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Anglo-Eastern Plant (AEP)

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Friday 29 April, 2022

Anglo-Eastern Plant

Final Results for year ended 31 December 2021

RNS Number : 8559J
Anglo-Eastern Plantations PLC
29 April 2022
 

Anglo-Eastern Plantations Plc

("AEP", "Group" or "Company")

 

Final results for year ended 31 December 2021

 

The group comprising Anglo-Eastern Plantations Plc ("AEP") and its subsidiaries (the "Group"), is a major producer of palm oil and to a lesser extent rubber with plantations across Indonesia and Malaysia, amounting to some 128,000 hectares, has today released its results for the year ended 31 December 2021.

 

Financial Highlights

 

The Group key performance indicators ("KPI") as required in accordance with the requirements of s414C, Companies Act 2006 are as follows:

 

Continuing operations

2021

$m

2020

$m

Change

%

 

 

 

 

Revenue

433.4

263.8

+64

Profit before tax:

 

 

 

-  before biological asset ("BA") movement

132.7

56.9

+133

-  after BA movement

137.1

58.1

+136

 

 

 

 

Basic Earnings per ordinary share ("EPS"):

 

 

 

 - before BA movement

235.25cts

89.31cts

+163

 - after BA movement

242.34cts

91.82cts

+164

Dividend (cents)

5.0cts

1.0cts

 

 

 

 

Enquiries:

 

Anglo-Eastern Plantations Plc

 

Dato' John Lim Ewe Chuan 

 +44 (0)20 7216 4621

 

 

Panmure Gordon (UK) Limited

 

Dominic Morley

+44 (0)20 7886 2954

 

 

 

 

Chairman's Statement

 

I am pleased that the UK has lifted all the restrictions relating to Covid-19 and that Malaysia is in a state of endemic rather than pandemic resulting in its borders being open to foreign visitors and a more relaxed set of Standard Operating Procedures ("SOPs"). All these have been made possible due to the very high fully vaccinated rate of the adult population of both these countries, who are now focusing on vaccinating the population of children.

 

Indonesia is lagging slightly behind in its vaccination programme with about 76% of its adult population fully vaccinated due to an earlier reported shortage of vaccines. There is also a stark gap in vaccination rates among the 34 provinces in Indonesia with the population in remote and less developed regions having difficulty in reaching vaccination centres. I am confident that the Indonesian government will achieve full vaccination for its adult population within a reasonable time.

 

Many countries have witnessed the effect that the prolonged lockdown has caused on mental and financial distress and are now adapting to coexist with Covid-19 rather than a zero tolerance strategy of eliminating Covid-19. Borders are beginning to open with the focus on reviving the economy which in turn leads to a gradual return of international air travel.

 

2021 was a year in which Indonesia and Malaysia went through either full lockdowns or partial lockdowns and the Group was fortunate that it was allowed to continue its operations as the food industry was an essential service. During this time management has drawn up strict SOPs for the staff to work safely and I am pleased to say that there was no major outbreak of Covid-19 cases in any of the plantations. However, we did have 5 fatalities due to Covid-19 in four of our plantations which must have been traumatic for the deceased loved ones and their colleagues. I and the rest of the Board shared their grief and we have ensured that the welfare of the affected families were appropriately looked after. The emergence of a new variant, Omicron, which is more transmissible but less deadly may, however, set back the progress made to date. Our management remains watchful and continues to observe strict safety protocols in its operations.

 

I am pleased that given the plantations have to operate within the constraints of Covid-19, the management and staff have delivered a very good set of results, partly due to the high price of Crude Palm Oil ("CPO") for the year and I thank them for their diligence and effort. Having said that the Group has been hampered for a number of years by three plantations in South Sumatera which have not contributed to the profitability of the Group, notwithstanding the time and investments incurred over the years. Accordingly, the Board has made a commercial decision to sell PT Riau Agrindo Agung, PT Empat Lawang Agro Perkasa and PT Karya Kencana Sentosa Tiga, all in South Sumatera, as going concern at a realistic achievable price. The Board is working with a consulting firm in Indonesia with a view to conclude the sale by the end of 2022.

 

The Group's fresh fruit bunches ("FFB") production in 2021 reached 1.19 million mt, 8% higher than last year of 1.10 million mt due to improved weather. Other than South Sumatera, rainfalls were satisfactory in all regions that the Group operated in. With mostly favourable weather, all regions except for Malaysia reported higher FFB production of between 1% to 28%. FFB bought-in from surrounding smallholders and plasma was 1.14 million mt (2020: 913,200 mt), 25% more than 2020. The mills processed a combined 2.31 million mt of FFB, 17% more than last year of 1.97 million mt. CPO production, as a result, was 17% higher at 473,200 mt, compared to 406,100 mt in 2020.

 

CPO prices had been on a tear for most of the year. The surge in prices was unprecedented especially when consumption of palm oil was expected to be weaker due to the economic lockdown caused by the Coronavirus. A combination of factors however contributed to the spectacular rise in prices. Unfavourable weather conditions in prime soybean producing countries, which had adversely affected the supply of soybean oil, of which palm oil is the closest substitute was a likely cause. This together with a tight supply of palm oil due to labour, fertiliser issues and improved demand prospects for vegetable oils as global economies reopen drove CPO prices higher. A more detailed explanation is provided in the Strategic Report under Commodity Prices. The average CPO price ex-Rotterdam ended the year 67% higher at $1,211/mt, compared to $723/mt in 2020.

 

The higher FFB production and elevated CPO prices meant that the Group's revenue from continuing operation reached a record high of $433.4 million, 64% higher compared to $263.8 million achieved in 2020. The operating profit for the Group from continuing operations in 2021, before biological asset ("BA") movement more than doubled to $129.3 million, from $54.6 million reported in 2020. The earnings per share, before BA movement from continuing operations, increased by 163% to 235.25cts, from 89.31cts in 2020. The Group's operating profit after BA movement from continuing operation for 2021 was at $133.7 million after an upward BA movement of $4.3 million as compared to 2020 operating profit of $55.8 million after an upward BA movement of $1.2 million.

 

The mills briefly enjoyed improved processing margins as the Indonesian government lowered the CPO export tax in July 2021 from $255/mt to $175/mt when the CPO price exceeded $1,000/mt. However, in November 2021 the export tax was revised upwards to $200/mt when the CPO price exceeded $1,283/mt. The Indonesian government in its effort to curb soaring prices of domestic cooking oil in February 2022 imposed a domestic market obligation ("DMO") rule which made it mandatory for palm oil producers to sell 20% (and then subsequently 30%) of their output to domestic refiners at fixed prices representing a steep discount to the current CPO price, eroding the profit margin of planters. The DMO has since been aborted and replaced by a maximum CPO export tax and levy at $575/mt. Furthermore, on 27 April 2022 the Indonesian government banned the export of CPO to try to stem the rising cost of cooking oil in Indonesia. News reports have generally indicated that this is a temporary measure as CPO is one of Indonesia's largest export revenues, and also Indonesia cannot consume or utilise all the CPO it produces. The ban on the export of CPO, whilst it is in place, will affect the tender price AEP will achieve as the CPO is sold locally.

 

The Group's new planting for oil palm including plasma for 2021 totalled 1,701 ha compared to 2,190 ha last year. The new planting was mostly concentrated in the Kalimantan regions where negotiations with owners over land compensation were concluded more efficiently. The land compensation process suffered as the pandemic restricted travel and social contact. Many landowners also demanded better land prices due to record CPO prices. Furthermore, the local authorities stopped all land compensation for three months in Bangka to resolve some complaints from local villages. Replanting of some 900 ha of oil palms in Bengkulu was accelerated during the year to replace trees with poor yield. In 2022, the Group plans to plant 2,500 ha of oil palm which includes replanting of another 1,200 ha in Bengkulu. Plasma planting for 2022 is estimated at 400 ha.

 

The Group has four biogas plants with a combined capacity of slightly above five megawatts. The Group sold surplus electricity of 20,300 MWh in 2021 compared to 18,900 MWh last year in our efforts to reduce the Group's carbon footprint. The biogas plants help trap and burn the more toxic methane gas emission from palm oil mill effluent ("POME") to generate green electricity and produce less harmful carbon dioxide. Methane has a higher heat-trapping potential than carbon dioxide and cutting its emission can have a positive impact on reining in global warming. The revenue from the sale of surplus electricity to the national grid was $999,000 (2020: $970,000)   

 

EU threat to reduce the use of palm oil for biofuel in 2024 and to completely phase it out by the year 2030 remains a potential risk. The adverse perception of palm oil as an environmentally unfriendly and non-renewable source particularly in the EU has continued to feature in recent years, touching on issues including deforestation, emission of greenhouse gases, planting on peatland and land rights, most of which affect climate change. AEP remains committed to No Deforestation, No Peatland, No Exploitation ("NDPE") policies. All supplies of FFB to our mills are traceable to their origins of supply chains and are not linked to illegal deforestation. We are aware of growing pressure from buyers to avoid CPO with NDPE and High Conservation Values ("HCV") issues. 

 

A resurgence of the Covid-19 and its variants including Omicron, remains a potential major risk to palm oil demand in both the food and energy sectors. Inequitable access to vaccines, tests and treatments amongst the rich and poor countries could possibly prolong the pandemic and continue to hurt the economies, risking the emergence of more dangerous variants resulting in weaker trade and commodity prices.

 

The war in Ukraine has caused another round of global uncertainty. Any further escalation of the war in Ukraine will no doubt create additional uncertainties impacting the major economies of the world which in turn could affect the demand for palm oil in both the food and energy sectors.

 

In determining the amount of dividends to be paid to our shareholders, the Board in previous years had been consistent with a balanced approach to the requirement of funds in the Company in order to expand and enhance shareholders' value but at the same time cognisant of shareholders' wishes to have dividends as a form of income. As with last year the Board continues to have regulatory obligation to ensure that the Group has adequate funds to continue as a going concern for the foreseeable future in a near worst-case scenario because of the uncertainty due to Covid-19 and to a lesser extent the war in Ukraine.  With the rising Coronavirus cases in Europe in early 2022, the Board felt justified in its opinion that the pandemic is far from over especially in the region where the Group's operations are, due to the mutations and variants more infectious than the initial virus that the world has been combating. With this in mind the Board continues to adopt a prudent view and in the light of the exceptional profit achieved in the year has declared a final dividend of 5.0cts per share, in line with our reporting currency, in respect of the year to 31 December 2021 (2020: 1.0cts). In the absence of any specific instructions up to the date of closing of the register on 10 June 2022, shareholders with addresses in the UK will be deemed to have elected to receive their dividends in Pounds Sterling and those with addresses outside of UK will be deemed to have elected to receive their dividends in US Dollars. Subject to the approval by shareholders at the AGM, the final dividend will be paid on 15 July 2022 to those shareholders on the register on 10 June 2022.

 

On behalf of the Board of Directors, I would like to convey our sincere thanks to our management and employees of the Group for their dedication, loyalty, resourcefulness, commitment and contribution to the preservation of the Group's operation as a going concern during this extremely difficult and trying period.

 

I would also like to take this opportunity to thank shareholders, business associates, government authorities and all other stakeholders for their continued confidence, understanding and support for the Group.

 

 

 

Madam Lim Siew Kim

Chairman

29 April 2022

 

 

 

 

Strategic Report

 

Introduction

The Strategic Report has been prepared to provide shareholders with information to complement the financial statements. This report may contain forward-looking statements, which have been included by the Board in good faith based on information available up to the time of approval of this report. Such statements should be treated with caution going forward given the uncertainties inherent with the economic and business risks faced by the Group.

 

Business Model 

The Group will continue to focus on its strength and expertise, which is planting more oil palms and production of CPO. This includes replanting old palms with low yield, replacing old rubber trees with palm trees and building more mills to process the FFB. The Group has, over the years, created value to shareholders through expansion in a responsible manner.

 

The Group remains committed to use its available resources to develop the land bank in Indonesia as regulatory constraints permit. The Indonesian government has, in recent years, passed laws to prioritise domestic investments and to limit foreign direct investments over national interest, including a limit of 20,000 ha per province and a national total of 100,000 ha on the licensed development of oil palms for companies that are not listed in Indonesia or with less than a majority local ownership.

 

The Group's objectives are to provide returns to investors in the long-term from its operations as well as through the expansion of the Group's business, to foster economic progress in localities of the Group's activities and to develop the Group's operations in accordance with the best corporate social responsibility and sustainability standards.

 

We believe that sustainable success for the Group is best achieved by acting in the long-term interests of our shareholders, our partners and society.

 

Our Strategy

One of the Group's objectives is to provide an appropriate level of return to the investors and to enhance shareholder value. Profitability, however, is very much dependent on the CPO price, which is volatile and is determined by supply and demand as well as the weather. The Group believes in the long-term viability of palm oil as it can be produced more economically than other competing oils and remains the most productive source of vegetable oil in a growing population. Soybean crops would require up to ten times as much land to produce an equivalent weight of palm oil. It has been reported that one hectare of land can produce up to 4 mt of CPO, much higher than rapeseed of 0.7 mt, sunflowers of 0.6 mt or even soybeans of 0.4 mt. In this regard, palm oil is far more sustainable than other edible vegetable oils.

 

The Group's strategies, therefore, focus on maximising yield per hectare above 22 mt/ha, minimum mill production efficiency of 110%, minimising production costs below $300/mt and streamlining estate management. For the year under review, the Indonesian operations achieved an FFB yield of 19.8 mt/ha, 155% mill efficiency and production cost of $296/mt. This compared favourably to 2020 where the Group achieved a yield of 18.9 mt/ha, 133% mill efficiency, except for production cost which was lower at $280/mt. Despite stiff competition for external crops from surrounding millers, the Group is committed to purchasing more external crops from third parties at competitive, yet fair prices, to maximise the production efficiency of the mills. With higher throughput, the mills would achieve economies of scale in production. A mill is deemed to achieve 100% mill efficiency when it operates 16 hours a day for 300 days per annum.

 

In line with the commitment to reduce its carbon footprint, the Group plans to construct, in stages, biogas plants at all its mills to trap the methane gas emitted from the treatment of palm mill effluents to generate electricity to power its boilers to reduce the consumption of fossil fuel. It plans to sell the surplus electricity and progressively reduce the greenhouse gas emissions per metric ton of CPO produced in the next few years. It is commonly accepted that failure to address growing calls to reduce greenhouse gas emissions could threaten the long-term social acceptability and profitability of a palm oil company. The Group is looking at more biogas projects as demand for electricity recovered after the pandemic.

