Final Results for year ended 31 December 2019

RNS Number : 3916N

Anglo-Eastern Plantations PLC

19 May 2020

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 $m	2018 $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 and its origin

The likelihood and impact of the risk and the circumstances under which the risk might be most relevant to the Company

Mitigating or other relevant considerations

Country and regulatory

The Group's operations are located substantially in Indonesia and therefore significantly rely on economic and political stability in Indonesia.

Political upheaval and deterioration in the security situation may cause disruption on the operation and consequently financial loss.

The country has recently benefited from a period of relative political stability, steady economic growth and stable financial system. But during the 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 to rein in the country's fiscal deficits. This included the exchange controls and restriction on repatriation of profit through payment of dividends.

Transfer of profit from Indonesia to the United Kingdom ("UK") will be restricted affecting servicing of UK obligations and payment of dividends to shareholders.

The Board is not aware of any attempt by the government to impose exchange controls that would restrict the transfer of profits from Indonesia to the UK. The Board 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. Based on National Land Agency Law 2 / 1999, mandatory restriction to land ownership by non-state plantation companies and companies not listed in Indonesia to 20,000ha per province and a total of 100,000ha in Indonesia.

Mandatory reduction of foreign ownership in Indonesian plantations could force divestment of interests in Indonesia at below market values.

The Group realises that there is a possibility that foreign owners may be required over time to partially divest ownership of Indonesia oil palm operations but has no reason to believe that such divestment would be anything other than at market value.

Group failure to meet the standards expected in relation to bribery and corruption.

Reputational damage and criminal sanctions.

The Group continues to maintain strong controls in this area as Indonesia has been classified as relatively high risk by the International Transparency Corruption Perceptions index.

Imposition of import controls or taxes in consuming and exporting countries. Efforts by EU to ban the use of palm oil and palm biodiesel on sustainable issues.

Reduced revenue and reduction in cash flow and profit. The higher import levy will raise the price of CPO and make it less competitive in the global oil market, thus reducing demand. It will be more difficult to export palm oil to EU either for food or palm biodiesel and will hurt the demand of CPO in EU which is the third largest consumer of CPO.

The Indonesian government allows free export of CPO but applies a sliding scale of duties on exports which allows producers economic margins. Despite the imminent ban on use of palm biodiesel in EU, CPO remains amongst the cheapest source and most productive of vegetable oil in a growing population.

Exchange rates

CPO is a US Dollar denominated commodity and a significant proportion of operating costs in Indonesia (such as fertiliser and fuel) and development costs (such as heavy machinery and mill equipment) are imported and are US Dollar related.

Adverse movements of Rupiah against US Dollar can have a negative effect on the operating costs and raise funding costs.

The Board has taken the view that these risks are inherent in the business and feels that adopting hedging mechanisms to counter the negative effects of foreign exchange volatility are both difficult to achieve and would not be cost effective.

Produce prices

CPO is a primary commodity and is affected by the world economy, levels of inflation, and availability of alternative soft oils such as soybean oil. CPO price also historically moves in tandem with crude oil prices which determine the competitiveness of CPO as a source of biodiesel.

This may lead to significant price swings. The profitability and cash flow of the plantation operations depend upon world prices of CPO and upon the Group's ability to sell CPO at price levels comparable with world prices, unlike soybean which is sown annually and production can be increased or decreased to match demand and prevailing prices.

Directors believe that such swings should be moderated by continuous demand in economies like China, India and Indonesia. Larger exports would lead to a lower inventory of CPO which augurs well for future produce price. In the short term, the prices and demand will be volatile due to the pandemic.

Social, community and human rights issues

Any material breakdown in relations between the Group and the host population in the vicinity of the operations could disrupt the Group's operations. The plantations hire large numbers of people and have significant economic importance for local communities in the areas of the Group's operations. Disputes over compensation for land allocated to the Group which were previously used by the communities for their livelihood.

Communication breakdown would cause disruption on the operation and consequently financial loss. Access to areas of disputed compensation is restricted due to blockages by the communities.

The Group mitigates this risk by liaising regularly with village representatives to mediate on disputes. It develops a close relationship with villagers by improving local living standards through mutually beneficial economic and social interaction with the local villages. The Group, when possible, gives priority to applications for employment from the local population and supports specific initiatives to encourage 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 as we are experiencing has affected national and world economies. COVID-19 and similar pandemics could disrupt the Group's operation.

