Half-year Report

RNS Number : 3454M

M. P. Evans Group PLC

16 September 2019

 

M.P. EVANS GROUP PLC

M.P. Evans Group PLC ("MP Evans" or "the Group"), a producer of Indonesian palm oil, announces its unaudited interim results for the six months ended 30 June 2019.

highlights

·     6% increase in crop in first half

·     95,000 tonnes of CPO produced: up 3% on 2018

·     Increased oil-extraction rate to 23.6%

·     20% fall in average price of CPO to US$528 per tonne

·     Cost per tonne of palm product up US$35 to US$385 per tonne

·     Operating profit US$1.0 million (2018 US$10.7 million)

·     Interim dividend maintained at 5.00 pence per share

Post-period end

·     US$70 per tonne increase in CPO price

·     Effective acquisition of 2,200 planted hectares from minority partner

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

"The results for the first half of 2019 reflected a period of low crude palm-oil prices, which outweighed an increase in the Group's crops and improvement in its extraction rate. Since the period end, the price of crude palm oil has risen, and the Group was able effectively to acquire a further 2,200 planted hectares by purchasing additional shareholdings in its own operating subsidiaries from one of its minority partners."

16 September 2019

Enquires:

M.P. Evans Group PLC	020 7220 0500 on 16 September 2019 only
	Thereafter telephone [phone]
Peter Hadsley-Chaplin	Chairman
Tristan Price	Chief executive
Matthew Coulson	Finance director
finnCap	020 7220 0500
Tim Redfern
Chris Raggett
Sunila de Silva
Peel Hunt LLP	020 7418 8900
Dan Webster
George Sellar
Guy Pengelley
Hudson Sandler	020 7796 4133
Charlie Jack
Elfie Kent

An analysts' meeting will be held today at 9.30 a.m. at the offices of Hudson Sandler, 25 Charterhouse Square, London. EC1M 6AE

Overview

Operating profit during the first half of 2019 was US$1.0 million compared with a profit of US$10.7 million in the first half of 2018. This reflected an underlying reduction in gross profit as the price for crude palm oil ("CPO") and palm kernels was significantly weaker in the first six months of the year than it had been in 2018. A small increase in finance costs compared with the previous year and an increased tax charge (relating to movements in the exchange rate) meant that the Group made a loss of US$0.5 million for the period compared with a profit of US$5.8 million in the first half of 2018.  In 2018, the peak crop arrived in the first half of the year. Despite the peak crop in 2019 being expected later in the year, crops for the first half still rose in comparison with 2018. Overall, crops from the Group's areas increased by 6%. Taking into account fresh fruit bunches ("ffb") from the Group's associated smallholder co-operatives and those bought from independent smallholders, the Group processed 4% more ffb during the first half of 2019 than during the same period in 2018.

By maintaining high operating standards, the Group has consistently produced good oil-extraction rates in its own mills. It was able to improve rates during 2019 at its mill in Kota Bangun, where the rate increased from 24.0% to 24.3%. Its mills at Pangkatan and Bangka both produced rates of 23.1% despite, as last year, processing a significant quantity of ffb from independent smallholders that is of lesser quality than that produced by the Group's own areas and its associated smallholder co-operatives.

The Group produced surplus operating cash during the first half of 2019 but, as anticipated, increased its borrowings in order to maintain the capital investment programme required to develop its newer estates. Consistent investment is needed to avoid compromising the long-term development of the Group's assets. This ensures the Group's estates are in the best possible position to benefit from any future rise in the price of CPO. The Group's total borrowings remained modest at US$66.8 million, with debt being carefully and conservatively managed.

The Group has continued to implement its strategy to focus on developing and operating majority-held plantations. Following the interim period, as announced on 4 September 2019, it was able to acquire additional shares in its Indonesian operating subsidiaries previously held by one of its minority partners, effectively adding good-quality and environmentally-sound planted hectares. The acquisition was fully funded by taking on additional debt of US$25.4 million. In this way, the Group was able to consolidate its ownership at a price of US$9,500 per hectare that represented an attractive and low-risk return to shareholders.

In Musi Rawas, there has been continued good progress on new planting. A total of 710 hectares were planted, 510 of which were for the Group and 200 for the smallholder co-operatives. Taking this into account, at the end of June 2019 the Group operated 39,200 hectares of oil palm and a further 12,200 hectares on behalf of smallholder co-operatives attached to its projects: a total of 51,400 hectares.

