax receivables 8 49,527 44,310
Biological assets 14 7,574 4,093
Trade and other receivables 15 5,774 5,203
Cash and cash equivalents 84,846 112,212
156,473 175,358
------------------------------------------- ------ ------------- -------------
Current liabilities
Loans and borrowings 16 (8,203) (11,078)
Trade and other payables 17 (16,110) (20,083)
Tax liabilities 8 (2,898) (5,626)
Dividend payables (23) (37)
Lease liabilities 29 (222) -
------------------------------------------- ------ ------------- -------------
(27,456) (36,824)
------------------------------------------- ------ ------------- -------------
Net current assets 129,017 138,534
------------------------------------------- ------ ------------- -------------
Non-current liabilities
Loans and borrowings 16 - (8,203)
Deferred tax liabilities 18 (17,047) (20,040)
Retirement benefits - net liabilities 19 (11,338) (8,244)
Lease liabilities 29 (456) -
------------------------------------------- ------ ------------- -------------
(28,841) (36,487)
------------------------------------------- ------ ------------- -------------
Net assets 495,818 464,581
------------------------------------------- ------ ------------- -------------
Issued capital and reserves attributable
to owners of the parent
Share capital 20 15,504 15,504
Treasury shares 20 (1,171) (1,171)
Share premium 23,935 23,935
Capital redemption reserve 1,087 1,087
Revaluation reserves 48,413 51,308
Exchange reserves (229,026) (245,170)
Retained earnings 542,415 526,487
------------------------------------------- ------ ------------- -------------
401,157 371,980
Non-controlling interests 94,661 92,601
------------------------------------------- ------ ------------- -------------
Total equity 495,818 464,581
------------------------------------------- ------ ------------- -------------
Consolidated Statement of Changes in Equity
For the year ended 31 December 2019
Capital
Share Treasury Share redemption Revaluation Exchange Retained Non-controlling Total
capital shares premium reserve reserves reserves earnings Total interests equity
$000 $000 $000 $000 $000 $000 $000 $000 $000 $000
Balance at 31 December 2017 15,504 (1,171) 23,935 1,087 51,288 (221,435) 515,884 385,092 91,799 476,891
Items of other comprehensive
income
* Unrealised gain on revaluation of leasehold land, ne
t
of tax - - - - 20 - - 20 117 137
-Remeasurement of retirement
benefit plan, net of tax - - - - - - 775 775 119 894
-Loss on exchange translation
of foreign operations - - - - - (23,735) - (23,735) (5,815) (29,550)
------------------------------------------------------------ -------- --------- -------- ----------- ------------ ---------- --------- ---------- ---------------- ----------
Total other comprehensive income
/ (expenses) - - - - 20 (23,735) 775 (22,940) (5,579) (28,519)
Profit for the year - - - - - - 11,413 11,413 6,454 17,867
------------------------------------------------------------ -------- --------- -------- ----------- ------------ ---------- --------- ---------- ---------------- ----------
Total comprehensive income /
(expenses) for the year - - - - 20 (23,735) 12,188 (11,527) 875 (10,652)
Dividends paid - - - - - - (1,585) (1,585) (73) (1,658)
------------------------------------------------------------ -------- --------- -------- ----------- ------------ ---------- --------- ---------- ---------------- ----------
Balance at 31 December 2018 15,504 (1,171) 23,935 1,087 51,308 (245,170) 526,487 371,980 92,601 464,581
------------------------------------------------------------ -------- --------- -------- ----------- ------------ ---------- --------- ---------- ---------------- ----------
Items of other comprehensive
income
* Unrealised (loss) / gain on revaluation of leasehold
land, net of tax - - - - (3,040) 1,211 - (1,829) 114 (1,715)
* Remeasurement of retirement benefit plan, net of tax - - - - - - (650) (650) (118) (768)
-Gain on exchange translation
of foreign operations - - - - - 14,933 - 14,933 3,747 18,680
------------------------------------------------------------ -------- --------- -------- ----------- ------------ ---------- --------- ---------- ---------------- ----------
Total other comprehensive (expenses)
/ income - - - - (3,040) 16,144 (650) 12,454 3,743 16,197
Profit for the year - - - - - - 16,096 16,096 78 16,174
------------------------------------------------------------ -------- --------- -------- ----------- ------------ ---------- --------- ---------- ---------------- ----------
Total comprehensive (expenses)
/ income for the year - - - - (3,040) 16,144 15,446 28,550 3,821 32,371
Issue of subsidiaries shares
to non-controlling interests - - - - - - - - 512 512
Accretion from change in stake - - - - 145 - 1,671 1,816 (1,816) -
Dividends paid - - - - - - (1,189) (1,189) (457) (1,646)
------------------------------------------------------------ -------- --------- -------- ----------- ------------ ---------- --------- ---------- ---------------- ----------
Balance at 31 December 2019 15,504 (1,171) 23,935 1,087 48,413 (229,026) 542,415 401,157 94,661 495,818
------------------------------------------------------------ -------- --------- -------- ----------- ------------ ---------- --------- ---------- ---------------- ----------
Consolidated Statement of Cash Flows
For the year ended 31 December 2019
2019 2018
Note $000 $000
--------------------------------------------------- ------ ----------- ---------
Cash flows from operating activities
Profit before tax 18,873 30,929
Adjustments for:
BA movement (3,255) 2,286
Gain on disposal of property, plant and
equipment (83) (21)
Depreciation 18,590 16,752
Retirement benefit provisions 2,152 1,250
Net finance income (3,189) (3,537)
Unrealised (gain) / loss in foreign exchange (251) 1,250
Property, plant and equipment written
off 261 620
(Reversal of impairment) / Impairment
losses (6,590) 4,339
Provision for expected credit loss 5,965 308
Operating cash flow before changes in
working capital 32,473 54,176
Decrease / (Increase) in inventories 1,185 (746)
(Increase) / Decrease in non-current,
trade and other receivables (1,586) 620*
(Decrease) / Increase in trade and other
payables (4,629) 3,986
--------------------------------------------------- ------ ----------- ---------
Cash inflow from operations 27,443 58,036
Interest paid (939) (1,511)
Retirement benefits paid (475) (257)
Overseas tax paid (11,438) (36,508)
--------------------------------------------------- ------ ----------- ---------
Net cash flow from operating activities 14,591 19,760
--------------------------------------------------- ------ ----------- ---------
Investing activities
Property, plant and equipment
* purchases (33,169) (30,282)
* sales 135 42
Interest received 4,169 5,048
Increase in receivables from cooperatives
under plasma scheme (5,116) (2,939)*
--------------------------------------------------- ------ ----------- ---------
Net cash used in investing activities (33,981) (28,131)
--------------------------------------------------- ------ ----------- ---------
Financing activities
Dividends paid to the holders of the
parent (1,240) (1,585)
Dividends paid to non-controlling interests (457) (73)
Issue of subsidiaries shares to non-controlling 512 -
interests
Repayment of existing long-term loans (11,078) (8,594)
Repayment of lease liabilities - principal (169) -
Repayment of lease liabilities - interest (41) -
--------------------------------------------------- ------ ----------- ---------
Net cash used in financing activities (12,473) (10,252)
--------------------------------------------------- ------ ----------- ---------
Net decrease in cash and cash equivalents (31,863) (18,623)
Cash and cash equivalents
At beginning of year 112,212 139,489
Exchange gains / (losses) 4,497 (8,654)
--------------------------------------------------- ------ ----------- ---------
At end of year 84,846 112,212
--------------------------------------------------- ------ ----------- ---------
Comprising:
Cash at end of year 28 84,846 112,212
--------------------------------------------------- ------ ----------- ---------
* These amounts had been reclassified according to the nature of
the transaction which were classified in the operating
cashflow.
Notes
1 Basis of preparation
Anglo-Eastern Plantations Plc ("AEP") is a company incorporated
in the United Kingdom under the Companies Act 2006 and is listed on
the London Stock Exchange. The registered office of AEP is located
at Quadrant House, 6(th) Floor, 4 Thomas More Square, London E1W
1YW, United Kingdom. The principal activity of the Group is
plantation agriculture, mainly in the cultivation of oil palm.
The financial information does not constitute the company's
statutory accounts for the years ended 31 December 2019 or 2018.
Statutory accounts for the years ended 31 December 2019 and 31
December 2018 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 2019 and 31 December
2018 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 2018 have been
filed with the Registrar of Companies. The statutory accounts for
the year ended 31 December 2019 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,
except as detailed in the following paragraph.
Basis of preparation
The financial statements have been prepared in accordance with
International Financial Reporting Standards and its interpretations
(IFRS and IFRIC interpretations) issued by the International
Accounting Standards Board ("IASB") as adopted by the European
Union ("EU") and with those parts of the Companies Act 2006
applicable to companies preparing their accounts under IFRS as
adopted by the EU.
The Directors have a reasonable expectation, having made the
appropriate enquiries, that the Group has control of the monthly
cashflows and that the Group has sufficient cash resources to cover
the fixed cashflows for a period of at least 12 months from the
date of approval of these financial statements, including having to
make full repayment of the bank loan. For these reasons, the
Directors adopted a going concern basis in 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 if all the plantations are infected with
Coronavirus as well as the impact on the demand for palm oil due to
the Coronavirus pandemic. Stress testing of other identified
uncertainties was undertaken on primarily commodity prices and
currency exchange rates.
Changes in accounting standards
a) The following amendments are effective for the first time for
accounting periods beginning on or after 1 January 2019 in these
financial statements:
-- IFRS 16 Leases
-- IFRIC 23 Uncertainty over Income Tax Treatments
-- Amendments to IFRS 9 Prepayment Features with Negative Compensation
-- Amendments to IAS 28: Long-term Interests in Associates and Joint Ventures
-- Annual Improvements to IFRSs 2015-2017 Cycle (IFRS 3 Business
Combinations and IFRS 11 Joint Arrangements, IAS 12 Income Taxes,
and IAS 23 Borrowing Costs)
-- Amendments to IAS 19: Plan Amendment, Curtailment or Settlement
All the new and amended standards and Interpretations listed
above that will apply for the first time in these financial
statements are not expected to impact the Group as they are either
not relevant to the Group's activities or require accounting which
is consistent with the Group's current accounting policies except
IFRS 16 Leases.
b) New standards, interpretations and amendments not yet effective.
