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M. P. Evans Group (MPE)

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Tuesday 23 March, 2021

M. P. Evans Group

Final Results

RNS Number : 0993T
M. P. Evans Group PLC
23 March 2021
 

M.P.EVANS GROUP PLC

 

M.P.Evans Group PLC ("MP Evans", "the Group" or "the Company"), a producer of sustainable Indonesian palm oil, announces its results for the year ended 31 December 2020.

 

The Group's 2020 annual report is available on its website at www.mpevans.co.uk .

 

 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF REGULATION (EU) NO.596 /2014.

 

The person responsible for making this announcement is Tristan Price, chief executive of the Group.

 

 

Highlights

 

Financial

Profit for the year US$22.2 million (2019 US$7.5 million) 

Operating profit US$31.3 million (2019 US$16.1 million) 

Sustainability premia increased to US$2.6 million (2019 US$1.9 million)

Continuing EPS 37.4 US cents (2019 - 11.6 US cents) 

24% increase in total dividend for the year with proposed final dividend of 17p per share

Intention to propose 30p per share total dividend in respect of 2021

Indonesian palm oil

Total crop processed up 21% to 1.2 million tonnes

100% of Group and scheme-smallholder crop grown to sustainability standards

Group crops up to 724,000 tonnes, a 9% increase

Crops at youngest operation, Musi Rawas, nearly trebled

Crude-palm-oil production up 17% to 272,000 tonnes

New Group 40-tonne mill began production in September 2020

Launched pilot traceability initiative, working with independent smallholders to achieve 100% traceability of all third-party ffb processed by the Group

Malaysian property

Conditional sale agreement of Bertam Estate for US$24.9 million announced

Group value

Group equity value of £10.99 per share at 31 December 2020 

 

Commenting on the results, Peter Hadsley-Chaplin, executive chairman of MP Evans , said: "I am pleased to report that 2020 was another record year for production and revenue resulting in a sharp rise in profit, which nearly trebled to US$22.2 million, and an increase in sustainability premia. Given this performance the board is recommending a final dividend of 17p per share, an increase of 4.25p, bringing total dividends for the year to 22p per share. In view of the strong increase in crop and production projected for the immediate future and the prospects for the palm-oil market, the board intends to recommend a dividend of 30p per share in respect of the 2021 financial year."

 

 

 

Enquiries:

 

M.P.Evans Group PLC

+44 (0)20 7796 4133 on 23 March 2021 only


Thereafter +44 (0)1892 516333

Peter Hadsley-Chaplin, Chairman


Tristan Price, Chief executive


Matthew Coulson, Finance director




Peel Hunt LLP

+44 (0)20 7418 8900

Dan Webster


Andrew Clark




finnCap

+44 (0)20 7220 0500

Tim Redfern


Chris Raggett




Hudson Sandler

+44 (0)20 7796 4133

Charlie Jack


Elfie Kent

Francis Kerrigan


 

An analysts' meeting will be held today at 09.30 by video conference.

Covid-19

 

The pandemic has had little effect on the Group's operations. Once the widespread nature of the virus became known, preventative measures were quickly introduced to protect the Group's employees and these measures remain under review and in place as required. Staff travel has been restricted, the Group has controlled access to its plantations and the majority of staff in its Jakarta office have been put on remote working. All estates and mills operated without interruption during the year. During the second quarter of the year, Covid-19 did have a marked effect on the price of CPO, but the price recovered strongly in the second half of the year.

 

Results

 

Another record year for production and revenue resulted in a sharp increase in profit for the year. A rising CPO price and continuing control of costs saw profit margins jump in comparison to 2019. Operating profit was US$31.3 million compared with US$16.1 million in 2019 despite an adverse foreign-exchange movement during 2020. The Group benefitted from an increase in the sustainability premia it receives for its CPO and palm kernels as well as sales of electricity generated from the methane it captures. Profit for the year nearly trebled to US$22.2 million.

