Half-year Report

RNS Number : 4796J

M. P. Evans Group PLC

12 September 2016

M.P. EVANS GROUP PLC

M.P. Evans Group PLC ("MP Evans" or "the Group"), a producer of Indonesian palm oil, announces its unaudited preliminary results for the six months ended 30 June 2016.

Highlights

· Profit of US$11.7 million on trading and disposal of investment in NAPCo

· Fall in crop of 9% following exceptional dry weather

· Half-year profit on continuing operations lower by US$0.3 million (4%)

· Profit for the period US$18 million

· Oil extraction continues at excellent levels

· Good planting momentum: 1,980 hectares on new projects, including smallholder areas

· CPO price similar to previous year and has strengthened substantially since 30 June

Commenting on the results, the chairman of M.P. Evans, Peter Hadsley-Chaplin, said: -

"The increased profit in the first half of 2016 reflects the one-off gain from the sale of the Group's NAPCo shares, offset by lower plantation earnings, following a reduction in oil-palm ffb crops, caused by exceptionally dry weather. Whilst palm-oil prices traded around the levels seen in the first half of 2015, the market has, since then, staged a welcome recovery in the second half, which augurs well for the Group's new, increased focus on palm oil."

12 September 2016

Enquires:

M.P. Evans Group PLC	020 7796 4133 on 12 September 2016 only
	Thereafter telephone 01892 516333

Peter Hadsley-Chaplin	Chairman
Tristan Price	Chief executive
Matthew Coulson	Chief financial officer

Peel Hunt LLP	020 7418 8900
Dan Webster
Adrian Trimmings
George Sellar

Hudson Sandler	020 7796 4133
Charlie Jack
Bertie Berger

An analysts' meeting will be held today at 9.30 a.m. at the offices of Hudson Sandler, 29 Cloth Fair, London EC1A 7NN.

OVERVIEW

The profit for the first half of 2016 stood at US$18.0 million compared with US$15.4 million for the first half of 2015. This result reflects the profit made by the Group on selling its shares in The North Australian Pastoral Company Pty Limited ("NAPCo"), but poorer results from its plantation operations compared with 2015, following an extended period of drought in some of the Group's areas.

For some time, the Group's board has been of the view that the interests of shareholders would be best served by adopting a strategy that focussed on plantation operations, securing future growth by further investment in plantation land to generate continuing growth in crops, revenue and profit. As recorded in the 2015 annual report, the Group sold its Australian cattle-fattening property, Woodlands, in December 2015. Subsequently, in May 2016, the Group reached agreement for the sale of its investment in NAPCo for A$107 million and this sale too has now been completed. These two disposals end the Group's interest in the Australian cattle sector and have provided it with the means to execute its strategy of expansion in the plantation sector. The Group is continuing to develop the remaining areas on its existing projects. In Kalimantan and Bangka, planting is nearing completion leaving Musi Rawas as the focus of its development activity. Between these three projects, the Group expects to plant a further 6,400 hectares for itself and 3,200 hectares for smallholder co-operatives, a total of 9,600 hectares. Additionally, the Group is exploring the acquisition of smaller parcels of land, ideally amounting in total to 4,000-5,000 hectares, close to its Kalimantan project, to bring it to an optimal operational size. In the short to medium term, the Group therefore aims to develop, either for itself or its smallholders, approximately a further 14,000 hectares. In the longer term, the Group plans to continue to acquire new areas of sustainable oil palm of a suitable economic size. Increased hectarage is the basis for sustained future crop and revenue growth.

The dry weather notably affected the Group's operations in its new projects in Kalimantan and, most especially, in Bangka. The Group's operations in North Sumatra and the results of its PT Agro Muko ("Agro Muko") joint venture in Bengkulu were less affected. In total, the crop on the Group's areas fell by 9% from 187,100 tonnes to 170,300 tonnes; that on the areas of its smallholder co-operatives falling by 15% from 46,800 tonnes to 39,600 tonnes. The upward momentum in crops will resume once normal rainfall re-establishes itself. The Group's palms are on average a young 7.9 years old (its associated smallholder co-operatives 5.2 years), and so under normal conditions are still increasing yields per hectare as they age. The commodity price of crude palm oil ("CPO") rose from the low level seen at the end of 2015 to above US$700 per tonne in the middle of March, where it traded consistently for some three months before weakening a little at the very end of the half year. The average Rotterdam c.i.f. price for the period was US$668 per tonne compared with US$673 for the equivalent period in 2015.

