REG - M. P. Evans Group - Final Results
21/03/2023 07:00
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RNS Number : 5845T M. P. Evans Group PLC 21 March 2023
M.P. EVANS GROUP PLC
M.P.Evans Group PLC ("MP Evans", "the Group" or "the Company"), producer of
sustainable Indonesian palm oil, announces its results for the year ended 31
December 2022.
The Group's 2022 annual report is available on its website at
www.mpevans.co.uk (http://www.mpevans.co.uk) .
Highlights
Financial
− Gross profit for the year up by 5% to US$109.2 million (2021 US$103.6
million)
− Operating profit down by 11%* to US$101.6 million (2021 US$114.6
million)
− Average mill-gate price for Group crude palm oil ("CPO") up by 5% to
US$854 per tonne (2021 US$810 per tonne)
− Sustainability premia increased to US$7.5 million (2021
US$4.3 million)
− Operating cash generation up by 21% to US$132.2 million (2021 US$109.2
million)
− Net cash at year end US$33.5 million (2021 net debt of US$5.4 million)
− Basic EPS down by 7%* to 108.0 pence (2021 - 115.6 pence)
− 21% increase in normal dividend for the year to 42.5p per share (2021 -
35p per share) with proposed final dividend of 30p per share (2021 final
dividend 25p per share)
*2021 results benefited from one-off gain on land sale of US$13.9 million
Operational
− Total crop processed up 11% to 1.5 million tonnes
− 100% of Group and scheme-smallholder crop grown to sustainability
standards
− 64% of total output currently certified sustainable, up from 55% in 2021
− Group crops up to 905,000 tonnes, a 12% increase
− Planting at youngest estate, Musi Rawas, approaching 10,000-hectare
target
− Crude-palm-oil production up 9% to 342,000 tonnes
Post year end
− Group's sixth palm-oil mill, at Musi Rawas, started production in
February 2023
− Further 2,100 planted hectares acquired close to Simpang Kiri estate in
March 2023
Commenting on the results, Peter Hadsley-Chaplin, executive chairman of MP
Evans, said: "The Group has produced another set of excellent operational and
financial results. Crop and production have increased once again and, as we
celebrate our 150-year anniversary, we have also reached the milestone of
processing 1.5 million tonnes of fresh fruit bunches. The Group remains
focused on long-term and sustainable growth, and has both acquired further
planted hectarage and started production at another Group palm-oil mill since
the end of the year.
Profit and cash generation have remained strong, the Group has eliminated net
debt, and now has net funds in place to support continued investment and
shareholder returns. The board is recommending a final dividend of 30p per
share, bringing total dividends for the year to 42.5p per share, up more than
20% from the 35p normal dividends paid in respect of the previous year, and a
further step forward in the Group's long-standing progressive dividend
policy."
Enquiries:
M.P. Evans Group PLC +44 (0)20 7796 4133 on 21 March 2023 only
Thereafter +44 (0)1892 516333
Peter Hadsley-Chaplin, Chairman
Matthew Coulson, Chief executive
Luke Shaw, Chief financial officer
Peel Hunt LLP (Nomad and joint broker) +44 (0)20 7418 8900
Dan Webster, Andrew Clark, Lalit Bose
finnCap (Joint broker) +44 (0)20 7220 0500
Tim Redfern, Harriet Ward
Hudson Sandler (Financial PR) +44 (0)20 7796 4133
Charlie Jack, Francis Kerrigan, Amelia Craddock
An analysts' meeting will be held today at 9.30am at the offices of Hudson
Sandler, 25 Charterhouse Square, London EC1M 6AE, 020 7796 4133.
Results
The Group achieved a gross profit of US$109.2 million, higher than the
US$103.6 million recorded in 2021, representing an all-time record. Average
palm-oil prices were particularly strong once again in 2022 and these,
combined with an increase in production, offset some inflationary cost
pressures, most notable in the fertiliser inputs required to maintain healthy
and productive palms across our estates. Earnings per share were 108.0p, a
little lower than the 115.6p in 2021, which benefited from the one-off profit
of US$13.9 million from the sale of non-core land in Malaysia. The Group has
continued to be significantly cash generative, with net operating cash
generated of US$102.3 million in the year, enabling the Group to continue with
capital investment, eliminate net debt, and prioritise progressive shareholder
returns.
