Final Results
ROWE EVANS INVESTMENTS PLC
OIL PALM AND RUBBER PLANTATIONS IN INDONESIA
ASSOCIATED COMPANIES WITH PLANTATION AND
PROPERTY-DEVELOPMENT INTERESTS IN MALAYSIA AND
COTTON FARMING IN AUSTRALIA
Preliminary announcement of unaudited results
for the year ended 31 December 2002
Highlights from the chairman's statement and preliminary announcement
for the year ended 31 December 2002 are as follows:-
* Profit before tax £6,698,000 (2001 £3,192,000), an
increase of 110%
* Operating cash flows £2,751,000 (2001 £1,573,000)
* Dividend increased to 4.75p per share (2001 - 4.25p)
* Substantially improved palm oil prices in 2002 primarily
responsible for increased profits
* Crops of oil palm fresh fruit bunches ("f.f.b.") lower
than expected as the palms went through a cyclical
downturn
* Crops from newly-acquired 64% subsidiary, PT Sembada
Sennah Maju, made a useful contribution
* Share of associates' profits before tax £3,540,000 (2001
£2,405,000 before exceptional costs), an increase of 47%
mainly due to the strong palm oil price
* PT Agro Muko (30.43% owned) has, in 2003, purchased 3.48%
of its own shares and paid a dividend in April 2003.
Prospects good for continuing strong cash flows
* Contracts out to tender re construction of palm oil mill
on Pangkatan Estate. Work expected to commence mid-2003
with completion end 2004
* Palm oil prices, although slightly down from year-end
level of US$460/tonne, still at satisfactory level of
around US$420
* Crops so far in 2003 ahead of the same period last year
* Transfer to AIM successfully completed in 2002
Extract from the chairman's statement
INTRODUCTION
Results and dividend
I am delighted to report a profit before taxation for the year of
£6,698,000, which compares with £3,192,000 for 2001. The 110% increase
in profits was primarily due to much improved palm oil prices during the
year, offset by lower-than-expected crops and the strengthening of the
Indonesian Rupiah. The Group generated operating cash flows of
£2,751,000 (2001 £1,573,000). Your board recommends that the dividend is
increased to 4.75p per share from last year's 4.25p.
REVIEW OF THE YEAR
The palm oil market
During the year continued strong demand for palm oil worldwide resulted
in lower stocks despite increased production and, as a consequence,
prices increased. Vegetable oils in general experienced the same
conditions but, with palm oil enjoying a price advantage, demand was
particularly strong, especially from the traditional markets of India,
the EU and China. The palm oil price climbed steadily throughout the
year from around US$300 per tonne at the beginning to some US$460 at the
year end. The price has weakened a little since the year end but still
remains around US$420.
Exchange rates
During the year most currencies, including Sterling and the Indonesian
Rupiah, strengthened against the US Dollar. With the average
Sterling/Rupiah rate for the year at £1 = Rp13,976 compared with 2001's
Rp14,666, this had a marginally negative effect on Group earnings as
palm oil sales originate in US Dollars whilst a significant proportion
of estate costs are Rupiah based.
Results for the year
Estate profit
The overriding influence on the year's results was the strength of the
palm oil price. The average price that we received for our oil palm
fresh fruit bunches ("f.f.b.") in local currency was Rp599,000 per tonne
in 2002 compared with Rp397,000 per tonne in 2001, a 51% increase. The
crop of oil palm f.f.b. was, however, a little disappointing with
production for the year, of 131,000 tonnes (which includes some 11,000
tonnes from the new estate, Sennah), somewhat behind the estimate of
142,000 tonnes and indeed was lower (with Sennah excluded) than 2001's
crop. 2002 was a dry year with rainfall in North Sumatra and Aceh, where
our estates are located, some 20% below normal. This may to some extent
have affected the yield but generally it is also likely that the palms
were experiencing a cyclical downturn after the good crops achieved in
2000. It is hoped that an upturn will take place in 2003.
With regard to rubber, the crop was ahead of expectations and much in
line with last year - some 560,000 kgs were also contributed by Sennah.
