RNS Number:8711X
Plantation & General Investmnts.PLC
21 April 2004
Plantation & General Investments plc
Preliminary announcement of results for the year ended 31 December 2003
Extract from the Chairman's Statement
The Group profit before taxation for the year ended 31 December 2003 improved to
#364,000, after a loss of #187,000 in 2002. Operating profits, at just over #2
million, were nearly double the previous year's, despite the inclusion of a non
recurring charge of #278,000 incurred in appraising a major potential
acquisition; and also an increased charge of #210,000 for additional
contributions to the Group pension scheme. Interest costs of #1.6m were 25%
lower than they were in 2002.
The charge for corporation tax increased in line with the higher proportion of
oversea profits and there was a further charge for deferred taxation. Group
turnover was reduced considerably due to new terms of trading at Jacobs, Young &
Westbury, which I have mentioned in previous statements.
The Group's net borrowings were reduced by #458,000, to just under #12 million.
Approximately #300,000 of this reduction was due to exchange-rate adjustments on
foreign currency borrowings.
During 2003 the US dollar again depreciated against sterling, and this was
coupled with further weakening of the local currencies in countries where the
Group operates, particularly Zimbabwe. Taken together, these have reduced the
Group's total net assets by #2.8 million.
Profits from plantations were particularly good in 2003, and justified the
investment we have made over the past five years. They were achieved despite
lower prices for tea and coffee.
Our Zimbabwean estate, Eastern Highlands, had another difficult year, although
its results benefited from the market rate of exchange falling faster than the
local rate of inflation. In January 2004 the Zimbabwe Government introduced an
auction system for exchanging foreign currency. This produced a rate
significantly stronger than the market rate achieved in December 2003. If this
exchange rate persists for long, and combined with other new foreign exchange
regulations, it will eliminate Eastern Highlands' profits.
Khal-Amazi, the Zambian rose farm, increased its production, but its net margin
was eroded by an exchange loss on its Euro denominated borrowings. It is
currently expanding its greenhouses by 7 hectares, which will bring the total
area of cultivated roses to 22 hectares. This will be the Group's largest
capital project during 2004, and will increase production in a full year to
around 70 million stems.
The Group's wheelbarrow manufacturer, Chillington, had another poor year. The
disruptive effect of moving to its new site was much greater than envisaged.
These difficulties were coupled with the loss of a major customer and steel
price increases at the beginning of the year, which cut margins. Significant
management changes were made during the year, and the results for the first few
months of 2004 are in line with budget.
The Group is assessing the transition to International Accounting Standards,
which are currently scheduled to take effect from 1 January 2005. Although
detailed modifications and disclosures may be needed in several areas, the main
impact on the Group accounts is likely to be the incorporation of the pension
deficit.
Looking ahead, this year's results will again be heavily influenced by weather,
commodity prices, exchange rates and inflation. Although tea production in
Malawi got off to a slow start, due to late rains, it is now on budget and
prices are a little ahead of last year. Meanwhile, margins in Zimbabwe are being
materially reduced by the introduction of the new exchange controls and
inflation, which is still running at over 500% year on year.
Derek Netherton will be leaving the Board at the AGM, and I thank him for his
sharp eye and clear mind.
Rupert Pennant-Rea
21 April 2004
Review of activities
Tropical agriculture
The Group's principal division grows tea, roses, macadamia nuts and coffee in
the Southern African states of Malawi, Zambia and Zimbabwe, and rubber and tea
in Indonesia. Overseas Farmers Group in London markets the produce of the
Group's agricultural operations and provides support services. An increasing
proportion of tea produced has been sold directly and on forward contracts to
leading brands. The overall operating profit for the division increased by 58
per cent to #4,013,000.
Tea accounted for 72 per cent of the division's turnover. Total production for
the year was 18,871 tonnes of which 1,592 tonnes is made from the purchase of
green leaf from smallholders. This is a policy we are actively promoting to
support the local community in both Malawi and Zimbabwe. This is the 4th year in
succession that yield per hectare has increased and the total tea production
through our factories, including the smallholder tea, has increased over this
period by 35 per cent. Average market prices for tea were 7 per cent lower than
2002 and this is at the low end of the ten-year range. This was partly offset by
improvements in tea quality achieved in Malawi.
Rose production in Zambia increased by 9 per cent and shipments exceeded 50
million stems. Prices improved with the strengthening Euro and the contribution
to the division's turnover increased to 17 per cent.
The production from the Indonesian rubber estates rose by 1 per cent to 2,386
tonnes as the plantations continued to mature. Rubber prices, having fallen to
the lowest level for several decades, increased throughout the year and the
average price achieved represented a 40 per cent increase over 2002. The crop
contributed 7 per cent of this division's turnover.
Macadamia nut production in Malawi will rise steadily over the next 10 years as
trees come to maturity, the total delivered was 322 tonnes of nut in shell. The
arabica coffee crop, now only grown in Zimbabwe, increased to 320 tonnes.