Except for IFRS 17, the following new standards, interpretations
and amendments are effective for periods beginning on 1 January
2020 and have not been applied in these financial statements:
-- Amendments to References to the Conceptual Framework in IFRS Standards
-- Amendments to IFRS 3: Definition of a Business
-- Amendments to IAS 1 and IAS 8: Definition of Material
-- Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)
-- IFRS 17 Insurance Contracts (effective 1 January 2021)
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 the Company 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) 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 and shell nut are recorded net of
sales and related taxes and levies, including export taxes and
recognised when the delivery order is issued to a purchaser. The
delivery order is not issued until goods are paid for. Revenue for
FFB, biomass and biogas are recognised upon delivery. Sales of
latex 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.
(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) 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:
-- Revalued land - Property, plant and equipment (note 11)
-- Biological assets (note 14)
For more detailed information in relation to the fair value
measurement of the items above, please refer to the applicable
notes.
(h) 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 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 on
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 or subject to certificate
of Land Exploitation Rights (HGU) being obtained, whichever is
earlier. The costs of immature plantations consist mainly of the
accumulated cost of land clearing, planting, fertilising and
maintaining the plantation, borrowing costs 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 and
accounted for as an indefinite finance lease. The leasehold land is
recognised at cost initially and is not depreciated. The land is
subsequently carried at fair value, based on periodic valuations on
an open market basis by a professionally qualified valuer. These
revaluations are made with sufficient regularity to ensure that the
carrying amount does not differ materially from that which would be
determined using fair value at the end of the reporting period.
Changes in fair value are recognised in other comprehensive income
and accumulated in the revaluation reserve except to the extent
that any decrease in value in excess of the credit balance on the
revaluation reserve, or reversal of such a transaction, is
recognised in income statement. On the disposal of a revalued
estate, any related balance remaining in the revaluation reserve is
transferred to retained earnings as a movement in reserves.
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.
Interest on third party loans directly related to field
development is capitalised in the proportion that the opening
immature area bears to the total planted area of the relevant
estate. Interest on loans related to construction in progress (such
as an oil mill) is capitalised up to the commissioning of that
asset. These interest rates are booked at the rate prevailing at
the time.
Plantations, buildings and oil mills are depreciated using the
straight-line method. All other property, plant and equipment items
are depreciated using the double-declining-balance method. The
yearly rates of depreciation are as follows:
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
(i) 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.
(j) Leased assets
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;
-- Variable lease payments that depend on an index or rate,
initially measured using the index or rate at the commencement
date;
-- The amount expected to be payable by the lessee under residual value guarantees;
-- The exercise price of purchase options, if the lessee is
reasonably certain to exercise the options; and
-- Payments of penalties for terminating the lease, if the lease
term reflects the exercise of an option to terminate the lease.
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 Group remeasures the lease liability (and makes a
corresponding adjustment to the related right-of-use asset)
whenever:
-- The lease term has changed or there is a significant event or
change in circumstances resulting in a change in the assessment of
exercise of a purchase option, in which case the lease liability is
remeasured by discounting the revised lease payments using a
revised discount rate.
-- The lease payments change due to changes in an index or rate
or a change in expected payment under a guaranteed residual value,
in which cases the lease liability is remeasured by discounting the
revised lease payments using an unchanged discount rate (unless the
lease payments change is due to a change in a floating interest
rate, in which case a revised discount rate is used).
-- A lease contract is modified and the lease modification is
not accounted for as a separate lease, in which case the lease
liability is remeasured based on the lease term of the modified
lease by discounting the revised lease payments using a revised
discount rate at the effective date of the modification.
The Group did not make any such adjustments during the periods
presented.
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.
Whenever the Group incurs an obligation for costs to dismantle
and remove a leased asset, restore the site on which it is located
or restore the underlying asset to the condition required by the
terms and conditions of the lease, a provision is recognised and
measured under IAS 37. To the extent that the costs relate to a
right-of-use asset, the costs are included in the related
right-of-use asset, unless those costs are incurred to produce
inventories.
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 the 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 'Property, Plant and Equipment'
policy. Variable rents that do not depend on an index or rate are
not included in the measurement of the lease liability and the
right-of-use asset. The related payments are recognised as an
expense in the period in which the event or condition that triggers
those payments occurs and are included in 'Other expenses' in
income statement (see Note 11). As a practical expedient, IFRS 16
permits a lessee not to separate non-lease components, and instead
account for any lease and associated non-lease components as a
single arrangement. The Group has not used this practical
expedient. For a contract that contain a lease component and one or
more additional lease or non-lease components, the Group allocates
the consideration in the contract to each lease component on the
basis of the relative stand-alone price of the lease component and
the aggregate stand-alone price of the non-lease components.
Land rights are held at fair value and revalued at the balance
sheet date.
(k) Impairment
Impairment tests on property, plant and equipment are 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 administrative
expenses in the income statement, except to the extent they reverse
gains previously recognised in the statement of recognised income
and expense.
(l) 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.
(m) 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 balance sheet.
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.
(n) 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.
(o) Deferred tax
Deferred tax assets and liabilities are recognised where the
carrying amount of an asset or liability in the balance sheet
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 or credited directly to equity, such as
revaluations, in which case the deferred tax is also dealt with in
other comprehensive income; in this case assets and liabilities are
offset.
(p) 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. These 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
high quality corporate bonds that have maturity dates approximating
to the terms of the liabilities; plus
-- Unrecognised past service costs; less
-- The effect of minimum funding requirements agreed with scheme trustees.
Remeasurements of the net defined obligation are recognised
directly within equity. 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 comprehensive income and include
current and past service costs as well as gains and losses on
curtailments.
Net interest expense / (income) is recognised in comprehensive
income, 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 comprehensive
income. Settlements of defined benefit schemes are recognised in
the period in which the settlement occurs.
(q) 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.
(r) 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 25.
(s) Critical accounting estimates and judgements
The preparation of the Group financial statements in conformity
with IFRS requires the use of estimates and assumptions that affect
the reported assets and liabilities and reported revenue and
expenses. Actual results could differ from those estimates and
accordingly, they are reviewed on an on-going basis. The main areas
in which estimates are used are the fair value of biological
assets, property, plant and equipment, deferred tax and retirement
benefits.
Revisions to accounting estimates are recognised in the period
in which the estimate is revised or the revision affects only that
period, or in the period of revision and future periods if the
revision affects both current and future periods.
Assumptions regarding the valuation of property, plant and
equipment and biological assets are set out in note 11 and note 14
respectively. The Group's policy with regard to impairment of such
assets is set out above.
Details on deferred tax are given in note 18 and retirement
benefits in note 19.
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.
CPO,
palm
Year to 31 December kernel Rubber Shell Biomass Biogas Others
2019 and FFB nut products products Total
$000 $000 $000 $000 $000 $000 $000
Contract counterparties
Government - - - - 908 - 908
Non-government
* Wholesalers 214,416 653 2,224 733 - 202 218,228
214,416 653 2,224 733 908 202 219,136
---------- --------- -------- ---------- ---------- --------- ----------
Timing of transfer
of goods
Delivery to customer
premises 5,624 653 - - - - 6,277
Delivery to port of
departure - - - 733 - - 733
Customer collect from
our mills / estates 208,792 - 2,224 - - - 211,016
Upon generation / others - - - - 908 202 1,110
214,416 653 2,224 733 908 202 219,136
---------- --------- -------- ---------- ---------- --------- ----------
CPO,
palm
Year to 31 December kernel Rubber Shell Biomass Biogas Others
2018 and FFB nut products products Total
$000 $000 $000 $000 $000 $000 $000
Contract counterparties
Government - - - - 863 - 863
Non-government
* Wholesalers 245,595 792 2,047 914 - 648 249,996
245,595 792 2,047 914 863 648 250,859
---------- --------- -------- ---------- ---------- --------- ----------
Timing of transfer
of goods
Delivery to customer
premises 2,696 792 - - - - 3,488
Delivery to port of
departure - - - 914 - - 914
Customer collect from
our mills / estates 242,899 - 2,047 - - - 244,946
Upon generation / others - - - - 863 648 1,511
245,595 792 2,047 914 863 648 250,859
---------- --------- -------- ---------- ---------- --------- ----------
4 Finance income and expense
2019 2018
$000 $000
Finance income
Interest receivable on:
Credit bank balances and time deposits 4,169 5,048
Finance expense
Interest payable on:
Development loans (note 16) (939) (1,511)
Interest expense on lease liabilities (note (41) -
11)
-------- ----------
(980) (1,511)
----------
Net finance income recognised in income statement 3,189 3,537
-------- ----------
5 Profit before tax
2019 2018
$000 $000
Profit before tax is stated after charging
Purchase of FFB 92,004 104,210
Depreciation (note 11) 18,590 16,752
Reversal of impairment (note 11) (8,868) -
Impairment losses (note 11) 2,278 4,339
Provision for expected credit loss (note
15) 5,965 308
Exchange (gains) / losses (251) 1,250
Movement of inventories 788 (142)
Operating lease expense
- Property 409 528
Legal and professional fees 1,236 1,422
Staff costs (note 7) 41,668 37,991
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 140 137
- Audit of consolidated financial statements
(prior year) 5 (1)
- Audit related assurance service 6 6
- Audit of UK subsidiaries 13 13
---------- ------------
Total audit services 169 160
---------- ------------
Audit of overseas subsidiaries
- Malaysia 21 19
- Indonesia 78 86
---------- ------------
Total audit services 99 105
---------- ------------
Total auditor's remuneration 268 265
---------- ------------
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 Executive Committee, that
is made up of a Senior General Manager in Malaysia, the Chief
Executive Officer, the Chief Operating Officer, Finance Director
and the Engineering Director.
