Interim Results
ROWE EVANS INVESTMENTS PLC
Oil palm and rubber plantations in Indonesia
Associated companies with plantation and property-development
interests in Malaysia and beef-cattle farming in Australia
Announcement of unaudited interim results for
the six months ended 30 June 2004
Highlights from the chairman's statement and unaudited interim results
For the six months ended 30 June 2004:-
* profit before tax 23% higher at £5,092,000 (2003 £4,139,000)
* operating cash inflows £2,224,000 (2003 £1,576,000)
* first half of 2004 characterised by higher crops of oil palm fresh
fruit bunches ("f.f.b.") in Indonesia and continued robust palm oil
prices, offset by effect of a weaker US Dollar
* share of associated companies' profits before tax £2,520,000 (2003
£2,410,000)
- Indonesia - slightly higher crops and robust palm oil prices
resulted in sharply improved profits
- Malaysia - continued firm palm oil prices offset by lower crops
and the negative effect of a weaker US Dollar resulted
in reduced plantation earnings for the Bertam Holdings PLC
Group. The 40% associate, Bertam Properties Sdn Bhd, did
not repeat profitable land disposals of last year
- Australia - another poor cotton crop due to unusually dry weather.
The Lendu Holdings PLC Group has, since the half year,
disposed of its cotton properties and intends to concentrate
on cattle fattening
* Pangkatan palm oil mill on schedule for completion before year end
* board has announced that discussions commenced with Bertam Holdings PLC
and Lendu Holdings PLC which may lead to an amalgamation. The Group's
nominated advisers, Westhouse Securities LLP, appointed as financial
advisers for the scheme
* palm oil prices have fallen off in the second half year but f.f.b.
crops continue to do well in Indonesia and are recovering in
Malaysia. Barring unforeseen circumstances, 2004 expected to be
another successful year
CHAIRMAN'S STATEMENT
Chairman's statement
I am pleased to report a profit before taxation of £5,092,000 for the first half
of 2004, a 23% increase over the £4,139,000 for the same period last year. The
Group generated operating cash flows of £2,224,000 in this period (2003
£1,576,000). The first half of 2004 was characterised by higher crops of oil
palm fresh fruit bunches ("f.f.b.") in Indonesia but lower in Malaysia and
continued robust palm oil prices, offset by the effect of the weakness of the US
Dollar.
REVIEW OF THE PERIOD
The palm oil market
The healthy palm oil price in the second half of 2003 continued, and indeed
improved, in the first four months of 2004 reaching a peak of around
US$550/tonne. There was then a sharp fall off in May and June to around the
US$430 level following concerns about the size of soya bean plantings
particularly in the USA and the greater-than-expected build up of palm oil
stocks. However, notwithstanding the sharp reduction in the price, the level of
US$430 is still certainly more than acceptable and provides a very adequate
return.
Exchange rates
Sterling strengthened against the US Dollar, particularly in the last quarter of
2003, during which time it moved from around £1 = US$1.58 to US$1.80 and it
continued near to that level for most of the first half of 2004. The average
rate for the first half of 2004 was £1 = US$1.82 compared with US$1.61 for the
same period in 2003 and the Sterling/Indonesian Rupiah rate broadly followed
this trend too. This had a negative effect on profits as the US Dollar is the
currency in which the Group's profits are mainly earned.
Results for the period
Estate profit
Crop and sales details were as follows:-
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2004 2003 2003
CROPS Tonnes Tonnes Tonnes
Oil palm fresh fruit bunches 71,100 65,900 147,700
Rubber 510 810 1,410
------- ------- -------
AVERAGE SELLING PRICES PER TONNE
Oil palm fresh fruit bunches - Rp'000 806 652 644
Crude palm oil - Rotterdam cif - US$ 510 436 445
Rubber - Rp'000 10,165 7,388 8,044
------- -------- -------
EXCHANGE RATES Rp Rp Rp
£1 = Indonesian Rupiah
- average 15,922 13,997 14,009
- period-end 17,053 13,665 15,083
------- ------- -------
£1 = US Dollar
- average 1.82 1.61 1.64
- period end 1.81 1.66 1.79
------- ------- -------
F.f.b. crops were slightly ahead of budget and some 8% ahead of those for the
same period last year. This combined with continued robust palm oil prices,
referred to above, resulted in an estate profit of £2,364,000, some 34% higher
than the £1,768,000 relating to the first half of 2003. The estates have all
generally been performing well and, despite the continuing difficulties in the
province of Aceh, Simpang Kiri Estate's f.f.b. crop has pleasingly been slightly
ahead of expectations. Senior staff have, with some difficulty, been granted
permission by the authorities to visit the estate and it is hoped that the
normal visiting routine will be re-started as soon as possible.
