Final Results
30 April 2013
Anglo-Eastern Plantations Plc
("AEP", "Group" or "Company")
Preliminary announcement of results for year ended 31 December 2012
Anglo-Eastern Plantations Plc, and its subsidiaries are a major producer of palm oil and rubber with plantations across Indonesia and Malaysia amounting to some 126,000 hectares, has today released its results for the year ended 31 December 2012.
Financial Highlights
|
|
2012 $ m |
|
* Restated 2011 $ m |
|
Revenue |
237.4 |
|
259.0 |
|
Profit before tax |
|
|
|
|
- before biological asset ("BA") adjustment |
88.6 |
|
101.9 |
|
- after BA adjustment |
84.0 |
|
123.0 |
|
|
|
|
|
|
|
|
|
|
|
EPS before BA adjustment |
133.99cts |
|
154.15cts |
|
EPS after BA adjustment |
123.10cts |
|
194.45cts |
|
Dividend (cents) |
4.5cts |
|
6.0cts |
|
Dividend (pence) |
**2.9p |
|
**3.7p |
Notes:
* The Financial Statements for the years 2011 were restated following the change of accounting policies. The Company's auditors have issued their opinion on the Group's financial statements for the year ended 31 December 2012 which contains a limitation of scope in respect of the method of valuation of biological assets, details of which are set out in the Financial Review below and note 10.
** Based on an exchange rate at 22 April 2013 of $1.5276/£
Enquiries:
|
Anglo-Eastern Plantations Plc |
|
|
Dato' John Lim Ewe Chuan |
020 7216 4621 |
|
|
|
|
Charles Stanley Securities |
|
|
Russell Cook / Karri Vuori |
020 7149 6000 |
Chairman's statement
AEP has continued to build and expand its operations through 2012 in challenging market conditions.
The Group achieved a record level of oil production in the year to 31 December 2012, although the lower Crude Palm Oil ("CPO") prices meant revenue for the Group was $237.4 million, compared to $259.0 million achieved in 2011.
The continuing maturity of the Group's trees resulting from the established planting programme mean that Fresh Fruit Bunch ("FFB") production for 2012 was 783,400mt, 11% higher than previous year (2011: 707,000mt). And although FFB bought-in from surrounding smallholders during 2012 was 537,100mt (2011: 546,800mt), 2% lower compared to 2011, the Group's mills processed 5% more FFB, and increased CPO production to 260,500mt (2011: 248,000mt).
The decline in the CPO price during 2012 resulted from strong production in Indonesia and Malaysia which saw palm oil inventories rise to record levels. While production levels were increasing, a slowdown in global economic activity in 2012 led to weaker growth in demand. The average CPO price in 2012 was $995/mt, 11% lower than the figure of $1,124/mt for 2011.
The Group operating profit for 2012, before biological asset ("BA") adjustment was $85.4 million, 13% down on the record figure of $98.5 million achieved in 2011. Earnings per share, before BA adjustment decreased to 133.99cts, compared to 154.15cts in 2011 and post BA adjusted earnings per share were 123.10cts compared to 194.45cts for the previous year.
As at 31 December 2012, the Group had cash and cash equivalents of $116.3 million and borrowings of $25.1 million, resulting in a net cash position of $91.2 million, compared to $84.0 million at 31 December 2011. The positive cash flow helped strengthen the Group's balance sheet over the year.
In spite of the challenging market conditions the Board has continued to invest in the development of new assets. The Group planted 1,900ha of oil palms during 2012. This was less than planned, due primarily to a protracted process in finalising agreement with villagers for land compensation payments and delays in securing the necessary land release permits.
Permits for the construction of palm oil mills in North Sumatera and Central Kalimantan were held up by local authorities in 2012 and the earthworks for one of the mills finally commenced in the fourth quarter of 2012.
Funding of the capital expenditure was aided through the securing of two loans for $45 million, details of which were announced in August 2012.
AEP embraces the Group's responsibility for the impact of its activities on the environment, consumers, employees, communities, stakeholders and all other members of wider society. In meeting the Group's Corporate Social Responsibility ("CSR") obligations it is cognisant of the contribution and welfare of its employees while continuing to contribute to improve the well-being of the wider community.
As announced previously, the Group has committed a $4.5 million investment in the biogas and biomass project for one of the mills in North Sumatera. Civil works for the plant commenced in the fourth quarter of 2012 and when completed in the third quarter of 2013, will improve significantly the treatment of palm oil mill waste and mitigate the emission of biogas from the effluent treatment process. The successful implementation and running of this project will pave the way for further similar undertakings in the Group's other palm oil mills.
The majority of our employees working at the Group's plantations and mills, together with their families and dependents, are housed in self-contained communities constructed by the Group. Employees and theirdependents are provided with free housing, clean water and electricity. Within these communities we also build and maintain places of worship, schools and sports facilities. In 2012, the Group spent $174,342 to build additional facilities and maintain these amenities and will continue to incur community development expenditure in 2013.
The Group also recognises its obligations to the wider farming communities in which it operates. The Indonesian authorities have established that not less than 20% of the new planted area acquired from 2007 onwards are to be reserved for the benefit of smallholder scheme cooperatives, known as Plasma scheme and the Group is integrating such smallholder developments alongside its estates.
The Board intends to pursue a further development programme of smallholder scheme. This smallholder scheme cooperative will be managed by the Group which involves 7 companies covering an approximate area of 5,379ha. The Group will assist the smallholder scheme cooperative to obtain financing for the plasma scheme through a local bank to be secured by land and assets of the scheme and guaranteed by the Group. As at end of 2012, the Group has registered approximately 507ha for plasma planting.
The Board is mindful that given the anticipated further capital commitments the level of dividend needs to be balanced against the planned expenditure. The Board has therefore declared a final dividend of 4.5cts per share in respect of the year to 31 December 2012 (2011: 6.0cts). Subject to approval by shareholders at the Annual General Meeting, the final dividend will be paid on 5 July 2013 to those shareholders on the register on 7 June 2013.
The Board views the prospects for 2013 with cautious optimism. With the continuing rise in income levels and population growth in China, India and Indonesia, the Board anticipates that CPO prices may recover gradually from the current low levels. Furthermore global inventories of 17 oils and fats remain at historically low levels and the price differential between CPO and soya oil, CPO's closest competing product, is at a near four-year high of over $300/mt, more than double the historical average differential price. However, the introduction of 2.5% import duty on CPO in India and China's recent introduction of new quality controls over imported refined palm oil in first quarter of 2013 may dampen demand for palm oil in the short term.
Furthermore, rising fertiliser costs and increasing wage inflation in Indonesia are expected to increase the overall production cost in 2013.
Nevertheless, the Group hopes that, against a backdrop of a global economic recovery, trading prospects would improve in 2013 and beyond.
On behalf of the Board of Directors, I would like to convey our sincere thanks to our management and all employees of the Group for their dedication, loyalty, resourcefulness, commitment and contribution to the success of the Group.
I would also like to take this opportunity to thank shareholders, business associates, government authorities and all other stakeholders for their continued confidence, understanding and support for the Group.
Madam Lim Siew Kim
Chairman
30 April 2013
Financial Review
For the year ended 31 December 2012, revenue for the Group was $237.4 million, 8% lower than $259.0 million reported in 2011 due primarily to lower CPO prices. Strong production in Indonesia and Malaysia boosted palm oil inventory to record level. This coupled with weaker growth in demand drove CPO prices downward for most of 2012. Group operating profit for 2012, before biological asset adjustment was $85.4 million, was 13% less than $98.5 million in 2011.
FFB production for 2012 was 783,400mt, 11% higher than the 707,000mt produced in 2011, due primarily to the increase in matured planting. FFB bought-in from local smallholders for 2012 was 537,100mt (2011: 546,800mt), 2% lower compared to 2011. During the year, FFB processed by the Group's mills was 5% higher resulting in 5% increase in CPO production at 260,500mt, compared to 248,000mt in 2011.
Profit before tax and after BA adjustment for the Group was $84.0 million, 32% lower compared to $123.0 million in 2011. The BA adjustment was a debit of $4.5 million, compared to a credit of $21.1 million in 2011, reflecting lower biological value.
The average CPO price for 2012 was $995/mt, 11% lower than 2011 of $1,124/mt.
Earnings per share before BA adjustment decreased by 13% to 133.99cts, compared to 154.15cts in 2011.
The Group's balance sheet remains strong. It continued to experience positive cash flow generation for 2012. As at 31 December 2012, the Group had cash and cash equivalents of $116.3 million and borrowings of $25.1 million, giving it a net cash position of $91.2 million, compared to $84.0 million in 2011.
The Group signed two loan agreements during the year of $45 million to fund plantation development and construction of two mills in North Sumatera and Central Kalimantan of which $25 million was drawndown during the year. In 2012 the Group also repaid $6.5 million (2011: $15.6 million) of the existing borrowings of $6.5 million (2011: $22.1 million).
