Restatement of Prior Year Results

RNS Number : 2047B

Anglo-Eastern Plantations PLC

28 February 2014

 



28 February 2014

Anglo-Eastern Plantations Plc

("AEP", "Group" or "Company")

Restatement of Prior Year Results

Anglo-Eastern Plantations Plc and its subsidiaries, which owns, operates and develops plantations in Indonesia and Malaysia, amounting to some 128,000 hectares producing mainly palm oil and some rubber of which approximately 61,000 hectares are planted.

The 2012 accounts stated that the Company was in the process of resolving a query from the Financial Reporting Council ("FRC") concerning the measurement of the notional rent used in the valuation of the Group's biological assets.

AEP has applied a notional rent equivalent to 9% of the value of planted land in the valuation of their biological assets and this has resulted in a reduction in the value of its biological assets at 31 December 2012 by $37 million (2011: $38 million) from $245 million (2011: $235 million) to $208 million (2011: $197 million), although the profit before biological asset adjustment of the Group remains unchanged. The Group's profit after biological asset adjustment for the years ended 31 December 2012 and 2011 were reduced by $1.6 million and $4.0 million respectively as a result of the restatement. The effect of these prior year adjustments has no impact on the cash flows of the Group. As a result of this change, the FRC has confirmed that it regards its enquiries into the Company's annual report and accounts for the year ended 31 December 2010 as concluded.

Financial Highlights

	Restated 2012 $ m		Restated 2011 $ m
Revenue	237.4		259.0
Profit before tax
-  before biological asset ("BA") adjustment	88.6		101.9
-  after BA adjustment	81.9		117.7
EPS before BA adjustment	133.99cts		154.15cts
EPS after BA adjustment	119.41cts		186.35cts
Dividend (cents)	4.5cts		6.0cts

The restated results for the financial years ended 31 December 2012 and 31 December 2011 are enclosed with this announcement.

For further enquiry, contact:

Anglo-Eastern Plantations Plc
Dato' John Lim Ewe Chuan	[phone]
Charles Stanley Securities
Russell Cook Karri Vuori	[phone]

Consolidated income statement

for the year ended 31 December 2012

		(Restated) 2012			(Restated) 2011
Continuing operations	Notes	Result before BA adjustment	BA adjustment	Total	Result before BA adjustment	BA adjustment	Total
		$000	$000	$000	$000	$000	$000
Revenue		237,352	-	237,352	259,037	-	259,037
Cost of sales		(142,755)	-	(142,755)	(155,147)	-	(155,147)
Gross profit		94,597	-	94,597	103,890	-	103,890
Biological asset revaluation movement		-	(6,729)	(6,729)	-	15,763	15,763
Administration expenses		(9,201)	-	(9,201)	(5,372)	-	(5,372)
Operating profit		85,396	(6,729)	78,667	98,518	15,763	114,281
Exchange profits		(24)	-	(24)	213	-	213
Finance income		3,336	-	3,336	3,891	-	3,891
Finance expense		(117)	-	(117)	(707)	-	(707)
Profit before tax		88,591	(6,729)	81,862	101,915	15,763	117,678
Tax expense		(22,476)	1,682	(20,794)	(26,809)	(3,940)	(30,749)
Profit for the year		66,115	(5,047)	61,068	75,106	11,823	86,929
Attributable to:
-  Owners of the parent		53,108	(5,777)	47,331	60,949	12,732	73,681
-  Non-controlling interests		13,007	730	13,737	14,157	(909)	13,248
		66,115	(5,047)	61,068	75,106	11,823	86,929
Earnings per share for profit attributable to the owners of the parent during the year
-  basic	3			119.41cts			186.35 cts
- diluted	3			119.27cts			185.69 cts

Consolidated Statement of Comprehensive Income

for the year ended 31 December 2012

	(Restated) 2012 $000		(Restated) 2011 $000
Profit for the year	61,068		86,929
Other comprehensive income:
Unrealised loss on revaluation of land	(4,064)		(48,932)
Loss on exchange translation of foreign operations	(25,337)		(4,959)
Deferred tax on revaluation	1,015		12,233
Other comprehensive expenses for the year	(28,386)		(41,658)
Total comprehensive income for the year	32,682		45,271
Attributable to:
-  Owners of the parent	23,172		41,805
-  Non-controlling interests	9,510		3,466
	32,682		45,271