As I have mentioned in previous reports, the rubber on Pangkatan and Sennah
Estates is declining as the replanting into oil palms gets under way. This
lesser volume of rubber is, however, attracting very good prices as can be seen
from the table above. This replanting is being undertaken in order to maximise
throughput at the new Pangkatan palm oil mill, to which I refer in more detail
below.
Associated companies
The Group's share of the profits before taxation of the associated companies was
£2,520,000 compared with £2,410,000 for the same period last year.
Crops were as follows:-
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2004 2003 2003
Oil palm fresh fruit bunches Tonnes Tonnes Tonnes
- Indonesia 151,000 149,000 301,000
- Malaysia 35,000 44,000 84,000
------- ------- -------
Rubber
- Indonesia 1,098 941 1,531
- Malaysia 30 38 80
------- ------- -------
Cotton Bales Bales Bales
- Australia 8,182 9,700 9,700
------- ------- -------
Indonesia
Although below expectations, PT Agro Muko's (31.53% owned) f.f.b. crop was ahead
of the same period last year. This, combined with good palm oil prices and a
higher rubber crop enjoying very firm prices, resulted in a sharply improved
profit for the period. The company's programme of distributing surplus funds
continues and, during the first half, the Group received dividends of £466,000
net of Indonesian withholding tax.
PT Kerasaan Indonesia's (36.00% owned) f.f.b. crop was in line with expectations
but some 10% below that for last year. However, despite this and because of the
strength of the palm oil price, the company reported sharply improved profits.
Dividends of £248,000 net of Indonesian withholding tax were received from the
company in the first half of this year.
Malaysia
Bertam Holdings PLC (48.34% owned) reported lower profits arising partly from a
marked fall off in the f.f.b. crops from its Malaysian estates and from the
adverse effect of the strength of Sterling against the Malaysian Ringgit, offset
by the robust palm oil market referred to above. In addition, its 40%
associate, Bertam Properties Sdn. Berhad, did not repeat the profitable land
disposals of last year and itself suffered from lower f.f.b. crops.
Australia
Lendu Holdings PLC (35.11% owned) regrettably reported another poor cotton
season, again due to unusually dry weather. As referred to below under "Current
trading", the company has reported that, since 30 June 2004, it has profitably
sold three cotton farms and intends to concentrate on beef-cattle farming.
PANGKATAN PALM OIL MILL
The mill is on target for commissioning by the end of the year.
SENNAH ESTATE
As announced on 18 May 2004, the lawsuit initiated by DR H Rahmat Shah, the 20%
shareholder in PT Sembada Sennah Maju ("SSM") (the company owning Sennah
Estate), was heard in the Medan District Court on 12 May 2004. The lawsuit
demanded that the sale and purchase agreement dated 19 March 2002, by which PT
Pangkatan Indonesia acquired its 80% holding in SSM, be cancelled. To the
board's disappointment, the District Court judge found in favour of DR H Rahmat
Shah ordering that the shares be handed back to him and that he repays the
purchase consideration of some US$3.61 million within twelve months.
The board, the managing agents and our Indonesian lawyers remain strongly of the
opinion that there is no legal basis to the lawsuit. Accordingly, an immediate
appeal was lodged with the Medan High Court and a decision is expected shortly.
In the meantime, the status quo remains with regard to the ownership of the
shares in SSM and to the ownership and management of the estate.
AMALGAMATION
It was announced on 31 August 2004 that the board was in discussions with the
boards of Bertam Holdings PLC and Lendu Holdings PLC which might lead to
proposals for an amalgamation of the three companies. Your board feels that the
time has come to simplify the corporate structure further. Modern legal and
accounting rules are becoming more and more burdensome and therefore expensive
for a structure of the current kind. In addition, it is felt that a simplified
structure should lead to increased liquidity in the shares and should also
facilitate a clearer understanding of the asset value and operating prospects
for the combined group. The Company already has a direct shareholding of 48% in
Bertam Holdings PLC, 35% in Lendu Holdings PLC and 48% in Sungkai Holdings
Limited, whereas Bertam Holdings PLC holds 19% directly, and 24% indirectly, in
the Company through its 49% in Sungkai Holdings Limited. In addition, there are
many shareholders who hold shares in two or more of these three quoted
companies.
Given the size of its existing direct shareholdings in Bertam Holdings PLC and
Lendu Holdings PLC, it is likely that the Company will be offering its shares to
the shareholders of those two companies by way of two schemes of arrangement.