The first half of 2016 saw good progress on planting in the new projects, with a further 700 hectares planted in Musi Rawas and 480 hectares in Kalimantan, mostly in areas now protected by a newly constructed flood-management bund. The first two phases of the bund have progressed faster than expected due to the dry weather that adversely affected crop. Some modest additional planting of 60 hectares in Bangka brought the Group's new planting in the period to 1,240 hectares. Additionally, across the three new projects, 740 hectares have been planted in the smallholder co-operative areas.

In addition to the special dividend of 5 pence per share paid on 17 August 2016 following the disposal of the Group's investment in NAPCo, the board has declared an interim dividend of 2.25 pence per share (2015: 2.25p per share). The board has resolved to stop offering a scrip-dividend alternative to a cash dividend payment given the Group's strong balance-sheet position following the sale of its investment in NAPCo. The dividend will be paid on or after 4 November 2016 to shareholders on the register at the close of business on 21 October 2016.

THE PALM-OIL MARKET

The average CPO price in the first half of 2016 was US$668 per tonne, only US$5 lower than the average price recorded for the first half of 2015. However, the price actually received by producers of Indonesian palm oil was reduced by the introduction of a new tax in July 2015, an 'export levy', at a flat rate of US$50 per tonne. This new tax supplements the existing export tax which operates at CPO prices above US$750 per tonne. The export tax was revised at the time the export levy was introduced, so that the total of export tax and export levy payable at prices above US$750 per tonne are broadly unchanged. Hence the export levy effectively only increases the tax burden at CPO prices below US$750 per tonne, as has been the case during the first half of 2016.

CPO prices started the year at the low level of US$580 per tonne. The traditional increase in demand ahead of Chinese New Year, in early February 2016, saw prices rise to a level just under US$650 per tonne. Reduced stocks of CPO, increasing biodiesel production in Indonesia and strengthening concern over the impact of dry weather on crops in South East Asia, supported a further rise in the price to a level above US$700 per tonne, where it traded until mid-June before finishing the period slightly lower at US$655 per tonne. It remained at this level during July but strengthened substantially in August to its current level of more than US$750 per tonne.

RESULTS FOR THE PERIOD

Majority-owned operations

Crops

Crops in the second quarter of 2016 fell behind the levels of 2015 in all of the Group's areas. By the end of June 2016, the Group's crops of 170,300 tonnes in the first half were 9% below the 187,100 tonnes harvested in 2015.

This fall in crop was not uniform across the Group's different areas of operation. Estates in Sumatra experienced a modest reduction of 5%, those in Kalimantan 7%, but the Group's project on Bangka suffered a fall of 23% in its crop (see table below). This last project normally experiences a mild annual dry spell, although in this case the extreme period of dryness beginning at the end of 2014 did not abate until the start of 2016. Weather of this nature is most unusual, and the cumulative effect of such an extended period of low rainfall has had a dramatic effect on production of fresh fruit bunches ("ffb"). Whilst the palms themselves are not at risk, lack of rain inhibits the formation of inflorescences which reduces the potential for the palm to produce new ffb. Once a more normal pattern of rainfall re-establishes itself, the palm begins a new cycle of production, often resulting in a period of 'flush' yields 18-24 months after adequate moisture is again available to support palm growth. In all of the Group's areas of operation, rainfall in the second quarter improved growing conditions.

The smallholder co-operative areas experienced a similar reduction in crop to that in the Group's own areas in the same project. Overall, smallholder crop fell from 46,800 tonnes to 39,600 tonnes. Purchases of outside crop continued in Kalimantan, although at the slightly lower level of 9,400 tonnes as compared with 10,500 tonnes in the previous year. Purchases of outside crop are made in Pangkatan only during high-cropping periods when they can be purchased at an attractive price. In 2016, the Group has delayed these purchases because of both the dry weather pattern and the timing of the Hari Raya religious festival.