 

Dividend

 

An interim dividend of 5.00p per share (2019 - 5.00p per share) was paid on 6 November 2020, and the board is recommending a final dividend of 17.00p per share (2019 - 12.75p per share). This represents an increase of 24% in the dividend in respect of normal operations for the year, bringing it to 22.00p per share.

 

The board intends to continue its long-standing policy of maintaining or increasing the dividend where possible. It believes the projected increase in yield from its young plantations provides a basis for sustained future crop growth and enhanced dividends. Furthermore, the Group expects capital expenditure to fall substantially from 2023 as it completes the series of investments begun in 2005, and its debt to have reached a peak in 2020. In light of the Group's strong balance sheet, and the marked increase in crop and production projected for the immediate future, and the prospects for the palm-oil market, the board intends to recommend a dividend of 30p per share in respect of the 2021 financial year.

 

Palm-oil market

 

The CPO price at the end of December 2020 stood at US$1,035 per tonne, a level last seen in July 2012. Having started 2020 promisingly, the CPO price fell as the Covid-19 pandemic struck. Whilst the pandemic resulted in a fall in world palm-oil consumption, world production of palm oil fell even further as labour shortages, dry weather and an increasing industry-average palm age took their toll. During the initial months of the year, stocks of palm oil acted as a buffer. Stocks then rebounded but quickly began to fall as a result of the production deficit.

 

Whilst initially the CPO price fell sharply, it recovered strongly from the middle of May 2020, continuing its rise to the end of the year. The average cif Rotterdam price for the year was US$716 per tonne, US$150 higher than in 2019. Regrettably, the Group has not benefitted fully from this rise as the Indonesian government imposed an increased export levy in December 2020, designed to subsidise Indonesian producers of biodiesel while crude-oil prices have been languishing. This was widely anticipated and reflected in prices received by the Group from October. The structure of the levy means the Group receives very nearly the same ex-mill-gate price at US$1,000 per tonne as for US$800 per tonne. This nonetheless represents a very healthy profit margin.

 

Strategic developments

 

The Group has continued to implement its strategy to focus on developing and operating majority-held plantations to produce sustainable Indonesian palm oil. Wherever possible, the Group mills its own crop of ffb since this allows it to report a higher level of certified sustainable production. The Group makes long-term decisions, suited both to a long-lived plant such as the oil palm and to the thinking needed to make the right choices for a sustainable future. The Group works closely with the local communities living on and near to its operations, seeking to have a positive economic and social impact on these communities, and foster long-term relationships. 

 

During 2020, the Group commissioned its second mill at Kota Bangun, needed to process the increasing crop from the maturing plantings on this project. This brings the Group's mills to four in total, with two at Kota Bangun, one at Bangka and one at Pangkatan. Construction of the Group's fifth mill, at Bumi Mas, is well advanced with commissioning expected in the middle of 2021, and design work has started on the sixth mill at Musi Rawas, planned for completion at the end of 2022. Where the Group has spare capacity in its mills, it buys ffb from independent smallholders. As we refer to below, the Group is committed to working with these smallholders to ensure their ffb can be certified as fully traceable and so sustainable under the new RSPO Independent Smallholder Standard.

 

The Group's strategy of controlling all its operations means it is best able to draw on its excellent operational management team, with a proven track record of developing and improving estates in the most effective, productive and sustainable way. This has resulted in construction of roads, permanent housing, methane capture facilities and water-management infrastructure, in addition to its mills. However, the Group's investment programme to develop its existing projects is coming to an end. A strong balance sheet allows the Group to plan for increasing returns to shareholders, as well as to acquire incremental hectarage for planting around its existing projects.