It is expected that the basis of the share-for-share exchange will be the
updated asset value of each company. Although it is proposed that independent
valuers will be appointed in this regard, this will not necessarily be a
straightforward process, and it is therefore difficult at this stage to provide
an estimated time frame for the prospective transaction. The board has
appointed the Group's nominated adviser, Westhouse Securities LLP, as its
independent financial adviser for this scheme.
CURRENT TRADING
Palm oil prices fell a little further after the half year to just over
US$400/tonne before strengthening again and the price is currently around the
US$430 level. F.f.b. crops on the Indonesian estates continue to do well, being
mainly ahead of both the budgeted crop to date and the actual for the same
period last year, whilst the Malaysian estates are showing signs of recovery in
the second half after the dip experienced in the first. It is expected that the
Group's crop estimate for the whole year for its own Indonesian estates of
154,000 tonnes will be achieved.
Since the half year, Sterling strengthened further against the US Dollar,
reaching around £1 = US$1.86 at one point before returning to the current level
of around US$1.80. The US Dollar has remained reasonably steady against the
Indonesian Rupiah at around US$1 = Rp9,300 although it has recently weakened a
little to Rp9,100.
The Bertam Holdings PLC Group has benefited from the improved f.f.b. crops
mentioned above. Its associate, Bertam Properties Sdn. Berhad, has reported
considerable interest from various parties in purchasing pieces of land from the
company, including one area of some 400 hectares. These are being progressed.
As referred to above, Lendu Holdings PLC ("Lendu") has, since the half year,
sold its cotton interests in Australia. It is understood that the Lendu board
felt that, with the continuing substantial escalation in values of water
licences and weak cotton prices, it was a good time to move on from this
business and to crystallise the gains derived from the development of the
properties and from the value of its portfolio of water licences. The Lendu
group has retained its 12,000-hectare cattle-fattening property, Woodlands, and
has stated its intention to expand its activities in the beef-cattle sector.
PROSPECTS
Barring unforeseen circumstances, your board anticipates that 2004 will be
another successful year.
PHILIP FLETCHER
Chairman
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the six months ended 30 June 2004
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2004 2003 2003
£'000 £'000 £'000
Turnover * 3,928 3,500 7,599
Cost of sales (1,564) (1,732) (3,390)
------- ------- -------
Estate profit 2,364 1,768 4,209
------- ------- -------
Foreign-exchange gains/(losses) 237 (134) (88)
Other administrative expenses (194) (233) (539)
------- ------- -------
Total administrative credit/(expenses) 43 (367) (627)
------- ------- -------
Group operating profit * 2,407 1,401 3,582
Share of operating profit in associates 2,520 2,410 4,431
------- ------- -------
Total operating profit 4,927 3,811 8,013
Exceptional items (note 3) 119 285 256
------- ------- -------
Profit on ordinary activities
before interest 5,046 4,096 8,269
Interest receivable and similar income 46 43 89
------- ------- -------
Profit on ordinary activities
before taxation 5,092 4,139 8,358
Tax on profit on ordinary activities (1,512) (1,236) (2,644)
------- ------- -------
Profit on ordinary activities
after taxation 3,580 2,903 5,714
Equity minority interests (396) (240) (619)
------- ------- -------
Profit on ordinary activities
attributable to the members
of Rowe Evans Investments PLC 3,184 2,663 5,095
Equity dividend proposed - - (2,644)
------- ------- -------
Profit retained for the financial period 3,184 2,663 2,451
======= ======= =======
Basic earnings per 10p share 6.66p 5.53p 10.59p
======= ======= =======
Diluted earnings per 10p share 6.58p 5.48p 10.49p
======= ======= =======
* All operations are classed as continuing.