Measurement of operating segment profit or loss, assets and
liabilities
The Group evaluates segmental performance on the basis of profit
or loss from operations calculated in accordance with IFRS but
excluding non-recurring losses, such as share based payments.
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 South Total
Sumatera Bengkulu Sumatera Riau Bangka Kalimantan Indonesia Malaysia UK Total
$000 $000 $000 $000 $000 $000 $000 $000 $000 $000
2019
Total sales revenue
(all external)
* CPO, palm kernel
and FFB 75,933 65,102 2,487 36,060 513 32,679 212,774 1,642 - 214,416
* Rubber 653 - - - - - 653 - - 653
* Shell nut 674 582 - 929 - 39 2,224 - - 2,224
* Biomass products 733 - - - - - 733 - - 733
* Biogas products 141 442 - - - 325 908 - - 908
* Others 25 57 32 - - 88 202 - - 202
--------- --------- ---------- --------- -------- ----------- ---------- ---------- ---------- ---------
Total revenue 78,159 66,183 2,519 36,989 513 33,131 217,494 1,642 - 219,136
--------- --------- ---------- --------- -------- ----------- ---------- ---------- ---------- ---------
Profit / (loss) before
tax 6,174 7,727 (8,933) 8,514 244 4,868 18,594 (1,264) (1,712) 15,618
BA movement 927 1,086 108 307 23 806 3,257 (2) - 3,255
--------- --------- ---------- --------- -------- ----------- ---------- ---------- ---------- ---------
Profit / (loss) for the
year before
tax per consolidated
income statement 7,101 8,813 (8,825) 8,821 267 5,674 21,851 (1,266) (1,712) 18,873
--------- --------- ---------- --------- -------- ----------- ---------- ---------- ---------- ---------
Interest income 1,921 1,789 3 299 - 29 4,041 124 4 4,169
Interest expense (73) - - - - (901) (974) (6) - (980)
Depreciation (4,791) (4,470) (2,465) (916) (281) (5,146) (18,069) (521) - (18,590)
Reversal of
impairment - - 5,151 - 600 3,117 8,868 - - 8,868
Impairment losses - - (1,595) - - (431) (2,026) (252) - (2,278)
(Provision) /
Reversal for
expected
credit loss (124) 4 (5,998) - 4 163 (5,951) - (14) (5,965)
Inter-segment
transactions (40,471) (2,027) 25,745 (581) 1,198 15,760 (376) 153 223 -
Inter-segmental
revenue 23,395 1,981 1,847 - - 1,274 28,497 - - 28,497
Tax expense 8,851 (995) (3,418) (2,009) (234) (4,884) (2,689) 186 (196) (2,699)
Total assets 206,764 104,756 39,151 31,083 14,667 127,746 524,167 21,678 6,270 552,115
Non-current assets 121,161 73,106 37,553 18,166 13,970 111,159 375,115 16,944 3,583 395,642
Non-current assets -
additions 10,342 3,950 2,919 333 4,265 11,881 33,690 351 - 34,041
North South Total
Sumatera Bengkulu Sumatera Riau Bangka Kalimantan Indonesia Malaysia UK Total
$000 $000 $000 $000 $000 $000 $000 $000 $000 $000
2018
Total sales revenue
(all external)
* CPO, palm kernel
and FFB 84,771 79,652 1 43,970 261 34,848 243,503 2,092 - 245,595
* Rubber 792 - - - - - 792 - - 792
* Shell nut 651 432 - 930 - 34 2,047 - - 2,047
* Biomass products 914 - - - - - 914 - - 914
* Biogas products 417 446 - - - - 863 - - 863
* Others 519 38 18 - - 73 648 - - 648
--------- --------- ---------- --------- -------- ----------- ---------- ---------- ---------- ---------
Total revenue 88,064 80,568 19 44,900 261 34,955 248,767 2,092 - 250,859
--------- --------- ---------- --------- -------- ----------- ---------- ---------- ---------- ---------
Profit / (loss) before
tax 12,993 18,753 (7,445) 13,112 (531) (557) 36,325 (894) (2,216) 33,215
BA movement (296) (1,074) (93) (272) (4) (479) (2,218) (68) - (2,286)
--------- --------- ---------- --------- -------- ----------- ---------- ---------- ---------- ---------
Profit / (loss) for the
year before
tax per consolidated
income statement 12,697 17,679 (7,538) 12,840 (535) (1,036) 34,107 (962) (2,216) 30,929
--------- --------- ---------- --------- -------- ----------- ---------- ---------- ---------- ---------
Interest income 1,594 2,978 3 318 - 20 4,913 133 2 5,048
Interest expense (141) - - - - (1,370) (1,511) - - (1,511)
Depreciation (4,031) (4,120) (2,530) (900) (234) (4,425) (16,240) (512) - (16,752)
Impairment losses - - (914) - - (3,425) (4,339) - - (4,339)
Provision for
expected credit
loss (10) (13) (24) - (4) (206) (257) (1) (50) (308)
Inter-segment
transactions 4,887 (2,021) (700) (579) (94) (1,870) (377) 103 274 -
Inter-segmental
revenue 24,409 1,608 3,710 - - 1,049 30,776 - - 30,776
Tax expense (7,872) (2,994) 1,862 (5,351) 151 1,154 (13,050) 19 (31) (13,062)
Total assets 188,266 118,098 41,074 36,900 11,815 113,186 509,339 22,347 6,206 537,892
Non-current assets 103,648 70,237 39,672 17,884 11,588 99,738 342,767 16,783 2,984 362,534
Non-current assets -
additions 8,578 4,460 3,753 472 1,647 11,355 30,265 110 - 30,375
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 2019, revenue from top 4 customers of the
Indonesian segment represents approximately $113.6m (2018: $115.4m)
of the Group's total revenue. 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. Two of
the top four customers were the same as in the prior year.
North South Total
Sumatera Bengkulu Sumatera Riau Bangka Kalimantan Indonesia Malaysia UK Total
$000 $000 $000 $000 $000 $000 $000 $000 $000 $000
2019
Customer 1 3,107 20,376 - 6,091 - 13,228 42,802 - - 42,802
Customer 2 27,751 - - - - - 27,751 - - 27,751
Customer 3 9,657 8,345 - 4,965 - - 22,967 - - 22,967
Customer 4 - - - 20,036 - - 20,036 - - 20,036
---------- --------- ---------- ------- ------- ----------- ----------- --------- ----- --------
40,515 28,721 - 31,092 - 13,228 113,556 - - 113,556
---------- --------- ---------- ------- ------- ----------- ----------- --------- ----- --------
2018
Customer 1 1,909 17,768 - 6,613 - 10,806 37,096 - - 37,096
Customer 2 - 29,604 - - - - 29,604 - - 29,604
Customer 3 24,933 - - - - - 24,933 - - 24,933
Customer 4 21,042 - - - - 2,735 23,777 - - 23,777
---------- --------- ---------- ------- ------- ----------- ----------- --------- ----- --------
47,884 47,372 - 6,613 - 13,541 115,410 - - 115,410
---------- --------- ---------- ------- ------- ----------- ----------- --------- ----- --------
% % % % % % % % % %
2019
Customer 1 1.4 9.3 - 2.8 - 6.0 19.5 - - 19.5
Customer 2 12.7 - - - - - 12.7 - - 12.7
Customer 3 4.4 3.8 - 2.3 - - 10.5 - - 10.5
Customer 4 - - - 9.1 - - 9.1 - - 9.1
---------- --------- ---------- ------- ------- ----------- ----------- --------- ----- --------
18.5 13.1 - 14.2 - 6.0 51.8 - - 51.8
---------- --------- ---------- ------- ------- ----------- ----------- --------- ----- --------
2018
Customer 1 0.8 7.1 - 2.6 - 4.3 14.8 - - 14.8
Customer 2 - 11.8 - - - - 11.8 - - 11.8
Customer 3 9.9 - - - - - 9.9 - - 9.9
Customer 4 8.4 - - - - 1.1 9.5 - - 9.5
---------- --------- ---------- ------- ------- ----------- ----------- --------- ----- --------
19.1 18.9 - 2.6 - 5.4 46.0 - - 46.0
---------- --------- ---------- ------- ------- ----------- ----------- --------- ----- --------
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
2019 2018
Number Number
Average numbers employed (primarily overseas)
during the year:
- full time 6,925 6,324
- part-time field workers 9,285 10,859
--------- ---------
16,210 17,183
--------- ---------
2019 2018
$000 $000
Staff costs (including Directors) comprise:
Wages and salaries 36,986 34,846
Social security costs 1,835 1,399
Retirement benefit costs
- United Kingdom - 64
- Indonesia (note 19) 2,791 1,651
- Malaysia 56 31
--------- ---------
41,668 37,991
--------- ---------
2019 2018
$000 $000
Directors emoluments 215 226
2019 2018
$000 $000
Remuneration expense for key management personnel
comprise:
Salaries 1,742 1,666
Social security costs - -
Retirement benefit costs - 6
-------- --------
1,742 1,672
-------- --------
The Executive Director, Non-Executive Directors and senior
management (general managers and above) are considered to be the
key management personnel.
8 Tax expense
2019 2018
$000 $000
Foreign corporation tax - current year 5,222 16,852
Foreign corporation tax - prior year 12 70
Deferred tax adjustment - origination and
reversal of temporary differences (note 18) (2,535) (3,860)
Total tax charge for year 2,699 13,062
--------- ---------
Corporation tax rate in Indonesia is at 25% whereas Malaysia is
at 24%. The standard rate of corporation tax in the UK for the
current year is 19%. The Group's charge for the year differs from
the standard UK rate of corporation tax as explained below:
2019 2018
$000 $000
Profit before tax 18,873 30,929
--------- ---------
Profit before tax multiplied by standard rate
of UK corporation tax of 19% (2018: 19%) 3,586 5,877
Effects of:
Rate adjustment relating to overseas profits 1,108 1,905
Group accounting adjustments not subject to
tax (1,916) 1,212
Expenses not allowable for tax 344 4,994
Deferred tax assets not recognised 48 -
Income not subject to tax (1,223) (1,260)
Under provision of prior year income tax 12 70
Utilisation of tax losses brought forward 836 90
(Over) / Under provision of prior year deferred
tax assets (96) 174
Total tax charge for year 2,699 13,062
--------- ---------
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 the refund process may take up to 12 months
or more.
