Final Results
R.E.A.Hldgs PLC
26 April 2002
R.E.A. Holdings plc
26 April 2002
Preliminary Results For The Year Ending 31 December 2001
Commentary on preliminary results - 2001
Results
The profit before taxation for 2001, as shown in the accompanying consolidated
profit and loss account, and the comparative figure for 2000, may be analysed as
follows
2001 2000
£'000 £'000
Normal Profits
Continuing operations (34) 233
Discontinued operations 13 (133)
Sale of assets and investments 448 524
_____ _____
427 624
_____ _____
As the table shows, the group results were again dominated by profits from the
divestment of assets. There was a small negative contribution from the
continuing operations. That this should have been the case was only to be
expected. Substantially the whole of the continuing operations now comprises the
group's interest in the East Kalimantan project and, whilst that project is now
moving rapidly into production, the major part of the project was still immature
or newly mature during 2001. Moreover, the average crude palm oil price for 2001
at $286 per tonne was a low of the annual averages of the past ten years (and
compares with a high of $671 per tonne in 1998).
Group development
The year saw the substantial completion of the divestment programme started in
1998. This was initially designed to focus the group's operations and to raise
money for the East Kalimantan project. As the programme progressed, the ultimate
objective was extended to one of basing the future of the group entirely on the
East Kalimantan project. This has now been achieved.
Businesses and assets divested during the year consisted of the activities in
East Africa (mainly comprising the sisal growing operations conducted through
REA Vipingo Plantations Limited but also including the East African residue of
the group's merchanting operations), the North American agricultural interests
(derived through a minority shareholding in Anglo American Agriculture PLC), the
long leasehold interest in the group's former head office at 7 Bedford Square
and the remaining participation in the group's tea gardens in Bangladesh
(although, in this last case, the divestment in part remains subject to
shareholders' approval which is to be sought shortly).
The entire net proceeds of the above divestments have been utilised in, or
earmarked for, the provision of further financing to the East Kalimantan
project.
Net assets
The 2001 balance sheet includes a revaluation of the group's Indonesian fixed
assets. As in the past, the net overall revaluation has been combined with
various exchange translation adjustments. These arise mainly from the impact of
currency fluctuations on the translation into sterling of the local currency
values of overseas estates.
Dividends
The semi-annual dividend on the 9 per cent cumulative preference shares due on
30 June 2001 was duly paid but payment of the subsequent dividend due on 31
December 2001 has been deferred. The directors intend to recommence payment of
preference dividends as soon as the cash resources of the company permit and the
directors are confident that payment of such dividends will not prejudice the
group's ability to take the East Kalimantan project as it now stands to full
maturity without further recourse to ordinary shareholders for additional
capital. In the meanwhile, all arrears of preference dividend will accumulate.
The directors recognise that many preference shares are acquired for income and
that such income should be postponed for as short a period as possible. No
ordinary dividends have been paid or are proposed in respect of 2001.
Consolidated balance sheet 31 December 2001
2001 2000
£000 £000
Fixed asset investments
Tangible fixed assets 50,304 1,625
Investments 507 7,394
_____ _____
50,811 9,019
_____ _____
Current assets
Stocks 1,143 35
Debtors 2,892 8,677
Cash 5,398 4,109
_____ _____
9,433 12,821
Creditors up to one year (39,373) (5,201)
_____ _____
Net current (liabilities) / assets (29,940) 7,620
_____ _____
Total assets less current liabilities 20,871 16,639
Creditors over one year (1,871) (1,100)
_____ _____
Net assets 19,000 15,539
_____ _____
Capital and reserves
Called up share capital 8,812 14,890
Share premium account 1,178 720
Capital redemption reserve 3,240 3,240
Warrants 1,218 1,219
Revaluation reserve (2,316) (772)
Profit and loss account 2,465 (3,778)
_____ _____
Shareholders' funds* 14,597 15,519
Minority interests 4,403 20
_____ _____
Total capital employed 19,000 15,539
_____ _____
* Shareholders' funds comprise equity interest of £8,892,000 (2000 £9,814,000)
and non-equity interest of £5,705,000 (2000 £5,705,000).
