Final Results

RNS Number : 0993T

M. P. Evans Group PLC

23 March 2021

 

M.P.EVANS GROUP PLC

M.P.Evans Group PLC ("MP Evans", "the Group" or "the Company"), a producer of sustainable Indonesian palm oil, announces its results for the year ended 31 December 2020.

The Group's 2020 annual report is available on its website at www.mpevans.co.uk .

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF REGULATION (EU) NO.596 /2014.

The person responsible for making this announcement is Tristan Price, chief executive of the Group.

Highlights

Financial

− Profit for the year US$22.2 million (2019 US$7.5 million) 

− Operating profit US$31.3 million (2019 US$16.1 million) 

− Sustainability premia increased to US$2.6 million (2019 US$1.9 million)

− Continuing EPS 37.4 US cents (2019 - 11.6 US cents) 

− 24% increase in total dividend for the year with proposed final dividend of 17p per share

− Intention to propose 30p per share total dividend in respect of 2021

Indonesian palm oil

− Total crop processed up 21% to 1.2 million tonnes

− 100% of Group and scheme-smallholder crop grown to sustainability standards

− Group crops up to 724,000 tonnes, a 9% increase

− Crops at youngest operation, Musi Rawas, nearly trebled

− Crude-palm-oil production up 17% to 272,000 tonnes

− New Group 40-tonne mill began production in September 2020

− Launched pilot traceability initiative, working with independent smallholders to achieve 100% traceability of all third-party ffb processed by the Group

Malaysian property

− Conditional sale agreement of Bertam Estate for US$24.9 million announced

Group value

− Group equity value of £10.99 per share at 31 December 2020 

Commenting on the results, Peter Hadsley-Chaplin, executive chairman of MP Evans , said: "I am pleased to report that 2020 was another record year for production and revenue resulting in a sharp rise in profit, which nearly trebled to US$22.2 million, and an increase in sustainability premia. Given this performance the board is recommending a final dividend of 17p per share, an increase of 4.25p, bringing total dividends for the year to 22p per share. In view of the strong increase in crop and production projected for the immediate future and the prospects for the palm-oil market, the board intends to recommend a dividend of 30p per share in respect of the 2021 financial year."

Enquiries:

M.P.Evans Group PLC	[phone] on 23 March 2021 only
	Thereafter [phone]
Peter Hadsley-Chaplin, Chairman
Tristan Price, Chief executive
Matthew Coulson, Finance director
Peel Hunt LLP	[phone]
Dan Webster
Andrew Clark
finnCap	[phone]
Tim Redfern
Chris Raggett
Hudson Sandler	[phone]
Charlie Jack
Elfie Kent Francis Kerrigan

An analysts' meeting will be held today at 09.30 by video conference.

Covid-19

The pandemic has had little effect on the Group's operations. Once the widespread nature of the virus became known, preventative measures were quickly introduced to protect the Group's employees and these measures remain under review and in place as required. Staff travel has been restricted, the Group has controlled access to its plantations and the majority of staff in its Jakarta office have been put on remote working. All estates and mills operated without interruption during the year. During the second quarter of the year, Covid-19 did have a marked effect on the price of CPO, but the price recovered strongly in the second half of the year.

Results

Another record year for production and revenue resulted in a sharp increase in profit for the year. A rising CPO price and continuing control of costs saw profit margins jump in comparison to 2019. Operating profit was US$31.3 million compared with US$16.1 million in 2019 despite an adverse foreign-exchange movement during 2020. The Group benefitted from an increase in the sustainability premia it receives for its CPO and palm kernels as well as sales of electricity generated from the methane it captures. Profit for the year nearly trebled to US$22.2 million.

Dividend

An interim dividend of 5.00p per share (2019 - 5.00p per share) was paid on 6 November 2020, and the board is recommending a final dividend of 17.00p per share (2019 - 12.75p per share). This represents an increase of 24% in the dividend in respect of normal operations for the year, bringing it to 22.00p per share.

The board intends to continue its long-standing policy of maintaining or increasing the dividend where possible. It believes the projected increase in yield from its young plantations provides a basis for sustained future crop growth and enhanced dividends. Furthermore, the Group expects capital expenditure to fall substantially from 2023 as it completes the series of investments begun in 2005, and its debt to have reached a peak in 2020. In light of the Group's strong balance sheet, and the marked increase in crop and production projected for the immediate future, and the prospects for the palm-oil market, the board intends to recommend a dividend of 30p per share in respect of the 2021 financial year.