 

In Malaysia, the Group reached an agreement to sell its last wholly-owned Malaysian asset, the remaining 70 hectares of its old Bertam Estate. The buyer was Bertam Properties Sdn Bhd, the joint venture in which the Group has a 40% shareholding. Bertam Properties will be able to add substantial value to this land by developing it, and the Group will reap its share of this benefit. The sale proceeds will contribute to funding the Group's investment in expansion of both its hectarage and production facilities in Indonesia.

 

Sustainability

 

The Group is running a pilot project in its Bangka estates to establish how best to generate enthusiasm amongst independent smallholders to register under the RSPO Independent Smallholder Standard and then achieve certification. At the end of 2020, 208 smallholders with more than 1,200 hectares of land had committed to the scheme. The Group has started to deliver training in agronomy to those who have registered to help them increase the yield from their palms. This will be supplemented by in-field visits and advice starting in the middle of 2021. As regards its own workforce, the Group has been conducting a pilot project in Kota Bangun to improve health and safety. This project aims to measure workplace injuries more accurately to help direct effective prevention.

 

Operational developments

 

The strong projected growth of the Group's crop is being realised. In 2020, the total crop processed grew by 21%, having grown at the same rate in 2019. The Group's crops rose by 9% and those of 'scheme smallholders' (those attached to the Group's projects) by 12%. The rise in crop was particularly pronounced at Musi Rawas, where the mature hectarage nearly doubled compared with 2019. High growth at Bumi Mas continued as the Group's investments in that area had an increasing impact. The crop at Kota Bangun declined slightly after it was not able to match the robust growth seen in the second half of 2019. In addition, the Group was able to increase its purchases of ffb from independent smallholders by more than 70% to reach 290,000 tonnes.

 



2020 

Increase/

(decrease)


2019 


Tonnes 

%

Tonnes 

Crop




Own crops




  Kota Bangun

186,400 

(4)

194,000 

  Bangka

127,500 

(1)

128,900 

  Pangkatan group

170,300 

4

164,300 

  Bumi Mas

154,300 

26

122,000 

  Musi Rawas

44,500 

189

15,400 

  Simpang Kiri

41,300 

7

38,700 


724,300 

9

663,300 

Scheme-smallholder crops




  Kota Bangun

81,500 

(7)

87,300 

  Bangka

64,400 

12

57,500 

  Bumi Mas

26,900 

37

19,600 

  Musi Rawas

20,200 

162

7,700 


193,000

12

172,100 

Independent-smallholder crop purchased




  Kota Bangun

142,500 

260

39,600 

  Bangka

112,800 

7

105,200 

  Pangkatan group

34,400 

62

21,300 


289,700

74

166,100 

Total crop

1,207,000 

21

1,001,500

 

 

The Group continues to pride itself on the level of extraction it achieves from its ffb. Overall, the Group's extraction rate in its own mills fell to 23.1% from 23.7% in 2019. This reflected the dramatic increase in crop bought from independent smallholders, which is not of the same quality as its own crop or that of scheme smallholders. The oil-extraction rate in its Bumi Permai mill at Kota Bangun was particularly affected by this since it not only processed significantly more independent-smallholder crop than in 2019, but also worked at very high levels of capacity utilisation in the period prior to commissioning the Rahayu mill. This led to longer maintenance intervals and some unplanned stoppages. The Group's other mills maintained good rates of oil- and kernel-extraction. For the time being, the Group's new Rahayu mill is processing exclusively crop bought from independent smallholders. In total, the Group produced 270,000 tonnes of CPO, 17% more than in 2019.

