Final Results
Anglo-Eastern Plantations PLC
07 April 2006
ANGLO-EASTERN PLANTATIONS PLC - PRELIMINARY ANNOUNCEMENT
Anglo-Eastern Plantations, which operates approximately 32,500 hectares (ha) of
developed plantations, primarily oil palm in Indonesia, announces a pre-tax
profit of $21.4m - its second largest ever - and a 10% increase in dividend per
share to 8.8cts
+---------------------------+---------+------------+-------------+
| | 2005| 2004| Change|
| | | | |
| | | | |
+---------------------------+---------+------------+-------------+
|Turnover ($000) | 64,321| 65,676| - 2%|
+---------------------------+---------+------------+-------------+
|Operating profit before | | | |
|biological asset adjustment| | | |
|($000) | 22,201| 24,934| - 11%|
+---------------------------+---------+------------+-------------+
|Pre-tax profit ($000) | 21,420| 26,744| - 20%|
+---------------------------+---------+------------+-------------+
|Basic earnings per share | 30.9| 37.4| - 17%|
|(cts) | | | |
+---------------------------+---------+------------+-------------+
|Dividend per share (cts) | 8.8| 8.0| + 10%|
+---------------------------+---------+------------+-------------+
* Pre-tax profit and EPS were depressed by swings of $2.0m in the biological
asset adjustment under IFRS and of $0.7m re exchange, so operating profit
before these items is the best immediate indicator of trading performance.
* Net cash increased to $5.2m from $3.8m.
* The average price of crude palm oil (CPO) reduced by 8% to $422/mt from
$460/mt.
* Crops of oil palm fresh fruit bunches (FFB) increased by 7% to 459,080mt
and bought-in FFB by 18% to 284,705mt - both records.
* Bengkulu in Southern Sumatra, where planting began in 1996, should be
fully planted at 15,900ha by 2007. Labuhan Bilik, c.4,200ha in Northern
Sumatra acquired in December 2004, is scheduled to be fully planted by the
end of 2008. The group is therefore actively looking to increase its land
holdings for further expansion in 2009 onwards.
Mr Chan Teik Huat, Chairman, commented:
'The CPO price has continued to fluctuate in a narrow range in the first three
months of 2006 and is currently $427/mt. Estate production is slightly ahead of
expectations and 12% ahead of the same period last year.
Barring unforeseen circumstances, total estate FFB production is targeted to
increase again in 2006 by about 10%. It is unlikely we shall maintain our
bought-in crop levels but, since this is lower margin business, the effect will
be limited. A larger factor in 2006 compared to previous years will be higher
inflation in local costs in all the main components - wages, fertilisers and
diesel. This will offset to some extent the effect of the improvement in estate
crops. As always, the group's operating results depend heavily on movement in
CPO prices. If the CPO price stays at present levels, then the group should
improve on the 2005 result.'
Enquiries:
Anglo-Eastern Plantations Plc 020-7236 2838
Rollo Barnes (Financial Director)
Bankside Consultants Limited
Charles Ponsonby 020-7367 8851 / 07789-202 312
Chairman's statement
As indicated was likely in the interim announcement of 28 September 2005 the
profit for 2005 did not match the record achieved in 2004. Nevertheless this was
the second highest recorded by the company.
Group operating profit before biological asset (BA) adjustment was 11% lower at
$22.2 million from $24.9 million in 2004 on revenue down 2% to $64.3 million
from $65.7 million in 2004. Although our estate crops of fresh fruit bunches
(FFB) increased 7% and bought-in crops 18% - both to all time records - these
were insufficient to compensate for the crude palm oil (CPO) prices which
averaged some 8% less than in 2004, and for the increase in operating costs on
our estates.
I begin by mentioning operating profit before BA adjustment because, in common
with all fully listed UK companies, we have had to apply International Financial
Reporting Standards (IFRS) for the first time in 2005 and have adjusted our 2004
comparatives onto the same basis. In our case the most significant of the IFRS
changes is the requirement for agricultural companies to charge or credit the
income statement with changes in the estimated values of biological assets. This
charge or credit is likely to be quite volatile and unrelated to the trading
performance of and cash generation by the company during any financial period.
