Preliminary Results
Anglo-Eastern Plantations Plc
("AEP", "Group" or "Company")
Preliminary announcement of results for year ended 31 December 2016
Anglo-Eastern Plantations Plc, and its subsidiaries is a major producer of palm oil and rubber with plantations across Indonesia and Malaysia amounting to some 128,600 hectares, has today released its results for the year ended 31 December 2016.
Financial Highlights
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2016 $m |
(Restated) 2015 $m |
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Revenue |
246.2 |
196.5 |
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Profit before tax |
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- before biological asset ("BA") adjustment |
57.5 |
26.0 |
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- after biological asset adjustment |
60.8 |
25.3 |
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EPS before BA adjustment |
82.16cts |
25.89cts |
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EPS after BA adjustment |
87.58cts |
24.66cts |
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Dividend (pence) |
3.0p |
1.75p |
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Dividend (cents) |
3.8*cts |
2.5cts |
Note: * Based on exchange rate at 19 April 2017 of $1.2811/£
Enquiries:
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Anglo-Eastern Plantations Plc |
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Dato' John Lim Ewe Chuan |
+44 (0)20 7216 4621 |
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Panmure Gordon & Co. |
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Andrew Godber |
+44 (0)20 7886 2500 |
Chairman's Statement
The Group's production of FFB in 2016 declined marginally to 897,700mt, from the previous year of 900,400mt. FFB production has steadily increased since 2010 but declined for the first time in six years. The lower production of FFB was primarily due to a sharp drop in yield in Riau region as palm trees took longer to recover from the prolonged drought and haze of last year. However production in 2017 may quickly rebound as 82% of the Group's palm trees are matured and are in favourable production age. The current weighted average age of trees is about 11 years old. The throughput at the six mills in 2016 however was at a record high as the Group purchased more external crops. FFB bought-in from surrounding smallholders was 813,700mt (2015: 678,200mt), 20% higher, due to the Group's aggressive purchasing policy and competitive prices. The mills as a result processed 12% more FFB, and increased CPO production by 10% to 353,100mt (2015: 321,400mt).
Revenue and profitability improved as CPO prices recovered to a three-year high on lower stocks due to the impact of one of the strongest El Nino on record and biodiesel mandates in Indonesia and United States ("US"), which are expected to boast consumption of edible oil. It was reported that many plantations were recovering from a low yields due to the drought from last year. The B20 biodiesel programme in Indonesia which aims to raise the minimum bio-content from the current 15% to 20% would use up more palm oil and increase demand for blending purposes. The strength in vegetable oil prices received further support in the wake of recent plans by the US to raise its renewable fuel standard which is likely to result in a higher demand of soybean oil for diesel. The average CPO Rotterdam price in 2016 was 15% higher at $706/mt, compared to $613/mt in 2015.
The Group's revenue was higher by 25% at $246.2 million, compared to $196.5 million achieved in 2015. The operating profit for the Group in 2016, before the biological asset ("BA") movement was $52.5 million, 122% higher compared to $23.7 million achieved in 2015. Earnings per share, before BA movement increased to 82.16cts, from 25.89cts in 2015. The Group's operating profit for 2016 was at $55.9 million after an upward BA movement of $3.4 million as compared to 2015 operating profit of $22.9 million after a downward BA movement of $0.7 million.
The financial statements for the comparative year of 2015 were restated with the adoption of new amendments to IAS 16 and IAS 41 for bearer plants which were mandatory from 1 January 2016. The revised standards require bearer plants to be treated as property, plant and equipment and to be valued at historical costs less depreciation or deemed costs at last valuation. The amendment means that the previously recognised movement in the fair value of biological assets in the financial statements is replaced by a depreciation charge and impairment loss, if any. In the restated operating results for the year ended 31 December 2015, an impairment loss amounting to $12.5 million was charged which was previously recognised under Biological Asset movement. The amendment also requires FFB growing on the trees which are not due for harvest to be measured at fair value. The methodology and its impact are explained in detail in note 2 - Prior year restatement.
The Group planted 2,621ha of oil palms in 2016 of which 1,516ha comprised of replanting. This was less than planned, due primarily to delays in finalising agreements with villagers for land compensation payments in Bengkulu, Bangka and Kalimantan. This issue is likely to continue as villagers may demand higher compensation for their land in view of higher CPO prices.
In addition to the current biogas and biomass plant in North Sumatera, two more biogas plants in Bengkulu and Kalimantan are in the final stages of construction and are estimated to cost $6.8 million on completion. Biogas engines have been installed with ancillary works covering gas piping and electrical works are in progress. The testing and commissioning should begin shortly and biogas plants are expected to be operational from the second quarter of 2017. The plants when completed are expected to generate a combined 3 megawatt of electrical power. A surplus of 15.6 million kilowatt hour ("kWh") of electricity worth $1.2 million is projected to be generated from these two plants which the Group intends to sell to the state electricity company. The use of clean energy in the mills will further reduce their reliance on fossil fuels and improve the Group's carbon foot print.
AEP was removed from the Financial Times Stock Exchange ("FTSE") All Shares Index in June 2016 resulting in a large sell down of its shares as index related funds reweighted their holdings. The drop in Company's share price coincided with the sell down. To remain in the index, AEP must achieve a monthly median turnover of 0.015% of its shares for eight out of twelve months. The removal was primarily based on the liquidity of the shares. FTSE will review the constituents of the index annually and the next review is due in June 2017.
The Indian government in November 2016 abruptly demonetised the country's large bank notes which has a knock-on effect on consumer demand. Retail sales suffered as many do not have sufficient cash to buy and pay for essentials resulting in a weaker demand for CPO. India is the largest consumer of CPO and in the first ten months of this year, India makes up 19% of the total palm oil exports. It has been reported that palm oil exports to India will normalise once the issues of insufficient cash in distribution are addressed.
Several EU countries including the UK signed the Amsterdam Declaration to support a fully sustainable palm oil supply chain by the year 2020 of which sustainable development goals called for, among other things, sustainable production and consumption, and ensuring food security and nutrition, ending poverty, halting biodiversity loss and land degradation. It was reported that palm oil has over the years suffered from increasing negative image in Europe due to issues related to deforestation which led to a decline in CPO use in the EU.
Despite all these challenges, palm oil prices have been strong with little prospect of real pickup in production until the second half of 2017. The suspension of new plantation licenses in Indonesia demonstrates the Indonesian government commitment to environmental stewardship and to protect the country's remaining tropical forest. The suspension augurs well for the CPO price. Nevertheless pressure continues from the larger global crops of soybeans and sunflower seed which is expected to translate into bigger oil supplies at competitive prices against palm oil. This tends to keep palm oil prices capped.
The Board is mindful that given the anticipated further capital commitments, the level of dividend needs to be balanced against the planned expenditure. The Board is also mindful of shareholders' sentiment and therefore declared a final dividend of 3.0p per share in respect of the year to 31 December 2016 (2015: 1.75p). Subject to the approval by shareholders at the Annual General Meeting, the final dividend will be paid on 14 July 2017 to those shareholders on the register on 9 June 2017.
On behalf of the Board of Directors, I would like to convey our sincere thanks to our management and all employees of the Group for their dedication, loyalty, resourcefulness, commitment and contribution to the success of the Group.
I would also like to take this opportunity to thank shareholders, business associates, government authorities and all other stakeholders for their continued confidence, understanding and support for the Group.
Madam Lim Siew Kim
Chairman
26 April 2017
Strategic Report
Business Model
The Group will continue to focus on its strength and expertise which is planting more oil palms. 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. We have bought and invested in new tracts of land and portions remain to be planted. Good land at a reasonable price has become more scarce. The Indonesian government has in 2014 moved to introduce a law to cap the size of new plantations owned by foreign companies. The Group remains committed to use its available resources to develop the land bank in Indonesia as regulatory constraints permit.
The Group's objectives are to provide appropriate returns to investors in the long-term from operation as well as expansion of the Group's business, to foster economic progress in the 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
The Group's objectives are to provide an appropriate level of returns to the investors and to enhance shareholders' value. Profitability however is very much dependent on the CPO price which is volatile and determined by supply and demand. The Group believes in the long-term viability of palm oil which remains cheap and the most productive source of vegetable oil in a growing population.
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 streamlining estate management. For the year under review, the Group achieved a yield of 17mt/ha, 119% mill efficiency and production cost of $275/mt on Indonesia operations. This compared to 2015 yield of 18.4mt/ha, 109% mill efficiency and production cost of $250/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 achieved economy of scales 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 foot prints, the Group plans to construct in stages biogas plants at all of its mills to trap the methane gas to generate electrical power and at the same time reduces the consumption of fossil fuel. It plans to 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 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 2016, revenue for the Group was $246.2 million, 25% higher than $196.5 million reported in 2015 due primarily to the higher CPO price. CPO price hit a three-year high on lower palm oil inventory brought about by the prolonged drought last year.
