Final Results

Rowe Evans Investments PLC 30 April 2001 ROWE EVANS INVESTMENTS PLC OIL PALM AND RUBBER PLANTATIONS IN INDONESIA Associated companies with plantation and property-development interests in Malaysia and cotton farming in Australia Preliminary announcement of unaudited results for the year ended 31 December 2000 Highlights from the chairman's statement and preliminary announcement, are as follows:- * dividend maintained at 4.25p per share * profit before tax £4,904,000 (1999 £5,375,000) * continuing economic and political problems in Indonesia * record crop of oil palm fresh fruit bunches ('f.f.b.') in 2000 * weak palm oil prices throughout 2000, continuing into 2001 so far * average rate of Indonesian Rupiah similar in 2000 to 1999 but has weakened markedly since year end - unhelpful for Indonesian economy but assists palm oil operations * share of associates' profits £2,694,000 (1999 £2,790,000). Lower plantation profits but improved result from Australian cotton operations * terms announced for merger of associated companies with Malaysian interests - proposals supported by board of Rowe Evans Investments PLC Extract from chairman's statement The profit before tax for the year amounted to £4,904,000 which compares with last year's £5,375,000. A healthy increase in the Indonesian oil palm crop was offset by a sharp decline in palm oil prices during the year resulting in a slightly lower estate profit. The associated companies experienced lower plantation profits although the Australian cotton operations showed an improvement. Given the unusually difficult trading conditions during 2000, the result for the year can be regarded as satisfactory. The board recommends that the dividend is maintained at 4.25p per share. REVIEW OF THE YEAR Indonesia Not much good news emanated from Indonesia during 2000 with continued political and economic difficulties and sporadic outbursts of ethnic violence in several parts of the archipelago. Modest growth was achieved with a strong export performance, which impacted positively on both the balance of payments and foreign reserves but there remain many deep-rooted problems in the banking and corporate sectors. Necessary reforms have not yet been achieved and this, in turn, has held back corporate reconstruction which is so vital to getting the economy going again on a sound footing. Tensions between some of the many ethnic groups in Indonesia have manifested themselves in outbreaks of intense violence on more than one occasion over the last couple of years. With the government under considerable pressure from several directions, it remains to be seen whether the regional differences can be settled and the political temperature lowered. Fortunately, the palm oil business in Sumatra has, by and large, escaped the serious problems referred to above. Despite the current period of low prices about which I talk in more detail later in my report, the industry has remained one of the more successful parts of the Indonesian economy. Palm oil market 2000 was a poor year for palm oil prices. Not only did world production increase during the year but the peak crops in the middle of the year continued much longer than expected, with the result that stocks increased and the price fell. Production and stocks of the other major oils and fats increased similarly. The big markets for palm oil in the EU, India and China all, however, imported substantially more than in 1999. This was despite the hike in import tariffs in India and the huge increase of imports of oilseeds, mainly soybeans, by China for crushing in that country rather than importing oil. Palm oil production is now starting to come down but prices remain weak. It may be a few months before the stock overhang is cleared and more normal levels return. Estate operating results The crop of oil palm fresh fruit bunches ('f.f.b.') at over 138,000 tonnes was a record. Palm oil prices were at poor levels during 2000. After strengthening sharply to around US$375 per tonne in March/April, the price then fell consistently for most of the remainder of the year, reaching a low of below US$250. Rubber also continued its lacklustre performance, remaining around the low level of US$0.65 to 0.70 per kg. The average rate of the Rupiah against Sterling was similar to 1999 and it traded in a narrower band than last year. After steadily weakening in the first half of the year, before reaching £1 = Rp14,500, there was a strong but short-lived recovery to Rp11,850 before weakness again set in and the year-end level was Rp14,215. This weakness has continued into 2001 and reflects the uncertainties, both economic and political, referred to above under 'Indonesia '. A weak Rupiah, whilst undesirable for the Indonesian economy