Palm-oil market

The CPO price at the end of December 2020 stood at US$1,035 per tonne, a level last seen in July 2012. Having started 2020 promisingly, the CPO price fell as the Covid-19 pandemic struck. Whilst the pandemic resulted in a fall in world palm-oil consumption, world production of palm oil fell even further as labour shortages, dry weather and an increasing industry-average palm age took their toll. During the initial months of the year, stocks of palm oil acted as a buffer. Stocks then rebounded but quickly began to fall as a result of the production deficit.

Whilst initially the CPO price fell sharply, it recovered strongly from the middle of May 2020, continuing its rise to the end of the year. The average cif Rotterdam price for the year was US$716 per tonne, US$150 higher than in 2019. Regrettably, the Group has not benefitted fully from this rise as the Indonesian government imposed an increased export levy in December 2020, designed to subsidise Indonesian producers of biodiesel while crude-oil prices have been languishing. This was widely anticipated and reflected in prices received by the Group from October. The structure of the levy means the Group receives very nearly the same ex-mill-gate price at US$1,000 per tonne as for US$800 per tonne. This nonetheless represents a very healthy profit margin.

Strategic developments

The Group has continued to implement its strategy to focus on developing and operating majority-held plantations to produce sustainable Indonesian palm oil. Wherever possible, the Group mills its own crop of ffb since this allows it to report a higher level of certified sustainable production. The Group makes long-term decisions, suited both to a long-lived plant such as the oil palm and to the thinking needed to make the right choices for a sustainable future. The Group works closely with the local communities living on and near to its operations, seeking to have a positive economic and social impact on these communities, and foster long-term relationships. 

During 2020, the Group commissioned its second mill at Kota Bangun, needed to process the increasing crop from the maturing plantings on this project. This brings the Group's mills to four in total, with two at Kota Bangun, one at Bangka and one at Pangkatan. Construction of the Group's fifth mill, at Bumi Mas, is well advanced with commissioning expected in the middle of 2021, and design work has started on the sixth mill at Musi Rawas, planned for completion at the end of 2022. Where the Group has spare capacity in its mills, it buys ffb from independent smallholders. As we refer to below, the Group is committed to working with these smallholders to ensure their ffb can be certified as fully traceable and so sustainable under the new RSPO Independent Smallholder Standard.

The Group's strategy of controlling all its operations means it is best able to draw on its excellent operational management team, with a proven track record of developing and improving estates in the most effective, productive and sustainable way. This has resulted in construction of roads, permanent housing, methane capture facilities and water-management infrastructure, in addition to its mills. However, the Group's investment programme to develop its existing projects is coming to an end. A strong balance sheet allows the Group to plan for increasing returns to shareholders, as well as to acquire incremental hectarage for planting around its existing projects.

In Malaysia, the Group reached an agreement to sell its last wholly-owned Malaysian asset, the remaining 70 hectares of its old Bertam Estate. The buyer was Bertam Properties Sdn Bhd, the joint venture in which the Group has a 40% shareholding. Bertam Properties will be able to add substantial value to this land by developing it, and the Group will reap its share of this benefit. The sale proceeds will contribute to funding the Group's investment in expansion of both its hectarage and production facilities in Indonesia.

Sustainability

The Group is running a pilot project in its Bangka estates to establish how best to generate enthusiasm amongst independent smallholders to register under the RSPO Independent Smallholder Standard and then achieve certification. At the end of 2020, 208 smallholders with more than 1,200 hectares of land had committed to the scheme. The Group has started to deliver training in agronomy to those who have registered to help them increase the yield from their palms. This will be supplemented by in-field visits and advice starting in the middle of 2021. As regards its own workforce, the Group has been conducting a pilot project in Kota Bangun to improve health and safety. This project aims to measure workplace injuries more accurately to help direct effective prevention.

Operational developments

The strong projected growth of the Group's crop is being realised. In 2020, the total crop processed grew by 21%, having grown at the same rate in 2019. The Group's crops rose by 9% and those of 'scheme smallholders' (those attached to the Group's projects) by 12%. The rise in crop was particularly pronounced at Musi Rawas, where the mature hectarage nearly doubled compared with 2019. High growth at Bumi Mas continued as the Group's investments in that area had an increasing impact. The crop at Kota Bangun declined slightly after it was not able to match the robust growth seen in the second half of 2019. In addition, the Group was able to increase its purchases of ffb from independent smallholders by more than 70% to reach 290,000 tonnes.