The breakdown of the tax receivables and tax liabilities is as
follows:
2019 2018
$000 $000
Tax Receivables
Income tax 14,348 7,110
Other taxes 35,179 37,200
---------- ------------
49,527 44,310
---------- ------------
Tax Liabilities
Income tax (1,512) (1,094)
Other taxes (1,386) (4,532)
---------- ------------
(2,898) (5,626)
---------- ------------
9 Earnings per ordinary share ("EPS")
2019 2018
$000 $000
Profit for the year attributable to owners
of the Company before BA movement 14,019 12,882
BA movement 2,077 (1,469)
---------- ----------
Earnings used in basic and diluted EPS 16,096 11,413
---------- ----------
Number Number
'000 '000
Weighted average number of shares in issue
in year
- used in basic EPS 39,636 39,636
- dilutive effect of outstanding share options - -
---------- ----------
- used in diluted EPS 39,636 39,636
---------- ----------
Basic and diluted EPS before BA movement 35.37cts 32.50cts
Basic and diluted EPS after BA movement 40.61cts 28.79cts
10 Dividends
2019 2018
$000 $000
Paid during the year
Final dividend of 3.0cts per ordinary share
for the year ended 31 December 2018 (2017:
4.0cts) 1,189 1,585
---------- ----------
Proposed final dividend of 0.5cts per ordinary
share for the year ended 31 December 2019 (2018:
3.0cts) 198 1,189
---------- ----------
The proposed dividend for 2019 is subject to shareholders'
approval at the forthcoming annual general meeting and has not been
included as a liability in these financial statements.
11 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 or valuation
At 1 January 2018 201,097 68,406 138,348 51,384 15,536 1,088 - 1,179 477,038
Exchange translations (12,641) (4,475) (8,308) (3,336) (981) (51) - (102) (29,894)
Reclassification 138 - (138) 5,180 27 - - (5,207) -
Revaluations - - 182 - - - - - 182
Additions 29 5,467 3,172 30 2,686 57 - 6,861 18,302
Development costs
capitalised 12,073 - - - - - - - 12,073
Disposal / Written off (819) (1,278) - (120) (410) (1) - - (2,628)
At 31 December 2018 199,877 68,120 133,256 53,138 16,858 1,093 - 2,731 475,073
Exchange translations 8,110 2,970 5,135 2,307 669 34 14 83 19,322
Reclassification - 143 - 7,557 26 (2) - (7,724) -
Revaluations - - (2,292) - - - - - (2,292)
Additions 411 7,732 5,861 45 1,562 193 832 5,971 22,607
Development costs
capitalised 11,434 - - - - - - - 11,434
Disposals / Written off (5,782) (606) (1,297) (219) (1,125) (41) - - (9,070)
At 31 December 2019 214,050 78,359 140,663 62,828 17,990 1,277 846 1,061 517,074
------------- -------- ----------- ---------- ---------- ---------- ------------- ------------- ---------
Accumulated depreciation
and
impairment
At 1 January 2018 73,277 20,775 805 15,581 12,000 920 - - 123,358
Exchange translations (4,531) (1,374) (67) (1,010) (733) (41) - - (7,756)
Charge for the year 8,926 3,462 - 2,939 1,361 64 - - 16,752
Impairment losses 3,418 - 921 - - - - - 4,339
Disposal / Written off (308) (1,225) - (74) (379) (1) - - (1,987)
At 31 December 2018 80,782 21,638 1,659 17,436 12,249 942 - - 134,706
Exchange translations 3,098 960 87 753 481 26 3 - 5,408
Reclassification - (15) - - 15 - - - -
Charge for the year 9,646 3,850 - 3,222 1,625 63 184 - 18,590
(Reversal of impairment)
/
Impairment losses (7,571) - 981 - - - - - (6,590)
Disposal / Written off (1,121) (590) - (123) (1,075) (22) - - (2,931)
-------- ----------- ---------- ---------- ---------- ------------- -------------
At 31 December 2019 84,834 25,843 2,727 21,288 13,295 1,009 187 - 149,183
------------- -------- ----------- ---------- ---------- ---------- ------------- ------------- ---------
Carrying amount
At 31 December 2017 127,820 47,631 137,543 35,803 3,536 168 - 1,179 353,680
At 31 December 2018 119,095 46,482 131,597 35,702 4,609 151 - 2,731 340,367
At 31 December 2019 129,216 52,516 137,936 41,540 4,695 268 659 1,061 367,891
The Group engaged Muttaqin Bambang Purwanto Rozak Uswatun &
Rekan (MBPRU) with its head office located in Jakarta, Indonesia to
undertake the land valuation for the Group. The valuation was
carried out independently by MBPRU who has the appropriate
professional qualifications and recent experience in the location
and category of the properties being valued. Further information of
MBPRU can be obtained from ' www.kjpp-mbpru.com '. For the year
ended 31 December 2019, valuations were undertaken on the land of
nine subsidiaries in Indonesia and Malaysia. The quantum per
hectare derived from the current valuation was then applied to the
land value of the remaining companies in the same geographical
location to derive the fair value of land as at 31 December 2019.
For the year ended 31 December 2018, independent land valuations
were undertaken for eight subsidiaries companies in Indonesia. The
same methodology to fair value land was adopted to value the land
of the remaining companies as at 31 December 2018. Unplantable land
was excluded in this exercise since it has zero value. Land is
valued on a rotational basis and all the land is valued by
qualified valuers every two years. Had the revalued land been
measured on a historical cost basis, their net book value would
have been $56,978,000 (2018: $50,571,000).
PT Simpang Ampat's land was valued on the basis that its highest
and best use is oil palm plantation. At present the land is planted
with rubber trees, however, the Group has the intention to replace
the ageing rubber trees with palm oil trees.
Details of the information about the fair value hierarchy in
relation to land at 31 December are as follows:
Level Level Level Fair value
1 2 3
$000 $000 $000 $000
Land
At 31 December 2019 - - 137,936 137,936
At 31 December 2018 - - 131,597 131,597
There was no item classified under Level 1 and Level 2 and thus
there was no transfer between Level 1 and Level 2 during the
year.
The valuation techniques and significant unobservable inputs
used in determining the fair value measurement of land and 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
Land Selling prices of Selling prices The higher the selling
comparable land of comparable price, the higher
in similar location land. the fair value.
adjusted for differences
in key attributes. Location, legal These are qualitative
The valuation model title, land area, inputs which require
is based on price land type and significant judgement
per hectare. topography. by professional valuer,
MBPRU.
-------------------------- ------------------- --------------------------
There was no change to the valuation techniques during the
year.
The fair value measurement is based on the above items' highest
and best use, which does not differ from their actual use.
Th e capitalisation rate used to determine the amount of
borrowing costs eligible for capitalisation is based on the
percentage of immature area of each estate against total planted
area in the estate. The average capitalisation rate was 9.6% (2018:
10.4%). The estates included $96,000 (2018: $160,000) of interest
and $4,850,000 (2018: $4,245,000) 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 2054 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. In Kalimantan, land titles were issued between
2016 and 2019 and expire between 2019 and 2054. In Bangka, land
titles were issued in 2018 and expire between 2021 and 2053. The
land title for South Sumatera were issued between 2011 and
2015.
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.
The land title of the estate in Malaysia is a long-term lease
expiring in 2084.
Impairment for 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 based on each cash generating unit ("CGU") which is
defined as each estate. In 2018, the impairment loss of $3,418,000
was due to the higher cost of new planting and the decrease in CPO
price. The reversal of impairment loss of $7,571,000 recognised in
2019 was primarily due to the increase in CPO price, attributed to
amounts being reclassified to plasma receivables during the year
and decreases in the pre-tax discount rates.
Given the volatility of CPO prices, the recoverable amount of
the Group's plantations in 2019 was based on value in use
calculations and that it will be higher than fair value less cost
to sell. The recoverable amount of the Group's plantations carried
at value in use was $32,962,000 (2018: $21,514,000).
The value in use is the net present value of the projected
future cash flows over the expected 20-year economic life of the
asset discounted at 16.6% (2018: 18.7%). Projected future cash
flows are calculated based on historical data, industry
performance, economic conditions and any other readily available
information.
The value in use is computed by the professional valuer, MBPRU
using discounted cash flow ("DCF") over the expected 20-year
economic life of the asset. The following table sets out the key
assumptions in the valuation along with the impact on the
impairment charge of a 1% change:
2019 2018
---------- -------------------------- --------------
Assumption Increase Assumption Increase
applied in impairment applied in impairment
$000 $000
CPO price - decrease of
1% $635/mt 1,459 $600/mt 975
Pre-tax discount rate - 16.51% -
increase by 1% 16.60% 2,600 18.7% 1,725
Inflation rate - increase
by 1% 3.38% 2,241 4.66% 1,620
12 Receivables: non-current
2019 2018
------------------ ------ ------
Book value Fair Book Fair
value value value
$000 $000 $000 $000
Due from non-controlling interests 3,571 1,994 2,965 1,833
Due from cooperatives under Plasma
scheme 12,929 11,924 8,055 6,240
16,500 13,918 11,020 8,073
---------- ------ ------ ------
The non-controlling interests in PT Alno Agro Utama and PT
Cahaya Pelita Andhika have acquired their interests on deferred
terms (see note 25 , Credit risk). In 2017, there was a change in
the ownership of the non-controlling interests in PT Sawit Graha
Manunggal, PT Karya Kencana Sentosa Tiga, PT Riau Agrindo Agung and
PT Empat Lawang Agro Plantation which was similarly acquired on
deferred terms (see note 25, 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 of $19,078,000 (2018: $8,136,000) which is
recoverable from the cooperatives, the details are disclosed in
note 15.