The largest cost category of plantations is labour use and by improved practices
and increasing mechanisation, we have increased productivity throughout the
group. Over the last three years, yield per labour unit has increased by 25 per
cent.
Trading
Jacobs Young & Westbury, the importer of garden furniture and leisure products,
was substantially affected by the change in terms of trading reported last year.
The major customer, Homebase, has unilaterally moved us to an agency basis and
this has substantially reduced profits in 2003. However, this also significantly
reduced capital employed. Work to develop new business is under way and the
company has begun to supply other major UK retailers.
Manufacturing
Chillington Manufacturing, the UK's largest wheelbarrow maker, moved the
operation to a new site in 2002 to allow greater operating efficiency.
Complications which arose in the process of the move resulted in severe losses
which continued in 2003.
The manufacturing process and the management and control systems have been
completely overhauled and modernised. New senior management has been recruited
and the business is now operating efficiently. The loss of a major customer last
year and recent steel price increases will require some time to overcome, but
the business is expected to show substantial improvements in 2004.
Investment
The major project of 2003 has been the re-development of the Bloomfield tea
factory in Malawi. Total capital expenditure in the year was #1.3 million
(previous year #0.9 million) the majority of which was replacement of machinery
and vehicles on the plantations.
Outlook
Management in Zimbabwe continues to be severely hampered by the political
instability and periodic deficiencies in supplies. The run up to the forthcoming
elections could cause further disruption, but the major issue at the start of
the year is the new exchange control regulation and local inflation.
Tea prices have started the year better than last year and the price of rubber
is holding up well. Macadamia nut and coffee prices are also up. Roses have
started the year very much as the previous year.
While the exchange rate is likely to render Eastern Highlands Plantations
unprofitable this year, there should be a significant recovery at Chillington.
Richard Clothier
Chief Executive
21 April 2004
Consolidated profit & loss account
for the year ended 31 December 2003
CONTINUING OPERATIONS
2003 2002
Notes #000 #000
Turnover 22,913 47,219
-------- --------
Cost of sales (14,242) (37,211)
-------- --------
Gross profit 8,671 10,008
Operating expenses (6,651) (8,926)
-------- --------
Operating profit 2,020 1,082
Profit on disposal or closure of operations - 199
Profit on disposal of properties - 774
Profit on disposal of investments - 7
-------- --------
Profit before interest 2,020 2,062
Interest (1,591) (2,110)
-------- --------
Profit/(loss) after interest 429 (48)
Monetary working capital hyper-inflation (65) (139)
adjustment
-------- --------
Profit/(loss) before taxation 364 (187)
Taxation 1 (680) (265)
-------- --------
Loss after taxation (316) (452)
Minority interests 44 145
-------- --------
Loss for the year and
amount transferred from reserves (272) (307)
==== ====
Pence Pence
Loss per ordinary share (Basic) (0.5) (0.6)
Dividends per ordinary share 2 - -
Balance sheets at 31 December 2003
Group Company
2003 2002 2003 2002
#000 #000 #000 #000
Fixed assets
Intangible assets 325 380 - -
Tangible assets 22,819 25,173 30 39
Investments 45 50 33,616 34,415
--------- -------- -------- --------
23,189 25,603 33,646 34,454
--------- -------- -------- --------
Current assets
Stocks 2,200 2,918 - -
Debtors 1,806 2,701 44 111
Cash at bank and in hand 399 741 2,274 1,934
--------- -------- -------- --------
4,405 6,360 2,318 2,045
--------- -------- -------- --------
Creditors: amounts falling due
within one year (2,874) (2,618) (576) (484)
Debt finance
Other (3,866) (3,976) (1,324) (1,334)
--------- -------- -------- --------
(6,740) (6,594) (1,900) (1,818)
--------- -------- -------- --------
Net current (liabilities)/assets (2,335) (234) 418 227
--------- -------- -------- --------
Total assets less current
liabilities 20,854 25,369 34,064 34,681
--------- -------- -------- --------
Creditors: amounts falling due after
more than
one year
Debt finance (including amounts
relating to (9,494) (10,550) (8,418) (9,069)
convertible debt )
Other (346) (354) (300) (295)
--------- -------- --------- --------
(9,840) (10,904) (8,718) (9,364)
Provisions for liabilities and
charges (147) (229) - -
--------- -------- --------- --------
Net assets 10,867 14,236 25,346 25,317
Capital and reserves
Called up share capital 12,948 12,948 12,948 12,948
Share premium account 11,248 11,297 11,248 11,297
Capital redemption reserve 250 250 250 250
Revaluation reserves 781 970 - -
Profit and loss account (15,253) (12,496) 900 822
--------- -------- --------- --------
Shareholders' funds-Equity 9,974 12,969 25,346 25,317
Minority interest - - -
Equity 286 491 - -
Non-equity 607 776 - -
--------- -------- --------- --------
893 1,267 - -
--------- -------- --------- --------
10,867 14,236 25,346 25,317
