REG - Anglo-Eastern Plant - Preliminary Results <Origin Href="QuoteRef">ANEA.L</Origin> - Part 3
26/04/2017 12:06
- Part 3: For the preceding part double click ID:nRSZ4078Db
fair value measurement of the
items above, please refer to the applicable notes.
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 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 on 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 or subject to certificate of Land Exploitation Rights (HGU) being
obtained, whichever is earlier. The costs of immature plantations consist
mainly of the accumulated cost of land clearing, planting, fertilising and
maintaining the plantation, borrowing costs 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 FFB 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 and accounted for as an indefinite finance lease. The leasehold land is
recognised at cost initially and is not depreciated. The land is subsequently
carried at fair value, based on periodic valuations on an open market basis by
a professionally qualified valuer. These revaluations are made with sufficient
regularity to ensure that the carrying amount does not differ materially from
that which would be determined using fair value at the end of the reporting
period. Changes in fair value are recognised in other comprehensive income and
accumulated in the revaluation reserve except to the extent that any decrease
in value in excess of the credit balance on the revaluation reserve, or
reversal of such a transaction, is recognised in income statement. On the
disposal of a revalued estate, any related balance remaining in the
revaluation reserve is transferred to retained earnings as a movement in
reserves.
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.
Interest on third party loans directly related to field development is
capitalised in the proportion that the opening immature area bears to the
total planted area of the relevant estate. Interest on loans related to
construction in progress (such as an oil mill) is capitalised up to the
commissioning of that asset. These interest rates are booked at the rate
prevailing at the time.
Plantations, buildings and oil mills are depreciated using the straight-line
method. All other property, plant and equipment items are depreciated using
the double-declining-balance method. The yearly rates of depreciation are as
follows:
Plantations - 5%
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
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 is charged or credited to the income statement within the
cost of sales.
Leased assets
Assets financed by leasing agreements which give rights approximating to
ownership (finance leases) are capitalised at amounts equal to the original
cost of the asset to the lessors and depreciation is provided on the asset
over the shorter of the lease term or its useful economic life in accordance
with Group depreciation policy for those held at cost. Land rights are held at
fair value and revalued at the balance sheet date. The capital elements of
future obligations under finance leases are included as liabilities in the
balance sheet and the current year's interest element is charged to the income
statement to produce a constant rate of charge on the balance of capital
repayments outstanding. There are no operating leases.
Impairment
Impairment tests on property, plant and equipment are 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
administrative expenses in the income statement, except to the extent they
reverse gains previously recognised in the statement of recognised income and
expense.
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.
Financial assets
All the Group's receivables and loans are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active market. They
are recognised at fair value at inception and subsequently at amortised cost.
No impairment provisions have been considered necessary.
Cash and cash equivalents consist of cash in hand and short term deposits at
banks with an original maturity of not exceeding three months. Bank overdrafts
are shown within loans and borrowings under current liabilities on the balance
sheet.
There are no assets in hedging relationships and no financial assets or
liabilities available for sale.
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 under Interest capitalisation above.
Trade and other payables are shown at fair value at recognition and
subsequently at amortised cost.
Deferred tax
Deferred tax assets and liabilities are recognised where the carrying amount
of an asset or liability in the balance sheet 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 on property
revaluation surpluses.
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 or
credited directly to equity, such as revaluations, in which case the deferred
tax is also dealt with in other comprehensive income; in this case assets and
liabilities are offset.
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 high quality
corporate bonds that have maturity dates approximating to the terms of the
liabilities; plus
• Unrecognised past service costs; less
• The effect of minimum funding requirements agreed with scheme trustees.
Remeasurements of the net defined obligation are recognised directly within
equity. The remeasurements include:
• Actuarial gains and losses;
• Return on plan assets (interest exclusive);
• Any asset ceiling effects (interest inclusive).
Service costs are recognised in comprehensive income, and include current and
past service costs as well as gains and losses on curtailments.
Net interest expense / (income) is recognised in comprehensive income, 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 comprehensive income.
Settlements of defined benefit schemes are recognised in the period in which
the settlement occurs.
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 share reserve. 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.
