Interim Results

R.E.A.Hldgs PLC 06 September 2004 R.E.A. HOLDINGS PLC =================== Summary of results for the six months ended 30 June 2004 to to 30 June 30 June 2004 2003 Change £'000 £'000 % •Sales 8,806 6,169 + 43 •Earnings before interest and similar items, tax, depreciation and amortisation 4,650 2,306 + 102 •Profit on ordinary activities before tax 2,621 755 + 247 •Profit on ordinary activities after tax 2,006 550 + 265 •Profit attributable to ordinary shareholders 1,328 61 + 2,077 •Earnings per ordinary share 6.8p 0.4p + 1,600 •Dividend per ordinary share nil nil nil Chairman's statement -------------------- Results The profit on ordinary activities before taxation for the first half of 2004, as shown in the accompanying consolidated profit and loss account, amounted to £2,621,000. This represented an increase of 247 per cent on the profit on ordinary activities before taxation for the corresponding period of the preceding year of £755,000. The increase in profits would have been greater were it not for the negative impact of exchange movements. These impacted the group in two ways. First, the relative strength of sterling against the US dollar meant that the percentage increase in group profits that was achieved in US dollar terms (being the currency in which the group's profits are largely earned) was reduced by some 11 per cent when expressed in sterling. Second, group profits were reduced by £718,000 on crystallisation of an exchange loss on the repayment of a US dollar denominated intra-group loan, although substantially the whole of this loss had previously been accounted for in the exchange portion of revaluation reserve. Profits did, however, benefit from gains of some £471,000 on repurchase of group loan balances. Operations The fresh fruit bunch ('FFB') crop for the first six months of 2004 amounted to 147,000 tonnes, some 50,500 tonnes higher than for the equivalent period of 2003. Rainfall during the period was relatively high with an average level across the group's planted hectarage of in excess of 2,500 millimetres. This, and the good crop realised to-date, have left the group well placed to achieve the budgeted FFB production for 2004 of 298,000 tonnes. Whilst positive for production, high rainfall is a negative for operational logistics and this was reflected in a slightly disappointing crude palm oil ('CPO') extraction rate for the six month period of 24.1 per cent. This meant that CPO production for the period was 35,500 tonnes, compared with 24,000 tonnes for the first half of 2003. Palm kernel output was 6,100 tonnes. Further modifications are being made to the palm oil mill to improve the palm kernel extraction rate. These modifications will be completed shortly. Sales revenue in the first six months benefited from the firm CPO prices that prevailed for the majority of the six month period but. in June, CPO prices fell back to levels similar to those that prevailed twelve months earlier. Planting out of the first 3,000 hectares of the extension planting programme initiated last year is proceeding satisfactorily. The production of seedlings from the nurseries is on programme and it is hoped that the field planting will be completed substantially on schedule. Land preparation for the next 3,000 hectares of the programme is in hand while a first nursery has been established for the new joint venture development area adjacent to the group's existing developed areas. Group development As has already been reported to shareholders, in April 2004, the group drew down new loan funding of $11 million from an Indonesian bank and applied that funding in repaying indebtedness of a like amount to Commerzbank (South East Asia) Limited. At the same time, the group repaid loans totalling $8.175 million (together with accrued current interest) from interests connected with Mr M E Zukerman. Deferred interest on the $8.175 million remains outstanding for settlement when the conditions for payment of such interest have been met. Subsequently, the group has secured support for its Indonesian debt restructuring plan from all those of its Indonesian lenders who had not previously approved the plan. As a result the Indonesian debt restructuring is now complete and the group is current on all debt service. Proposals relating to the company's preference share capital that were circulated on 5 July 2004 to shareholders and holders of other securities of the company were duly approved at meetings held on 29 July 2004. The approval resulted in a scrip issue of 1,026,643 new preference shares to existing holders of preference shares (at the rate of 18 new preference shares, credited as fully paid, for each 100 shares held) and the cancellation of £1,026,643 arrears of dividend on the preference shares (such arrears being shown as 'other reserve' in the accompanying consolidated balance sheet). Preference shareholders elected to sell back to the company at par 99,345 new preference shares arising from the scrip issue and these shares were resold to placees. In addition, the company placed 1,000,000 new preference shares at par for cash. As a result of these transactions, all arrears of preference dividend have