The Group operating profit for 2016 before biological asset movement was $52.5 million, 122% more than $23.7 million in 2015.
FFB production for 2016 was 897,700mt, marginally lower than the 900,400mt produced in 2015. The yield remains below expectation due to a sharp drop in yield for the planation in Riau brought about by the wide spread drought and haze of last year. FFB bought-in from local smallholders for 2016 was 813,700mt (2015: 678,200mt), 20% higher compared to 2015. During the year, FFB processed by the Group's mills was 1.69 million mt, 12% higher than last year of 1.51 million mt and CPO production was 10% higher at 353,100mt, compared to 321,400mt in 2015.
Profit before tax and after BA movement for the Group was $60.8 million, 141% higher compared to a profit of $25.3 million in 2015. The BA movement was a credit of $3.4 million, compared to a debit of $0.7 million in 2015.
The average CPO price for 2016 was $706/mt, 15% higher than 2015 of $613/mt.
Earnings per share before BA movement increased by 217% to 82.16cts compared to 25.89cts in 2015. Earnings per share after BA movement increased from 24.66cts to 87.58cts.
Going Concern
The Group's balance sheet remains strong. As at 31 December 2016, the Group had cash and cash equivalents of $118.2 million and borrowings of $34.1 million, giving it a net cash position of $84.1 million, compared to $70.0 million in 2015. The Group's borrowings in the year reduced to $34.1 million (2015: $34.6 million). For these reasons, the Directors adopt a going concern basis of accounting and believe the Group will continue operation and meet its liabilities for a period of at least twelve months from the date of approval of the financial statements.
Business Review
Indonesia
FFB production in North Sumatera, which aggregates the estates of Tasik, Anak Tasik, Labuhan Bilik, Blankahan, Rambung, Sg Musam and Cahaya Pelita ("CPA"), produced 303,500mt in 2016 (2015: 325,200mt), 7% lower than 2015. The prolonged dry weather from last year induced a higher development of abnormal and smaller FFB bunches as well as male flowers in the Labuhan Bilik plantation. Replanting of over 1,500ha of oil palm in Tasik Raja and Anak Tasik also contributed to the lower production. In the CPA which is located on the west coast of North Sumatera, production was disrupted by flash floods that regularly occurred over 2,000ha of low laying plantation. As safety of the workers is of paramount importance, the safe evacuation of FFB was not possible until the flood had receded substantially. Canals and water gates built to mitigate the flood could not contain the heavy rain which is in excess of 5,300mm per annum.
Ganoderma fungus and Upper Stem Rot which attacks the productive palms in AnakTasik, Blankahan and Rambung remains a threat. Water management, good sanitation and high standards of agronomic practices remain the main priority to avoid spreading of the diseases. This includes proper disposal of severely diseased palms after detection. Soil mounding on infected palms was carried out to lengthen the economic life span of oil palms. Replanting in 2017 will continue in AnakTasik due to the significant decline in yield attributed to Ganoderma attack. There was no serious insect damage by Oryctes beetle, other leaf eating pests, wild animals and rats.
FFB production in Bengkulu and South Sumatera, which aggregates the estates of Puding Mas, Alno, KKST, ELAP and RAA produced 337,100mt (2015: 317,400mt), 6% higher than 2015. The higher production was due to higher contribution from maturing estates in KKST, ELAP and RAA. 177km of roads were resurfaced with gravel and laterite soil during the year to improve transport of FFB. As most of the estates are situated close to forest reserves, wild boars and herds of elephants continued to damage palm trees. Deep trenches and fencing provide temporary relief. The protracted negotiation with the villagers over land compensation will have an effect on the future planting in Bengkulu and South Sumatera.
FFB production in the Riau region, comprising Bina Pitri estates, produced 111,100mt in 2016 (2015: 122,500mt), 9% lower than 2015. The drop in yield was due to the severe drought and haze in 2015. Despite a 3% increase in external crop purchase, CPO production declined by 7% due to the lower internal crop production.
FFB production in Kalimantan which comprises of the Sawit Graha Manunggal estates produced 121,800mt in 2016 (2015: 108,100mt) 13% higher than 2015 mainly from newly matured oil palm area of over 8,500ha. During the year bagworms (Metisa plana) attacked 150ha of oil palm and damaged the fronds. The plantation sprayed Prevathon systemic pesticide at 14 days interval until the infestation was completely eradicated. Outbreak of bagworms tends to be associated with the combined effect of drought and excessive mortality of natural enemies. The palm trees are expected to recover with no lasting damage.
Overall bought-in crops for Indonesian operations were 20% higher at 813,700mt for the year 2016 (2015: 678,200mt). The average oil extraction rate from our mills was 20.9% in 2016 (2015: 21.2%).
Malaysia
FFB production in 2016 was 12% lower at 24,000mt, compared to 27,200mt in 2015. The Malaysian operations faced severe shortage in workers due to difficulty in recruiting foreign workers hampering harvesting and estate work. The government froze the intake of foreign workers at the beginning of the year pending a review of its policy on levy and rehiring programmes. After the freeze was lifted, the industry was hit by an increase in the minimum wage by about 10%. Despite the increase in wages and various cash incentives introduced by management, the estate continued to lose its foreign workers who absconded for better wages and working conditions in the cities. The shortage of labour is the biggest challenge facing the industry in Malaysia. In 2016, the Malaysian plantations had $0.8million pre-tax profit after BA movement compared to a pre-tax profit of $0.2 million in 2015.
Commodity Prices
The CPO CIF Rotterdam price started the year at $570/mt (2015: $700/mt), it dipped to the lowest level of $535/mt in the middle of January 2016 before trending upwards for the rest of the year. It reached a peak of $827/mt in late December 2016. It ended the year at $795/mt (2015: $560/mt), averaging $706/mt for the year, 15% higher than last year (2015: $613/mt).
Despite a softer demand, CPO price has rallied since January 2016 reaching a three-year high due to lower stocks and biodiesel mandates in Indonesia and United States, which both expected to increase consumption of edible oil. Both Indonesia and Malaysia reported lower CPO production as the El Nino weather phenomenon caused extreme drought which curbed CPO production in 2016. It was reported that production of CPO in Indonesia fell 3% to 31.5 million mt while production in Malaysia fell 13% to 17 million mt. The CPO production is however expected to improve in 2017 as palm trees recovered from moisture stress and increased planting.
Rubber prices averaged $1,324/mt for 2016 (2015: $1,269/mt). Our small area of 512ha of mature rubber contributed a revenue of $1.1 million in 2016 (2015: $1.1 million).
Corporate Development
In 2016, the Group opened up new land and planted 1,606ha of oil palm mainly in Kalimantan, boasting planted area including Plasma by 2.4% to 66,670ha (2015: 65,100ha). This excludes the replanting of 1,516ha of oil palm in North Sumatera. New plantings remain behind schedule due to delays in finalising settlement of land compensation with villagers in Bengkulu, Bangka and Kalimantan. The villagers seek compensation beyond what the Group considered fair and reasonable resulting in protracted negotiations.
Two more biogas plants in Bengkulu and Kalimantan are in the final stages of construction and are estimated to cost a total of $6.8 million. Biogas engines have been installed with the ancillary works covering gas piping and electrical works still in progress. The testing and commissioning should be completed soon and the biogas plants are expected to be operational from the second quarter of 2017. The plants when completed are expected to generate a combined 3 Megawatt of electrical power. A surplus of 15.6 million kWh of electricity worth $1.2 million is projected to be generated per year which the Group intends to sell to the state electricity company. The use of clean energy in the mills will further reduce their reliance on fossil fuels and improve the Group's carbon foot print.
Negotiations to sell the surplus power estimated in excess of 5 million kWh per year to the Indonesian National Electricity Company from its new biogas plant in North Sumatera has been approved by the local authority in January 2017 after the completion of a feasibility study and all the required permits.
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 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 73 mosques and 18 churches in all its estates. In 2016, the Group spent $300,400 to build additional facilities and to maintain these amenities.
Staff and selected employees are given the opportunity to be trained and to attend seminars to enhance their working skills and capability. The Group provides free education for all employees' children in the local plantations and communities where they work. In 2016, scholarships amounting to $38,700 were provided to children in surrounding villages and selected employees' children to further their tertiary education in collaboration with universities in Riau and Bengkulu. In total 97 scholarships were given out. Selected under graduates were given opportunities for industrial training during semester breaks. In addition, the Group provides computers and funding to construct educational facilities including laboratories and libraries. The salaries of teachers in the estates and the cost of school buses to transport employees' children to the schools are provided by the Group. Over the years a total of 34 schools have been built with 150 teachers currently employed within our Group estates. In 2016, the Group spent some $582,700 on running the schools. The Group bought two additional school buses in Kalimantan taking the tally of school buses operated by the Group in 2016 to 34 vehicles.
