Interim Results
R.E.A.Hldgs PLC
21 September 2006
R.E.A. HOLDINGS PLC - 2006 INTERIM RESULTS
SUMMARY
=======
6 months to 6 months to
30 June 30 June
2006 2005 Change
£'000 £'000 %
Revenue 9,064 8,209 + 10
Earnings before interest, tax, depreciation,
amortisation and biological gain 3,967 3,716 + 7
Profit before tax 5,505 5,425 + 1
Profit for the period 3,763 3,844 - 2
Profit attributable to ordinary shareholders 3,143 2,902 + 8
Earnings per ordinary share (diluted) 10.7p 10.6p + 1
Dividend per ordinary share nil nil nil
CHAIRMAN'S STATEMENT
====================
Results
The profit before tax for the six months to 30 June 2006 amounted to £5,505,000,
representing a slight increase on the profit before tax for the corresponding
period of 2005 of £5,425,000. The results principally reflected the combination
of a higher gross profit for the period (£4,803,000 against £4,141,000) and a
lower biological gain (£1,926,000 against £2,410,000).
At the gross profit level, the benefit of increasing crops more than offset
significant increases in operating costs. These increases resulted from the
direct impact of a tripling of diesel oil prices following the 2005 removal of
state subsidies, wage inflation in Indonesia, itself partly induced by the
higher fuel prices, and a strengthening of the Indonesian rupiah against the US
dollar with a consequent increase in operating costs in US dollar terms. The
lower biological gain was derived from a revaluation of the group's biological
assets at 30 June 2006 on bases that incorporated a number of adjustments to the
variables underlying the 31 December 2005 valuation of those assets. Such
adjustments assumed, in particular, a slightly reduced contribution margin from
future biological production and a higher overall cost per hectare to carry to
maturity the significant areas of oil palm that the group is developing.
Although a marginally increased rate of tax as compared with the preceding year
meant that the profit for the period fell short of that of the first six months
of 2005, profit attributable to ordinary shareholders was in fact higher at
£3,143,000 against £2,902,000. This was the consequence of a reduction in profit
attributable to minority interests following the company's acquisition, in
January 2006, of the former 12.3 per cent minority shareholding in the company's
subsidiary, Makassar Investments Limited ('Makassar').
Ordinary dividend
The group continues to face continuing demands for cash to finance its
substantial extension development programme and to meet debt repayments. Against
this, the directors recognise that it is important to many shareholders that
they receive a sustainable dividend income from their shareholdings. Moreover,
the directors consider that the progress of recent months in the consolidation
of the group's finances, as detailed under 'Group development' below, has
improved the group's stability and that the group's current results and
immediate prospects are encouraging. Accordingly, they propose that the payment
of ordinary dividends should be resumed and intend to declare an interim
dividend in lieu of final in respect of 2006 of 1p per ordinary share, such
dividend to be paid in early 2007.
Operations
Fresh fruit bunches ('FFB') harvested during the six months to 30 June 2006
totalled 191,000 tonnes. This was well ahead of the FFB crop of 148,000 tonnes
achieved in the corresponding period of 2005 and some 27,000 tonnes ahead of
budget. Whilst it is satisfactory to be able to report a surplus against budget,
year to year variations in the monthly phasing of crops are normal and it should
not be assumed that the budgeted crop for 2006 of 353,000 tonnes will be
exceeded, particularly given that, although crops have remained comfortably
ahead of budget up to end August 2006, recent bunch censuses for the last four
months of the year suggest that a cyclic depression in cropping in some of the
mature areas may result in a crop outturn for the year much in line with budget.
Cyclic depressions or rest periods are a normal aspect of the oil palm's
cropping cycle.
Crude palm oil ('CPO') and palm kernel production amounted to, respectively,
43,900 tonnes (36,500 tonnes) and 7,400 tonnes (6,600 tonnes) reflecting
extraction rates of 23.0 per cent for CPO (24.7 per cent) and 3.9 per cent for
kernels(4.7 per cent).
The lower than normal extraction rates are attributed to sub-optimal
cross-pollination in the last quarter of 2005 following the very high levels of
rainfall received in that period. Rainfall in the six months to 30 June 2006
averaged 2,070 millimetres. This rainfall was lower than the 2,500 millimetres
received in the first half of 2005 and much better distributed. Improved
extraction rates can therefore be expected in the second half of 2006.