helps the palm oil business as the palm oil price is determined in US Dollars and a large proportion of the costs are Rupiah based. Estate operations Pangkatan Estate After a rather disappointing year in 1999 with regard to the f.f.b crop, 2000 witnessed a strong recovery with yields returning to a more normal level. The young areas planted within the last ten or so years are looking very promising whilst the areas at the peak of their yield cycle (10 to 20 years old) also performed well in 2000. Rubber enjoyed a very good year with yields substantially ahead of expectations and last year. The age profile of the rubber plantings is on the young side and prospects for the coming years are encouraging. Simpang Kiri Estate As has been mentioned many times before, the two divisions of this estate have been subject to unexplained downturns in their yield cycles. This has been investigated in some depth but no really satisfactory explanation has been found - it may be a combination of the weather pattern and the wide diversity of soils in that area. Such a downturn was experienced in 2000, although it appears to have been short-lived and yields now appear to be recovering. Bilah Estate This estate achieved another very good year with an f.f.b. crop substantially ahead both of estimates and of last year. Being a low-lying coastal peat area brings with it many logistical problems, particularly controlling water levels but this good performance was attained despite this. Estate profit As a result of all of the above, the estate profit for the year amount to £ 2,252,000, compared with £2,611,000 in 1999. Associated companies The Group's share of the profits before taxation of the associated companies was £2,694,000 compared with 1999's £2,790,000. This included the share of the associated companies' exceptional items of £292,000 against last year's £ 146,000. Indonesia PT Agro Muko (30.43% owned) PT Agro Muko had a very successful year with its f.f.b. crop some 30% higher than last year and rubber some 11%. As with the Group's own estates, this was more than offset by the substantial fall in the palm oil price. Because of the recent period of very low palm oil prices which impacts directly on the company's cash flow, it has been decided to postpone preparations for the 1,000 hectares proposed to be replanted in 2002 until more certain conditions return to the palm oil market. The second palm oil mill was successfully commissioned in early 2001. The construction of this mill was largely financed from the Company's own resources and the loan from International Finance Corporation (IFC) was repaid in full in 2000. Two more instalments, totalling DM2.07 million, are due to be repaid during 2001 to the German development bank, DEG. It has been decided to proceed cautiously with the planting programme until the palm oil price recovers but the prospect of strong future cash flows remains. PT Kerasaan Indonesia (36% owned) Kerasaan Estate had another successful cropping year offset by the weak palm oil price. This resulted in profits, in Sterling terms, some 9.5% lower than 1999. The estate continues to be a well-managed and well-established oil palm plantation. Malaysia Bertam Holdings PLC (36.23% owned) Bertam Holdings PLC reported improved trading profits, largely because of a sharply- improved performance from its Thai rubber manufacturing activities offset by lower plantation profits for the same reasons as set out above. With regard to Bertam Holdings PLC's main associated company, Bertam Properties Sdn. Berhad (40% owned), property-development activities proved to be less buoyant than had originally been hoped for. On the plantation side, lower f.f.b. crops were recorded as well as the weaker palm oil prices referred to above. However, offsetting this the company sold a large, 127-hectare, piece of land to a Malaysian property group during the year for the development of an educational park. This sale was subject to conditions which have been met and both a 10% deposit and a subsequent instalment have been paid but negotiations continue with regard to the payment of the remaining instalments. Accordingly, credit has only been taken for the cash received to date until such time as it becomes clear what the agreed programme of payments will be. Other Malaysian associates The three small Malaysian operating associates, Beradin Holdings PLC (19.75% owned), Padang Senang Holdings PLC (29.37% owned) and The Singapore Para Rubber Estates, PLC (42.03% owned) all reported substantially lower profits due to the adverse conditions in the palm oil market, referred to above. Lendu Holdings PLC (35.11% owned) Lendu Holdings PLC's Australian cotton operations enjoyed a successful season in 1999/2000. Over 16,500 