Our plantations and mills could be seriously infected which may require a total shut down of the infected part of our operations to contain and eradicate the infection.

The local governments where the Group operates could enforced a total lockdown requiring a total shutdown of the Group's operations.

The Group imposed travel restriction and strict movement on workers housed in our mills and estates. Workers leaving the housing and workplace must seek 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 also stock up on essential goods and spare parts to minimise disruption to estate and mills operation should the 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 sunshine and rainfall but these weather patterns can vary and extremes such as unusual dry periods or, conversely, heavy rainfall leading to flooding in some locations can occur. Indonesia, where most of its plantations are located, frequently experience natural disasters like earthquake, forest fire and tsunami.

Dry periods, in particular, will affect yields in the short and medium term. It may result in wildfire that may damage and destroy the palms. Drought induces moisture stress in palm trees. High levels of rainfall can disrupt estate operations and result in harvesting delays with loss of FFB or deterioration in fruit quality. Delay in collection of harvested FFB could raise the level of free fatty acid ("FFA") in the CPO. CPO with high FFA would be sold at a discount to market prices. Low level of sunshine could result in delay in formation of FFB resulting in potential loss of revenue. Any natural disaster could result in a shortage of workers and incur temporary work stoppage due to damage to the plantation or mill.

Where appropriate, bunding is built around flood prone areas and canals/drainage/retention ponds constructed and adapted either to evacuate surplus water or to maintain water levels in areas quick to dry out. Where practical, natural disasters are covered by insurance policies. Certain risks (including the risk of crop loss through fire, earthquake, flood and other perils potentially affecting the planted areas on the Group's estates) if they materialise could dent the potential revenues, for which insurance cover is either not available or would in the opinion of the Directors be disproportionately expensive, are not insured. These risks of floods, earthquake, fires or haze are mitigated by the geographical spread of the plantations but an occurrence of an adverse uninsured event could result in the Group sustaining material losses.

Hedging risk

The Group's subsidiaries have borrowings in US Dollar.

The Group could face significant exchange losses in the event of depreciation of their local currency (i.e. strengthening of US Dollar) and vice versa.

The risk is partially mitigated by US Dollar denominated cash balances and the higher average interest rate on Rupiah deposits which is 4.44% higher than on US Dollar 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 faced by the Group include threats to its IT infrastructure, unlawful attempts to gain access to classified information and potential for business disruptions associated with IT failures.

Failure to combat cyberattack could cause disruption to our business operations. Potential loss of financial records leading to error or misstatement in financial statements.

The Group has measures in place including appropriate tools and techniques to monitor and mitigate this risk. The Group through its IT Consultant has in place antivirus, threat detection, log analysis, 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
Continuing operations	Note	Result before BA movement	BA movement	Total	Result before BA movement	BA movement	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
- basic	9			40.61cts				28.79cts
- diluted	9			40.61cts				28.79cts

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2019

	2019 $000	2018 $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

	Note	31.12.2019 $000	31.12.2018 $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

	Share capital	Treasury shares	Share premium	Capital redemption reserve	Revaluation reserves	Exchange reserves	Retained earnings	Total	Non-controlling interests	Total 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, net 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

	Note	2019 $000	2018 $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 interests		512	-
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.

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.

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.

Year to 31 December 2019	CPO, palm kernel and FFB	Rubber	Shell nut	Biomass products	Biogas products	Others	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

Year to 31 December 2018	CPO, palm kernel and FFB	Rubber	Shell nut	Biomass products	Biogas products	Others	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 $000	2018 $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 11)	(41)	-
	(980)	(1,511)
Net finance income recognised in income statement	3,189	3,537

5 Profit before tax

	2019 $000	2018 $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 Sumatera	Bengkulu	South Sumatera	Riau	Bangka	Kalimantan	Total 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 Sumatera	Bengkulu	South Sumatera	Riau	Bangka	Kalimantan	Total 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 Sumatera	Bengkulu	South Sumatera	Riau	Bangka	Kalimantan	Total 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 Number	2018 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 $000	2018 $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 $000	2018 $000

Directors emoluments	215	226

	2019 $000	2018 $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 $000	2018 $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 $000	2018 $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 $000	2018 $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 $000	2018 $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 $000	2018 $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

	Plantations	Mill	Leasehold land	Buildings	Estate plant, equipment & vehicle	Office plant, equipment & vehicle	Right-of-use assets	Construction 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 1	Level 2	Level 3	Fair value
	$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 comparable land in similar location adjusted for differences in key attributes. The valuation model is based on price per hectare.