The CPO price in the first half of 2006 averaged US$432 per tonne, CIF
Rotterdam, as compared with an average of US$418 per tonne for the first half of
2005. The group continues to explore options for minimising shipping costs so as
to reduce the differential between the CIF Rotterdam price for CPO and the price
achievable FOB Samarinda (the group's closest port). To this end, the group has
recently expanded its barge fleet by time chartering a 3,000 tonne barge, double
the tonnage of the largest barge previously operated by the group. Initial
results suggest that this latest addition to the barge fleet will enable the
group to improve returns from local CPO sales by delivering to local buyers'
nominated destinations rather than, as has hitherto been the case, requiring
that the CPO be collected from Samarinda.
The group's extension development programme continues to be a major area of
operational focus. The group has previously suffered delays to the development
programme as a result of difficulties in agreeing compensation claims from, or
otherwise satisfying the concerns of, villagers from villages adjacent to the
group's operational areas. The first six months of 2006 saw a recurrence of
these difficulties with the villagers on this occasion expressing concern about
the grant to the group by the Indonesian government of titles to land claimed
historically to have been used by the villages for various purposes. These
difficulties have, for the moment at least, been overcome as the group's
expanding community development and smallholder programmes begin to bear fruit
and development is now proceeding apace. Provided that weather and other normal
constraints permit the current rate of progress to be maintained, the group
should be able to achieve its targeted extension development of 6,000 hectares
during 2006 and may even, prior to year end, make a start on the targeted 2007
development of 7,000 hectares.
Construction of the group's second oil mill and palm kernel processing plant
remains on schedule and the mill and processing plant are currently being
commissioned. The existing oil mill continues to operate satisfactorily.
Group development
The first half of 2006 saw substantial progress in the consolidation of the
group's financial position.
The longstanding dispute between the group and Mr M E Zukerman and his
associated interests (the 'MEZ group') was finally resolved with the payment by
the group to the MEZ group of $6 million in cash, in settlement of various
claims by the MEZ group, and the acquisition by the company, for a consideration
of $19 million, of the minority interest in Makassar formerly owned by the MEZ
group. This consideration was satisfied by the issue by the company to the MEZ
group of $19 million nominal of 7.5 per cent dollar notes 2012/14 of the company
('dollar notes').
During the period, the company also issued a total of 4,200,000 new ordinary
shares and 3,000,000 new preference shares for cash to raise some £13.4 million,
net of estimated expenses. Of these monies, $6 million was applied in
refinancing the $6 million payment to the MEZ group and $5.7 million in funding
liquidation distributions to third party shareholders in the company's
subsidiary, Makassar Participation plc, which is being wound up.
Proposals agreed in April 2006 with the holders of the company's outstanding
warrants resulted in amendment of the terms of the warrants so as to require
that all warrants be exercised or allowed to lapse during 2006. Following this
amendment, 910,858 warrants were exercised during July and August 2006 and it is
to be expected that the balance of 637,949 warrants will be exercised by or on
behalf of the remaining holders by the end of October 2006. The consequent cash
inflow during the second half of the 2006 should be some £900,000. The third
quarter of 2006 has also seen a net cash inflow to the company of $5.4 million
from the completion of the dollar note offering programme with the issue of a
further $6 million nominal of dollar notes increasing the nominal amount of
dollar notes in issue to the full $30 million originally proposed.
The combined effect of the foregoing transactions has been to eliminate all
group minority interests, other than interests representing local investor
participations in Indonesia, and to provide the group with cash resources
appropriate to the immediate needs of the group's extension development
programme. Group indebtedness now comprises the $30 million nominal of dollar
notes referred to above, a term bank loan of $41 million and modest drawings
under working capital and leasing facilities. The directors are satisfied that
this level of indebtedness can be supported by the group but retain their
previously expressed concern that the term bank loan is repayable by instalments
over a five year period when the new oil palm plantings that the loan is, in
substance, financing will take nearly four years from nursery planting to
maturity and then a further period of three to four years to full yield. The
group continues to explore alternative debt financing strategies to address this
mismatch of maturity profiles.
Good progress continues to be made in completing the formalities relating to the
establishment of PT Sasana Yudha Bakti and PT Kutai Kartanegara Sakti as 95 per
cent subsidiaries of the company, with 5 per cent local Indonesian investor
participations, and in finalising titles to all of the land areas, totalling
some 36,000 hectares, that have been allocated to these subsidiaries. The
company has also initiated discussions regarding the possible formation of a
further 95 per cent subsidiary, again with local Indonesian investor
participation of 5 per cent, to secure an additional land area of around 8,000
hectares adjacent to the existing allocated areas. Were full titles to be
obtained to both the 36,000 hectares and the 8,000 hectares, the fully titled
areas held by the group would, in total, increase to 74,000 hectares.