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 used Inter-relationship
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% (2018: 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 6.78%
(2018: 6.58%).
----------------------- ------------ --------------------------
The details of the expected credit losses ("ECL") are disclosed
in note 15.
13 Inventories
2019 2018
$000 $000
Estate and mill consumables 5,332 5,916
Processed produce for sale 3,420 3,624
------- -------
8,752 9,540
------- -------
14 Biological assets
2019 2018
$000 $000
At 1 January 4,093 6,772
Changes in fair value less cost to sell 89,706 92,758
Decreases due to harvest (86,451) (95,044)
Exchange translations 226 (393)
----------
At 31 December 7,574 4,093
---------- ----------
The valuation of the unharvested FFB was carried out internally
for each plantation of the Group and confirmed by external valuers.
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 two months' post balance sheet
date.
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 FFB selling
produce FFB selling price The higher the selling price,
price less harvesting the higher the fair value
cost Harvesting
cost The higher the harvesting
cost, the lower the fair
value
----------------------- --------------- -------------------------------
15 Trade and other receivables
2019 2018
$000 $000
Trade receivables 1,775 1,123
Other receivables 3,610 3,638
Prepayments and accrued income 389 442
--------
5,774 5,203
-------- --------
The carrying amount of trade and other receivables classified as
amortised cost approximates fair value.
As at 31 December 2019, trade receivables of $1,490,000 (2018:
$860,000) were past due but not impaired. They were related to the
customers with no default history and substantially secured by bank
guarantee. The ageing analysis of trade receivables of the Group
are as follows:
2019 2018
$000 $000
Neither past due nor impaired 285 263
Past due but not impaired
-------- -------
31 to 60 days 1,091 518
61 to 90 days 258 154
91 to 120 days 141 146
> 120 days - 42
-------- -------
1,490 860
-------
1,775 1,123
-------- -------
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 10-year period prior
to the year end and forward-looking information on macroeconomic
factors affecting the Group's customers. The historical loss rate
for trade receivables is considered to be 0% hence no ECL have been
recognised.
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; or
- 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.
Movements on the Group's loss provision on current and
non-current other receivables and financial guarantee contracts are
as follows:
2019 2018
$000 $000
At 1 January 308 -
Loss provision during the year 5,965 308
At 31 December 6,273 308
-------- -------
At 31 December 2019, the expected loss provision for other
receivables is as follows:
Gross Loss Net carrying
carrying provision amount
amount $000 $000
$000
2019
Other receivables (note 15) 3,654 (44) 3,610
Receivables: non-current (note
12)
- Due from non-controlling interests 3,607 (36) 3,571
- Due from cooperatives under
Plasma scheme 19,078 (6,149) 12,929
26,339 (6,229) 20,110
----------- ------------ --------------
Financial guarantee contracts
(note 24) - (44) (44)
----------- ------------ --------------
26,339 (6,273) 20,066
----------- ------------ --------------
Gross Loss Net carrying
carrying provision amount
amount $000 $000
$000
2018
Other receivables (note 15) 3,673 (35) 3,638
Receivables: non-current (note
12)
- Due from non-controlling
interests 2,995 (30) 2,965
- Due from cooperatives under
Plasma scheme 8,136 (81) 8,055
14,804 (146) 14,658
----------- ------------ --------------
Financial guarantee contracts
(note 24) - (162) (162)
----------- ------------ --------------
14,804 (308) 14,496
----------- ------------ --------------
16 Loans and borrowings
2019 2018
---------------------- ------------------
Book value Fair value Book value Fair
value
$000 $000 $000 $000
Non-current
Long-term loan (b) - - 8,203 7,742
- - 8,203 7,742
---------- ---------- ---------- ---------
Current
Long-term loan (a) - - 1,312 1,312
Long-term loan (b) 8,203 7,943 9,766 9,766
---------- ---------- ---------- ---------
8,203 7,943 11,078 11,078
---------- ---------- ---------- ---------
Total loans and borrowings 8,203 7,943 19,281 18,820
Amounts repayable after more than
one year, as follows:
in more than one year but not more
than two years - 8,203
in more than two years but not more - -
than five years
- 8,203
---------- ----------
(a) A subsidiary company, PT Hijau Pryan Perdana, has obtained a
long-term loan of $10 million for a period of seven years
(including two years grace repayment period) to support the capital
expenditure requirement for planting, development and maintenance
of oil palm estate and to finance mill construction and other
property, plant and equipment owned by the subsidiary company as
well as to utilise for repayment of amount due to related parties.
It is secured by the subsidiary company's land with a carrying
amount of $6.3 million (2018: $5.9 million) measured at fair value
and its plantation with a carrying amount of $6.3 million (2018:
$6.6 million) as at 31 December 2019. The loan is also guaranteed
by PT Tasik Raja and by the Company. This loan bears interest at a
rate based on Base Lending Rate which is payable quarterly in
arrears . Average interest rate in 2019 was about 6.78% (2018:
6.48%). The loan was fully paid during the year.
(b) Another subsidiary company, PT Sawit Graha Manunggal, has
obtained a long-term loan of $35 million for a period of eight
years (including four years grace repayment period) to support the
capital expenditure requirement for planting, development and
maintenance of oil palm estate and to finance oil mill construction
and other property, plant and equipment owned by the subsidiary
company. It is secured by the subsidiary company's land with a
carrying amount of $5.8 million (2018: $5.3 million) measured at
fair value and its plantation with a carrying amount of $23.0
million (2018: $23.4 million) as at 31 December 2019 and is
guaranteed by the Company. This loan bears interest at a rate based
on SIBOR + 4.5% + Liquidity Premium which is payable quarterly in
arrears. Average interest rate in 2019 was about 6.78% (2018:
6.68%). The loan is repayable from 30 December 2016 to 30 September
2020.
All the loans and borrowings are denominated in USD. The effect
of changes in foreign exchange rates is disclosed in note 25.
The fair value of the items classified as loans and borrowings
is disclosed below and is classified as Level 3 in the fair value
hierarchy:
2019 2018
---------------------- ------------------
Book value Fair value Book value Fair
value
$000 $000 $000 $000
Loans and borrowings 8,203 7,943 19,281 18,820
The fair value for disclosure purposes has been determined using
discounted cash flows. Significant inputs include the discount rate
used to reflect the credit risk associated with the Group. The fair
value reduces as higher discount rate being used.
17 Trade and other payables
2019 2018
$000 $000
Trade payables 5,028 7,483
Other payables 3,588 4,724
Accruals 7,494 7,876
--------- ---------
16,110 20,083
--------- ---------
The carrying amount of trade and other payables classified as
financial liabilities measured at amortised cost approximates fair
value.
18 Deferred tax
The movement on the deferred tax account as shown below:
2019 2018
$000 $000
At 1 January (8,893) (13,081)
Recognised in income statement:
Tax expense 3,220 3,059
BA movement (930) 571
Revaluation of leasehold land 245 230
Recognised in other comprehensive income:
Revaluation of leasehold land 577 (45)
Retirement benefits 256 (298)
Exchange differences (271) 671
At 31 December (5,796) (8,893)
--------- ----------
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
2019
Revaluation surplus - (22,479) (22,479) 245 577
Retirement benefits 2,834 - 2,834 420 256
BA movement - (2,010) (2,010) (930) -
Unutilised tax losses 14,170 - 14,170 1,152 -
Unremitted earnings - (319) (319) - -
Other temporary differences 2,008 - 2,008 1,648 -
-------- ------------ --------- ------------ -------------
Tax assets / (liabilities) 19,012 (24,808) (5,796) 2,535 833
Set off of tax (7,761) 7,761 - - -
-------- ------------ --------- ------------ -------------
Net tax assets / (liabilities) 11,251 (17,047) (5,796) 2,535 833
-------- ------------ --------- ------------ -------------
2018
Revaluation surplus - (22,316) (22,316) 230 (45)
Retirement benefits 2,056 - 2,056 248 (298)
BA movement - (1,022) (1,022) 571 -
Unutilised tax losses 12,459 - 12,459 2,656 -
Unremitted earnings - (292) (292) - -
Other temporary differences 111 111 222 155 -
-------- ------------ --------- ------------ -------------
Tax assets / (liabilities) 14,626 (23,519) (8,893) 3,860 (343)
Set off of tax (3,479) 3,479 - - -
-------- ------------ --------- ------------ -------------
Net tax assets / (liabilities) 11,147 (20,040) (8,893) 3,860 (343)
-------- ------------ --------- ------------ -------------
2019 2018
$000 $000
A deferred tax asset has not been recognised
for the following items:
Unutilised tax losses 19,142 17,228
The Groups 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 , due to their respective plantation assets
becoming more mature and historically this resulting in the
companies becoming profitable. However, the Group does not
recognise the tax losses in certain companies within the Group as
tax assets as the future recoverability of losses of these
companies cannot be certain. The time limit on utilisation of tax
losses is subject to the agreement of the relevant tax authorities.
As of 31 December 2019, the relevant time limits are 5 years in
Indonesia, 7 years in Malaysia and unlimited in UK.
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
$635,809,000 (2018 - $650,475,000). 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, or such a reversal would not give rise to an
additional tax liability.
19 Retirement benefits
The Group operates two defined benefit schemes in respect of its
Indonesian operations in accordance with Indonesia Labour Law No.
13/2003 ("the Law") dated 25 March 2003. The law does not impose
funding requirements on the Company to create a fund asset to pay
the defined benefit obligations.
The first scheme is a defined benefit pension scheme offered to
certain employees. This scheme is funded and managed by SKU UKINDO
Pension Fund authorised by the Ministry of Finance of the Republic
of Indonesia. When an employee reaches the mandatory retirement
age, dies or becomes disabled, the Group shall pay the higher of
the benefit from the pension scheme and the benefit calculated
under the Law. The asset value of the pension scheme is adequate to
fund the annual payment of benefits.
