Year End Results and Disposal of Next Oasis
LONDON NUSANTARA PLANTATIONS PLC
("London Nusantara", the “Group†or the "Company")
Audited Results for the Year Ended 31 December 2016 and Disposal of 11 per cent. Interest in Next Oasis
CHAIRMAN’S STATEMENT
I am pleased to present the Group’s audited financial results for the year ended 31 December 2016. With no operating business as yet, the Group made a consolidated pre-tax loss for the year of £113,438 (2015: £165,706). The parent company loss for the year amounted to £112,944 (2015: £165,706). Cash at bank at the end of December 2016 was £82,633 (2015: £191,097). During the financial year 2016, a new subsidiary entity – Lonnus (M) Sdn Bhd – was incorporated in Malaysia. Our net assets stood at £178,629 (2015: 292,067) as at 31 December 2016.
The Company remains quoted on the NEX Exchange Growth Market (formerly ISDX Growth Market), as an investment vehicle seeking to identify and secure potential acquisition opportunities within the agriculture sector, primarily in oil palm plantations (upstream and downstream) and also vacant land suitable for oil palm cultivation.
Principal Activities and Review of the Business
The principal activity of the Company is to invest in companies, or assets, in the agriculture sector primarily in oil palm plantations and/or vacant land suitable for oil palm cultivation. The Company has continued in this activity since listing on the NEX Exchange Growth Market in June 2014.
Subsequent to the financial year end, the Company has entered into a Share Sale Agreement (“SSAâ€) dated 29 May 2017 to dispose of its investment in Next Oasis Sdn Bhd for RM683,000 (£124,181). The sale averaged a return of 8.1% which is above average return on capital asset disposals.
During the year we expanded our investment horizon to include Indonesia as the rebound in palm oil prices resulted in an increase in capital values of estates in Malaysia. Negotiations with estate owners have been difficult in 2016, on the back of a challenging 2015. Capital raising from conventional bank borrowings and equity placements have also proved difficult. We have now embarked on looking at further downstream opportunities in varying our investment strategy for 2017. These include the possibility of investing in the palm oil mill sector, which includes production of crude palm oil, and renewable energy businesses from oil palm waste monetisation. We also intend to capitalise on the joint venture business model as it allows us to tap into the experience of more established players, possibly working together to raise conventional bank loans to finance investments.
We are constantly looking for investment opportunities in the region and our plan is to embark on an aggressive fund raising exercise in 2017 in conjunction with an expanded investment plan in the palm oil industry.
Financial Review
The audited results for the year show a loss of £113,438. About 40% of the Company’s primary expenses are largely to maintain its listing status, and professional fees. The other expenses are related to business development incurred in identifying potential investment targets, directors’ fees and office rentals. In a more positive note the Group recorded a foreign exchange gain of £26,668 compared to the loss in 2015 of £44,955 thanks to the improving Ringgit vs. the British Sterling. We also recorded revenue of £4,901 from interest received from our treasury fund placements. Our cash position as at 31 December 2016 stood at £82,633. We expect to undertake a further capitalisation during the year 2017 in order to maintain the listing status and continue seeking further investments.
The directors do not recommend the payment of a dividend for the year ended 31 December 2016.
The Directors consider the results for the year to be satisfactory despite the adverse conditions faced during the year 2016.
CHAIRMAN’S STATEMENT & INDUSTRY OUTLOOK 2017
This year, Malaysia is celebrating 100 years of oil palm planting. In 1917, Henri Fauconnier, established Malaysia’s first commercial oil palm planting at Tennamaram Estate, Selangor, in a bid to replace an unsuccessful coffee estate. The industry has played a large part in the development of the economy and will continue to be one of the main pillars for Malaysia’s economy.