On 14 November 2011 the Financial Reporting Council ('FRC') wrote to the company in respect of its policies and methodologies for valuing and accounting for its biological assets and non-biological assets in its accounts for the year ended 31 December 2010.
As a result of discussions with the FRC, the company's interim accounts for the period ended 30 June 2012, announced on 30 August 2012, stated that the company had revisited its policies and methodologies for valuing and accounting for its estate assets. As a result, the directors had concluded that the proportions of the total value attributed to the biological and non-biological assets needed to be restated and that it is not possible to measure reliably the fair value of plant, machinery and estate infrastructure. The restatement and related adjustments are disclosed in these accounts in note 2.
Between 19 October 2012 and 29 April 2013 the FRC and the company exchanged correspondence. Additional information and explanations were provided to the FRC in respect of the restatement of biological assets and land at 31 December 2010 and 2011, including in respect of the measurement of notional rent. Following receipt of information during April, the FRC's enquiries into the restated valuation of biological assets and land at 31 December 2010 and 2011 are on-going at the date of these accounts being signed.
The Company's auditors have issued their opinion on the Group's financial statements for the year ended 31 December 2012 which contains a limitation of scope in respect of the matters referred to under note 8 - Biological assets, property, plant and equipment. The directors are confident that the method of valuation of biological assets, described in note 1 - Accounting policies and used in the financial statements, is in accordance with IAS 41.
Corporate Development
In 2012, the Group planted 1,900ha of oil palm mainly in Kalimantan, boosting planted area by 3% to 59,000ha (2011: 57,100ha). New plantings remain behind schedule due to protracted negotiations over settlement of land compensation with villagers and a delay in the issuance of land release permit (Izin Pelepasan) for two plantations. However, one of these plantations has now obtained the necessary permit and shall proceed to clear the land for planting.
Permits for the construction of palm oil mills in North Sumatera and Central Kalimantan were held up by local authorities in 2012 and the earthworks for one of the mills finally commenced in fourth quarter of 2012.
On the progress of the Group's $4.5million investment in the biogas and biomass project for one of the mills in North Sumatera, civil works for the plant commenced in the fourth quarter of 2012 and the whole project is expected to be completed in the third quarter of 2013. This project will enhance the waste management treatment of the mill and at the same time mitigate emissions of biogas.
The successful implementation and running of this project will pave the way for further similar undertakings for the rest of the Group's mills.
New Palm Oil Mill Projects
The earthworks for the mill in Kalimantan commenced in the fourth quarter of 2012 while civil works is expected to start in second quarter of 2013. This mill is expected to be completed in first quarter of 2015 with an initial capacity of 45mt FFB/hr.
The earthworks for another mill in North Sumatera started in the first quarter of 2013 and the civil works is expected to start in the fourth quarter of 2013. This mill is expected to be completed by the second quarter of 2015 with a final capacity of 60mt FFB/hr.
Corporate Social Responsibility
CSR is an integral part of corporate self-regulation incorporated into our business model. Our Group embraces responsibility for the impact of its activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere. In engaging the social dimension of CSR, the Group's business has taken cognizance of the contribution and further enrichment of its employees while continuing to make contributions to improve the well-being of the surrounding community.
The majority of employees and their dependents in the plantations and mills are housed in self-contained communities built by the Group. The employees and their dependents are provided with free housing, clean water and electricity. The Group also builds, provides and repair places of worship for workers of different religious faith as well as schools and sports facilities in these communities. In 2012, the Group spent $174,342 to build additional facilities and maintain these amenities in 2012 and will continue to incur community development expenditure in 2013.
Staff and selected employees are given the opportunity to be trained and to attend seminars to enhance their working skills and capacity. The Group provides free education for allemployees' childrenin the local plantations and communities where they work. In some cases, scholarships were provided to selected employees' children to further their tertiary education. In addition the Group provides funding to construct educational facilities such as laboratories, libraries, and computers. The salaries of teachers in the estates and the cost ofschool buses to transport employees' children to the school are provided by the Group. Over the years a total of 32 schools have been built with 100 teachers currently employed within our Group estates. In 2012, the Groupspentsome $313,121 for running the schools.
The Group continues to providefree comprehensive health care for all its workers as we believe that every employee and their dependents should have easy access to health services. We have established 20clinicsoperated by qualified doctors, nurses and hospital assistants in the estates.Related healthcare expenses for 2012 were $619,919.
A strong commitment to CSR has a positive impact on employees' attitudes and boosts employee engagement. The Group realizes that employees are valuable assets in order to run an efficient, effective, profitable and sustainable business and operations.
For plantations acquired from 2007 onwards, the Group has an obligation to develop not less than 20% of the new planted area for benefit of smallholder scheme cooperatives. The smallholder scheme or commonly known as Plasma schemein Indonesia will be developed alongside the Group's estates. This smallholder scheme cooperative will be managed by the Group which involves 7 companies covering an approximate area of 5,379ha. The Group will assist the smallholder scheme cooperative to obtain financing for the plasma scheme through a local bank to be secured by land and assets of the scheme and guaranteed by the Group. As at end of 2012, we have registered approximately 507ha for plasma planting.
In addition to education and healthcare which includes the construction of schools, provision of scholarships, books, education and free medical activities, the Group also develop infrastructure such as construction and repair of bridges and roads. The Group also provides aid to villagers such as goats and fish fries to start community sustaining programs. The Group helped victims of floods and other disasters, including afforestation to the amount of approximately $187,320 in 2012.
Indonesian Sustainable Palm Oil
The Indonesian Sustainable Palm Oil ("ISPO") certification is legally mandatory for all plantations in Indonesia. In March 2012, ISPO, which is fundamentally aligned to RSPO (Roundtable on Sustainable Palm Oil) principles, has become the mandatory standard for Indonesian planters.
A Steering Committee was established to work out a roadmap to support the ISPO implementation at mills and estates. Workshops and training sessions on occupational safety and healthcare were carried out to inculcate a safety culture in workplaces at the estates and mills in North Sumatera. In the year the Group upgraded its agricultural chemical stores and diesel fuel storage tanks in various plantations and mills to meet safety and environmental standards. Standard operating procedures were refined and documented based on sustainable oil palm best practices. The Group also conducts internal audit using audit checklist adopted from the above practices to determine level of compliance. The Group worked closely with appointed certification consultants in the implementation of ISPO standard. Three plantations are expected to be ready for certification by third quarter of 2013.
Care For The Environment and Sustainable Practices
As a Group, we highlight the importance of creating awareness and implementation of good environmental management practices throughout the organisation. The Group has been consistently practising good agricultural practices such as zero burning, integrated pest management, land terracing and recycling of biomass and reducing fossil fuel consumption.
Effluent discharged from some mills is initially treated in lagoons before they are applied to trenches located between rows of palm trees. Once the effluent dries up, it becomes organic fertilizer for the oil palm and reduces the application and buying of inorganic fertilizers. In some estates, empty bunches are shredded and applied to land where it biodegrades to fertilizers.
On completion of the Group's first biogas and biomass project in North Sumatera, it will enhance the waste management treatment of the mill and at the same time mitigate greenhouse biogas emissions. Under this project, the methane gas will be trapped and will be used to generate electricity to partially power its mills and increase energy efficiency. Further similar undertakings for the Group's mills are planned and shall be implemented in stages.
The Group is committed to implementing good agricultural practices as spelled out in its standard operating procedures for the planting of oil palm. Integrated Pest Management has been adopted to control pests and to improve biological balance.
Barn Owls were introduced to control rats. Beneficial plants of Turnera sp, Cassia cobannesisand Antigonon leptosus were planted to attract predator insects of caterpillar pests. Weeds are controlled selectively by using more environmental friendly herbicide such as Glyphosate.
The usage of Paraquat herbicide has been reduced and minimized.The sprayers are also trained insafety and spraying techniques. Natural vegetation on uncultivable land such as deep peat, very steep areas and riparian zones along watercourses are maintained to preserve biodiversity and wildlife corridor.
Our mills utilize the waste mesocarp fibre from the oil palm fruits as fuel to generate steam from boilers to produce power. The power generated drives some of the processing equipment in mills and estate housing. This helps to reduce reliance on fossil fuels such as diesel in our milling operations.
Directors
Dato' John Lim Ewe Chuan's appointment as the Executive Director - Corporate Finance & Corporate Affairs expired on 31 August 2012 and was extended for a further two years by the Board.
Madam Lim Siew Kim and Drs. Kanaka Puradiredjawill be submitting themselves for re-appointment at the forthcoming annual general meeting.
Dividends
The Board is mindful that the Group's development programme will require a considerable capital commitment. In this respect, the dividend level needs to be balanced against the planned capital expenditure. The Board is proposing to declare a final dividend of 4.5cts in respect of 2012 (2011: 6.0cts). Subject to shareholder approval at the AGM, the final dividend will be paid on 5 July 2013 to those shareholders on the register on 7 June 2013. Shareholders choosing to receive their dividend in Sterling will do so at the rate ruling on 7 June 2013, when the register closes. Based on the exchange rate at 22 April 2013 of $1.5276/£, the proposed dividend would be equivalent to 2.9p, compared to 3.7p declared in respect of 2011.