	2020	Increase/ (decrease)	2019
	Tonnes	%	Tonnes
Crop
Own crops
Kota Bangun	186,400	(4)	194,000
Bangka	127,500	(1)	128,900
Pangkatan group	170,300	4	164,300
Bumi Mas	154,300	26	122,000
Musi Rawas	44,500	189	15,400
Simpang Kiri	41,300	7	38,700
	724,300	9	663,300
Scheme-smallholder crops
Kota Bangun	81,500	(7)	87,300
Bangka	64,400	12	57,500
Bumi Mas	26,900	37	19,600
Musi Rawas	20,200	162	7,700
	193,000	12	172,100
Independent-smallholder crop purchased
Kota Bangun	142,500	260	39,600
Bangka	112,800	7	105,200
Pangkatan group	34,400	62	21,300
	289,700	74	166,100
Total crop	1,207,000	21	1,001,500

The Group continues to pride itself on the level of extraction it achieves from its ffb. Overall, the Group's extraction rate in its own mills fell to 23.1% from 23.7% in 2019. This reflected the dramatic increase in crop bought from independent smallholders, which is not of the same quality as its own crop or that of scheme smallholders. The oil-extraction rate in its Bumi Permai mill at Kota Bangun was particularly affected by this since it not only processed significantly more independent-smallholder crop than in 2019, but also worked at very high levels of capacity utilisation in the period prior to commissioning the Rahayu mill. This led to longer maintenance intervals and some unplanned stoppages. The Group's other mills maintained good rates of oil- and kernel-extraction. For the time being, the Group's new Rahayu mill is processing exclusively crop bought from independent smallholders. In total, the Group produced 270,000 tonnes of CPO, 17% more than in 2019.

		Increase/
	2020	(decrease)	2019
Production	Tonnes	%	Tonnes
Crude palm oil
Kota Bangun	96,500	22	79,000
Bangka	69,600	3	67,400
Pangkatan group	46,100	8	42,800
	212,200	12	189,200
Bumi Mas	37,400	27	29,500
Musi Rawas	13,200	175	4,800
Simpang Kiri	8,900	6	8,400
	59,500	39	42,700
	271,700	17	231,900
Palm kernels
Kota Bangun	19,300	14	17,000
Bangka	16,900	4	16,200
Pangkatan group	10,800	7	10,100
	47,000	9	43,300
Bumi Mas	8,600	26	6,800
Musi Rawas	2,900	164	1,100
Simpang Kiri	1,900	6	1,800
	13,400	38	9,700
	60,400	14	53,000
Extraction rates	%	%	%
Crude palm oil
Kota Bangun - Bumi Permai	23.8	(3)	24.6
Kota Bangun - Rahayu	21.6	-	-
Bangka	22.9	(1)	23.1
Pangkatan group	22.5	(3)	23.1
	23.1	(3)	23.7
Bumi Mas	20.7	(1)	20.9
Musi Rawas	20.4	(1)	20.6
Simpang Kiri	21.5	(1)	21.8
Palm kernels
Kota Bangun - Bumi Permai	4.9	(8)	5.3
Kota Bangun - Rahayu	4.0	-	-
Bangka	5.5	(2)	5.6
Pangkatan group	5.3	(2)	5.4
	5.1	(6)	5.4
Bumi Mas	4.7	(2)	4.8
Musi Rawas	4.6	-	4.6
Simpang Kiri	4.5	(6)	4.8

At Bumi Mas, the Group continues its planned investment in strengthening roads, managing tidal water flows and building housing for workers.

At Musi Rawas, planting since development began has not changed from the 8,000 hectares reached in the middle of 2019. This is a result of pausing development to ensure the Group complies with enhanced standards affecting new planting adopted by the RSPO in 2019. In both the Group's own areas and those of its scheme smallholders, planting is carried out in rigorous compliance with RSPO standards to ensure the fruit will be certified as being produced sustainably. It is anticipated that planting at Musi Rawas should resume in mid-2021.

At the end of 2020, the Group managed 51,600 hectares of oil palm on behalf of itself and its scheme smallholders. The effective ownership of planted oil palm hectarage by the Group's shareholders, taking account of minority-shareholder interests, amounted to 37,700 hectares.

