Final Results

R.E.A.Hldgs PLC
22 April 2004


R.E.A. Holdings plc

Commentary on preliminary results - 2003

Results

The profit on ordinary activities before taxation for 2003, as shown in the
accompanying consolidated profit and loss account, amounted to £2,070,000. This
represented an increase of 42 per cent over the profit before tax for the
preceding year of £1,456,000.

A combination of a relatively low tax charge, principally reflecting deferred
tax adjustments, and a reduction in the component of profit attributable to
minorities resulted in a profit after tax attributable to the group of
£1,342,000, almost double the figure of £682,000 achieved in the preceding year.

The results were achieved despite the strengthening of sterling against the US
dollar during the year. This has had a negative impact because the group's
revenues are effectively US dollar denominated.

Operations

Operationally, the year was a little disappointing in as much as the fresh fruit
bunch ('FFB') crop of 222,713 tonnes, although some 12 per cent higher than the
199,184 tonnes harvested in 2002, was 17 per cent below estimate. The directors
attribute the shortfall to the dry conditions experienced in East Kalimantan in
2002 and do not believe that it has any implications as respects long term crop
projections, particularly as the last four months of the year saw crops
returning towards estimated levels and crops for the early months of 2004 have
been in line with expectations.

The planned installation of a second production line in the group's oil mill was
completed during 2003. With additional capacity coming on stream from July, the
mill was comfortably able to cope with the processing requirements of the peak
cropping period of September to December.

Land clearing for the new extension planting programme of 3,000 hectares per
annum started in mid 2003 and good progress has been made on the construction of
roads and bridges and the planting of cover crops in the newly cleared areas.

Group development

In March 2003, the company raised £3.07 million (before expenses) by way of a
placing and open offer. Then, in September 2003, an additional £1.9 million
(before expenses) was raised by way of a further placing. With these monies, the
company supported a rights issue by its subsidiary, Makassar Investments Limited
('Makassar') (the Jersey holding company of PT REA Kaltim Plantations ('REA
Kaltim'), the direct owner of the established East Kalimantan operations).
Outside shareholders in Makassar did not take up their rights and, in
consequence, the company further increased its equity interest in Makassar to
the current level of 87.7 per cent.

Makassar was able, with the proceeds of its 2003 rights issue, to provide
additional financial support to REA Kaltim. This has enabled REA Kaltim to
arrange new loan funding from an Indonesian bank with which to complete the
restructuring of REA Kaltim's bank debt. It is expected that such loan funding
will be drawn down shortly.

Whilst the demand for repayment of REA Kaltim's outstanding indebtedness of
US$8.175 million to interests connected with Mr M E Zukerman remains outstanding
(see contingent liability note to the preliminary results), the group has at
last (and for the first time since early 2001) achieved a position in which no
event of default can be declared on any of its bank indebtedness in respect of
any event that has arisen to-date.

Agreement in principle has been reached during 2003, and has recently been
formalised, for the establishment of a joint venture oil palm development (to be
owned 95 per cent by the group and 5 per cent by a local Indonesian investor) on
an area of land adjacent to the REA Kaltim property that lies to the south of
the Belayan river. Subject to financing, it is hoped to develop that part of the
new joint venture area that is suitable for planting with oil palms, currently
estimated to comprise some 5,000 hectares, over a period of three to four years
from July 2004. Such development will be in addition to the established 3,000
hectares per annum extension planting on the REA Kaltim property.

Dividends

A dividend equal in amount to the fixed semi-annual dividend on the 9 per cent
cumulative preference shares that fell due on 31 December 2003 was duly paid to
holders of the preference shares but the company remains in arrears to the
extent of four semi-annual dividends on the preference shares. The rights of the
preference shares provide for accumulation of arrears of preference dividends so
that no entitlement to dividends will be lost by preference shareholders.
However, the directors recognise that many preference shares are acquired for
income and that the postponement of that income is unsatisfactory.

Subject to the price of crude palm oil ('CPO') remaining at satisfactory levels,
and absent any material adverse change in the group's financial condition, the
directors intend that the company should make payments equal to all future
semi-annual dividends on the preference shares as these arise and should seek to
eliminate the accumulated arrears of dividend on the preference shares as
rapidly as circumstances permit.

No dividend can be paid on the ordinary shares until all arrears of dividend on
the preference shares have been discharged. Accordingly, no ordinary dividends
have been paid or are proposed in respect of 2003.

Prospects

With the East Kalimantan operations having received good rainfall in 2003, the
directors are optimistic that 2004 will see yields returning to levels normal
for the maturity profile of the productive areas. On that basis, the FFB crop
for 2004 has been estimated at 298,000 tonnes, some 34 per cent ahead of the
crop achieved in 2003. Present CPO price levels are highly remunerative for the
group and, whilst commodity prices trends are difficult to predict, forward
prices indicate that the CPO price levels should remain firm well into the
second half of the year. On that basis the directors foresee 2004 proving to be
a very good year for the group.