Dividend

The board proposes to pay an interim dividend of 5.00 pence per share (2018 - 5.00 pence per share). It has previously announced its intention, where possible, to increase or at least to maintain the level of normal dividends. In the absence of prolonged extraordinary weakness in the CPO price, the board plans to maintain this long-standing policy given the strong increase in crop and production projected over the coming years.

The palm-oil market

Strong production and record stocks of CPO at the end of 2018 have hung over the market during the first half of 2019. Whilst the price of CPO (cif Rotterdam) rallied during the first two months of the year and strengthened to US$570 per tonne, it then declined to reach US$503 per tonne at the end of June. On average, the cif Rotterdam price in the first half of 2019 was US$528 per tonne, some US$135 or 20% lower than in the first half of 2018. Rising demand for vegetable oil globally could still be satisfied out of accumulated stocks and so did not create any upward pressure on the price of CPO. Indeed, demand for CPO exceeded production during the first half with both China and India increasing imports of CPO. Nevertheless, rising demand, a widening discount to soybean oil and a reduction in stocks did not yet provide enough positive support to lift the price.

The price for palm kernels follows that of palm-kernel oil whose main competitor is coconut oil, originating mainly in the Philippines. This has seen booming supply from young coconut palms planted in the wake of Typhoon Hainan at the end of 2013. In 2018, Philippine production had recovered to its previous levels at the same time as production of palm-kernel oil rose strongly for the second year in succession following increasing crops of ffb as the sector recovered from the 2015-16 El Niño weather pattern. This trend has continued into the first half of 2019.

Results for the period

Crops

Steady growth in ffb crop during the first quarter of the year continued at a slightly higher pace during the second quarter. In the first half, crops from the Group's own estates increased by 6%. In total, crops from the Group's own areas increased to 287,200 tonnes compared with 270,700 in the first half of 2018.

Performance was not consistent across the Group's estates (see table below). The new areas coming into harvesting for the first time at Musi Rawas and the young areas at Bumi Mas grew strongly as the palms began on the upward yield trajectory that carries them to their maximum yield by the time they reach some ten years of age. Furthermore, the work done by the Group to improve operating standards at Bumi Mas since it acquired the estate at the end of 2017 is having a beneficial effect. Simpang Kiri is an older estate but finds itself in a similar position to Bumi Mas as it has just completed a programme of replanting, meaning that it too will experience growing yield, and hence crop, in the coming years. The Pangkatan Group comprises settled estates which produced a small increase in crop.

In contrast, the estates at Kota Bangun and Bangka experienced a fall in crop compared with 2018. Palms naturally 'rest' for some months after a period of high productivity before resuming production of ffb. After two years of strikingly high crop growth, productivity of the Bangka palms faded during the first half leading to a 14% fall in crop compared with the previous year. A crop peak in the second half of the year would reduce this difference. In Kota Bangun, the flush yields experienced in the first part of 2018 were not repeated: crops in this area fell by 15%. This pause in crop growth has enabled estate management to focus on its harvesting and field standards, bringing them to a higher level. The construction of bunds to manage the flow of water through the estate from neighbouring higher ground and to protect the estates from the Mahakam River when in flood, was completed at the end of July 2019. This is expected to enhance the productivity of these areas in future years.

The level of crop from the smallholder co-operatives attached to the Group's projects was very similar to that in the first half of 2018, rising 1% to 72,900 tonnes. This was less than the growth in Group crop, reflecting the concentration of smallholder areas at Kota Bangun and Bangka, where both Group and smallholder crops fell in the period under review. The Group's mills are designed to handle the Group's and smallholder co-operatives' crop at the point these plantings reach peak yield; until then the mills have spare capacity, which is being profitably used by buying in ffb from third parties. However, in contrast to the increase in crops processed by the Group from its own areas and those of the smallholder co-operatives, the Group purchased a slightly lower volume of ffb from third parties.

Crop on the Group's 38%-owned associated-company estate, Kerasaan, was 27,300 tonnes during the first half of 2019, 26% higher than in the previous year as the estate benefitted from the increasing yield of replantings carried out between 2008 and 2012.