For example, the biological asset adjustment in our case in 2004 was a credit of
$1,950,000 but in 2005 a charge of $35,000. Therefore operating profit before BA
adjustment is in our view the best immediate indicator of our operating
performance.
Group profit before tax in 2005, as stated under IFRS, was $21.4 million
compared to $26.7 million in 2004, a fall of 20% compared to the 11% fall in
trading profit. The difference is accounted for by the biological adjustment and
by an exchange loss of $550,000 arising from the effect on our dollar loans in
Indonesia where the dollar strengthened some 5% against the rupiah.
Earnings per share before biological adjustment, as shown in note 5, fell 10% to
31.0cts in 2005 from 34.5cts in 2004. On the IFRS basis, EPS fell 17% to 30.9cts
from 37.4cts.
Group cash net of all borrowings increased slightly from $3.8 million at the
beginning of the year to $5.2 million at the end of the year. This improvement
was achieved after repayment of bank loans during the year of $5.5 million. As a
result, the entire loan of $8 million used to fund the development in Bengkulu
has been repaid. Total group borrowings at the end of 2005 were $6.0 million
compared to $11.1 million at the end of 2004.
Cash generation in 2005, at $12.8 million, was lower than the $21.6 million in
2004 not only because of the lower profits but because of high residual tax
payments in Indonesia relating to the record 2004 result and because of a
deliberate increase in fertiliser inventories in anticipation of price rises.
These factors, together with the loan repayments, meant that gross cash balances
fell from $14.9 million to $11.2 million.
Capital expenditure of $7.6 million included extension of the Tasik mill
referred to below, together with continued new planting and immature maintenance
in Bengkulu and Bina Pitri.
The other major effect of the introduction of IFRS has been to reduce the
group's net asset value by a provision for deferred tax at the Indonesian tax
rate of 30% on the surplus of estate valuations over their equivalent carrying
value for tax purposes. The provision amounts to $17.2 million and reduces the
group's net asset value per share from 159p under UK GAAP to 142p under IFRS.
At first glance, this might be seen by readers as a provision for capital gains
tax on the potential disposal of the relevant assets. In fact, the intention of
the standard is to provide tax now on the future flow of value represented by
the valuation surplus. However, I should record that it is highly unlikely the
group would sell any of its estates.
The estates have been valued in total on the same basis as previous years. The
relatively small increase of $2.2 million in total value to $129.5 million
reflects our decision to allow for significantly higher operating costs in
future as the effect of current oil prices and other inflationary pressures work
through. However, it would not be prudent to assume an equivalent increase in
produce prices. Biological assets have been estimated as a proportion of these
valuations and as a result there is only a very small equivalent movement in
this item charged to the income statement in 2005 compared to the sizable credit
in 2004.
Commodity prices
Unusually, CPO prices fluctuated in a narrow range through 2005 - between $390/
mt to $450/mt - averaging about $422/mt. This compared with an average of about
$460/mt in 2004.
Another unusual feature was the sustained high price of palm kernel oil relative
to CPO in the last two years and therefore of our subsidiary product, palm
kernels. The kernel price used to be between 45% and 55% of the CPO price, but
for 2005 and 2004 it has averaged 67% and 62% respectively.
Rubber experienced strong demand through 2005 and the price rose from $1,180/mt
to close at $1,750/mt, a 48% increase.
Cocoa prices, by contrast, fell over the year from $1,560/mt to $1,470/mt.
Indonesia
At the half year, I reported that FFB production from Tasik in North Sumatra was
17% down on the same period in the previous year and from Bengkulu 19% ahead.
This position then reversed and by the year end production from Tasik and Anak
Tasik was 170,000mt, only 2.5% down on the previous year and not far off the
record of 176,000mt set in 2000. By contrast, Bengkulu production ended at
159,500mt, up only 10% on the year.
We continue to hope and plan that we can defer replanting of Tasik until 2008
and even then that we need only start in a modest way.