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 22 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 minimum standard required by the government under the country's Health and Social Security Agency. In addition, the Group organised fogging to prevent spread of dengue mosquitoes.
In isolated locations, the Group drill tube wells to provide clean water. Related healthcare expenses for 2016 were $254,700. In December 2016, a strong earthquake hit Aceh province and damaged roads and houses. The Group made a contribution to rebuild houses and water tanks.
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.
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 new planted areas acquired from 2007 onwards are to be reserved for the benefit of smallholder cooperative scheme, known as Plasma, and the Group is integrating such smallholder developments alongside its estates. In order to aid the development of Plasma scheme, a subsidiary provided a corporate guarantee to a local bank in excess of $16 million to cover loans raised by the cooperative. The plasma development has commenced in stages for its estates in Sumatera and Kalimantan.
The Board supported Kas Desa smallholder village development programme to supplement the livelihood of the villages. The Group has to-date financed, developed and managed 22 smallholder village schemes across four companies.
In addition to education and healthcare which includes the construction of schools, provision of scholarships and books, the Group also develops infrastructure such as the construction and repair of two bridges and maintain 240km of external roads in 2016. The Group also provides initial aid and seed capital to villagers such as fruit seedlings, fish fries, cattle and ducks to start community sustainable programs.
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 RSPO (Roundtable on Sustainable Palm Oil) principles, has become the mandatory standard for Indonesian planters.
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. In 2016 the regional government in Bengkulu awarded two operating companies the Zero Accident Awards for 2015 in recognition of the companies' effort to reduce accident at the workplace. During the year the Group continued to upgrade its agricultural chemical stores and diesel fuel storage tanks in various plantations and mills to meet safety and environmental standards. Standard operating procedures were refined and documented based on sustainable oil palm best practices. The Group 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. To-date six companies have been ISPO certified. Another four companies have completed the second stage of ISPO audit while two companies are at second stage of certification audit.
Care For The Environment and Sustainable Practices
As a Group, we highlight the importance of creating awareness and implementation of good environmental management practices throughout the organisation. The Group has been consistently practising good agricultural practices such as zero burning, integrated pest management, land terracing and recycling of biomass. When it comes to replanting, the old palms felled are chipped and left to decompose at 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. 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 employees. Legume cover crops are planted to minimise soil erosion and preserve the soil moisture. In mature areas, fronds and empty fruit bunch ("EFB") are placed inter-rows to allow the slow release of organic nutrients while minimising soil erosion especially sandy soil and degradation. The Group does not incinerate EFB as it emits unhealthy gases and smoke during burning at low temperatures.
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. The final discharge is applied to the estates land where it is used as fertilisers.
The Group's three biogas plants will enhance the waste management treatment in the mill 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 other needs without dependency on fossil fuels. Further similar undertakings for the Group's mills are planned and shall be implemented in stages. The Group intends to sell the surplus power generated to the National Grid.
The Group is committed to implementing good agricultural practices as spelled out in its standard operating procedures for the planting of oil palm. Integrated Pest Management has been adopted to control pests and to improve biological balance.
Barn Owls were introduced to control rats. 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 environmental friendly herbicide such as Glyphosate which is also less costly.
The usage of Paraquat herbicide and chemicals has been reduced and minimized to control weeds and vermins.The sprayers are also trained in safety and spraying techniques. The chemicals are kept in designated storage and examined at regular intervals. Employees who handled the use of chemicals undergo medical examination routinely. Natural vegetation on uncultivable land such as deep peat, very steep areas and riparian zones along watercourses are maintained to preserve biodiversity and wildlife corridors.
The Group continues to comply and preserve the High Conservative Value ("HCV") areas recognised by the Department of Forestry.
Principal 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 risks facing the Group on an annual basis.
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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 |
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Country and regulatory |
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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 security situation may cause disruption on 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 were civil unrest attributed to ethnic tensions in some parts of Indonesia. But the Group operations were not interrupted by the regional security problems.
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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 dividend. |
Transfer of profit from Indonesia to 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.
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The Group acquires the land exploitation rights ("HGU") after paying land acquisition and HGU processing costs. These costs are capitalized as land asset costs since the asset characteristics fulfill the recognition criteria. The Group holds its land under 25 or 35 year renewable leases.
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Any changes in law and regulations relating to land tenure could have negative impact on the Group's activities. |
There are several more years before the first HGU is due for renewal in 2023. There are no reasons for the Directors to believe that the HGU will not be renewed upon expiration by complying with existing law and regulations. |
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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. Forced divestment of interests in Indonesia at below market values. |
The Group realise 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.
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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. |
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Exchange rates |
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CPO is a US Dollar denominated commodity and a significant proportion of revenue costs in Indonesia (such as fertiliser and fuel) and development costs (such as heavy machinery and mills equipment) are imported and are US Dollar related.
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Adverse movements of Rupiah against US Dollar can have a negative effect on the operating costs and raise funding cost. |
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. |
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Weather and natural disasters |
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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. |
Dry periods, in particular, will affect yields in the short and medium terms. Drought induces moisture stress in palm trees. High levels of rainfall can disrupt estate operations and result in harvesting delays with loss of oil palm fruits or deterioration in fruit quality. Any delay in collection of harvested FFB during the rainy season could raise the level of free fatty acid ("FFA") in the CPO. CPO with higher level of FFA will 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. |
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 policy. 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 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.
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Produce prices |
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CPO is a primary commodity and is affected by the world economy, levels of inflation, availability of alternative soft oils such as soya oils. CPO price also moves in tandem with crude oil prices which determines 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. |
Directors believe that such swings should be moderated by continuous demand in economies like China, India and Indonesia. Larger export would lead to lower inventory of CPO which augurs well for future produce price. |
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Imposition of import controls or taxes in consuming and exporting countries. The Indonesian government in July 2015 imposes a $50/mt export levy to fund biodiesel subsidies. It also introduced a simpler export tax system expressed in US Dollar instead of a percentage of CPO price.
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Reduced revenue and reduction in cash flow and profit. When CPO price is below $750/mt, the export tax levy will impact upon the Group's profit. When CPO price recovers to above $750/mt, the effective tax rate will be lower providing some relief to planters. Effective July 2015, the Indonesian government imposed a progressive export tax from $3/mt for CPO exported above $750/mt.
|
The Indonesian government allows free export of CPO but applies a sliding scale of duties on exports which allows producers economic margins. The export levy may be regarded as a measure to support CPO producers through increase in biodiesel consumption.
|
|
|
Hedging risk |
|
|
|
|
The Group's subsidiaries have borrowing 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. |
Risk is partially mitigated by US Dollar denominated cash balances. It also considers the average interest rate on Rupiah deposits which is 3.9% higher than on US Dollar deposits whereas interest rate for Rupiah borrowing is about 5.31% higher as compared to US Dollar borrowing. |
|
|
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. |
Communication breakdown would cause disruption on operation and consequently financial loss. |
The Group endeavours to mitigate this risk by liaising regularly with representatives of surrounding villages and by seeking to improve local living standards through mutually beneficial economic and social interaction with the local villages. In particular, the Group, when possible, gives priority to applications for employment from members of 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 sums of 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 Kebun Kas Desa (village's scheme) and Plasma schemes surrounding the operating estates. The returns from these plots are used to improve villages' community welfare.
|
|
|
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 |
The Group has measures in place including appropriate tools and techniques to monitor and mitigate this risk. |
|
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 to its composition based on legislative requirement.
|
|
2016 average employed during the year |
||
|
Group Headcount |
Women |
Men |
Total |
|
Board (Company and subsidiaries) |
2 |
14 |
16 |
|
Senior Management (GM and Above) |
- |
6 |
6 |
|
Managers & Executives |
30 |
390 |
420 |
|
Full Time |
181 |
5,215 |
5,396 |
|
Part-time Field Workers |
4,418 |
6,516 |
10,934 |
|
Total |
4,631 |
12,141 |
16,772 |
|
% |
28% |
72% |
100% |
|
|
|
|
|
|
|
|
|
|
|
|
2015 average employed during the year |
||
|
Group Headcount |
Women |
Men |
Total |
|
Board (Company and subsidiaries) |
2 |
14 |
16 |
|
Senior Management (GM and Above) |
- |
8 |
8 |
|
Managers & Executives |
30 |
369 |
399 |
|
Full Time |
314 |
5,095 |
5,409 |
|
Part-time Field Workers |
4,745 |
6,235 |
10,980 |
|
Total |
5,091 |
11,721 |
16,812 |
|
% |
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 percentage of women workforce within the Group decreased from 30% in 2015 to 28% in 2016.