Outlook
FFB production for two months to February 2013 was 1% higher against the same period in 2012. Although we have been spared extreme weather patterns so far this year, it is too early to forecast whether the production will be better for the rest of the year.
The CIF (Cost, Insurance, Freight) Rotterdam CPO price opened the year 2013 at $835/mt and prices are expected to be in the range of $700/mt to $1,000/mt for the first half of 2013. A confluence of negatives drove the CPO price to a near two-year low. Recent CPO price weakness was driven by a weak global economy resulting in reduced growth in demand coupled with seasonally high production accentuating in a high stockpile of CPO.
The US dollar appreciated by approximately 10% (2011:1%) against the Indonesian Rupiah in 2012. There was no adverse fluctuation against the US dollar in early 2013. We expect a stable currency exchange level to be attainable for the rest of the year.
The CPO price remained under pressure during first quarter of 2013 due to the continuing higher levels of supply and lower demand from China and India. With rising income levels and population growth in China, India and Indonesia, the Board believes that the CPO price will recover gradually. Furthermore global stock-to-usage of 17 oils and fats is relatively low and the price differential between CPO and soyoil, the closest competing product, is at a near four-year high of over $300/mt, which is more than double the historical average and should help spur demand for CPO and ultimately price recovery. On the other hand, the introduction of 2.5% import duty on CPO in India and the China's implementation of quality control over imported refined palm oil in first quarter of 2013 may dampen demand and hurt the palm oil industry in the short term.
The rising fertiliser costs and wages in Indonesia are expected to increase the overall production cost in 2013. Indonesia's minimum wage has increased at an average rate of between 10% to 15% per annum over the last few years. The Indonesian government however recently announced exceptional hikes in 2013 minimum wage ranging from 29% to 49% for some provinces in Bengkulu and East Kalimantan. This wage hikes would potentially raise overall estate costs and erode profit margins.
Nevertheless barring any unforeseen circumstances, the Group is confident that CPO demand will be sustainable in the long term on the backdrop of global economic recovery and we can expect a satisfactory profit level and cash flow for 2013.
Consolidated income statement
for the year ended 31 December 2012
|
|
|
2012 |
(Restated) 2011 |
||||
|
Continuing operations |
Notes |
Result before BA adjustment |
BA adjustment |
Total |
Result before BA adjustment |
BA adjustment |
Total |
|
|
|
$000 |
$000 |
$000 |
$000 |
$000 |
$000 |
|
Revenue |
3 |
237,352 |
- |
237,352 |
259,037 |
- |
259,037 |
|
Cost of sales |
|
(142,755) |
- |
(142,755) |
(155,147) |
- |
(155,147) |
|
Gross profit |
|
94,597 |
- |
94,597 |
103,890 |
- |
103,890 |
|
Biological asset revaluation movement |
|
- |
(4,549) |
(4,549) |
- |
21,056 |
21,056 |
|
Administration expenses |
|
(9,201) |
- |
(9,201) |
(5,372) |
- |
(5,372) |
|
Operating profit |
|
85,396 |
(4,549) |
80,847 |
98,518 |
21,056 |
119,574 |
|
Exchange profits |
|
(24) |
- |
(24) |
213 |
- |
213 |
|
Finance income |
4 |
3,336 |
- |
3,336 |
3,891 |
- |
3,891 |
|
Finance expense |
4 |
(117) |
- |
(117) |
(707) |
- |
(707) |
|
Profit before tax |
5 |
88,591 |
(4,549) |
84,042 |
101,915 |
21,056 |
122,971 |
|
Tax expense |
|
(22,476) |
1,137 |
(21,339) |
(26,809) |
(5,264) |
(32,073) |
|
Profit for the year |
|
66,115 |
(3,412) |
62,703 |
75,106 |
15,792 |
90,898 |
|
Attributable to: |
|
|
|
|
|
|
|
|
- Owners of the parent |
|
53,108 |
(4,316) |
48,792 |
60,949 |
15,933 |
76,882 |
|
- Non-controlling interests |
|
13,007 |
904 |
13,911 |
14,157 |
(141) |
14,016 |
|
|
|
66,115 |
(3,412) |
62,703 |
75,106 |
15,792 |
90,898 |
|
Earnings per share for profit attributable to the owners of the parent during the year |
|
|
|
|
|
|
|
|
- basic |
6 |
|
|
123.10cts |
|
|
194.45cts |
|
- diluted |
6 |
|
|
122.95cts |
|
|
193.75cts |
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2012
|
|
2012 $000 |
|
(Restated) 2011 $000 |
|
|
|
|
|
|
Profit for the year |
62,703 |
|
90,898 |
|
|
|
|
|
|
Other comprehensive income: |
|
|
|
|
Unrealised loss on revaluation of the estates |
(4,064) |
|
(48,932) |
|
Loss on exchange translation of foreign operations |
(27,059) |
|
(5,245) |
|
Deferred tax on revaluation |
1,015 |
|
12,233 |
|
|
|
|
|
|
Other comprehensive expenses for the year |
(30,108) |
|
(41,944) |
|
|
|
|
|
|
Total comprehensive income for the year |
32,595 |
|
48,954 |
|
|
|
|
|
|
Attributable to: |
|
|
|
|
- Owners of the parent |
23,142 |
|
44,764 |
|
- Non-controlling interests |
9,453 |
|
4,190 |
|
|
32,595 |
|
48,954 |
Consolidated Statement of Financial Position
As at 31 December 2012
|
|
Notes |
2012 $000 |
|
(Restated) 2011 $000 |
|
(Restated) 2010 $000 |
|
Non-current assets |
|
|
|
|
|
|
|
Biological assets |
8 |
245,313 |
|
235,158 |
|
186,755 |
|
Property, plant and equipment |
8 |
212,177 |
|
214,840 |
|
249,610 |
|
Receivables |
|
5,033 |
|
1,551 |
|
1,494 |
|
|
|
|
|
|
|
|
|
|
|
462,523 |
|
451,549 |
|
437,859 |
|
Current assets |
|
|
|
|
|
|
|
Inventories |
|
6,075 |
|
9,439 |
|
6,820 |
|
Tax receivables |
|
4,734 |
|
5,098 |
|
7,342 |
|
Trade and other receivables |
|
7,419 |
|
4,877 |
|
3,356 |
|
Cash and cash equivalents |
|
116,250 |
|
90,482 |
|
70,871 |
|
|
|
|
|
|
|
|
|
|
|
134,478 |
|
109,896 |
|
88,389 |
|
Current liabilities |
|
|
|
|
|
|
|
Loans and borrowings |
|
(52) |
|
(6,465) |
|
(15,650) |
|
Trade and other payables |
|
(15,635) |
|
(20,878) |
|
(15,170) |
|
Tax liabilities |
|
(6,996) |
|
(11,019) |
|
(5,130) |
|
|
|
(22,683) |
|
(38,362) |
|
(35,950) |
|
Net current assets |
|
111,795 |
|
71,534 |
|
52,439 |
|
Non- current liabilities |
|
|
|
|
|
|
|
Loans and borrowings |
|
(25,026) |
|
(58) |
|
(6,438) |
|
Deferred tax liabilities |
|
(46,644) |
|
(52,533) |
|
(59,192) |
|
Retirement benefits - net liabilities |
|
(3,057) |
|
(1,593) |
|
(2,305) |
|
Net assets |
|
499,591 |
|
468,899 |
|
422,363 |
|
Issued capital and reserves attributable to owners of the parent |
|
|
|
|
|
|
|
Share capital |
|
15,504 |
|
15,504 |
|
15,504 |
|
Treasury shares |
|
(1,171) |
|
(1,507) |
|
(1,507) |
|
Share premium |
|
23,935 |
|
23,935 |
|
23,935 |
|
Capital redemption reserve |
|
1,087 |
|
1,087 |
|
1,087 |
|
Revaluation reserves |
|
36,799 |
|
39,480 |
|
67,303 |
|
Exchange reserves |
|
(90,571) |
|
(67,602) |
|
(63,307) |
|
Retained earnings |
|
427,186 |
|
380,633 |
|
305,683 |
|
|
|
412,769 |
|
391,530 |
|
348,698 |
|
Non-controlling interests |
|
86,822 |
|
77,369 |
|
73,665 |
|
Total equity |
|
499,591 |
|
468,899 |
|
422,363 |
Consolidated Statement of Changes in Equity
For the year ended 31 December 2012
|
|
Share capital |
Treasury shares |
Share premium |
Capital redemption reserve |
Re-valuation reserve |
Foreign exchange reserve |
Retained earnings |
Total |