Board of the company
The directors are pleased to announce the appointment of David Killick as an
independent non-executive director of the company. After qualifying as a
barrister, Mr Killick, who is aged 68, worked for over 28 years for the
Commonwealth Development Corporation serving as a member of its management board
from 1980 to 1994. He therefore brings to the company many years' experience of
agricultural and other projects in developing countries generally and Indonesia
in particular. Since retiring from Commonwealth Development Corporation,
Mr Killick has held a number of directorships. These include a non-executive
directorship of Makassar of which he has been a board member since 1995.
Mr Killick is currently also a director of Siberia Investment Management Company
Limited and Reallyenglish.com Limited and a member of the council of management
of Slough Council for Voluntary Service.
Prospects
Recent months have seen the CIF Rotterdam price of CPO at over $500 per tonne
and it is currently standing at slightly below that level. If such higher
prices for CPO are maintained throughout the remainder of 2006, the group can
expect a slight increase in US dollar revenues in the second half of the year
notwithstanding that a crop outturn for the year at the budgeted level would
imply FFB production in the second half of 162,000 tonnes against the 191,000
tonnes harvested in the first half.
Looking further forward, consumption of vegetable oils continues to grow
strongly with traditional food offtake augmented by increased use of vegetable
oil in bio-diesel and other bio-fuels. Whilst the viability of bio-fuels depends
materially on the price of petroleum oil and the levels of government subsidies
designed to encourage the use of sustainable resources, the reported expansion
of bio-diesel manufacturing capacity in Malaysia and Indonesia seems likely at
least to maintain CPO prices at good levels well into 2007 and thereafter to
underpin vegetable oil markets in a way that may moderate the extent of any
future downturn in those markets.
Whilst the ability to sell its produce at favourable prices is obviously a
positive development for the group, CPO prices are set by international markets
and the group cannot influence them. The group therefore continues to
concentrate its energies on maximising production efficiency with a view to
achieving a unit cost of production that is as low as, and ideally lower than,
that of other producers of CPO and competitor vegetable oils. The directors
believe that realisation of this objective will be facilitated by capitalising
on the economies of scale that a single site plantation permits and building the
group's East Kalimantan operations, which already represent a substantial unit,
into one of the largest single site plantation units in South East Asia.
The prospective achievement of the current year extension development target
provides encouragement that the group has the logistical capacity to manage a
large expansion programme. Cost inflation in Indonesia is impacting development
costs, but extension planting in areas adjacent to the existing developed areas
still offers the prospect of attractive returns. Accordingly, the directors
intend to continue extending the existing operations as rapidly as the dictates
of prudence and the group's land bank and finances permit.
Assuming that the 2006 extension development target is achieved, developed
hectarage at the end of the year would amount to some 25,000 hectares. That is
nearly double the existing mature area of 13,000 hectares. The enlarged
hectarage, when fully mature, can therefore be expected to result in a near
doubling of crops with the expectation of still further material increases in
crops from the extension developments of 2007 and later years. The resultant
impact on revenues, with a central overhead that should not increase
proportionately as the group expands, offers exciting prospects for the future
value of the group.
RICHARD M ROBINOW
Chairman
21 September 2006
CONSOLIDATED INCOME STATEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2006
===================================================================
6 months to 6 months to Year to
30 June 30 June 31 December
2006 2005 2005
Note £'000 £'000 £'000
Revenue 2 9,064 8,209 14,944
Cost of sales (4,261) (4,068) (6,641)
-------------------------------
Gross profit 4,803 4,141 8,303
Net gain arising from changes in
fair value of biological assets 7 1,926 2,410 4,133
Other operating income 5 479 6
Distribution costs (93) (67) (190)
Administrative expenses (1,188) (1,177) (1,572)
Other operating expenses - (51) -
-------------------------------
Operating profit 5,453 5,735 10,680
Investment revenues 2 751 60 98
Finance costs 4 (699) (370) (1,156)
-------------------------------
Profit before tax 5,505 5,425 9,622
Tax 5 (1,742) (1,581) (3,323)
-------------------------------
Profit for the period 3,763 3,844 6,299
===============================
Attributable to:
Ordinary shareholders 3,143 2,902 4,520
Preference shareholders 450 383 765
Minority interest 170 559 1,014
-------------------------------
3,763 3,844 6,299
===============================
Earnings per 25p ordinary share 6
Basic 11.5p 14.4p 20.0p
Diluted 10.7p 10.6p 16.7p
All operations in all periods are continuing.
CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2006
=============================================
30 June 30 June 31 December
2006 2005 2005
Note £'000 £'000 £'000
Non-current assets
Goodwill 10 6,798 - -
Biological assets 7 69,173 59,709 68,192
Property, plant and equipment 12,743 8,172 10,565
Prepaid operating lease rentals 1,017 447 661
Deferred tax assets 5,357 6,675 5,619
Non-current receivables 1,662 941 1,193
---------------------------------
Total non-current assets 96,750 75,944 86,230
Current assets
Inventories 2,608 1,700 2,017
Trade and other receivables 1,680 2,655 2,854
Assets held for resale - 1,067 -
Cash and cash equivalents 9,014 1,093 5,007
---------------------------------
Total current assets 13,302 6,515 9,878
---------------------------------
Total assets 110,052 82,459 96,108
---------------------------------
Current liabilities
Trade and other payables (3,266) (4,887) (7,122)
Current tax liabilities (136) (132) (141)
Obligations under finance leases (161) (227) (354)
Bank loans (4,730) (3,019) (2,180)
Other loans and payables (152) - (149)
---------------------------------
Total current liabilities (8,445) (8,265) (9,946)
---------------------------------
Non-current liabilities
Bank loans (18,378) (12,218) (19,913)
US dollar notes (12,889) - (2,852)
Convertible loan stock - (2,367) -
Deferred tax liabilities (17,049) (16,300) (17,372)
Obligations under finance leases (172) (421) (190)
Other loans and payables (1,796) (1,688) (1,702)
---------------------------------
Total non-current liabilities (50,284) (32,994) (42,029)
---------------------------------
Total liabilities (58,729) (41,259) (51,975)
---------------------------------
Net assets 51,323 41,200 44,133
=================================
Equity
Issued share capital 18,884 13,536 14,788
Share premium account 9,172 3,888 2,627
Capital redemption reserve - 3,240 3,240
Warrants 1,162 1,164 1,162
Translation reserve (8,802) (7,004) (5,858)
Equity reserve - 369 -
Special reserve (non-distributable) 2,768 - -
Retained earnings 28,043 20,050 21,668
---------------------------------
51,227 35,243 37,627
Minority Interests 96 5,957 6,506
---------------------------------
Total equity 51,323 41,200 44,133
=================================
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
FOR THE SIX MONTHS TO 30 JUNE 2006
=======================================================
6 months to 6 months to Year to
30 June 30 June 31 December
2006 2005 2005
£'000 £'000 £'000
Exchange translation differences (3,357) 2,398 3,522
Tax on items taken directly to equity 148 110 352
-------------------------------
Net income recognised directly in equity (3,209) 2,508 3,874
Profit for the period 3,763 3,844 6,299
-------------------------------
Total recognised income and
expense for the period 554 6,352 10,173
===============================
Attributable to:
Ordinary shareholders 199 5,010 7,791
Preference shareholders 450 383 765
Minority interests (95) 959 1,617
-------------------------------
554 6,352 10,173
===============================
RECONCILIATION OF MOVEMENTS IN EQUITY FOR THE SIX MONTHS TO 30 JUNE 2006
========================================================================
6 months to 6 months to Year to
30 June 30 June 31 December
2006 2005 2005
£'000 £'000 £'000
Total recognised income and
expense for the period 554 6,352 10,173
Issue of new ordinary shares less expenses 10,334 - -
Issue of preference shares less expenses 3,067 - -
Issue of new ordinary shares arising on
conversion of convertible loan stock - 5 7
Issue of new ordinary shares arising on
restructuring of the balance of the
convertible loan stock and write off
of debt and equity issuance costs - - (384)
Issue of ordinary shares on exercise of
warrants - - 2
Dividends to minority shareholders of
a subsidiary (60) (110) (236)
Dividends to preference shareholders (450) (383) (765)
Acquisition of minority interest in
a subsidiary (4,011) - -
Redemption of shares in a subsidiary held
by minorities (2,244) - -
--------------------------------
7,190 5,864 8,797
Equity at beginning of period 44,133 35,336 35,336