After a long period of poor prices, rubber finally picked up in 2002 and
the average that we received for the year was Rp7,083/kg, compared with
last year's Rp5,404, a 31% increase.
As a result of the above, the estate profit for the year amounted to
£3,339,000, a 106% increase over 2001's profit of £1,620,000 before
exceptional items.
Associated companies
The Group's share of the profits before taxation of the associated
companies was £3,540,000 compared with 2001's profits before exceptional
items of £2,405,000, an increase of 47%.
Indonesia
PT Agro Muko (30.43% owned)
F.f.b. crops, although they recovered to some extent from 2001's low
levels, were nevertheless somewhat below expectations although this was
more than compensated for by the effect of the significantly improved
palm oil price, referred to above. As a result, PT Agro Muko reported
substantially higher profits.
PT Kerasaan Indonesia (36.00% owned)
An improved f.f.b. crop, albeit slightly behind expectations, coupled
with the substantially stronger palm oil prices resulted in markedly
higher profits during 2002.
Malaysia - Bertam Holdings PLC (46.46% held)
The Bertam Holdings PLC Group reported sharply increased plantation
earnings in Malaysia, primarily resulting from the strength of the palm
oil price. Its share of its associates was lower as its 40%-owned
Bertam Properties Sdn. Berhad did not repeat the property disposals
achieved in 2001 and the Malaysian property market remained subdued.
Exceptional investment-disposal gains were recorded in both 2001 and
2002, whilst there were exceptional net costs in 2001 arising mainly
from the substantial merger costs in that year. Overall, Rowe Evans
Investments PLC's share of Bertam Holdings PLC's profits in 2002 was
some 20% higher than the previous year.
During 2002, and continuing in 2003, Bertam Holdings PLC purchased a
considerable number of its own shares with the result that the shares
held by Rowe Evans Investments PLC, which represented 43.41% at 1
January 2002, represented 46.46% at the year end. As at the date of this
report that percentage is 46.73%.
Australia - Lendu Holdings PLC (35.11% owned)
The Australian irrigated cotton farm owned by Lendu Holdings PLC
achieved a record crop in 2001/02 of 18,350 bales, sold at reasonably
good prices. This, together with higher profits from the cattle
operations and gains from investment sales, resulted in a marked
improvement in the profit when compared with last year's loss.
Review of operating activities
Group companies
Pangkatan Estate
Whilst the f.f.b. crop in 2002 was similar to the previous year, it did
not match up with original expectations but it is hoped that yields will
improve in 2003. The rubber areas performed well, achieving a similar
crop to 2002 but pleasingly somewhat ahead of the budget for the year.
With regard to the proposed construction of the palm oil mill, good
progress has been made. A loan facility of US$3 million has been agreed
with the German development bank, DEG, and this will be drawn down when
required, probably in the latter part of 2003. The building of the mill
will be overseen by our managing agents, PT Tolan Tiga Indonesia, and
the construction contracts have gone out to tender. As soon as they have
been awarded, work will commence on the ground, expected to be in July.
As originally anticipated, it is hoped that the mill will be
commissioned at the end of 2004. Until the contracts have been awarded,
the exact cost will not be known but it is anticipated that it will be
up to approximately US$6 million.
Simpang Kiri Estate
Although not achieving its budget for the year, the estate did well to
improve on 2001's f.f.b. crop. The security problems in Aceh have been
well documented and, although a tentative ceasefire was implemented
towards the end of 2002, there was an atmosphere of high tension
throughout the province during the year. Fortunately, most of the
problems have been further north than the estate which is on the
southern border with North Sumatra. In the circumstances, management did
well to keep the estate running normally. During 2002 66 hectares were
replanted and 79 are scheduled for 2003.
Bilah Estate
The crop for the year was slightly lower than both budget and last year
but yields were nevertheless reasonably good. 10 hectares of low-lying
land were planted in 2002 and the remaining 10 will be dealt with in
2003 after which the estate will be fully planted.