	6 months ended			6 months ended	Year ended
		30 June	Increase/	30 June	31 December
		2019	(decrease)	2018	2018
		Tonnes	%	Tonnes	Tonnes
Crop
Own crop
Kota Bangun		86,300	(15)	101,200	200,400
Bangka		56,600	(14)	65,900	133,500
Pangkatan group		71,500	2	69,900	161,100
Bumi Mas		49,300	190	17,000	38,700
Musi Rawas		5,100	264	1,400	4,700
Simpang Kiri		18,400	20	15,300	34,600
		287,200	6	270,700	573,000
Smallholder co-operative crops
Kota Bangun		38,600	(8)	42,000	84,600
Bangka		23,700	(15)	27,800	57,700
Bumi Mas		8,200	215	2,600	5,700
Musi Rawas		2,400	-	-	1,600
		72,900	1	72,400	149,600
Outside crop purchased
Kota Bangun		5,900	-	5,900	13,500
Bangka		36,200	(11)	40,900	81,000
Pangkatan group		8,800	47	6,000	12,000
		50,900	(4)	52,800	106,500
		411,000	4	395,900	829,100

Production

The Group produced 95,000 tonnes of CPO in the first half of 2019 and 21,800 tonnes of palm kernels. Production of both CPO and palm kernels was 3% higher than in the previous year. These rates were lower than the level of crop increase since the crop from newer areas is sold to outside mills which offer lower rates of extraction than the Group's own mills. Efficiency in the Group's mills has continued to improve since the first half of 2019. Aggregated extraction in its own mills rose to 23.6%, notwithstanding the significant tonnage of ffb bought from independent smallholders that is of a lower quality than the Group's own ffb. At Kota Bangun, the oil-extraction rate rose to 24.3% for the first half of the year. This rate has been on an upward trend, regularly exceeding 25% during the second quarter.

At Bangka, the capacity of the mill was increased from 45 to 60 tonnes per hour of ffb. This increase will be needed to process crop from the Group's and smallholder co-operatives' crop but, until these areas reach full maturity, temporarily offers additional surplus capacity profitably to buy ffb from independent smallholders.

Whilst the Group does not have its own mills at Bumi Mas, Musi Rawas and Simpang Kiri, it sells its ffb to local mills based on the commodity price for CPO and an assumed rate of extraction. To reflect the substance of this arrangement, oil produced from the crop grown on these estates has been included in CPO production.

Of the Group's production, 69% is certified sustainable palm oil. Certification is awarded to mills rather than for the crop, so this percentage will rise as the Group constructs its own mills. It is also working with third-party smallholders wanting to supply it with ffb to achieve Roundtable for Sustainable Palm Oil ("RSPO") certification. By 2024, the Group anticipates that all of its production, other than from Simpang Kiri, will be certified sustainable. In the meantime, all of the Group's crop and that of its associated smallholder co-operatives is produced in accordance with RSPO standards.

Production and selling-price details for the estates controlled by the Group are as follows:-

	6 months ended			6 months ended	Year ended
		30 June	Increase/	30 June	31 December
		2019	(decrease)	2018	2018
		Tonnes	%	Tonnes	Tonnes
Production
Crude palm oil
Group mills
Kota Bangun		31,800	(11)	35,700	71,400
Bangka		27,000	(13)	31,000	63,200
Pangkatan group		18,500	6	17,500	39,900
		77,300	(8)	84,200	174,500
Third-party mills
Bumi Mas		12,000	200	4,000	9,100
Musi Rawas		1,600	433	300	1,200
Simpang Kiri		4,100	21	3,400	7,700
		17,700	130	7,700	18,000
		95,000	3	91,900	192,500
Palm kernels
Group mills
Kota Bangun		6,800	(8)	7,400	14,800
Bangka		6,500	(16)	7,700	15,100
Pangkatan group		4,500	5	4,300	9,600
		17,800	(8)	19,400	39,500
Third-party mills
Bumi Mas		2,700	200	900	2,000
Musi Rawas		400	300	100	300
Simpang Kiri		900	13	800	1,700
		4,000	122	1,800	4,000
		21,800	3	21,200	43,500
Extraction rate		%		%	%
Crude palm oil
Group mills
Kota Bangun		24.3	1	24.0	23.9
Bangka		23.1	-	23.0	23.2
Pangkatan group		23.1	-	23.1	23.1
		23.6	1	23.4	23.5
Third-party mills
Bumi Mas		20.8	2	20.4	20.4
Musi Rawas		21.5	19	18.0	19.2
Simpang Kiri		22.3	-	22.3	22.3
Palm kernels
Group mills
Kota Bangun		5.2	4	5.0	5.0
Bangka		5.6	(3)	5.8	5.5
Pangkatan group		5.5	(2)	5.6	5.5
		5.4	-	5.4	5.3
Third-party mills
Bumi Mas		4.7	4	4.5	4.6
Musi Rawas		4.8	-	4.8	4.8
Simpang Kiri		5.0	-	5.0	5.0
Average selling prices		US$		US$	US$
Crude palm oil (cif Rotterdam)		528	(20)	663	598
Palm-kernel oil		605	(41)	1,030	1,246