Production

The Group commissioned its new mill on Bangka in May this year. The project comprises: a 45-tonne-per-hour mill (expandable to 60 tonnes); a composting facility, where the empty fruit bunches are turned into a valuable organic compost which is returned to the field; and a biogas plant, where methane is captured from mill effluent and used to generate electricity. The project was completed on time and within budget.

Whilst crop has been lower than in the previous year, both oil- and kernel-extraction rates remain at high levels. In Kalimantan, an oil-extraction rate of 26.0% was achieved in the first half of 2016, an improvement on the already-high level of 25.6% recorded in the first half of 2015. Oil extraction also improved in Pangkatan from 23.2% in 2015 to 23.6%. The Bangka mill managed to achieve an oil-extraction rate of 23.7% in its first weeks of operation. Throughput at all three mills has been maintained at optimal levels. The Group expects capacity utilisation in its newest mills to increase as plantings on the new projects mature and the yield per hectare of ffb increases.

Crops, production and selling-price details for the majority-owned estates are set out as follows:-

	6 months		6 months	Year
	ended		ended	ended
	30 June	Increase/	30 June	31 December
	2016	(decrease)	2015	2015
	Tonnes	%	Tonnes	Tonnes
Crops
Own crops
Pangkatan group	60,300		61,700	148,900
Simpang Kiri	18,900		21,800	44,200
	79,200	(5)	83,500	193,100
				`
Kalimantan	67,000	(7)	72,300	164,500
Bangka	24,100	(23)	31,300	66,300
	170,300	(9)	187,100	423,900

Smallholder co-operative crops
Kalimantan	29,700	(8)	32,200	70,400
Bangka	9,900	(32)	14,600	30,300
	39,600	(15)	46,800	100,700

Outside crop purchased
Kalimantan	9,400	(10)	10,500	21,400
Pangkatan	-	(100)	3,500	16,300
	9,400	(33)	14,000	37,700

Production
Crude palm oil
Kalimantan	27,700	(6)	29,500	64,300
Pangkatan	14,200	(6)	15,100	37,900
Bangka	3,400		-	-
	45,300	2	44,600	102,200

Palm kernels
Kalimantan	5,200	6	4,900	11,000
Pangkatan	3,300	(13)	3,800	9,600
Bangka	700		-	-
	9,200	6	8,700	20,600

Extraction rates	%		%	%
Crude palm oil
Kalimantan	26.0		25.6	25.1
Pangkatan	23.6		23.2	23.0
Bangka	23.7		-	-

Palm kernels
Kalimantan	4.9		4.3	4.3
Pangkatan	5.5		5.8	5.8
Bangka	4.7		-	-


Average selling prices	US$		US$	US$
Crude palm oil (Rotterdam c.i.f.)	668	(1)	673	622
Palm-kernel oil	1,157	22	948	909

Costs

Cost per tonne of palm product (crude palm oil and palm kernels) at US$445 was higher than the US$425 in the first half of 2015. The main reason for this was a higher cost per tonne of ffb produced on the Group's estates. This was a natural consequence of the lower crop: there are fixed costs in a plantation such as weeding, pruning and fertilizing that do not vary with crop. As the crop fell during the first half of 2016, so the cost per tonne of ffb due to these fixed costs increased. The cost per tonne of palm product is typically lower during the second half of the year as crop levels rise, and one significant cost, fertilizer, is often incurred disproportionately during the first half of the year. An important component of overall cost is the element relating to ffb. The Group expects costs to fall as the young palms on its new projects mature and so average bunch weight rises. This will bear down on the Group's overall cost per tonne of palm product, demonstrating the Group's position as an efficient low-cost operator.

Mill-gate price

As noted above in the section 'The palm-oil market', the average Rotterdam c.i.f. price for the period was US$668 per tonne, only a little lower than it had been during the first half of 2015. However, the introduction of an 'export levy' in Indonesia had the effect of lowering the mill-gate price to producers of CPO, irrespective of whether their sales were made into the export market. The burden of the US$50 per tonne export levy seems to have fallen largely on producers of CPO, with only a small residual amount bearing on refiners of CPO. As a result, the average mill-gate price per tonne of CPO for the period was US$543, 7% lower than the US$582 achieved in the first half of 2015.