Employees
In 2016, the number of full time workforce averaged 5,838 (2015: 5,832) while the part-time labour averaged 10,934 (2015: 10,980).
The Group has formal processes for recruitment particularly 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.
The Group has a programme for recruiting graduates from Indonesian universities to join existing employees selected on regular basis to training programmes organised by the Group's training centre that provides 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, motivation, self-improvement, company values, health and safety.
A large workforce and their families are housed in the Group's housing across the Group's plantations. The Group further provides at its own cost water and electricity and a host of other amenities including places of worship, schools and clinics. On top of competitive salaries and bonuses, extensive benefits and privileges help the Group to retain and motivate its employees.
The Group promotes a policy for 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 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.
Although the Group does not have a specific policy on 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 three months to March 2017 was 20% higher against the same period in 2016 mainly due to the increase in production from Riau and Kalimantan region. It is too early to forecast whether the production will be better for the rest of the year.
The CPO CIF (Cost, Insurance, Freight) Rotterdam price opened the year 2017 at $790/mt and prices are expected to be in the range of $650/mt to $850/mt for the first half of 2017.
The current high CPO price should sustain at least into the second quarter of 2017 underpinned by the carry-over effect of previous El Nino and seasonally low production cycle. We do however expect the CPO price to trend lower for the remaining of 2017 as production recovers. Furthermore Oil World, the independent forecasting service for oilseeds and oils projected rival soybean output to increase by 7.3% to 334 million mt in 2017 on the back of higher output from several major soybean producing countries. The US Department of Agriculture also projects record soybean plantings in the US for the year 2017.
It was reported that the palm oil demand from India and China is unlikely to increase significantly in 2017 as continued structural adjustment in China will continue to moderate China's economy growth hence limiting palm oil consumption. The current high CPO prices typically cap demand particularly from price-sensitive countries like India. The recent demonetisation of the Indian Rupee may also continue to weigh on India's palm oil imports at least in the near term.
US Dollar depreciated by approximately 3% (2015: +13%) against the Indonesian Rupiah in 2016 in anticipation of an interest rate hike in the United States and the weak emerging economies. The Rupiah has since strengthened by 1% in 2017 which makes palm oil more expensive for importers.
The rising material costs and wages in Indonesia are expected to increase the overall production cost in 2017. The Indonesian government recently announced regional hikes in 2017 minimum wage averaging 8.2%. These wage hikes will raise overall estate costs and erode profit margins.
Nevertheless barring any unforeseen circumstances, the Group is confident that CPO demand will be sustainable in the long term on the backdrop of global economic recovery and we can expect a satisfactory trading outturn and cash flow for 2017.
On behalf of the Board
Dato' John Lim Ewe Chuan
Executive Director, Corporate Finance and Corporate Affairs
26 April 2017
Consolidated Income Statement
For the year ended 31 December 2016
|
|
|
2016 |
(Restated) 2015 |
|||||
|
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 |
246,210 |
- |
246,210 |
196,451 |
- |
196,451 |
|
|
Cost of sales |
|
(184,337) |
3,383 |
(180,954) |
(152,684) |
(732) |
(153,416) |
|
|
Gross profit |
|
61,873 |
3,383 |
65,256 |
43,767 |
(732) |
43,035 |
|
|
Administration expenses |
|
(6,653) |
- |
(6,653) |
(7,630) |
- |
(7,630) |
|
|
Impairment losses |
|
(2,740) |
- |
(2,740) |
(12,470) |
- |
(12,470) |
|
|
Operating profit |
|
52,480 |
3,383 |
55,863 |
23,667 |
(732) |
22,935 |
|
|
Exchange gains / (losses) |
|
845 |
- |
845 |
(2,354) |
- |
(2,354) |
|
|
Finance income |
4 |
5,881 |
- |
5,881 |
6,683 |
- |
6,683 |
|
|
Finance expense |
4 |
(1,743) |
- |
(1,743) |
(2,010) |
- |
(2,010) |
|
|
Profit before tax |
5 |
57,463 |
3,383 |
60,846 |
25,986 |
(732) |
25,254 |
|
|
Tax expense |
|
(16,021) |
(844) |
(16,865) |
(10,385) |
183 |
(10,202) |
|
|
Profit for the year |
|
41,442 |
2,539 |
43,981 |
15,601 |
(549) |
15,052 |
|
|
Attributable to: |
|
|
|
|
|
|
|
|
|
- Owners of the parent |
|
32,563 |
2,150 |
34,713 |
10,263 |
(488) |
9,775 |
|
|
- Non-controlling interests |
|
8,879 |
389 |
9,268 |
5,338 |
(61) |
5,277 |
|
|
|
|
41,442 |
2,539 |
43,981 |
15,601 |
(549) |
15,052 |
|
|
Earnings per share for profit attributable to the owners of the parent during the year |
|
|
|
|
|
|
|
|
|
- basic |
8 |
|
|
87.58cts |
|
|
24.66cts |
|
|
- diluted |
8 |
|
|
87.58cts |
|
|
24.64cts |
|
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2016
|
|
2016 $000 |
(Restated) 2015 $000 |
|
|
|
|
|
Profit for the year |
43,981 |
15,052 |
|
|
|
|
|
Other comprehensive income / (expense): |
|
|
|
|
|
|
|
Items may be reclassified to profit or loss: |
|
|
|
|
|
|
|
Gain / (Loss) on exchange translation of foreign operations |
8,860 |
(45,737) |
|
|
|
|
|
Net other comprehensive income / (expense) may be reclassified to profit or loss |
8,860 |
(45,737) |
|
|
|
|
|
Items not to be reclassified to profit or loss: |
|
|
|
|
|
|
|
Unrealised gain on revaluation of leasehold land, net of tax |
1,752 |
3,636 |
|
|
|
|
|
Remeasurement of retirement benefits plan, net of tax |
(567) |
334 |
|
|
|
|
|
Net other comprehensive income not being reclassified to profit or loss |
1,185 |
3,970 |
|
Total other comprehensive income / (expense) for the year, net of tax |
10,045 |
(41,767) |
|
Total comprehensive income / (expense) for the year |
54,026 |
(26,715) |
|
|
|
|
|
Attributable to: |
|
|
|
- Owners of the parent |
43,099 |
(23,850) |
|
- Non-controlling interests |
10,927 |
(2,865) |
|
|
54,026 |
(26,715) |
Consolidated Statement of Financial Position
As at 31 December 2016
|
|
Note |
31.12.2016 $000 |
(Restated) 31.12.2015 $000 |
(Restated) 1.1.2015 $000 |
|
Non-current assets |
|
|
|
|
|
Property, plant and equipment |
10 |
356,790 |
336,444 |
360,424 |
|
Receivables |
|
3,891 |
3,655 |
3,007 |
|
Deferred tax assets |
|
13,451 |
8,311 |
3,982 |
|
|
|
|
|
|
|
|
|
374,132 |
348,410 |
367,413 |
|
Current assets |
|
|
|
|
|
Inventories |
|
9,219 |
6,693 |
7,846 |
|
Tax receivables |
|
26,695 |
16,679 |
9,231 |
|
Biological assets |
|
7,107 |
3,673 |
4,895 |
|
Trade and other receivables |
|
5,767 |
4,704 |
8,807 |
|
Cash and cash equivalents |
|
118,176 |
104,614 |
125,937 |
|
|
|
|
|
|
|
|
|
166,964 |
136,363 |
156,716 |
|
Current liabilities |
|
|
|
|
|
Loans and borrowings |
|
(6,203) |
(1,750) |
(313) |
|
Trade and other payables |
|
(16,054) |
(17,406) |
(21,010) |
|
Tax liabilities |
|
(8,974) |
(5,917) |
(10,752) |
|
Dividend payables |
|
- |
- |
(20) |
|
|
|
(31,231) |
(25,073) |
(32,095) |
|
Net current assets |
|
135,733 |
111,290 |
124,621 |
|
Non-current liabilities |
|
|
|
|
|
Loans and borrowings |
|
(27,875) |
(32,875) |
(34,625) |
|
Deferred tax liabilities |
|
(30,063) |
(27,684) |
(29,559) |
|
Retirement benefits - net liabilities |
|
(6,666) |
(4,528) |
(4,445) |
|
|
|
(64,604) |
(65,087) |
(68,629) |
|
Net assets |
|
445,261 |
394,613 |
423,405 |
|
Issued capital and reserves attributable to owners of the parent |
|
|
|
|
|
Share capital |
|
15,504 |
15,504 |
15,504 |
|
Treasury shares |
|
(1,171) |
(1,171) |
(1,171) |
|
Share premium |
|
23,935 |
23,935 |
23,935 |
|
Capital redemption reserve |
|
1,087 |
1,087 |
1,087 |
|
Revaluation reserves |
|
61,038 |
59,572 |
57,029 |
|
Exchange reserves |
|
(219,570) |
(226,974) |
(190,503) |
|
Retained earnings |
|
482,288 |
449,062 |
440,853 |
|
|
|
363,111 |
321,015 |
346,734 |
|
Non-controlling interests |