--------------------------------
Equity at end of period 51,323 41,200 44,133
================================
CONSOLIDATED CASH FLOW STATEMENT FOR THE SIX MONTHS TO 30 JUNE 2006
===================================================================
6 months to 6 months to Year to
30 June 30 June 31 December
2006 2005 2005
Note £'000 £'000 £'000
Operating activities
Operating profit 5,453 5,735 10,680
Depreciation of property,
plant and equipment 428 384 806
Amortisation of prepaid operating
lease rentals 12 7 19
Biological gain (1,926) (2,410) (4,133)
Gain on disposal of property,
plant and equipment - - (5)
Loss on disposal of investment - - 9
--------------------------------
Operating cash flows before
movements in working capital 3,967 3,716 7,376
(Increase)/decrease in inventories (691) 122 (116)
Decrease/(increase) in receivables 459 (202) (647)
(Decrease)/increase in payables (2,766) 814 2,933
Exchange differences (336) (231) (505)
--------------------------------
Cash generated by operations 8 633 4,219 9,041
Taxes paid (45) (31) (59)
Interest paid (699) (335) (1,008)
--------------------------------
Net cash from operating activities (111) 3,853 7,974
--------------------------------
Investing activities
Interest received 156 60 98
Proceeds on disposal of property,
plant and equipment - - 15
Purchases of property, plant
and equipment (3,488) (435) (2,931)
Expenditure on biological assets (4,006) (1,596) (5,660)
Expenditure on operating leases (426) (132) (332)
Costs incurred in acquisition of
minority interest in a subsidiary (198) - -
Disposal of investments - - 1,058
--------------------------------
Net cash from investing activities (7,962) (2,103) (7,752)
--------------------------------
Financing activities
Preference dividends paid (450) (383) (765)
Dividends paid to minority shareholders
in a subsidiary (850) - -
Repayment of borrowings - (1,264) (17,463)
Repayment of obligations under
finance leases (200) (114) (158)
Proceeds of issue of ordinary share
capital less expenses 10,334 - (138)
Proceeds of issue of preference
share capital less expenses 3,067 - -
Redemption of preference shares by a
subsidiary undertaking (2,244) - -
New borrowings raised 2,639 - 22,093
Issue costs of US dollar notes (30) - (49)
--------------------------------
Net cash from financing activities 12,266 (1,761) 3,520
--------------------------------
Cash and cash equivalents
Net increase/(decrease) in cash and
cash equivalents 4,193 (11) 3,742
Cash and cash equivalents at
beginning of period 5,007 1,061 1,061
Effect of exchange rate changes (186) 43 204
--------------------------------
Cash and cash equivalents at end of period 9,014 1,093 5,007
================================
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
==============================================
1. Basis of accounting
The consolidated financial statements for the six months ended 30 June 2006 have
been prepared in accordance with International Financial Reporting Standards
(IFRS) endorsed for use by the EU at that date and in accordance with the
provisions of the Companies Act 1985. The group accounting policies are set out
in the annual report and financial statements for 2005. The consolidated interim
financial information has been prepared in accordance with those accounting
policies and with IAS 34 'Interim Financial Reporting'.
2. Revenue 6 months to 6 months to Year to
30 June 30 June 31 December
2006 2005 2005
£'000 £'000 £'000
Sales of goods 9,010 8,084 14,770
Revenue from services 54 125 174
-------------------------------
9,064 8,209 14,944
Other operating income 5 479 6
Investment revenues 751 60 98
-------------------------------
Total revenue 9,820 8,748 15,048
-------------------------------
Investment revenues comprises:
Interest receivable 157 60 98
Exchange profit on redemption of
preference shares held by minority
shareholders in a subsidiary undertaking 594 - -
-------------------------------
751 60 98
-------------------------------
3. Segment information
The group operates in only one business segment and hence no analysis of results
by segment is required.