bales of cotton were picked, a record, and good beef-cattle prices produced improved profits. A drought period before the 2000/2001 cotton-planting season means that there will be a much lower crop in the current year. However, since then there has been a considerable amount of rainfall resulting in several floods which has allowed the water-storage reservoirs to be filled to capacity. This augurs well for the 2001/2002 season. CURRENT TRADING The crop estimate for the Group in 2001 is approximately 136,000 tonnes of f.f.b. and 794,000 kg of rubber. Crops, from the Group's estates and the Malaysian associates, have been higher than for the same period last year whilst those from the Indonesian associates have been lower. The palm oil market has continued to be extremely weak, with prices dropping as low as US$230 per tonne. There is still a stock overhang in the world market and, until this has been reduced, it is unlikely that there will be any significant improvement in the price. Global production is falling off but it is a little difficult to predict when stocks will come down by any significant amount. Continuing uncertainties in Indonesia have led to a further weakening of the Rupiah during the first part of 2001 to the current level of around £1 = Rp17,000. AMALAGATION OF ASSOCIATED COMPANIES WITH MALAYSIAN OPERATIONS I referred both in my report last year and the interim report to the discussions under way between four of the associated companies, namely Bertam Holdings PLC, Beradin Holdings PLC, Padang Senang Holdings PLC and The Singapore Para Rubber Estates, PLC, with a view to amalgamating. This is a very complex restructuring, involving three simultaneous schemes of arrangement. It has taken somewhat longer than originally envisaged to clear the complicated regulatory hurdles and to obtain the approval of all parties. However, the terms of the scheme have now been published. The terms have been scrutinized closely and your board is satisfied that the schemes are being done on a fair basis and is in favour of them. FURTHER DEVELOPMENT I referred in my report last year to the desire of the board to expand our operations in Indonesia. Various proposals have been considered during the year but no acceptable terms could be reached. As I have mentioned at some length above, this has been a very difficult year in Indonesia and these difficulties continue. Whilst assets can sometimes be acquired during troubled times at cheap prices, it is your board's view that extra care must be taken in ensuring that any acquisition is of an acceptable quality without unacceptable liabilities attached to it. Your board continues to look out for further acquisitions but continues to be cautious. NEW SHARE OPTION SCHEMES Shareholders' approval will be sought at the annual general meeting to set up new share option schemes. Preliminary results (unaudited) The board announces the following unaudited results and proposed dividend for the year ended 31 December 2000:- Consolidated profit and loss account FOR THE YEAR ENDED 31 DECEMBER 2000 2000 1999 Note £'000 £'000 Turnover 4,534 4,756 Cost of sales (2,282) (2,145) -------- ----------- Estate profit 2,252 2,611 Administrative expenses (382) (362) Exchange gains 104 39 -------- ----------- Group operating profit 1,974 2,288 Share of operating profit in associates 2,402 2,644 -------- ----------- Total operating profit 4,376 4,932 Gain on sale of fixed assets 311 167 -------- ----------- Profit on ordinary activities before interest 4,687 5,099 Interest receivable and similar income 217 276 -------- ----------- Profit on ordinary activities before taxation 4,904 5,375 Tax on profit on ordinary activities 2 (1,223) (1,364) -------- ----------- Profit on ordinary activities after taxation 3,681 4,011 Equity minority interests (343) (379) -------- ----------- Profit on ordinary activities attributable to the members of Rowe Evans Investments PLC 3,338 3,632 Equity dividend proposed 1 (2,057) (2,057) -------- ----------- Profit retained for the financial year 1,281 1,575 -------- ----------- Earnings per 10p share - pence 3 6.90 7.53 Diluted earnings per 10p share - pence 3 6.90 7.53 -------- ----------- All operations are classed as continuing. Consolidated balance sheet AT 31 DECEMBER 2000 2000 1999 £'000 £'000 £'000 £'000 Fixed assets Tangible assets 9,064 9,309 Investments 38,029 33,995 ------- ------- 47,093 43,304 Current assets Stocks 126 121 Debtors 773 1,076 Cash at bank and in hand 3,053 4,943 ------- ------- 3,952 6,140 ------- ------- Creditors: Amounts falling due within one year Trade creditors 98 207 Other creditors including taxation and social security 50 163 Equity dividend proposed 2,057 2,057 ------- ------- 2,205 2,427 ------- ------- Net