 



Increase/



2020 

(decrease)

2019 





Production

Tonnes 

%

Tonnes 

Crude palm oil




  Kota Bangun

96,500 

22

79,000 

  Bangka

69,600 

3

67,400 

  Pangkatan group

46,100 

8

42,800 


212,200 

12

189,200 

  Bumi Mas

37,400 

27

29,500 

  Musi Rawas

13,200 

175

4,800 

  Simpang Kiri

8,900 

6

8,400 

 

59,500 

39

42,700 


271,700 

17

231,900 

Palm kernels




  Kota Bangun

19,300 

14

17,000 

  Bangka

16,900 

4

16,200 

  Pangkatan group

10,800 

7

10,100 


47,000 

9

43,300 

  Bumi Mas

8,600 

26

6,800 

  Musi Rawas

2,900 

164

1,100 

  Simpang Kiri

1,900 

6

1,800 


13,400 

38

9,700 


60,400 

14

53,000 









Extraction rates

%

%

%

Crude palm oil




  Kota Bangun - Bumi Permai

23.8 

(3)

24.6 

  Kota Bangun - Rahayu

21.6 

-

-

  Bangka

22.9 

(1)

23.1 

  Pangkatan group

22.5 

(3)

23.1 


23.1 

(3)

23.7 

  Bumi Mas

20.7 

(1)

20.9 

  Musi Rawas

20.4 

(1)

20.6 

  Simpang Kiri

21.5 

(1)

21.8 

Palm kernels




  Kota Bangun - Bumi Permai

4.9 

(8)

5.3 

  Kota Bangun - Rahayu

4.0 

-

-

  Bangka

5.5 

(2)

5.6 

  Pangkatan group

5.3 

(2)

5.4 


5.1 

(6)

5.4 

  Bumi Mas

4.7 

(2)

4.8 

  Musi Rawas

4.6 

-

4.6 

  Simpang Kiri

4.5 

(6)

4.8 

 

 

At Bumi Mas, the Group continues its planned investment in strengthening roads, managing tidal water flows and building housing for workers.

 

At Musi Rawas, planting since development began has not changed from the 8,000 hectares reached in the middle of 2019. This is a result of pausing development to ensure the Group complies with enhanced standards affecting new planting adopted by the RSPO in 2019. In both the Group's own areas and those of its scheme smallholders, planting is carried out in rigorous compliance with RSPO standards to ensure the fruit will be certified as being produced sustainably. It is anticipated that planting at Musi Rawas should resume in mid-2021.

 

At the end of 2020, the Group managed 51,600 hectares of oil palm on behalf of itself and its scheme smallholders. The effective ownership of planted oil palm hectarage by the Group's shareholders, taking account of minority-shareholder interests, amounted to 37,700 hectares.

 

Group valuation

 

Continuing development of the Group's estates produced an increase in the total US Dollar value of the Group's plantations during the year. At the same time, there was a reduction in the value of Malaysian property in line with a general fall in the sector. There was also a decline in the value of the US Dollar against Sterling. Overall, the Group's value per share, based on an independent valuation at the end of 2020 was £10.99, similar to that a year earlier.

 

Current trading and prospects

 

Crop in the first two months of 2021 is ahead of 2020 in all regions except North Sumatra, which lagged the good levels seen last year. The increase was particularly pronounced at Musi Rawas in South Sumatra, where yield on the young palms is improving and new areas are being brought into first harvesting. Compared with last year, the Group has also purchased significantly more ffb from independent smallholders. At the end of February, total crop processed was 217,000 tonnes, 20% more than the 180,000 tonnes processed during the first two months of 2020. The details are set out in the following table:- 

 


2 months ended 


2 months ended 


28 February 2021 

Increase 

29 February 2020 


Tonnes 

Tonnes 

Own crops

124,200 

16 

107,100 

Smallholder crop

38,300 

39 

27,500 

Outside crop purchased

54,400 

19 

45,600 


216,900 

20 

180,200 

 

Crop is rising due to the young average age of its palms across the Group, an average of 8 years. This is a consequence of the development of its projects in Bangka and East Kalimantan over the last ten years, the acquisition of Bumi Mas and the development of Musi Rawas. The upward trend in crop is expected to last until 2027 before plateauing. This would be further augmented by the acquisition or development of new project areas.