Planting

Good progress has been made with developing the Group's areas: during the interim period 1,240 hectares were planted. The majority of this was on the Group's newest project in Musi Rawas where 700 hectares were planted as the progress on development continues to build momentum. In addition to the areas already planted, 1,800 hectares have been compensated and so are available for planting, and a further 3,300 hectares have been measured in anticipation that compensation will be paid in due course. In Kalimantan 480 hectares were planted; as were 60 hectares in Bangka.

Planting in respect of smallholder co-operatives continued, amounting to a further 740 hectares: 280 in Bangka; 120 in Kalimantan; 340 in Musi Rawas. Altogether, therefore, the Group planted 1,980 hectares in the first half of 2016 for itself and its smallholders.

Development of the Group's projects in Kalimantan and Bangka is nearing a conclusion. The Group expects the total final planted area to reach 10,600 hectares in Kalimantan with an additional 4,400 hectares for the smallholder co-operatives. In Bangka, the total of planted land is expected to reach 6,000 hectares with a further 4,000 for the smallholder co-operatives. It is too early to say with any degree of confidence how much of the 20,000-hectare concession in Musi Rawas will eventually be planted, but the board's current estimate of the plantable land is 7,000 hectares for the Group and 3,000 hectares for the smallholder co-operatives.

New land

The Group is exploring the acquisition of additional hectarage close to its new projects to bring them to an optimal size. The Group's experience is that 10,000 hectares of oil palm with a 60-tonne mill provides a unit which is both big enough to provide economies of scale in production and administration and small enough to allow the careful scrutiny by field management needed to maintain high standards. The Group's projects in Bangka and Musi Rawas, including smallholder areas, are of this size and the board is actively engaged in extending the Kalimantan project from the currently-projected 15,000 hectares to bring it to the equivalent of two 10,000 hectare units. The board's longer-term intention is to commence a new substantive project, of a suitable economic size, once the development of Musi Rawas is approaching an end. Preliminary work to identify suitable possibilities will begin once there is better visibility of the point at which planting on Musi Rawas will be concluded.

Gross profit

As a result of all of the above, the gross profit for the first half of 2016 was US$5.1 million, 42% lower than the US$8.9 million recorded for the same period in 2015.

Foreign-exchange difference

The Group principally incurs foreign-exchange differences on monetary Rupiah assets and liabilities held in Indonesia. During the period under review the Indonesian Rupiah appreciated by 5% against the US Dollar generating an unrealised exchange gain of US$1.3 million (2015 loss of US$4.0 million) on cash balances, recoverable tax and loans made to the co-operative schemes attached to the Group's new projects. In Indonesia, US Dollar borrowing by the new projects generated a taxable gain and so inflates the Group's tax charge in the same way that it pushed down the Group's tax charge in 2015.

Other administrative expenses

Other administrative expenses increased by US$1.0 million between the first half of 2016 and that in 2015. This increase is almost entirely due to the write-back in 2015 of a provision in respect of irrecoverable tax that was not repeated in 2016. Other administrative expenses excluding non-recurring items increased by 6% between the two periods due mainly to an increase in professional fees for tax advisory work.

Associated companies

Indonesia

The Group's share of profit of its Agro Muko joint venture and associated-company PT Kerasaan Indonesia ("Kerasaan") was US$3.1 million, very similar to its share of profit in the first six months of 2015 (see note 3). Their location meant these estates were not affected by the pattern of severe weather that negatively affected output in the Group's new projects.

In Kerasaan, a similar level of profit reflects the crop remaining at its 2015 level of 18,700 tonnes, very slightly ahead of expectation. For Agro Muko, a 3% increase in its own crop was slightly behind expectation but was supplemented by a doubling of crop bought in from outgrowers to 9,600 tonnes, although this advantage was eroded by a fall in the extraction rate to 22.0%. The local management team is engaged in a set of initiatives to improve the rate of extraction, initially by driving up field standards. As previously reported, an accelerated replanting programme is in place which will hold back an increase in crop until after the middle of the next decade. A small loss was made on rubber production.