Dividend
An interim dividend of 12.5p per share (2021 - 10p per share) was paid on 4
November 2022, and the board is recommending a final dividend of 30p per share
(2021 - 25p per share). This represents another year of increasing normal
dividends, up by 7.5p from 2021, and a substantial increase of 93% from the
amount paid two years ago.
Dividends have accelerated in recent years as the Group's operational cash
flows have strengthened due to the increasing maturity of the Group's
operations. The Group has an unbroken track record, spanning more than thirty
years, of maintaining or increasing dividends, and the anticipated trend of
increasing crop and production forms a sound basis for further dividend
increases.
150-year anniversary
During 2023 the Group is proud to be marking its 150-year anniversary, having
traced its origins back to the early 1870s. The Group is holding several
celebratory events, both in Indonesia and in the UK during the year, including
an AGM at Mansion House in London followed by a celebratory lunch, to which
shareholders are invited. Places for the lunch are limited and registration is
required. Further information is included in the investor pages of the Group's
website.
Palm-oil market
CPO prices were at historically high levels in the first half of 2022,
reaching a peak of almost US$2,000 per tonne cif Rotterdam following the
outbreak of war between Ukraine and Russia, and concern over reductions in
sunflower oil supplies from Ukraine. Pricing moderated somewhat in the second
half of the year, but palm oil was attractive given the, at times, wide
discount to soya oil of up to US$400 per tonne. The Group does not receive the
full benefit of the high quoted CPO prices. Its net mill-gate price is
received on a tender basis, which is after adjustments to take account of the
Indonesian export tax and levy, as well as transport and insurance costs. Over
the course of 2022, the average mill-gate price received for the Group's CPO
was US$854 per tonne, 5% higher than the US$810 per tonne in 2021.
Prices for palm kernels also increased in 2022, particularly in the early part
of the year, following a similar pattern to CPO pricing. The Group's palm
kernels sold for an average price of US$611 per tonne in the year, 15% higher
than the US$533 per tonne in 2021.
Strategic developments
During 2022, the Group continued to execute its principal activity, being the
responsible ownership, management and development of sustainable oil-palm
estates in Indonesia. Alongside its own projects, the Group also manages and
develops scheme-smallholder areas attached to those estates. The Group's
objective is to continue increasing both its own crop and that from its scheme
smallholders, whilst also increasing its own milling capacity, thereby
increasing its output of certified sustainable palm oil. As Group areas
mature, its strategy is to increase the planted hectarage controlled by it.
Milling its own crop and that of its scheme smallholders in its own mills
enables the Group to deploy its operational expertise to greatest effect with
the aim of generating stronger returns, allowing shareholders to receive
sustained increases in dividends.
Throughout the course of 2022, the Group had five operational palm-oil mills,
with a sixth under construction at Musi Rawas. The mill at Musi Rawas opened
in February 2023 and will now process all of the crop from that estate and
start to take in additional crop from independent suppliers to maximise its
utilisation. All the Group's palm-oil mills are accredited as certified
sustainable producers as soon as possible after commissioning, although it can
take time to complete the necessary independent audit and approval checks. All
of the Group's ffb, and that of its scheme smallholders, are grown to the same
high standards and in a sustainable way.
Following the year end, the Group has been successful in acquiring an
additional 2,100 planted hectares close to its estate at Simpang Kiri in Aceh
Province in northern Sumatra. This is in line with the Group's strategy of
continuing to increase its planted area through the acquisition of further
hectarage, initially within the vicinity of its existing projects. It is
likely that, in time, the Group will build a further palm-oil mill to process
the fruit from this enlarged estate. After the acquisition at Simpang Kiri,
the Group remains committed to its growth strategy, and a number of further
projects remain under review.
Sustainability
The Group is committed to the production of certified sustainable palm oil,
and sustainability is at the core of its strategic and operational
decision-making. All the Group's estates are developed and managed
sustainably, but independent certification enabling the sale of the Group's
production as sustainable palm oil is awarded to the Group's mills. Certified
sustainable sales rose significantly in 2022 to almost two thirds of the
total, an increase of approximately 50,000 tonnes from the previous year. As
the Group continues to grow, by adding milling capacity, maximising the yield
from its existing areas and seeking additional sustainably managed areas to
provide further Group crop for those mills, its ambition is to continue
elevating its sustainable output towards 100%.