 

The Group will continue to engage and offer competitive and fair compensation to the villagers so that land can be cleared and be planted.

 

Non-financial reporting statement

The Group has complied with the requirements of Section 414CB of the Companies Act 2006 by providing a wide range of non-financial information about employees, environmental and social matters in the table below and in our website:

 

Non-financial matter

Policies and standards which govern our approach

Business model

Business model and strategy

Principal risks and uncertainties

Environmental matters

Principal risks and uncertainties: Country, regulatory and governance practices

Principal risks and uncertainties: Weather and Environmental and conservation practices

Indonesian Sustainable Palm Oil 

Environmental, Social and Governance practices

Management of Climate Risks

Decarbonisation modelling and high level target setting

Carbon Reporting

Corporate Governance: Environmental and corporate responsibility

Other responsible agricultural practices and sustainable policies can be found on our website

Employees and

Health & Safety

Employees: Employment policies

Directors' Remuneration Report: Employees engagement

Workers are protected from exposure to occupational health and safety hazards that are likely to pose immediate risk of permanent injury, illness or fatality. Proper signages are in place at relevant spots to alert employees of safety. Workshops and training sessions on occupational safety and health care are regularly conducted.

Social matters

Principal risks and uncertainties: Covid-19

AEP has established clear policies and strict protocols for the control and prevention of the spread of Covid-19 within the workplace environment. There are requirements for mask wearing, social distancing and sanitising of the workplace regularly. AEP also privately funded vaccination programme within its plantations and employees are required to be compulsorily vaccinated. AEP also has strict procedures on testing at work and self isolation of its employees when necessary, together with home support for the affected ones to ensure full recovery before they resumed work.

Respect for human rights

AEP has clear policies of no exploitation of its employees, including complying with paying minimum wage. It does not practise child or forced labour in line with the Modern Slavery Statement referred to on its website. In addition, a whistle blowing policy is in place to allow any employee to raise concerns about unethical, illegal or questionable practices without the risk of reprisal and in full confidence.

Anti-corruption and anti-bribery matters

Directors' report: Political donations, anti-corruption and anti-bribery matters

 

 

 

Financial Review

Performance of the business during the year

For the year ended 31 December 2021, revenue for the Group from continuing operation was $433.4 million, 64% higher than $263.8 million reported in 2020 due primarily to the higher CPO prices and higher production. 

 

The Group's operating profit from continuing operation for 2021, before biological asset movement, was $129.3 million, 137% better than last year of $54.6 million. 

 

FFB production for continuing operations for 2021 reached 1.15 million mt, 7% higher than the 1.07 million mt produced in 2020. The overall yield for the Indonesian plantations was higher at 21.1 mt/ha (2020: 20.4 mt/ha) due to more consistent and better rainfall throughout the year coupled with an increase in matured areas to harvest. Except for Malaysia, all regions in Indonesia in which the Group operated show improvement in crop harvest.  Young matured oil palms in North Sumatera and Kalimantan grew well and reported a 13% higher crop production. With replanting in progress, crop production in Bengkulu region, increased marginally by 1%.

 

FFB bought-in from local smallholders and plasma in 2021 was 1.14 million mt (2020: 913,200 mt), 25% more compared to 2020. As explained earlier, a more consistent weather with no extended period of dryness meant that there was an abundance of external crops to purchase especially in the first half of the year. Crop purchases by our mills in North Sumatera, Riau, Bengkulu and Kalimantan grew by between 9% and 64% in comparison to last year. During the year, the Group's mills processed a combined 2.31 million mt of FFB, 17% more than last year of 1.97 million mt. CPO production, as a result, was 17% higher at 473,200 mt, compared to 406,100 mt in 2020.

 

Profit before tax and after BA movement from continuing operation for the Group was $137.1 million, 136% higher compared to a profit of $58.1 million in 2020. The BA movement was a credit of $4.3 million, compared to a credit of $1.2 million in 2020. The BA movement was mainly due to higher FFB price in 2021. The profit before tax included a reversal of impairment charge on plantations and impairment of land amounting to $5.0 million compared to a reversal of impairment on land amounting to $2.2 million in 2020. Net finance income recognised in the income statement increased from $2.6 million in 2020 to $3.2 million in 2021 due to higher time deposits and absence of interest expense. The tax expense increased from $15.2 million in 2020 to $25.7 million in 2021 due to the increase in profit before tax.

 

The total loss on the discontinued operations during the year was $28.5 million, made up of operating loss of $6.7 million and a further write down of the three plantations assets net of liabilities of $21.8 million. The loss from the discontinued operation was also impacted by the expected credit loss from Plasma receivables amounting to $1.2 million in 2021 (2020: $1.4 million) attributed to the additional amounts allocated for plasma development during the year.

 

The average CPO price ex-Rotterdam for 2021 was $1,211/mt, 67% higher than 2020 of $723/mt. The ex-mill price for 2021 averaged $776/mt, 37% higher than last year of $567/mt.

 

Earnings per share before BA movement from continuing operations increased by 163% to 235.25cts compared to 89.31cts in 2020. Earnings per share after BA movement from continuing operations increased from 91.82cts to 242.34cts. Earnings per share have increased mainly due to the increase in profit after tax.

 

There was a loss of exchange in translation of foreign operations, recognised in other comprehensive income, totalling $6.3 million for 2021 against an exchange loss of $5.4 million in the previous year due to the slight weakening of the Indonesian rupiah at the year end. The retirement benefits due to the employees at 31 December 2021, as calculated by a third party actuary, decreased to $11.5 million from $13.4 million last year due to the impact from the job creation law.

 

Position of the business at the end of the year

The Group's statement of financial position remains strong, with a cash and cash equivalents balance of USD218.2 million and no external borrowing at the end of 2021. All material changes in statement of financial position and cash flows are listed in the following table:

 

 

Note

31.12.2021

$000

31.12.2020

 $000

 

 

 

 

Property, plant and equipment

i

260,532

280,831

Deferred tax assets

ii

4,324

14,389

Income tax liabilities

iii

(13,139)

(5,981)

Cash and cash equivalents

v, vi, vii

218,249

115,211

Assets in disposal groups classified as held for sale

iv

13,210

-

Net cash generated from operating activities

v

131,346

65,353

Purchase of property, plant and equipment

vi

(26,374)

(18,965)

Net cash used in financing activities

vii

(1,028)

(9,039)

 

i.  The reduction in property, plant and equipment from $280.8 million in 2020 to $260.5 million was due to the reclassification of the assets in South Sumatera to assets held for sale in current assets.

 

ii. The movement in deferred tax assets was due to the utilisation of some of the losses against taxable profits during the year.

 

iii. The income tax liabilities are higher principally as a result of higher profits in 2021.A detailed explanation of income tax, including other taxes, is provided in note 9.

 

iv.  Assets in disposal groups classified as held for sale reflects the reclassification of the assets in South Sumatera, net of an impairment adjustment.

 

v. As at 31 December 2021, the Group had cash and cash equivalents of $218.2 million (2020: $115.2 million). The cash position was higher in 2021 principally due to the significant increase in profitability during the year and to a lesser extent the recovery of $14.8 million from the over payment of VAT, together with the benefit of part of the current year corporate income tax of $13.1 million being retained as at year end. The net cash inflow from operating activities during the year was higher at $131.3 million by 101% compared to $65.4 million in 2020 mainly due to the more robust CPO prices and higher production.  

 

vi.  The higher additions to development costs for property, plant and equipment ("PPE") amounting to $26.4 million in 2021 (2020: $19.0 million) was due to increase in construction costs.

 

vii. The net cash used in financing activities during the year was lower by 89% at $1.0 million compared to $9.0 million in 2020 due to no repayment of borrowings during the year.

 

Viability Statement

The viability assessment considers solvency and liquidity over a longer period than for the purposes of the going concern assessment made. Inevitably, the degree of certainty reduces over a longer period.

 

The Group's business activities, financial performance, corporate development and principal risks associated with the local operating environment are covered under the various sections of this strategic report. In undertaking the review of the Group's performance in 2021, the Board considered the prospects of the Company, focusing on the strategy for growth via the expansion of its planted area in tandem with forecasting demand for CPO, over one to five-year periods. The process involved a detailed review of the 2022 detailed budget and the five-year income and cash flow projection. The one-year budget has a greater level of certainty and is used to set detailed budgetary targets at all levels across the Group. It is also used by the Remuneration Committee to set targets for the annual incentive. The five-year income and cash flow projection contains less certainty of the outcome but provides a robust planning tool against which strategic decisions can be made. The Board believes that to project beyond five years has more elements of uncertainties and therefore less reliable for making informed decisions.

 

The Board also considered the five-year cash flow projection under various severe but plausible scenarios, including the financial impact on the Group due to partial or total shutdown of its operations and the contraction of demand for palm oil resulting from the Coronavirus pandemic, as outlined in the Strategic Report under Going Concern, and the need to support if any financially loss-making newly matured estates, together with the projected capital expenditure. The Group also factored in the impact of the price increase of materials and fertilisers primarily as a result of the conflict in Ukraine.  In arriving at the conclusion that the Group has adequate resources to continue in operation and meet its liabilities in the next five years the Board has assumed a worst case scenario of CPO price at its lowest average of $500/mt and that demand for CPO dropped by 50%. The Board has also factored in that half of the total plantations could be shut down for six months due to infectious disease such as Covid19. The assumptions applied are linked to risk of CPO price fluctuation, risk of a substitute for oil palm and a pandemic from an infectious disease. On this basis and other matters considered and reviewed by the Board during the year, the Board has a reasonable expectation that the Group has adequate resources to continue in operation and meet its liabilities over the five years from 2022 to 2026.

 

Going Concern

As the Group is still facing a period of uncertainty due to the Coronavirus pandemic, the Directors carried out stress tests as required, to ensure that the Group has adequate resources in a worst-case scenario to remain as a going concern for at least twelve months from the date of this report.

 

The Directors have a reasonable expectation, having made the appropriate enquiries, that the Group has control of the monthly cash flows and that the Group has sufficient cash resources to cover the fixed cash flows for a period of at least twelve months from the date of approval of these financial statements. For these reasons, the Directors adopted a going concern basis in the preparation of the financial statements. The Directors have made this assessment after consideration of the Group's budgeted cash flows and related assumptions including appropriate stress testing of identified uncertainties, specifically on the potential shut down of the entire operations from three to twelve months if all the plantations are infected with Coronavirus as well as the impact on the demand for palm oil with decreases of 50% to 100%. Stress testing of other identified uncertainties and risks such as commodity prices and currency exchange rates were also undertaken.

 

Business Review

Indonesia

The performance of the Indonesian operations is divided into six geographical regions.

 

North Sumatera

FFB production in North Sumatera, which aggregates the estates of Tasik, Anak Tasik, Labuhan Bilik ("HPP"), Blankahan, Rambung, Sg Musam and Cahaya Pelita ("CPA") produced 400,800 mt in 2021 about 13% above last year (2020: 354,900 mt). The increase in matured areas to 18,047 ha from 16,238 ha contributed to this higher production. A more consistent rainfall pattern with no prolonged period of dryness and better harvest from young matured palms in Tasik also improved the annual yield to 22.2 mt/ha from the previous year of 21.6 mt/ha. 

 

Higher production can be expected in the coming years due to new planting and recently replanted areas of 546 ha maturing next year and starting to bear fruits. 

 

In 2021, the two mills in North Sumatera produced 136,900 mt of CPO (2020:124,900 mt) from a throughput of 698,800 mt (2020: 629,200 mt). Tasik Raja mill had another stellar year, processing 10% more FFB in 2021 at 501,900 mt (2020: 455,000 mt) due mainly to better internal crop production, raising the mill utilization to 174% from 158% the previous year. Oil extraction rate ("OER"), however, was lower at 19.9% (2020: 20.0%) possibly due to the dura contamination from external crops that made up 35% of the total crops processed. Dura crops with thinner mesocarp normally have an oil content of 18% or lower. The Blankahan mill showed some improvement by processing 13% more FFB at 196,900 mt (2020: 174,200 mt) due to higher external crop purchases increasing mill utilization from 91% to 103% this year. Outside crops that made up 58% of the total crops processed by the mill in the previous year increased to 61% in 2021. Internal crop production was marginally higher as the average age of trees reached 27 years with replanting to be carried out when necessary. Replanting in Blankahan was delayed as the yield had been consistently high in the past years averaging 26 mt/ha due to good soil condition. 

 

The two biogas plants in North Sumatera did not perform as expected in 2021, but are expected to perform better going forward. The state electric company resumed the uptake of electricity from the Blankahan biogas plant in 3Q 2021 as commercial activities pick-up steam. It sold about 1,900 MWh (2020: 2,500 MWh) of surplus electricity and generated $114,100 (2020: $151,800) in revenue. The contract to supply electricity was finally signed for two years. As for Tasik biogas plant, the authorities are currently evaluating its power production capacity and the local consumption. There is a realistic chance that the authorities will purchase the surplus electricity as the economy recovers from the lockdown. It also helps that the Indonesian government is promoting the use of green energy going forwards as part of its efforts to achieve the climate change mitigation promises.

 

The sales from the biomass plant were lower in 2021 at $335,800 compared to $427,100 last year, as the plant exported 4% less dried long fibres at 4,710 mt compared to 4,930 mt last year. Average selling prices had fallen by 18% as foreign buyers had to contend with lack of containers as well as higher shipment costs. The production at the plant was temporarily halted in the last month of the year as it ran out of storage facilities as inventory built up due to logistic problems. This was the second time in the year where production had to stop due to high inventory and storage constraint.

 

Bengkulu

FFB production in Bengkulu, which aggregates the estates of Puding Mas ("MPM") and Alno produced 307,400 mt (2020: 304,000 mt), 1% more than 2020. Production from Bengkulu region has improved despite some areas being recently replanted as rainfall normalised to 3,500 mm in 2021 (2020: 4,000mm) with higher yield at 19.6 mt/ha from 18.2 mt/ha last year.

 

MPM and Sumindo mills processed a combined 807,000 mt (2020: 672,200 mt) of FFB in 2021 due to higher internal crop production as well as higher external crop purchases. External crop purchases increased by 35% to 464,800 mt from 344,700 mt last year due to better weather conditions increasing mill utilization to 160% from 133% in the prior year. CPO production for the year was 19% higher at 164,300 mt (2020: 138,200 mt) with OER for the two mills averaging 20.4%, lower from 20.6% last year. External crops made up 58% of the throughput compared to 51% in 2020. The remaining processed crop was purchased from other group companies.