The Group also established a funding programme through a savings
plan managed by PT Asuransi Allianz Life Indonesia for the payment
of severance / pension for eligible staff. The assets of the fund
are to be used only to settle defined benefit obligations. The
asset value of the funding programme is adequate to fund the annual
payment of benefits.
The scheme is valued by an actuary at the end of each financial
year. The major assumptions used by the actuary were:
2019 2018
Rate of increase in wages 8.0% 8.0%
Rate of return on scheme assets 8.5% 8.5%
Discount rate 8.0% 8.5%
Mortality rate* 100% TMI3 100% TMI3
Disability rate 10% TMI3 10% TMI3
* Mortality rate was derived from observation of Indonesian life
insurance policyholders released in 2011 and load 10% to allow for
disability.
The Group also operates a non-contributory non-funded retirement
plan for staff in Indonesia. Retirement benefits are paid to
employees in a single lump sum at the time of retirement.
Retirement benefits are accrued by the Group and charged in the
income statement based on individual employee's service up to the
end of the financial year.
The Group provides other long-term employee benefits in the form
of Long Service Award. Employees who have 10, 20 or 25 years of
continuous service will receive Long Service Award amounting up to
2 months of basic salary.
2019 2018
$000 $000
Service cost
Current service cost 1,597 1,538
Past service cost 427 (445)
Net interest expense 734 635
Actuarial gain / (loss) 31 (77)
------- -------
Total employee benefits expense 2,789 1,651
------- -------
(i) Reconciliation of defined benefit obligation and fair value of scheme assets
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 2018 (7,957) (5,379) (13,336) 4,314 - 4,314 (3,643) (5,379) (9,022)
Service cost -
current (629) (909) (1,538) - - - (629) (909) (1,538)
Service cost -
past 268 177 445 - - - 268 177 445
Interest (cost)
/ income (545) (402) (947) 312 - 312 (233) (402) (635)
Actuarial gain - 77 77 - - - - 77 77
-------- --------- ---------- ------- --------- -------- -------- --------- --------
Included in
comprehensive
income (906) (1,057) (1,963) 312 - 312 (594) (1,057) (1,651)
Remeasurement gain /
(loss)
Actuarial gain /
(loss) from:
-------- --------- ---------- ------- --------- -------- -------- --------- --------
Adjustments
(experience) 106 (27) 79 - - - 106 (27) 79
Financial
assumptions 655 648 1,303 - - - 655 648 1,303
Return on plan
assets (exclude
interest) - - - (190) - (190) (190) - (190)
-------- --------- ---------- ------- --------- -------- -------- --------- --------
Included in other
comprehensive
income 761 621 1,382 (190) - (190) 571 621 1,192
Effect of
movements in
exchange
rates 510 352 862 (283) - (283) 227 352 579
Employer
contributions - - - 401 - 401 401 - 401
Benefits paid 346 142 488 (231) - (231) 115 142 257
-------- --------- ---------- ------- --------- -------- -------- --------- --------
Other movements 856 494 1,350 (113) - (113) 743 494 1,237
At 31 December 2018 (7,246) (5,321) (12,567) 4,323 - 4,323 (2,923) (5,321) (8,244)
-------- --------- ---------- ------- --------- -------- -------- --------- --------
Defined benefit obligation Fair value of scheme Net defined
assets scheme
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 31 December 2018 (7,246) (5,321) (12,567) 4,323 - 4,323 (2,923) (5,321) (8,244)
Service cost -
current (675) (922) (1,597) - - - (675) (922) (1,597)
Service cost -
past (420) (7) (427) - - - (420) (7) (427)
Interest (cost)
/ income (630) (485) (1,115) 381 - 381 (249) (485) (734)
Actuarial loss - (31) (31) - - - - (31) (31)
-------- --------- --------- ------- --------- ------- -------- --------- ---------
Included in
comprehensive
income (1,725) (1,445) (3,170) 381 - 381 (1,344) (1,445) (2,789)
Remeasurement
(loss) / gain
Actuarial (loss)
/ gain from:
-------- --------- --------- ------- --------- ------- -------- --------- ---------
Adjustments
(experience) (144) 41 (103) - - - (144) 41 (103)
Financial
assumptions (391) (367) (758) - - - (391) (367) (758)
Return on plan
assets
(exclude
interest) - - - (162) - (162) (162) - (162)
-------- --------- --------- ------- --------- ------- -------- --------- ---------
Included in other
comprehensive
income (535) (326) (861) (162) - (162) (697) (326) (1,023)
Effect of
movements in
exchange
rates (335) (250) (585) 192 - 192 (143) (250) (393)
Employer
contributions - - - 637 - 637 637 - 637
Benefits paid 475 198 673 (199) - (199) 276 198 474
-------- --------- --------- ------- --------- ------- -------- --------- ---------
Other movements 140 (52) 88 630 - 630 770 (52) 718
At 31 December 2019 (9,366) (7,144) (16,510) 5,172 - 5,172 (4,194) (7,144) (11,338)
-------- --------- --------- ------- --------- ------- -------- --------- ---------
(ii) Disaggregation of defined benefit scheme assets
The fair value of the funded assets is analysed as follows:
2019 2018
$000 $000
Bonds
- Corporate bonds 24 -
- Government bonds - 28
- Mutual fund bonds 288 214
------ ------
312 242
Mutual funds - 351
Cash / deposits 4,860 3,730
------ ------
5,172 4,323
------ ------
(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%) (1,559) 1,723
(+ / -
Growth in wages 1%) 1,775 (1,629)
(+ / -
Future mortality rate 10%) 68 (74)
The weighted average duration of the defined benefit obligation
is 14.65 years (2018: 15.55 years).
The company expects to pay contributions of $620,000 to the
funded plans in 2020. For the unfunded plans, the company pays the
benefits directly to the individuals; the company expects to make
direct benefit payments of $282,000 in 2020.
At 31 December 2019, the following benefits, which reflect
expected future service as appropriate, are expected to be
paid:
Year $000
2020 902
2021 to 2024 5,061
2025 to 2029 12,868
after 2029 129,942
Total 148,773
--------
20 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
2019 2018 2019 2018
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
(568.0p/share) 2,465
End of year (574.0p/share) 2,577
No treasury share was purchased in 2019 (2018: 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.
21 Ultimate controlling shareholder
At 31 December 2019 , Genton International Limited ("Genton"), a
company registered in Hong Kong, held 20,247,814 (2018: 20,247,814)
shares of the Company representing 51.1% (2018: 51.1%) of the
issued share capital of the Company. Together with other deemed
interested parties, the Genton's shareholding totals 20,551,914 or
51.9%. Madam Lim Siew Kim, a Director of the Company, has advised
the Company that she is the controlling shareholder of Genton
International Limited.
22 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.
During the year the Company engaged UHY Hacker Young LLP, an
accounting firm of which Dato' John Lim Ewe Chuan was a partner
(until 30 April 2019), to provide company secretarial and taxation
services for a fee of $25,229 (2018: $32,517). The services
provided are on an arm's length basis. The balance outstanding at
the year end was $204 (2018: $6,999).
An office premises lease agreement was entered with Infra Sari
Sdn Bhd, a company controlled by Madam Lim Siew Kim. The rental
paid during the year was $352,845 (2018: $314,259). There was no
balance outstanding at the year end (2018: Nil).
In 2019, a land lease agreement was entered with Kuang Rong
Holdings Sdn Bhd, company controlled by Madam Lim Siew Kim. The
rental paid during the year was $33,871. There was no balance
outstanding at the year end.
In 2019, the final dividend paid to Genton International
Limited, a company controlled by Madam Lim Siew Kim, was $607,434
for the year ended 31 December 2018 (2018: $809,913 for the year
ended 31 December 2017). The final dividend paid to other companies
controlled by Madam Lim Siew Kim was $9,123 for the year ended 31
December 2018 (2018: $12,164 for the year ended 31 December 2017).
There was no balance outstanding at the year end.
23 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.
24 Guarantees and other financial commitments
2019 2018
$000 $000
Capital commitments at 31 December
Contracted but not provided - normal estate
operations 14 285
Authorised but not contracted - plantation
and mill development 13,073 22,667
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 12, in
relation to a loan taken by KBSS from PT Bank Mandiri (Persero)
Tbk. of Rp226.02 billion ($16.3 million) (2018: Rp226.02 billion,
$15.6 million). The corporate guarantee remains until the loan is
fully settled by 23 December 2027. The HGU (land 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 $9.5 million as at 31 December 2019 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), with 10 (Ten) years maturity period
effective from 24 July 2017 with an interest rate of 13.25% per
annum. KPPM pledges its 147.04 hectares oil palm plantation located
in Desa Serami Baru, Kecamatan Malin Deman, Kabupaten Mukomuko,
Bengkulu and its plantation with a carrying amount of $0.7 million
as at 31 December 2019 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 financial guarantee was $44,000
(2018: $162,000). The details of the ECL were disclosed in note
15.
25 Disclosure of financial instruments and other risks
The Group's principal financial instruments comprised cash,
short and long-term bank loans, trade receivables and payables 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 2019 and 2018 were:
Financial
Amortised liabilities Total carrying
cost at value
$000 amortised $000
cost
$000
2019
Non-current receivables 16,500 - 16,500
Trade and other receivables 5,385 - 5,385
Cash and cash equivalent 84,846 - 84,846
Loans and borrowings due within
one year - (8,203) (8,203)
Trade and other payables - (16,110) (16,110)
106,731 (24,313) 82,418
----------- ------------- ----------------
Financial
liabilities Total carrying
Amortised at amortised value
cost cost $000
$000 $000
2018
Non-current receivables 11,020 - 11,020
Trade and other receivables 4,761 - 4,761
Cash and cash equivalent 112,212 - 112,212
Loans and borrowings due within
one year - (11,078) (11,078)
Trade and other payables - (20,083) (20,083)
Loans and borrowings due after
one year - (8,203) (8,203)
----------- ------------- ----------------
127,993 (39,364) 88,629
----------- ------------- ----------------
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, and borrowings due within one year.