CONSOLIDATED BALANCE SHEET
At 30 June 2004
30 June 30 June 31 December
2004 2003 2003
£'000 £'000 £'000
Fixed assets
Tangible assets 13,586 12,916 12,950
Investments 33,473 36,154 34,199
------- ------- -------
47,059 49,070 47,149
------- ------- -------
Current assets
Stocks 240 200 221
Debtors 704 768 759
Investments 2,148 2,038 2,826
Cash at bank and in hand 935 107 1,039
------- ------- -------
4,027 3,113 4,845
------- ------- -------
Creditors: Amounts falling due
within one year
Trade creditors 558 285 233
Amounts owed to associated undertakings 5 - 2
Other creditors including taxation and
social security 272 302 537
Equity dividend proposed - - 2,644
------- ------- -------
835 587 3,416
------- ------- -------
Net current assets 3,192 2,526 1,429
------- ------- -------
Total assets less current liabilities 50,251 51,596 48,578
Provisions for liabilities and charges (662) (900) (742)
Equity minority interests (2,791) (2,815) (2,930)
------- ------- -------
46,798 47,881 44,906
======= ======= =======
Capital and reserves
Called-up share capital 4,807 4,807 4,807
Share premium account 5,108 5,108 5,108
Capital redemption reserve 59 59 60
Share of associated companies' reserves 18,400 21,046 19,086
Profit and loss account 18,424 16,861 15,845
------- ------- -------
Total equity shareholders' funds 46,798 47,881 44,906
======= ======= =======
Reconciliation of movements in
equity shareholders' funds
Profit attributable to members of
the Company 3,184 2,663 5,095
Equity dividend proposed - - (2,644)
------- ------- -------
3,184 2,663 2,451
Buy-back of shares - (181) (181)
Other recognised gains and losses
relating to the period (1,292) 503 (2,260)
------- ------- -------
Net addition to equity shareholders' funds 1,892 2,985 10
Opening equity shareholders'funds 44,906 44,896 44,896
------- ------- -------
Closing equity shareholders' funds 46,798 47,881 44,906
======= ======= =======
CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 30 June 2004
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2004 2003 2003
£'000 £'000 £'000
Net cash inflow from operating activities 2,224 1,576 3,555
Dividends from associated undertakings 1,898 1,582 2,486
Returns on investments and servicing
of finance (158) (315) (235)
Taxation (868) (833) (1,278)
Capital expenditure and financial investment (1,224) (181) (727)
Equity dividend paid (2,644) (2,284) (2,284)
------- ------- -------
Net cash (outflow)/inflow before
management of liquid resources and financing (772) (455) 1,517
Management of liquid resources
Decrease/(increase) in short-term deposits 398 376 (442)
Financing
Buy-back of own shares - (181) (181)
------- ------- -------
(Decrease)/increase in cash (374) (260) 894
------- ------- -------
Reconciliation of total operating profit to
net cash inflow from operating activities
Total operating profit 4,927 3,811 8,013
Exchange differences (503) 24 (186)
Depreciation 127 155 299
Share of associated undertakings' profits (2,520) (2,410) (4,431)
Increase in stocks (19) (25) (46)
Decrease/(increase) in debtors 67 (127) (118)
Increase in creditors 145 148 24
------- ------- -------
Net cash inflow from operating activities 2,224 1,576 3,555
------- ------- -------
Returns on investments and servicing
of finance
Dividends paid to minorities (204) (358) (324)
Interest and similar income received 46 43 89
------- ------- -------
Net cash outflow on returns on investments
and servicing of finance (158) (315) (235)
------- ------- -------
Taxation
Overseas tax paid (868) (833) (1,278)
------- ------- -------
Capital expenditure and financial
investment
Purchase of tangible fixed assets (1,242) (194) (781)
Sale of tangible fixed assets 18 13 54
------- ------- -------
Net cash outflow from capital
expenditure and financial investment (1,224) (181) (727)
------- ------- -------
Reconciliation of net cash flow
and movement in net funds
(Decrease)/increase in cash in the period (374) (260) 894
(Decrease)/increase in liquid resources (398) (376) 442
Exchange differences (10) 134 (118)
------- ------- -------
Movements in net funds (782) (502) 1,218
Net funds at 1 January 3,865 2,647 2,647
------- ------- -------
Net funds at 30 June/31 December 3,083 2,145 3,865
======= ======= =======
NOTES
1. Statutory information
The financial information for the six-month periods ended 30 June 2004 and
2003 has been neither audited nor reviewed by the Group's auditors and does
not constitute accounts within the meaning of section 240 of the Companies Act
1985. The financial information for the year ended 31 December 2003 is
abridged from the statutory accounts which have been reported on by the
Group's auditors, Deloitte & Touche LLP, and which have been filed with the
Registrar of Companies. The report of the auditors thereon was unqualified
and did not contain a statement under section 237(2) or (3) of the Companies
Act 1985.
2. Accounting policies
These interim accounts have been prepared on the basis of accounting policies
as set out in the annual financial statements at 31 December 2003.
3. Exceptional items
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2004 2003 2003
£'000 £'000 £'000
Loss on sale of tangible fixed assets (28) (14) (51)
Share of associated undertakings'
exceptional items
Gain on sale of tangible fixed assets 147 4 14
Gain on sale of fixed-asset investments - 295 293
------- ------- -------
119 285 256
======= ======= =======
4. Distribution
The Company will be circulating its interim report to shareholders on 5
October 2004 and copies may be obtained thereafter from M.P. Evans (UK)
Limited, 3 Clanricarde Gardens, Tunbridge Wells, Kent TN1 1HQ.
By order of the board
M.P.Evans (UK) Limited
Secretaries
30 September 2004
Enquiries: Philip Fletcher
Telephone: 01892 516333
Fax: 01892 518639
E-mail: philipf@mpevans.co.uk
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