 

900 ha palms were replanted in 2021 with good planting material. Another 3,200 ha of palms will be replanted from 2022 to 2024 as the matured palms in Alno and MPM reached the average age of 18 and 22 years respectively. The replanting is also fast tracked as the dura palms constituted a significant portion of the planted areas. Fruits from dura palms have thin mesocarp which ultimately produce less oil.

 

The MPM biogas plant sold over 10,300 MWh (2020: 9,600 MWh) of surplus electricity, 7% higher and generated $484,900 in revenue (2020: $444,300). One of the engines in the plant was shut down for up to two months for repairs as delivery of service parts was delayed due to Covid-19 travel restriction. Occasional breakdown of transmission lines also meant that the biogas plant did not perform to its optimum capacity of two megawatt.

 

South Sumatera

FFB production in South Sumatera, which aggregates the estates of Karya Kencana ("KKST"), Empat Lawang ("ELAP") and Riau Agrindo ("RAA") produced 37,200 mt (2020: 34,200 mt), 9% higher than 2020. Better rainfall and more matured palms contributed to a higher harvest. While rainfall during the year improved in KKST and South ELAP, low annual moisture remains a real threat in this region which retards growth as the plantations are located behind a mountain range sheltered from the Indian Ocean. Annual rainfall in North ELAP decreased to 1,095 mm (2020: 1,861 mm) which also experienced ten months where rainfall fell below the minimum of 150 mm per month for healthy crop production. The yield of 6.5 mt/ha in South Sumatera reflected the improved conditions from 6.3 mt/ha the previous year.

 

During the year about 17,100 new palms were spot planted in South Sumatera boosting the stems per hectare to 103 trees from the target of 105 trees. It incurred higher planting cost as frequent resupply of young palms was needed due to damage incurred by the freely roaming cattle owned by local villagers. Trenching and fencing the plantation were explored but were deemed uneconomical. Discussions with the local villagers were not productive and to avoid any strained relationship which can be detrimental in the long run, management decided instead to fence individual young plants to protect them from the cattle. With higher CPO prices, more FFB thefts were reported in 2021 as the region faced high unemployment during the pandemic.  The management has also stepped-up security patrols. 

 

With the inherent problems of rainfall, terrains, security and non productive dialogues with the local villages, the Board arrived at a decision in the last quarter of 2021 to discontinue its operations in South Sumatera and has put the three plantations for sale in the open market as a going concern during the 1Q of 2022. The Board has arrived at its decision as a result of the low crop yield which is unlikely to improve and the continuing losses incurred in the region, notwithstanding the significant investments and efforts over the years.

 

Riau

FFB production in the Riau region, comprising Bina Pitri estates, produced 139,600 mt in 2021 (2020: 133,200 mt) 5% higher than 2020. Rainfall was lower at 2,620 mm (2020: 2,850 mm) but was consistently above 150 mm per month except for February 2021. The yield for the year was slightly higher at 28.7 mt/ha from last year of 27.3 mt/ha. As 78% of the palms are between the ages of 24 to 27 years, there is a planned replanting process of 2,800 ha of palms from 2023 to 2026. 

 

The mill external crop purchase was higher by 18% at 266,600 mt compared to 225,300 mt last year, with the mill utilization rate improved to 141% from 125% last year. Overall the CPO production was higher by 12% to 77,500 mt compared to 69,100 mt in 2020. Despite the high yield, the region is contaminated by dura palms which made up 66% of the crops processed by the mill. The mill therefore had a low OER of 19.1% compared to 19.3% in the previous year.

 

Bangka

FFB production in the Bangka region, comprising Bangka Malindo Lestari estates, produced 11,100 mt in 2021 (2020: 8,700 mt), 28% higher than 2020. Higher crop was due to a larger harvestable area and more palms having reached peak maturity. Rainfall averaged 2,370 mm in the year compared to 3,043 mm previous year. Yield declined slightly from 13.5 mt/ha to 13.4 mt/ha in 2021. With new planting in 2021 totalling 160 ha (2020: 706 ha), the total planting including plasma in Bangka has reached 3,036 ha (2020: 2,856 ha). The land compensation dialogue in Bangka was briefly interrupted for three months after local authorities requested the company to stop the process to facilitate an investigation following complaints against the village head.

 

Kalimantan

FFB production in Kalimantan which comprises the Sawit Graha Manunggal ("SGM") and Kahayan Agro Plantation ("KAP") estates was 281,500 mt in 2021 (2020: 249,500 mt) 13% higher than 2020 as more palms matured and reached the peak production age. The average age of palms in SGM and KAP were nine and five years respectively. During the year 767 ha of palms matured in SGM and KAP leading to its first harvest. The yield in Kalimantan recovered to 19.8 mt/ha from 18.6 mt/ha last year. Wetter-than normal weather prevailed in KAP at 4,490 mm (2020: 4,350 mm) while rainfall in SGM was lower at 2,320 mm (2020: 2,870 mm). 

 

New planting in SGM and KAP is expected to reach 1,000 ha next year. The long-term prospect for Kalimantan remains bright.

 

The purchase of external and plasma crops in SGM reached 112,800 mt in 2021 which was higher by 64% compared to 68,900 mt last year. The total external and plasma crop at the SGM mill made up 29% of the total crops processed from 22% last year. With the throughput at the mill reaching 393,300 mt (2020: 312,000 mt), the mill utilization rate increased to 182% from 144% last year producing 94,500 mt of CPO, 28% more than 2020 of 73,900 mt. OER for the mill averaged 24.0% for the year compared to 23.7% last year and continue to outperform the rest of the mills in the Group.

 

The SGM biogas plant generated 19% more electricity in 2021 at over 8,100 MWh (2020: 6,800 MWh) worth $399,900 (2020: $373,700). Negotiation has started with the state authorities to extend the contract to sell electricity, which is due to expire before the 2Q of 2022.

 

As international borders remained mostly closed to non-essential travelling during the year, the Malaysian based agronomist could not make monthly field visits to underperforming estates in Indonesia to provide advice on optimizing field disciplines and improving crop yields.

 

Overall bought-in crops for Indonesian operations including plasma were 25% higher at 1.14 million mt for the year 2021 (2020: 913,200 mt). The average OER for our mills was marginally lower in 2021 at 20.5% in 2021 (2020: 20.6%).

 

Malaysia

The La Nina weather pattern towards the end of 2020 caused massive flooding and landslides which affected the evacuation of crops for the 1Q 2021 as internal roads and bridges badly damaged were repaired. FFB production in 2021 was 35% lower at 12,000 mt, compared to 18,600 mt in 2020.  The plantation continued to experience a substantial shortage of workers which hampered not only field maintenance and application of fertilisers but harvesting resulting in crop losses. Due to international border closure throughout the year the attrition of workers for the past two years since the pandemic started could not be replaced. In addition, the under application of fertilisers at 10% of the recommended dosage resulted in undernourished plants and poor yield. To compound the problem further, supplier of fertilisers could not deliver for most part of the year as their manufacturing activities were forced to shut down during the lockdown. Although there was a partial lifting of the freeze on recruitment of foreign workers in late 2021, it will still take some time before any replacement workers can be found. In December 2021, parts of the plantation were closed for three weeks as seven of its foreign workers were infected with the Coronavirus.  The palms, with an average age of 24 years, faced declining yield and stems per hectare steadily declined due to damage by wild elephants. The Malaysian plantation in 2021 generated a profit before tax after BA movement of $0.4 million compared to a marginal loss in 2020. The plantation obtained its mandatory Malaysian Sustainable Palm Oil ("MSPO") certification in January 2021. 

 

The financial performance of the various regions is reported in note 7 on segmental information.

 

Commodity Prices

The CPO ex-Rotterdam price started the year at $1,014/mt (2020: $878/mt) and trended upwards for most part of the year. The price was lowest at the beginning of March 2021 at $900/mt and peaked in November 2021 at $1,435/mt before ending the year at $1,305/mt (2020: $1,014/mt), averaging $1,211/mt for the year, 67% higher than last year (2020: $723/mt).

 

While the FFB production in Indonesia as a country was marginally down from last year, the Malaysian's palm oil yields as a country dropped to nearly 40-year lows in 2021 as the plantation industry struggled with a shortage of workers and devastating floods in several parts of the country.  It was reported that the Food and Agriculture Organisation's global edible oil index was up 91% and is expected to climb further as economies reopen following the Covid-19 lockdowns, boosting food and fuel consumption of edible oils. Besides labour shortages, many producers at the same time have been battling a range of impediments including heatwaves and vermin infestation that is driving collective stocks of world's most consumed edible oils - palm, soybean, canola and sunflower seed to their lowest levels in a decade. The pressure on stocks led to higher consumer prices.  In the last one year, India has revised downwards its taxes on CPO, palm products and other vegetable oils several times to tame domestic inflation caused by rising prices of edible oils.

 

The current market prices have been shaped by higher anticipated demand, slower growth in palm oil production and market dynamics of vegetable oils. Ukraine and Russia are major producers of sunflower oil and jointly export up to 70% of the worldwide production. The disruption in harvesting and planting caused by the current conflict between Ukraine and Russia would likely result in a higher demand for CPO and would sustain the current high prices.

 

The export and movement in CPO prices are also influenced by Indonesian government policies.

 

Over a period of ten years, CPO price has touched a monthly average high of $1,395/mt in November 2021 and a monthly average low of $472/mt in November 2018. The monthly average price over the ten years is about $779/mt.

 

Rubber prices averaged $1,637/mt for 2021 (2020: $1,356/mt). Our small area of 262 ha of mature rubber contributed a revenue of $0.7 million in 2021 (2020: $0.6 million). Rubber continues to struggle with low prices. Lower tappable trees due to wind damage and dry bark were the main cause for lower rubber production.

 

Corporate Development

In 2021, the Group opened up new land and planted 1,701 ha (2020: 2,190 ha) of oil palm mainly in Kalimantan and South Sumatera, boosting planted area including the smallholder cooperative scheme, known as Plasma, by 2% to 75,204 ha (2020: 73,600 ha). Another 900 ha was replanted in Bengkulu. In 2022, the Group plans to plant 2,500 ha of oil palm which includes replanting of 1,200 ha in Bengkulu. Opening of new land for planting can be cumbersome and requires written approval from local authorities, submission of environment impact assessments and meetings with local communities.

 

Old quarters for workers throughout the plantations will be upgraded in 2022. New quarters together with recreation facilities will be added to accommodate more workers and families at the cost of $2.3 million. A further $420,000 will be spent to connect the plantations in Bina Pitri, MPM and SGM to the national electric grids as part of the Group's effort to reduce carbon emissions. This is expected to reduce fossil fuel consumed by the generators in the remote plantations. 

 

The construction of the seventh mill in HPP, North Sumatera has been delayed by frequent lockdowns caused by the pandemic, affecting the deployment of manpower at the construction site, as well as fabrication of mechanical works, interruption of supply chain and the transport of building materials. During the year, the concrete pilling has completed together with the fabrication of a loading ramp, clarification tanks and conveyors. Cost of construction has spiralled to about $22 million as the mill, located on peat area, has to be built according to strict specifications laid out by environmental laws in Indonesia. The conventional anaerobic lagoon constructed from earth is not permitted on peat land due to possible seepage of effluent and contamination of ground water. A purpose-built treatment plant is required to treat the effluent from the mill to a quality specified for discharge to the water course. The effluent plant also includes two 4,000 mt anaerobic digesters and two 1,200 mt aeration tanks. A decanter for solid removal and oil recovery was also added to reduce the number of tanks required which in turn reduced the high cost of concrete piles for its foundation. Steel, which constituted a major part of the building and equipment appreciated by 15% during the construction period putting further pressure on project costs. The project is earmarked for completion by the 3Q of 2022.

 

Our feasibility study concluded that it is more profitable to build a mill in KAP in Kalimantan to support its operation due to high logistic costs. KAP is currently transporting the FFB some 600km to SGM mill or, when this becomes too arduous during the monsoon season, the fruits are sold locally to third parties. The Group plans to build a 45 mt/hr mill with two storage tanks of 4,000 mt each with minimum spare machineries at an estimated cost of $13 million. Due to the hilly terrain and steep ravines, the choice for a mill site is limited. Nevertheless a few possible sites were identified and geological survey and onsite inspections are in progress. Construction is expected to start next year as soon as formal approval from the authorities is received. 

 

To improve transport of FFB in our plantations and help deliver the FFB to the mills, the Group has budgeted to buy more dump trucks costing more than $1 million in 2022. This is necessary amidst rising logistic cost as independent transport companies especially in Kalimantan cannot supply adequate trucks to transport our harvest as many trucks are diverted to carry coal which pay better transport rates.  In addition, the Group is expected to spend $1.2 million to improve the field roads and connectivity between estates and mills by building new bridges. 

 

The two vertical sterilisers/pressure vessels in Bina Pitri mill are 12 years old and are scheduled to be replaced, for safety reasons, at a cost of $370,000 in 2022.

 

The fabrication and installation of an additional 45,000 kg/hour steam boiler in SGM mill costing $980,000 is expected to be completed in 2022 after a long delay caused by the pandemic. A second boiler is required to back-up the mill operation and to avoid any disruption as it enters its sixth year of operation. The mill is projected to process up to 380,000 mt of FFB in 2022.

 

Upgrading works at SGM and Sumindo mills which started three years ago involving the addition of boilers, steam turbines, screw press, digester, CPO and kernel storages, clarification station, water and effluent treatment plants and sterilizer at a combined cost of $4.5 million are expected to be completed this year increasing their milling capacity to 60 mt/hr from 45 mt/hr.

 

The Group plans to install an oil recovery system for its MPM mill at a cost of $1 million. This system extracts oil from its raw effluent as well as reducing the solid content of the effluent. The system, when fully operational is reportedly able to improve the OER by 0.2% to 0.3%. As the mill processes up to 420,000 mt of FFB annually, it could potentially recover up to 1,000 mt of CPO per year.  Reducing the solids in the raw effluent will result in less silting in the ponds after extraction of biogas in the anaerobic lagoon.

 

 

 

On behalf of the Board

Dato' John Lim Ewe Chuan

Executive Director, Corporate Finance and Corporate Affairs

29 April 2022

 

 

 

 

Directors' Responsibilities

 

The Directors are responsible for preparing the annual report and the financial statements in accordance with UK adopted international accounting standards and applicable law and regulations.

 

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors are required to prepare the Group financial statements in accordance with UK adopted International Accounting Standards ("IAS") and have elected to prepare the company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law) ("UK GAAP"). Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss for the Group for that period. 