Costs

The cost per tonne of palm product (CPO and palm kernels) produced from the Group's estates was US$385, a little higher than the US$350 in the first half of 2018. As noted in previous reports, the unit cost is sensitive to crop volume as well as the timing of significant expenditure, such as fertilizing. During the first half of 2019, the Group has taken advantage of drier weather to accelerate field-maintenance tasks, leading to higher costs compared with the previous year. Additionally, there was a small cost increase associated with enhanced mill-maintenance expenditure. The unit cost is expected to fall during the second half of the year.

The cost of palm product from ffb supplied by smallholders attached to the Group's projects is lower than US$385, reflecting the low commodity price of CPO to which purchases of their ffb are pegged. This also affected the cost of palm product milled from independent smallholders' ffb which was, however, slightly higher than the Group's cost on account of these ffb inherently yielding less oil than ffb produced under the Group's management.

The Group continues to expect unit costs to fall as the young palms on its new projects mature and so crop volume and average bunch weight rise, irrespective of the CPO price. The Group's ability to convert ffb to palm oil and kernels at a diminishing cost per tonne demonstrates its position as an efficient low-cost operator.

Mill-gate price

The dominant feature of the period was the low CPO and palm-kernel prices described in the section 'The palm-oil market' above. The average cif Rotterdam price for the period was US$528 per tonne, 20% lower than the US$663 recorded during the first half of 2018. Consequently, during the first half of 2019, the Group actually received on average US$453 per tonne of CPO, US$111 less than in the first half of 2018. At the same time, the average sustainability premium additionally received by the Group rose slightly from US$7 to US$9 per tonne.

For palm kernels, the Group received US$254 per tonne, much lower than the US$435 in the previous year, following a sharp decline in the price of palm-kernel oil. The Group did receive US$9 per tonne in the premium available for kernels sold with sustainability certificates, although this was US$5 per tonne less than in the first half of 2018.

Planting

New planting determines the Group's capacity to produce crop growth in the future. All of the Group's new planting is at Musi Rawas, where steady progress was maintained. At the end of June 2019, planting since development began reached 8,000 hectares, of which 5,700 were for the Group and 2,300 for the smallholder co-operatives. In addition, 480 hectares were ready for planting and further hectares had been surveyed, which is a necessary precursor to the land being available for planting. However, during 2019 the RSPO adopted a change to its standards which affects new planting. Currently development at Musi Rawas has been paused to allow the Group time to assess the new standards and ensure that it complies with them. In the Group's own areas and in those of its associated smallholder co-operatives, planting is carried out in rigorous compliance with RSPO standards to ensure that the fruit will be certified as being produced sustainably.

The Group newly planted 710 hectares for itself and its smallholders, of which 510 hectares were for itself. In North Sumatra, 220 hectares were replanted.

New land

The Group is exploring the acquisition of additional hectarage close to its existing 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 seeking eventually to extend the Kalimantan project from the current 15,000 hectares to the equivalent of two 10,000-hectare units.

In the meantime, following the end of the period, the Group purchased additional shareholdings in its own operating subsidiaries from one of its minority partners, thereby effectively acquiring an additional 2,200 planted hectares. Operationally, this represented a very low risk as it comprised good-quality land already managed by the Group. The land was valued at US$9,500 per hectare, somewhat below the level of independent valuations, reflecting both the minority nature of the shareholding and the current environment of unusually low CPO prices.

Associated company: Malaysia

The Group's share of the profit arising in Bertam Properties Sdn. Berhad ("Bertam Properties") was US$0.5 million compared with a loss for the equivalent period in 2018 of US$0.1 million. The result for 2019 demonstrates a certain resilience in the market for the types of properties developed by Bertam Properties, and of the Penang region, as compared with the general slowdown in the Malaysian property market as a whole.