|
82,150 |
73,598 |
76,671 |
|
Total equity |
|
445,261 |
394,613 |
423,405 |
Consolidated Statement of Changes in Equity
For the year ended 31 December 2016
|
|
Share capital |
Treasury shares |
Share premium |
Capital redemption reserve |
Revaluation reserve |
Foreign exchange reserve |
Retained earnings |
Total |
Non-controlling interests |
Total equity |
|
|
$000 |
$000 |
$000 |
$000 |
$000 |
$000 |
$000 |
$000 |
$000 |
$000 |
|
Balance at 31 December 2014 |
15,504 |
(1,171) |
23,935 |
1,087 |
57,029 |
(190,503) |
521,355 |
427,236 |
90,813 |
518,049 |
|
Restatement (note 2) |
- |
- |
- |
- |
- |
- |
(80,502) |
(80,502) |
(14,142) |
(94,644) |
|
Balance at 31 December 2014 after restatement |
15,504 |
(1,171) |
23,935 |
1,087 |
57,029 |
(190,503) |
440,853 |
346,734 |
76,671 |
423,405 |
|
Items of other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
-Unrealised gain on revaluation of leasehold land, net of tax |
- |
- |
- |
- |
2,543 |
- |
- |
2,543 |
1,093 |
3,636 |
|
-Remeasurement of retirement benefit plan, net of tax |
- |
- |
- |
- |
- |
- |
303 |
303 |
31 |
334 |
|
-Loss on exchange translation of foreign operations |
- |
- |
- |
- |
- |
(36,471) |
- |
(36,471) |
(9,266) |
(45,737) |
|
Total other comprehensive income / (expenses) |
- |
- |
- |
- |
2,543 |
(36,471) |
303 |
(33,625) |
(8,142) |
(41,767) |
|
Profit for the year |
- |
- |
- |
- |
- |
- |
9,775 |
9,775 |
5,277 |
15,052 |
|
Total comprehensive income / (expenses) for the year |
- |
- |
- |
- |
2,543 |
(36,471) |
10,078 |
(23,850) |
(2,865) |
(26,715) |
|
Dividends paid |
- |
- |
- |
- |
- |
- |
(1,869) |
(1,869) |
(208) |
(2,077) |
|
Balance at 31 December 2015 after restatement |
15,504 |
(1,171) |
23,935 |
1,087 |
59,572 |
(226,974) |
449,062 |
321,015 |
73,598 |
394,613 |
|
Items of other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
-Unrealised gain on revaluation of leasehold land, net of tax |
- |
- |
- |
- |
1,466 |
- |
- |
1,466 |
286 |
1,752 |
|
-Remeasurement of retirement benefit plan, net of tax |
- |
- |
- |
- |
- |
- |
(484) |
(484) |
(83) |
(567) |
|
-Gain on exchange translation of foreign operations |
- |
- |
- |
- |
- |
7,404 |
- |
7,404 |
1,456 |
8,860 |
|
Total other comprehensive income / (expenses) |
- |
- |
- |
- |
1,466 |
7,404 |
(484) |
8,386 |
1,659 |
10,045 |
|
Profit for the year |
- |
- |
- |
- |
- |
- |
34,713 |
34,713 |
9,268 |
43,981 |
|
Total comprehensive income for the year |
- |
- |
- |
- |
1,466 |
7,404 |
34,229 |
43,099 |
10,927 |
54,026 |
|
Dividends paid |
- |
- |
- |
- |
- |
- |
(1,003) |
(1,003) |
(2,375) |
(3,378) |
|
Balance at 31 December 2016 |
15,504 |
(1,171) |
23,935 |
1,087 |
61,038 |
(219,570) |
482,288 |
363,111 |
82,150 |
445,261 |
Consolidated Statement of Cash Flows
For the year ended 31 December 2016
|
|
2016 $000 |
(Restated) 2015 $000 |
|
Cash flows from operating activities |
|
|
|
Profit before tax |
60,846 |
25,254 |
|
Adjustments for: |
|
|
|
BA movement |
(3,383) |
732 |
|
Profit on disposal of tangible fixed assets |
(13) |
(392) |
|
Depreciation |
15,677 |
13,556 |
|
Retirement benefit provisions |
1,700 |
973 |
|
Net finance income |
(4,138) |
(4,673) |
|
Unrealised (gain) / loss in foreign exchange |
(845) |
2,354 |
|
Property, plant and equipment written off |
731 |
163 |
|
Impairment losses |
2,740 |
12,470 |
|
Operating cash flow before changes in working capital |
73,315 |
50,437 |
|
(Increase) / Decrease in inventories |
(2,353) |
341 |
|
(Increase) / Decrease in non-current, trade and other receivables |
(1,460) |
4,425 |
|
Decrease in trade and other payables |
(1,749) |
(1,623) |
|
Cash inflow from operations |
67,753 |
53,580 |
|
Interest paid |
(1,743) |
(2,010) |
|
Retirement benefit paid |
(250) |
(103) |
|
Overseas tax paid |
(27,133) |
(27,856) |
|
Net cash flow from operations |
38,627 |
23,611 |
|
|
|
|
|
Investing activities |
|
|
|
Property, plant and equipment |
|
|
|
- purchase |
(30,484) |
(36,926) |
|
- sale |
931 |
979 |
|
Interest received |
5,881 |
6,683 |
|
Net cash used in investing activities |
(23,672) |
(29,264) |
|
|
|
|
|
Financing activities |
|
|
|
Dividends paid by Company |
(1,003) |
(1,869) |
|
Dividends paid to minority shareholders |
(2,375) |
(228) |
|
Drawdown of long term loans |
1,250 |
- |
|
Repayment of existing long term loans |
(1,797) |
(313) |
|
Net cash used in financing activities |
(3,925) |
(2,410) |
|
Increase / (Decrease) in cash and cash equivalents |
11,030 |
(8,063) |
|
|
|
|
|
Cash and cash equivalents |
|
|
|
At beginning of year |
104,614 |
125,937 |
|
Foreign exchange |
2,532 |
(13,260) |
|
At end of year |
118,176 |
104,614 |
|
Comprising: |
|
|
|
Cash at end of year |
118,176 |
104,614 |
Notes
1 Accounting policies
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, 6th 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 set out below does not constitute the company's statutory accounts for 2016 or 2015. Statutory accounts for the years ended 31 December 2016 and 31 December 2015 have been reported on by the Independent Auditors. The Independent Auditors' Reports on the Annual Report and Financial Statements for the years ended 31 December 2016 and 31 December 2015 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 2015 have been filed with the Registrar of Companies. The statutory accounts for the year ended 31 December 2016 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 in these financial statements:
• IAS 16 Amendments - Property, Plant and Equipment (effective for accounting periods beginning on or after 1 January 2016)*
• IAS 41 Amendments - Agriculture (effective for accounting periods beginning on or after 1 January 2016)*
The nature and the impact of the amendments to IAS 16 and IAS 41 are disclosed in note 2 - Prior year restatement.
b) New standards, interpretations and amendments not yet effective.
The following new standards, interpretations and amendments are effective for periods beginning after 1 January 2017 and have not been applied in these financial statements:
• IFRS 9 Financial Instruments (effective for accounting periods beginning on or after 1 January 2018)
• IFRS 15 Revenue from Contracts with Customers (effective for accounting periods beginning on or after 1 January 2018)
• IFRS 16 Leases (effective for accounting periods beginning on or after 1 January 2019)
None of the above new standards, interpretations and amendments are expected to have a material effect on the Group's future financial statements.
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.
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.
Foreign currency
The individual financial statements of each subsidiary are presented in the currency of the country in which it operates (its functional currency) with the exception of the Company and its UK subsidiaries which are presented in US Dollar. The presentation currency for the consolidated financial statements is also US Dollar, chosen because, as internationally traded commodities, the price of the bulk of the Group's products are ultimately link 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 "foreign exchange reserve"). 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 foreign exchange reserve 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 foreign exchange reserve relating to that operation up to 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.
Revenue recognition
Revenue includes
- amounts receivable for produce provided in the normal course of business, net of sales related taxes and levies, including export taxes;
- amounts received for sales of palm kernel shell, rubber wood, biomass products and other income of an operating nature.
Sales of CPO, palm kernel, FFB, shell nut, biomass products and rubber slab are recognised when goods are delivered or allocated to a purchaser. Delivery or allocation does not take place until contracts are paid for. Sales of latex are recognised on signing of sales contract, this being the point at which the significant risks and rewards of ownership are passed over to the buyer. Other income mainly consists of amounts received from sales of nut shell, which is recognised when the goods are delivered.