Consolidated Statement of Financial Position

As at 31 December 2012

	Notes	(Restated) 2012 $000		(Restated) 2011 $000		(Restated) 2010 $000
Non-current assets
Biological assets	4	207,679		197,410		153,915
Property, plant and equipment	4	212,177		214,840		249,610
Receivables		5,033		1,551		1,494
		424,889		413,801		405,019
Current assets
Inventories		6,075		9,439		6,820
Tax receivables		4,734		5,098		7,342
Trade and other receivables		7,419		4,877		3,356
Cash and cash equivalents		116,250		90,482		70,871
		134,478		109,896		88,389
Current liabilities
Loans and borrowings		(52)		(6,465)		(15,650)
Trade and other payables		(15,635)		(20,878)		(15,170)
Tax liabilities		(6,996)		(11,019)		(5,130)
		(22,683)		(38,362)		(35,950)
Net current assets		111,795		71,534		52,439
Non- current liabilities
Loans and borrowings		(25,026)		(58)		(6,438)
Deferred tax liabilities		(37,236)		(43,098)		(50,982)
Retirement benefits - net liabilities		(3,057)		(1,593)		(2,305)
Net assets		471,365		440,586		397,733
Issued capital and reserves attributable to owners of the parent
Share capital		15,504		15,504		15,504
Treasury shares		(1,171)		(1,507)		(1,507)
Share premium		23,935		23,935		23,935
Capital redemption reserve		1,087		1,087		1,087
Revaluation reserves		36,799		39,480		67,303
Exchange reserves		(88,838)		(67,360)		(63,307)
Retained earnings		401,006		355,914		284,165
		388,322		367,053		327,180
Non-controlling interests		83,043		73,533		70,553
Total equity		471,365		440,586		397,733

Consolidated Statement of Changes in Equity

For the year ended 31 December 2012

	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 as at 31 December  2010	15,504	(1,507)	23,935	1,087	67,303	(63,307)	305,683	348,698	73,665	422,363
Restatement (note 2)	-	-	-	-	-	-	(21,518)	(21,518)	(3,112)	(24,630)
Balance at 31 December 2010 after restatement	15,504	(1,507)	23,935	1,087	67,303	(63,307)	284,165	327,180	70,553	397,733
Items of other comprehensive income
-Unrealised gain on revaluation of land	-	-	-	-	(37,097)	-	-	(37,097)	(11,835)	(48,932)
-Deferred tax on revaluation of assets	-	-	-	-	9,274	-	-	9,274	2,959	12,233
-Loss on exchange translation	-	-	-	-	-	(4,053)	-	(4,053)	(906)	(4,959)
Net loss recognised directly in equity	-	-	-	-	(27,823)	(4,053)	-	(31,876)	(9,782)	(41,658)
Profit for year	-	-	-	-	-	-	73,681	73,681	13,248	86,929
Total comprehensive income and expense for the year	-	-	-	-	(27,823)	(4,053)	73,681	41,805	3,466	45,271
Issue of subsidiary shares to minority shareholder	-	-	-	-	-	-	-	-	2,054	2,054
Share options exercised / Share based payment expense	-	-	-	-	-	-	45	45	-	45
Dividends paid	-	-	-	-	-	-	(1,977)	(1,977)	(2,540)	(4,517)
Balance at 31 December 2011 after restatement	15,504	(1,507)	23,935	1,087	39,480	(67,360)	355,914	367,053	73,533	440,586

Consolidated Statement of Changes in Equity

For the year ended 31 December 2012

	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 as at 31 December  2011	15,504	(1,507)	23,935	1,087	39,480	(67,602)	380,633	391,530	77,369	468,899
Restatement (note 2)	-	-	-	-	-	242	(24,719)	(24,477)	(3,836)	(28,313)
Balance at 31 December 2011 after restatement	15,504	(1,507)	23,935	1,087	39,480	(67,360)	355,914	367,053	73,533	440,586
Items of other comprehensive income
-Unrealised loss on revaluation of land	-	-	-	-	(3,574)	-	-	(3,574)	(490)	(4,064)
-Deferred tax on revaluation of assets	-	-	-	-	893	-	-	893	122	1,015
-Loss on exchange translation	-	-	-	-	-	(21,478)	-	(21,478)	(3,859)	(25,337)
Total other comprehensive income	-	-	-	-	(2,681)	(21,478)	-	(24,159)	(4,227)	(28,386)
Profit for year	-	-	-	-	-	-	47,331	47,331	13,737	61,068
Total comprehensive income and expense for the year	-	-	-	-	(2,681)	(21,478)	47,331	23,172	9.510	32,682
Share option exercised	-	336	-	-	-	-	133	469	-	469
Dividends paid	-	-	-	-	-	-	(2,372)	(2,372)	-	(2,372)
Balance at 31 December 2012 after restatement	15,504	(1,171)	23,935	1,087	36,799	(88,838)	401,006	388,322	83,043	471,365

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, 6^th Floor, 4 Thomas More Square, London E1W 1YW, United Kingdom. The principal activity of the Group is plantation agriculture.