The Group received sustainability premia of US$7.5 million (2021 US$4.3
million), another increase reflecting both the demand for certified
sustainable production and the Group's ability to deliver more of its own
certified output. CPO and palm kernels ("PK") are sold with both RSPO and ISCC
certifications depending on demand and where the best premia can be achieved.
The average premia for CPO when sold as certified oil was US$16.90 per tonne
(2021 US$17.40), whilst demand for sustainable PK was particularly strong in
2022 following high demand for sustainably sourced cosmetic products, with
average premia for PK sold as certified up to US$91.80 per tonne (2021
US$55.20).
Operational developments
The total crop processed by the Group increased in the year to 1,511,700
tonnes (2021 - 1,366,200 tonnes), an overall increase of 11%. This was in line
with the Group's growth plans, and a result of both the long-term investment
made by the Group in Indonesian oil palm and the commitment to operational
excellence by the Group's agronomic management teams.
2022 Increase/ 2021
(decrease)
Tonnes % Tonnes
Crop
Own crops
Kota Bangun 219,400 13 194,300
Bangka 167,200 10 152,300
Pangkatan group 192,500 8 179,000
Bumi Mas 166,700 1 165,700
Musi Rawas 107,600 55 69,400
Simpang Kiri 52,000 6 49,000
905,400 12 809,700
Scheme-smallholder crops
Kota Bangun 91,000 5 86,300
Bangka 91,200 13 80,800
Pangkatan group 900 - -
Bumi Mas 30,600 2 29,900
Musi Rawas 52,000 61 32,300
265,700 16 229,300
Independent crop purchased
Kota Bangun 191,700 (9) 210,600
Bangka 62,800 (20) 78,200
Pangkatan group 39,100 9 35,900
Bumi Mas 47,000 1,780 2,500
340,600 4 327,200
Total crop 1,511,700 11 1,366,200
The Group is committed to increasing its CPO and PK production capacity as
much as possible. The Group's crops and those of its scheme smallholders are
of a high standard, and the Group seeks to maximise the margins available to
it by milling that crop and selling the oil and kernels for itself. With the
benefit of having five Group mills operational throughout the year, total CPO
production increased by 9% to 341,700 tonnes, and PK production was up by 10%
to 73,800 tonnes.
Increase/
2022 (decrease) 2021
Production Tonnes % Tonnes
Crude palm oil
Kota Bangun 112,800 (1) 114,400
Bangka 75,100 1 74,200
Pangkatan group 53,300 10 48,600
Bumi Mas with mill 56,200 170 20,800
297,400 15 258,000
Bumi Mas pre mill - - 23,100
Musi Rawas 32,600 57 20,800
Simpang Kiri 11,700 6 11,000
44,300 (19) 54,900
341,700 9 312,900
Palm kernels
Kota Bangun 23,800 5 22,700
Bangka 18,400 3 17,800
Pangkatan group 12,200 8 11,300
Bumi Mas with mill 9,600 182 3,400
64,000 16 55,200
Bumi Mas pre mill - - 5,000
Musi Rawas 7,500 60 4,700
Simpang Kiri 2,300 5 2,200
9,800 (18) 11,900
73,800 10 67,100
Extraction rates % % %
Crude palm oil
Kota Bangun - Bumi Permai 23.2 (2) 23.8
Kota Bangun - Rahayu 21.2 (6) 22.5
Bangka 23.4 (2) 23.8
Pangkatan group 22.9 1 22.6
Bumi Mas 23.0 1 22.8
22.9 (2) 23.3
Bumi Mas - - 21.6
Musi Rawas 20.4 - 20.4
Simpang Kiri 22.5 - 22.5
Palm kernels
Kota Bangun - Bumi Permai 5.1 4 4.9
Kota Bangun - Rahayu 4.2 - 4.2
Bangka 5.7 - 5.7
Pangkatan group 5.2 (2) 5.3
Bumi Mas 3.9 5 3.7
4.9 (2) 5.0
Bumi Mas - - 4.7
Musi Rawas 4.67 2 4.6
Simpang Kiri 4.5 - 4.5
At Musi Rawas, planting continued throughout 2022. All planting is performed
in compliance with the environmental standards published by the RSPO. The
Group planted 585 hectares at Musi Rawas in 2022, bringing the total planted
area there to 9,600 hectares, and the Group expects to achieve its initial
target of achieving a total planted area of 10,000 hectares during 2023.