 

In preparing these financial statements, the Directors are required to:

· select suitable accounting policies and then apply them consistently;

· make judgements and accounting estimates that are reasonable and prudent;

· state whether they have been prepared in accordance with UK adopted international accounting standards, subject to any material departures disclosed and explained in the financial statements;

· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Company will continue in business; and

· prepare a Directors' Report, a Strategic Report and Directors' Remuneration Report which comply with the requirements of the Companies Act 2006.

 

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006.

 

They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for ensuring that the annual report and accounts, taken as a whole, are fair, balanced, and understandable and provides the information necessary for shareholders to assess the group's performance, business model and strategy.

 

Website publication

The Directors are responsible for ensuring the annual report and the financial statements are made available on a website. Financial statements are published on the Company's website in accordance with the legislation in the UK governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company's website is the responsibility of the Directors.  The Directors' responsibility also extends to the ongoing integrity of the financial statements contained therein.

 

Directors' responsibilities pursuant to Disclosure and Transparency Rules 4 ("DTR4")

The Directors confirm to the best of their knowledge:

· The financial statements have been prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit and loss of the Group.

· The annual report includes a fair review of the development and performance of the business and the financial position of the Group and Company, together with a description of the principal risks and uncertainties that they face.

 

 

 

On behalf of the Board

Dato' John Lim Ewe Chuan

Executive Director, Corporate Finance and Corporate Affairs   

29 April 2022

 

 

 

Consolidated Income Statement

For the year ended 31 December 2021

 

 

 

 

(Restated)

 

 

 

2021

2020

 

 

 

 

 

 

Note

Result before

BA movement*

 

 

BA movement

 

 

 

Total

Result before

BA movement*

 

 

BA movement

 

 

 

Total

 

 

 

 

$000

 

$000

 

$000

 

$000

 

$000

 

$000

 

Continuing operations

 

 

 

 

 

 

 

 

Revenue

4

433,421

-

433,421

263,818

-

263,818

 

Cost of sales

 

(300,354)

4,349

(296,005)

(203,326)

1,203

(202,123)

 

Gross profit

 

133,067

4,349

137,416

60,492

1,203

61,695

 

Administration expenses

 

(8,764)

-

(8,764)

(7,768)

-

(7,768)

 

Reversal of impairment

6, 13

5,437

-

5,437

2,165

-

2,165

 

Impairment losses

6, 13

(585)

-

(585)

(188)

-

(188)

 

Reversal / (Provision) for expected credit loss

6, 18

177

-

177

(102)

-

(102)

 

Operating profit

 

129,332

4,349

133,681

54,599

1,203

55,802

 

Exchange gains / (losses)

 

212

-

212

(269)

-

(269)

 

Finance income

5

3,214

-

3,214

2,873

-

2,873

 

Finance expense

5

(24)

-

(24)

(292)

-

(292)

 

Profit before tax

6

132,734

4,349

137,083

56,911

1,203

58,114

 

Tax expense

9

(24,784)

(958)

(25,742)

(15,103)

(55)

(15,158)

 

Profit for the year from continuing operations

 

107,950

3,391

111,341

41,808

1,148

42,956

 

(Loss) / gain on discontinued operation, net of tax

10

(28,471)

50

(28,421)

(5,275)

60

(5,215)

 

 

 

79,479

3,441

82,920

36,533

1,208

37,741

 

Profit for the year attributable to:

 

 

 

 

 

 

 

 

  -  Owners of the parent

 

65,485

2,856

68,341

30,653

1,051

31,704

 

  -  Non-controlling interests

 

13,994

585

14,579

5,880

157

6,037

 

 

 

79,479

3,441

82,920

36,533

1,208

37,741

 

Profit for the year from continuing operations attributable to:

 

 

 

 

 

 

 

 

  -  Owners of the parent

 

93,245

2,809

96,054

35,399

994

36,393

 

  -  Non-controlling interests

 

14,705

582

15,287

6,409

154

6,563

 

 

 

107,950

3,391

111,341

41,808

1,148

42,956

 

Earnings per share attributable to the owners of the parent during the year

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit

 

 

 

 

 

 

 

 

-  basic and diluted

11

 

 

172.42cts

 

 

79.99cts

 

Profit from continuing operations

 

 

 

 

 

 

 

 

-  basic and diluted

11

 

 

242.34cts

 

 

91.82cts

 

                     

 

* The total column represents the IFRS figures and the result before BA movement is an Alternative Performance Measure ("APM") which reflects the Group's results before the movement in fair value of biological assets has been applied. We have opted to additionally disclose this APM as the BA movement is considered to be a fair value calculation which does not appropriately represent the Group's result for the year.

 

 

 

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2021

 

 

 

(Restated)

 

2021

$000

2020

$000

 

 

 

Profit for the year

82,920

37,741

 

 

 

 

Other comprehensive expenses:

 

 

 

 

 

Items may be reclassified to profit or loss:

 

 

 

 

 

  Loss on exchange translation of foreign operations

(5,429)

(4,801)

 

 

 

Net other comprehensive expenses may be reclassified to profit or loss

(5,429)

(4,801)

 

 

 

Items not to be reclassified to profit or loss:

 

 

 

 

 

  Remeasurement of retirement benefits plan, net of tax

1,086

(649)

 

 

 

Net other comprehensive income / (expenses) not being reclassified to profit or loss

1,086

(649)

 

 

 

Total other comprehensive expenses for the year, net of tax

(4,343)

(5,450)

 

 

 

Total comprehensive income for the year

78,577

32,291

Total comprehensive income for the year attributable to:

 

 

  -  Owners of the parent

64,993

27,269

  -  Non-controlling interests

13,584

5,022

 

78,577

32,291

 

 

 

 

Consolidated Statement of Financial Position

As at 31 December 2021

Company Number: 1884630

 

 

 

 

 

 

 

 

 

(Restated)*

(Restated)

 

Note

31.12.2021

$000

31.12.2020

$000

1.1.2020

$000

 

 

 

 

 

Non-current assets

 

 

 

 

Property, plant and equipment

13

260,532

280,831

281,287

Investments

31

49

-

-

Receivables

14

22,000

22,236

16,500

Deferred tax assets

15

4,324

14,389

17,807

 

 

 

 

 

 

 

286,905

317,456

315,594

 

 

 

 

 

Current assets

 

 

 

 

Inventories

16

14,316

12,541

8,752

Income tax receivables

9

5,072

10,071

14,348

Other tax receivable

9

45,423

41,618

35,179

Biological assets

17

12,803

8,783

7,574

Trade and other receivables

18

5,182

4,693

5,774

Short-term investments

 

1,439

1,957

-

Cash and cash equivalents

19

218,249

115,211

84,846

 

 

302,484

194,874

156,473

Assets in disposal groups classified as held for sale

10

13,210

-

-

 

 

 

 

 

 

 

315,694

194,874

156,473

 

 

 

 

 

Current liabilities

 

 

 

 

Loans and borrowings

 

-

-

(8,203)

Trade and other payables

20

(32,533)

(26,310)

(16,110)

Income tax liabilities

9

(13,139)

(5,981)

(1,512)

Other tax liabilities

9

(1,615)

(1,089)

(1,386)

Dividend payables

 

(25)

(24)

(23)

Lease liabilities

21

(240)

(236)

(222)

 

 

(47,552)

(33,640)

(27,456)

Net current assets

 

268,142

161,234

129,017

 

 

 

 

 

Non-current liabilities

 

 

 

 

Deferred tax liabilities

15

(1,330)

(782)

(442)

Retirement benefits - net liabilities

22

(11,499)

(13,383)

(11,338)

Lease liabilities

21

(110)

(217)

(456)

 

 

(12,939)

(14,382)

(12,236)

Net assets

 

542,108

464,308

432,375

 

 

 

 

 

Issued capital and reserves attributable to owners of the parent

 

 

 

 

Share capital

23

15,504

15,504

15,504

Treasury shares

23

(1,171)

(1,171)

(1,171)

Share premium

 

23,935

23,935

23,935

Capital redemption reserve

 

1,087

1,087

1,087

Exchange reserves

 

(241,907)

(237,599)

(233,723)

Retained earnings

 

642,582

573,677

542,730

 

 

440,030

375,433

348,362

Non-controlling interests

 

102,078

88,875

84,013

Total equity

 

542,108

464,308

432,375

 

 

 

 

 

 

 

 

 

Consolidated Statement of Changes in Equity

For the year ended 31 December 2021

 

 

Note

Share capital

Treasury shares

Share premium

Capital redemption reserve

Revaluation reserves

Exchange reserves

Retained earnings

Total

Non-controlling interests

Total equity

 

 

$000

$000

$000

$000

$000

$000

$000

$000

$000

$000

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 31 December 2019

 

15,504

(1,171)

23,935

1,087

48,413

(229,026)

542,415

401,157

94,661

495,818

Restatement (note 3)

 

-

-

-

-

(48,413)

(4,697)

315

(52,795)

(10,648)

(63,443)

Balance at 31 December 2019 after restatement

 

15,504

(1,171)

23,935

1,087

-

(233,723)

542,730

348,362

84,013

432,375

Items of other comprehensive expenses

 

 

 

 

 

 

 

 

 

 

 

-Remeasurement of retirement benefit plan, net of tax

22

-

-

-

-

-

-

(559)

(559)

(90)

(649)

-Loss on exchange translation of foreign operations

 

-

-

-

-

-

(3,876)

-

(3,876)

(925)

(4,801)

Total other comprehensive expenses

 

-

-

-

-

-

(3,876)

(559)

(4,435)

(1,015)

(5,450)

Profit for the year

 

-

-

-

-

-

-

31,704

31,704

6,037

37,741

Total comprehensive (expenses) / income for the year

 

-

-

-

-

-

(3,876)

31,145

27,269

5,022

32,291

Dividends paid

 

-

-

-

-

-

-

(198)

(198)

(160)

(358)

Balance at 31 December 2020 after restatement

 

15,504

(1,171)

23,935

1,087

-

(237,599)

573,677

375,433

88,875

464,308

Items of other comprehensive (expenses) / income

 

 

 

 

 

 

 

 

 

 

 

-Remeasurement of retirement benefit plan, net of tax

22

-

-

-

-

-

-

960

960

126

1,086

-Loss on exchange translation of foreign operations

 

-

-

-

-

-

(4,308)

-

(4,308)

(1,121)

(5,429)

Total other comprehensive (expenses) / income

 

-

-

-

-

-

(4,308)

960

(3,348)

(995)

(4,343)

Profit for the year

 

-

-

-

-

-

-

68,341

68,341

14,579

82,920

Total comprehensive (expenses) / income for the year

 

-

-

-

-

-

(4,308)

69,301

64,993

13,584

78,577

Dividends paid

 

-

-

-

-

-

-

(396)

(396)

(381)

(777)

Balance at 31 December 2021

 

15,504

(1,171)

23,935

1,087

-

(241,907)

642,582

440,030

102,078

542,108

 

 

 

 

Consolidated Statement of Cash Flows

For the year ended 31 December 2021

 

 

 

 

(Restated)

 

 

2021

$000

2020

$000

Cash flows from operating activities

 

 

 

Profit before tax from continuing operations

 

137,083

58,114

Adjustments for:

 

 

 

BA movement

 

(4,349)

(1,203)

Loss / (Gain) on disposal of property, plant and equipment

 

24

(20)

Depreciation

 

16,994

16,177

Retirement benefit provisions

 

103

1,564

Net finance income

 

(3,190)

(2,581)

Unrealised (gain) / loss in foreign exchange

 

(212)

269

Property, plant and equipment written off

 

72

274

Reversal of impairment

 

(4,852)

(1,977)

(Reversal) / Provision for expected credit loss

 

(177)

124

Operating cash flows before changes in working capital

 

141,496

70,741

Increase in inventories

 

(2,649)

(3,945)

 Increase in non-current, trade and other receivables 

 

(517)

(13,246)

Increase in trade and other payables

 

6,683

10,485

Cash inflows from operations

 

145,013

64,035

Retirement benefits paid

 

(487)

(352)

Overseas tax paid

 

(12,359)

(8,559)

Operating cash flows from continuing operations

 

132,167

55,124

Operating cash flows (used in) / from discontinued operations

 

(821)

10,229

Net cash generated from operating activities

 

131,346

65,353

 

 

 

 

Investing activities

 

 

 

Property, plant and equipment

 

 

 

-  purchases

 

(26,374)

(18,965)

-  sales

 

413

27

Interest received

 

3,214

2,873

Increase in receivables from cooperatives under plasma scheme

 

(1,985)

(3,826)

Investment in share equity

 

(49)

-

Placement of fixed deposits with original maturity of more than three months

 

(1,439)

(1,957)

Withdrawal of fixed deposits with original maturity of more than three months

 

1,957

-

Cash used in investing activities from continuing operations

 

(24,263)

(21,848)

Cash used in investing activities from discontinued operations

 

(1,594)

(2,990)

Net cash used in investing activities

 

(25,857)

(24,838)

 

 

 

 

Financing activities

 

 

 

Dividends paid to the holders of the parent

 

(395)

(197)

Dividends paid to non-controlling interests

 

(381)

(160)

Interest paid 

 

-

(258)

Repayment of existing long-term loans

 

-

(8,167)

Repayment of lease liabilities - principal

 

(228)

(223)

Repayment of lease liabilities - interest

 

(24)

(34)

Cash used in financing activities from continuing operations

 

(1,028)

( 9,039 )

Cash used in financing activities from discontinued operations

 

-

-

Net cash used in financing activities

 

(1,028)

( 9,039 )

Net increase in cash and cash equivalents

 

104,461

31,476

 

 

 

 

Cash and cash equivalents

 

 

 

At beginning of year

 

115,211

84,846

Exchange losses

 

(1,423)

(1,111)

At end of year

 

218,249

115,211

Comprising:

 

 

 

Cash at end of year

19

218,249

115,211

 

 

Notes

 

Basis of preparation

 

AEP is a company incorporated in the UK under the Companies Act 2006 and is listed on the London Stock Exchange. The registered office of AEP is located at Quadrant House, 6th Floor, 4 Thomas More Square, London E1W 1YW, UK. The principal activity of the Group is plantation agriculture, mainly in the cultivation of oil palm in Indonesia and Malaysia, of which Indonesia is the principal place of business.