Basis of preparation

The annual financial statements of Anglo-Eastern Plantations Plc are prepared in accordance with IFRSs as adopted by the European Union. The financial information for the year ended 31 December 2012 included within this report does not constitute the full statutory accounts for that period. The statutory Annual Report and Financial Statements for 2012 have been filed with the Registrar of Companies. The Independent Auditors' Report on that Annual Report and Financial Statement for 2012 was qualified on the basis of a limitation in scope, did not draw attention to any matters by way of emphasis, and contained statements under 498(2) or 498(3) of the Companies Act 2006.

Except for the measurement of notional rent, the same accounting policies, presentation and methods of computation are followed in these restated consolidated financial statements as were applied in the Group's annual audited financial statements. The Company's accounting policy for biological assets, set out below, is unchanged. 

The 2012 Annual Report stated that the Company was in the process of resolving a query from the Financial Reporting Council ("FRC") concerning the measurement of the notional rent used in the valuation of the Group's biological assets. Following further discussion with the FRC, the Group has changed the determination of notional rent, one of the assumptions used in the valuation of the Group's biological assets in accordance with its stated policy to reflect current market data in the estimate of the cost for the use of the land. The change in measurement of the notional rent has significant impact on the carrying amount of biological asset and thus the accounts for years ended 31 December 2012 and 2011 were restated. The restatements and related adjustments are disclosed in these accounts in note 2.

Biological assets

Biological assets comprise oil palm trees and nurseries. The biological process commences with the initial preparation of land and planting of seedlings and ceases with the delivery of crop in the form of fresh fruit bunches ("FFB") to the manufacturing process in which crude palm oil and palm kernel are extracted from the FFB.

Biological assets are carried at fair value less costs to sell determined on the basis of the net present value of cash flows arising in producing FFB. No account is taken in the valuation of future replanting. Biological assets are valued at each accounting date based upon a valuation of the planted areas using a discounted cash flow method by reference to the FFB expected to be harvested over the full remaining productive life of the trees up to 20 years. Areas are included in the valuation once they are planted. However oil palm which are not yet mature at the accounting date, and hence are not producing FFB, are valued on a similar basis but with the discounted value of the estimated cost to complete planting and to maintain the assets to maturity being deducted from the discounted FFB value. Movement in valuation surplus of biological assets is charged or credited to the income statement for the relevant period (BA adjustment).

2.  Prior year restatement

The 2012 Annual Report stated that the Company was in the process of resolving a query from the Financial Reporting Council ("FRC") concerning the measurement of the notional rent used in the valuation of the Group's biological assets. In October 2013, the Group engaged a professional valuer in the United Kingdom ('UK valuer') for an independent opinion on the measurement of the notional rent. As a result, the Group has adopted a notional rent equivalent to 9% of the value of planted land value as proposed by the UK valuer in valuing its biological asset. This resulted in the accounts for the years ended 31 December 2012 and 2011 being restated and the closure of discussions with the FRC. The effect of the restatements is summarised below.

The impact of these prior year adjustments:- After Biological Assets	(Restated) 2012 $000		(Restated) 2011 $000
Profit for the year before restatement	62,703		90,898
Effect of change in restatement:
Biological asset revaluation movement	(2,180)		(5,293)
Tax	545		1,324
	(1,635)		3,969
Profit for the year after restatement	61,068		86,929
Other comprehensive income for the year before restatement	(30,108)		(41,944)
Effect of change in restatement:
Profit/(loss) on exchange translation of foreign operations	1,722		286
Other comprehensive income for the year after restatement	(28,386)		(41,658)

The effect of these prior year adjustments had a negative impact on the earnings per share of 3.69cts (2011: 8.10cts) for the year to 31 December 2012.

