Final Results

R.E.A.Holdings PLC 22 March 2000 Commentary on preliminary results - 1999 Results Comparison of the 1999 results shown in the accompanying consolidated profit and loss account with those of the preceding year is complicated by the fact that the 1998 figures reflected the effects of several significant corporate transactions implemented by the group during that year. Identification of the key components of the results and comparison with 1998 may be facilitated by the following table which summarises the 1999 and 1998 consolidated results before taxation. 1999 1998 £000 £000 Normal profits Continuing activities 347 887 Discontinued activities - 630 Sale of assets 265 (168) ----- ----- 612 1,349 It had always been expected that the 1998 decision to divest most of the group's former UK businesses and to concentrate increasingly on the Indonesian oil palm project would mean that group profits would be marginal for a limited period until the Indonesian operations had reached a sufficient level of maturity to contribute meaningfully to those profits. Nevertheless, group profits from continuing activities in 1999 were lower than might have been expected and materially lower than in the previous year. This was entirely due to poor results from the agricultural division. Weak tea prices for most of the year coupled with reduced cropping made it difficult for the Bangladesh operations to cover costs while, in East Africa, although crops recovered from the previous year to a record level, weak sisal prices, reflecting poor demand from the key markets in the Far East, meant that a loss was sustained. That the results were not worse than reported was only because of a first contribution from the Indonesian operations. Production started during the year and although crops were only harvested from the relatively small area comprising the first mature plantings, an encouraging initial profit was made. Merchanting, following last year's divestments, comprises solely sisal, abaca and flax trading. Despite the depressed sisal market and difficult trading conditions generally, the division achieved a satisfactory result. Group development The established policy of divesting non core operations was continued during 1999. Further residual assets in East Africa were sold, while the group's net investment in Anglo American Agriculture PLC was reduced by the repayment of balances due to the group from Anglo American. In the UK, the group sold the freehold of its former office property in Southwark Bridge Road, subject to lease back of a minor part of the property for continued occupation by the merchanting division. The year saw additional investment in Indonesia as the group and its partner in the Indonesian project provided the bridge finance necessary to sustain the project for a limited further period until it becomes self supporting at its existing stage of development. More funding will be needed if the project is to be developed further but it is hoped that such supplemental funding can be secured from external sources. Net assets The 1999 balance sheet includes revaluations of all group properties and estates. As in the past, the net overall revaluation has had set against it various exchange translation adjustments. These arise mainly from the impact of currency fluctuations on the translation into sterling of the local currency values of overseas estates. In revaluing the property in Indonesia, the directors have made special provision for the remaining political uncertainties of that country. Dividends An immediate effect of the December 1998 restructuring was the loss to the group of the former contribution to group profits of the businesses divested. The replacement of that contribution is principally dependent upon future revenues from the Indonesian project. It was noted in the 1998 chairman's statement that the directors intended that future dividend payments by the company (if any) should reflect the extent to which such revenues materialised. In line with that intention and having regard to the fact that, in 1999, with the Indonesian project still largely in a development phase, revenues from that project were modest, the directors have not declared and do not recommend the payment of any ordinary dividend in respect of 1999. It remains the intention of the directors to restore ordinary dividend payments as revenues from the Indonesian project increase. Consolidated balance sheet 31 December 1999 1999 1998 £000 £000 Fixed assets Tangible assets 1,896 3,021 Investments 11,242 11,578 ------ ------ 13,138 14,599 Current assets Stocks 898 1,135 Debtors* 13,906 21,682 Cash 2,565 224 ------ ------ 17,369 23,041 Creditors up to one year (11,448) (17,202) ------- ------- Net current assets 5,921 5,839 ------- ------- Total assets less current 19,059 20,438 liabilities Creditors over one year (664) (1,790) ------- ------- Net assets 18,395 18,648 Capital and reserves Called up share capital 14,890 14,889 Share premium account 720 720 Capital redemption reserve 3,240 3,240 Warrants 1,219 1,219 Revaluation reserve 1,860 712 Profit and loss account (3,534) (2,156) ------ ------ Shareholders' funds* 18,395 18,624 Minority interests - 24 ------ ------ Total capital employed 18,395 18,648 ====== ====== * Debtors include amounts due after one year of £nil (1998 £1,134,000), and shareholders' funds comprise equity interest of £12,690,000 (1998 £12,919,000) and non-equity interest of £5,705,000 (1998 £5,705,000). Consolidated profit and loss