Financial guarantee contracts
Where the Company and its subsidiaries enters into financial guarantee
contracts and guarantees the indebtedness of other companies within the Group
and/or third party entities, the Group considers these to be insurance
arrangements and accounts for them as such. In this respect, the Group treats
the guarantee contract as a contingent liability until such time that it
becomes probable that the Group will be required to make a payment under the
guarantee.
Critical accounting estimates and judgements
The preparation of the Group financial statements in conformity with IFRS
requires the use of estimates and assumptions that affect the reported assets
and liabilities and reported revenue and expenses. Actual results could differ
from those estimates and accordingly they are reviewed on an on-going basis.
The main areas in which estimates are used are: fair value of biological
assets, property, plant and equipment, deferred tax and retirement benefits.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised or the revision affects only that period, or in the period
of revision and future periods if the revision affects both current and future
periods.
Assumptions regarding the valuation of property, plant and equipment are set
out in note 10. The Group's policy with regard to impairment of such assets is
set out above.
2 Prior year restatement
The amendments to IAS 16 and the amendments to IAS 41, which came into effect
on 1 January 2016, require Biological Assets that meet the definition of
bearer plants to be accounted for as Property, Plant and Equipment in
accordance with IAS 16, adopting either a cost model or a revaluation model.
This required retrospective application.
As the Biological Assets of the Group fall within the definition of bearer
plants, with effect from 1 January 2016 the immature plants are stated at
accumulated cost until maturity, subject to impairment reviews, and the mature
plantations are stated at historical cost less accumulated depreciation. The
unharvested FFB, which is agricultural produce under the revised IAS 41, are
recognised as Biological Assets and are stated at fair value less cost to sell
at the point of harvest, with changes recognised in profit and loss. This has
resulted in the accounts for the year ended 31 December 2015 being restated.
The effects of the restatements are summarised as follows:
(Restated)2015$000
Impact on consolidated income statement
Profit for the year before restatement (13,429)
Effect of change in restatement:
Cost of sales (6,787)
Biological asset movement 63,389
Administration expenses 196
Impairment loss (12,470)
Tax expense (15,847)
28,481
Profit for the year after restatement 15,052
The effect of the prior year adjustments had a negative impact on the earnings
per share before BA of 43.50cts and a positive impact on the earnings per
share after BA of 62.24cts for the year to 31 December 2015.
(Restated)2015$000
Impact on consolidated statement of comprehensive income
Other comprehensive expenses for the year before restatement (50,585)
Effect of change in restatement:
Loss on exchange translation of foreign operations 8,858
Deferred tax on revaluation (40)
8,818
Other comprehensive expenses for the year after restatement (41,767)
Balance as reported31 December 2015$000 Effect of restatement $000 Restated balance at31 December 2015$000
Impact on consolidated statement of financial position
Non-current assets - Biological assets 179,010 (179,010) -
Property, plant and equipment 219,990 116,454 336,444
Deferred tax (20,911) 1,538 (19,373)
Current assets - Biological assets - 3,673 3,673
Revaluation reserves (59,594) 22 (59,572)
Exchange reserves 234,490 (7,516) 226,974
Retained earnings (504,892) 55,830 (449,062)
Non-controlling interest (82,607) 9,009 (73,598)
Balance as reported1 January 2015$000 Effect of restatement $000 Restated balance at1 January 2015$000
Impact on consolidated statement of financial position
Non-current assets - Biological assets 251,374 (251,374) -
Property, plant and equipment 227,380 133,044 360,424
Deferred tax (44,368) 18,791 (25,577)
Current assets - Biological assets - 4,895 4,895
Retained earnings (521,355) 80,502 (440,853)
Non-controlling interest (90,813) 14,142 (76,671)
The prior year restatement has changed from that reported in the interim
financial statements as the figures have now been subject to audit.