Non-controlling interests |
Total equity |
|
|
$000 |
$000 |
$000 |
$000 |
$000 |
$000 |
$000 |
$000 |
$000 |
$000 |
|
Balance as at 31 December 2010 |
15,504 |
(1,507) |
23,935 |
1,087 |
149,396 |
(63,307) |
229,060 |
354,168 |
74,495 |
428,663 |
|
Restatement (note 2) |
- |
- |
- |
- |
(82,093) |
- |
76,623 |
(5,470) |
(830) |
(6,300) |
|
Balance at 31 December 2010 after restatement |
15,504 |
(1,507) |
23,935 |
1,087 |
67,303 |
(63,307) |
305,683 |
348,698 |
73,665 |
422,363 |
|
Items of other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
-Unrealised gain on revaluation of estates |
- |
- |
- |
- |
(37,097) |
- |
- |
(37,097) |
(11,835) |
(48,932) |
|
-Deferred tax on revaluation of assets |
- |
- |
- |
- |
9,274 |
- |
- |
9,274 |
2,959 |
12,233 |
|
-Loss on exchange translation |
- |
- |
- |
- |
- |
(4,295) |
- |
(4,295) |
(950) |
(5,245) |
|
Net loss recognised directly in equity |
- |
- |
- |
- |
(27,823) |
(4,295) |
- |
(32,118) |
(9,826) |
(41,944) |
|
Profit for year |
- |
- |
- |
- |
- |
- |
76,882 |
76,882 |
14,016 |
90,898 |
|
Total comprehensive income and expense for the year |
- |
- |
- |
- |
(27,823) |
(4,295) |
76,882 |
44,764 |
4,190 |
48,954 |
|
Issue of subsidiary shares to minority shareholder |
- |
- |
- |
- |
- |
- |
- |
- |
2,054 |
2,054 |
|
Share options exercised / Share based payment expense |
- |
- |
- |
- |
- |
- |
45 |
45 |
- |
45 |
|
Dividends paid |
- |
- |
- |
- |
- |
- |
(1,977) |
(1,977) |
(2,540) |
(4,517) |
|
Balance at 31 December 2011 |
15,504 |
(1,507) |
23,935 |
1,087 |
39,480 |
(67,602) |
380,633 |
391,530 |
77,369 |
468,899 |
|
Items of other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
-Unrealised loss on revaluation of estates |
- |
- |
- |
- |
(3,574) |
- |
- |
(3,574) |
(490) |
(4,064) |
|
-Deferred tax on revaluation of assets |
- |
- |
- |
- |
893 |
- |
- |
893 |
122 |
1,015 |
|
-Loss on exchange translation |
- |
- |
- |
- |
- |
(22,969) |
- |
(22,969) |
(4,090) |
(27,059) |
|
Total other comprehensive income |
- |
- |
- |
- |
(2,681) |
(22,969) |
- |
(25,650) |
(4,458) |
(30,108) |
|
Profit for year |
- |
- |
- |
- |
- |
- |
48,792 |
48,792 |
13,911 |
62,703 |
|
Total comprehensive income and expense for the year |
- |
- |
- |
- |
(2,681) |
(22,969) |
48,792 |
23,142 |
9,453 |
32,595 |
|
Share option exercised |
- |
336 |
- |
- |
- |
- |
133 |
469 |
- |
469 |
|
Dividends paid |
- |
- |
- |
- |
- |
- |
(2,372) |
(2,372) |
- |
(2,372) |
|
Balance at 31 December 2012 |
15,504 |
(1,171) |
23,935 |
1,087 |
36,799 |
(90,571) |
427,186 |
412,769 |
86,822 |
499,591 |
Consolidated Statement of Cash Flows
For the year ended 31 December 2012
|
|
2012 $000 |
|
(Restated) 2011 $000 |
|
Cash flows from operating activities |
|
|
|
|
Profit before tax |
84,042 |
|
122,971 |
|
Adjustments for: |
|
|
|
|
BA adjustment |
4,549 |
|
(21,056) |
|
Loss on disposal of tangible fixed assets |
19 |
|
68 |
|
Depreciation |
6,135 |
|
5,124 |
|
Retirement benefit provisions |
1,898 |
|
987 |
|
Net finance income |
(3,219) |
|
(3,184) |
|
Unrealised loss / (gain) in foreign exchange |
24 |
|
(213) |
|
Share based payments expense |
- |
|
45 |
|
Operating cash flow before changes in working capital |
93,448 |
|
104,742 |
|
Decrease / (Increase) in inventories |
2,821 |
|
(2,665) |
|
Increase in trade and other receivables |
(6,646) |
|
(1,578) |
|
Decrease / (Increase) in trade and other payables |
(4,143) |
|
4,080 |
|
Cash inflow from operations |
85,480 |
|
104,579 |
|
Interest paid |
(144) |
|
(759) |
|
Retirement benefit paid |
(294) |
|
(1,716) |
|
Overseas tax paid |
(26,622) |
|
(17,917) |
|
Net cash flow from operations |
58,420 |
|
84,187 |
|
|
|
|
|
|
Investing activities |
|
|
|
|
Property, plant and equipment |
|
|
|
|
- purchase |
(49,054) |
|
(50,086) |
|
- sale |
786 |
|
237 |
|
Interest received |
3,336 |
|
3,891 |
|
Net cash used in investing activities |
(44,932) |
|
(45,958) |
|
Financing activities |
|
|
|
|
Dividends paid by Company |
(2,372) |
|
(1,977) |
|
Share options exercised |
469 |
|
- |
|
Issue of subsidiary shares to minority shareholder |
- |
|
2,054 |
|
Repayment of existing long term loans |
(6,438) |
|
(15,555) |
|
Drawdown of long term loans |
25,000 |
|
- |
|
Finance lease repayment |
(27) |
|
- |
|
Dividends paid to minority shareholders |
- |
|
(2,540) |
|
Net cash used in financing activities |
16,632 |
|
(18,018) |
|
Increase in cash and cash equivalents |
30,120 |
|
20,211 |
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
|
At beginning of year |
90,482 |
|
70,871 |
|
Foreign exchange |
(4,352) |
|
(600) |
|
At end of year |
116,250 |
|
90,482 |
|
Comprising: |
|
|
|
|
Cash at end of year |
116,250 |
|
90,482 |
Notes
1. Accounting policies
Anglo-Eastern Plantations Plc ("AEP") is a company incorporated in the United Kingdom under the Companies Act 2006 and is listed on the London Stock Exchange. The registered office of AEP is located at Quadrant House, 6th Floor, 4 Thomas More Square, London E1W 1YW, United Kingdom. The principal activity of the Group is plantation agriculture.
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated in note 2 - Prior year restatement.
On 14 November 2011 the Financial Reporting Council ('FRC') wrote to the company in respect of its policies and methodologies for valuing and accounting for its biological assets and non-biological assets in its accounts for the year ended 31 December 2010.
As a result of discussions with the FRC, the company's interim accounts for the period ended 30 June 2012, announced on 30 August 2012, stated that the company had revisited its policies and methodologies for valuing and accounting for its estate assets. As a result, the directors had concluded that the proportions of the total value attributed to the biological and non-biological assets needed to be restated and that it is not possible to measure reliably the fair value of plant, machinery and estate infrastructure. The restatement and related adjustments are disclosed in these accounts in note 2.
Between 19 October 2012 and 29 April 2013 the FRC and the company exchanged correspondence. Additional information and explanations were provided to the FRC in respect of the restatement of biological assets and land at 31 December 2010 and 2011, including in respect of the measurement of notional rent. Following receipt of information during April, the FRC's enquiries into the restated valuation of biological assets and land at 31 December 2010 and 2011 are on-going at the date of these accounts being signed.
Basis of preparation
The financial statements have been prepared in accordance with International Financial Reporting Standards and its interpretations (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 their accounts under IFRS.
Changes in accounting standards
a) The following new amendment is also effective for the first time in these financial statements but does not have a material effect on the Group.
- IFRS 1 Amendments - Severe Hyperinflation and Removal of Fixed Dates for First Time Adopters
b) New standards, interpretations and amendments not yet effective.