 

The financial information does not constitute the company's statutory accounts for the years ended 31 December 2021 or 2020. Statutory accounts for the years ended 31 December 2021 and 31 December 2020 have been reported on by the Independent Auditor.  The Independent Auditor's Reports on the Annual Report and Financial Statements for the years ended 31 December 2021 and 31 December 2020 were unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

 

Statutory accounts for the year ended 31 December 2020 have been filed with the Registrar of Companies. The statutory accounts for the year ended 31 December 2021 will be delivered to the Registrar in due course.

 

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all years presented, except as detailed in note 3.

 

Basis of preparation

The consolidated financial statements have been prepared in accordance with UK adopted International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards.

 

On 31 December 2020, IFRS as adopted by the European Union at that date was brought into the UK law and became UK adopted International Accounting Standards, with future changes being subject to endorsement by the UK Endorsement Board. The Group transitioned to UK adopted International Accounting Standards in its consolidated financial statements on 1 January 2021. There was no impact or changes in accounting from the transition.

 

The Directors have a reasonable expectation, having made the appropriate enquiries, that the Group has control of the monthly cash flows and that the Group has sufficient cash resources to cover the fixed cash flows for a period of at least twelve months from the date of approval of these financial statements. For these reasons, the Directors adopted a going concern basis in preparation of the financial statements. The Directors have made this assessment after consideration of the Group's budgeted cash flows and related assumptions including appropriate stress testing of identified uncertainties, specifically on the potential shut down of the entire operations from three to twelve months if all the plantations are infected with Coronavirus as well as the impact on the demand for palm oil with decreases of 50% to 100%. Stress testing of other identified uncertainties and risks such as commodity prices and currency exchange rates were also undertaken.

 

Changes in accounting standards

a)  New standards, interpretations and amendments effective in the current year

 

There are no new and amended standards and Interpretations that apply for the first time in these financial statements.

 

b)  New standards, interpretations and amendments not yet effective.

 

T he following new standards, interpretations and amendments are effective for future periods (as indicated) and have not been applied in these financial statements:

Annual improvements to IFRS Standards 2018-2020 (1 January 2022, not yet adopted)

IAS 1 (amendments) Classification of liabilities as current or non-current (1 January 2023, not yet adopted

IAS 1 (amendments) and IFRS Practice Statement 2 Disclosure of Accounting Policies (1 January 2023, not yet adopted)

IAS 8 (amendments) Definition of Accounting Estimates (1 January 2023, not yet adopted)

IAS 12 (amendments) Deferred Tax related to Assets and Liabilities arising from a Single Transaction (1 January 2023, not yet adopted)

 

None of the above new standards, interpretations and amendments are expected to have a material effect on the Group's future financial statements.

 

2  Accounting policies

 

(a)  Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December each year. The Company controls a subsidiary if all three of the following elements are present; power over the subsidiary, exposure to variable returns from the subsidiary, and the ability of the investor to use its power to affect those variable returns. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date control ceases. In respect of cooperatives under the Plasma scheme, the Group has not consolidated these results on the basis that the Company does not have control over those entities.

 

(b)  Business combinations

The consolidated financial statements incorporate the results of business combinations using the purchase method. In the consolidated statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. Acquisitions of entities that comprise principally land with no active plantation business do not represent business combinations, in such cases, the amount paid for each acquisition is allocated between the identifiable assets/liabilities at the acquisition date.

 

(c)  Foreign currency

The individual financial statements of each subsidiary are presented in the currency of the country in which it operates (its functional currency), being the currency in which the majority of their transactions are denominated, with the exception of the Company and its UK subsidiaries which are presented in US Dollar. The presentation currency for the consolidated financial statements is also US Dollar, chosen because, as internationally traded commodities, the price of the bulk of the Group's products are ultimately linked to the US Dollar.

 

On consolidation, the results of overseas operations are translated into US Dollar at average exchange rates for the year unless exchange rates fluctuate significantly in which case the actual rate is used. All assets and liabilities of overseas operations are translated at the rate ruling at the balance sheet date. Exchange differences arising on re-translating the opening net assets at opening rate and the results of overseas operations at actual rate are recognised directly in equity (the "exchange reserves"). Exchange differences recognised in the income statement of Group entities' separate financial statements on the translation of long-term monetary items forming part of the Group's net investment in the overseas operation concerned are reclassified to the exchange reserves if the item is denominated in the presentational currency of the Group or of the overseas operation concerned.

 

On disposal of a foreign operation, the cumulative exchange differences recognised in the exchange reserves relating to that operation up to the date of disposal are transferred to the income statement as part of the profit or loss on disposal.

 

All other exchange profits or losses are credited or charged to the income statement. 

 

(d)  Revenue recognition

The Group derives its revenue from the sale of CPO, palm kernel, FFB, shell nut, biomass products, biogas products and rubber slab. Revenue for CPO, palm kernel, FFB, shell nut, biomass and biogas products are recorded net of sales and related taxes and levies, including export taxes and recognised when the customer has taken delivery of the goods. The collection/delivery of the goods will not take place until the goods are paid for. Sales of rubber slab are recognised on signing of the sales contract, this being the point at which control is transferred to the buyer.

 

The transacted price for each product is based on the market price or predetermined monthly contract value. There is no right of return nor warranty provided to the customers on the sale of products and services rendered.

 

Advance receipts represent the Group's obligation to transfer goods to a customer for which the Group has received consideration but the goods have yet to be delivered to/collected by the customer.

 

(e)  Tax

UK and foreign corporation tax are provided at amounts expected to be paid or recovered using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

 

The directors consider that the carrying amount of tax receivables approximates its fair value.

 

(f)  Dividends

Equity dividends are recognised when they become legally payable. The Company pays only one dividend each year as a final dividend which becomes legally payable when approved by the shareholders at the next annual general meeting.

 

(g)  Property, plant and equipment

All items of property, plant and equipment are initially measured at cost. Cost includes expenditure that is directly attributable to the acquisition of the items. After initial recognition, all items of property, plant and equipment except some land and construction in progress, are stated at cost less accumulated depreciation and any accumulated impairment losses.

 

Plantations comprise of the cost of planting and development of oil palm and other plantation crops. Costs of new planting and development of plantation crops are capitalised from the stage of land clearing up to the stage of maturity. The costs of immature plantations consist mainly of the accumulated cost of land clearing, planting, fertilising and maintaining the plantation and other indirect overhead costs up to the time the trees are harvestable and to the extent appropriate. Oil palm plantations are considered mature within three to four years after planting and generating average annual CPO of four to six metric tons per hectare. Immature plantations are not depreciated.

 

The Indonesian authorities have granted certain land exploitation rights and operating permits for the estates. The land rights are usually renewed without significant cost subject to compliance with the laws and regulations of Indonesia therefore, the Group has classified the land rights as leasehold land. The leasehold land is recognised at cost initially and is not depreciated except the leasehold land in Malaysia which is depreciated over the term of the lease as its renewal cannot be guaranteed. Costs include the initial cost of obtaining the location permits and subsequent payments to compensate existing land owners plus any legal costs incurred to acquire the necessary land exploitation rights.

 

Construction in progress is stated at cost. The accumulated costs will be reclassified to the appropriate class of assets when construction is completed and the asset is ready for its intended use. Construction in progress is also not depreciated until such time when the asset is available for use.

 

Plantations, buildings and oil mills are depreciated using the straight-line method. The yearly rates of depreciation are as follows:

 

Leasehold land in Malaysia - over the term of the lease

Plantations - 5% per annum

Buildings - 5% to 10% per annum

Oil Mill - 5% per annum

Estate plant, equipment & vehicle - 12.5% to 50% per annum

Office plant, equipment & vehicle - 25% to 50% per annum

 

(h)  Biological assets

Biological assets comprise an estimation of the fair value less costs to sell of unharvested FFB at balance sheet date. Changes in the fair value of biological assets are charged or credited to the income statement within the cost of sales.

 

(i)  Leases

The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets (such as tablets and personal computers, small items of office furniture and telephones). For these leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.

 

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the lessee uses its incremental borrowing rate.

 

Lease payments included in the measurement of the lease liability comprise:

Fixed lease payments (including in-substance fixed payments), less any lease incentives receivable.

 

The lease liability is presented as a separate line in the consolidated statement of financial position.

 

The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.

 

The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses.

 

Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease.

 

The right-of-use assets are presented together in property, plant and equipment in the consolidated statement of financial position. The Group applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any identified impairment loss as described in the "Impairment" policy.

 

Land rights are recognised at historical cost without depreciation at the balance sheet date except for leasehold land in Malaysia is recognised at historical cost and depreciated over the term of the lease. The details of the change in accounting policy are disclosed in note 3.

 

(j)  Impairment

An assessment of indicators of impairment over the Group's assets is undertaken annually on 31 December. Where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of value in use or fair value, less costs to sell), the asset is written down accordingly. Impairment charges are included in the income statement, except to the extent they reverse gains previously recognised in other comprehensive income. Reversal on impairment loss would be recognised if, and only if, there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment test was carried out. Reversal on impairment losses will be immediately recognised in the income statement.

 

(k)  Inventories

Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value. In the case of processed produce for sale which comprises palm oil and kernel, cost represents the monthly weighted-average cost of production and appropriate production overheads.  Estate and mill consumables are valued on a weighted average cost basis.

 

(l)  Financial assets

The Group's financial assets measured at amortised cost comprise trade and other receivables and cash and cash equivalents in the consolidated statement of financial position. All the Group's receivables and loans are non-derivative financial assets with cash flows that are solely payments of principal and interest. They are recognised at fair value at inception and subsequently at amortised cost as this is what the Group considers to be most representative of the business model for these assets.

 

Cash and cash equivalents consist of cash in hand and short-term deposits at banks with an original maturity not exceeding three months. Bank overdrafts are shown within loans and borrowings under current liabilities on the statement of financial position.

 

The Group considers a trade receivable or other receivable as credit impaired when one or more events that have a detrimental impact on the estimated cash flow have occurred. Trade and other receivables are written off when there is no expectation of recovery based on the assessment performed. If the receivables are subsequently recovered, these are recognised in income statement.

 

The Group use three categories for those receivables which reflect their credit risk and how the loss provision is determined for those categories. These include trade receivables using the simplified approach and debt instruments at amortised costs other than trade receivables and financial guarantee contracts using the three-stage approach.

 

(m)  Financial liabilities

All the Group's financial liabilities are non-derivative financial liabilities.

 

Bank borrowings and long-term development loans are initially recognised at fair value and subsequently at amortised cost, which is the total of proceeds received net of issue costs. Finance charges are accounted for on an accruals basis and charged in the income statement unless capitalised according to the policy as set out in the property, plant and equipment policy.

 

Trade and other payables are shown at fair value at recognition and subsequently at amortised cost.

 

(n)  Deferred tax

Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the statement of financial position differs from its tax base except for differences in the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting nor taxable profit.

 

The Group recognises deferred tax liabilities arising from taxable temporary differences on investments in subsidiaries, except where the Group is able to control the reversal of the temporary differences and it is probable that the temporary difference will not reverse in the foreseeable future.

 

Recognition of deferred tax assets is restricted to those instances where it is possible that taxable profit will be available against which the difference can be utilised.

 

Deferred tax is recognised on temporary differences arising from property revaluation surpluses or deficits.

 

Deferred tax is determined using the tax rates that are enacted or substantively enacted at the balance sheet date. Deferred tax is charged or credited in the income statement, except when it relates to items charged to other comprehensive income, such as revaluations, in which case the deferred tax is also dealt with in other comprehensive income.

 

(o)  Retirement benefits

Defined contribution schemes

Contributions to defined contribution pension schemes are charged to the consolidated income statement in the year to which they relate.

 

Defined benefit schemes

The Group operates a number of defined benefit schemes in respect of its Indonesian operations. These schemes' surpluses and deficits are measured at:

The fair value of plan assets at the reporting date; less

Plan liabilities calculated using the projected unit credit method discounted to its present value using yields available on Indonesian Government bonds that have maturity dates approximating to the terms of the liabilities; plus

Past service costs; less

The effect of minimum funding requirements agreed with scheme trustees.

 

Remeasurements of the net defined benefit obligation are recognised in other comprehensive income. The remeasurements include:

Actuarial gains and losses;

Return on plan assets (interest exclusive); and

Any asset ceiling effects (interest inclusive).

 

Service costs are recognised in the income statement and include current and past service costs as well as gains and losses on curtailments.

 

Net interest expense / (income) is recognised in the income statement, and is calculated by applying the discount rate used to measure the defined benefit obligation / (asset) at the beginning of the annual period to the balance of the net defined benefit obligation / (asset), considering the effects of contributions and benefit payments during the period.

 

Gains or losses arising from changes to scheme benefits or scheme curtailment are recognised immediately in the income statement. Settlements of defined benefit schemes are recognised in the period in which the settlement occurs. 

 

(p)  Treasury shares

Consideration paid or received for the purchase or sale of the Company's own shares for holding in treasury is recognised directly in equity, where the cost is presented as the treasury shares. Any excess of the consideration received on the sale of treasury shares over the weighted average cost of shares sold is taken to the share premium account.

 

Any shares held in treasury are treated as cancelled for the purpose of calculating earnings per share.

 

(q)  Financial guarantee contracts

Where the Company and its subsidiaries enter into financial guarantee contracts and guarantee the indebtedness of other companies within the Group and/or third party entities, these are accounted for under IFRS 9. The details of financial guarantee contracts are disclosed in note 27.

 

(r)  Non-current assets held for sale and disposal groups

Non-current assets and disposal groups are classified as held for sale when:

They are available for immediate sale;

Management is committed to a plan to sell;

It is unlikely that significant changes to the plan will be made or that the plan will be withdrawn;

An active programme to locate a buyer has been initiated;

The asset or disposal group is being marketed at a reasonable price in relation to its fair value; and

A sale is expected to complete within 12 months from the date of classification.

 

Non-current assets and disposal groups classified as held for sale are measured at the lower of:

Their carrying amount immediately prior to being classified as held for sale in accordance with the group's accounting policy; and

Fair value less costs of disposal.

 

Following their classification as held for sale, non-current assets (including those in a disposal group) are not depreciated.

 

A discontinued operation is a component of the Group's business that represents a separate major line of business or geographical area of operations or is a subsidiary acquired exclusively with a view to resale, that has been disposed of, has been abandoned or that meets the criteria to be classified as held for sale.

 

Discontinued operations are presented in the consolidated statement of comprehensive income as a single line which comprises the profit or loss after tax of the discontinued operation along with the gain or loss after tax recognised on the re-measurement to fair value less costs to sell or on disposal of the assets or disposal groups constituting discontinued operations.

