REG - R.E.A.Hldgs PLC - Half Yearly Report <Origin Href="QuoteRef">PLSA.I</Origin> <Origin Href="QuoteRef">REAH.L</Origin> - Part 2
26/08/2015 07:00
- Part 2: For the preceding part double click ID:nRSZ0821Xa
inventory represents the movement in the fair value of that inventory less the
amount of the movement in such inventory at historic cost (which is included
in cost of sales).
5. Administrative expenses
6 months to 6 months to Year to
30 June 30 June 31 December
2015 2014 2014
$'000 $'000 $'000
Net foreign exchange losses/(gains) 217 106 (391)
Net (credit)/charge for additional UK pension contributions (see note 17) (2,179) 74 314
Loss on disposal of fixed assets - - 484
Indonesian operations 5,683 7,476 13,794
Head office 2,696 2,771 5,587
_______ _______ _______
6,417 10,427 19,788
Amounts included as additions to biological assets (2,002) (2,240) (3,397)
_______ _______ _______
4,415 8,187 16,391
_______ _______ _______
6. Finance costs
6 months to 6 months to Year to
30 June 30 June 31 December
2015 2014 2014
$'000 $'000 $'000
Interest on bank loans and overdrafts 3,686 3,939 4,869
Interest on US dollar notes 1,275 1,681 3,438
Interest on sterling notes 2,510 2,790 5,414
Change in value of sterling notes arising from exchange fluctuations 466 1,851 (3,350)
Change in fair value of derivative financial instruments (730) (2,080) 2,404
Change in value of loans arising from exchange fluctuations (1,121) 528 (354)
Other finance charges 887 538 (402)
_______ _______ _______
6,973 9,247 12,019
Amount included as additions to biological assets (1,717) (1,676) (3,249)
_______ _______ _______
5,256 7,571 8,770
_______ _______ _______
7. Tax
6 months to 6 months to Year to
30 June 30 June 31 December
2015 2014 2014
$'000 $'000 $'000
Current tax:
UK corporation tax - 301 -
Foreign tax 589 5,783 7,711
Prior year - - (7,000)
_______ _______ _______
Total current tax 589 6,084 711
_______ _______ _______
Deferred tax:
Current year 207 (1,051) 2,063
Prior year - - (1,011)
_______ _______ _______
Total deferred tax 207 (1,051) 1,052
_______ _______ _______
Total tax 796 5,033 1,763
_______ _______ _______
The tax charge for the period of $796,000 (2014: $5,033,000) is based on the
reported results of the operations in each jurisdiction, using relevant rates
of tax, adjusted for items which include non-taxable income/expense,
Indonesian withholding taxes not utilisable
in the UK and time expired tax losses brought forward. If the income mix in
the second half of 2015 differs materially from that of the first half, it
will result in a disproportionate movement in the effective rate of taxation
for the full year.
As disclosed in note 9 on page 88 of the 2014 Annual Report, the Indonesian
tax authorities filed earlier in the year an appeal for judicial review with
the Supreme Court of Indonesia of the findings of the Jakarta Tax Court in May
2014 in favour of a group subsidiary which had disputed the disallowance of
mark-to-market losses in 2008 on its cross currency interest rate swap. The
case is still pending in the Supreme Court.
8. (Loss)/earnings per share
6 months to 6 months to Year to
30 June 30 June 31 December
2015 2014 2014
$'000 $'000 $'000
(Loss)/earnings for the purpose of (loss)/earnings per share* (3,397) 8,122 14,153
_______ _______ _______
* being net (loss)/profit attributable to ordinary shareholders
'000 '000 '000
Weighted average number of ordinary shares for the purpose of (loss)/earnings per share 35,085 35,079 35,085
_______ _______ _______
9. Dividends
6 months to 6 months to Year to
30 June 30 June 31 December
2015 2014 2014
$'000 $'000 $'000
Amounts paid or payable and recognised as distributions to equity holders:
Preference dividends of 9p per share per annum 4,204 3,990 8,140
Ordinary dividends:
Interim re 2013 (3.5p per share paid 24 January 2014) - 2,036 2,036
Final re 2013 (3.75p per share paid 25 July 2014) - 2,244 2,244
Interim re 2014 (4p per share paid 23 January 2015) 2,124 - -
Final re 2014 (3.75p per share paid 24 July 2015) 2,044 - -
_______ _______ _______
8,372 8,270 12,420
_______ _______ _______
10. Biological assets
6 months to 6 months to Year to
30 June 30 June 31 December
2015 2014 2014
$'000 $'000 $'000
Beginning of period 310,175 288,180 288,180
Opening balance adjustment (215) - -
Additions to planted area and costs to maturity including finance costs 9,772 8,538 20,617
Transfers to property, plant and equipment (2,203) - (2,095)
Transfer to non-current receivables - (50) -
Transfer to current receivables (297) - (98)
Net biological gain 2,907 3,202 3,571
_______ _______ _______
End of period 320,139 299,870 310,175
_______ _______ _______
Net biological gain comprises:
Fair value of crops harvested during the period (31,008) (44,000) (87,647)
Gain arising from movement in fair value attributable to other physical changes 18,407 39,997 76,808
Gain arising from movement in fair value attributable to price changes 15,508 7,205 14,410
_______ _______ _______
2,907 3,202 3,571
_______ _______ _______
The basis of the determination of the fair value of the group's biological
assets is explained on page 81 of the Annual Report 2014 under Accounting
policies (group), and has remained unchanged. The discount rates used in the
determination of fair value in these financial statements are 15 per cent
(2014: 15 per cent) in the case of PT REA Kaltim Plantations and PT Sasana
Yudha Bhakti, 15 per cent in the case of PT Kutai Mitra Sejahtera (2014: 16.5
per cent) and 18 per cent in the case of all other group plantation companies
(2014: 18 per cent). The discount rates reflect the degree of maturity of the
relevant plantations. In addition a standard unit margin of $63.9 (2014:
$60.9) per tonne of oil palm fresh fruit bunches has been used.