Prolonged dry weather conditions and below average rainfall brought about by the El-Nino weather phenomena during the second half of 2015 and into the first half of 2016 had impacted the Malaysian oil palm industry performance in 2016. Prices of all oil palm products were traded higher and Crude Palm Oil (“CPOâ€) price was traded higher by 23.2% or RM499.50 per tonne. The average CPO price in 2016 was higher by 23.2% to reach RM2,653 (£482) per tonne as compared to RM2,153.50 (£391) per tonne in 2015. The year 2016 saw CPO production recording a decline of 13.2% to 17.32 million tonnes, against 19.96 million tonnes produced in 2015. This double-digit, decline drew down palm oil stocks and pushed up palm oil prices. The decrease was due to lower Fresh Fruit Bunches (“FFBâ€) processed; down by 12.0% arising from lower FFB yield. The FFB yield for 2016 was also lower, down by 13.9% to 15.91 tonnes per hectare, against 18.48 tonnes per hectare achieved in 2015. CPO production in Peninsular Malaysia, Sabah and Sarawak decreased by 15.7%, 15.3% and 3.2% to 8.89 million tonnes, 4.85 million tonnes and 3.59 million tonnes respectively compared to 2015. High palm oil prices had influenced exports to major markets as the discount of CPO to soyabean oil narrowed. Higher palm oil prices also helped to increase export revenue by 7.3% to RM64.58 billion (£11.7 billion) from RM60.17 billion (£10.9 billion) in 2015 for Malaysia.
The FFB yield for 2016 was also lower, down by 13.9% to 15.91 tonnes per hectare as against 18.48 tonnes per hectare achieved in 2015. The El-Nino phenomenon beginning in the second half of 2015, with prolonged dry weather conditions and below average rainfall had impacted the production of FFB in 2016. FFB yield for Peninsular Malaysia declined by 16.0% to 15.77 tonnes per hectare, against 18.77 tonnes per hectare achieved in 2015. Sabah registered a decline of 14.5% to 17.10 tonnes per hectare, against 19.99 tonnes per hectare achieved in the previous year. Sarawak’s FFB yield was relatively lower at 14.86 tonnes per hectare or down by 8.3% as compared to 16.21 tonnes per hectare achieved in 2015. Palm oil stocks closed at 1.67 million tonnes, a decline of 36.7% from 2.63 million tonnes recorded in December 2015. The lower closing stocks was mainly due to lower CPO production, down by 13.2% or 2.64 million tonnes and lower palm oil imports by 59.6% or 612,743 tonnes.
The highest traded price was in December 2016 at RM3,200 per tonne and the lowest price was in January at RM2,250.50 per tonne. The higher CPO price during the year was mainly due to lower CPO production as dryness caused by El-Nino weather phenomena, which lowered FFB yield, thus boosting palm oil prices, coupled with firmer competing vegetable oil prices, i.e. Soybean Oil (“SBOâ€) price and weaker Ringgit, against the US Dollar, which made palm oil cheaper as compared to other vegetable oils in the world market. (Source: Malaysian Palm Oil Board).
Malaysia's economic growth expanded at 4.5 per cent in the fourth quarter of 2016, which was flat when compared to a year ago, underpinned by the manufacturing and services sector, according to Bank Negara Malaysia. The central bank said for 2016, the gross domestic product reported lower growth of 4.2%, which was slightly lower from 5%. In the agriculture sector, economic activity contracted at a slower pace at -2.4%, reflecting the diminishing impact of El Niño on crude palm oil yields. The global economy is on the recovery path after bottoming out last year. Better-than-expected performance in major economies, particularly the United States, China, Japan and Euro area, and the recovery of larger emerging and low income economies as commodities prices improved provided the impetus for global growth (Malaysian Institute of Economic Research).
Leading analysts have forecast 2017 to be a positive year for palm oil prices, at least for the first half. Global palm oil production is forecast to increase by 6 million tonnes in 2017, according to leading vegetable oils analysts. Last October 2016, it had been estimated global palm oil output for 2016/2017 to grow by 5.5 million tonnes. Malaysian palm oil output is forecast to increase to 19.85 million tonnes this year from 17.32 million tonnes, a year ago, while production of Indonesian palm oil will rise to 35 million tonnes in 2017 from 32.10 million tonnes last year. Most oil palm analysts agree that palm oil prices have peaked, but due to insufficient supplies and a prospective strong world import demand, prices are likely to remain at current levels. Yields are expected to recover, but remain below average, adding that last year, the average annual oil yield fell to a 19-year-low. Replenishment of vegetable oil stocks will take time and will not be possible in 2016/2017 as good weather and high production is required. It is anticipated that palm oil [PRODUCTION//] would stay below soybean oil for much of 2017. World imports of vegetable oils have to increase by at least 3.3 million tonnes to 3.6 million tonnes in January/September 2017, to ensure sustainable supplies to meet the current demand.