Looking further forward, it must be remembered that the group is engaged in
operations that are inherently risky. The CPO market is cyclical, agriculture
can always be affected by climatic factors and the group's assets are located
entirely in Indonesia. To these inherent risks must be added the risks
associated with the continuing litigation against the company. Against these
factors, the group now has a substantial and efficient operating base, is a low
cost producer of CPO and has an expansion programme that should ensure
increasing crops for many years to come. Moreover the much improved financial
position of the group as compared with November 2001, when the New York
litigation was initiated, has reduced the materiality of that litigation.

The directors acknowledge that it would be foolish to ignore the risks that the
group faces. Moreover, they appreciate that, realistically, the group's forward
progress will not be one of linear growth. Nevertheless, they believe that the
group has an exceptional opportunity in East Kalimantan to establish a world
class oil palm operation and they fully intend that the group should realise the
potential that this opportunity affords.


Consolidated profit and loss account
for the year ended 31 December 2003
                                                           Unaudited
                                                                2003      2002
                                                                £000      £000

Turnover                                                      13,781    12,831
Cost of sales                                                 (7,469)   (7,897)
                                                              ------    ------
Gross profit                                                   6,312     4,934
Administrative expenses                                       (2,236)   (2,571)
                                                              ------    ------
Group operating profit                                         4,076     2,363

Disposal of fixed assets and investments - continuing             24        (6)
Disposal of fixed assets and investments - discontinued         (281)     (320)
Interest receivable and similar income                           165        88
Interest payable                                              (1,914)     (669)
                                                              ------    ------
Profit on ordinary activities before taxation                  2,070     1,456

Tax on profit on ordinary activities                            (345)      (49)
                                                              ------    ------
Profit on ordinary activities after taxation                   1,725     1,407

Minority interests (including non-equity interests)             (383)     (725)
                                                              ------    ------
Profit for the financial year                                  1,342       682
Non-equity dividends                                            (513)     (512)
                                                              ------    ------
Retained profit for the year                                     829       170
                                                              ------    ------
                                                                      
Earnings per ordinary share - basic                              5.1p      1.4p
Earnings per ordinary share - fully diluted                      3.7p      1.3p

All operations in both years are continuing except where stated.


Consolidated balance sheet 
31 December 2003
                                                  Unaudited
                                                       2003               2002
                                                       £000               £000
Fixed assets
Tangible fixed assets                                50,238             49,603
                                                     ------             ------
Current assets
Stocks                                                1,346                857
Debtors                                               3,710              4,544
Cash                                                  6,790              5,156
                                                     ------             ------
                                                     11,846             10,557
Creditors: falling due within one year              (15,244)           (13,765)

                                                     ------             ------
Net current liabilities                              (3,398)            (3,208)
                                                     ------             ------

Total assets less current liabilities                46,840             46,395

Creditors: falling due after more than one year
Convertible debt                                     (3,463)            (3,419)
Other creditors                                     (15,312)           (21,134)
                                                     ------             ------
                                                    (18,775)           (24,553)
                                                     ------             ------
Provision for liabilities and charges                  (288)                 -
                                                     ------             ------
Net assets                                           27,777             21,842
                                                     ------             ------

Capital and reserves

Called up share capital                              10,376              8,887
Share premium account                                 4,665              1,233
Capital redemption reserve                            3,240              3,240
Warrants                                              1,212              1,218
Revaluation reserve                                    (384)              (532)
Other reserve                                         1,027                768
Profit and loss account                               3,333              2,454
                                                     ------             ------
Shareholders' funds                                  23,469             17,268
Equity minority interests                             2,002              2,010
Non-equity minority interests                         2,306              2,564
                                                     ------             ------
Total capital employed                               27,777             21,842
                                                     ------             ------

Shareholders' funds may be analysed as follows
Equity interests                                     16,737             11,563
Non-equity interests                                  6,732              5,705
                                                     ------             ------
                                                     23,469             17,268
                                                     ------             ------



Consolidated statement of total recognised gains and losses
for the year ended 31 December 2003
                                                          Unaudited
                                                               2003       2002
                                                               £000       £000

Profit for the financial year                                 1,342        682
Currency translation and revaluation adjustments                150      1,784
                                                             ------     ------
                                                              1,492      2,466
                                                             ------     ------


Consolidated cash flow statement
for the year ended 31 December 2003
                                                          Unaudited
                                                               2003       2002
                                                               £000       £000

Net cash flow from operating activities                       7,259      1,035
                                                             ------     ------

Returns on investments and servicing of finance
Interest received                                               165         88
Interest paid                                                (1,914)      (669)
Preference dividends paid                                      (257)         -
                                                             ------     ------
                                                             (2,006)      (581)
                                                             ------     ------

Taxation                                                        (11)      (101)
                                                             ------     ------

Capital expenditure and financial investment
Purchase of tangible fixed assets                            (4,675)    (2,154)
Sale of tangible fixed assets                                    40         60
Sale of investments                                             597          -
                                                             ------     ------
                                                             (4,038)    (2,094)
                                                             ------     ------