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.
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 12); and
- Loans and borrowings (note 16).
The principal financial risks to which the Group is exposed
are:
- commodity selling price changes;
- exchange movements; and
which, in turn, can affect financial instruments and/or
operating performance.
With the exception described below, 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 $55,797,000 (2018:
$57,989,000), while the balance sheet value of the Group's share of
underlying assets at 31 December 2019 amounted to $401,157,000
(2018: $371,980,000).
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.
The Group's subsidiaries which are borrowing in US Dollar, as
set out under Liquidity Risk below could face significant exchange
losses in the event of depreciation of their local currency - and
vice versa. This risk is mitigated to some extent by US Dollar
denominated cash balances in those subsidiaries. The Company will
continue to partially match US Dollar cash balances with US Dollar
financial liabilities. The average interest rate on local currency
deposits was 4.44% higher (2018: 4.85% higher) than on US Dollar
deposits whereas interest rate for local currency borrowing was
about 2.72% higher (2018: 4.09% higher) as compared to US Dollar
borrowing. The unmatched balance at 31 December 2019 is represented
by the $5,910,000 shown in the table below (2018: $806,000). If the
Group's net cash position continues to improve then US Dollar cash
balances will continue to increase through 2020.
The table below shows the net monetary assets and liabilities of
the Group as at 31 December 2019 and 2018 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
2019
Rupiah 3,882 - 3,882
US Dollar - 475 475
Ringgit 2,028 - 2,028
---------------- -------------- ------------
Total 5,910 475 6,385
---------------- -------------- ------------
2018
Rupiah (1,921) - (1,921)
US Dollar - 991 991
Ringgit 1,115 - 1,115
---------------- -------------- ------------
Total (806) 991 185
---------------- -------------- ------------
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 is:
2019 2018
---------------- -----------------
-10% in +10% in Carrying -10% +10% in
Carrying 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 16,500 (1,172) 1,432 11,020 (730) 892
Trade and other receivables 5,385 (305) 372 4,761 (246) 301
Cash and cash equivalents 84,846 (7,651) 9,352 112,212 (10,093) 12,335
Financial Liabilities
Borrowings due within
one year (8,203) 746 (911) (11,078) 1,007 (1,231)
Trade and other payables (16,110) 1,349 (1,649) (20,083) 1,713 (2,094)
Borrowings due after
one year - - - (8,203) 746 (911)
------- ------- -------- -------
Total (decrease) /
increase (7,033) 8,596 (7,603) 9,292
------- ------- -------- -------
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 2019, the Group had the following
loans and facilities:
Borrowings Facilities Repayable
$000 $000
Indonesia:
US Dollar denominated - long-term 2020 (note
loan 8,203 35,000 16)
The total loan borrowings together with interest at current
rates are as follows:
2019 2018
$000 $000
Principal 8,203 19,281
Interest 278 1,275
------------ -------
Total 8,481 20,556
------------ -------
Amount repayable within one year 8,481 12,079
Amount repayable after one year but
not more than two years - 8,477
8,481 20,556
------------ -------
Forecasts prepared in December 2019 indicate that the Group has
sufficient funds to meet its development plans and financial
commitments through 2020.
All the long-term loans include varying covenants covering
minimum net worth and cash balances, dividend and interest cover
and debt service ratios. The subsidiary companies concerned have
complied with the covenants as stated in the loan agreement.
Interest rate risk
Both the Group's surplus cash and its borrowings are subject to
variable interest rates. The Group had net cash throughout 2019, so
the effect of variations in borrowing rates is more than offset. A
1% change in the borrowing or deposit interest rate would not have
a significant impact on the Group's reported results as shown in
the table below. The rates on borrowings are set out in note
16.
2019 2018
-------------------- --------------------
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
Cash and cash equivalents 84,846 (810) 810 112,212 (1,053) 1,053
Financial Liabilities
Borrowings due within
one year (8,203) 82 (82) (11,078) 111 (111)
Borrowings due after
one year - - - (8,203) 82 (82)
Total (decrease)
/ increase (728) 728 (860) 860
--------- --------- --------- -----------
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
and cash) at 31 December were:
Total Fixed rate Variable No interest
rate
$000 $000 $000 $000
2019
Sterling 475 - 20 455
US Dollar 17,868 3,607 8,892 5,369
Rupiah 83,991 - 68,687 15,304
Ringgit 4,397 - 3,393 1,004
------- ---------- -------- -----------
Total 106,731 3,607 80,992 22,132
------- ---------- -------- -----------
2018
Sterling 991 - 19 972
US Dollar 22,556 2,995 11,660 7,901
Rupiah 99,286 - 89,368 9,918
Ringgit 5,160 - 4,292 868
------- ---------- -------- -----------
Total 127,993 2,995 105,339 19,659
------- ---------- -------- -----------
Long-term receivables of $3,607,000 (2018: $2,995,000) comprise
US Dollar denominated amounts due from non-controlling interests as
described in note 12 on which interest is due at a fixed rate of
6%.
Average US Dollar deposit rate in 2019 was 2.43% (2018: 1.88%)
and Rupiah deposit rate was 6.86% (2018: 6.73%).
Interest rate profiles of the Group's financial liabilities
(comprising bank loans and other financial liabilities and trade
and other payables) at 31 December were:
Total Fixed rate Variable No interest
rate
$000 $000 $000 $000
2019
Sterling - - - -
US Dollar (9,338) - (8,203) (1,135)
Rupiah (14,750) - - (14,750)
Ringgit (225) - - (225)
-------- ---------- -------- -----------
Total (24,313) - (8,203) (16,110)
-------- ---------- -------- -----------
2018
Sterling - - - -
US Dollar (20,383) - (19,281) (1,102)
Rupiah (18,620) - - (18,620)
Ringgit (361) - - (361)
-------- ---------- -------- -----------
Total (39,364) - (19,281) (20,083)
-------- ---------- -------- -----------
Weighted average interest rate on variable rate borrowings was
6.78% in 2019 (2018: 6.66%).
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
-- Debt instruments 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 2019 is disclosed in note 15. The
remaining amount in which no ECL provision was recognised is deemed
to be recoverable, with low probability of default.
In respect of the previous financial years, the impairment of
trade receivables was assessed based on the incurred loss model.
Individual receivables were assessed to determine whether there was
objective evidence that a loss event had occurred and a provision
for impairment was recognised accordingly when the loss event
occurred. Information in respect of the provision for impairment
loss in the prior financial year is disclosed in note 15.
(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 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
which is calculated as the excess over the value of the associated
land and plantation assets.
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 to. Accordingly,12-month ECL have been recognised at 1% on
the financial guarantee contracts and disclosed in note 24.
Information regarding other non-current assets and trade and
other receivables that are neither past due nor impaired is
disclosed in notes 12 and 15 respectively. Amounts receivable from
local partners, amounting to $3,607,000 (2018: $2,995,000), 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 12, 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 15.
Deposits with banks and other financial institutions, investment
securities and derivatives that are neither past due nor impaired
are placed with, 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 24.
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 $401,157,000
at 31 December 2019 (2018: $371,980,000).
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 2019, the Group had no net borrowings
(2018: 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.
26 Subsidiary companies
The principal subsidiaries of the Company all of which have been
included in these consolidated financial statements are as
follows:
Country of Non-controlling
incorporation Proportion interests
and principal of ownership ownership
place of interest / voting interest
Name business at 31 December at 31 December
2019 2018 2019 2018
Principal sub-holding company
United
Anglo-Indonesian Oil Palms Limited Kingdom 100% 100% - -
Management company
United
Indopalm Services Limited Kingdom 100% 100% - -
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% - - -
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 90% 90% 10% 10%
PT Empat Lawang Agro Perkasa* Indonesia 95% 95% 5% 5%
PT Hijau Pryan Perdana Indonesia 80% 80% 20% 20%
PT Kahayan Agro Plantation* Indonesia 78% 95% 22% 5%
PT Karya Kencana Sentosa Tiga* Indonesia 95% 95% 5% 5%
PT Mitra Puding Mas Indonesia 90% 90% 10% 10%
PT Musam Utjing Indonesia 75% 75% 25% 25%
PT Riau Agrindo Agung* Indonesia 95% 95% 5% 5%
PT Sawit Graha Manunggal Indonesia 82% 82% 18% 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% - -
* Following a restructure of the group's subsidiaries during the
year, the Company's effective ownership was decreased for a number
of entities however there was no loss of control. The resulting
impact on the equity attributable to owners of the parent was an
increase of $1,816,000.