Extension of the Tasik mill, from 45mt/hr to 60mt/hr, was completed at the year
end at a cost of about $1.8 million. Unfortunately, competition from
neighbouring mills for bought-in crop has become intense and FFB bought-in in
2005 totalled 111,330mt, down 14% on the 129,120mt of the previous year.
However, the Tasik mill is now 15 years old; the extended capacity is a welcome
cover against breakdown and will reduce running costs.
FFB production from the three smaller estates around Medan in North Sumatra was
63,500mt, exceeding last year's record of 58,000mt by 8%. Crop from Sungei Musam
was the main contributor to this increase, where the yield was 24mt/ha.
Blankahan continues to achieve yields of around 29mt/ha.
The new mill at Blankahan, commissioned in December 2004, operated very
satisfactorily through the year, processing crop from the other two Medan
estates, Sungei Musam and Rambung, as well as buying in 26,400mt of FFB. This
outside crop reduced the average extraction rates from an initial 25% to 23%. It
remains a continual struggle, as it does in the other mills, to maintain
bought-in volume while insisting on high standards of FFB. The profitability of
Blankahan and Sungei Musam has been significantly improved by completion of this
mill which was funded from the group's own resources.
At Rambung, we have just begun to remove the 258ha of cocoa, which has always
been problematic, and replant with rubber: we expect to complete 120ha in 2006.
Although 10% up on 2004, Bengkulu FFB production was 10% below target for 2005.
The reason was a clear change in the flowering pattern in some areas and should
be temporary. Field standards are good and in most parts these properties are
looking well established estates, though the younger areas suffer from damage
from wild pigs. The priority over the next few years is to increase yields
towards those in North Sumatra. Of the 13,570ha planted so far, 3,830ha are
immature. New planting speeded up in the second half of 2005 to total 1,020ha
for the year from only 310ha at the half year. This was still below expectations
because of a combination of continued negotiations with neighbouring villagers,
difficulty in finding suitable contractors in what is a remote location, and the
installation of metal collars round every young tree as protection from pigs. As
a consequence, we have revised to 2007 our target for completion of the Bengkulu
planting.
In contrast to Tasik, we were able to increase bought-in crop in Bengkulu by 31%
to 146,960mt to fill the mill capacity which had been increased to 60mt/hour in
2004. But like Tasik, new stand alone mills have opened nearby and we shall be
hard pressed to maintain this volume at current levels of profitability.
FFB crop from Bina Pitri increased 81% to 27,420mt. While this was below the
level we had expected, the signs in early 2006 are that the crops are beginning
to respond to the first fertiliser applications in May 2004 soon after our
acquisition of this run down property. Normally, the effect on crop takes two
years and we remain optimistic about the prospects for this property. While it
lost about $400,000 in 2005, it should be profitable in 2006 onwards. New
planting amounted to 1,260ha, of which 960ha were in further land acquired in
2004 and 300ha were in vacant areas acquired with the original estate. This
property now has a planted area of 4,950ha.
Foundations are now finished for a 40mt/hr mill which we expect to be completed
in the first quarter of 2007 at a total cost of $6.2 million.
Malaysia
Production from the Cenderung estates totalled 38,520mt, an increase of 7% on
2004 which itself was a disappointing year. With lower CPO prices, the estates
made a loss of $600,000 compared to a profit of $70,000 in 2004. In 2004,
operating cash flow was sufficient to meet capital expenditure and local loan
repayments. But at recent prices there is a small cash requirement which can
easily be met from current Malaysian bank facilities or by the group. In spite
of the physical problems, we remain committed to bring these properties to
reasonable yields and profitabillity.
Group development
At Labuhan Bilik, an area of about 4,200ha in North Sumatra acquired in December
2004, we are now preparing about 1,100ha for planting towards the end of 2006.
The terrain is flat and we have high hopes that this will eventually be a very
productive estate. We hope to complete planting by the end of 2008.
We are therefore looking actively to increase our land bank for further
expansion from 2009 onwards - but with caution, for it is now not easy to find
problem free land or plantations in Indonesia.