 

The price of CPO climbed in the second half of 2020, ending the year at a price of US$1,035 per tonne cif Rotterdam. This strong level carried over into 2021. In the first two months of the year it has mainly stood above US$1,000, and indeed from the beginning of February 2021 climbed further to reach US$1,100. The price was influenced by higher export levies introduced in Indonesia. It is also likely that exports from Indonesia in December 2020 may have been boosted by trade brought forward from January in order to avoid potentially higher levies on exports in 2021. Nevertheless, stocks of palm oil were at low levels at the end of 2020. A recovery in palm-oil production is expected in 2021, although the extent of this may be limited by continuing labour shortages arising from travel restrictions imposed to control the spread of Covid-19. The path of consumption will be affected by the speed of recovery of the hospitality sector, notably in India, which is a significant consumer of palm oil. In the longer term, insufficient levels of replanting in Malaysia and a reduction in new Indonesian planting are likely to curb growth in production.

 

Notwithstanding the uncertainties surrounding Covid-19, the board is of the view that palm oil, because of its high yield and low cost of production, is well placed to benefit from increasing demand for vegetable oil and hence that the outlook remains encouraging.

 

 

 

Peter Hadsley-Chaplin

Chairman

 

 

CONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2020



2020 

2019 



US$'000 

US$'000 

Continuing operations




  Revenue


174,510 

119,341 

  Cost of sales


(139,755)

(102,297)

  Gross profit


34,755 

17,044 

  Gain on biological assets


682 

927 

  Foreign-exchange (losses)/gains


(1,068)

1,161 

  Other administrative expenses


(4,587)

(3,466)

  Other income


1,539 

458 

  Operating profit


31,321 

16,124 

  Finance income


527 

403 

  Finance costs


(3,408)

(3,747)

  Profit before tax


28,440 

12,780 

  Tax on profit on ordinary activities


(7,692)

(7,183)

  Profit after tax


20,748 

5,597 

  Share of associated companies' profit after tax


1,421 

1,873 

Profit for the year


22,169 

7,470 





Attributable to:




Owners of M.P. Evans Group PLC


20,371 

6,333 

Non-controlling interests


1,798 

1,137 



22,169 

7,470 







US cents 

US cents 

Continuing operations




  Basic earnings per 10p share


37.4 

11.6 

  Diluted earnings per 10p share


37.3 

11.5 







Pence 

Pence 

Basic earnings per 10p share




  Continuing operations


29.2 

9.0 

 

 

CONSOLIDATED BALANCE SHEET

As at 31 December 2020

 

Company number: 1555042








2020 

2019




US$'000 

US$'000

Non-current assets





Goodwill



11,767 

11,767 

Other intangible assets



1,381 

1,433 

Property, plant and equipment



390,642 

368,744 

Investments in associates



22,154 

21,553 

Investments



67 

66 

Deferred-tax asset



5,046 

5,284 

Trade and other receivables



10,917 

11,555 




441,974 

420,402 

Current assets





Biological assets



2,749 

2,067 

Inventories



11,617 

11,072 

Trade and other receivables



48,620 

45,117 

Current-tax asset



3,968 

4,245 

Current-asset investments



334 

1,160 

Cash and cash equivalents



27,222 

25,947 




94,510 

89,608 

Total assets



536,484 

510,010 






Current liabilities





Borrowings



39,605 

28,337 

Trade and other payables



26,039 

22,215 

Current-tax liability



6,003 

3,657 




71,647 

54,209 

Net current assets



22,863 

35,399 

Non-current liabilities





Borrowings



66,079 

66,137 

Trade and other payables



38 

265 

Deferred-tax liability



10,529 

12,312 

Retirement-benefit obligations



14,051 

9,401 




90,697 

88,115 

Total liabilities



162,344 

142,324 

Net assets



374,140 

367,686 






Equity





Share capital



9,204 

9,200 

Other reserves



55,090 

55,385 

Retained earnings



300,117 

294,139 

Equity attributable to the owners of





  M.P. Evans Group PLC



364,411 

358,724 

Non-controlling interests



9,729 

8,962 

Total equity



374,140 

367,686 

 