Stocks will remain low during these lower production months, plantations bounce back from El Niño perhaps more slowly than many traders expect, and exports to India recover from the current issues surrounding the availability of large denomination currency, which will likely exaggerate the already decreasing levels of in-country palm oil stocks in the short-term. In the other main export markets for palm oil, Chinese stocks are already at historic low levels, although we wait to see whether this is indeed a low or a new normal. The Chinese government appears to be focusing more on rival soybean oil through increased imports and encouragement to increase its own modest levels of domestic production. However, the election of Donald Trump in the US may swing this focus back towards palm oil, given his articulated views on China and China's own moves to take the initiative away from the US with regards to South East Asia trade.
Towards the back end of 2017, and into 2018, it is possible we may see some softening of palm oil prices as the US soybean crop is harvested and the impact of El Niño is finally removed from palm oil estates, which may result in a prolonged period of flush production.
Therefore it’s predicted the CPO price outlook for 2017 is expected to average RM2,700 per tonne compared with RM2,653 per tonne in 2016. CPO prices can be traded within a low of RM2,500 per tonne and a high of RM2,800 per tonne this year.
Principal Risks and Uncertainties
The principal risks and uncertainties lie in the investments the Group holds. The agriculture sector means that returns are influenced by external factors that include weather patterns, suitability and availability of arable land and global demand and supply.
Given the nature of the business and activity of the Group, the Directors believe that the Group is more specifically exposed to the following risks:
Agricultural risk
The primary risk factors that affect most agricultural operations are usually related to agro climatic conditions, pests and diseases that may affect the crop production and the crop itself. To mitigate the abovementioned risk factors, companies need to be cognizant of their Agricultural practices which can mitigate the risk of outbreaks of pests and diseases. Adverse climatic conditions including drought or excessive rainfall or unusually low levels of rainfall required for the normal development of the oil palms may lead to a reduction in subsequent crop levels.
London Nusantara will consider the above risk factors and mitigating factors which would be part of its agronomic due diligence process before deciding on the investment.
Commodity and Crude Palm Oil (“CPOâ€) prices
Oil palm production companies depend on sales of Fresh Fruit Bunches (“FFBsâ€) to mills or Crude Palm Oil (“CPOâ€) if the Company owns its own mill as its primary source of revenue. The price of the commodity is dependent on the demand and supply of the product globally and other competing edible oil supplies, especially soybean oil. The price of edible oils depends generally on the production levels of all other edible oils including palm oil, which are substitutable by users. Therefore the price fluctuation is influenced by factors beyond the Group’s control.
These factors include global supply and demand of CPO and other macro-economic factors related to the global commodity market. A significant prolonged decline in CPO prices could impact the viability of some or all of the Group’s investments.
Liquidity risk
The Group’s continued future operations depend on the ability to hold sufficient working capital to be able to meet its financial obligations. The Directors are confident that there is adequate funding to finance future immediate working capital requirements for the next 12 months.
Financial Risk Management
The Group’s principal financial instruments are cash and cash equivalents. No bank loans or other financing arrangements have been entered into. No borrowings have been raised to finance working capital. Therefore the Group’s exposure to credit risk, liquidity risk and market risk is not deemed significant.
M Subramaniam H Bin Abdul Jalil
Chief Executive Officer Non-Executive Director
30 May 2017
DISPOSAL OF 11 PER CENT. INTEREST IN NEXT OASIS
London Nusantara is pleased to announce that it has disposed of its 11 per cent. interest in Next Oasis Sdn Bhd (“Next Oasisâ€) for a consideration of, in aggregate, RM 683,000 (approximately GBP 124,181). The purchase details are summarised in the next paragraph. The after-transaction net profit uplift, before capital gains tax, is approximately 16.2 per cent. The consideration has been paid in cash upon signing of the Share Sales Agreement dated 29 May 2017. The sale was made to FCB Plantation Holdings SDN BHD (“FCBâ€), the owner of the other 89 per cent. interest in Next Oasis.
On 18 March 2015, the Company completed the acquisition of an 11 per cent. interest in Next Oasis. London Nusantara advanced RM510,000 (approximately GBP92,636) to Next Oasis as a deposit for the purchase of the 11 per cent. interest in the oil palm land from MWE Holdings Berhad (“MWEâ€). An additional RM50,000 (approximately GBP9,081) advance was made by an issuance of 200,000 new ordinary shares in London Nusantara at an agreed value of 5p per share to MWE, the vendor of 404.6-hectare oil palm land. On completion, London Nusantara owned 11 per cent. and FCB owned the remaining 89 per cent. of Next Oasis.