Crops and production are as set out in the table below: -

	6 months		6 months	Year
	ended		ended	ended
	30 June		30 June	31 December
	2016	Increase	2015	2015
	Tonnes	%	Tonnes	Tonnes
Ffb crops
PT Agro Muko
- own	158,300	3	153,700	340,500
- outgrowers	9,600	104	4,700	12,700
	167,900	6	158,400	353,200

PT Kerasaan Indonesia	18,700	-	18,700	41,600
	186,600	5	177,100	394,800

Production (PT Agro Muko)
- Crude palm oil	36,900	3	35,700	80,300
- Palm kernels	8,600	2	8,400	18,800


Extraction rates	%		%	%
- Crude palm oil	22.0		22.5	22.7
- Palm kernels	5.2		5.3	5.3

	Tonnes		Tonnes	Tonnes
Rubber crops
PT Agro Muko	1,031	11	928	1,650

Australia

The profit for the half year includes US$11.7 million attributable to NAPCo. After a significant period of negotiation, the Group entered into a contract on 6 May 2016 to sell its investment in NAPCo alongside the majority Foster family shareholder for A$107 million. The sale was expected to be concluded before the end of July, allowing time for various routine statutory conditions to be fulfilled. By the end of June, these conditions had been substantially met and, therefore, the profit from the disposal has been recognised in this interim report. The sale was duly completed on 20 July 2016.

The profit of US$11.7 million in respect of NAPCo comprises both the Group's share of NAPCo's profit for the period and the book gain on disposal of the investment (see note 8). The Group's share of NAPCo's profit in the period was due to healthy weight gain in NAPCo's herd, leading to an upward revaluation of the herd despite a 2.4% fall in numbers by 4,329 to 173,649. The average value per head increased by some 11%.

Malaysia

The Group's share of Bertam Properties Sdn. Berhad ("Bertam Properties") profit was US$1.6 million compared with a loss for the equivalent period in 2015 of US$0.1 million. This disparity arises from the timing of property sales, which are recognised only once they are finally completed. During the first half of 2015, no property sales were recognised, although a number were in process at 30 June; 370 sales of developed properties were subsequently recognised during the second half of 2015. In the first half of 2016, sales of 217 developed properties were recognised as well as the sale of two hectares of prime land to the Tesco supermarket group. A number of sales of developed property are in progress.

CURRENT TRADING AND PROSPECTS

Since 30 June, palm-oil prices have risen to their current level of more than US$750 per tonne against a background of low world vegetable-oil stock levels. In respect of CPO, low stock levels seem to be due to reduced production, notably in Indonesia, a consequence of the extended dry period resulting from the widely-reported El Niño that has affected South East Asia. Within Indonesia, there are signs that the government's mandate to introduce a 10% biodiesel blend in the transport sector (and 7% in the industrial sector) is having a positive effect on the domestic demand for palm oil as well as drawing in more imports of biodiesel from abroad.

The extended dry period that affected the Group's results in the interim period has come to an end. Oil palms will often produce above-average crops after a period in which their environment has not supported normal formation of ffb. However, the beneficial effects of renewed rainfall can take up to six months to produce a resurgence in crop and up to 24 months fully to overcome the effects of drought. Notwithstanding the dry weather, the second-half crop is likely, as would normally be expected, to be higher than in the first half.

Good planting momentum provides the basis for future crop growth and hence rising revenue. The board remains confident that the fundamentals of the palm-oil market continue to be encouraging. Vegetable oil is a basic foodstuff and increasing demand from a growing world population looks likely to persist. Palm oil delivers by far the highest yield per hectare of all the vegetable oils and has the lowest cost of production. It is therefore well placed, long term, to benefit from the likely future increase in demand.