The following table summarises the impact of these prior year adjustments on the Consolidated Statement of Financial Position:-

	Biological assets	Deferred tax liabilities	Exchange reserve	Retained earnings		Non-controlling interest
	$000	$000	$000	$000		$000
Balance as reported 1 January 2011	186,755	(59,192)	(63,307)	305,683		73,665
Effect of restatement	(32,840)	8,210	-	(21,518)		(3,112)
Restated balance as at 1 January 2011	153,915	(50,982)	(63,307)	284,165		70,553
Balance as reported 31 December 2011	235,158	(52,533)	(67,602)	380,633		77,369
Effect of restatement up to 1 January 2011	(32,840)	8,210	-	(21,518)		(3,112)
Effect of restatement during the year	(4,908)	1,225	242	(3,201)		(724)
Restated balance as at 31 December 2011	197,410	(43,098)	(67,360)	355,914		73,533

Balance as reported 31 December 2012	245,313	(46,644)	(90,571)	427,186	86,822
Effect of restatement up to 1 January 2012	(37,748)	9,435	242	(24,719)	(3,836)
Effect of restatement during the year	114	(27)	1,491	(1,461)	57
Restated balance as at 31 December 2012	207,679	(37,236)	(88,838)	401,006	83,043

3   Earning per ordinary share (EPS)

	(Restated) 2012 $000		(Restated) 2011 $000
Profit for the year attributable to owners of the Company before BA adjustment	53,108		60,949
Net BA adjustment	(5,777)		12,732
Earnings used in basic and diluted EPS	47,331		73,681
	Number		Number
	'000		'000
Weighted average number of shares in issue in year
- used in basic EPS	39,636		39,539
- dilutive effect of outstanding share options	48		141
- used in diluted EPS	39,684		39,680
Basic EPS before BA adjustment	133.99cts		154.15cts
Basic EPS after BA adjustment	119.41cts		186.35cts
Dilutive EPS before BA adjustment	133.83cts		153.60cts
Dilutive EPS after BA adjustment	119.27cts		185.69cts

4   Biological assets, property, plant and equipment

	Biological assets	Mill	Land	Buildings	Estate plant, equipment & vehicle	Office plant, equipment & vehicle	Construction  in progress	PPE Total	Total
	$000	$000	$000	$000	$000	$000	$000	$000	$000
Cost or valuation
At 1 January 2011 (restated)	153,915	39,080	200,977	15,859	11,883	1,212	2,114	271,125	425,040
Exchange translations	(2,601)	(354)	(308)	(370)	(15)	(24)	(44)	(1,115)	(3,716)
Decrease due to harvest	(14,905)	-	-	-	-	-	-	-	(14,905)
Revaluations	30,668	-	(48,932)	-	-	-	-	(48,932)	(18,264)
Additions	10,437	3,404	2,637	6,142	2,357	163	693	15,396	25,833
Development costs capitalised	19,896	-	3,016	966	248	-	216	4,446	24,342
Disposals	-	(243)	-	(23)	(222)	-	-	(488)	(488)
At 31 December 2011 (restated)	197,410	41,887	157,390	22,574	14,251	1,351	2,979	240,432	437,842
Exchange translations	(11,531)	(2,546)	(8,643)	(1,527)	(769)	(30)	(156)	(13,671)	(25,202)
Reclassification	848	-	(848)	4,350	-	-	(4,350)	(848)	-
Decrease due to harvest	(20,522)	-	-	-	-	-	-	-	(20,522)
Revaluations	13,793	-	(4,064)	-	-	-	-	(4,064)	9,729
Additions	3,749	2,509	4,246	7,674	2,571	81	2,165	19,246	22,995
Development costs capitalised	23,932	-	-	-	-	-	2,151	2,151	26,083
Disposals	-	(97)	-	(142)	(462)	(2)	(690)	(1,393)	(1,393)
At 31 December 2012	207,679	41,753	148,081	32,929	15,591	1,400	2,099	241,853	449,532
Accumulated depreciation and impairment
At 1 January 2011 (restated)	-	8,951	-	4,575	7,411	578	-	21,515	21,515
Exchange translations	-	(123)	-	(88)	(640)	(13)	-	(864)	(864)
Charge for the year	-	2,167	-	1,112	1,666	179	-	5,124	5,124
Disposal	-	(183)	-	-	-	-	-	(183)	(183)
At 31 December 2011 (restated)	-	10,812	-	5,599	8,437	744	-	25,592	25,592
Exchange translations	-	(704)	-	(305)	(431)	(23)	-	(1,463)	(1,463)
Charge for the year	-	2,344	-	1,640	1,963	188	-	6,135	6,135
Disposal	-	(77)	-	(102)	(408)	(1)	-	(588)	(588)
At 31 December 2012	-	12,375	-	6,832	9,561	908	-	29,676	29,676
Carrying amount
At 31 December 2010 (restated)	153,915	30,129	200,977	11,284	4,472	634	2,114	249,610	403,525
At 31 December 2011 (restated)	197,410	31,075	157,390	16,975	5,814	607	2,979	214,840	412,250
At 31 December 2012	207,679	29,378	148,081	26,097	6,030	492	2,099	212,177	419,856
Net (loss)/gain arising from changes in fair value of biological assets
At 31 December 2011 (restated)	15,763	-	-	-	-	-	-	-	15,763
At 31 December 2012	(6,729)	-	-	-	-	-	-	-	(6,729)