Consolidated profit and loss account for the year ended 31 December 2001
2001 2001 2000 2000
£000 £000 £000 £000
Turnover
Continuing 1,326 894
Discontinued 105 13,054
_____ _____
1,431 13,948
Cost of sales (403) (11,485)
_____ _____
Gross profit 1,028 2,463
Other income and expenses (1,223) (2,819)
_____ _____
Continuing (241) (505)
Discontinued 46 149
_____ _____
Group operating loss (195) (356)
Share of operating (loss) / profit of associates
- continuing (29) 124
- discontinued 151 (22)
Disposal of assets and investments 448 524
Interest receivable and similar income 1,131 1,541
Interest payable - associates (807) (547)
Interest payable - group (272) (640)
_____ _____
Profit on ordinary activities before taxation 427 624
Tax on profit on ordinary activities (147) 15
_____ _____
Profit on ordinary activities after taxation 280 639
Minority interests (including non-equity (59) (21)
interests)
_____ _____
Profit for the financial year 221 618
Non-equity dividends (512) (513)
_____ _____
Retained (loss) / profit for the year (291) 105
_____ _____
Earnings per ordinary share
- basic (2.6)p 1.1p
- fully diluted (2.6)p 1.1p
Total consolidated recognised gains and losses for the year ended 31 December 2001
2001 2000
£000 £000
Profit for the financial year 221 618
Currency translation and revaluation adjustments (2,254) (3,231)
_____ _____
(2,033) (2,613)
_____ _____
Consolidated cash flows for the year ended 31 December 2001
2001 2000
£000 £000
Net cash (outflow) / inflow from operating activities (2,522) 5,007
_____ _____
Returns on investments and servicing of finance
Interest received 1,131 1,541
Interest paid (272) (640)
Investment income - 14
Dividends paid to minority shareholders - (40)
Dividends paid to preference shareholders (256) (513)
_____ _____
603 362
_____ _____
Taxation (59) 2
_____ _____
Capital expenditure and financial investment
Purchase of tangible fixed assets (664) (29)
Sale of tangible fixed assets 2,146 -
Sale of investments 406 1,008
_____ _____
1,888 979
_____ _____
Acquisitions and disposals
Purchase of shares in associated companies - (313)
Sale of subsidiaries 3,145 500
Adjustment of selling price of interests in subsidiaries 100 (53)
_____ _____
3,245 134
_____ _____
Equity dividends paid - (368)
_____ _____
Cash inflow before management of liquid resources and financing 3,155 6,116
_____ _____
Management of liquid resources 108 (1,641)
_____ _____
Financing
Net (repayment) of debt up to one year (2,699) (4,972)
Net (repayment)/issue of debt over one year (1,064) 575
Finance lease repayments (7) (129)
Share issue and expenses 1,268 -
_____ _____
(2,502) (4,526)
_____ _____
_____ _____
Increase/(decrease) in cash 761 (51)
_____ _____
Notes to the preliminary accounts
(a) Segment information
In the tables below the group's net assets, turnover and profit before taxation
(excluding result of sales of assets) are analysed by geographical area and by
business class. The element of continuing turnover and profit before taxation
(excluding result of sales of assets) included in total, is separately
identified.
Net assets, in the case of the geographical analysis, are allocated to the area
where the main operation of a particular activity is carried out and where the
majority of that activity's assets are situated. Unallocated items include
general group financing and head office costs; financing which is directly
attributable to a particular activity has been allocated to that activity.
(i) Net assets 2001 2001 2000 2000
Associates Total Associates Total
Net assets - by geographical area £m £m £m £m
United Kingdom - 5.7 - 8.0
Continental Europe - - - 0.3
Bangladesh - 0.5 1.1 1.1
Indonesia - 12.8 3.7 3.7
America - - 0.3 0.3
Africa - - 2.1 2.1
___ ___ ___ ___
- 19.0 7.2 15.5
___ ___ ___ ___
Net assets - by business class
Merchanting - - - 0.3
Agriculture - 13.3 7.2 7.2
Unallocated - 5.7 - 8.0
___ ___ ___ ___
- 19.0 7.2 15.5
___ ___ ___ ___
(ii) Turnover
2001 2001 2000 2000
Total of which Total of which
continuing continuing
Turnover - by geographical area £m £m £m £m
United Kingdom 0.3 0.3 2.7 0.3
Continental Europe - - 5.4 -
Asia 0.9 0.9 2.5 0.2
America - - 2.0 0.1
Africa 0.2 0.1 1.2 0.3
Australasia - - 0.1 -
___ ___ ___ ___
1.4 1.3 13.9 0.9
___ ___ ___ ___
Turnover - by geographical area, by origin of
transaction
United Kingdom 0.7 0.6 11.1 0.8
Continental Europe - - 2.5 -
Africa - - 0.3 0.1
Indonesia (1 month) 0.7 0.7 - -
___ ___ ___ ___
1.4 1.3 13.9 0.9
___ ___ ___ ___
Turnover - by business class
Merchanting 0.1 - 12.1 0.2
Agriculture (1 month) 0.7 0.7 - -
Other activities 0.6 0.6 1.8 0.7
___ ___ ___ ___
1.4 1.3 13.9 0.9
___ ___ ___ ___
(iii) Profit before taxation excluding sales
of assets and investments
2001 2001 2001 2000 2000 2000
Associates Total of which Associates Total of which
£000 £000 continuing £000 £000 continuing
£000 £000
Profit - by geographical
area, by origin of transaction
United Kingdom - 527 489 - 493 654
Continental Europe - - - - 116 -
Bangladesh 35 35 - (1) (1) (1)
Indonesia (660) (523) (523) (129) (129) (129)
America (56) (56) - (122) (122) (92)
Africa (4) (4) - (193) (257) (199)
___ ___ ___ ___ ___ ___
(685) (21) (34) (445) 100 233
___ ___ ___ ___ ___ ___
Profit - by business class