current assets 1,747 3,713 -------- -------- Total assets less current liabilities 48,840 47,017 Equity minority interests (1,133) (1,225) -------- -------- 47,707 45,792 -------- -------- Capital and reserves Called-up share capital 4,840 4,815 Share premium account 5,977 5,849 Capital redemption reserve 27 27 Revaluation reserve 10,306 8,826 Profit and loss account 26,557 26,275 -------- -------- Total equity shareholders' funds 47,707 45,792 -------- -------- Consolidated cash-flow statement FOR THE YEAR ENDED 31 DECEMBER 2000 2000 1999 £'000 £'000 Reconciliation of operating profit to net cash inflow from operating activities Total operating profit 4,376 4,932 Exchange differences (235) 302 Depreciation 250 213 Share of associated undertakings' profits (2,402) (2,644) Increase in stocks (5) (24) Decrease/(increase) in debtors 167 (80) (Decrease)/increase in creditors (180) 100 -------------------- ---------- Net cash inflow from operating activities 1,971 2,799 Returns on investments and servicing of finance 1,174 1,020 Taxation (682) (1,877) Capital expenditure and financial investment (2,267) (565) Equity dividend paid (2,057) (2,048) -------------------- ---------- Net cash outflow before management of liquid resources and financing (1,861) (671) Management of liquid resources Decrease/(increase) in short-term deposits 1,935 (83) Financing Issue of shares 140 - -------------------- ---------- Increase/(decrease) in cash 214 (754) -------------------- ---------- The financial information set out in the announcement does not constitute the Company's statutory accounts for the years ended 31 December 2000 or 1999. The financial information for the year ended 31 December 1999 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985. The statutory accounts for the year ended 31 December 2000 will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's annual general meeting. Statement of total recognised gains and losses FOR THE YEAR ENDED 31 DECEMBER 2000 2000 1999 £'000 £'000 Profit attributable to the members of the Company 3,338 3,632 Unrealised share of associated undertakings' reserves 1,779 560 Exchange differences on foreign-currency net (1,285) 106 investments ----- -------------- Total recognised gains and losses for the year 3,832 4,298 ----- -------------- NOTES 1) Equity dividend proposed The board recommends a dividend of 4.25p per 10p share (1999 - 4.25p) 2000 1999 Amount per 10p share 4.25p 4.25p Cost £2,057,000 £2,057,000 Payable on or after 29/06/01 01/08/00 Record date 11/05/01 19/05/00 Ex-dividend date 09/05/01 15/05/00 2) Taxation 2000 1999 £'000 £'000 United Kingdom corporation tax at 30% (1999 - 30.25%) 503 319 Double taxation relief (503) (319) ------ ----------------- - - Overseas taxation 780 829 Advance corporation tax - 2 Consortium relief - (2) ------ ----------------- 780 829 Adjustment in respect of prior year 7 4 ------ ----------------- 787 833 Share of associated undertakings' taxation 436 531 ------ ----------------- 1,223 1,364 ------ ----------------- Unrelieved losses of £2,501,000 (1999 £2,314,000) remain available to offset future taxable profits of Group companies. 3) Earnings per share The calculation of earnings per 10p share is based on profits of £3,338,000 and on 48,359,909 shares which was the average number of shares in issue during the year. The calculation of earnings per share in 1999 was based on profits of £ 3,632,000 and on 48,210,278 shares which was the average number of shares in issue during the year. The calculation of diluted earnings per 10p share is based on profits of £ 3,338,000 and on 48,400,073 shares which was the average number of shares in issue during the year. The additional shares used in the calculation of diluted earnings per share represent an adjustment made for shares under option and exercised during the year. The calculation of diluted earnings per share in 1999 was based on profits of £3,632,000 and on 48,220,256 shares which was the average number of shares in issue during the year. The additional shares used in the calculation of diluted earnings per share represent an adjustment made for shares under option. 4) Timetable The report and financial statements will be despatched to shareholders on 9 May 2001 and the annual general meeting will be held on 8 June 2001. 5) Distribution Copies of the full report and financial statements for the year ended 31 December 2000 will be available from M. P. Evans (UK) Limited, 3 Clanricarde Gardens, Tunbridge Wells, Kent TN1 1HQ on and after 9 May 2001. By order of the board M. P. Evans (UK) Limited Secretaries 30 April 2001 Enquires: Philip Fletcher Telephone: 01892 516333 Fax: 01892 518639 E-mail: Philipf@mpevans.co.uk

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