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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