The following new standards, interpretations and amendments, which have not been applied in these financial statements, will or may have an effect on the Group's future financial statements:
- IFRS 9 Financial Instruments (effective for accounting periods beginning on or after 1 January 2015)*
- IFRS 10 Consolidated Financial Statements (effective for accounting periods beginning on or after 1 January 2014)
- IFRS 11 Joint Arrangements (effective for accounting periods beginning on or after 1 January 2014)
- IFRS 12 Disclosures of Interest in Other Entities (effective for accounting periods beginning on or after 1 January 2014)
- IFRS 13 Fair Value Measurement (effective for accounting periods beginning on or after 1 January 2013)
- IAS 27 Separate Financial Statements (effective for accounting periods beginning on or after 1 January 2014)
- IAS 28 Investments in Associates and Joint Ventures (effective for accounting periods beginning on or after 1 January 2014)
- IFRIC 20 Interpretations - Stripping Costs in the Production Phase of a Surface Mine (effective for accounting periods beginning on or after 1 January 2013)
- IFRS 7 Amendments - Offsetting Financial Assets and Financial Liabilities (effective for accounting periods beginning on or after 1 January 2013)
- IAS 1 Amendments - Presentation of Items of Other Comprehensive Income (effective for accounting periods beginning on or after 1 July 2012)
- IAS 19 Amendments - Employee Benefits (effective for accounting periods beginning on or after 1 January 2013)
- IAS 32 Amendments - Offsetting Financial Assets and Financial Liabilities (effective for accounting periods beginning on or after 1 January 2014)
- IAS 12 Amendments - Deferred tax : Recovery of Underlying Assets (effective for accounting periods beginning on or after 1 January 2013)
- IFRS 1 Amendments - Government Loans (effective for accounting periods beginning on or after 1 January 2013)*
- Improvements to IFRSs (effective for accounting periods beginning on or after 1 January 2013)*
*These standards and interpretations are not endorsed by the EU at present.
Other than IAS 12 and IAS 19, none of the other new standards, interpretations and amendments, which are effective for periods beginning after 1 January 2013 and which have not been adopted early, are expected to have a material effect on the Group's future financial statements. IAS 12 will impact the level of disclosure. IAS 19 requires all income and expenses in relation to retirement benefit to be recognised in other comprehensive income rather than pass through income statement. If IAS 19 would have applied in year 2012, the income statement would have increased by $1,749,000 and the other comprehensive income would have decreased by the same amount.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.
Business combinations
The consolidated financial statements incorporate the results of business combinations using the purchase method. In the consolidated statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. Acquisitions of entities that comprise principally land with no active plantation business do not represent business combinations, in such cases, the amount paid for each acquisition is allocated between the identifiable assets/liabilities at the acquisition date.
Foreign currency
The individual financial statements of each subsidiary are presented in the currency of the country in which it operates (its functional currency) with the exception of the Company and its UK subsidiaries which are presented in US dollars. The presentation currency for the consolidated financial statements is also US dollars, chosen because, as internationally traded commodities, the price of the bulk of the Group's products are ultimately link to the US dollar.
On consolidation, the results of overseas operations are translated into US dollars at average exchange rates for the year unless exchange rates fluctuate significantly in which case the actual rate is used. All assets and liabilities of overseas operations are translated at the rate ruling at the balance sheet date. Exchange differences arising on re-translating the opening net assets at opening rate and the results of overseas operations at actual rate are recognised directly in equity (the "foreign exchange reserve"). Exchange differences recognised in the income statement of Group entities' separate financial statements on the translation of long-term monetary items forming part of the Group's net investment in the overseas operation concerned are reclassified to the foreign exchange reserve if the item is denominated in the presentational currency of the Group or of the overseas operation concerned.
On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve relating to that operation up to date of disposal are transferred to the income statement as part of the profit or loss on disposal.
All other exchange profits or losses are credited or charged to the income statement.
Revenue recognition
Revenue includes
- amounts receivable for produce provided in the normal course of business, net of sales related taxes and levies, including export taxes;
- amounts received for sales of palm kernel shell, rubber wood and other income of an operating nature.
Sales of CPO, palm kernel and rubber slab are recognised when goods are delivered or allocated to a purchaser. Delivery or allocation does not take place until contracts are paid for. Sales of latex are recognised on signing of sales contract, this being the point at which the significant risks and rewards of ownership are passed over to the buyer. Other income mainly consists of amounts received from sales of nut shell, which is recognised when the goods are delivered.
Share based payments
Share options are measured at fair value (excluding the effect of non market-based vesting conditions) at the date of grant. This fair value is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest and adjusted for the effect of non market-based vesting conditions.
Fair value is measured by use of a binomial model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.
Provided that all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied.
Capitalisation on development activities
Interest capitalisation
Interest on third party loans directly related to field development is capitalised in the proportion that the opening immature area bears to the total planted area of the relevant estate. Interest on loans related to construction in progress (such as an oil mill) is capitalised up to the commissioning of that asset. These interest rates are booked at the rate prevailing at the time.
Plantation development
Plantation development comprises cost of planting and development on oil palm and other plantation crops. Costs of new planting and development of plantation crops are capitalised from the stage of land clearing up to the stage of maturity or subject to certificate of Land Exploitation Rights (HGU) being obtained, whichever is earlier. The costs of immature plantations consist mainly of the accumulated cost of land clearing, planting, fertilising and maintaining the plantation, borrowing costs and other indirect overhead costs up to the time the trees are harvestable and to the extent appropriate.
Tax
UK and foreign corporation tax is provided at amounts expected to be paid or recovered using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.
Dividends
Equity dividends are recognised when they become legally payable. The Company pays only one dividend each year as a final dividend which becomes legally payable when approved by the shareholders at the next following annual general meeting.
Property, plant and equipment
During the year the Company has adopted new accounting policy on property, plant and equipment as stated below. The details of the change of accounting policies are disclosed in note 2 - Prior year restatement.
All items of property, plant and equipment are initially measured at cost. Cost includes expenditure that is directly attributable to the acquisition of the items. After initial recognition, all items of property, plant and equipment except land and construction in progress, are stated at cost less accumulated depreciation and any accumulated impairment losses.
Estate land is subsequently carried at fair value, based on periodic valuations on an open market basis by a professionally qualified valuer. These revaluations are made with sufficient regularity to ensure that the carrying amount does not differ materially from that which would be determined using fair value at the end of the reporting period. Changes in fair value are recognised in other comprehensive income and accumulated in the revaluation reserve except to the extent that any decrease in value in excess of the credit balance on the revaluation reserve, or reversal of such a transaction, is recognised in income statement. On the disposal of a revalued estate, any related balance remaining in the revaluation reserve is transferred to retained earnings as a movement in reserves.
Construction in progress is stated at cost. The accumulated costs will be reclassified to the appropriate class of assets when construction is completed and the asset is ready for its intended use. Construction in progress is also not depreciated until such time when the asset is available for use.
Buildings and oil mills are depreciated using the straight-line method. All other property, plant and equipment items are depreciated using the double-declining-balance method. The yearly rates of depreciation are as follows:
Buildings - 5% to 10% per annum
Oil Mill - 5% per annum
Estate plant, equipment & vehicle - 12.5% to 50% per annum
Office plant, equipment & vehicle - 25% to 50% per annum
Biological assets
During the year the Company has changed their method of valuation on biological assets as stated below. The details of the change of valuation are disclosed in note 2 - Prior year restatement.
Biological assets comprise oil palm trees and nurseries. The biological process commences with the initial preparation of land and planting of seedlings and ceases with the delivery of crop in the form of fresh fruit bunches ("FFB") to the manufacturing process in which crude palm oil and palm kernel are extracted from the FFB.
Biological assets are carried at fair value less costs to sell determined on the basis of the net present value of cash flows arising in producing FFB. No account is taken in the valuation of future replanting. Biological assets are valued at each accounting date based upon a valuation of the planted areas using a discounted cash flow method by reference to the FFB expected to be harvested over the full remaining productive life of the trees up to 20 years. Areas are included in the valuation once they are planted. However oil palm which are not yet mature at the accounting date, and hence are not producing FFB, are valued on a similar basis but with the discounted value of the estimated cost to complete planting and to maintain the assets to maturity being deducted from the discounted FFB value. Movement in valuation surplus of biological assets is charged or credited to the income statement for the relevant period (BA adjustment).
Leased assets
Assets financed by leasing agreements which give rights approximating to ownership (finance leases) are capitalised at amounts equal to the original cost of the asset to the lessors and depreciation is provided on the asset over the shorter of the lease term or its useful economic life in accordance with Group depreciation policy. The capital elements of future obligations under finance leases are included as liabilities in the balance sheet and the current year's interest element is charged to the income statement to produce a constant rate of charge on the balance of capital repayments outstanding. There are no operating leases.
Impairment
Impairment tests on tangible assets are undertaken annually on 31 December. Where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of value in use or fair value, less costs to sell), the asset is written down accordingly. Impairment charges are included in the administrative expenses in the income statement, except to the extent they reverse gains previously recognised in the statement of recognised income and expense.
Inventories
FFB harvested from the biological assets are stated at fair value less costs to sell at the point of harvest. The fair value gain arising on the initial recognition of harvested produce is the result of the FFB weight produced multiplied by the FFB price adjusted for transportation costs to sell. There is an active market for FFB and the price is based on statistics provided by the government for each region.
The gain/(loss) arising on the initial recognition at the point of harvest is recognised in the income statement within the biological asset revaluation. The FFB is transferred to the mill, processed in to CPO and sold within 24 hours so the write off of the FFB is netted off against the initial recognition within the biological asset revaluation.
All other inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value. In the case of processed produce for sale which comprises palm oil and kernel, cost represents the monthly weighted-average cost of production, and appropriate production overheads. Estate and mill consumables are valued on a weighted average cost basis.