Sennah Estate
64% of PT Sembada Sennah Maju, the company owning Sennah Estate, was
acquired in March 2002. The strong palm oil prices that prevailed during
2002 meant that our ownership of this estate got off to a good start. I
mentioned last year that it was our intention to replant the rubber
areas straightaway and, accordingly, the programme for 2003 is for 295
hectares. The remaining 251 hectares of rubber will be replanted in 2004
and then it will be decided how best to tackle the oil palm - some areas
are substandard and it may be deemed sensible to replant them earlier
than normal.
Associated companies
Indonesia
PT Agro Muko
Although the f.f.b. crop was higher in 2002 than the previous year, it
did not reach expectations but this was more than compensated for by the
strength of palm oil prices during the year. At the end of 2002, the
company's planted area consisted of some 15,000 hectares of oil palm and
1,800 hectares of rubber. By 2005 the area under oil palms will be
around 16,500 hectares.
Now that the borrowings have been cleared, the company is set for a
period of positive cash flows. Using its own resources, the company was
able, in early 2003, to purchase 3.48% of its own shares from a
shareholder who had decided to divest. As a result, the Group's holding
has increased to 31.53%. A US$1 million dividend was paid in April 2003
and it has been intimated that henceforth there will be a regular
programme of dividend payments.
PT Kerasaan Indonesia
This well-established estate continues to generate good cash flows and
profits. Indeed, the Group received some £430,000 by way of dividends
after Indonesian withholding tax during 2002.
Malaysia - Bertam Holdings PLC
Bertam Holdings PLC's assets consist primarily of Malaysian land with
varying degrees of development potential and investments in land-based
companies. Although the property market in Malaysia is somewhat subdued
at the moment, the value of raw land has, by and large, held up and in
the meantime the plantation activities have benefited from the strength
of the palm oil price.
The investment that the group has made in Asia Green Environmental Sdn.
Berhad has much promise. A great deal of interest has been expressed in
the company's system of processing liquid and solid waste from palm oil
mills into nutritious compost which can be returned to the field. One of
these systems will be installed at the Pangkatan mill.
Australia - Lendu Holdings PLC
After a record cotton crop was achieved by the group in 2001/02 one of
the severest droughts in living memory hit large parts of Australia,
including Southern Queensland and Northern New South Wales where the
farms are located. As a result, the planting for the 2002/03 season had
to be restricted and the company reported that a reduced crop is
therefore expected for the current year.
In August 2002 another cotton farm with 8 water licences was acquired.
The total water available from these licences is more than that required
by the new farm and the surplus can be utilised for the group's existing
areas.
The company has also reported that it has changed its strategy with
regard to its cattle operations. Instead of tying up capital in running
a breeding herd, it has been decided to sell the herd and undertake
"backgrounding" cattle from outside sources. These cattle will be
fattened on the company's upgraded pastures and the owners will be
charged a fee related to the weight gain achieved.
CURRENT TRADING
Crops have, to date, been at improved levels compared with the same
period last year. Palm oil prices have fallen back a little to around
US$420 a tonne from the level of US$460 at the year end but are still
well above the levels of a year ago, whilst rubber prices have
maintained the improvement of the second half of 2002. Sterling has
weakened slightly from the year-end level against the Indonesian Rupiah
of £1 = Rp14,338 to the current level of around Rp13,900.
INVESTMENTS IN ASSOCIATED UNDERTAKINGS
During the year a detailed review of the consolidation accounting
process was carried out. As a result, an adjustment has been made to the
Group's share of the reserves of its associated undertakings which
reflects the retranslation of the Group's share of the net assets of
those associates, using the exchange rates at 31 December 2002. This
adjustment has no impact on either the profit and loss account or the
value of the associates but it has had the effect of reducing their book
value by £3,241,000. At 31 December 2002 the market value of the listed
associates was £31,511,000 compared with £21,043,000 at the end of 2001,
and the directors' valuation of the unlisted associates was £24,000,000
compared with 2001's £22,100,000.