3 Revenue
2016$000 2015$000
Sales of produce:
- CPO, palm kernel and FFB 243,020 193,364
- Rubber 1,149 1,075
- Shell nut 1,717 1,685
- Biomass products 324 327
246,210 196,451
4 Finance income and expense
2016$000 2015$000
Finance income
Interest receivable on:
Credit bank balances and time deposits 5,881 6,683
Finance expense
Interest payable on:
Development loans (1,743) (2,010)
Net finance incomerecognised in income statement 4,138 4,673
5 Profit before tax
2016$000 (Restated)2015$000
Profit before tax is stated after charging
Depreciation (note 10) 15,677 13,556
Impairment losses (note 10) 2,740 12,470
Exchange (gains) / losses (845) 2,354
Movement of inventories (2,526) 1,153
Operating lease expense
- Property 515 523
Professional fees 760 1,086
Staff costs (note 7) 31,564 29,007
Remuneration received by the group's auditor or associates of the group's auditor:
- Audit of parent company 5 5
- Audit of consolidated financial statement 132 157
- Audit related assurance service 6 7
- Audit of UK subsidiaries 13 13
Total audit services 156 182
Audit of overseas subsidiaries
- Malaysia 21 19
- Indonesia 70 66
Total audit services 91 85
Total auditors' remuneration 247 267
6 Segment information
Measurement of operating segment profit or loss, assets and liabilities
The Group evaluates segmental performance on the basis of profit or loss from
operations calculated in accordance with IFRS but excluding non-recurring
losses, such as share based payments.
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 South Sumatera Riau Bangka Kalimantan Total Indonesia Malaysia UK Total
$000 $000 $000 $000 $000 $000 $000 $000 $000 $000
2016
Total sales revenue (all external)
- CPO, palm kernel and FFB 88,465 86,564 3 40,169 27 24,342 239,570 3,450 - 243,020
- Rubber 1,149 - - - - - 1,149 - - 1,149
- Shell nuts 628 736 1 205 - 147 1,717 - - 1,717
- Biomass products 324 - - - - - 324 - - 324
Total revenue 90,566 87,300 4 40,374 27 24,489 242,760 3,450 - 246,210
Profit / (loss) before tax 23,219 24,785 (4,695) 12,861 (602) 1,623 57,191 296 (24) 57,463
BA movement 628 1,421 144 653 2 431 3,279 104 - 3,383
Profit for the year before tax per consolidated income statement 23,847 26,206 (4,551) 13,514 (600) 2,054 60,470 400 (24) 60,846
Depreciation (4,029) (4,096) (2,505) (898) (85) (3,414) (15,027) (650) - (15,677)
Impairment losses - - 693 - (335) (3,098) (2,740) - - (2,740)
Inter-segment transactions 3,828 (2,117) (767) (609) - (1,334) (999) 604 395 -
Income tax (9,275) (5,744) 3,410 (4,531) 90 644 (15,406) (81) (1,378) (16,865)
Total Assets 175,332 129,428 54,280 41,887 11,732 103,906 516,565 20,944 3,587 541,096
Non-Current Assets 101,843 76,048 52,862 20,044 11,520 94,974 357,291 16,263 578 374,132
Non-Current Assets - Additions 7,956 5,544 2,638 857 657 12,771 30,423 61 - 30,484
North Sumatera Bengkulu South Sumatera Riau Bangka Kalimantan Total Indonesia Malaysia UK Total
$000 $000 $000 $000 $000 $000 $000 $000 $000 $000
2015 (Restated)
Total sales revenue (all external)
- CPO, palm kernel and FFB 67,978 73,661 37 37,129 1 11,426 190,232 3,132 - 193,364
- Rubber 1,075 - - - - - 1,075 - - 1,075
- Shell nuts 513 812 10 225 38 87 1,685 - - 1,685
- Biomass products 327 - - - - - 327 - - 327
Total revenue 69,893 74,473 47 37,354 39 11,513 193,319 3,132 - 196,451
Profit / (loss) before tax 18,301 15,627 (13,360) 15,431 (433) (7,742) 27,824 (795) (1,043) 25,986
BA movement (147) (612) (21) (214) - 251 (743) 11 - (732)
Profit for the year before tax per consolidated income statement 18,154 15,015 (13,381) 15,217 (433) (7,491) 27,081 (784) (1,043) 25,254
Depreciation (3,911) (3,840) (1,197) (842) (26) (2,986) (12,802) (754) - (13,556)
Impairment losses - - (10,945) - (301) (1,224) (12,470) - - (12,470)
Inter-segment transactions 3,546 (2,169) (765) (624) - (1,427) (1,439) 1,157 282 -
Income tax (7,273) (2,900) 1,379 (3,814) - 2,584 (10,024) (73) (105) (10,202)
Total Assets 148,349 104,959 47,995 54,295 11,100 92,171 458,869 21,610 4,294 484,773
Non-Current Assets 94,578 71,025 46,878 19,203 10,945 87,028 329,657 17,560 1,193 348,410
Non-Current Assets - Additions 8,374 3,623 3,822 2,658 867 17,441 36,785 141 - 36,926
In year 2016, revenue from 4 customers of the Indonesian segment represent
approximately $114.1m (2015: $107.2m) of the Group's total revenue. An
analysis of these revenue is provided as below. Although Customer 1 to 4 are
over 10% of the Group total revenue, there is no over reliance on these
Customers as tenders are performed on a monthly basis. Two of the top four
customers are the same as in the prior year.