Financial assets
All the Group's receivables and loans are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are recognised at fair value at inception and subsequently at amortised cost. No impairment provisions have been considered necessary.
Cash and cash equivalents consist of cash in hand and short term deposits at banks with an original maturity of not exceeding three months. Bank overdrafts are shown within loans and borrowings under current liabilities on the balance sheet.
There are no assets in hedging relationships and no financial assets or liabilities available for sale.
Financial liabilities
All the Group's financial liabilities are non-derivative financial liabilities.
Bank borrowings and long term development loans are initially recognised at fair value and subsequently at amortised cost, which is the total of proceeds received net of issue costs. Finance charges are accounted for on an accruals basis and charged in the income statement, unless capitalised according to the policy as set out under Interest capitalisation above.
Trade and other payables are shown at fair value at recognition and subsequently at amortised cost.
Deferred tax
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the balance sheet differs from its tax base except for differences in the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting nor taxable profit.
The Group recognises deferred tax liabilities arising from taxable temporary differences on investments in subsidiaries, except where the Group is able to control the reversal of the temporary differences and it is probable that the temporary difference will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those instances where it is possible that taxable profit will be available against which the difference can be utilised.
Deferred tax is recognised on temporary differences arising on property revaluation surpluses.
Deferred tax is determined using the tax rates that are enacted or substantively enacted at the balance sheet date. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, such as revaluations, in which case the deferred tax is also dealt with in equity; in this case assets and liabilities are offset.
Retirement benefits
Contributions to defined contribution pension schemes are charged to the income statement in the year to which they relate.
The Group operates a number of defined benefit pension schemes in respect of its Indonesian operations. The pension costs of these schemes charged to the income statement comprise the annual payments to the schemes together with any provision required for any shortfall in funding as disclosed by annual valuations of the schemes as advised by the schemes' actuaries. Any difference between the expected return on assets and that actually achieved, and any changes in the liabilities over the year due to changes in assumptions or experience within the scheme are recognised in comprehensive income in the period in which they arise.
Treasury shares
Consideration paid or received for the purchase or sale of the Company's own shares for holding in treasury is recognised directly in equity, where the cost is presented as the treasury share reserve. Any excess of the consideration received on the sale of treasury shares over the weighted average cost of shares sold, is taken to the share premium account.
Any shares held in treasury are treated as cancelled for the purpose of calculating earnings per share.
Critical accounting estimates and judgements
The preparation of the Group financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported assets and liabilities and reported revenue and expenses. Actual results could differ from those estimates and accordingly they are reviewed on an on-going basis. The main areas in which estimates are used are: fair value of biological assets, property, plant and equipment, deferred tax and retirement benefits.
Revisions to accounting estimates are recognised in the period in which the estimate is revised or the revision affects only that period, or in the period of revision and future periods if the revision affects both current and future periods.
Assumptions regarding the valuation of biological assets, property, plant and equipment are set out in note 8. Assumptions regarding the valuation of agricultural produce at the point of harvest less costs to sell are set out in the inventories accounting policy. The Group's policy with regard to impairment of such assets is set out above.
2. Prior year restatement
During the year the Company has revisited its policies and methodologies for valuing and accounting for its estate assets. As a result, the directors have concluded that in accordance with the requirements of IAS 8 (Accounting Policies, Changes in Accounting Estimates and Errors), prior year adjustments are required to restate the figures previously reported.
Former policy and methodology
Estates comprise biological assets and non-biological plantation assets including land, infrastructure and mills. In previous years, an overall estate valuation was determined based upon a valuation of the planted and unplanted areas using a discounted cash flow method. The value of the biological assets was estimated as a proportion of the overall estate value using percentages derived from historic data. For a plantation with a mill, the biological asset portion was estimated at 18% of the estate value while for a plantation without a mill, it was estimated at 23%. The movement in valuation of biological assets was charged or credited to the income statement for the relevant year. The movement in valuation of non-biological assets (excluding mills which were carried at depreciated cost) was transferred to the revaluation reserve.
Revised policy and methodology
For the current year, rather than valuing the entire estate and then estimate the amount attributable to its biological and non-biological components using the percentages noted above, the Group has changed to an approach of valuing and accounting for the components separately, as follows:
- Biological assets - are carried at fair value less costs to sell determined on the basis of the net present value of cash flows arising in producing FFB. Areas are included in the valuation once they are planted, however oil palm which are not yet mature at the accounting date, and hence are not producing FFB, are valued on a similar basis but with the discounted value of the estimated cost to complete planting and to maintain the assets to maturity being deducted from the discounted FFB value. No account is taken in the valuation of future replanting. As in previous years, the movement in valuation surplus of biological assets is charged or credited to the income statement for the relevant period.
- Estate land - is initially recognised at cost, including related transaction costs. It is subsequently carried at fair value on an open market basis. Land is not depreciated. As in previous years, any surplus or deficit on revaluation of estate land is transferred to the revaluation reserve, except that a deficit which is in excess of any previously recognised surplus relating to the same property is charged to the income statement. On the disposal of a revalued estate, any balance remaining in the revaluation reserve is transferred to retained earnings as a movement in reserves. In correcting the associated deferred tax, an error was also identified in the prior year calculation separate to the above which has resulted in an $8,000,000 correction in the prior year restatement.
- Non-biological assets (excluding land) comprise oil mills, plant, machinery and estate infrastructure - the Group's historic accounting policy in respect of oil mills was to carry them at depreciated cost and there has been no change to that policy. However, under the Group's former policy plant, machinery and estate infrastructure was valued as an integral part of the estate and, along with estate land, carried at valuation in the consolidated balance sheet as 'non-biological assets'. As noted above, the Group has now moved to a methodology whereby the biological assets and estate land are valued as separate components. In the opinion of the directors, it is not possible to measure reliably the fair value of plant, machinery and estate infrastructure as separate components. The Group has therefore changed to a policy of carrying plant, machinery and estate infrastructure at cost less depreciation which they believe is a more appropriate policy for the nature of the assets. Depreciation is calculated on a straight line basis for buildings and oil mills. All other non-biological assets (excluding land) are depreciated using the double-declining-balance method.
The Company has obtained independent valuations of its biological assets as at 31 December 2011 and as at 31 December 2010 to support the reflection of the prior year adjustments. The Company has obtained independent valuations of its estate land as at 31 December 2011 on an open market basis; the valuations as at 31 December 2010 are based on director's estimates.
The change to a methodology of obtaining separate valuations of the biological assets and estate land has highlighted that biological assets and estate land need to be restated in prior years as a consequence of using the percentage allocation method. The consequential change to carrying non-biological assets excluding land and oil mills at cost less depreciation rather than at a valuation represents a change in accounting policy. A prior year adjustment has therefore been made to restate the comparative figures to reflect the revised methodology. In the opinion of the directors, it is not possible to reliably measure the fair value of plant, machinery and estate infrastructure as separate components so it is not possible to split out the effect of restatements and the effect of change in accounting policy separately and this has been summarised in total below instead.
|
The impact of these prior year adjustments:-
After Biological Assets |
$000 |
|
(Restated) 2011 $000 |
|
Profit for the year before restatement |
|
|
79,628 |
|
Effect of change in restatement and accounting policy: |
|
|
|
|
Cost of sales |
3,650 |
|
|
|
Biological asset revaluation movement |
10,545 |
|
|
|
Tax expense |
(2,925) |
|
|
|
|
|
|
11,270 |
|
Profit for the year after restatement |
|
|
90,898 |
|
|
|
|
|
|
Other comprehensive income for the year before restatement |
|
|
(53,886) |
|
Effect of change in restatement and accounting policy: |
|
|
|
|
Unrealised (loss)/surplus on revaluation of the estates |
27,717 |
|
|
|
Profit/(loss) on exchange translation of foreign operations |
(774) |
|
|
|
Deferred tax on revaluation |
(15,001) |
|
|
|
|
|
|
11,942 |
|
Other comprehensive income for the year after restatement |
|
|
(41,944) |
The effect of these prior year adjustments had a positive impact on the earnings per share of 30.15cts for the year to 31 December 2011.