The Company continues to seek investments in accordance with its investment criteria as outlined in the Company’s admission document dated 13 June 2014.
The Directors of the Company accept responsibility for the contents of this announcement.
For further information please contact:
The Company
LONDON NUSANTARA PLANTATIONS PLC
Manichelvam Subramaniam, Chief Executive Officer +60 3 7865 3987
Simon Rothschild, Non-executive Director +44 7703 167 065
NEX Exchange Corporate Adviser +44 (0)20 7469 0930
PETERHOUSE CORPORATE FINANCE LIMITED
Mark Anwyl/Guy Miller
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2016
| Year ended | Year ended | |
| 31-Dec | 31-Dec | |
| 2016 | 2015 | |
| £ | £ | |
| Revenue | - | - |
| Cost of sales | - | - |
| _________ | _________ | |
| Gross profit | - | |
| Administration expenses | -118,339 | -174,357 |
| _________ | _________ | |
| Operating loss | -118,339 | -174,357 |
| Finance income | 4,901 | 8,651 |
| _________ | _________ | |
| Loss before taxation | -113,438 | -165,706 |
| Taxation | - | - |
| _________ | _________ | |
| Loss for the year | -113,438 | -165,706 |
| Other comprehensive income | - | - |
| _________ | _________ | |
| Total comprehensive loss | -113,438 | -165,706 |
| ======== | ======== | |
| Loss attributable to: | ||
| Equity holders of the company | -113,438 | -165,706 |
| ======== | ======== | |
| Loss per share | (0.06)p | (0.09)p |
| ======== | ======== |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2016
| 31-Dec | 31-Dec | ||
| 2016 | 2015 | ||
| £ | £ | ||
| Non-Current Assets | |||
| Office equipment | 151 | 230 | |
| Investments | 111,772 | 111,772 | |
| ________ | ________ | ||
| Total non-current assets | 111,923 | 112,002 | |
| ________ | ________ | ||
| Current assets | |||
| Prepayments | 24 | - | |
| Cash and cash equivalents | 82,633 | 191,097 | |
| ________ | ________ | ||
| Total current assets | 82,657 | 191,097 | |
| _________ | ________ | ||
| Total assets | 194,580 | 303,099 | |
| _________ | ________ | ||
| Current liabilities | |||
| Accruals | -15,951 | -11,032 | |
| _________ | _________ | ||
| Total liabilities | -15,951 | -11,032 | |
| _________ | ________ | ||
| Net assets / (liabilities) | 178,629 | 292,067 | |
| ======== | ======== | ||
| Capital and reserves | |||
| Share capital | 669,438 | 669,438 | |
| Retained losses | -490,809 | -377,371 | |
| _________ | ________ | ||
| Total equity | 178,629 | 292,067 | |
| ======== | ======== |
The financial statements of London Nusantara Plantations plc, registered number 009753V (Isle of Man), were approved by the board of directors and authorised for issue on 30 May 2017. They were signed on its behalf by:
M Subramaniam
Director
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2016
| 31-Dec | 31-Dec | ||
| 2016 | 2015 | ||
| £ | £ | ||
| Non-Current Assets | |||
| Office equipment | 151 | 230 | |
| Investments | 111,954 | 111,772 | |
| ________ | _________ | ||
| Total non-current assets | 112,105 | 112,002 | |
| ________ | _________ | ||
| Current assets | |||
| Amounts receivable from related parties | 862 | - | |
| Prepayments | 24 | - | |
| Cash and cash equivalents | 81,969 | 191,097 | |
| _________ | _________ | ||
| Total current assets | 82,855 | 191,097 | |
| _________ | _________ | ||
| Total assets | 194,960 | 303,099 | |
| _________ | _________ | ||
| Current liabilities | |||
| Accruals | -15,837 | -11,032 | |
| _________ | _________ | ||
| Total liabilities | -15,837 | -11,032 | |
| _________ | _________ | ||
| Net assets / (liabilities) | 179,123 | 292,067 | |
| ======== | ======== | ||
| Capital and reserves | |||
| Share capital | 669,438 | 669,438 | |
| Retained losses | -490,315 | -377,371 | |
| _________ | _________ | ||
| Total equity | 179,123 | 292,067 | |
| ======== | ======== |