North Sumatera Bengkulu South Sumatera Riau Bangka Kalimantan Total Indonesia Malaysia UK Total
$000 $000 $000 $000 $000 $000 $000 $000 $000 $000
2016
Customer 1 - 39,101 - - - - 39,101 - - 39,101
Customer 2 17,177 - - 9,832 - - 27,009 - - 27,009
Customer 3 15,700 - - 8,522 - - 24,222 - - 24,222
Customer 4 - 5,577 - - - 18,219 23,796 - - 23,796
32,877 44,678 - 18,354 - 18,219 114,128 - - 114,128
2015
Customer 1 - 35,069 - - - - 35,069 - - 35,069
Customer 2 19,544 - - 13,088 - - 32,632 - - 32,632
Customer 3 2,654 15,193 - 2,004 - - 19,851 - - 19,851
Customer 4 19,633 - - - - - 19,633 - - 19,633
41,831 50,262 - 15,092 - - 107,185 - - 107,185
% % % % % % % % % %
2016
Customer 1 - 15.9 - - - - 15.9 - - 15.9
Customer 2 7.0 - - 4.0 - - 11.0 - - 11.0
Customer 3 6.4 - - 3.5 - - 9.9 - - 9.9
Customer 4 - 2.3 - - - 7.4 9.7 - - 9.7
13.4 18.2 - 7.5 - 7.4 46.5 - - 46.5
2015
Customer 1 - 17.9 - - - - 17.9 - - 17.9
Customer 2 9.9 - - 6.7 - - 16.6 - - 16.6
Customer 3 1.4 7.7 - 1.0 - - 10.1 - - 10.1
Customer 4 10.0 - - - - - 10.0 - - 10.0
21.3 25.6 - 7.7 - - 54.6 - - 54.6
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.
7 Employees' and Directors' remuneration
2016Number 2015number
Average numbers employed (primarily overseas) during the year:
- full time 5,838 5,832
- part-time field workers 10,934 10,980
16,772 16,812
2016$000 2015$000
Staff costs (including Directors) comprise:
Wages and salaries 28,764 26,691
Social security costs 773 880
Retirement benefit costs
- United Kingdom 64 -
- Indonesia 1,911 1,378
- Malaysia 52 58
31,564 29,007
2016$000 2015$000
Directors emoluments 228 240
Remuneration expense for key management personnel 2,039 2,289
The Executive Director, Non-Executive Directors and senior management (general
managers and above) are considered to be the key management personnel.
8 Earnings per ordinary share (EPS)
2016$000 (Restated)2015$000
Profit for the year attributable to owners of the Company before BA movement 32,563 10,263
BA movement 2,150 (488)
Earnings used in basic and diluted EPS 34,713 9,775
Number Number
'000 '000
Weighted average number of shares in issue in year
- used in basic EPS 39,636 39,636
- dilutive effect of outstanding share options - 38
- used in diluted EPS 39,636 39,674
Basic EPS before BA movement 82.16cts 25.89cts
Basic EPS after BA movement 87.58cts 24.66cts
Dilutive EPS before BA movement 82.16cts 25.87cts
Dilutive EPS after BA movement 87.58cts 24.64cts
9 Dividends
2016$000 2015$000
Paid during the year
Final dividend of 1.75p per ordinary share for the year ended 31 December 2015 (2014: 3.0p) 1,003 1,869
Proposed final dividend of 3.0p per ordinary share for the year ended 31 December 2016 (2015: 1.75p) 1,463 1,028
The proposed dividend for 2016 is subject to shareholders' approval at the
forthcoming annual general meeting and has not been included as a liability in
these financial statements.