Community development
Our management continues to place great importance on good relations with, and
assistance to, local communities. In addition to maintaining some rural roads
and communal buildings in neighbouring villages to our estates, our schemes to
establish communal oil palm plantings in some of those villages are progressing
smoothly.
I am also pleased to report, despite their heavy workload, our staff have
supervised the construction, at the company's expense, of two primary schools in
the tsunami affected areas of Aceh in Northern Sumatra and are in the process of
completing a fresh water supply facility in another earthquake affected area.
Directors
In September 2005, Mr Foo San Kan resigned as a non-executive director and we
thank him for his contribution.
In August 2005, Mr Kee Lian Yong was appointed as an executive director. Mr Kee
was formerly chief executive for ten years of Kumpulan Mas Bhd, a company quoted
on the Kuala Lumpur Stock Exchange with interests in plantations, water
engineering and education. He therefore brings with him wide experience of
business in Asia.
Outlook
The CPO price has continued to fluctuate in a narrow range in the first three
months of 2006 and is currently $427/mt. Weather in both Indonesia and Malaysia
in the same period has been exceptionally wet, which has hampered operations.
Nevertheless, our management and workforce have done well. Estate production is
slightly ahead of expectations and 12% ahead of the same period last year.
Bought-in crop is suffering from the competition mentioned earlier and is 10%
down on the same period in 2005.
Barring unforeseen circumstances, total estate FFB production is targeted to
increase again in 2006 by about 10%. It is unlikely we shall maintain our
bought-in crop levels but, since this is lower margin business, the effect will
be limited. A larger factor in 2006 compared to previous years will be higher
inflation in local costs in all the main components - wages, fertilisers, and
diesel. This will offset to some extent the effect of the improvement in estate
crops. As always, the group's trading results depend heavily on movement in CPO
prices. If the CPO price stays at present levels, then the group should improve
on the 2005 results.
Dividend
The dividend has been increased more than 400% over the four years to 2004 -
from a low of 1.5cts per share in 2000 to 8.0cts per share in respect of 2004.
We intend to try to keep the dividend increasing, but from now on at a much
slower rate, which we hope can be maintained as long as there is no sustained
fall in CPO prices. Accordingly, the board is proposing a dividend of 8.8cts per
share, an increase of 10% over 2004. This dividend is covered 3.5 times by basic
earnings per share.
CHAN TEIK HUAT 7 April 2006
Chairman
Consolidated income statement
2005 2004
(unaudited) (audited)
Restated for IFRS
Result BA Total Result BA Total
before BA adjustment before adjust-
adjustment BA ment
adjustment
Continuing $'000 $'000 $'000 $'000 $'000 $'000
operations
Revenue 64,321 64,321 65,676 65,676
Cost of sales (39,514) (39,514) (38,468) (38,468)
Gross profit 24,807 24,807 27,208 27,208
Biological asset (35) (35) 1,950 1,950
revaluation movement
(BA adjustment)
Other income 115 115 124 124
Administration (2,721) (2,721) (2,398) (2,398)
expenses
Operating profit 22,201 (35) 22,166 24,934 1,950 26,884
Exchange (losses)/ (550) (550) 147 147
profits
Finance income 302 302 251 251
Finance costs (498) (498) (538) (538)
Profit before tax 21,455 (35) 21,420 24,794 1,950 26,744
Tax (7,107) 10 (7,097) (8,449) (585) (9,034)
Profit for year 14,348 (25) 14,323 16,345 1,365 17,710
Attributable to:
- Equity holders of 12,235 (52) 12,183 13,651 1,158 14,809
the parent
- Minority interest 2,113 27 2,140 2,694 207 2,901
14,348 (25) 14,323 16,345 1,365 17,710
Earnings per share
- basic 30.9 cts 37.4 cts
- diluted 30.9 cts 37.3 cts
Consolidated statement of total recognised income and expenses
2005 2004
(unaudited) (audited)
restated