Merchanting - 45 - - 29 65
Agriculture (685) (548) (523) (445) (445) (415)
Other activities - 118 125 - (67) -
Unallocated - 364 364 - 583 583
___ ___ ___ ___ ___ ___
(685) (21) (34) (445) 100 233
___ ___ ___ ___ ___ ___
(b) Taxation
2001 2000
£000 £000
UK Corporation tax (122) (20)
Foreign taxation (97) (51)
Share of taxation of (13) 23
associated companies
Previous years 85 63
___ ___
(147) 15
___ ___
(c) Tangible fixed assets
Consolidated balance sheet
The movement in the year was as follows:
Estates, land and Leasehold Plant and Total
buildings property machinery
£'000
£'000 £'000 £'000
Cost or valuation
Beginning of year - 1,500 233 1,733
Revaluation and foreign exchange (4,187) - 40 (4,147)
Additions 580 - 188 768
New subsidiary 50,260 - 5,645 55,905
Subsidiaries sold - - (23) (23)
Disposals - (1,500) (116) (1,616)
______ ______ ______ ______
46,653 - 5,967 52,620
______ ______ ______ ______
Depreciation
Beginning of year - - 108 108
Revaluation and foreign exchange 6 - 8 14
Charge 70 - 67 137
New subsidiary 1,000 - 1,115 2,115
Subsidiaries sold - - (17) (17)
Disposals - - (41) (41)
______ ______ ______ ______
End of year 1,076 - 1,240 2,316
______ ______ ______ ______
Net book value
End of year 45,577 - 4,727 50,304
______ ______ ______ ______
Beginning of year - 1,500 125 1,625
______ ______ ______ ______
At the year end the net book value of finance leases in plant and machinery
included above was £150,000 (2000 £44,000).
The estates were revalued at the year end by PT Cakra Hasta Konsultan, an
independent external valuer in Indonesia, at 31 December 2001. The valuation is
based on a seven year crop method.
(d) Creditors: falling due within one year
Consolidated balance sheet 2001 2000
£000 £000
Bank loans and overdrafts - agriculture (27,931) -
Bank loans and overdrafts - merchanting - (19)
Current portion of debenture loans - (75)
Loan from related party - (2,630)
Loan from a shareholder in a subsidiary (5,638) -
Lease obligations (83) (38)
Trade creditors (1,284) (43)
Associates - (10)
Taxation and social security (142) (43)
Other creditors (1,493) (2,219)
Accruals (2,802) (124)
___ ___
(39,373) (5,201)
___ ___
During the year, a subsidiary defaulted on payment of interest due on bank loans
and overdrafts - agriculture and of principal due on certain of those loans. The
subsidiary has entered into negotiations with its bankers to reschedule these
loans and has agreed a memorandum of understanding setting out proposed terms
for this rescheduling. The first date on which a repayment will be made is to be
postponed. Since under FRS 4 Capital Instruments the maturity of debt is
determined by reference to the earliest date on which the lender can require
repayment, all bank loans are shown as fully due within one year.
A subsidiary has granted a floating charge over its fixed assets, stocks and all
other tangible properties to secure bank borrowings of £17,931,000 and has
granted a mortgage over the phase II development of the estate to secure bank
borrowings of £7,586,000.
(e) Audit opinion and fundamental uncertainty
This statement was approved by the board on 26 April 2002. It does not
constitute the Company's statutory accounts for the year ended 31 December 2001
but is derived from those accounts. The Auditors have reported on those accounts
and their report is unqualified and did not contain statements under s237(2) or
(3) of the Companies Act 1985. However, in the audit report in respect of the
year ended 31 December 2001, the auditors have referred to fundamental
uncertainty affecting the group in the following terms:
'Fundamental uncertainty and going concern
The group's operations in Indonesia continue to be exposed to adverse
economic, political and social conditions. In forming our opinion we have
considered the adequacy of disclosures, made in the financial statements
concerning the economic, political and social situation in Indonesia and its
effect on the group.
Although exchange rates and other economic indicators were less than
volatile during the year, it is not possible to determine the effect that
social unrest, political change or further deterioration in economic
conditions may have on future values of assets, earnings, profitability or
cash flows of the group. The financial statements include the effects of
these factors so far as can be currently determined and estimated.
The financial statements have been prepared on a going concern basis. There
remains a fundamental uncertainty as to the effect on the group's operations
of the economic, political and social conditions in Indonesia.
Our opinion is not qualified in this respect.
In forming our opinion, we have considered the adequacy of disclosures made
in the financial statements in Notes 7 and 23 concerning the default of
payment of interest by PT REA Kaltim Plantations on its loans, and the
uncertainty over the rescheduling or replacement of these loans. In view of
the significance of this uncertainty we consider that it should be brought
to your attention but our opinion is not qualified in this respect.'
It is expected that full accounts for 2001 will be despatched to shareholders
today.
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