UNAUDITED CONSOLIDATED INCOME STATEMENT

For the six months ended 30 June 2016

	Note	6 months ended 30 June 2016 US$'000	6 months ended 30 June 2015 Restated* US$'000	Year ended 31 December 2015 Restated* US$'000

Continuing operations
Revenue	3	30,354	38,029	72,528
Cost of sales		(25,233)	(29,160)	(57,469)
Gross profit	3	5,121	8,869	15,059
Gain/(loss) on biological assets		310	126	(232)
Foreign-exchange gain /(loss)		1,338	(3,997)	(5,320)
Other administrative expenses		(1,805)	(820)	(2,768)
Other income		104	309	380
Operating profit		5,068	4,487	7,119
Finance income		349	505	894
Finance costs		(664)	(594)	(1,244)
Group-controlled profit before taxation		4,753	4,398	6,769
Tax on profit on ordinary activities		(3,172)	(812)	(2,401)
Group-controlled profit after tax		1,581	3,586	4,368
Share of associated companies' profit after tax	3	4,731	3,004	8,554
Profit for the period on continuing operations		6,312	6,590	12,922
Profit for the period from discontinued operations	8	11,694	8,828	12,473
Profit for the period		18,006	15,418	25,395
Attributable to:
Owners of M.P. Evans PLC		16,702	14,759	24,084
Non-controlling interests		1,304	659	1,311
		18,006	15,418	25,395

Continuing operations		US Cents	US Cents	US Cents
Basic earnings per 10p share		9.0	10.7	20.9
Diluted earnings per 10p share		9.0	10.7	20.9
Continuing and discontinued operations
Basic earnings per 10p share		30.0	26.7	43.4
Diluted earnings per 10p share		30.0	26.6	43.4

* See notes 5 and 8.

UNAUDITED CONSOLIDATED BALANCE SHEET

As at 30 June 2016

	Note	30 June 2016 US$'000	30 June 2015 Restated* US$'000	31 December 2015 US$'000
Non-current assets
Goodwill		1,157	1,157	1,157
Property, plant and equipment		196,571	197,014	185,902
Investment in associates		48,136	96,419	97,586
Investments		83	89	78
Deferred-tax asset		15,983	15,924	17,076
		261,930	310,603	301,799
Current assets
Biological assets		1,203	8,085	893
Inventories		11,452	6,670	8,000
Trade and other receivables		99,505	15,689	18,316
Current-tax asset		4,814	2,544	3,155
Cash and cash equivalents**		34,341	38,878	44,214
		151,315	71,866	74,578
Total assets		413,245	382,469	376,377
Current liabilities
Borrowings		14,820	31,072	13,453
Trade and other payables		30,833	14,934	15,209
Current-tax liabilities		727	1,443	2,206
		46,380	47,449	30,868
Net current assets		104,935	24,417	43,710

Non-current liabilities
Borrowings		26,160	11,765	19,222
Deferred-tax liability		616	139	429
Retirement-benefit obligations		5,098	3,958	4,233
		31,874	15,862	23,884
Total liabilities		78,254	63,311	54,752
Net assets		334,991	319,158	321,625
Equity
Share capital	6	9,366	9,349	9,360
Other reserves		60,220	73,550	76,226
Profit and loss account		243,654	215,316	214,423
Equity attributable to owners of M.P. Evans Group PLC		313,240	298,215	300,009
Non-controlling interests		21,751	20,943	21,616
Total equity		334,991	319,158	321,625

* See notes 5 and 8

** Of this balance, US$17.2 million has been pledged as security against bank loans

UNAUDITED CONSOLIDATED CASH-FLOW STATEMENT

For the six months ended 30 June 2016

	Note	6 months ended 30 June 2016 US$'000	6 months ended 30 June 2015 US$'000	Year ended 31 December 2015 US$'000

Net cash generated by operating activities	7	3,815	7,876	20,231
Investing activities
Purchase of property, plant and equipment		(15,990)	(11,977)	(28,419)
Interest received		349	505	894
Proceeds on disposal of property, plant and equipment		104	319	21,127
Net cash used by investing activities		(15,537)	(11,153)	(6,398)
Financing activities
Loan drawdowns		10,644	-	18,571
Repayment of borrowings		(2,339)	(3,932)	(30,449)
Dividends paid to Company shareholders		(4,622)	(3,665)	(5,208)
Dividends paid to non-controlling interest		(1,169)	-	-
Net cash used by financing activities		2,514	(7,597)	(17,086)
Net decrease in cash and cash equivalents		(9,208)	(10,874)	(3,253)
Net cash and cash equivalents 1 January		44,214	48,042	48,042
Effect of foreign exchange rates on cash and cash equivalents		(665)	1,710	(575)
Net cash and cash equivalents at period end		34,341	38,878	44,214