Group valuation

Continuing development of the Group's estates produced an increase in the total US Dollar value of the Group's plantations during the year. At the same time, there was a reduction in the value of Malaysian property in line with a general fall in the sector. There was also a decline in the value of the US Dollar against Sterling. Overall, the Group's value per share, based on an independent valuation at the end of 2020 was £10.99, similar to that a year earlier.

Current trading and prospects

Crop in the first two months of 2021 is ahead of 2020 in all regions except North Sumatra, which lagged the good levels seen last year. The increase was particularly pronounced at Musi Rawas in South Sumatra, where yield on the young palms is improving and new areas are being brought into first harvesting. Compared with last year, the Group has also purchased significantly more ffb from independent smallholders. At the end of February, total crop processed was 217,000 tonnes, 20% more than the 180,000 tonnes processed during the first two months of 2020. The details are set out in the following table:- 

	2 months ended		2 months ended
	28 February 2021	Increase	29 February 2020
	Tonnes	%	Tonnes
Own crops	124,200	16	107,100
Smallholder crop	38,300	39	27,500
Outside crop purchased	54,400	19	45,600
	216,900	20	180,200

Crop is rising due to the young average age of its palms across the Group, an average of 8 years. This is a consequence of the development of its projects in Bangka and East Kalimantan over the last ten years, the acquisition of Bumi Mas and the development of Musi Rawas. The upward trend in crop is expected to last until 2027 before plateauing. This would be further augmented by the acquisition or development of new project areas.

The price of CPO climbed in the second half of 2020, ending the year at a price of US$1,035 per tonne cif Rotterdam. This strong level carried over into 2021. In the first two months of the year it has mainly stood above US$1,000, and indeed from the beginning of February 2021 climbed further to reach US$1,100. The price was influenced by higher export levies introduced in Indonesia. It is also likely that exports from Indonesia in December 2020 may have been boosted by trade brought forward from January in order to avoid potentially higher levies on exports in 2021. Nevertheless, stocks of palm oil were at low levels at the end of 2020. A recovery in palm-oil production is expected in 2021, although the extent of this may be limited by continuing labour shortages arising from travel restrictions imposed to control the spread of Covid-19. The path of consumption will be affected by the speed of recovery of the hospitality sector, notably in India, which is a significant consumer of palm oil. In the longer term, insufficient levels of replanting in Malaysia and a reduction in new Indonesian planting are likely to curb growth in production.

Notwithstanding the uncertainties surrounding Covid-19, the board is of the view that palm oil, because of its high yield and low cost of production, is well placed to benefit from increasing demand for vegetable oil and hence that the outlook remains encouraging.

Peter Hadsley-Chaplin

Chairman

CONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2020

		2020	2019
		US$'000	US$'000
Continuing operations
Revenue		174,510	119,341
Cost of sales		(139,755)	(102,297)
Gross profit		34,755	17,044
Gain on biological assets		682	927
Foreign-exchange (losses)/gains		(1,068)	1,161
Other administrative expenses		(4,587)	(3,466)
Other income		1,539	458
Operating profit		31,321	16,124
Finance income		527	403
Finance costs		(3,408)	(3,747)
Profit before tax		28,440	12,780
Tax on profit on ordinary activities		(7,692)	(7,183)
Profit after tax		20,748	5,597
Share of associated companies' profit after tax		1,421	1,873
Profit for the year		22,169	7,470
Attributable to:
Owners of M.P. Evans Group PLC		20,371	6,333
Non-controlling interests		1,798	1,137
		22,169	7,470
		US cents	US cents
Continuing operations
Basic earnings per 10p share		37.4	11.6
Diluted earnings per 10p share		37.3	11.5
		Pence	Pence
Basic earnings per 10p share
Continuing operations		29.2	9.0