10 Property, plant and equipment
Plantations Mill Leaseholdland Buildings Estate plant,equipment & vehicle Office plant,equipment & vehicle Construction in progress Total
$000 $000 $000 $000 $000 $000 $000 $000
Cost or valuation
At 1 January 2015 (restated) 174,905 51,656 150,982 39,043 15,515 1,202 3,020 436,323
Exchange translations (19,470) (5,596) (16,936) (4,331) (1,721) (166) (268) (48,488)
Reclassification - (11) - 7,477 11 - (7,477) -
Revaluations - - 4,902 - - - - 4,902
Additions 63 11,161 1,727 32 702 58 5,402 19,145
Development costs capitalised 17,104 - 14 - - - 663 17,781
Disposal / Written off (564) (298) - (119) (353) (6) - (1,340)
Conversion of rubber to oil palm (123) - - - - - - (123)
At 31 December 2015 (restated) 171,915 56,912 140,689 42,102 14,154 1,088 1,340 428,200
Exchange translations 3,720 1,440 2,773 998 287 1 37 9,256
Reclassification - 1 - 3,608 - - (3,609) -
Revaluations - - 2,246 - - - - 2,246
Additions 57 8,665 2,001 765 927 36 2,846 15,297
Development costs capitalised 13,393 - 933 - - - 861 15,187
Disposals / Written off (2,042) (225) (65) (229) (540) (142) - (3,243)
At 31 December 2016 187,043 66,793 148,577 47,244 14,828 983 1,475 466,943
Accumulated depreciation and impairment
At 1 January 2015 (restated) 41,861 13,884 - 9,075 10,181 898 - 75,899
Exchange translations (5,574) (1,496) - (1,066) (1,187) (134) - (9,457)
Reclassification - (11) - - 11 - - -
Charge for the year 6,788 2,931 - 2,270 1,432 135 - 13,556
Impairment losses 12,470 - - - - - - 12,470
Disposal / Written off - (277) - (60) (285) (6) - (628)
Conversion of rubber to oil palm (84) - - - - - - (84)
At 31 December 2015 (restated) 55,461 15,031 - 10,219 10,152 893 - 91,756
Exchange translations 833 371 - 190 182 (2) - 1,574
Charge for the year 8,260 3,371 - 2,685 1,286 75 - 15,677
Impairment losses 2,740 - - - - - - 2,740
Disposal / Written off (636) (215) - (141) (466) (136) - (1,594)
At 31 December 2016 66,658 18,558 - 12,953 11,154 830 - 110,153
Carrying amount
At 31 December 2014 (restated) 133,044 37,772 150,982 29,968 5,334 304 3,020 360,424
At 31 December 2015 (restated) 116,454 41,881 140,689 31,883 4,002 195 1,340 336,444
At 31 December 2016 120,385 48,235 148,577 34,291 3,674 153 1,475 356,790
The Group engaged Muttaqin Bambang Purwanto Rozak Uswatun & Rekan (MBPRU) with
its head office located in Jakarta, Indonesia to undertake the land valuation
for the Group. The valuation was carried out independently by MBPRU who has
the appropriate professional qualifications and recent experience in the
location and category of the properties being valued. Further information of
MBPRU can be obtained from 'www.kjpp-mbpru.com'. For the year ended 31
December 2016, valuations were undertaken on the land of eight subsidiaries.