Result

As a result of the operational outcomes described above, gross profit for the first half of 2019 was US$2.2 million, US$12.4 million lower than the US$14.6 million recorded for the same period in 2018. Operating profit for the period was US$1.0 million, US$9.7 million lower than that recorded for the first half of 2018. Finance costs increased as the Group's position changed from net cash to one of modest net debt, and it incurred a higher implicit tax rate arising from exchange differences on lending between Group companies. After interest, tax and its share in the profits of associated companies, the Group made a loss of US$0.5 million compared with a profit of US$5.8 million in 2018.

CURRENT TRADING AND PROSPECTS

During the first half of July, CPO prices traded between US$480 and US$500 per tonne. Since the middle of July, the CPO price has steadily strengthened, reaching a level of US$570 in the first week of September. Overall, the increase in production of palm oil is expected to slow down compared with 2018 and stocks of CPO have fallen during 2019. Furthermore, North American planting of soybeans, palm oil's main competitor, has been affected by low prices and poor weather, which is likely to have a continuing impact on price expectations during the remainder of 2019. The forward markets for CPO anticipate further price increases before the end of the year and into 2020.

The increasing maturity of all the Group's newer projects and good progress on planting in South Sumatra provide the basis for considerable future crop growth, and hence rising revenue, even without the acquisition of any further hectarage. The Group anticipates increasing production of certified sustainable palm oil as it completes the development of its new projects.

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. In the longer term, insufficient levels of replanting in Malaysia and a reduction in new Indonesian planting are likely to curb growth in production. Palm oil delivers by far the highest yield per hectare of all the vegetable oils and has the lowest cost of production. Hence, the board remains of the view that palm oil is well placed to benefit from rising global demand for vegetable oil and, therefore, that the outlook for the Group remains positive.

UNAUDITED CONSOLIDATED INCOME STATEMENT

FOR THE SIX MONTHS ENDED 30 JUNE 2019

		6 months	6 months
		ended	ended	Year ended
		30 June	30 June	31 December
		2019	2018	2018
	Note	US$'000	US$'000	US$'000
Continuing operations
Revenue	3	46,249	53,784	108,553
Cost of sales		(44,086)	(39,188)	(82,028)
Gross profit	3	2,163	14,596	26,525
Gain/(loss) on biological assets		408	85	(703)
Foreign-exchange losses		(72)	(2,612)	(4,056)
Other administrative expenses		(1,689)	(1,697)	(2,940)
Other income		230	329	652
Operating profit		1,040	10,701	19,478
Finance income		108	288	300
Finance costs		(1,705)	(904)	(1,430)
Group-controlled (loss)/profit before taxation		(557)	10,085	18,348
Tax on (loss)/profit on ordinary activities		(868)	(4,500)	(12,657)
Group-controlled (loss)/profit after tax		(1,425)	5,585	5,691
Share of associated companies' profit after tax	3	907	225	1,470
(Loss)/profit for the period		(518)	5,810	7,161
Attributable to:
Owners of M.P.Evans Group PLC		(884)	4,976	5,405
Non-controlling interests		366	834	1,756
		(518)	5,810	7,161
		US cents	US cents	US cents
Continuing operations
Basic (loss)/earnings per 10p share		(1.6)	9.1	9.9
Diluted (loss)/earnings per 10p share		(1.6)	9.0	9.8
		Pence	Pence	Pence
Basic (loss)/earnings per 10p share
Continuing operations		(1.2)	6.6	7.4