Consolidated cash flow statement
for the year ended 31 December 2003 2003 2002
#000 #000
Cash flow from operating activities 3,114 3,504
Returns on investments and servicing of finance (1,695) (2,172)
Taxation - Oversea tax paid (39) (110)
Capital expenditure and financial investment (1,219) 187
Disposals - 821
-------- --------
Cash flow before financing 161 2,230
Financing -------- --------
Issue of shares (net of expenses) - 1
Loans (net of repayments) (634) 60
Capital elements of finance lease rentals payable (138) (219)
-------- --------
Total financing (772) (158)
-------- --------
(Decrease)/increase in cash in the year (611) 2,072
-------- --------
Reconciliation of net cash flow to movement in net debt
(Decrease)/increase in cash in the year (611) 2,072
Cash outflow/(inflow) from increase in debt 634 (60)
Cash outflow from reduction in finance lease liabilities 138 219
-------- --------
Change in net debt resulting from cash flows 161 2,231
New finance leases (13) (248)
Exchange translation differences 310 1,680
Net borrowing disposed with divisions - 22
-------- --------
Movement in net debt in the year 458 3,685
Net debt 1 January (12,427) (16,112)
-------- --------
Net debt 31 December (11,969) (12,427)
-------- --------
Reconciliation of operating profit to operating cash
flow
Operating profit 2,020 1,082
Depreciation 881 1,558
Amortisation of goodwill 55 55
Working capital (increase)/decrease
Stocks 718 5,132
Debtors 895 2,311
Creditors (452) (4,380)
Exchange translation difference on working capital (980) (1,209)
Working capital derived from disposal of - (1,004)
subsidiary undertakings and divisions
Disposal of tangible fixed assets (23) (41)
-------- --------
3,114 3,504
==== ====
Statement of total recognised gains & losses
for the year ended 31 December 2003
2003 2002
#000 #000
Loss for the year (272) (307)
Monetary working capital hyper-inflation adjustment 65 139
Revaluation (deficit)/surplus net of minority interests (558) 2,835
Exchange differences (2,230) (6,072)
-------- --------
Total recognised losses for the year (2,995) (3,405)
-------- --------
Statement of movement in shareholders' funds
for the year ended 31 December 2003
2003 2002
#000 #000
Recognised losses for the year (2,995) (3,405)
Reversal of capital reserve - (251)
Issue of new shares (net of expenses) - 1
-------- --------
Net reduction in shareholders' funds (2,995) (3,655)
Shareholders' funds at beginning of year 12,969 16,624
-------- --------
Shareholders' funds at the end of year 9,974 12,969
===== =====
Segmental analysis - profit/(loss) before taxation
2003 2002
#000 #000
By activity:
Tropical agriculture 4,013 2,541
Trading 159 39
Manufacturing (968) (691)
Central costs net of sundry income (1,184) (807)
Interest (including monetary working capital
hyper-inflation adjustment) (1,656) (2,249)
Profit on disposal of operations properties and
investments - 980
-------- --------
364 (187)
===== =====
NOTES
1. Taxation
2003 2002
#000 #000
UK corporation tax:
Current tax on income for the period 66 49
Double taxation relief (66) (49)
-------- --------
- -
-------- --------
Foreign tax:
Current tax on income for the period 598 26
Adjustment in respect of prior periods - 37
Other (51) 9
-------- --------
547 72
-------- --------
Deferred taxation:
Origination and reversal of timing differences 118 211
Utilisation of tax losses - 168
Lower rates on oversea earnings (16) (33)
Decrease/(increase) in discount 31 (152)
Adjustment in respect of prior periods - (1)
-------- --------
133 193
-------- --------
Tax on profit on ordinary activities 680 265
===== =====
2. Dividend
No final dividend is proposed in 2003 (2002: nil).
3. Accounts
The preliminary announcement has been prepared on the basis of the accounting
policies as set out in the most recently published set of annual accounts.
The financial information set out above does not constitute the company's
statutory accounts for the years ended 31 December 2003 or 2002 but is derived
from those accounts. Statutory accounts for 2002 have been delivered to the
Registrar of Companies, whereas those for 2003 which have been agreed with
Company's Auditors will be delivered following the Company's Annual General
Meeting. The Auditors have reported on the 2002 accounts; their report was
qualified for the same matter as mentioned below, but did not contain a
statement under Section 237(2) or (3) of the Companies Act 1985. The report of
the auditors on the 2003 accounts will be qualified. Plantations and related
assets have been included in the balance sheet at valuations determined by the
directors and not by qualified valuers as the directors believe reliable full
valuations as required by FRS15 cannot be obtained. Thus there were no
satisfactory audit procedures which could be adopted in order that the auditors
could confirm that these properties were valued at their depreciated replacement
cost at the balance sheet date and the audit report will be qualified, in
respect of this point alone, accordingly.
This information is provided by RNS
The company news service from the London Stock Exchange
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