THE ALTERNATIVE INVESTMENT MARKET (AIM)
As foreshadowed in the 2002 interim report, the Company transferred
trading in its shares to AIM on 28 October 2002. The volume of shares
traded has increased and your board is confirmed in its opinion that the
AIM listing is more appropriate for a small company like Rowe Evans
Investments PLC.
Preliminary results (unaudited)
The board announces the following unaudited results and proposed
dividend for the year ended 31 December 2002:-
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the year ended 31 December 2002
2002 2001
Total Total
£'000 £'000
Turnover 6,399 3,775
Cost of sales (3,060) (2,450)
-------- --------
Estate profit 3,339 1,325
Administrative expenses (557) (410)
Exchange (losses)/gains (60) 129
-------- --------
Group operating profit 2,722 1,044
Share of operating 3,540 2,255
profit in associates
-------- --------
Total operating profit 6,262 3,299
Exceptional items
(note3)
Net gains on sale 316 109
of fixed assets
Fundamental
reorganisation of
associated undertaking 34 (381)
-------- --------
Profit on ordinary 6,612 3,027
activities before interest
Interest receivable and 86 165
similar income
-------- --------
Profit on ordinary activities 6,698 3,192
before taxation
Tax charge on profit on (1,887) (837)
ordinary activities (note 2)
-------- --------
Profit on ordinary activities 4,811 2,355
after taxation
Equity minority interests (535) (212)
-------- --------
Profit on ordinary activities
attributable
to the members of 4,276 2,143
Rowe Evans Investments PLC
Equity dividend proposed (2,284) (2,057)
(note 1)
-------- --------
Profit retained for the 1,992 86
financial year
======== ========
Basic earnings per 10p 8.84 4.43
share - pence
(note 4)
======== ========
Diluted earnings per 10p 8.80 4.43
share - pence
(note 4)
======== ========
All operations are classed as continuing.
CONSOLIDATED BALANCE SHEET
At 31 December 2002
2002 2001
£'000 £'000 £'000 £'000
Fixed assets
Tangible assets 12,717 8,863
Investments 35,262 40,274
-------- -------
47,979 49,137
Current assets
Stocks 175 130
Debtors 647 647
Investments 2,494 3,334
Cash at bank 153 55
and in hand
-------- -------
3,469 4,166
-------- -------
Creditors: Amounts
falling due
within one year
Trade creditors 203 131
Other creditors
including 480 63
taxation and social
security
Equity dividend 2,284 2,057
proposed
-------- -------
2,967 2,251
-------- -------
Net current assets 502 1,915
------- ------
Total assets less
current 48,481 51,052
liabilities
Provisions for
liabilities (790) (484)
and charges
Equity minority (2,795) (1,191)
interests
------- ------
Net assets 44,896 49,377
======= ======
Capital and reserves
Called-up share 4,822 4,840
capital
Share premium 5,108 5,108
account
Revaluation - 685
reserve
Capital redemption 45 27
reserve
Share of associated
companies' reserves 20,153 24,388
Profit and loss 14,768 14,329
account
------- ------
Total equity 44,896 49,377
shareholders' funds
======= ======
CONSOLIDATED CASH-FLOW STATEMENT
At 31 December 2002
2002 2001
£'000 £'000
Net cash inflow from 2,751 1,573
operating activities
Returns on investments 1,630 1,488
and servicing of finance
Taxation (276) (431)
Capital expenditure (458) (206)
and financial investment
Acquisitions and disposals (2,397) -
Equity dividend paid (2,057) (2,057)
-------- --------
Net cash (outflow)/inflow
before management (807) 367
of liquid resources
and financing
Management of liquid
resources
Decrease/(increase) 890 (425)
in short-term deposits
Financing
Issue of shares to 118 -
minority
Buy back of own shares (173) -
-------- --------
Increase/(decrease) 28 (58)
in cash
======== ========
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
For the year ended 31 December 2002
2002 2001
£'000 £'000
Profit attributable to the 4,276 2,143
members of the Company
Unrealised share of associated (3,300) 2,409
undertakings' reserves
Exchange differences on (3,000) (413)