UNAUDITED CONSOLIDATED BALANCE SHEET

AS AT 30 JUNE 2019

		30 June	30 June	31 December
		2019	2018	2018
	Note	US$'000	US$'000	US$'000
Non-current assets
Goodwill		11,767	11,767	11,767
Property, plant and equipment		351,061	327,967	338,225
Investments in associates		23,930	23,786	23,020
Investments		62	53	62
Deferred-tax asset		6,195	10,004	5,192
Trade and other receivables		-	6,740	8,740
		393,015	380,317	387,006
Current assets
Biological assets		1,547	1,928	1,140
Inventories		14,442	13,249	12,883
Trade and other receivables		48,613	37,378	39,681
Current-tax asset		4,414	3,982	3,470
Current-asset investments		2,547	6,255	2,502
Cash and cash equivalents		34,201	35,111	21,626
		105,764	97,903	81,302
Total assets		498,779	478,220	468,308
Current liabilities
Borrowings		18,578	8,727	20,883
Trade and other payables		19,021	13,700	15,029
Current-tax liabilities		623	1,341	2,423
		38,222	23,768	38,335
Net current assets		67,542	74,135	42,967
Non-current liabilities
Borrowings		48,231	26,144	9,173
Deferred-tax liability		11,799	11,325	11,505
Retirement-benefit obligations		9,525	8,715	8,251
		69,555	46,184	28,929
Total liabilities		107,777	69,952	67,264
Net assets		391,002	408,268	401,044
Equity
Share capital	5	9,220	9,241	9,228
Other reserves		56,071	55,244	54,948
Retained earnings		301,986	316,909	315,565
Equity attributable to the
owners of M.P.Evans Group PLC		367,277	381,394	379,741
Non-controlling interests		23,725	26,874	21,303
Total equity		391,002	408,268	401,044

UNAUDITED STATEMENT OF CHANGES IN CONSOLIDATED TOTAL EQUITY

FOR THE SIX MONTHS ENDED 30 JUNE 2019

			6 months	6 months	Year
			ended	ended	ended
			30 June	30 June	31 December
			2019	2018	2018
	Note		US$'000	US$'000	US$'000
(Loss)/profit for the period			(518)	5,810	7,161
Other comprehensive (loss)/gain for the period			(124)	10	154
Total comprehensive (loss)/income for the period			(642)	5,820	7,315
Issue of share capital			218	159	159
Purchase of own shares			(957)	(1,790)	(2,733)
Dividends - Company shareholders	4		(8,845)	(9,221)	(12,725)
Dividends - non-controlling interests			-	(3,578)	(8,105)
Credit to equity for equity-settled share-based payments			184	226	490
Group reconstruction			-	-	(9)
Acquisition			-	(343)	(343)
Transactions with owners			(9,400)	(14,547)	(23,266)
At 1 January			401,044	416,995	416,995
Balance at period end			391,002	408,268	401,044

UNAUDITED CONSOLIDATED CASH-FLOW STATEMENT

FOR THE SIX MONTHS ENDED 30 JUNE 2019

				6 months	6 months	Year
				ended	ended	ended
				30 June	30 June	31 December
				2019	2018	2018
	Note			US$'000	US$'000	US$'000
Net cash generated by operating activities	6			5,628	2,147	16,629
Investing activities
Purchase of property, plant and equipment				(20,537)	(13,908)	(31,879)
Interest received				108	288	300
Proceeds on disposal of property, plant and equipment				97	446	727
Purchase of subsidiary undertaking				-	(49,167)	(49,167)
Net cash used by investing activities				(20,332)	(62,341)	(80,019)
Financing activities
New borrowings				75,000	-	-
Repayment of borrowings				(38,247)	(4,414)	(9,159)
(Increase)/decrease in current-asset investment bank deposits				(45)	658	4,411
Dividends paid to Company shareholders				(8,845)	(9,221)	(12,725)
Dividends paid to non-controlling interests				-	(3,578)	(8,105)
Exercise of Company share options				218	159	159
Buyback of Company shares				(957)	(1,790)	(2,733)
Net cash generated/(used) by financing activities				27,124	(18,186)	(28,152)
Net increase/(decrease) in cash and cash equivalents				12,420	(78,380)	(91,542)
Cash and cash equivalents at 1 January				21,626	113,910	113,910
Effect of foreign-exchange rates on cash and cash equivalents				155	(419)	(742)
Net cash and cash equivalents at period end				34,201	35,111	21,626

NOTES TO THE INTERIM STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2019

Note 1             General information

The financial information for the six-month periods ended 30 June 2019 and 2018 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 2018 is abridged from the statutory accounts.  The 31 December 2018 statutory accounts have been reported on by the Group's auditors for that year, 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.

Note 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 2018, with the exception of the Group's accounting policy for leases which has been revised from 1 January 2019 upon adoption of IFRS16 'Leases'.  Due to the small number and value of leases that had not previously been capitalised, there has been no material change to the Group's results.

Note 3             Segment information

The Group's reportable segments are distinguished by location and product: palm oil plantation crops in Indonesia and property development in Malaysia.