NOTES TO THE INTERIM STATEMENTS

For the six months ended 30 June 2016

1. Statutory information

The financial information for the six-month periods ended 30 June 2016 and 2015 has been neither audited nor reviewed by the Group's auditors and does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006. The financial information for the year ended 31 December 2015 is abridged from the statutory accounts. The 31 December 2015 statutory accounts have been reported on by the Group's auditors, PricewaterhouseCoopers LLP, and have been 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.

2. Accounting policies

The consolidated financial results have been prepared in accordance with International Financial Reporting Standards (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 accounts under IFRS.

The accounting policies of the Group follow those set out in the annual financial statements at 31 December 2015.

3. Segment information

The Group's reportable segments previously followed three areas of activity. These were distinguished by location and product: plantation crops (predominantly palm oil) in Indonesia, cattle in Australia, and property development in Malaysia. Following the disposal of the Group's interest in NAPCo, and its treatment as a discontinued operation, the Group now has two remaining reportable segments.

	Plantation Indonesia	Property Malaysia	Other	Total
	US$'000	US$'000	US$'000	US$'000
6 months ended 30 June 2016
Revenue	30,281	-	73	30,354
Gross profit/(loss)	5,131	-	(10)	5,121
Share of associated
companies' profit after tax
Agro Muko	2,749	-	-	2,749
Kerasaan	376	-	-	376
Bertam Properties	-	1,606	-	1,606
	3,125	1,606	-	4,731
6 months ended 30 June 2015
Revenue	37,937	-	92	38,029
Gross profit	8,868	-	1	8,869
Share of associated
companies' profit/(loss) after tax
Agro Muko	2,724	-	-	2,724
Kerasaan	348	-	-	348
Bertam Properties	-	(68)	-	(68)
	3,072	(68)	-	3,004
Year ended 31 December 2015
Revenue	72,381	-	147	72,528
Gross profit/(loss)	15,084	-	(25)	15,059
Share of associated companies' profit
Agro Muko	5,105	-	-	5,105
Kerasaan	699	-	-	699
Bertam Properties	-	2,750	-	2,750
	5,804	2,750	-	8,554

4. Dividends:-

	6 months	6 months	Year ended
	ended	ended	31 December
	30 June 2016	30 June 2015	2015
	US$'000	US$'000	US$'000

2014 final dividend 6.50 p per 10p share	-	5,646	5,646
2015 interim dividend 2.25 p per 10p share	-	-	1,928
2015 final dividend 6.50 p per 10p share	4,852	-	-
	4,852	5,646	7,574

Subsequent to 30 June 2016, on 20 July 2016 the board declared a special dividend of 5p per 10p share. The dividend was paid on 17 August 2016 to those shareholders who were on the register at the close of business on 5 August 2016.

In addition, subsequent to 30 June 2016, the board has declared an interim dividend of 2.25p per 10p share. The dividend will be paid on or after 4 November 2016 to those shareholders on the register at the close of business on 21 October 2016.

No scrip dividend was offered in relation to the special dividend, and no scrip dividend is being offered in relation to the interim dividend. The board has resolved to stop offering a scrip dividend alternative to a cash dividend payment.

5. Biological assets

As disclosed in the 2015 interim report, the Group adopted the amendments to IAS 41 issued by the IASB on 30 June 2014, and accounted for the Group's bearer biological assets under IAS 16 within those results. At that time, the Group did not recognise an asset in relation to unharvested ffb growing in its plantations. In the accounts for the year ended 31 December 2015, taking into account advice from the Group's auditor on the interpretation of IAS 41, the Group introduced a policy of including an estimate of the value of ffb prior to harvest as a biological asset in the Group's balance sheet for the purposes of statutory reporting.