 

(s)  Critical accounting estimates and judgements

The Group makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

 

Judgements

Assessment of de-facto control of cooperatives under Plasma scheme (see note 2(a) and note 29)

Classification of land as leasehold with no depreciation charged (see note 13)

Classification of assets as held for sale and discontinued operations (see note 10)

 

Estimates and assumptions

Impairment of plantation assets - estimate of future cash flows and determination of the discount rate and other assumptions (see note 13)

Expected credit losses ("ECL") on amounts due from cooperatives under Plasma scheme - determination of possible outcomes and their weighted probability (see note 14)

Carrying value of income tax receivables - determination of historic recovery rates (see note 9)

Income taxes and deferred tax - provisions for income taxes in various jurisdictions (see note 9 and note 15)

Valuation of assets classified as held for sale (see note 10)

Recognition of deferred tax on losses - estimate of future profitability of respective entities (see note 15)

Retirement benefits - actuarial assumptions (see note 22)

Fair value measurement - a number of assets and liabilities included in the Group's financial statements require measurement at, and/or disclosure of, fair value. The fair value measurement of the Group's financial and non-financial assets and liabilities utilises market observable inputs and data as far as possible. Inputs used in determining fair value measurements are categorised into different levels based on how observable the inputs used in the valuation technique utilised are (the 'fair value hierarchy'):

Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 - inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and

Level 3 - unobservable inputs for the asset or liability.

 

The classification of an item into the above levels is based on the lowest level of the inputs used that has a significant effect on the fair value measurement of the item. Transfers of items between levels are recognised in the period they occur.

 

The Group measures the following assets at fair value:

Biological assets (note 17)

 

The Group measures the following assets at amortised cost, however disclosure of fair value is given in accordance with IFRS7 and IFRS 13:

Non-current receivables due from non-controlling interests (note 14)

Non-current receivables due from cooperatives under Plasma scheme (note 14)

 

For more detailed information in relation to the fair value measurement of the items above, please refer to the applicable notes.

 

3  Prior year restatement

 

With effect from 31 December 2021 and applied retrospectively, the Group have opted for a change in accounting policy in respect of the treatment of land in the Group's financial statements which is accounted for in accordance with IAS 16 Property, Plant and Equipment. The Group has historically recognised land under the revaluation model however, following an analysis of the Group's peers in the UK, it was apparent that the majority reported their land at historical cost and therefore the decision was made to change the accounting policy to make the financial information more comparable and provide a more relevant result. Land has always been recognised in the local Indonesian financial statements at historical cost. The Group now recognises land at cost initially and is not depreciated except for the land in Malaysia as the possibility to renew the leasehold land in Malaysia is minimal, the details are disclosed in note 13.

 

The effects of the restatements are summarised as follows:

 

 

2020

$000

Impact on consolidated income statement

 

Profit for the year before restatement

37,943

Effect of change in restatement:

 

Cost of sales

(124)

Tax expense

(78)

 

(202)

Profit for the year after restatement

37,741

 

The effect of the prior year adjustments had a negative impact on the earnings per share before BA of 0.33cts and a negative impact on the earnings per share after BA of 0 .33 cts for the year to 31 December 2020.

 

 

20 20

$000

Impact on consolidated statement of comprehensive income

 

Other comprehensive expenses for the year before restatement

(4,830)

Effect of change in restatement:

 

Unrealised loss on revaluation of leasehold land, net of tax

(1,309)

Gain on exchange translation of foreign operations

689

 

(620)

Other comprehensive expenses for the year after restatement

(5,450)

 

The following table summarises the impact of this prior year restatement on the Consolidated Statement of Financial Position:

 

Balance as reported

31 December 20 20

$000

 

 

Effect of restatement

$000

Restated balance at

31 December 2020

$000

 

Impact on consolidated statement of financial position

 

 

 

 

Property, plant and equipment

365,353

(84,522)

280,831

Deferred tax assets

8,817

5,572

14,389

Deferred tax liabilities

(15,467)

14,685

(782)

Revaluation reserves

49,367

(49,367)

-

Exchange reserves

(233,534)

(4,065)

(237,599)

Retained earnings

573,493

184

573,677

 

Non-controlling interests

99,892

(11,017)

88,875

 

 

 

 

 

Balance as reported

1 January 20 20

$000

 

 

Effect of restatement

  $000

Restated balance at

1 January 2020

$000

Impact on consolidated statement of financial position

 

 

 

Property, plant and equipment

367,891

(86,604)

281,287

Deferred tax assets

11,251

6,556

17,807

Deferred tax liabilities

(17,047)

16,605

(442)

Revaluation reserves

48,413

(48,413)

-

Exchange reserves

(229,026)

(4,697)

(233,723)

Retained earnings

542,415

315

542,730

Non-controlling interests

94,661

(10,648)

84,013

 

The restatement of land from fair value to historical cost has decreased the value of the property, plant and equipment and eliminated the revaluation reserves. Deferred tax liabilities previously recognised on the revaluation of land have been reversed resulting in a decrease in deferred tax liabilities, but also an increase in deferred tax assets where individual entities have moved from a net deferred tax liability position to a net deferred tax asset position. Depreciation of the land in Malaysia recognised retrospectively and the reversal of the deferred tax liabilities previously recognised has resulted in a small increase in retained earnings. All entities for which these adjustments relate have non-controlling interests and therefore the impact on those non-controlling interests has also been recognised.

 

4  Revenue

 

Disaggregation of Revenue

The Group has disaggregated revenue into various categories in the following table which is intended to:

Depict how the nature, amount and uncertainty of revenue and cash flows are affected by timing of revenue recognition; and

Enable users to understand the relationship with revenue segment information provided in note 7.

 

There is no right of return and warranty provided to the customers on the sale of products and services rendered.

 

 

 

Year to 31 December 2021

CPO, palm kernel and FFB

 

 

Rubber

Shell nut

Biomass products

Biogas products

 

 

Others

Total

 

$000

$000

$000

$000

$000

$000

$000

 

 

 

 

 

 

 

 

Contract counterparties

 

 

 

 

 

 

 

Government

-

-

-

-

999

-

999

Non-government

Wholesalers

 

426,436

 

695

 

4,036

 

336

 

-

 

919

 

432,422

 

426,436

695

4,036

336

999

919

433,421

 

 

 

 

 

 

 

 

Timing of transfer of goods

 

 

 

 

 

 

 

Delivery to customer premises

4,995

695

-

-

-

-

5,690

Delivery to port of departure

-

-

-

336

-

-

336

Customer collect from our mills / estates

 

421,441

 

-

 

4,036

 

-

 

-

 

-

 

425,477

Upon generation / others

-

-

-

-

999

919

1,918

 

426,436

695

4,036

336

999

919

433,421

 

 

 

 

 

 

 

 

 

                     

 

Year to 31 December 2020

 

 

 

 

 

 

 

 

 

Contract counterparties

 

 

 

 

 

 

 

 

Government

-

-

-

-

970

-

970

Non-government

Wholesalers

 

257,282

 

631

 

3,959

 

427

 

-

 

549

 

262,848

 

257,282

631

3,959

427

970

549

263,818

 

 

 

 

 

 

 

 

Timing of transfer of goods

 

 

 

 

 

 

 

Delivery to customer premises

4,052

631

-

-

-

-

4,683

Delivery to port of departure

-

-

-

427

-

-

427

Customer collect from our mills / estates

253,230

-

3,959

-

-

-

257,189

Upon generation / others

-

-

-

-

970

549

1,519

 

257,282

631

3,959

427

970

549

263,818

                       

 

 

5  Finance income and expense

 

 

2021

$000

 

2020

$000

 

 

 

 

 

Finance income

 

 

 

 

Interest receivable on:

 

 

 

 

Credit bank balances and time deposits

 

3,214

 

2,873

 

 

 

 

 

Finance expense

 

 

 

 

Interest payable on:

 

 

 

 

Development loans

 

-

 

(257)

Interest expense on lease liabilities (note 21)

 

(24)

 

(35)

 

 

(24)

 

(292)

Net finance income recognised in income statement

 

3,190

 

2,581

 

6  Expenses by nature

 

 

 

 

 

2021

$000

 

(Restated) 2020

$000

Expenses by nature:

 

 

 

 

Purchase of FFB

 

191,915

 

110,225

 

 

 

 

 

Depreciation (note 13):

 

 

 

 

-  continuing operations

 

16,994

 

16,177

-  discontinued operations

 

1,978

 

2,090

 

 

18,972

 

18,267

Reversal of impairment (note 13):

 

 

 

 

-  continuing operations

 

(5,437)

 

(2,165)

-  discontinued operations

 

-

 

(31)

 

 

(5,437)

 

(2,196)

Impairment losses (note 13):

 

 

 

 

-  continuing operations

 

585

 

188

-  discontinued operations

 

716

 

-

 

 

1,301

 

188

 

 

 

 

 

Impairment loss on adjustment to fair value

 

21,772

 

-

 

 

 

 

 

Provision for expected credit loss (note 18):

 

 

 

 

-  continuing operations

 

(177)

 

102

-  discontinued operations

 

1,231

 

1,383

 

 

1,054

 

1,485

 

 

 

 

 

Exchange (gains) / loss

 

(213)

 

268

Legal and professional fees

 

945

 

834

Staff costs (note 8)

 

51,431

 

48,103

Remuneration received by the Group's auditor or associates of the Group's auditor:

 

 

 

 

Audit of parent company

 

5

 

5

Audit of consolidated financial statements

 

209

 

146

Audit of consolidated financial statements (prior year)

 

-

 

-

Audit related assurance service

 

7

 

6

Audit of UK subsidiaries

 

13

 

13

Total audit services

 

234

 

170

 

 

 

 

 

Audit of overseas subsidiaries

 

 

 

 

  - Malaysia

 

22

 

21

  - Indonesia

 

116

 

76

Total audit services

 

138

 

97

 

 

 

 

 

Total auditor's remuneration

 

372

 

267

 

7  Segment information

 

Description of the types of products and services from which each reportable segment derives its revenues

In the opinion of the Directors, the operations of the Group comprise one class of business which is the cultivation of plantation in Indonesia and Malaysia. From the cultivation of plantation, the Group produced the crude palm oil and associated products such as palm kernel, shell nut, biomass products, biogas products and rubber.

 

Factors that management used to identify reportable segments in the Group

The reportable segments in the Group are strategic business units based on the geographical spread. Operating segments are consistent with the internal reporting provided to the Board of Directors. The Board of Directors is responsible for allocating resources and assessing the performance of the operating segments. The Board decision is implemented by the Executive Committee, that is made up of a Senior General Manager in Malaysia, the President Director, the Chief Operating Officer, Finance Director and the Engineering Director.

 

Measurement of operating segment profit or loss, assets and liabilities

The Group evaluates segmental performance on the basis of profit or loss before tax calculated in accordance with IFRS but excluding BA movement.

 

Inter-segment transactions are made based on terms mutually agreed by the parties to maximise the utilisation of Group's resources at a rate acceptable to local tax authorities. This policy was applied consistently throughout the current and prior period.

 

The Group's assets are allocated to segments based on geographical location.

 

 

 

 

 

North Sumatera

Bengkulu

Riau

Bangka

Kalimantan

Total Indonesia

Malaysia

UK

Total from continuing operations

South* Sumatera

 

$000

$000

$000

$000

$000

$000

$000

$000

$000

$000

2021

 

 

 

 

 

 

 

 

 

 

Total sales revenue (all external)

 

 

 

 

 

 

 

 

 

 

CPO, palm kernel and FFB

127,216

141,070

73,827

2,178

79,470

423,761

2,675

-

426,436

7,999

Rubber

695

-

-

-

-

695

-

-

695

-

Shell nut

1,173

1,191

1,440

-

232

4,036

-

-

4,036

-

Biomass products

336

-

-

-

-

336

-

-

336

-

Biogas products

114

485

-

-

400

999

-

-

999

-

Others

93

20

89

16

583

801

27

91

919

270

Total revenue

129,627

142,766

75,356

2,194

80,685

430,628

2,702

91

433,421

8,269

 

 

 

 

 

 

 

 

 

 

 

Profit / (loss) before tax

40,160

35,769

20,555

553

37,539

134,576

(517)

(1,325)

132,734

(4,786)

BA movement

1,660

700

574

111

1,273

4,318

31

-

4,349

64

Profit / (loss) for the year before tax per consolidated income statement

 

41,820

 

36,469

 

21,129

 

664

 

38,812

 

138,894

 

(486)

 

(1,325)

 

137,083

 

(4,722)

 

 

 

 

 

 

 

 

 

 

 

Interest income

2,323

720

133

1

22

3,199

15

-

3,214

5

Interest expense

(15)

-

-

-

-

(15)

(9)

-

(24)

-

Depreciation

(5,270)

(4,132)

(905)

(356)

(5,660)

(16,323)

(671)

-

(16,994)

(1,978)

Reversal of impairment

-

-

-

-

5,437

5,437

-

-

5,437

-

Impairment losses

-

-

-

-

(452)

(452)

(133)

-

(585)

(716)

(Provision) / Reversal for expected credit loss

(4)

-

-

-

180

176

-

1

177

(1,231)

Inter-segment transactions

902

(2,001)

(11,754)

(282)

(1,934)

(15,069)

476

74

(14,519)

14,519

Inter-segmental revenue

42,566

2,641

-

-

9,431

54,638

-

-

54,638

7,438

Tax expense

(8,939)

(7,831)

(2,153)

(109)

(6,379)

(25,411)

(112)

(219)

(25,742)

(1,927)

 

 

 

 

 

 

 

 

 

 

 

Total assets

252,633

117,748

34,580

17,095

145,578

567,634

13,758

7,152

588,544

14,055

Non-current assets

77,170

42,027

8,751

14,960

108,844

251,752

8,780

-

260,532

27,425

Non-current assets - additions

8,490

4,727

608

1,600

7,072

22,497

517

-

23,014

3,424

 

 

North Sumatera

Bengkulu

Riau

Bangka

Kalimantan

Total Indonesia

Malaysia

UK

Total from continuing operations

South* Sumatera

 

$000

$000

$000

$000

$000

$000

$000

$000

$000

$000

2020 (restated)

 

 

 

 

 

 

 

 

 

 

Total sales revenue (all external)

 

 

 

 

 

 

 

 

 

 

CPO, palm kernel and FFB

81,764

82,194

46,865

1,026

43,103

254,952

2,330

-

257,282

5,066

Rubber

631

-

-

-

-

631

-

-

631

-

Shell nut

1,232

956

1,586

-

185

3,959

-

-

3,959

-

Biomass products

427

-

-

-

-

427

-

-

427

-

Biogas products

152

444

-

-

374

970

-

-

970

-

Others

60

105

-

16

355

536

6

7

549

176

Total revenue

84,266

83,699

48,451

1,042

44,017

261,475

2,336

7

263,818

5,242

 