The increase per hectare derived from the current valuation was then applied
to the land value of the remaining companies in the same geographical location
to derive at the fair value of land as at 31 December 2016. For the year ended
31 December 2015, independent land valuations were undertaken for nine
subsidiary companies in Indonesia and Malaysia. The same methodology to fair
value land was adopted to value the land of the remaining companies as at 31
December 2015. Unplantable land was excluded in this exercise since it has
zero value. Land is valued on a rotational basis and all land is valued by
qualified valuers every two years. Had the revalued land been measured on a
historical cost basis, their net book value would have been $46,982,000 (2015:
$43,713,000).
PT Simpang Ampat's land was valued on the basis that its highest and best use
is oil palm plantation. At present the land is planted with rubber trees,
however the Group has the intention to replace the ageing rubber trees with
oil palm trees
Details of the information about the fair value hierarchy in relation to land
at 31 December are as follows:
Level 1 Level 2 Level 3 Fair value
$000 $000 $000 $000
Land
At 31 December 2016 - - 148,577 148,577
At 31 December 2015 - - 140,689 140,689
There were no items classified under Level 1 and Level 2 and thus there were
no transfers between Level 1 and Level 2 during the year.
The valuation techniques and significant unobservable inputs used in
determining the fair value measurement of land and 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
Land Selling prices of comparable land in similar location adjusted for differences in key attributes. The valuation model is based on price per hectare. Selling prices of comparable land Location, legal title, land area, land type and topography The higher the selling price, the higher the fair value These are qualitative inputs which require significant judgement by professional valuer, MBPRU
There were no changes to the valuation techniques during the year.
The fair value measurement is based on the above items' highest and best use,
which does not differ from their actual use.
The estates include $325,000 (2015: $483,000) of interest and $3,930,000
(2015: $4,909,000) 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 2038 with rights of
renewal thereafter. As of estates in Bengkulu land titles were issued between
1994 and 2008 and the titles expire between 2028 and 2034 with rights of
renewal thereafter for two consecutive periods of 25 and 35 years
respectively. In Riau, land titles were issued in 2004 and expire in 2033. In
the case of PT Cahaya Pelita Andhika's estate acquired in 2007 land titles
were issued in 1996 to expire in 2029.
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.
The land title of the estate in Malaysia is a long-term lease expiring in
2084.
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 loss of $12,470,000 recognised in
2015 was primarily due to the lower CPO price and higher cost of new planting.
In 2016, although the CPO price has improved but the Group incurred higher
cost for new planting hence there was a further impairment of $2,740,000.
The value in use is the net present value of the projected future cash flows
over the expected 20-year economic life of the asset discounted at 15.0%
(2015: 15.5%). Projected future cash flows are calculated based on historical
data, industry performance, economic conditions and any other readily
available information.
The fair value less cost to sell is computed by professional valuer, MBPRU
using discounted cash flow ("DCF") over the expected 20-year economic life of
the asset. The assumptions applied in the valuation are, inter-alia, listed as
below:
CPO selling price 2016$700/mt 2015$625/mt
Cost of selling as a percentage of the asset's fair value 4.5% 4.5%
Overhead cost as a percentage of revenue 10% 10%
Notional rent as a percentage of land value 9% 9%
Discount rate 17.4% 16.8%
The plantations carried at fair value less cost to sell are classified as
Level 3 in the fair value hierarchy.
Changes to the assumptions adopted in the projected future cash flows would
affect the amount of impairment. The recoverable amount of the Group's
plantations carried at fair value less cost to sell was $2,099,000 (2015:
$2,738,000) whereas the recoverable amount of the Group's plantations carried
at value in use was $17,869,000 (2015:$23,654,000).
11 Posting of annual financial report
The Annual Financial Report will be posted to shareholders on or before 25 May
2017. Copies of the Annual Financial Report will then be available from the
offices of the Company Secretary, CETC (Nominees) Limited, Quadrant House, 6th
Floor, 4 Thomas More Square, London E1W 1YW and on the Company's website at
www.angloeastern.co.uk.
Copies of this announcement are available from the offices of the Company
Secretary, CETC (Nominees) Limited, Quadrant House, 6th Floor, 4 Thomas More
Square, London E1W 1YW and on the Company's website.
Note: The information communicated in this announcement is inside
information for the purposes of Article 7 of Market Abuse Regulation
596/2014.
This information is provided by RNS
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