Share based payments
Share options are measured at fair value (excluding the effect of non market-based vesting conditions) at the date of grant. This fair value is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest and adjusted for the effect of non market-based vesting conditions.
Fair value is measured by use of a binomial model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.
Provided that all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied.
Tax
UK and foreign corporation tax is 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.
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 following annual general meeting.
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;
• 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 10)
• Biological assets
For more detailed information in relation to the fair value measurement of the items above, please refer to the applicable notes.
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 FFB 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%
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
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 is charged or credited to the income statement within the cost of sales.
Leased assets
Assets financed by leasing agreements which give rights approximating to ownership (finance leases) are capitalised at amounts equal to the original cost of the asset to the lessors and depreciation is provided on the asset over the shorter of the lease term or its useful economic life in accordance with Group depreciation policy for those held at cost. Land rights are held at fair value and revalued at the balance sheet date. The capital elements of future obligations under finance leases are included as liabilities in the balance sheet and the current year's interest element is charged to the income statement to produce a constant rate of charge on the balance of capital repayments outstanding. There are no operating leases.
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.
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.
Financial assets
All the Group's receivables and loans are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are recognised at fair value at inception and subsequently at amortised cost. No impairment provisions have been considered necessary.
Cash and cash equivalents consist of cash in hand and short term deposits at banks with an original maturity of not exceeding three months. Bank overdrafts are shown within loans and borrowings under current liabilities on the balance sheet.
There are no assets in hedging relationships and no financial assets or liabilities available for sale.
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 under Interest capitalisation above.
Trade and other payables are shown at fair value at recognition and subsequently at amortised cost.
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 on property revaluation surpluses.
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.
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);
• 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.
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 share reserve. 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.
Financial guarantee contracts
Where the Company and its subsidiaries enters into financial guarantee contracts and guarantees the indebtedness of other companies within the Group and/or third party entities, the Group considers these to be insurance arrangements and accounts for them as such. In this respect, the Group treats the guarantee contract as a contingent liability until such time that it becomes probable that the Group will be required to make a payment under the guarantee.
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: 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 are set out in note 10. The Group's policy with regard to impairment of such assets is set out above.
2 Prior year restatement
The amendments to IAS 16 and the amendments to IAS 41, which came into effect on 1 January 2016, require Biological Assets that meet the definition of bearer plants to be accounted for as Property, Plant and Equipment in accordance with IAS 16, adopting either a cost model or a revaluation model. This required retrospective application.
As the Biological Assets of the Group fall within the definition of bearer plants, with effect from 1 January 2016 the immature plants are stated at accumulated cost until maturity, subject to impairment reviews, and the mature plantations are stated at historical cost less accumulated depreciation. The unharvested FFB, which is agricultural produce under the revised IAS 41, are recognised as Biological Assets and are stated at fair value less cost to sell at the point of harvest, with changes recognised in profit and loss. This has resulted in the accounts for the year ended 31 December 2015 being restated.
The effects of the restatements are summarised as follows:
|
|
(Restated) 2015 $000 |
|
Impact on consolidated income statement |
|
|
Profit for the year before restatement |
(13,429) |
|
Effect of change in restatement: |
|
|
Cost of sales |
(6,787) |
|
Biological asset movement |
63,389 |
|
Administration expenses |
196 |
|
Impairment loss |
(12,470) |
|
Tax expense |
(15,847) |
|
|
28,481 |
|
Profit for the year after restatement |
15,052 |
The effect of the prior year adjustments had a negative impact on the earnings per share before BA of 43.50cts and a positive impact on the earnings per share after BA of 62.24cts for the year to 31 December 2015.
|
|
(Restated) 2015 $000 |
|
Impact on consolidated statement of comprehensive income |
|
|
Other comprehensive expenses for the year before restatement |
(50,585) |
|
Effect of change in restatement: |
|
|
Loss on exchange translation of foreign operations |
8,858 |
|
Deferred tax on revaluation |
(40) |
|
|
8,818 |
|
Other comprehensive expenses for the year after restatement |
(41,767) |
|
|
Balance as reported 31 December 2015 $000 |
Effect of restatement $000 |
Restated balance at 31 December 2015 $000 |
|
Impact on consolidated statement of financial position |
|
|
|
|
Non-current assets - Biological assets |
179,010 |
(179,010) |
- |
|
Property, plant and equipment |
219,990 |
116,454 |
336,444 |
|
Deferred tax |
(20,911) |
1,538 |
(19,373) |
|
Current assets - Biological assets |
- |
3,673 |
3,673 |
|
Revaluation reserves |
(59,594) |
22 |
(59,572) |
|
Exchange reserves |
234,490 |
(7,516) |
226,974 |
|
Retained earnings |
(504,892) |
55,830 |
(449,062) |
|
Non-controlling interest |
(82,607) |
9,009 |
(73,598) |
|
|
Balance as reported 1 January 2015 $000 |
Effect of restatement $000 |
Restated balance at 1 January 2015 $000 |
|
Impact on consolidated statement of financial position |
|
|
|
|
Non-current assets - Biological assets |
251,374 |
(251,374) |
- |
|
Property, plant and equipment |
227,380 |
133,044 |
360,424 |
|
Deferred tax |
(44,368) |
18,791 |
(25,577) |
|
Current assets - Biological assets |
- |
4,895 |
4,895 |
|
Retained earnings |
(521,355) |
80,502 |
(440,853) |
|
Non-controlling interest |
(90,813) |
14,142 |
(76,671) |
The prior year restatement has changed from that reported in the interim financial statements as the figures have now been subject to audit.
3 Revenue
|
|
|
2016 $000 |
|
2015 $000 |
|
|
|
|
|
|
|
Sales of produce: |
|
|
|
|
|
- CPO, palm kernel and FFB |
|
243,020 |
|
193,364 |
|
- Rubber |
|
1,149 |
|
1,075 |
|
- Shell nut |
|
1,717 |
|
1,685 |
|
- Biomass products |
|
324 |
|
327 |
|
|
|
246,210 |
|
196,451 |
4 Finance income and expense
|
|
|
2016 $000 |
|
2015 $000 |
|
|
|
|
|
|
|
Finance income |
|
|
|
|
|
Interest receivable on: |
|
|
|
|
|
Credit bank balances and time deposits |
|
5,881 |
|
6,683 |
|
|
|
|
|
|
|
Finance expense |
|
|
|
|
|
Interest payable on: |
|
|
|
|
|
Development loans |
|
(1,743) |
|
(2,010) |
|
Net finance income recognised in income statement |