CONSOLIDATED BALANCE SHEET

As at 31 December 2020

Company number: 1555042
			2020	2019
			US$'000	US$'000
Non-current assets
Goodwill			11,767	11,767
Other intangible assets			1,381	1,433
Property, plant and equipment			390,642	368,744
Investments in associates			22,154	21,553
Investments			67	66
Deferred-tax asset			5,046	5,284
Trade and other receivables			10,917	11,555
			441,974	420,402
Current assets
Biological assets			2,749	2,067
Inventories			11,617	11,072
Trade and other receivables			48,620	45,117
Current-tax asset			3,968	4,245
Current-asset investments			334	1,160
Cash and cash equivalents			27,222	25,947
			94,510	89,608
Total assets			536,484	510,010
Current liabilities
Borrowings			39,605	28,337
Trade and other payables			26,039	22,215
Current-tax liability			6,003	3,657
			71,647	54,209
Net current assets			22,863	35,399
Non-current liabilities
Borrowings			66,079	66,137
Trade and other payables			38	265
Deferred-tax liability			10,529	12,312
Retirement-benefit obligations			14,051	9,401
			90,697	88,115
Total liabilities			162,344	142,324
Net assets			374,140	367,686
Equity
Share capital			9,204	9,200
Other reserves			55,090	55,385
Retained earnings			300,117	294,139
Equity attributable to the owners of
M.P. Evans Group PLC			364,411	358,724
Non-controlling interests			9,729	8,962
Total equity			374,140	367,686

CONSOLIDATED CASH-FLOW STATEMENT

For the year ended 31 December 2020

			2020	2019
			US$'000	US$'000
Net cash generated by operating activities			39,598	32,002
Investing activities
Purchase of property, plant and equipment			(41,409)	(46,531)
Purchase of intangible assets			(113)	(721)
Interest received			108	210
Decrease in bank deposits treated as current-asset
investments			826	1,342
Decrease in receivables from smallholder co-operatives			3,886	4,690
Proceeds on disposal of property, plant and equipment			732	489
Loan to related party			-	(11,747)
Net cash used by investing activities			(35,970)	(52,268)
Financing activities
New borrowings			24,581	110,419
Repayment of borrowings			(13,307)	(46,134)
Lease liability payments			(209)	(167)
Dividends paid to Company shareholders			(12,105)	(12,364)
Dividends paid to non-controlling interest			(89)	-
Purchase of non-controlling interests			-	(25,417)
Exercise of Company share options			-	218
Buy-back of Company shares			(1,155)	(2,286)
Net cash (used)/generated by financing activities			(2,284)	24,269
Net increase in cash and cash equivalents			1,344	4,003
Net cash and cash equivalents at 1 January			25,947	21,626
Effect of foreign-exchange rates on cash and cash
equivalents			(69)	318
Cash and cash equivalents at 31 December			27,222	25,947

Notes

1.  Dividends paid and proposed

	US$'000	US$'000
2020 interim dividend - 5.00p per 10p share (2019 interim dividend 5.00p)	3,511	3,519
2019 final dividend - 12.75p per 10p share (2018 final dividend 12.75p)	8,594	8,845
	12,105	12,364

Following the year end, the board has proposed a final dividend for 2020 of 17.00p per 10p share, amounting to US$13.0 million.

	2020	2019
Ex-dividend date	22 April 2021	23 April 2020
Record date	23 April 2021	24 April 2020
Dividend payable on or after	18 June 2021	19 June 2020

2.  Basic and diluted earnings per share

The calculation of earnings per 10p share is based on:-

		2020		2019
	2020	Number	2019	Number
	US$'000	of shares	US$'000	of shares
Profit for the year attributable to the owners
of M.P. Evans Group PLC	20,371		6,333
Average number of shares in issue		54,478,518		54,599,417
Diluted average number of shares in issue*		54,667,409		54,875,441

*The difference between the number of shares in issue and the diluted number of shares relates to unexercised share options held by directors and key employees of the Group.

3.  Financial information

The financial information has been derived from the Company's audited accounts but does not itself constitute statutory accounts within the meaning of section 435 of the Companies Act 2006. The statutory accounts for the financial year ended 31 December 2020 have been reported on by the Group's auditors, BDO LLP, and will be filed with the Registrar of Companies. The report of the auditors thereon was unqualified and did not contain a statement under section 498(2) or (3) of the Companies Act 2006, nor did it contain any matters to which the auditors drew attention without qualifying their audit report.

4.  International Financial Reporting Standards

This announcement is based on the Group's financial statements which were prepared in accordance with International Financial Reporting Standards ("IFRS") as applicable to companies reporting under IFRS.

5.  Distribution timetable

The Group's 2020 annual report is available on the Group's website and will be despatched to shareholders on or before 31 March 2021. Printed copies of the Group's 2020 annual report will be available from the Company, 3 Clanricarde Gardens, Tunbridge Wells, Kent TN1 1HQ. The annual general meeting will be held on Thursday 10 June 2021.

By order of the board

Katya Merrick

Company secretary

 

END

 

 

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