	Plantation		Property
	Indonesia		Malaysia	Other	Total
	US$'000		US$'000	US$'000	US$'000
6 months ended 30 June 2019
Revenue	46,212		-	37	46,249
Gross profit/(loss)	2,201		-	(38)	2,163
Share of associated companies' profit after tax
Kerasaan	372		-	-	372
Bertam Properties	-		535	-	535
	372		535	-	907
6 months ended 30 June 2018
Revenue	53,740		-	44	53,784
Gross profit/(loss)	14,633		-	(37)	14,596
Share of associated companies' profit/(loss) after tax
Kerasaan	344		-	-	344
Bertam Properties	-		(119)	-	(119)
	344		(119)	-	225
Year ended 31 December 2018
Revenue	108,445		-	108	108,553
Gross profit/(loss)	26,583		-	(58)	26,525
Share of associated companies' profit after tax
Kerasaan	864		-	-	864
Bertam Properties	-		606	-	606
	864		606	-	1,470

Note 4             Dividends

	6 months ended	6 months ended	Year ended
	30 June	30 June	31 December
	2019	2018	2018
	US$'000	US$'000	US$'000
2017 final dividend - 12.75p per 10p share	-	9,221	9,221
2018 interim dividend - 5.00p per 10p share	-	-	3,504
2018 final dividend - 12.75p per 10p share	8,845	-	-
	8,845	9,221	12,725

Subsequent to 30 June 2019, the board has declared an interim dividend of 5.00p per 10p share. The dividend will be paid on or after 1 November 2019 to those shareholders on the register at the close of business on 18 October 2019.

Note 5             Share capital

	30 June	30 June	31 December	30 June	30 June	31 December
	2019	2018	2018	2019	2018	2018
	Number	Number	Number	US$'000	US$'000	US$'000
Shares of 10p each
At 1 January	54,677,872	54,883,451	54,883,451	9,228	9,255	9,255
Issued	50,000	75,000	75,000	6	10	10
Redeemed	(109,680)	(174,464)	(280,579)	(14)	(24)	(37)
At period end	54,618,192	54,783,987	54,677,872	9,220	9,241	9,228

During the period, as a result of the exercise of share options, the Company issued 50,000 10p shares for US$218,000 cash consideration. In addition, the Company bought back and cancelled 109,680 10p shares for a total cost of US$957,000.

Note 6             Analysis of movements in cash flow

	6 months ended		6 months ended	Year ended
	30 June		30 June	31 December
	2019		2018	2018
	US$'000		US$'000	US$'000
Operating profit	1,040		10,701	19,478
Biological (gain)/loss	(408)		(85)	703
Disposal of property, plant and equipment	10		(7)	13
Release of deferred profit	(128)		(148)	(164)
Depreciation of property, plant and equipment	7,594		7,070	14,474
Remeasurement of investment	-		-	(10)
Retirement-benefit obligation	1,121		937	2,122
Share-based payments	184		226	490
Dividends from associated companies	-		-	1,568
Operating cash flows before movements
in working capital	9,413		18,694	38,674
Increase in inventories	(1,559)		(2,787)	(2,421)
Increase in receivables	(192)		(4,285)	(8,588)
Increase/(decrease) in payables	3,992		(2,628)	(2,092)
Cash generated by operating activities	11,654		8,994	25,573
Income tax paid	(4,321)		(5,943)	(7,514)
Interest paid	(1,705)		(904)	(1,430)
Net cash generated by operating activities		5,628	2,147	16,629

Note 7             Exchange rates

		30 June	30 June	31 December
		2019	2018	2018
US$1=Indonesian Rupiah	-     average	14,194	13,766	14,234
	-     period end	14,128	14,330	14,380
US$1=Malaysian Ringgit	-     average	4.12	3.94	4.04
	-     period end	4.13	4.04	4.13
£1=US Dollar	-     average	1.29	1.38	1.34
	-     period end	1.27	1.32	1.27

Note 8             Post-balance sheet event

On 4 September 2019 the Group effectively acquired a further 2,200 planted hectares by purchasing additional shareholdings in its own operating subsidiaries from one of its minority partners. The acquisition cost was US$25.4 million funded by taking on additional debt.

The purchase consideration was based on an average price of US$9,500 per planted hectare and included an adjustment for working capital.  The average price was somewhat less than independent valuations of the land on a per-planted-hectare basis, reflecting both the minority nature of the shareholding and the current environment of unusually low CPO prices.  Operationally, the land is of high quality and already controlled and managed by the Group.  All the land is registered with the RSPO.

 

END

 

 

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