|
4,138 |
|
4,673 |
5 Profit before tax
|
|
|
2016 $000 |
|
(Restated) 2015 $000 |
|
|
|
|
|
|
|
Profit before tax is stated after charging |
|
|
|
|
|
Depreciation (note 10) |
|
15,677 |
|
13,556 |
|
Impairment losses (note 10) |
|
2,740 |
|
12,470 |
|
Exchange (gains) / losses |
|
(845) |
|
2,354 |
|
Movement of inventories |
|
(2,526) |
|
1,153 |
|
Operating lease expense |
|
|
|
|
|
- Property |
|
515 |
|
523 |
|
Professional fees |
|
760 |
|
1,086 |
|
Staff costs (note 7) |
|
31,564 |
|
29,007 |
|
Remuneration received by the group's auditor or associates of the group's auditor: |
|
|
|
|
|
- Audit of parent company |
|
5 |
|
5 |
|
- Audit of consolidated financial statement |
|
132 |
|
157 |
|
- Audit related assurance service |
|
6 |
|
7 |
|
- Audit of UK subsidiaries |
|
13 |
|
13 |
|
Total audit services |
|
156 |
|
182 |
|
|
|
|
|
|
|
Audit of overseas subsidiaries |
|
|
|
|
|
- Malaysia |
|
21 |
|
19 |
|
- Indonesia |
|
70 |
|
66 |
|
Total audit services |
|
91 |
|
85 |
|
|
|
|
|
|
|
Total auditors' remuneration |
|
247 |
|
267 |
6 Segment information
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 |
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
Total sales revenue (all external) |
|
|
|
|
|
|
|
|
|
|
|
- CPO, palm kernel and FFB |
88,465 |
86,564 |
3 |
40,169 |
27 |
24,342 |
239,570 |
3,450 |
- |
243,020 |
|
- Rubber |
1,149 |
- |
- |
- |
- |
- |
1,149 |
- |
- |
1,149 |
|
- Shell nuts |
628 |
736 |
1 |
205 |
- |
147 |
1,717 |
- |
- |
1,717 |
|
- Biomass products |
324 |
- |
- |
- |
- |
- |
324 |
- |
- |
324 |
|
Total revenue |
90,566 |
87,300 |
4 |
40,374 |
27 |
24,489 |
242,760 |
3,450 |
- |
246,210 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit / (loss) before tax |
23,219 |
24,785 |
(4,695) |
12,861 |
(602) |
1,623 |
57,191 |
296 |
(24) |
57,463 |
|
BA movement |
628 |
1,421 |
144 |
653 |
2 |
431 |
3,279 |
104 |
- |
3,383 |
|
Profit for the year before tax per consolidated income statement |
23,847 |
26,206 |
(4,551) |
13,514 |
(600) |
2,054 |
60,470 |
400 |
(24) |
60,846 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
(4,029) |
(4,096) |
(2,505) |
(898) |
(85) |
(3,414) |
(15,027) |
(650) |
- |
(15,677) |
|
Impairment losses |
- |
- |
693 |
- |
(335) |
(3,098) |
(2,740) |
- |
- |
(2,740) |
|
Inter-segment transactions |
3,828 |
(2,117) |
(767) |
(609) |
- |
(1,334) |
(999) |
604 |
395 |
- |
|
Income tax |
(9,275) |
(5,744) |
3,410 |
(4,531) |
90 |
644 |
(15,406) |
(81) |
(1,378) |
(16,865) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
175,332 |
129,428 |
54,280 |
41,887 |
11,732 |
103,906 |
516,565 |
20,944 |
3,587 |
541,096 |
|
Non-Current Assets |
101,843 |
76,048 |
52,862 |
20,044 |
11,520 |
94,974 |
357,291 |
16,263 |
578 |
374,132 |
|
Non-Current Assets - Additions |
7,956 |
5,544 |
2,638 |
857 |
657 |
12,771 |
30,423 |
61 |
- |
30,484 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North Sumatera |
Bengkulu |
South Sumatera |
Riau |
Bangka |
Kalimantan |
Total Indonesia |
Malaysia |
UK |
Total |
|
|
$000 |
$000 |
$000 |
$000 |
$000 |
$000 |
$000 |
$000 |
$000 |
$000 |
|
2015 (Restated) |
|
|
|
|
|
|
|
|
|
|
|
Total sales revenue (all external) |
|
|
|
|
|
|
|
|
|
|
|
- CPO, palm kernel and FFB |
67,978 |
73,661 |
37 |
37,129 |
1 |
11,426 |
190,232 |
3,132 |
- |
193,364 |
|
- Rubber |
1,075 |
- |
- |
- |
- |
- |
1,075 |
- |
- |
1,075 |
|
- Shell nuts |
513 |
812 |
10 |
225 |
38 |
87 |
1,685 |
- |
- |
1,685 |
|
- Biomass products |
327 |
- |
- |
- |
- |
- |
327 |
- |
- |
327 |
|
Total revenue |
69,893 |
74,473 |
47 |
37,354 |
39 |
11,513 |
193,319 |
3,132 |
- |
196,451 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit / (loss) before tax |
18,301 |
15,627 |
(13,360) |
15,431 |
(433) |
(7,742) |
27,824 |
(795) |
(1,043) |
25,986 |
|
BA movement |
(147) |
(612) |
(21) |
(214) |
- |
251 |
(743) |
11 |
- |
(732) |
|
Profit for the year before tax per consolidated income statement |
18,154 |
15,015 |
(13,381) |
15,217 |
(433) |
(7,491) |
27,081 |
(784) |
(1,043) |
25,254 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
(3,911) |
(3,840) |
(1,197) |
(842) |
(26) |
(2,986) |
(12,802) |
(754) |
- |
(13,556) |
|
Impairment losses |
- |
- |
(10,945) |
- |
(301) |
(1,224) |
(12,470) |
- |
- |
(12,470) |
|
Inter-segment transactions |
3,546 |
(2,169) |
(765) |
(624) |
- |
(1,427) |
(1,439) |
1,157 |
282 |
- |
|
Income tax |
(7,273) |
(2,900) |
1,379 |
(3,814) |
- |
2,584 |
(10,024) |
(73) |
(105) |
(10,202) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
148,349 |
104,959 |
47,995 |
54,295 |
11,100 |
92,171 |
458,869 |
21,610 |
4,294 |
484,773 |
|
Non-Current Assets |
94,578 |
71,025 |
46,878 |
19,203 |
10,945 |
87,028 |
329,657 |
17,560 |
1,193 |
348,410 |
|
Non-Current Assets - Additions |
8,374 |
3,623 |
3,822 |
2,658 |
867 |
17,441 |
36,785 |
141 |
- |
36,926 |
In year 2016, revenue from 4 customers of the Indonesian segment represent approximately $114.1m (2015: $107.2m) of the Group's total revenue. An analysis of these revenue is provided as below. Although Customer 1 to 4 are over 10% of the Group total revenue, there is no over reliance on these Customers as tenders are performed on a monthly basis. Two of the top four customers are 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 |
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
Customer 1 |
- |
39,101 |
- |
- |
- |
- |
39,101 |
- |
- |
39,101 |
|
Customer 2 |
17,177 |
- |
- |
9,832 |
- |
- |
27,009 |
- |
- |
27,009 |
|
Customer 3 |
15,700 |
- |
- |
8,522 |
- |
- |
24,222 |
- |
- |
24,222 |
|
Customer 4 |
- |
5,577 |
- |
- |
- |
18,219 |
23,796 |
- |
- |
23,796 |
|
|
32,877 |
44,678 |
- |
18,354 |
- |
18,219 |
114,128 |
- |
- |
114,128 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 |
|
|
|
|
|
|
|
|
|
|
|
Customer 1 |
- |
35,069 |
- |
- |
- |
- |
35,069 |
- |
- |
35,069 |
|
Customer 2 |
19,544 |
- |
- |
13,088 |
- |
- |
32,632 |
- |
- |
32,632 |
|
Customer 3 |
2,654 |
15,193 |
- |
2,004 |
- |
- |
19,851 |
- |
- |
19,851 |
|
Customer 4 |
19,633 |
- |
- |
- |
- |
- |
19,633 |
- |
- |
19,633 |
|
|
41,831 |
50,262 |
- |
15,092 |
- |
- |
107,185 |
- |
- |
107,185 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
% |
% |
% |
% |
% |
% |
% |
% |
% |
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
Customer 1 |
- |
15.9 |
- |
- |
- |
- |
15.9 |
- |
- |
15.9 |
|
Customer 2 |
7.0 |
- |
- |
4.0 |
- |
- |
11.0 |
- |
- |
11.0 |
|
Customer 3 |
6.4 |
- |
- |
3.5 |
- |
- |
9.9 |
- |
- |
9.9 |
|
Customer 4 |
- |
2.3 |
- |
- |
- |
7.4 |
9.7 |
- |
- |
9.7 |
|
|
13.4 |
18.2 |
- |
7.5 |
- |
7.4 |
46.5 |
- |
- |
46.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 |
|
|
|
|
|
|
|
|
|
|
|
Customer 1 |
- |
17.9 |
- |
- |
- |
- |
17.9 |
- |
- |
17.9 |
|
Customer 2 |
9.9 |
- |
- |
6.7 |
- |
- |
16.6 |
- |
- |
16.6 |
|
Customer 3 |
1.4 |
7.7 |
- |
1.0 |
- |
- |
10.1 |
- |
- |
10.1 |
|
Customer 4 |
10.0 |
- |
- |
- |
- |
- |
10.0 |
- |
- |
10.0 |
|
|
21.3 |
25.6 |
- |
7.7 |
- |
- |
54.6 |
- |
- |
54.6 |
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
|
|
|
2016 Number |
|
2015 number |
|
|
|
|
|
|
|
Average numbers employed (primarily overseas) during the year: |
|
|
|
|
|
- full time |
|
5,838 |
|
5,832 |
|
- part-time field workers |
|
10,934 |
|
10,980 |
|
|
|
16,772 |
|
16,812 |
|
|
|
|
|
|
|
|
|
2016 $000 |
|
2015 $000 |
|
|
|
|
|
|
|
Staff costs (including Directors) comprise: |
|
|
|
|
|
Wages and salaries |
|
28,764 |
|
26,691 |
|
Social security costs |
|
773 |
|
880 |
|
Retirement benefit costs |
|
|
|
|
|
- United Kingdom |
|
64 |
|
- |
|
- Indonesia |
|
1,911 |
|
1,378 |
|
- Malaysia |
|
52 |
|
58 |
|
|
|
31,564 |
|
29,007 |
|
|
|
2016 $000 |
|
2015 $000 |
|
|
|
|
|
|
|
Directors emoluments |
|
228 |
|
240 |
|
|
|
|
|
|
|
Remuneration expense for key management personnel |
|
2,039 |
|
2,289 |
The Executive Director, Non-Executive Directors and senior management (general managers and above) are considered to be the key management personnel.