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 are incorporated in Malaysia and are direct
subsidiaries of the Company. The Indonesian operating companies 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
27 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
Puding Mas Utama Jaya Graha
Manunggal
18%
NCI percentage 20% 10% 10% 20%
Summarised income
statement
For the year 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018
ended 31
December
$000 $000 $000 $000 $000 $000 $000 $000 $000 $000
---------- ---------- --------- --------- --------- -------- --------- --------- ---------- ---------
Revenue 45,786 47,054 27,121 32,557 40,403 49,149 36,060 43,970 32,022 34,507
(Loss) /
Profit after
tax (31,473) 12,043 3,898 6,689 1,653 5,632 6,225 16,158 12,482 (3,458)
Other
comprehensive
income
/ (expense) 7,208 (12,219) 3,384 (4,845) 3,962 (5,205) 6,438 (8,953) (21) 203
Total
comprehensive
(expenses)
/ income (24,265) (176) 7,280 1,844 5,615 427 12,663 7,205 12,461 (3,255)
(Loss) /
Profit
allocated
to NCI (6,295) 2,409 390 669 165 563 1,245 3,232 2,272 (629)
Other
comprehensive
income
/ (expenses)
allocated to
NCI 1,442 (2,444) 338 (485) 396 (521) 1,288 (1,791) (4) 37
Total
comprehensive
(expenses)
/ income
allocated to
NCI (4,853) (35) 728 184 561 42 2,533 1,441 2,268 (592)
Dividends paid
to NCI - - 56 8 3 11 32 32 - -
Summarised
statement of
financial
position
As at 31 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018
December
$000 $000 $000 $000 $000 $000 $000 $000 $000 $000
---------- ---------- --------- --------- --------- -------- --------- --------- ---------- ---------
Non-current
assets 123,795 252,877 76,145 35,923 66,899 49,829 129,742 106,720 81,655 80,325
Current assets 15,948 40,901 7,158 41,094 25,386 36,560 12,927 25,233 14,941 40,137
Non-current
liabilities (4,686) (123,803) (3,807) (3,332) (8,088) (7,069) (3,561) (3,209) (77,001) (82,382)
Current
liabilities (3,600) (12,912) (3,656) (4,183) (3,377) (3,575) (3,915) (4,917) (11,089) (42,033)
Net assets 131,457 157,063 75,840 69,502 80,820 75,745 135,193 123,827 8,506 (3,953)
Accumulated NCI 26,291 31,413 7,584 6,950 8,082 7,575 27,039 24,765 1,548 (719)
Summarised cash
flows
For the year 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018
ended 31
December
$000 $000 $000 $000 $000 $000 $000 $000 $000 $000
---------- ---------- --------- --------- --------- -------- --------- --------- ---------- ---------
Cash flows
(used in) /
from
operating
activities (505) 16,548 (13,443) (13,805) 9,688 (2,308) 4,158 16,591 15,404 (942)
Cash flows from
/ (used in)
investing
activities 103,978 (21,005) (631) (1,958) (17,593) (3,187) (12,654) (20,502) (5,285) (7,519)
Cash flows
(used in) /
from
financing
activities (122,378) 25,697 (557) (77) (5) (21) (45) (159) (10,575) 9,247
Net cash
(outflows) /
inflows (18,905) 21,240 (14,631) (15,840) (7,910) (5,516) (8,541) (4,070) (456) 786
28 Notes supporting statement of cash flows
Cash and cash equivalents for purposes of the statement of cash
flows comprised:
2019 2018
$000 $000
Cash at bank available on demand 29,443 28,485
Short-term deposits 55,381 83,707
Cash in hand 22 20
------- --------
84,846 112,212
------- --------
Significant non-cash transactions from investing 2019 2018
activities are as follows:
$000 $000
Property, plant and equipment purchased but
not yet paid at year end 312 286
Non-cash transactions from financing activities are shown in the
reconciliation of liabilities from financing transactions as
follows:
Non-current Current Non-current
loans and loans and lease Current
borrowings borrowings liabilities lease Total
liabilities
$000 $000 $000 $000 $000
At 1 January 2019 (8,203) (11,078) - - (19,281)
Cash Flows - 11,096 - 210 11,306
Non-cash flows
- Effect of foreign
exchange (169) 151 (9) (4) (31)
- New lease - - (474) (464) (938)
- Loans and borrowings
classified as non-current
at 31 December 2018 becoming
current during 2019 8,372 (8,372) - - -
- Interest accruing
during the year - - 27 36 63
------------ ------------ -------------- -------------- ---------
- (8,203) (456) (222) (8,881)
------------ ------------ -------------- -------------- ---------
Non-current Current
loans and loans and Non-current Current
borrowings borrowings lease lease Total
liabilities liabilities
$000 $000 $000 $000 $000
At 1 January 2018 (19,281) (8,594) - - (27,875)
Cash Flows - 8,735 - - 8,735
Non-cash flows
- Effect of foreign
exchange - (141) - - (141)
- Loans and borrowings
classified as non-current
at 31 December 2017 becoming
current during 2018 11,078 (11,078) - - -
(8,203) (11,078) - - (19,281)
------------ ------------ -------------- -------------- ---------
29 Leases
2019
$000
Analysed as:
Non-current (456)
Current (222)
------
(678)
------
The following table sets out the carrying amounts, the weighted
average incremental borrowing rate per annum is 6.8%.
2019
$000
Maturity analysis
Within one year (222)
Later than one year but not more than two
years (237)
Later than two years but not more than five
years (219)
Later than five years -
------
(678)
------
The Group does not face a significant liquidity risk with regard
to its lease liabilities.
Amounts recognised in income statement:
2019
$000
Depreciation expense on right-of-use assets (184)
Interest expense on lease liabilities (41)
Expense relating to short-term leases (403)
Expense relating to leases of low value assets (6)
(634)
-------
At 31 December 2019, the Group is committed to $0.01 million for
short-term leases.
All the lease payment is fixed payments. The total cash outflow
for leases amount to $0.21 million.
The Group leases a piece of land and office under the
right-of-use assets. The lease term is between 3 to 4 years. (2018:
0 year). 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 11.
Right-of-Use assets
Land Building Total
$000 $000 $000
At 1 January 2019 - - -
Additions 221 611 832
Amortisation (31) (153) (184)
Effect of foreign exchange 3 8 11
At 31 December 2019 193 466 659
----- --------- ------
Lease liabilities
Land Building Total
$000 $000 $000
At 1 January 2019 - - -
Additions (224) (622) (846)
Interest expense (6) (35) (41)
Lease payments 34 176 210
Effect of foreign exchange - (1) (1)
At 31 December 2019 (196) (482) (678)
------ --------- ------
30 First time adoption of IFRS 16
In the current year, the Group has applied IFRS 16 Leases (as
issued by the IASB in January 2016) that is effective for annual
periods that begin on or after 1 January 2019.
IFRS 16 introduces new or amended requirements with respect to
lease accounting. It introduces significant changes to lessee
accounting by removing the distinction between operating and
finance lease and requiring the recognition of a right-of-use asset
and a lease liability at commencement for all leases, except for
short-term leases and leases of low value assets when such
recognition exemptions are adopted. In contrast to lessee
accounting, the requirements for lessor accounting have remained
largely unchanged. Details of these new requirements are described
in Note 2. There is no impact of the adoption of IFRS 16 on the
Group's consolidated financial statements during the date of
initial application.
(a) Impact of the new definition of a lease
The Group has made use of the practical expedient available on
transition to IFRS 16 not to reassess whether a contract is or
contains a lease. Accordingly, the definition of a lease in
accordance with IAS 17 and IFRIC 4 will continue to be applied to
those leases entered or changed before 1 January 2019.
The change in definition of a lease mainly relates to the
concept of control. IFRS 16 determines whether a contract contains
a lease on the basis of whether the customer has the right to
control the use of an identified asset for a period of time in
exchange for consideration. This is in contrast to the focus on
'risks and rewards' in IAS 17 and IFRIC 4.
The Group applies the definition of a lease and related guidance
set out in IFRS 16 to all lease contracts entered into or changed
on or after 1 January 2019 (whether it is a lessor or a lessee in
the lease contract). In preparation for the first-time application
of IFRS 16, the Group has carried out an implementation project.
The project has shown that the new definition in IFRS 16 will not
significantly change the scope of contracts that meet the
definition of a lease for the Group.
(b) Impact on Lessee Accounting
IFRS 16 changes how the Group accounts for leases previously
classified as operating leases under IAS 17, which were off balance
sheet.
Applying IFRS 16, for all leases (except as noted below), the
Group:
a. Recognises right-of-use assets and lease liabilities in the
consolidated statement of financial position, initially measured at
the present value of the future lease payments, with the
right-of-use asset adjusted by the amount of any prepaid or accrued
lease payments in accordance with IFRS 16:C8(b)(ii)
b. Recognises depreciation of right-of-use assets and interest
on lease liabilities in the consolidated income statement;
c. Separates the total amount of cash paid into a principal
portion (presented within financing activities) and interest
(presented within financing activities) in the consolidated
statement of cash flows.
Lease incentives (e.g. rent free period) are recognised as part
of the measurement of the right-of-use assets and lease liabilities
whereas under IAS 17 they resulted in the recognition of a lease
incentive, amortised as a reduction of rental expenses on a
straight line basis.
Under IFRS 16, right-of-use assets are tested for impairment in
accordance with IAS 36.
For short-term leases (lease term of 12 months or less) and
leases of low-value assets (which includes tablets and personal
computers, small items of office furniture and telephones), the
Group has opted to recognise a lease expense on a straight-line
basis as permitted by IFRS 16. This expense is presented within
'other expenses' in income statement.
31 Significant event subsequent to the end of the reporting
period
The World Health Organisation declared the 2019 Novel
Coronavirus infection ("COVID-19") a pandemic on 11 March 2020.
This is the first pandemic caused by a coronavirus.
Since these developments occurred subsequent to the end of the
reporting period, the COVID-19 pandemic is treated as a
non-adjusting event in accordance with IAS 10 Events after the
Reporting Period. Consequently, the financial statements for the
financial year ended 31 December 2019 do not reflect the effects
arising from this non-adjusting event.
The effects of COVID-19 would potentially impact the judgements
and assumptions used in the preparation of the financial statements
for the financial year ending 31 December 2020, such as expected
credit losses of financial assets.
The Group is in the process of assessing the financial reporting
impact of COVID-19 pandemic since ongoing developments remain
uncertain and cannot be reasonably predicted as at the date of
authorisation of the financial statements.
The Group anticipates that any potential financial reporting
impact of COVID-19 would be recognised in the financial statements
of the Group during the financial year ending 31 December 2020.
32 Posting of annual financial report
The Annual Financial Report will be posted to shareholders on or
before 3 June 2020. Copies of the Annual Financial Report will then
be available from the offices of the Company Secretary, CETC
(Nominees) Limited, Quadrant House, 6th Floor, 4 Thomas More
Square, London E1W 1YW and on the Company's website at
www.angloeastern.co.uk .
Copies of this announcement are available from the offices of
the Company Secretary, CETC (Nominees) Limited, Quadrant House, 6th
Floor, 4 Thomas More Square, London E1W 1YW and on the Company's
website.
Note: The information communicated in this announcement is
inside information for the purposes of Article 7 of Market Abuse
Regulation 596/2014.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR GCGDUXXDDGGG
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May 20, 2020 05:47 ET (09:47 GMT)
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