 

 

 

 

 

 

 

 

 

 

Profit / (loss) before tax

18,916

16,809

12,341

(76)

11,174

59,164

(806)

(1,447)

56,911

(6,640)

BA movement

550

130

126

36

344

1,186

17

-

1,203

71

Profit / (loss) for the year before tax per consolidated income statement

 

19,466

 

16,939

 

12,467

 

(40)

 

11,518

 

60,350

 

(789)

 

(1,447)

 

58,114

 

(6,569)

 

 

 

 

 

 

 

 

 

 

 

Interest income

2,121

670

34

-

25

2,850

22

1

2,873

3

Interest expense

(25)

-

-

-

(257)

(282)

(10)

-

(292)

-

Depreciation

(4,741)

(4,253)

(886)

(308)

(5,387)

(15,575)

(602)

-

(16,177)

(2,090)

Reversal of impairment

-

-

-

-

2,165

2,165

-

-

2,165

31

Impairment losses

-

-

-

-

-

-

(188)

-

(188)

-

Reversal / (Provision) for expected credit loss

65

(1)

-

(1)

(167)

(104)

1

1

(102)

(1,383)

Inter-segment transactions

4,744

(1,966)

(564)

(195)

(1,913)

106

467

168

741

(741)

Inter-segmental revenue

27,668

3,293

-

-

4,167

35,128

-

-

35,128

3,505

Tax expense

(6,734)

(3,218)

(2,742)

25

(1,665)

(14,334)

(737)

(87)

(15,158)

1,354

 

 

 

 

 

 

 

 

 

 

 

Total assets

194,269

83,338

25,798

15,872

135,624

454,901

14,405

5,978

475,284

37,046

Non-current assets

75,004

42,178

9,184

13,872

104,098

244,336

9,390

-

253,726

27,105

Non-current assets - additions

4,582

2,413

342

4,474

6,868

18,679

127

-

18,806

2,319

 

                           

 

* South Sumatera represents the operations which have been discontinued and have therefore been separated from the continuing operations. The details of discontinued operations for South Sumatera are disclosed in note 10.

 

Below is an analysis of revenue from the Group's top 4 customers, incorporating all those contributing greater than 10% of the Group's external revenue in accordance with the requirements of IFRS 8. In year 2021, revenue from top 4 customers of the Indonesian segment represents approximately $266.3m (2020: $130.8m) of the Group's total revenue. Although Customer 1 to 4 made up over 10% of the Group's total revenue, there was no over reliance on these Customers as tenders were performed on a weekly basis. Two of the top four customers were the same as in the prior year.

 

 

North Sumatera

Bengkulu

Riau

Bangka

Kalimantan

Total Indonesia

Malaysia

UK

Total

South Sumatera

Total

 

$000

$000

$000

$000

$000

$000

$000

$000

$000

$000

$000

2021

 

 

 

 

 

 

 

 

 

 

 

Customer 1

2,203

36,104

36,909

-

45,655

120,871

-

-

120,871

-

120,871

Customer 2

-

31,431

-

-

19,335

50,766

-

-

50,766

-

50,766

Customer 3

48,333

-

-

-

-

48,333

-

-

48,333

-

48,333

Customer 4

-

46,324

-

-

-

46,324

-

-

46,324

-

46,324

 

50,536

113,859

36,909

-

64,990

266,294

-

-

266,294

-

266,294

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2020

 

 

 

 

 

 

 

 

 

 

 

Customer 1

819

22,558

7,164

-

23,075

53,616

-

-

53,616

-

53,616

Customer 2

31,556

-

-

-

-

31,556

-

-

31,556

-

31,556

Customer 3

-

-

25,042

-

-

25,042

-

-

25,042

-

25,042

Customer 4

-

15,977

-

-

4,584

20,561

-

-

20,561

-

20,561

 

32,375

38,535

32,206

-

27,659

130,775

-

-

130,775

-

130,775

 

 

 

 

 

 

 

 

 

 

 

 

 

%

%

%

%

%

%

%

%

%

%

%

2021

 

 

 

 

 

 

 

 

 

 

 

Customer 1

0.5

8.2

8.4

-

10.3

27.4

-

-

27.4

-

27.4

Customer 2

-

7.1

-

-

4.4

11.5

-

-

11.5

-

11.5

Customer 3

10.9

-

-

-

-

10.9

-

-

10.9

-

10.9

Customer 4

-

10.5

-

-

-

10.5

-

-

10.5

-

10.5

 

11.4

25.8

8.4

-

14.7

60.3

-

-

60.3

-

60.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2020

 

 

 

 

 

 

 

 

 

 

 

Customer 1

0.3

8.4

2.7

-

8.6

20.0

-

-

20.0

-

20.0

Customer 2

11.7

-

-

-

-

11.7

-

-

11.7

-

11.7

Customer 3

-

-

9.3

-

-

9.3

-

-

9.3

-

9.3

Customer 4

-

5.9

-

-

1.7

7.6

-

-

7.6

-

7.6

 

12.0

14.3

12.0

-

10.3

48.6

-

-

48.6

-

48.6

 

Save for a small amount of rubber, all the Group's operations are devoted to oil palm. The Group's report is by geographical area, as each area tends to have different agricultural conditions.

 

 

8  Employees' and Directors' remuneration

 

 

 

2021

Number

 

2020

Number

Average numbers employed (primarily overseas) during the year:

 

 

 

 

-  full time

 

7,618

 

7,242

-  part-time field workers*

 

6,191

 

7,208

 

 

13,809

 

14,450

* Part-time field workers headcounts based on full time equivalent of 8 hours per day.

 

 

 

 

 

 

 

 

 

 

 

2021

$000

 

2020

$000

Staff costs (including Directors and discontinued operations) comprise:

 

 

 

 

Wages and salaries

 

47,628

 

43,129

Social security costs

 

3,342

 

2,921

Retirement benefit costs

 

 

 

 

  -  United Kingdom

 

-

 

-

-  Indonesia (note 22)

 

411

 

2,003

-  Malaysia

 

50

 

50

 

 

51,431

 

48,103

 

 

 

2021

$000

 

2020

$000

 

 

 

 

 

Directors emoluments

 

187

 

200

 

 

 

 

 

 

 

2021

$000

 

2020

$000

Remuneration expense for key management personnel comprise:

 

 

 

 

Short-term employee benefits

 

1,835

 

1,499

Post-employment benefits

 

-

 

-

 

 

1,835

 

1,499

 

The Executive Director, Non-Executive Directors and senior management (general managers and above) are considered to be the key management personnel.

 

9  Tax expense

 

 

 

2021

$000

 

(Restated) 2020

$000

 

 

 

 

 

Foreign corporation tax - current year

 

20,404

 

9,920

Foreign corporation tax - prior year

 

258

 

287

Deferred tax adjustment - origination and reversal of temporary differences (note 15)

 

5,080

 

4,264

Recognition of previously unrecognised deferred tax (note 15)

 

-

 

687

Total tax charge for year

 

25,742

 

15,158

 

Corporation tax rate in Indonesia is at 22% (2020: 22%) whereas Malaysia is at 24% (2020: 24%). The standard rate of corporation tax in the UK for the current year is 19% (2020: 19%). The Group's charge for the year differs from the standard Indonesian rate of corporation tax as explained below:

 

 

 

2021

$000

 

(Restated)

2020

$000

 

 

 

 

 

Profit before tax from continuing operations

 

137,083

 

58,114

 

 

 

 

 

Profit before tax multiplied by standard rate of Indonesia corporation tax of 22% (2020: 22%)

 

30,158

 

12,785

Effects of:

 

 

 

 

Rate adjustment relating to overseas profits

 

(30)

 

(17)

Group accounting adjustments not subject to tax

 

(1,023)

 

(19)

Expenses not allowable for tax

 

263

 

640

Deferred tax assets not recognised

 

(10)

 

-

Income not subject to tax

 

(659)

 

(646)

Under provision of prior year income tax

 

258

 

287

Utilisation of tax losses not previously recognised

 

(3,215)

 

-

Under provision of prior year deferred tax

 

-

 

687

 Change in tax rate

 

-

 

1,431

Total tax charge for year

 

25,742

 

15,158

 

The above reconciliation has been prepared by reference to the Indonesian tax rate rather than the UK tax rate as, in accordance with IAS 12, this is the applicable tax rate that provides the most meaningful information, given this is the country in which the majority of tax arises.

 

The tax receivables represent the corporate income tax ("CIT") and value added tax ("VAT") that have yet to be refunded by the Indonesia tax authority. The tax receivables relating to CIT arose due to over payment of tax. The tax receivables relating to VAT arose because the majority of the Groups' CPO was sold to bonded zones which do not attract output VAT and thus the input VAT incurred is claimable. Upon submission of a tax return (for CIT) or a request letter (for VAT refund), a tax audit will be conducted by the tax authority and whilst every effort is made to resolve this quickly, the process can sometimes take more than 12 months.

 

The breakdown of the tax receivables and tax liabilities is as follows:

 

2021

$000

 

2020

$000

 

 

 

 

 

 

 

 

Tax Receivables

 

 

 

 

 

Income tax

5,072

 

10,071

 

 

Other taxes

45,481

 

41,618

 

 

 

50,553

 

51,689

 

 

Transfer to assets held for sale (note 10)

(58)

 

-

 

 

 

50,495

 

51,689

 

 

 

 

 

 

 

 

Tax Liabilities

 

 

 

 

 

Income tax

(13,139)

 

(5,981)

 

 

Other taxes

(1,615)

 

(1,089)

 

 

 

(14,754)

 

(7,070)

 

 

 

10  Assets held for sales and discontinued operations

 

In October 2021, the Board approved to dispose of the operations of KKST, ELAP and RAA to cut losses. The Group has engaged Helios Capital as our Financial Advisor for disposal of the three companies and an active programme to locate a buyer was initiated. The proposed disposal of the operations are expected to be completed within 12 months and as a result the assets of KKST, ELAP and RAA have been classified as held for sale in the consolidated statement of financial position from 31 December 2021.

 

The entire operations of the disposal group are presented within the South Sumatera operating segment disclosed in Note 7 and represent a separate geographical area of operations. The activities for the financial years ending 31 December 2021 and 31 December 2020 have been classified as discontinued operations in the consolidated income statement as a single line.

 

The post-tax loss on disposal of discontinued operations was determined as follows:

 

 

 

 

 

 

 

2021

2020

 

 

 

 

 

 

 

 

Result before

BA movement

 

 

BA movement

 

 

 

Total

Result before

BA movement

 

 

BA movement

 

 

 

Total

 

 

 

 

$000

 

$000

 

$000

 

$000

 

$000

 

$000

 

Discontinued operations

 

 

 

 

 

 

 

 

Revenue

4

8,269

-

8,269

5,242

-

5,242

Cost of sales

 

(11,052)

64

(10,988)

(10,168)

71

(10,097)

Gross (loss) / profit

 

(2,783)

64

(2,719)

(4,926)

71

(4,855)

Administration expenses

 

(62)

-

(62)

(366)

-

(366)

(Impairment loss) / Reversal of impairment

13

(716)

-

(716)

31

-

31

Provision for expected credit loss

18

(1,231)

-

(1,231)

(1,383)

-

(1,383)

Operating (loss) / profit

 

(4,792)

64

(4,728)

(6,644)

71

(6,573)

Exchange gains

 

1

-

1

1

-

1

Finance income

 

5

-

5

3

-

3

Finance expense

 

-

-

-

-

-

-

(Loss) / Profit before tax

6

(4,786)

64

(4,722)

(6,640)

71

(6,569)

Tax expense

 

(1,913)

(14)

(1,927)

1,365

(11)

1,354

(Loss) / Profit for the year from discontinued operations

 

(6,699)

50

(6,649)

(5,275)

60

(5,215)

Impairment loss on adjustment to fair value

 

 

(21,772)

 

-

 

(21,772)

 

-

 

-

 

-

 

 

(28,471)

50

(28,421)

(5,275)

60

(5,215)

Attributable to:

 

 

 

 

 

 

 

  -  Owners of the parent

 

(27,760)

47

(27,713)

(4,746)

57

(4,689)

  -  Non-controlling interests

 

(711)

3

(708)

(529)

3

(526)

 

 

(28,471)

50

(28,421)

(5,275)

60

(5,215)

Earnings per share attributable to the owners of the parent during the year

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

- Basic and diluted EPS before BA movement

 

(69.92)cts

 

 

(11.83)cts

- Basic and diluted EPS after BA movement

 

(69.92)cts

 

 

(11.83)cts

                         

 

Statement of cash flows

 

The statement of cash flows includes the following amounts relating to discontinued operations:

 

 

 

2021

$000

 

2020

$000

Operating activities

 

(821)

 

10,229

Investing activities

 

(1,594)

 

(2,990)

Financing activities

 

-

 

-

Net increase in cash and cash equivalents from discontinued operations

 

(2,415)

 

7,239

 

The following major classes of assets relating to the discontinued operations have been classified as held for sale in the consolidated statement of financial position on 31 December:

 

 

 

 

2021

$000

Property, plant and equipment (note 13)

 

 

 

27,425

Impairment loss on adjustment to fair value

 

 

 

(21,772)

Property, plant and equipment net of impairment losses

 

 

 

5,653

 

 

 

 

 

Non-current receivables (note 14)

 

 

 

3,338

Deferred tax assets (note 15)

 

 

 

3,124

Inventories (note 16)

 

 

 

729

Income tax receivable (note 9)

 

 

 

46

Other tax receivable (note 9)

 

 

 

12

Biological assets (note 17)

 

 

 

303

Trade and other receivables (note 18)

 

 

 

68

Exchange differences

 

 

 

(63)

Total assets held for sale

 

 

 

13,210

 

An impairment loss of $21,772,000 on the measurement of the disposal group to fair value less cost to sell has been recognised and is included in discontinued operations. The fair value less cost to sell has been determined from a valuation range obtained through the sales marketing process, through discussion with potential buyers and review of internal forecasts. Management do not expect the final amount realised to be materially different from this. They are categorised as level 3 non-recurring fair value measurements. The fair value measurement is based on the above items' highest and best uses, which do not differ from their actual use.