been eliminated. The position as respects litigation pending or threatened against the group by interests connected with Mr M E Zukerman remains as was detailed in the circular of 5 July 2004. International financial reporting standards All listed companies will be required to present consolidated financial statements which comply with International Financial Reporting Standards ('IFRS') for accounting periods commencing on or after 1 January 2005. Hence the company's financial statements in 2005, both for the period to 30 June 2005 and for the year as a whole, will be prepared under IFRS with all comparative figures being shown on that basis. As a result, the accompanying statements to June 2004 will have to be restated to the IFRS basis for comparison purposes in next year's interim statement. As IFRS standards are still being revised and reissued, the company considers it premature to provide IFRS basis figures at this juncture. Prospects Whilst the CPO price has fallen back from the level of $550 per tonne (spot CIF Rotterdam) achieved in April 2004, it remains at over $400 per tonne, a level at which the margins achievable by the group are still remunerative. On that basis, the directors remain confident of a good final result for 2004. RICHARD M ROBINOW Chairman 6 September 2004 Consolidated profit and loss account for the six months ended 30 June 2004 -------------------------------------------------------------------------- 6 months to 6 months to Year to 30 June 30 June 31 December 2004 2003 2003 £'000 £'000 £'000 Turnover 8,806 6,169 13,781 Cost of sales (3,846) (3,677) (7,469) ----- ----- ------ Gross profit 4,960 2,492 6,312 Administrative expenses (1,342) (1,243) (2,236) ----- ----- ------ Group operating profit 3,618 1,249 4,076 Disposal of fixed assets and investments - continuing 7 - 24 Disposal of fixed assets and investments - discontinued - - (281) Interest receivable and similar income 154 63 165 Interest payable (1,158) (557) (1,914) ----- ----- ------ Profit on ordinary activities before taxation 2,621 755 2,070 Tax on profit on ordinary activities (615) (205) (345) ----- ----- ------ Profit on ordinary activities after taxation 2,006 550 1,725 Minority interests (including non-equity interests) (422) (233) (383) ----- ----- ------ Profit for the period 1,584 317 1,342 Non-equity dividends (256) (256) (513) ----- ----- ------ Retained profit for the period 1,328 61 829 ===== ===== ====== Earnings per 25p ordinary share Basic 6.8p 0.4p 5.1p Fully diluted 5.0p 0.4p 3.7p All operations in all periods are continuing except where stated. Consolidated balance sheet as at 30 June 2004 --------------------------------------------- 30 June 30 June 31 December 2004 2003 2003 £'000 £'000 £'000 Fixed assets Tangible fixed assets 50,845 49,723 50,238 ------ ------ ------ Current assets Stocks 1,189 984 1,346 Debtors 2,298 3,702 3,710 Cash 3,703 7,015 6,790 ------ ------ ------ 7,190 11,701 11,846 ------ ------ ------ Creditors: falling due within one year Debt (1,090) (8,375) (8,344) Other (4,468) (4,535) (6,900) ------ ------ ------ (5,558) (12,910) (15,244) ------ ------ ------ Net current assets / (liabilities) 1,632 (1,209) (3,398) ------ ------ ------ Creditors: falling due after more than one year Convertible debt (3,069) (3,448) (3,463) Other debt (18,271) (19,882) (15,194) Other (103) (185) (118) ------ ------ ------ Provision for liabilities and charges (1,586) - (288) ------ ------ ------ Net assets 29,448 24,999 27,777 ====== ====== ====== Capital and reserves Called up share capital 10,591 10,042 10,376 Share premium account 4,860 3,172 4,665 Capital redemption reserve 3,240 3,240 3,240 Warrants 1,212 1,218 1,212 Revaluation reserve (622) (945) (384) Other reserve 1,027 1,024 1,027 Profit and loss account 4,661 2,515 3,333 ------ ------ ------ Total shareholders' funds 24,969 20,266 23,469 Equity minority interests 2,198 2,130 2,002 Non-equity minority interests 2,281 2,603 2,306 ------ ------ ------ Total capital employed 29,448 24,999 27,777 ====== ====== ====== Shareholders' funds may be analysed as: Equity interests 18,237 13,537 16,737 Non-equity interests 6,732 6,729 6,732 ------ ------ ------ 24,969 20,266 23,469 ====== ====== ====== Consolidated statement of total recognised gains and losses for --------------------------------------------------------------- the six months ended 30 June 2004 --------------------------------- 6 months to 6 months to Year to 30 June 30 June 31 December 2004 2003 2003 £'000 £'000 £'000 Profit for the period 1,584 317 1,342 Currency translation adjustments (238) (342) (2,175) Revaluation adjustments - (71) 2,325 ----- --- ----- Total recognised gains and losses 1,346 (96) 1,492 ===== === ===== Movement in total shareholders' funds for the six months ended 30 June 2004 --------------------------------------------------------------------------- 6 months to 6 months to Year to 30 June 30 June 31 December 2004 2003 2003 £'000 £'000 £'000 Profit for the financial period 1,584 317 1,342 Goodwill previously written off, reinstated - - 50 Dividends (256) - (256) Issue of shares 410 3,094 4,921 Redemption of warrants - - (6) Realised exchange loss arising on repayment