4. Finance costs 6 months to 6 months to Year to
30 June 30 June 31 December
2006 2005 2005
£'000 £'000 £'000
Interest on bank loans 1,098 539 1,302
Interest on US dollar notes 482 - 94
Interest on convertible loan stock - 91 95
Interest on other loans - - 168
Interest on obligations under finance leases 22 35 64
-------------------------------
1,602 665 1,723
Amount included as additions to
biological assets (849) (360) (967)
Amount capitalised on acquisition (54) - -
-------------------------------
699 305 756
Other finance charges - 11 277
Exchange loss on repayment of long
term intra-group foreign currency loans - 54 123
-------------------------------
699 370 1,156
-------------------------------
5. Tax 6 months to 6 months to Year to
30 June 30 June 31 December
2006 2005 2005
£'000 £'000 £'000
Current tax:
UK corporation tax - - -
Foreign tax 40 31 79
-------------------------------
Total current tax 40 31 79
Deferred tax:
Current year 1,702 1,550 3,244
Attributable to an increase in the rate of tax - - -
-------------------------------
Total deferred tax 1,702 1,550 3,244
-------------------------------
Total tax 1,742 1,581 3,323
-------------------------------
6. Earnings per share 6 months to 6 months to Year to
30 June 30 June 31 December
2006 2005 2005
£'000 £'000 £'000
Earnings for the purpose of basic
earnings per share* 3,143 2,902 4,520
Interest on convertible loan stock (net of tax) - 43 66
-------------------------------
Earnings for the purpose of diluted
earnings per share 3,143 2,945 4,586
-------------------------------
* being profit attributable to ordinary shareholders
'000 '000 '000
Weighted average number of ordinary shares for
the purpose of basic earnings per share 27,210 20,122 22,631
Effect of dilutive potential ordinary shares 2,105 7,626 4,784
--------------------------------
Weighted average number of ordinary shares for
the purpose of diluted earnings per share 29,315 27,748 27,415
--------------------------------
7. Biological assets 30 June 30 June 31 December
2006 2005 2005
£'000 £'000 £'000
Beginning of period 68,192 51,765 51,765
Additions to planted area and
costs to maturity 4,006 1,596 5,660
Net biological gain 1,926 2,410 4,133
Exchange differences (4,951) 3,938 6,592
Transfers - - 42
--------------------------------
End of period 69,173 59,709 68,192
--------------------------------
Net biological gain comprises:
Gain arising from changes in fair value
attributable to physical changes 2,336 3,220 4,309
Loss arising from changes in fair value
attributable to price changes (410) (810) (176)
-------------------------------
1,926 2,410 4,133
-------------------------------
8. Consolidated cash flow statement
Cash generated by operations of £633,000 has been reduced by the payment of
$6,000,000 (£3,417,000) made in February 2006 as part of a settlement with
Mr M E Zukerman and his associated interests of claims for additional interest
on former loans to, and fees for past services and financial support, to
PT REA Kaltim Plantations ('REA Kaltim', a member of the group).
This payment is reflected in the decrease in payables in the period to 30 June
2006, the settlement liability having been accrued at 31 December 2005.
9. Movement in net borrowings 30 June 30 June 31 December
2006 2005 2005
£'000 £'000 £'000
Change in net borrowings resulting
from cash flows:
Increase/(decrease) in cash and
cash equivalents 4,193 (11) 3,742
(Increase)/decrease in borrowings (2,409) 1,378 (4,423)
--------------------------------
1,784 1,367 (681)
Issue of US dollar notes for the
acquisition of minority interest in a
subsidiary (10,728) - -
Issue of US dollar notes - - (2,745)
Interest charged less paid on US dollar
notes and convertible loan stock - (30) (35)
Conversion of convertible loan stock - - 2,367
New leases (20) (81) (10)
--------------------------------
(8,964) 1,256 (1,104)
Currency translation differences 2,130 (1,004) (1,967)
Net borrowings at beginning of period (20,482) (17,411) (17,411)
--------------------------------
Net borrowings at end of period (27,316) (17,159) (20,482)
--------------------------------
10. Goodwill on acquisition of minority interest in a subsidiary
£'000
Consideration:
US dollar notes issued 10,728
Costs of acquisition 198
------
Total costs of acquisition 10,926
Net book value of shares formerly held by minorities (4,011)
------
Goodwill recognised on acquisition 6,915
Goodwill on previous acquisitions not separately identified 192
Exchange differences (309)
------
Goodwill at end of period 6,798
------
On 23 January 2006, R.E.A. Holdings plc acquired the 12.3 per cent minority
interest in the issued ordinary share capital of Makassar Investments Limited,
the parent company of REA Kaltim, for a consideration comprising the issue
of $19 million nominal (£10.7 million) of 7.5 per cent dollar notes 2012/14.
The goodwill of £6.8 million at the end of the period is considered by the
directors to be fully supported by their view of the long-term prospects for
REA Kaltim.
11. Basis of preparation
The interim financial information contained in this report has not been audited
and does not constitute statutory accounts for the purpose of Section 240 of
the Companies Act 1985. It complies with applicable International Financial
Reporting Standards and has been prepared on the basis of the stated accounting
policies which are the policies set out in the 2005 annual report. The figures
for the year ended 31 December 2005 are abridged and have been based on figures
extracted from the statutory accounts filed with the Registrar of Companies on
which the auditors gave an unqualified report.
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