In North Sumatra and Aceh, the Group has made significant progress during the
year on the formation of new co-operative schemes and financing replanting of
areas of oil palm for members of those schemes. By the end of 2022, a total of
1,147 hectares had been replanted as part of these schemes, both at Pangkatan
and Simpang Kiri. In addition, 64 hectares of the Group's own oil palm were
replanted at Pangkatan during the year.
At the end of 2022, the Group managed 54,100 hectares of planted oil palm from
its own and associated scheme-smallholder areas, 93% of which were mature and
in harvest, and the average yield per mature planted hectare had increased to
23 tonnes.
Group valuation
An independent valuation of the Group's plantations was performed at the end
of the year, valuing the Group's planted areas at an average of US$20,700 per
hectare. After allowing for other Group assets and liabilities, this equity
value per share had increased during the year to £14.98 per share. The Group
did benefit, in sterling terms, from a weaker year-end exchange rate when
compared to the position at the end of 2021, accounting for £1.58 of the
increase.
Current trading and prospects
The Group has made a positive start to 2023, and total crop processed in the
first two months of the year was 213,000 tonnes, 8% higher than in the first
two months of 2022. The benefits of the significant investment made by the
Group in its Indonesian estates continue to be felt, and, barring any
unforeseen circumstances, the long-term trend of increasing crop is expected
to continue as the Group moves further into 2023. The new mill at Musi Rawas
began processing Group crop in February 2023, and after a short period of
stabilisation, will soon start to take in crop from outside suppliers, only
adding further to the Group's ability to process crop and increase production.
2 months ended Increase/ 2 months ended
28 February 2023 (decrease) 28 February 2022
Tonnes % Tonnes
Own crops 116,300 (1) 116,900
Smallholder crop 35,100 - 35,000
Outside crop purchased 61,300 38 44,300
212,700 8 196,200
CPO pricing remained stable in the early part of 2023, and the Group enjoyed
mill-gate prices in a relatively narrow band around US$750 per tonne, similar
to those achieved in the latter part of 2022, although sales prices have
increased above US$800 per tonne for recent contracts. Whilst these are lower
than the unusually high prices seen in the early part of 2022, the Group
remains confident that, at these price levels, it will be able to deliver
further significant profits and cash generation.
Since the year end, the Group has announced the acquisition of 2,100 planted
hectares close to its Simpang Kiri project in Aceh Province, northern Sumatra,
bringing the total planted area, including that of associated scheme
smallholders, to 4,800 hectares. Although the existing area at Simpang Kiri
has been both highly productive and profitable for many years, it has not been
worthwhile to construct our own mill there, and Group crop has been sent for
outside processing. Whilst some of the newly acquired hectarage will require a
certain amount of replanting and rehabilitation, as crop from the combined
area increases, this is likely, in time, to warrant the construction of an
additional Group mill. At that point all of the Group's estates would have
their own mills.
Palm oil continues to be, by volume of supply and consumption, the largest of
the vegetable oils produced globally and of the major vegetable oils is the
most efficient to produce when measured by tonnes of oil per hectare of land.
The board is of the belief that sustainably produced palm oil will continue to
be in demand for the foreseeable future, and that Group prospects therefore
remain positive.