As a result of this, the results for the six months ended 30 June 2015 have been restated, increasing net assets by US$1.3 million, and increasing the profit for the period by US$0.1 million.

6. Share capital

	30 June	30 June	31 December	30 June	30 June	31 December
	2016	2015	2015	2016	2015	2015
	Number	Number	Number	US$'000	US$'000	US$'000
Shares of 10p each
At 1 January	55,700,444	55,327,395	55,327,395	9,360	9,302	9,302
Issued	39,275	304,355	373,049	6	47	58
At period end	55,739,719	55,631,750	55,700,444	9,366	9,349	9,360

39,275 shares were issued in lieu of the 2015 final dividend paid on 21 June 2016 (2015 - 304,355 shares issued in lieu of the 2014 final dividend; 68,694 shares were issued in lieu of the 2015 interim dividend).

7. Analysis of movements in cash flow

	6 months ended	6 months ended 30 June 2015	Year ended 31 December 2015
	30 June 2016	(Restated)	(Restated)
	US$'000	US$'000	US$'000

Profit for the period	18,006	15,418	25,395
Discontinued operations	(11,694)	(8,828)	(12,473)
Share of associated companies' profit after tax	(4,731)	(3,004)	(8,554)
Tax charge	3,172	812	2,401
Finance costs	664	594	1,244
Finance income	(349)	(505)	(894)
Operating profit	5,068	4,487	7,119
Biological gain	(310)	(2,166)	(4,346)
Disposal of property, plant and equipment	(55)	(195)	438
Release of deferred profit	(95)	(95)	(263)
Depreciation of property, plant and equipment	5,287	4,929	9,869
Retirement-benefit obligations	656	458	871
Share-based payments	14	60	78
Discontinued operations	-	1,230	1,496
Dividends from associated companies	3,007	4,335	7,637
Operating cash flows before movements in working capital	13,572	13,043	22,899
(Increase)/decrease in inventories	(3,452)	(430)	7,399
Increase in receivables	(1,468)	(2,562)	(5,228)
Increase in payables	856	2,393	2,676
Cash generated by operating activities	9,508	12,444	27,746
Income tax paid	(5,029)	(3,974)	(6,271)
Interest paid	(664)	(594)	(1,244)
Net cash generated by operating activities	3,815	7,876	20,231

8. Discontinued operations

On 6 May 2016, the Group entered into a contract for the disposal of its 34.37% interest in NAPCo. The disposal was subject to a number of conditions, all of which were substantially satisfied at 30 June 2016. Disposal proceeds, which were received in cash on 21 July 2016, were US$79.7 million, and after a tax charge of US$13.8 million the Group realised a net profit on disposal of US$7.4 million. This, in addition to the US$4.3 million Group share of NAPCo's profit for the period up to disposal, resulted in a total profit of US$11.7 million from the NAPCo discontinued operation in the six months ended 30 June 2016.

Furthermore, as disclosed in the statutory accounts for the year ended 31 December 2015, the Group completed the sale of its wholly-owned 'Woodlands' cattle property in Australia in that year and reported its results as a discontinued operation. For consistency, the results and associated cash flows for the six months ended 30 June 2015 have also been reclassified as discontinued operations in this report.

	6 months ended	6 months ended 30 June 2015	Year ended 31 December 2015
	30 June 2016	(Restated)	(Restated)
	US$'000	US$'000	US$'000

Group share of NAPCo profit pre disposal	4,312	7,598	10,977
Profit on disposal of NAPCo	7,382	-	-
	11,694	7,598	10,977

Profit from discontinued Woodlands operation	-	1,230	1,496
	11,694	8,828	12,473

9. Exchange rates

		30 June 2016	30 June 2015	31 December 2015

US$1 = Indonesian Rupiah	- average	13,434	12,962	13,390
	- period end	13,180	13,332	13,795
US$1 = Australian Dollar	- average	1.37	1.28	1.33
	- period end	1.34	1.30	1.37
US$1 = Malaysian Ringgit	- average	4.10	3.64	3.91
	- period end	4.03	3.77	4.29
£1 = US Dollar	- average	1.44	1.52	1.53
	- period end	1.34	1.57	1.47