foreign-currency net investments
-------- --------
Total recognised gains (2,024) 4,139
and losses for the year
======== ========
NOTES
1) Equity dividend proposed
The board recommends a dividend of 4.75p per 10p share
(2001 - 4.25p)
2002 2001
Amount per 10p share 4.75p 4.25p
Cost £2,284,000 £2,057,000
Payable on or after 10-06-2003 28-06-2002
Record date 09-05-2003 10-05-2002
Ex-dividend date 07-05-2003 08-05-2002
2) Taxation
2002 2001
£'000 £'000
United Kingdom corporation
tax 206 189
charge for the year
Relief for overseas taxation (206) (189)
-------- --------
Overseas taxation 1,018 548
Adjustments in respect 2 (2)
of prior periods
-------- --------
1,020 546
Share of associated 915 381
undertakings' taxation
-------- --------
1,935 927
Deferred taxation (48) (90)
-------- --------
Tax on profit on 1,887 837
ordinary activities
======== ========
Unrelieved losses of £3,143,000 (2001 £2,750,000) remain
available to offset future taxable profits of Group companies.
3) Exceptional items 2002 2001
£'000 £'000
Exceptional cost included
in cost of sales
Provision for - (295)
past-service liabilities
-------- --------
Share of associated
undertakings' exceptional items
Provision for - (150)
past-service liabilities
-------- --------
Net gain on sale of
fixed assets
Group gain on sale of 6 -
fixed assets
Share of associated
undertakings' net gains on
sale of fixed assets 3 109
Share of associated
undertakings' net gains on
sale of fixed-asset 307 -
investments
-------- --------
316 109
-------- --------
Fundamental reorganisation
of associated
undertaking
Group share of
Bertam Holdings PLC 34 (381)
merger credit/(costs)
-------- --------
Total net exceptional 350 (717)
credits/(costs)
======== ========
4) Basic and diluted earnings per share
The calculation of basic earnings per 10p share is based on profits of
£4,276,000 and on 48,378,553 shares which was the average number of
shares in issue during the year. The calculation of basic and diluted
earnings per share in 2001 was based on profits of £2,143,000 and on
48,400,073 shares which was the average number of shares in issue during
that year.
The calculation of diluted earnings per 10p share in 2002 was based on
profits of £4,276,000 and on 48,607,150 shares, which was the diluted
average number of shares in issue during the year. There was no dilution
of earnings per 10p share in 2001. The additional shares used in the
calculation of the 2002 diluted earnings per share represent an
adjustment made for shares under option.
5) Financial information
The financial information set out in the announcement does not
constitute the Company's statutory accounts for the years ended 31
December 2002 or 2001. The financial information for the year ended 31
December 2001 is derived from the statutory accounts for that year which
have been delivered to the Registrar of Companies. The auditors reported
on those accounts; their report was unqualified and did not contain a
statement under section 237(2) or (3) of the Companies Act 1985. The
statutory accounts for the year ended 31 December 2002 will be finalised
on the basis of the financial information presented by the directors in
this preliminary announcement and will be delivered to the Registrar of
Companies following the Company's annual general meeting.
6) Timetable
The report and financial statements will be despatched to shareholders
on 9 May 2003 and the annual general meeting will be held on 9 June
2003.
7) Distribution
Copies of the full report and financial statements for the year ended 31
December 2002 will be available from M. P. Evans (UK) Limited, 3
Clanricarde Gardens, Tunbridge Wells, Kent TN1 1HQ on and after 9 May
2003.
By order of the board
M. P. Evans (UK) Limited
Secretaries
30 April 2003
Enquires: Philip Fletcher
Peter Hadsley-Chaplin
Telephone: 01892 516333
Fax: 01892 518639
E-mail: philipf@mpevans.co.uk
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