Selling prices of comparable land.

Location, legal title, land area, land type and topography.

The higher the selling price, the higher the fair value.

These are qualitative inputs which require significant judgement 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 applied	Increase in impairment		Assumption applied	Increase in impairment
		$000			$000

CPO price - decrease of 1%	$635/mt	1,459		$600/mt	975
Pre-tax discount rate - increase by 1%	16.51% - 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 value	Book value	Fair 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 interests

Based on cash flows discounted using current lending rate of 6% (2018: 6%).

Discount rate

The higher the discount rate, the lower the fair value.

Due from cooperatives under Plasma scheme

Based on cash flows discounted using an estimated current lending rate of 6.78% (2018: 6.58%).

Discount rate

The higher the discount rate, the lower the fair value.

The details of the expected credit losses ("ECL") are disclosed in note 15.

13 Inventories

	2019 $000	2018 $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 $000	2018 $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 assets - Unharvested produce

Based on FFB weight multiplied by the sum of FFB selling price less harvesting cost

FFB weight

FFB selling price

Harvesting cost

The higher the weight, the higher the fair value

The higher the selling price, the higher the fair value

The higher the harvesting cost, the lower the fair value

15 Trade and other receivables

	2019 $000	2018 $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 $000	2018 $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 $000	2018 $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 carrying amount $000	Loss provision $000	Net carrying amount $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 carrying amount $000	Loss provision $000	Net carrying amount $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 $000	2018 $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 $000	2018 $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:

	Asset $000	Liability $000	Net $000	(Charged)/ credited to income statement $000	(Charged)/ credited to equity $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 assets			Net defined scheme liability
	Funded scheme	Unfunded scheme	Total	Funded scheme	Unfunded scheme	Total	Funded scheme	Unfunded 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 assets			Net defined scheme liability
	Funded scheme	Unfunded scheme	Total	Funded scheme	Unfunded scheme	Total	Funded scheme	Unfunded 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

	Authorised Number	Issued and fully paid Number	Authorised £000	Issued and fully paid £000	Authorised $000	Issued and fully paid $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 shares:						$'000
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 $000	2018 $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:

	Amortised cost $000	Financial liabilities at amortised cost $000	Total carrying value $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

	Amortised cost $000	Financial liabilities at amortised cost $000	Total carrying value $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)
Functional currency of Group operation	US Dollar $000	Sterling $000	Total $000
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
	Carrying	-10% in	+10% in	Carrying	-10% in	+10% in
	Amount US$	Rp : $ and RM : $	Rp : $ and RM : $	Amount US$	Rp : $ and RM : $	Rp : $ and RM : $
	$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

$000

Facilities

$000

Repayable

Indonesia:

US Dollar denominated - long-term loan

8,203

35,000

2020 (note 16)

The total loan borrowings together with interest at current rates are as follows:

	2019 $000	2018 $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 amount	-1% in interest rate	+1% in interest rate	Carrying amount	-1% in interest rate		+1% in interest 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 rate	No interest
	$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 rate	No interest
	$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:

Name	Country of incorporation and principal place of business		Proportion of ownership interest at 31 December		Non-controlling interests ownership / voting interest at 31 December
			2019	2018	2019	2018
Principal sub-holding company
Anglo-Indonesian Oil Palms Limited	United Kingdom	100%		100%	-	-

Management company
Indopalm Services Limited	United 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 (1913) Limited	United Kingdom	100%		100%	-	-
Gadek Indonesia (1975) Limited	United Kingdom	100%		100%	-	-
Mergerset (1980) Limited	United Kingdom	100%		100%	-	-
Musam Indonesia Limited	United 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 Puding Mas		PT Alno Agro Utama		PT Bina Pitri Jaya		PT Sawit Graha Manunggal 18%
NCI percentage	20%		10%		10%		20%
Summarised income statement
For the year ended 31 December	2019	2018	2019	2018	2019	2018	2019	2018	2019	2018
	$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 December	2019	2018	2019	2018	2019	2018	2019	2018	2019	2018
	$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 ended 31 December	2019	2018	2019	2018	2019	2018	2019	2018	2019	2018
	$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 activities are as follows:	2019	2018
	$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 loans and borrowings	Current loans and borrowings	Non-current lease liabilities	Current lease liabilities	Total
	$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 loans and borrowings	Current loans and borrowings	Non-current lease liabilities	Current lease liabilities	Total
	$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 XX May 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

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