 

At 31 December 2021, the expected loss provision for receivables in assets held for sale is as follows:

 

 

 

Gross carrying amount

$000

 

Loss provision

$000

 

Net carrying amount

$000

2021

 

 

 

 

 

 

Trade receivable

 

12

 

-

 

12

Other receivables (note 18)

 

23

 

-

 

23

Receivables: non-current (note 14)

 

 

 

 

 

 

- Due from cooperatives under Plasma scheme

 

12,136

 

(8,798)

 

3,338

 

 

12,171

 

(8,798)

 

3,373

 

11  Earnings per ordinary share ("EPS")

 

 

2021

$000

 

(Restated) 2020

$000

Total operations

 

 

 

Profit for the year attributable to owners of the Company before BA movement

65,485

 

30,653

BA movement

2,856

 

1,051

Earnings used in basic and diluted EPS

68,341

 

31,704

 

 

 

 

Continuing operations

 

 

 

Profit for the year attributable to owners of the Company before BA movement

93,245

 

35,399

BA movement

2,809

 

994

Earnings used in basic and diluted EPS

96,054

 

36,393

 

 

 

 

Discontinued operations

 

 

 

Profit for the year attributable to owners of the Company before BA movement

(27,760)

 

(4,746)

BA movement

47

 

57

Earnings used in basic and diluted EPS

(27,713)

 

(4,689)

 

 

 

 

 

Number

 

Number

 

'000

 

'000

Weighted average number of shares in issue in the year

 

 

 

-  used in basic EPS

39,636

 

39,636

-  dilutive effect of outstanding share options

-

 

-

-  used in diluted EPS

39,636

 

39,636

 

 

 

 

Total operations

 

 

 

 - Basic and diluted EPS before BA movement

165.22cts

 

77.34cts

 - Basic and diluted EPS after BA movement

172.42cts

 

79.99cts

Continuing operations

 

 

 

 - Basic and diluted EPS before BA movement

235.25cts

 

89.31cts

 - Basic and diluted EPS after BA movement

242.34cts

 

91.82cts

Discontinued operations

 

 

 

 - Basic and diluted EPS before BA movement

(70.04)cts

 

(11.97)cts

 - Basic and diluted EPS after BA movement

(69.92)cts

 

(11.83)cts

12  Dividends

 

2021

$000

 

2020

$000

 

 

 

 

Paid during the year

 

 

 

Final dividend of 1.0cts per ordinary share for the year ended 31 December 2020

(2019: 0.5cts)

 

396

 

 

198

 

 

 

 

Proposed final dividend of 5.0cts per ordinary share for the year ended 31 December 2021 (2020: 1.0cts)

 

1,982

 

 

396

 

The proposed dividend for 2021 is subject to shareholders' approval at the forthcoming annual general meeting and has not been included as a liability in these financial statements.

 

 

13  Property, plant and equipment  

 

 

 

Plantations

Mill

 Leasehold

land

Buildings

Estate plant,

equipment & vehicle

Office plant,

equipment & vehicle

Right-of-use assets

Construction

 in progress

Total

 

$000

$000

$000

$000

$000

$000

$000

$000

$000

Cost

 

 

 

 

 

 

 

 

 

At 1 January 2020 (restated)

214,050

78,359

56,978

62,828

17,990

1,277

846

1,061

433,389

Exchange translations

(2,486)

(1,085)

(321)

(774)

(209)

5

(5)

(28)

(4,903)

Reclassification

-

70

-

2,572

-

-

-

(2,642)

-

Additions

167

1,946

3,821

496

816

109

-

2,263

9,618

Development costs capitalised

10,451

-

1,037

-

-

19

-

-

11,507

Disposal / Written off

(2,447)

(510)

(243)

(239)

(563)

(5)

-

(12)

(4,019)

At 31 December 2020 (restated)

219,735

78,780

61,272

64,883

18,034

1,405

841

642

445,592

Exchange translations

(2,753)

(899)

(957)

(768)

(242)

(30)

(15)

7

(5,657)

Reclassification

-

(19)

-

2,909

19

-

-

(2,909)

-

Additions

-

2,495

3,512

114

1,041

592

133

8,095

15,982

Development costs capitalised

10,456

-

-

-

-

-

-

-

10,456

Disposals / Written off

(1,684)

(700)

(379)

(208)

(814)

(5)

-

-

(3,790)

Transfer to assets held for sale (note 10)

(31,888)

-

(10,963)

(6,067)

(2,191)

-

-

(127)

(51,236)

At 31 December 2021

193,866

79,657

52,485

60,863

15,847

1,962

959

5,708

411,347

 

 

 

 

 

 

 

 

 

 

Accumulated depreciation and impairment

 

 

 

 

 

 

 

 

 

At 1 January 2020 (restated)

84,834

25,843

5,646

21,288

13,295

1,009

187

-

152,102

Exchange translations

(639)

(272)

(56)

(165)

(122)

3

11

-

(1,240)

Reclassification

-

-

-

-

-

-

-

-

-

Charge for the year

9,450

3,587

124

3,476

1,400

82

148

-

18,267

(Reversal of impairment) / Impairment losses

-

-

(2,196)

-

-

-

188

-

(2,008)

Disposal / Written off

(1,166)

(509)

-

(143)

(539)

(3)

-

-

(2,360)

At 31 December 2020 (restated)

92,479

28,649

3,518

24,456

14,034

1,091

534

-

164,761

Exchange translations

(1,297)

(318)

(108)

(296)

(191)

(24)

(11)

-

(2,245)

Reclassification

-

-

-

-

-

-

-

-

-

Charge for the year

9,907

3,873

125

3,523

1,309

82

153

-

18,972

(Reversal of impairment) / Impairment losses

(5,437)

-

1,168

-

-

-

133

-

(4,136)

Disposal / Written off

(1,313)

(455)

-

(155)

(798)

(5)

-

-

(2,726)

Transfer to assets held for sale (note 10)

(19,225)

-

(957)

(1,782)

(1,847)

-

-

-

(23,811)

At 31 December 2021

75,114

31,749

3,746

25,746

12,507

1,144

809

-

150,815

 

 

 

 

 

 

 

 

 

 

Carrying amount

 

 

 

 

 

 

 

 

 

At 31 December 2019 (restated)

129,216

52,516

51,332

41,540

4,695

268

659

1,061

281,287

At 31 December 2020 (restated)

127,256

50,131

57,754

40,427

4,000

314

307

642

280,831

At 31 December 2021

118,752

47,908

48,739

35,117

3,340

818

150

5,708

260,532

 

The Group had changed the measurement of leasehold land from fair value to historical cost, the details are disclosed in note 3.

 

Th e capitalisation rate used to determine the amount of borrowing costs eligible for capitalisation is based on the percentage of immature area of each estate against total planted area in the estate. The average capitalisation rate was 0% (2020: 8.6%) due to no borrowing cost in 2021.  The estates included $nil (2020: $24,000) of interest and $181,000 (2020: $64,000) of overheads capitalised during the year in respect of expenditure on estates under development.

 

The Indonesian authorities have granted certain land exploitation rights and operating permits for the estates. In the case of established estates in North Sumatera, these rights and permits expire between 2023 and 2056 with rights of renewal thereafter. As of estates in Bengkulu land titles were issued between 1994 and 2016 and the titles expire between 2028 and 2051 with rights of renewal thereafter for two consecutive periods of 25 and 35 years respectively. In Riau, land titles were issued in 2003 and expire in 2033 with rights of renewal thereafter. In Kalimantan, land titles were issued between 2015 and 2020 and expire between 2049 and 2054 with rights of renewal thereafter. In Bangka, land titles were issued in 2018 and expire in 2053. The rights and permits for South Sumatera were renewed in 2020. Some of the land is still in application progress to obtain the land title.

 

Subject to compliance with the laws and regulations of Indonesia, land rights are usually renewed. The cost of renewing the land rights is not significant. On the basis that the Group has an indefinite right to renew, leasehold land is not depreciated except leasehold land in Malaysia.

 

The land title of the estate in Malaysia is a long-term lease expiring in 2084.

 

There is an impairment of land for $1,168,000 recognised in 2021 based on the land valuation in 2020, which there is no material change within one year. The total value of the Group's land carried at fair value which was lower than original cost was $13,861,000 (2020: $9,584,000). The land cost of $6,450,000 relates to the land which has been transferred to assets held for sale, the details are disclosed in note 10. The total value of the Group's right-of-use assets carried at value in use which was lower than original cost was $322,000 (2020: $196,000). For right-of-use assets, the impairment is recognized for $133,000 (2020: $188,000) due to no future economic benefits.

 

Impairment for plantations is measured by comparing its carrying amount with its recoverable amount, which is the higher of the fair value less cost to sell and its value in use. The impairment assessment is based on each cash generating unit ("CGU") which is defined as each estate. The reversal of impairment loss of $5,437,000 recognised in 2021 was primarily due to the increase in CPO price. In 2020, no impairment loss or reversal of impairment loss of plantations had been recognised.

 

The recoverable amount of the Group's plantations in 2021 was based on value in use calculations, which due to the nature of the cashflows, will be higher than fair value less cost to sell. The total value of the Group's plantations carried at value in use which was lower than original cost was $12, 899 ,000 (2020: $33,429,000). The plantations cost of $12,663,000 relates to the plantations which have been transferred to assets held for sale, the details are disclosed in note 10.

 

The value in use, computed by the professional valuer MBPRU using a discounted cash flow ("DCF") model, is the net present value of the projected future cash flows over the expected 20-year economic life of the asset discounted at 14.8% (2020: 16.0%). Projected future cash flows are calculated based on historical data, industry performance, economic conditions and any other readily available information including the impact of climate change. The compliance with changing regulations, changes in buyer preferences, development of new products and use of lower emission sources of energy will affect the FFB production, CPO price and its growth. Heavy rainfall & flooding, droughts and fires will have an effect on company specific risk within the calculation of our discount rate as well as potential impacts on the ability of our plants to produce FFB. Pests & disease will impact the upkeeping cost. 

 

The sensitivity analysis below has been performed to show the reasonably possible changes in the key assumptions which would have a material impact on the impairment losses: 

 

 

 

  2021

 

 

 

Assumption applied

 

Increase in impairment

 

 

 

$000

 

 

 

 

CPO price - decrease of 8%

$1,000/mt

 

1,325

Pre-tax discount rate - increase by 300 bps

14.76%

 

1,771

Inflation rate - increase by 200 bps

2.73%

 

1,152

             

 

 

 

  2020

 

 

 

Assumption applied

 

Increase in impairment

 

 

 

 

$000

 

 

 

 

 

CPO price - decrease of 1%

 

$650/mt

 

-

Pre-tax discount rate - increase by 100 bps

 

15.98%

 

383

Inflation rate - increase by 100 bps

 

3.12%

 

609

             

 

14  Receivables: non-current

 

 

2021

 

  2020

 

Book value

 

Fair value

 

Book value

 

Fair value

 

 

$000

 

$000

 

$000

 

$000

 

 

 

 

 

 

 

 

 

 

Due from non-controlling interests

5,459

 

3,042

 

5,493

 

3,050

 

Due from cooperatives under Plasma scheme

19,879

 

13,122

 

16,743

 

14,857

 

 

25,338

 

16,164

 

22,236

 

17,907

 

Transfer to assets held for sale (note 10)

(3,338)

 

(2,079)

 

-

 

-

 

 

22,000

 

14,085

 

22,236

 

17,907

 

                     

 

The non-controlling interests in PT Chaya Pelita Andhika, PT Sawit Graha Manunggal, PT Empat Lawang Agro Perkasa, PT Karya Kencana Sentosa Tiga, PT Riau Agrindo Agung and PT Kahayan Agro Plantation have acquired their interests on deferred terms (see note 28, Credit risk).

 

Plasma scheme is an initiative by the Indonesian Government that mandated plantation owners to allocate a percentage of their land acquired to the surrounding community and to further provide financial and technical assistance to cultivate oil palm on that land to improve the income and welfare of the community or cooperatives. During the year, certain subsidiary companies have funded plasma with a cumulative gross amount before ECL for $16,612,000 (2020: $24,632,000) which is recoverable from the cooperatives, the details with ECL are disclosed in note 10 and note 18.

 

The fair values disclosed above are for disclosure purposes and all non-current receivables are classified as Level 3 in the fair value hierarchy.

 

The valuation techniques and significant unobservable inputs used in determining the fair value measurement of non-current receivables, as well as the inter-relationship between key unobservable inputs and fair value, are set out in the table below:

 

Item

Valuation approach

Inputs used

Inter-relationship between key unobservable inputs and fair value

 

Due from non-controlling interests

Based on cash flows discounted using current lending rate of 6% (2020: 6%).

Discount rate

The higher the discount rate, the lower the fair value.

Due from cooperatives under Plasma scheme

Based on cash flows discounted using an estimated current lending rate of 7.00% (2020: 6.75%).

Discount rate

The higher the discount rate, the lower the fair value.

 

 

15  Deferred tax

 

The movement on the deferred tax account as shown below:

 

 

 

 

 

2021

$000

 

(Restated)

2020

$000

 

 

 

 

 

At 1 January

 

13,607

 

17,365

Recognised in income statement from continuing operations

 

(7,005)

 

(3,597)

Recognised in other comprehensive income

 

(306)

 

130

Transfer to assets held for sale (note 10)

 

(3,124)

 

-

Exchange differences

 

(178)

 

(291)

At 31 December

 

2,994

 

13,607

 

The most significant movement in deferred tax was due to the utilisation of some of the losses against taxable profits during the year.

 

The deferred tax asset and liability, together with the amounts recognised in income statement and other comprehensive income are detailed as follows:

 

 

 

 

 

Asset

$000

 

 

 

 

Liability

$000

 

 

 

 

Net

$000

 

 

 

(Charged)/

credited

to equity

$000

2021

 

 

 

 

 

 

 

 

Impairment of land

139

 

-

 

139

 

 

-

Retirement benefits

2,304

 

-

 

2,304

 

 

(280)

BA movement

-

 

(2,819)

 

(2,819)

 

(957)

 

-

Unutilised tax losses

3,713

 

-

 

3,713

 

(4,303)

 

-

Unremitted earnings

-

 

(132)

 

(132)

 

 

-

Other temporary differences

-

 

(211)

 

(211)

 

158

 

-

Tax assets / (liabilities)

6,156

 

(3,162)

 

2,994

 

 

(280)

Set off of tax

(1,832)

 

1,832

 

-

 

-

 

-

Net tax assets / (liabilities)

4,324

 

(1,330)

 

2,994

 

(5,080)

 

(280)

 

 

 

 

 

 

 

 

 

2020 (restated)