 

CONSOLIDATED CASH-FLOW STATEMENT

For the year ended 31 December 2020

 



2020 

2019 



US$'000 

US$'000 

Net cash generated by operating activities


39,598 

32,002 





Investing activities




Purchase of property, plant and equipment


(41,409)

(46,531)

Purchase of intangible assets


(113)

(721)

Interest received


108 

210 

Decrease in bank deposits treated as current-asset




investments


826 

1,342 

Decrease in receivables from smallholder co-operatives


3,886 

4,690 

Proceeds on disposal of property, plant and equipment


732 

489 

Loan to related party


(11,747)

Net cash used by investing activities


(35,970)

(52,268)





Financing activities




New borrowings


24,581 

110,419 

Repayment of borrowings


(13,307)

(46,134)

Lease liability payments


(209)

(167)

Dividends paid to Company shareholders


(12,105)

(12,364)

Dividends paid to non-controlling interest


(89)

Purchase of non-controlling interests


(25,417)

Exercise of Company share options


218 

Buy-back of Company shares


(1,155)

(2,286)

Net cash (used)/generated by financing activities


(2,284)

24,269 





Net increase in cash and cash equivalents


1,344 

4,003 





Net cash and cash equivalents at 1 January


25,947 

21,626 

Effect of foreign-exchange rates on cash and cash




equivalents


(69)

318 

Cash and cash equivalents at 31 December


27,222 

25,947 

 

 

Notes

 

1.  Dividends paid and proposed

 


US$'000 

US$'000 

2020 interim dividend - 5.00p per 10p share (2019 interim dividend 5.00p)

3,511 

3,519 

2019 final dividend - 12.75p per 10p share (2018 final dividend 12.75p)

8,594 

8,845 


12,105 

12,364 

 

Following the year end, the board has proposed a final dividend for 2020 of 17.00p per 10p share, amounting to US$13.0 million.


2020 

2019 

Ex-dividend date

22 April 2021

23 April 2020

Record date

23 April 2021

24 April 2020

Dividend payable on or after

18 June 2021

19 June 2020

 

2.  Basic and diluted earnings per share

 

The calculation of earnings per 10p share is based on:-



2020 


2019 


2020 

Number 

2019 

Number 


US$'000 

of shares 

US$'000 

of shares 

Profit for the year attributable to the owners





  of M.P. Evans Group PLC

20,371 


6,333 


Average number of shares in issue


54,478,518 


54,599,417 

Diluted average number of shares in issue*


54,667,409 


54,875,441 

 

*The difference between the number of shares in issue and the diluted number of shares relates to unexercised share options held by directors and key employees of the Group.

 

3.  Financial information

 

The financial information has been derived from the Company's audited accounts but does not itself constitute statutory accounts within the meaning of section 435 of the Companies Act 2006. The statutory accounts for the financial year ended 31 December 2020 have been reported on by the Group's auditors, BDO LLP, and will be filed with the Registrar of Companies. The report of the auditors thereon was unqualified and did not contain a statement under section 498(2) or (3) of the Companies Act 2006, nor did it contain any matters to which the auditors drew attention without qualifying their audit report.

 

4.  International Financial Reporting Standards

 

This announcement is based on the Group's financial statements which were prepared in accordance with International Financial Reporting Standards ("IFRS") as applicable to companies reporting under IFRS.

 

5.  Distribution timetable

 

The Group's 2020 annual report is available on the Group's website and will be despatched to shareholders on or before 31 March 2021. Printed copies of the Group's 2020 annual report will be available from the Company, 3 Clanricarde Gardens, Tunbridge Wells, Kent TN1 1HQ. The annual general meeting will be held on Thursday 10 June 2021.

 

 

 

By order of the board

Katya Merrick

Company secretary

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