account for the year ended 31 December 1999 1999 1998 £000 £000 Turnover Continuing 23,899 29,582 Discontinued - 40,885 ------ ------ 23,899 70,467 Cost of sales (20,781) (61,753) ------ ------ Gross profit 3,118 8,714 Other income and expenses (2,077) (6,663) ------ ------ Group operating profit* 1,041 2,051 Share of operating profit of 1,886 2,196 associates Disposal of assets and investments 265 (168) Interest payable - associates (1,724) (1,180) Interest payable - other (856) (1,550) ------ ------ Profit on ordinary 612 1,349 activities before taxation Tax on profit on ordinary activities (214) (259) ------ ------ Profit on ordinary activities 398 1,090 after taxation Minority interests (161) (647) ------ ------ Profit for the financial year 237 443 Dividends, including non-equity (513) (806) dividends ------ ------ Retained loss for the year (276) (363) ====== ====== (Loss)/earnings per ordinary share - basic (3.0)p 0.1p - fully diluted (3.2)p 0.1p - fully * Group operating profit comprises £1,041,000 for continuing operations and £nil for discontinued (1998 £784,000 and £1,267,000). Total consolidated recognised gains and losses for the year ended 31 December 1999 1999 1998 £000 £000 Profit for the financial year 237 443 Currency translation and revaluation 46 595 adjustments ------ ------ 283 1,038 ====== ====== Consolidated cash flows for the year ended 31 December 1999 1999 1998 £000 £000 Net cash inflow from operating 6,169 1,217 activities ------ ------ Dividends from associates 235 96 ------ ------ Returns on investments and servicing of finance Interest received 568 477 Interest paid (856) (1,550) Investment income 2 4 Dividends paid to minority shareholders - (46) Dividends paid to preference shareholders (559) (438) ----- ------ (845) (1,553) ----- ------ Taxation (183) (265) ----- ------ Capital expenditure and financial investment Purchase of tangible fixed assets (21) (145) Sale of tangible fixed assets 1,337 237 Sale of investments 108 133 Purchase of investments (70) - ------ ------ 1,354 225 ------ ------ Acquisitions and disposals Sale of own shares - 646 Purchase of shares in associated - (934) companies Sale of one half of Deundi Tea Company - 1,161 Limited Sale of interests in Willington plc - 1,872 ------ ------ - 2,745 ------ ------ Equity dividends paid - (321) ------ ------ Management of liquid resources (2,050) - ------ ------ Financing Net repayment of debt up to one year (118) (167) Net issue/(repayment) of debt over one 315 (209) year Finance lease repayments (118) (639) Share issue and expenses 1 (14) ------ ------ 80 (1,029) ------ ------ Increase in cash 4,760 1,115 ====== ====== Notes to the preliminary accounts Segment information In the tables below the group's net assets, turnover and profit before taxation (excluding result of sales of assets) are analysed by geographical area and by business class. The element of continuing turnover and profit before taxation (excluding result of sales of assets) included in total, is separately identified. Net assets, in the case of the geographical analysis, are allocated to the area where the main operation of a particular activity is carried out and where the majority of that activity's assets are situated. Unallocated items include general group financing and head office costs; financing which is directly attributable to a particular activity has been allocated to that activity. (a) Net assets 1999 1999 1998 1998 Associates Total Associates Total Net assets - by £m £m £m £m geographical area United Kingdom - 6.6 - 5.4 Continental Europe - 0.4 - 0.5 Bangladesh 1.1 1.1 1.5 1.5 Rest of Asia - Indonesia 7.1 7.1 6.6 6.6 America 0.4 0.4 0.4 1.5 Africa 2.0 2.8 2.4 3.1 ----- ----- ----- ----- 10.6 18.4 10.9 18.6 ===== ===== ===== ===== Net assets - by business class Merchanting - 1.8 - 1.8 Agriculture 10.6 10.6 10.9 11.9 Other activities - 0.4 - 0.4 Unallocated - 5.6 - 4.5 ----- ----- ----- ----- 10.6 18.4 10.9 18.6 ===== ===== ===== ===== (b) Turnover 1998 1999 1998 of which Total Total continuing Turnover - by geographical area £m £m £m United Kingdom 3.3 33.2 2.7 Continental Europe 12.0 18.2 13.0 Bangladesh - 0.8 0.8 Rest of Asia 4.2 6.4 3.9 America 2.6 6.3 4.7 Africa 1.3 5.0 3.9 Australasia 0.5 0.6 0.6 ----- ----- ----- 23.9 70.5 29.6 ===== ===== ===== Turnover - by geographical area, by origin of transaction United Kingdom 22.0 66.8 25.9 Continental Europe 1.6 1.9 1.9 Bangladesh - 0.8 0.8 Africa 0.3 1.0 1.0 ----- ----- ----- 23.9 70.5 29.6 ===== ===== ===== Turnover - by business class Merchanting 22.2 60.6 27.1 Agriculture - 0.8 0.8 Storage - 7.4 - Other activities 1.7 1.7 1.7 ----- ----- ----- 23.9 70.5 29.6 ===== ===== ===== Notes to preliminary accounts - continued (c) Profit before taxation excluding sales of assets 1998 1999 1999 1998 1998 of which Associates Total Associates Total continuing £000 £000 £000 £000 £000 Profit - by geographical area, by origin of transaction United Kingdom - 183 - 100 (530) Continental Europe - 48 - 107 107 Bangladesh (58) (58) 157 477 477 Indonesia 157 157 - - - America 87 87 683 683 683 Africa (24) (70) 176 150 150 ----- ----- ----- ----- ----- 162 347 1,016 1,517 887 ===== ===== ===== ===== ===== Profit - by business class Merchanting - 369 - 152 251 Agriculture 162 162 1,016 1,186 1,186 Storage - - - 729 - Other activities - (11) - (106) (106) Unallocated - (173) - (444) (444) ----- ----- ----- ----- ----- 162 347 1,016 1,517 887 ===== ===== ===== ===== =====

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