of long term intra-group loans and transferred to profit and loss account 718 - - Revaluation and foreign exchange translation (956) (413) 150 ------ ------ ------ 1,500 2,998 6,201 Shareholders' funds at beginning of period 23,469 17,268 17,268 ------ ------ ------ Shareholders' funds at end of period 24,969 20,266 23,469 ====== ====== ====== Consolidated cash flow statement for the six months ended 30 June 2004 ---------------------------------------------------------------------- 6 months to 6 months to Year to 30 June 30 June 31 December 2004 2003 2003 £'000 £'000 £'000 Net cash inflow from operating activities 3,554 2,529 7,259 Returns on investment and servicing of finance (542) (494) (2,006) Taxation (27) (36) (11) Purchase of tangible fixed assets (1,393) (2,282) (4,675) Sale of tangible fixed assets 12 - 40 Sale of investments - - 597 Acquisitions and disposals - (75) - Equity dividend paid - - - ----- ----- ----- Cash inflow / (outflow) before management of liquid resources and financing 1,604 (358) 1,204 Management of liquid resources 4,325 (758) (4,226) Issue of ordinary share capital and expenses - 3,094 4,901 Net repayment of debt (4,554) (794) (2,863) ----- ----- ----- Increase / (decrease) in cash 1,375 1,184 (984) ===== ===== ===== Reconciliation of net cash flows to net debt for -------------------------------------------------- the six months ended 30 June 2004 --------------------------------- 6 months to 6 months to Year to 30 June 30 June 31 December 2004 2003 2003 £'000 £'000 £'000 Increase / (decrease) in cash in the period 1,375 1,184 (984) Cash flow from debt and leases 4,554 794 2,863 Cash flow from the management of liquid resources (4,325) 758 4,226 ----- ----- ----- 1,604 2,736 6,105 New debt and leases, net (334) (128) (521) Exchange 214 614 2,117 ------ ------ ------ Decrease in net borrowings 1,484 3,222 7,701 Net debt at beginning of period (20,211) (27,912) (27,912) ------ ------ ------ Net debt at end of period (18,727) (24,690) (20,211) ====== ====== ====== Notes to the interim statement ------------------------------ 1.Segmental information 6 months to 6 months to Year to 30 June 30 June 31 December 2004 2003 2003 £'m £'m £'m Turnover by geographical origin: United Kingdom 0.1 0.1 0.2 Indonesia 8.7 6.1 13.6 --- --- ---- 8.8 6.7 13.8 === === ==== 6 months to 6 months to Year to 30 June 30 June 31 December 2004 2003 2003 £'000 £'000 £'000 Profit by geographical origin: United Kingdom (853) (235) 956 Indonesia 3,502 990 1,371 ----- --- ----- 2,649 755 2,327 Disposal of assets and investments (28) - (257) ----- --- ----- 2,621 755 2,070 ===== === ===== 2.Interest payable and similar charges 6 months to 6 months to Year to 30 June 30 June 31 December 2004 2003 2003 £'000 £'000 £'000 Interest payable on bank loans and overdrafts 458 334 1,833 Interest payable on other loans 346 453 1,209 ----- --- ----- 804 788 3,042 Interest capitalised (364) (231) (1,128) ----- --- ----- 440 557 1,914 Realised exchange loss on repayment of long term intra-group foreign currency loans 718 - - ----- --- ----- 1,158 557 1,914 ===== === ===== 3.Taxation 6 months to 6 months to Year to 30 June 30 June 31 December 2004 2003 2003 £'000 £'000 £'000 UK corporation tax charge for the period - - - Relief for overseas tax - - - --- --- --- - - - Overseas tax 39 25 57 Adjustments in respect of prior periods - - - --- --- --- Current tax 39 25 57 Deferred tax 576 180 288 --- --- --- Tax charge on profit on ordinary activities 615 205 345 === === === 4.Earnings per share 6 months to 6 months to Year to 30 June 30 June 31 December 2004 2003 2003 £'000 £'000 £'000 Profit after non-equity dividends (basic earnings) 1,328 61 829 Interest saved on conversion of debt 47 53 106 ----- --- --- Profit after interest saving (diluted earnings) 1,375 114 935 ===== === === Number of shares ('000) Basic 19,399 15,423 16,385 Diluted 27,626 23,378 24,965 5.Reconciliation of operating profit to operating cash flows 6 months to 6 months to Year to 30 June 30 June 31 December 2004 2003 2003 £'000 £'000 £'000 Operating profit 3,618 1,249 4,076 Depreciation and amortisation 979 1,057 2,114 Decrease / (increase) in stocks 10 (80) (573) Decrease / (increase) in debtors 1,208 986 (379) Increase / (decrease) in creditors (2,354) (700) 1,942 Exchange gain 93 17 79 ----- ----- ----- Net cash inflow from operating activities 3,554 2,529 7,259 ===== ===== ===== 6.Basis of preparation The interim financial information has not been audited and does not constitute statutory accounts for the purpose of Section 240 of the Companies Act 1985. It complies with applicable UK accounting standards and has been prepared on the basis of accounting policies set out in the 2003 annual report. The figures for the year ended 31 December 2003 are abridged and have been extracted from the statutory accounts filed with the Registrar of Companies on which the auditors gave an unqualified report. A copy of the interim statement for the six months to 30 June 2004 will be placed on the company's website www.rea.co.uk. This information is provided by RNS The company news service from the London Stock Exchange

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