Acquisitions and disposals
Purchase of further shares in subsidiary companies                -       (560)
                                                             ------     ------

Equity dividends paid                                             -          -
                                                             ------     ------

Cash inflow (outflow) before management of liquid resources and
financing
Financing                                                     1,204     (2,301)
                                                             ------     ------
Management of liquid resources                               (4,226)    (3,315)
                                                             ------     ------
                                                                  -          -
Financing
Issue of ordinary share capital and expenses                  4,901         (5)
Issue of convertible loan stock and expenses                      -      3,419
Net (repayment)/ issue of debt over one year                 (2,619)     2,815
Finance lease repayments                                       (244)      (151)
                                                             ------     ------
                                                              2,038      6,078
                                                             ------     ------

                                                             ------     ------
(Decrease)/Increase in cash                                    (984)       462
                                                             ------     ------



Notes to the preliminary results


Basis of preparation

The financial statements have been prepared in accordance with accounting
standards applicable in the United Kingdom. The principal accounting policies
have been applied consistently.


Segment information

In the tables below the group's turnover, net assets and profit before taxation
are analysed by geographical area. No analysis is provided of these items by
business class as with effect from 2002 the group only operates within the
agricultural sector with any other income being incidental to that activity.
Comparative figures have been restated accordingly.

Net assets, in the case of the geographical analysis, are allocated to the area
where the activity related to those assets is located.

                                                          Unaudited
                                                               2003       2002
                                                                £'m        £'m
Turnover by geographical origin
United Kingdom                                                  0.2        0.2
Indonesia                                                      13.6       12.6
                                                              -----      -----
                                                               13.8       12.8
                                                              -----      -----

Turnover by destination
United Kingdom                                                  0.2        0.2
Indonesia                                                      10.4       12.1
Other Asia                                                      3.2        0.5
                                                              -----      -----
                                                               13.8       12.8
                                                              -----      -----

Net assets by geographical origin
United kingdom                                                 (2.5)      (2.5)
Indonesia                                                      30.3       23.8
Other Asia                                                        -        0.5
                                                              -----      -----
                                                               27.8       21.8
                                                              -----      -----

                                                              £'000      £'000
Profit by geographical origin
United Kingdom                                                  956       (380)
Indonesia                                                     1,371      2,162
                                                              -----      -----
                                                              2,327      1,782
Disposal of assets and investments                             (257)      (326)
                                                              -----      -----
                                                              2,070      1,456
                                                              -----      -----


                                                          Unaudited
                                                               2003       2002
Taxation                                                      £'000      £'000

UK Corporation tax                                                -          -
Foreign taxation
Foreign taxation                                                (57)       (59)
                                                              -----      -----
Adjustments in respect of previous years                          -         10
Share of taxation of associated companies
                                                              -----      -----
Total current tax                                               (57)       (49)
Deferred tax                                                   (288)         -
                                                              -----      -----
                                                               (345)       (49)
                                                              -----      -----


Contingent liability

In November 2001, entities associated with Mr M E Zukerman ('the plaintiffs')
commenced an action in New York against the company and two of its directors
personally ('the defendants') asserting claims ('the claims') for fraud,
fraudulent inducement, breach of contract, promissory estoppel and tortious
interference in relation to a purported oral contract between the company and
the plaintiffs to cause Makassar and/or REA Kaltim to pay a return of 30 per
cent per annum on monies lent to REA Kaltim by, or with the support of, the
plaintiffs.

The company entered into no such agreement as is alleged by the plaintiffs.
Accordingly, the directors consider that the claims are without merit and, on
the basis of legal advice received, the defendants filed a motion to have the
claims dismissed in their entirety. A magistrate judge (to whom the motion for
dismissal was referred) recommended that, save for one minor component of one
claim for fraud, all claims for fraud, fraudulent inducement and tortious
interference should be dismissed but that the remaining claims, which are all
contract related, should proceed (on the grounds that such claims could not be
dismissed without investigation of the factual background which is not possible
on a motion for dismissal). The plaintiffs have objected to the magistrate's
recommendations as respects most of the claims recommended for dismissal and the
defendants have objected as respects the magistrate's recommendation to retain
the minor component of one claim for fraud. A final ruling on these matters is
still awaited.


Announcement based on draft accounts

The financial information set out in the announcement does not constitute the
company's statutory accounts for the year ended 31 December 2003 or 2002. The
financial information for the year ended 31 December 2002 is derived from the
statutory accounts for that year which have been delivered to the Registrar of
Companies. The auditors reported on those accounts; their report was unqualified
and did not contain a statement under s237(2) or (3) of the Companies Act 1985.
The statutory accounts for the year ended 31 December 2003 will be finalised on
the basis of the financial information presented by the directors in this
preliminary announcement and will be delivered to the Registrar of Companies
following the company's annual general meeting.




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