The financial statements of London Nusantara Plantations plc, registered number 009753V (Isle of Man), were approved by the board of directors and authorised for issue on 30 May 2017. They were signed on its behalf by:
M Subramaniam
Director
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2016
| Year ended | Year ended | ||
| 31-Dec | 31-Dec | ||
| 2016 | 2015 | ||
| £ | |||
| Cash flow from operating activities | |||
| Loss for the year | -113,438 | -165,706 | |
| Adjusted for: | |||
| Depreciation | 79 | 78 | |
| Interest received | -4,901 | -8,651 | |
| (Increase) / decrease in receivables | -24 | 750 | |
| Increase / (decrease) in payables | 4,919 | -15,226 | |
| _________ | _________ | ||
| Net cash outflow from operating activities | -113,365 | -188,755 | |
| _________ | _________ | ||
| Cash flow from investing activities | |||
| Interest received | 4,901 | 8,651 | |
| Purchase of investment | - | -1,275 | |
| _________ | _________ | ||
| Net cash inflow from investing activities | 4,901 | 7,376 | |
| _________ | _________ | ||
| Net decrease in cash and cash equivalents | -108,464 | -181,379 | |
| Cash and cash equivalents at the beginning of the year | 191,097 | 372,476 | |
| _________ | _________ | ||
| Cash and cash equivalents at the end of the year | 82,633 | 191,097 | |
| ======== | ======== |
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2016
| Year ended | Year ended | ||||
| 31-Dec | 31-Dec | ||||
| 2016 | 2015 | ||||
| £ | £ | ||||
| Cash flow from operating activities | |||||
| Loss for the year | -112,944 | -165,706 | |||
| Adjusted for: | |||||
| Depreciation | 79 | 78 | |||
| Interest received | -4,901 | -8,651 | |||
| (Increase) / decrease in receivables | -728 | 750 | |||
| Decrease / (increase) in payables | 4,647 | -15,226 | |||
| _________ | __________ | ||||
| Net cash outflow from operating activities | -113,847 | -188,755 | |||
| _________ | __________ | ||||
| Cash flow from investing activities | |||||
| Interest received | 4,901 | 8,651 | |||
| Purchase of investment | -182 | -1,275 | |||
| _________ | __________ | ||||
| Net cash inflow from investing activities | 4,719 | 7,376 | |||
| _________ | ___________ | ||||
| Net decrease in cash and cash equivalents | -109,128 | -181,379 | |||
| Cash and cash equivalents at the beginning of the year | 191,097 | 372,476 | |||
| _________ | __________ | ||||
| Cash and cash equivalents at the end of the year | 81,969 | 191,097 | |||
| ======== | ========= |
LONDON NUSANTARA PLANTATIONS PLC
STATEMENTS OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2016
| Group | Share | Retained | Total |
| capital | losses | equity | |
| £ | £ | £ | |
| As at 1 January 2016 | 669,438 | -377,371 | 292,067 |
| Loss for the year | - | -113,438 | -113,438 |
| _________ | _________ | _________ | |
| At 31 December 2016 | 669,438 | -490,809 | 178,629 |
| ======== | ======== | ======== | |
| As at 1 January 2015 | 659,438 | -211,665 | 447,773 |
| Loss for the year | - | -165,706 | -165,706 |
| Shares issued in the year | 10,000 | - | 10,000 |
| _________ | _________ | _________ | |
| At 31 December 2015 | 669,438 | -377,731 | 292,067 |
| ======== | ======== | ======== | |
| Company | Share | Retained | Total |
| capital | losses | equity | |
| £ | £ | £ | |
| As at 1 January 2016 | 669,438 | -377,371 | 292,067 |
| Loss for the year | - | -112,944 | -112,944 |
| _________ | _________ | _________ | |
| At 31 December 2016 | 669,438 | -490,315 | 179,123 |
| ======== | ======== | ======== | |
| As at 1 January 2015 | 659,438 | -211,665 | 447,773 |
| Loss for the year | - | -165,706 | -165,706 |
| Shares issued in the year | 10,000 | - | 10,000 |
| _________ | _________ | _________ | |
| At 31 December 2015 | 669,438 | -377,731 | 292,067 |
| ======== | ======== | ======== |
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