The fair value less costs to sell of FFB harvested during the period, determined at the point of harvest is exhibited below:

	2012		2011
Fair value of FFB
Crop production and yield - FFB (mt)	783,000		707,000
Fair value of FFB ($000)	128,750		131,987
Fair value of FFB less costs to sell ($000)	122,783		124,373

The fair value of FFB at the point of harvest is recognised in the income statement within the biological asset revaluation. A reconciliation of the amount included within the income statement and the biological asset has been included below:

	(Restated) 2012 $000				(Restated) 2011 $000
Harvest included in the biological asset valuation from estimated production and pricing assumptions less costs to sell in the prior year	20,522				14,905
Gain from actual production and pricing	102,261				109,468
Fair value of FFB harvested from own production	122,783				124,373

The decrease due to harvest of $20,522,000 (2011: $14,905,000) is the amount included within the prior year valuation for the current year and is therefore deducted from biological asset valuation in the current year as the FFB is harvested. The actual fair value of harvested FFB varies to that forecast due to the changes in; actual production, actual FFB price and actual costs incurred. The gain on fair value of the harvested FFB is written off as the FFB is processed in to CPO.

The biological asset revaluation movement included within the income statement is calculated as follows:

	(Restated) 2012 $000		(Restated) 2011 $000
Decrease due to harvest	(20,522)		(14,905)
Revaluations	13,793		30,668
Net (loss)/gain arising in the income statement from changes in fair value of biological assets	(6,729)		15,763

The carrying amount of the Group's biological assets was based on independent valuations undertaken by independent valuers, Doli Siregar & Rekan which its head office is located in Jakarta, Indonesia except for an adjustment on discount rate and the measurement of the notional rent which is determined by the directors and the UK valuer respectively. Both firms have the appropriate professional qualifications and recent experience in the location and category of the properties being valued. Further information of the Indonesian firm can be obtained from 'www.ds-r.co.id'.  The Group's land as at 31 December 2012 has been valued by directors with the last independent valuation undertaken as at 31 December 2011.

The methodology of the valuations undertaken was using discounted cash flow over the expected 20-year economic life of the asset.  The assumption applied in the valuation were, inter alia, an assumed CPO selling price of $675/mt (2011: $625/mt), discount rate of 17.5% (2011: 16.5%) and notional rent equivalent to 9% (2011: 9%) of the value of planted land value. The discount rates were determined by the directors based on their assessment of various risks including financial, business and country risk of where the plantations are located as well as taking into account the Company's weighted average cost of capital. The CPO price is taken to be the 10-year average (2011: 10-year average) based on historical widely-quoted commodity price for CPO and represents the directors' best estimate of the price sustainable over the longer term. The CPO price assumed is revised to reflect a price which is closer to the market price of $810/mt as at 31 December 2012. The notional rent charge is based on key capital market and property indicators in the countries and regions of operations.

The following table exhibits the sensitivity of the Group's biological assets to the fluctuation in CPO price and discount rate:

	(Restated) 2012 $000
A change of $50 in the price assumption for CPO
-$50 in the price assumption	(43,991)
+$50 in the price assumption	45,273
A change of 1% in the discount rate
-1% in the discount rate	12,079
+1% in the discount rate	(11,084)
A change of notional rent equivalent to 1% of the value of planted land
-1% of the value of planted land	4,840
+1% of the value of planted land	(4,716)

The estates include nil (2011: $14) of interest and $9,308,000 (2011: $6,074,000) of overheads capitalised during the year in respect of expenditure on estates under development.

 

END

 

 

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