The following table summarises the impact of these prior year adjustments on the Consolidated Statement of Financial Position:-
|
|
Biological assets |
Property, plant and equipment |
Deferred tax liabilities |
Revaluation reserve |
Exchange reserve |
Retained earnings |
Non-controlling interest |
|
|
$000 |
$000 |
$000 |
$000 |
$000 |
$000 |
$000 |
|
Balance as reported 1 January 2011 |
68,593 |
376,173 |
(61,293) |
149,396 |
(63,307) |
229,060 |
74,495 |
|
Effect of restatement and change in accounting policy |
118,162 |
(126,563) |
2,101 |
(82,093) |
- |
76,623 |
(830) |
|
Restated balance as at 1 January 2011 |
186,755 |
249,610 |
(59,192) |
67,303 |
(63,307) |
305,683 |
73,665 |
|
|
|
|
|
|
|
|
|
|
Balance as reported 31 December 2011 |
77,066 |
340,786 |
(37,299) |
111,460 |
(66,893) |
292,092 |
76,309 |
|
Effect of restatement and change in accounting policy up to 1 January 2011 |
118,162 |
(126,563) |
2,101 |
(82,093) |
- |
76,623 |
(830) |
|
Effect of restatement and change in accounting policy during the year |
39,930 |
(668) |
(17,335) |
10,113 |
(709) |
11,918 |
1,890 |
|
Effect of exchange during the year |
- |
1,285 |
- |
- |
- |
- |
- |
|
Restated balance as at 31 December 2011 |
235,158 |
214,840 |
(52,533) |
39,480 |
(67,602) |
380,633 |
77,369 |
|
|
|
|
|
|
|
|
|
The following table details the effect of the prior year adjustments on Property, plant and equipment:-
|
|
Mills |
Land |
Other Non-biological assets |
Total |
|
|
$000 |
$000 |
$000 |
$000 |
|
Balance as reported 1 January 2011 |
30,129 |
243,366 |
102,678 |
376,173 |
|
Effect of restatement and change in accounting policy |
- |
(42,389) |
(84,174) |
(126,563) |
|
Restated balance as at 1 January 2011 |
30,129 |
200,977 |
18,504 |
249,610 |
|
|
|
|
|
|
|
Balance as reported 31 December 2011 |
31,075 |
200,447 |
109,264 |
340,786 |
|
Effect of restatement and change in accounting policy up to 1 January 2011 |
- |
(42,389) |
(84,174) |
(126,563) |
|
Effect of restatement and change in accounting policy during the year |
- |
(668) |
- |
(668) |
|
Effect of exchange during the year |
- |
- |
1,285 |
1,285 |
|
Restated balance as at 31 December 2011 |
31,075 |
157,390 |
26,375 |
214,840 |
3 Revenue
|
|
|
2012 $000 |
|
2011 $000 |
|
|
|
|
|
|
|
Sales of produce: |
- |
|
|
|
|
- CPO |
|
232,717 |
|
253,357 |
|
- Rubber |
|
2,527 |
|
3,669 |
|
Other income |
|
2,108 |
|
2,011 |
|
|
|
237,352 |
|
259,037 |
4 Finance Income and expense
|
|
|
2012 $000 |
|
2011 $000 |
|
|
|
|
|
|
|
Finance income |
|
|
|
|
|
Interest receivable on: |
|
|
|
|
|
Credit bank balances and time deposits |
|
3,336 |
|
3,891 |
|
|
|
|
|
|
|
Finance expense |
|
|
|
|
|
Interest payable on: |
|
|
|
|
|
Development loans |
|
(117) |
|
(707) |
|
Net finance income recognised in income statement |
|
3,219 |
|
3,184 |
5 Profit before tax
|
|
|
2012 $000 |
|
2011 $000 |
|
|
|
|
|
|
|
Profit before tax is stated after charging |
|
|
|
|
|
Depreciation |
|
6,135 |
|
5,124 |
|
Staff costs |
|
23,545 |
|
19,701 |
|
Auditors' remuneration: |
|
|
|
|
|
- Group audit |
|
244 |
|
151 |
|
- Other services |
|
46 |
|
87 |
|
- Total |
|
290 |
|
238 |
6 Earning per ordinary share (EPS)
|
|
2012 $000 |
|
2011 $000 |
|
|
|
|
|
|
Profit for the year attributable to owners of the Company before BA adjustment |
53,108 |
|
60,949 |
|
Net BA adjustment |
(4,316) |
|
15,933 |
|
Earnings used in basic and diluted EPS |
48,792 |
|
76,882 |
|
|
|
|
|
|
|
Number |
|
Number |
|
|
'000 |
|
'000 |
|
|
|
|
|
|
Weighted average number of shares in issue in year |
|
|
|
|
- used in basic EPS |
39,636 |
|
39,539 |
|
- dilutive effect of outstanding share options |
48 |
|
141 |
|
- used in diluted EPS |
39,684 |
|
39,680 |
|
|
|
|
|
|
Basic EPS before BA adjustment |
133.99cts |
|
154.15cts |
|
Basic EPS after BA adjustment |
123.10cts |
|
194.45cts |
|
|
|
|
|
|
Dilutive EPS before BA adjustment |
133.83cts |
|
153.60cts |
|
Dilutive EPS after BA adjustment |
122.95cts |
|
193.75cts |
7 Dividends
|
|
2012 $000 |
|
2011 $000 |
|
|
|
|
|
|
Paid during the year |
|
|
|
|
Final dividend of 6.0 cts per ordinary share for the year ended 31 December 2011 (2010: 5.0 cts) |
2,372 |
|
1,977 |
|
|
|
|
|
|
Proposed final dividend of 4.5 cts per ordinary share for the year ended 31 December 2012 (2011: 6.0 cts) |
1,784 |
|
2,372 |
The proposed dividend for 2012 is subject to shareholders' approval at the forthcoming annual general meeting and has not been included as a liability in these financial statements.
8 Biological assets, property, plant and equipment
|
|
Biological assets |
Mill |
Land |
Buildings |
Estate plant, equipment & vehicle |
Office plant, equipment & vehicle |
Construction in progress |
PPE Total |
Total |
|
|
$000 |
$000 |
$000 |
$000 |
$000 |
$000 |
$000 |
$000 |
$000 |
|
Cost or valuation |
|
|
|
|
|
|
|
|
|
|
At 1 January 2011 (restated) |
186,755 |
39,080 |
200,977 |
15,859 |
11,883 |
1,212 |
2,114 |
271,125 |
457,880 |
|
Exchange translations |
(2,986) |
(354) |
(308) |
(370) |
(15) |
(24) |
(44) |
(1,115) |
(4,101) |
|
Decrease due to harvest |
(23,448) |
- |
- |
- |
- |
- |
- |
- |
(23,448) |
|
Revaluations |
44,504 |
- |
(48,932) |
- |
- |
- |
- |
(48,932) |
(4,428) |
|
Additions |
10,437 |
3,404 |
2,637 |
6,142 |
2,357 |
163 |
693 |
15,396 |
25,833 |
|
Development costs capitalised |
19,896 |
- |
3,016 |
966 |
248 |
- |
216 |
4,446 |
24,342 |
|
Disposals |
- |
(243) |
- |
(23) |
(222) |
- |
- |
(488) |
(488) |
|
At 31 December 2011 (restated) |
235,158 |
41,887 |
157,390 |
22,574 |
14,251 |
1,351 |
2,979 |
240,432 |
475,590 |
|
Exchange translations |
(13,825) |
(2,546) |
(8,643) |
(1,527) |
(769) |
(30) |
(156) |
(13,671) |
(27,496) |
|
Reclassification |
848 |
- |
(848) |
4,350 |
- |
- |
(4,350) |
(848) |
- |
|
Decrease due to harvest |
(26,896) |
- |
- |
- |
- |
- |
- |
- |
(26,896) |
|
Revaluations |
22,347 |
- |
(4,064) |
- |
- |
- |
- |
(4,064) |
18,283 |
|
Additions |
3,749 |
2,509 |
4,246 |
7,674 |
2,571 |
81 |
2,165 |
19,246 |
22,995 |
|
Development costs capitalised |
23,932 |
- |
- |
- |
- |
- |
2,151 |
2,151 |
26,083 |
|
Disposals |
- |
(97) |
- |
(142) |
(462) |
(2) |
(690) |
(1,393) |
(1,393) |
|
At 31 December 2012 |
245,313 |
41,753 |
148,081 |
32,929 |
15,591 |
1,400 |
2,099 |
241,853 |
487,166 |
|
Accumulated depreciation and impairment |
|
|
|
|
|
|
|
|
|
|
At 1 January 2011 (restated) |
- |
8,951 |
- |
4,575 |
7,411 |
578 |
- |
21,515 |
21,515 |
|
Exchange translations |
- |
(123) |
- |
(88) |
(640) |
(13) |
- |
(864) |
(864) |
|
Charge for the year |
- |
2,167 |
- |
1,112 |
1,666 |
179 |
- |
5,124 |
5,124 |
|
Disposal |
- |
(183) |
- |
- |
- |
- |
- |
(183) |
(183) |
|
At 31 December 2011 (restated) |
- |
10,812 |
- |
5,599 |
8,437 |
744 |
- |
25,592 |
25,592 |
|
Exchange translations |
- |
(704) |
- |
(305) |
(431) |
(23) |
- |
(1,463) |
(1,463) |
|
Charge for the year |
- |
2,344 |
- |
1,640 |
1,963 |
188 |
- |
6,135 |
6,135 |
|
Disposal |
- |
(77) |
- |
(102) |
(408) |
(1) |
- |
(588) |
(588) |
|
At 31 December 2012 |
- |
12,375 |
- |
6,832 |
9,561 |
908 |
- |
29,676 |
29,676 |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amount |
|
|
|
|
|
|
|
|
|
|
At 31 December 2010 (restated) |
186,755 |
30,129 |
200,977 |
11,284 |
4,472 |
634 |
2,114 |
249,610 |
436,365 |
|
At 31 December 2011 (restated) |
235,158 |
31,075 |
157,390 |
16,975 |
5,814 |
607 |
2,979 |
214,840 |
449,998 |
|
At 31 December 2012 |
245,313 |
29,378 |
148,081 |
26,097 |
6,030 |
492 |
2,099 |
212,177 |
457,490 |
|
Net (loss)/gain arising from changes in fair value of biological assets |
|
|
|
|
|
|
|
|
|
|
At 31 December 2011 (restated) |
21,056 |
- |
- |
- |
- |
- |
- |
- |
21,056 |
|
At 31 December 2012 |
(4,549) |
- |
- |
- |
- |
- |
- |
- |
(4,549) |
The fair value less costs to sell of FFB harvested during the period, determined at the point of harvest is exhibited below:
|
|
2012 |
|
2011 |
|
Fair value of FFB |
|
|
|
|
Crop production and yield - FFB (mt) |
783,000 |
|
707,000 |
|
Fair value of FFB ($000) |
128,750 |
|
131,987 |
|
Fair value of FFB less costs to sell ($000) |
122,783 |
|
124,373 |
The fair value of FFB at the point of harvest is recognised in the income statement within the biological asset revaluation. A reconciliation of the amount included within the income statement and the biological asset has been included below:
|
|
2012 $000 |
|
2011 $000 |
|
|
|
|
|
|
Harvest included in the biological asset valuation from estimated production and pricing assumptions less costs to sell in the prior year |
26,896 |
|
23,448 |
|
Gain from actual production and pricing |
95,887 |
|
100,925 |
|
Fair value of FFB harvested from own production |
122,783 |
|
124,373 |
|
|
|
|
|
The decrease due to harvest of $26,896,000 (2011: $23,448,000) is the amount included within the prior year valuation for the current year and is therefore deducted from biological asset valuation in the current year as the FFB is harvested. The actual fair value of harvested FFB varies to that forecast due to the changes in; actual production, actual FFB price and actual costs incurred. The gain on fair value of the harvested FFB is written off as the FFB is processed in to CPO.