for IFRS
US$'000 US$'000
Profit for the year 14,323 17,710
Unrealised surplus on revaluation of the estates 3,112 9,955
Loss on exchange translation (5,703) (7,880)
Deferred tax on revaluation (176) (2,730)
Total recognised income and expense for the year 11,556 17,055
Attributable to:
- Equity holders of the parent 9,736 14,179
- Minority interest 1,820 2,876
11,556 17,055
Consolidated balance sheet
2005 2004
(unaudited) (audited)
restated
for IFRS
US$'000 US$'000
Non-current assets
Biological assets 26,975 26,558
Property, plant and equipment 102,543 100,744
Receivables 1,071 1,071
130,589 128,373
Current assets
Inventories 2,499 1,535
Investments 259 405
Trade and other receivables 3,109 2,707
Cash and cash equivalents 11,194 14,933
17,061 19,580
Current liabilities
Bank loans and other financial liabilities (2,103) (5,576)
Trade and other payables (3,487) (4,438)
Tax liabilities (2,594) (4,518)
(8,184) (14,532)
Net current assets 8,877 5,048
Non-current liabilities
Bank loans and other financial liabilities (3,940) (5,558)
Deferred tax liabilities (16,941) (16,698)
Retirement benefit net liabilities (602) (1,103)
Net assets 117,983 110,062
Equity
Share capital 15,481 15,424
Treasury shares (1,387) (1,387)
Share premium reserve 23,868 23,825
Share capital redemption reserve 1,087 1,087
Revaluation and exchange reserve (9,121) (6,674)
Retained earnings 67,536 58,511
Equity attributable to equity holders of the parent 97,464 90,786
Minority interests 20,519 19,276
117,983 110,062
Consolidated cash flow statement
2005 2004
(unaudited) (audited)
restated
for IFRS
US$000 US$000
Operating profit 22,166 26,884
Adjustments for:
BA adjustment 35 (1,950)
Income from current asset investments (77) (17)
Depreciation 3,243 2,917
Share-based remuneration expense 14 14
Retirement benefit provisions (491) 339
Foreign exchange (994) 310
Operating cash flow before changes in working capital 23,896 28,497
(Increase)/decrease in inventories (964) 178
(Increase)/decrease in trade and other receivables (258) 43
Increase in trade and other payables 542 380
Cash inflow from operations 23,216 29,098
Interest paid (600) (612)
Overseas tax paid (9,809) (6,928)
Net cash flow from operations 12,807 21,558
Investing activities
Property, plant and equipment
- purchase (7,596) (11,247)
- sale 116 112
Purchase of subsidiary - (4,777)
Interest received 302 251
Net cash used in investing activities (7,178) (15,661)
Financing activities
Dividends paid by parent company (3,158) (2,375)
Share options exercised 100 251
Purchase of own shares - (1,387)
Repayment of existing long term loans (5,531) (2,023)
Repayment of loans in newly acquired subsidiary - (4,154)
Drawdown of new long term loan - 5,000
Finance lease drawdown/(repayment) 74 (15)
Dividends paid to minority shareholders (2,587) (699)
Repayment by/(advance to) minority shareholders 693 (693)
Subscriptions to subsidiary share capital by minority 448 -
shareholders
Receipt from sale of portfolio investment 227 -
Net cash used in financing activities (9,734) (6,095)
Decrease in cash and cash equivalents (4,105) (198)
Cash and cash equivalents less overdrafts
At beginning of year 14,910 15,108
At end of year 10,805 14,910
Comprising:
Cash at end of period 11,194 14,933
Overdraft at end of period (389) (23)
10,805 14,910
1 Basis of accounts preparation
These financial statements have been prepared in accordance with International
Financial Reporting Standards including International Accounting Standards and
Interpretations (collectively 'IFRS') issued by the International Accounting
Standards Board ('IASB') and endorsed for use by companies in the EU, and with
those parts of the UK Companies Act 1985 applicable to companies reporting under
IFRS.
Full details of IFRS policies applied and reconciliations of comparative figures
between UK GAAP and IFRS are available in our Interim Statement, a copy of which
is available from our website www.angloeastern.co.uk. A brief reconciliation of
the main changes is detailed in note 9.