Peter Hadsley-Chaplin
Chairman
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2022
2022 2021
US$'000 US$'000
Continuing operations
Revenue 326,917 276,592
Cost of sales (217,707) (172,979)
Gross profit 109,210 103,613
(Loss)/gain on biological assets (1,431) 1,771
Profit on sale of land - 13,946
Foreign-exchange loss (3,444) (820)
Other administrative expenses (4,614) (5,380)
Other income 1,865 1,426
Operating profit 101,586 114,556
Finance income 1,395 645
Finance costs (2,731) (2,699)
Profit before tax 100,250 112,502
Tax on profit on ordinary activities (24,073) (23,228)
Profit after tax 76,177 89,274
Share of associated companies' profit after tax 2,184 2,508
Profit for the year 78,361 91,782
Attributable to:
Owners of M.P. Evans Group PLC 73,060 86,406
Non-controlling interests 5,301 5,376
78,361 91,782
US cents US cents
Continuing operations
Basic earnings per 10p share 133.9 158.4
Diluted earnings per 10p share 133.4 157.9
Pence Pence
Basic earnings per 10p share
Continuing operations 108.0 115.6
CONSOLIDATED BALANCE SHEET
As at 31 December 2022
Company number: 1555042
2022 2021
US$'000 US$'000
Non-current assets
Goodwill 11,767 11,767
Other intangible assets 1,167 1,222
Property, plant and equipment 411,658 401,005
Investments in associates 11,795 13,242
Investments 61 65
Deferred-tax asset 989 3,602
Trade and other receivables 9,146 16,618
446,583 447,521
Current assets
Biological assets 3,089 4,520
Inventories 23,112 21,754
Trade and other receivables 32,681 41,892
Current-tax asset 2,290 2,522
Cash and cash equivalents 82,503 65,609
143,675 136,297
Total assets 590,258 583,818
Current liabilities
Borrowings 17,364 20,531
Trade and other payables 24,410 31,200
Current-tax liability 4,455 12,219
46,229 63,950
Net current assets 97,446 72,347
Non-current liabilities
Borrowings 31,675 50,517
Deferred-tax liability 13,538 11,417
Retirement-benefit obligations 9,972 12,886
55,185 74,820
Total liabilities 101,414 138,770
Net assets 488,844 445,048
Equity
Share capital 9,179 9,232
Other reserves 54,543 55,467
Retained earnings 407,460 366,825
Equity attributable to the owners of
M.P. Evans Group PLC 471,182 431,524
Non-controlling interests 17,662 13,524
Total equity 488,844 445,048
CONSOLIDATED CASH-FLOW STATEMENT
For the year ended 31 December 2022
2022 2021
US$'000 US$'000
Net cash generated by operating activities 102,288 92,272
Investing activities
Purchase of property, plant and equipment (33,714) (32,510)
Purchase of intangible assets (116) (8)
Interest received 622 316
Decrease in bank deposits treated as current-asset
investments - 334
Decrease in receivables from smallholder co-operatives
1,714 17,630
Proceeds on disposal of property, plant and equipment
3,055 15,125
Net cash (used by)/from investing activities (28,439) 887
Financing activities
Repayment of borrowings (22,009) (34,636)
Lease liability payments (38) (218)
Dividends paid to Company shareholders (28,500) (20,527)
Dividends paid to non-controlling interest (124) (164)
Issue of Company shares 191 827
Buyback of Company shares (4,902) -
Net cash used by financing activities (55,382) (54,718)
Net increase in cash and cash equivalents 18,467 38,441
Net cash and cash equivalents at 1 January 65,609 27,222
Effect of foreign-exchange rates on cash and cash
equivalents (1,573) (54)
Cash and cash equivalents at 31 December 82,503 65,609
Notes
1. Dividends paid and proposed
US$'000 US$'000
2022 interim dividend - 12.5p per 10p share (2021 interim dividend 10p) 7,611 7,377
2021 special dividend - 5p per 10p share 3,662 -
2021 final dividend - 25p per 10p share (2020 final dividend 17p) 17,227 13,150
28,500 20,527
Following the year end, the board has proposed a final dividend for 2022 of
30p per 10p share, amounting to US$19.4 million.
2022 2021
Ex-dividend date 27 April 2022 28 April 2022
Record date 28 April 2022 29 April 2022
Dividend payable on or after 16 June 2022 17 June 2022
2. Basic and diluted earnings per share
The calculation of earnings per 10p share is based on:-
2022 2021
2022 Number 2021 Number
US$'000 of shares US$'000 of shares
Profit for the year attributable to the owners
of M.P. Evans Group PLC 73,060 86,406
Average number of shares in issue 54,579,591 54,564,864
Diluted average number of shares in issue* 54,754,110 54,710,139
*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 2022 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 Accounting Standards
This announcement is based on the Group's financial statements which were
prepared in accordance with UK-adopted International Accounting Standards.
5. Distribution timetable
The Group's 2022 annual report is available on the Group's website and will be
despatched to shareholders on or before 31 March 2023. Printed copies of the
Group's 2022 annual report will be available from the Company, 3 Clanricarde
Gardens, Tunbridge Wells, Kent TN1 1HQ. The annual general meeting will be
held on Friday 9 June 2023.
By order of the board
Katya Merrick
Company secretary
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