The biological asset revaluation movement included within the income statement is calculated as follows:
|
|
2012 $000 |
|
2011 $000 |
|
|
|
|
|
|
Decrease due to harvest |
(26,896) |
|
(23,448) |
|
Revaluations |
22,347 |
|
44,504 |
|
Net (loss)/gain arising in the income statement from changes in fair value of biological assets |
(4,549) |
|
21,056 |
The carrying amount of the Group's biological assets was based on independent valuations undertaken by independent valuers, Doli Siregar & Rekan which its head office is located in Jakarta, Indonesia except for an adjustment on discount rate which is determined by the directors. The firm has the appropriate professional qualifications and recent experience in the location and category of the properties being valued. Further information of the firm can be obtained from 'www.ds-r.co.id'. The Group's land as at 31 December 2012 has been valued by directors with the last independent valuation undertaken as at 31 December 2011.
The methodology of the valuations undertaken was using discounted cash flow over the expected 20-year economic life of the asset. The assumption applied in the valuation were, inter alia, an assumed CPO selling price of $675/mt (2011: $625/mt) and discount rate of 17.5% (2011: 16.5%). The discount rates were determined by the directors based on their assessment of various risks including financial, business and country risk of where the plantations are located as well as taking into account the Company's weighted average cost of capital. The CPO price is taken to be the 10-year average (2011: 10-year average) based on historical widely-quoted commodity price for CPO and represents the directors' best estimate of the price sustainable over the longer term. The CPO price assumed is revised to reflect a price which is closer to the market price of $810/mt as at 31 December 2012.
The following table exhibits the sensitivity of the Group's biological assets to the fluctuation in CPO price and discount rate:
|
|
2012 $000 |
|
2011 $000 |
|
|
|
|
|
|
A change of $50 in the price assumption for CPO |
|
|
|
|
-$50 in the price assumption |
(44,142) |
|
(36,985) |
|
+$50 in the price assumption |
44,047 |
|
36,961 |
|
A change of 1% in the discount rate |
|
|
|
|
-1% in the discount rate |
13,960 |
|
16,562 |
|
+1% in the discount rate |
(12,808) |
|
(14,918) |
The estates include nil (2011: $14) of interest and $9,308,000 (2011: $6,074,000) of overheads capitalised during the year in respect of expenditure on estates under development.
The Indonesian authorities have granted certain land exploitation rights and operating permits for the estates. In the case of established estates in North Sumatra these rights and permits expire between 2023 and 2038 with rights of renewal thereafter. In the case of estates in Bengkulu land titles were issued between 1994 and 2008 and the titles expire between 2028 and 2034 with rights of renewal thereafter for two consecutive periods of 25 and 35 years respectively. In the case of estates in Riau, land titles were issued in 2004 and expire in 2033. In the case of PT Cahaya Pelita Andhika's estate acquired in 2007 land titles were issued in 1996 to expire in 2029.
Renewal is subject to compliance with the laws and regulations of Indonesia.
The land title of the estate in Malaysia is a long lease expiring in 2084.
On 14 November 2011 the Financial Reporting Council ('FRC') wrote to the company in respect of its policies and methodologies for valuing and accounting for its biological assets and non-biological assets in its accounts for the year ended 31 December 2010.
As a result of discussions with the FRC, the company's interim accounts for the period ended 30 June 2012, announced on 30 August 2012, stated that the company had revisited its policies and methodologies for valuing and accounting for its estate assets. As a result, the directors had concluded that the proportions of the total value attributed to the biological and non-biological assets needed to be restated and that it is not possible to measure reliably the fair value of plant, machinery and estate infrastructure. The restatement and related adjustments are disclosed in these accounts in note 2.
Between 19 October 2012 and 29 April 2013 the FRC and the company exchanged correspondence. Additional information and explanations were provided to the FRC in respect of the restatement of biological assets and land at 31 December 2010 and 2011, including in respect of the measurement of notional rent. Following receipt of information during April, the FRC's enquiries into the restated valuation of biological assets and land at 31 December 2010 and 2011 are on-going at the date of these accounts being signed.
The directors are confident that the method of valuation of biological assets, described in note 1 - Accounting policies and used in the financial statements, is in accordance with IAS 41.
9 Posting of Annual Financial Report
The Annual Financial Report will be posted to shareholders in due course. Copies of this announcement are available from the offices of the Company Secretary, CETC (Nominees) Limited, Quadrant House, 6th Floor, 4 Thomas More Square, London E1W 1YW and on the Company's website at www.angloeastern.co.uk.
10 Status of financial information
The financial information set out in this preliminary announcement does not constitute the company's statutory accounts for 2011 or 2012. Statutory accounts for the year ended 31 December 2011 have been reported on by the Independent Auditors. The Independent Auditors' Reports on the Annual Report and Financial Statements for 2011 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006. The Independent Auditors' Report on the Annual Report and Financial Statements for 2012 was qualified as a result of a limitation in scope. The following is an extract from the auditors' report describing the basis for the qualification:
Basis for qualified opinion on financial statements
We have been unable to conclude whether or not the carrying value of the Group's biological assets currently stated in the consolidated statement of financial position at a value of $245.3m has been determined in accordance with IAS 41 Agriculture because as described in note 11, the Company is currently in the process of resolving a query from the Financial Reporting Council (FRC) concerning the valuation methodology used by the Group to undertake the valuation, a query that has been ongoing since 14 November 2011. More specifically, the FRC have stated in a letter to the company dated 29 April 2013: "We do not understand the company's justification for notional rent being determined on a historical cost basis because it does not reflect a market rate for the use of land. We consider this to be a fundamental matter in the determination of the fair value of the company's biological assets and on which we do not yet agree. The resolution of this matter may have a material effect on the amounts recorded in the company's accounts. "
As noted in note 8, the Company's Directors are confident that the methodology which has been applied is in accordance with IAS 41, however, although the full facts are known, the existence of the ongoing FRC queries and their description of the potential impact provides differing opinions regarding the application of IAS 41. Until this matter is resolved between the FRC and the Group, we are unable to obtain sufficient audit evidence regarding the appropriate application of IAS 41 to the carrying value of the Group's biological assets.
The Independent Auditors' report also contained the following statements made under Sections 498(2) and 498(3) of the Companies Act 2006:
In respect solely of the limitation on our work relating to the valuation of biological assets, described above:
- we have not obtained all the information and explanations we considered necessary for the purpose of our audit; and
- we were unable to determine whether adequate accounting records had been kept .
Statutory accounts for the year ended 31 December 2011 have been filed with the Registrar of Companies. The statutory accounts for the year ended 31 December 2012 will be delivered to the Registrar in due course.
This information is provided by RNS
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