2 Status of financial information
The financial information contained in this preliminary announcement does not
constitute the company's consolidated statutory financial statements for the
years ended 31 December 2005 or 2004, but is derived from those financial
statements. The financial statements for the year ended 31 December 2004, which
were prepared under UK GAAP, have been delivered to the Registrar of Companies.
The auditors' report on those financial statements was unqualified and did not
contain statements under section 237 (2) or (3) of the Companies Act 1985. The
auditors have not yet reported on the financial statements for the year ended 31
December 2005. The financial statements for the year ended 31 December 2005 have
been prepared under IFRS and will be delivered to the Registrar of Companies at
the same time as their despatch to shareholders.
3 Exchange rates ($ : £)
2005 2004
Year end Rp : $ 9,830 9,290
$ : £ 1.72 1.92
Average Rp : $ 9,751 9,001
$ : £ 1.81 1.84
4 Tax
2005 2004
(unaudited) (audited)
restated
for IFRS
US$000 US$000
Foreign corporation tax - current year 6,509 7,003
Foreign withholding tax on remittances 539 866
Deferred tax adjustment - current year 49 1,165
7,097 9,034
5 Earnings per share
2005 2004
(unaudited) (audited)
restated
for IFRS
US$ US$
Earnings per share before biological adjustment:
- basic 31.0cts 34.5cts
5 Earnings per share - continued
Weighted average number of shares in issue
2005 2004
Number of Number of
shares shares
'000 '000
Used in basic EPS 39,411 39,609
Dilutive effect of outstanding employee share options 50 137
Used in diluted EPS 39,461 39,746
6 Dividend
2005 2004 2005 2004
(unaudited) (audited) (unaudited) (audited)
US$'000 US$'000
Paid during the year 8.0cts 6.0cts 3,158 2,375
Proposed final dividend in
respect of the year ended 31
December 8.8cts 8.0cts 3,514 3,147
Shareholders electing to receive
sterling
5.02p 4.26p
The proposed dividend for 2005 is subject to shareholder approval at the
forthcoming annual general meeting and has not been included as a liability.
Assuming shareholder approval the proposed dividend will be paid on 28 June 2006
to shareholders on the register on 26 May 2005.
7 Crops
2005 2004
Tonnes Tonnes
Oil palm fresh fruit bunches
- ex estates 459,080 428,657
- bought-in or processed for third parties 284,705 241,359
- mill throughput 677,845 562,134
Saleable CPO 145,820 118,197
Saleable palm kernels 35,049 28,526
Rubber 946 1,370
Cocoa 157 208
8 Areas
Total Mature Immature
Planted Ha Ha Ha
Oil palm 31,874 26,393 5,481
Rubber 434 434 -
Cocoa 258 258 -
32,566 27,085 5,481
Reserves 7,114
Land rights 4,240
Total 43,920
9 Reconciliation of net assets and profit under UK GAAP to IFRS
Profit Tax Profit Minority Profit
before after Interests for
tax tax year
Results for year ended 31
December 2004
US$'000 US$'000 US$'000 US$'000 US$'000
As previously reported under
UK GAAP
24,808 (8,450) 16,358 (2,694) 13,664
Share based remuneration (14) - (14) - (14)
BA adjustment 1,950 (584) 1,366 (207) 1,159
Group profit for 2004
reported under IFRS
26,744 (9,034) 17,710 (2,901) 14,809
Consolidated balance sheet
At 31 Dec At 1 Jan
2004 2004
US$'000 US$'000
Net assets 123,986 108,391
Share based remuneration (14) -
Dividend write back 3,147 2,375
Deferred tax (17,057) (13,742)
110,062 97,024
A full explanation of the above adjustments was given in the interim statement.
It should be noted that the biological adjustment for 2004 was reported in the
interim statement as a net credit of $1,366,000 instead of $1,159,000 above and
the deferred tax adjustment as $17,920,000 instead of $17,057,000 above. These
amendments reflect revised management judgements on estate valuations.
This information is provided by RNS
The company news service from the London Stock Exchange
Wednesday, 18th December 2024
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