8 Earnings per ordinary share (EPS)
|
|
2016 $000 |
|
(Restated) 2015 $000 |
|
|
|
|
|
|
Profit for the year attributable to owners of the Company before BA movement |
32,563 |
|
10,263 |
|
BA movement |
2,150 |
|
(488) |
|
Earnings used in basic and diluted EPS |
34,713 |
|
9,775 |
|
|
|
|
|
|
|
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 |
- |
|
38 |
|
- used in diluted EPS |
39,636 |
|
39,674 |
|
|
|
|
|
|
Basic EPS before BA movement |
82.16cts |
|
25.89cts |
|
Basic EPS after BA movement |
87.58cts |
|
24.66cts |
|
|
|
|
|
|
Dilutive EPS before BA movement |
82.16cts |
|
25.87cts |
|
Dilutive EPS after BA movement |
87.58cts |
|
24.64cts |
9 Dividends
|
|
2016 $000 |
|
2015 $000 |
|
|
|
|
|
|
Paid during the year |
|
|
|
|
Final dividend of 1.75p per ordinary share for the year ended 31 December 2015 (2014: 3.0p) |
1,003 |
|
1,869 |
|
|
|
|
|
|
Proposed final dividend of 3.0p per ordinary share for the year ended 31 December 2016 (2015: 1.75p) |
1,463 |
|
1,028 |
The proposed dividend for 2016 is subject to shareholders' approval at the forthcoming annual general meeting and has not been included as a liability in these financial statements.
10 Property, plant and equipment
|
|
Plantations |
Mill |
Leasehold land |
Buildings |
Estate plant, equipment & vehicle |
Office plant, equipment & vehicle |
Construction in progress |
Total |
|
|
$000 |
$000 |
$000 |
$000 |
$000 |
$000 |
$000 |
$000 |
|
Cost or valuation |
|
|
|
|
|
|
|
|
|
At 1 January 2015 (restated) |
174,905 |
51,656 |
150,982 |
39,043 |
15,515 |
1,202 |
3,020 |
436,323 |
|
Exchange translations |
(19,470) |
(5,596) |
(16,936) |
(4,331) |
(1,721) |
(166) |
(268) |
(48,488) |
|
Reclassification |
- |
(11) |
- |
7,477 |
11 |
- |
(7,477) |
- |
|
Revaluations |
- |
- |
4,902 |
- |
- |
- |
- |
4,902 |
|
Additions |
63 |
11,161 |
1,727 |
32 |
702 |
58 |
5,402 |
19,145 |
|
Development costs capitalised |
17,104 |
- |
14 |
- |
- |
- |
663 |
17,781 |
|
Disposal / Written off |
(564) |
(298) |
- |
(119) |
(353) |
(6) |
- |
(1,340) |
|
Conversion of rubber to oil palm |
(123) |
- |
- |
- |
- |
- |
- |
(123) |
|
At 31 December 2015 (restated) |
171,915 |
56,912 |
140,689 |
42,102 |
14,154 |
1,088 |
1,340 |
428,200 |
|
Exchange translations |
3,720 |
1,440 |
2,773 |
998 |
287 |
1 |
37 |
9,256 |
|
Reclassification |
- |
1 |
- |
3,608 |
- |
- |
(3,609) |
- |
|
Revaluations |
- |
- |
2,246 |
- |
- |
- |
- |
2,246 |
|
Additions |
57 |
8,665 |
2,001 |
765 |
927 |
36 |
2,846 |
15,297 |
|
Development costs capitalised |
13,393 |
- |
933 |
- |
- |
- |
861 |
15,187 |
|
Disposals / Written off |
(2,042) |
(225) |
(65) |
(229) |
(540) |
(142) |
- |
(3,243) |
|
At 31 December 2016 |
187,043 |
66,793 |
148,577 |
47,244 |
14,828 |
983 |
1,475 |
466,943 |
|
Accumulated depreciation and impairment |
|
|
|
|
|
|
|
|
|
At 1 January 2015 (restated) |
41,861 |
13,884 |
- |
9,075 |
10,181 |
898 |
- |
75,899 |
|
Exchange translations |
(5,574) |
(1,496) |
- |
(1,066) |
(1,187) |
(134) |
- |
(9,457) |
|
Reclassification |
- |
(11) |
- |
- |
11 |
- |
- |
- |
|
Charge for the year |
6,788 |
2,931 |
- |
2,270 |
1,432 |
135 |
- |
13,556 |
|
Impairment losses |
12,470 |
- |
- |
- |
- |
- |
- |
12,470 |
|
Disposal / Written off |
- |
(277) |
- |
(60) |
(285) |
(6) |
- |
(628) |
|
Conversion of rubber to oil palm |
(84) |
- |
- |
- |
- |
- |
- |
(84) |
|
At 31 December 2015 (restated) |
55,461 |
15,031 |
- |
10,219 |
10,152 |
893 |
- |
91,756 |
|
Exchange translations |
833 |
371 |
- |
190 |
182 |
(2) |
- |
1,574 |
|
Charge for the year |
8,260 |
3,371 |
- |
2,685 |
1,286 |
75 |
- |
15,677 |
|
Impairment losses |
2,740 |
- |
- |
- |
- |
- |
- |
2,740 |
|
Disposal / Written off |
(636) |
(215) |
- |
(141) |
(466) |
(136) |
- |
(1,594) |
|
At 31 December 2016 |
66,658 |
18,558 |
- |
12,953 |
11,154 |
830 |
- |
110,153 |
|
Carrying amount |
|
|
|
|
|
|
|
|
|
At 31 December 2014 (restated) |
133,044 |
37,772 |
150,982 |
29,968 |
5,334 |
304 |
3,020 |
360,424 |
|
At 31 December 2015 (restated) |
116,454 |
41,881 |
140,689 |
31,883 |
4,002 |
195 |
1,340 |
336,444 |
|
At 31 December 2016 |
120,385 |
48,235 |
148,577 |
34,291 |
3,674 |
153 |
1,475 |
356,790 |
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 2016, valuations were undertaken on the land of eight subsidiaries. The increase 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 at the fair value of land as at 31 December 2016. For the year ended 31 December 2015, independent land valuations were undertaken for nine subsidiary companies in Indonesia and Malaysia. The same methodology to fair value land was adopted to value the land of the remaining companies as at 31 December 2015. Unplantable land was excluded in this exercise since it has zero value. Land is valued on a rotational basis and all 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 $46,982,000 (2015: $43,713,000).
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 oil palm 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 2016 |
- |
- |
148,577 |
148,577 |
|
At 31 December 2015 |
- |
- |
140,689 |
140,689 |
There were no items classified under Level 1 and Level 2 and thus there were no transfers 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 were no changes 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.
The estates include $325,000 (2015: $483,000) of interest and $3,930,000 (2015: $4,909,000) 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 2038 with rights of renewal thereafter. As of estates in Bengkulu land titles were issued between 1994 and 2008 and the titles expire between 2028 and 2034 with rights of renewal thereafter for two consecutive periods of 25 and 35 years respectively. In Riau, land titles were issued in 2004 and expire in 2033. In the case of PT Cahaya Pelita Andhika's estate acquired in 2007 land titles were issued in 1996 to expire in 2029.
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.
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 loss of $12,470,000 recognised in 2015 was primarily due to the lower CPO price and higher cost of new planting. In 2016, although the CPO price has improved but the Group incurred higher cost for new planting hence there was a further impairment of $2,740,000.
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 15.0% (2015: 15.5%). Projected future cash flows are calculated based on historical data, industry performance, economic conditions and any other readily available information.
The fair value less cost to sell is computed by professional valuer, MBPRU using discounted cash flow ("DCF") over the expected 20-year economic life of the asset. The assumptions applied in the valuation are, inter-alia, listed as below:
|
CPO selling price |
|
2016 $700/mt |
|
2015 $625/mt |
|
Cost of selling as a percentage of the asset's fair value |
|
4.5% |
|
4.5% |
|
Overhead cost as a percentage of revenue |
|
10% |
|
10% |
|
Notional rent as a percentage of land value |
|
9% |
|
9% |
|
Discount rate |
|
17.4% |
|
16.8% |
The plantations carried at fair value less cost to sell are classified as Level 3 in the fair value hierarchy.
Changes to the assumptions adopted in the projected future cash flows would affect the amount of impairment. The recoverable amount of the Group's plantations carried at fair value less cost to sell was $2,099,000 (2015: $2,738,000) whereas the recoverable amount of the Group's plantations carried at value in use was $17,869,000 (2015:$23,654,000).
11 Posting of annual financial report
The Annual Financial Report will be posted to shareholders on or before 25 May 2017. 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
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