11. Capital expenditure on property, plant and equipment and capital
commitments
In the period, there were additions to property, plant and equipment of $3.8
million (2014: $6.4 million).
Capital commitments contracted, but not provided for by the group as at 30
June 2015, amounted to $1.8 million (31 December 2014: $3.9 million, 30 June
2014: $1.7 million).
12. Fair values of financial instruments
The table below provides, as at the balance sheet date, an analysis of the
book values and fair values of financial instruments, excluding receivables
and trade payables and Indonesian stone and coal interests all of which are
carried at cost and as respects which the directors consider that cost is
approximately equal to their fair values. All financial instruments are
classified as level 1 in the fair value hierarchy prescribed by IFRS 7
"Financial instruments: disclosures" other than the cross currency interest
rate swaps and the preference shares issued by a subsidiary that are
classified as levels 2 and 3 respectively. No reclassifications between
levels in the fair value hierarchy were made during the period (2014: none).
30 June 2015 30 June 2014 31 December 2014
Book value Fair value Book value Fair value Book value Fair value
$'000 $'000 $'000 $'000 $'000 $'000
Cash and deposits* 6,038 6,038 25,193 25,193 16,224 16,224
Bank debt-within one year* (43,150) (43,150) (36,110) (36,110) (40,326) (40,326)
Bank debt-after more than one year* (59,861) (59,861) (59,792) (59,792) (60,638) (60,638)
Preference shares issued by a subsidiary - - (38) - - -
US dollar notes** (33,553) (35,031) (39,602) (41,034) (33,472) (34,691)
Sterling notes-within one year** (15,499) (16,561) - - (14,693) (16,006)
Sterling notes-after more than one year** (37,641) (40,222) (57,606) (62,899) (37,713) (41,084)
Hedging instruments-hedge against principal liabilities (8,306) (8,306) (4,999) (4,999) (8,567) (8,567)
______ ______ ______ ______ ______ ______
Net debt and related engagements (191,972) (197,093) (172,954) (179,641) (179,185) (185,088)
Hedging instruments-hedge against interest liabilities (479) (479) (921) (921) (1,023) (1,023)
______ ______ ______ ______ ______ ______
(192,451) (197,572) (173,875) (180,562) (180,208) (186,111)
______ ______ ______ ______ ______ ______
* bearing interest at floating rates
** bearing interest at fixed rates
The fair values of cash and deposits and bank debt approximate their carrying
values since these carry interest at current market rates. The fair values of
the US dollar notes and sterling notes are based on the latest prices at which
those notes were traded prior to the balance sheet dates.
A one per cent increase in interest applied to those financial instruments
shown in the table above which carry interest at floating rates would have
resulted over a period of one year in a pre-tax profit (and equity) decrease
of approximately $970,000 (2014: pre-tax profit (and equity) decrease of
$707,000).
The group's derivative financial instruments which are held at fair value
comprise the hedging instruments as described in note 13. There were no
non-recurring fair value measurements.
13. Hedging instruments
Hedging instruments comprise the outstanding cross currency interest rate swap
("CCIRS") described in note 26 (page 100) of the Annual Report 2014. The fair
value of the CCIRS has been derived by a discounted cash flow analysis using
quoted foreign forward exchange rates and yield curves derived from quoted
interest rates with maturities corresponding to the applicable cash flows. The
valuation of the CCIRS at 30 June 2015 at fair value resulted in a gain of
$730,000 (30 June 2014: gain $2,080,000). The movement in the period has been
dealt with through the consolidated income statement under finance costs.
A 50 basis points movement in the spread between the assumed yield curves for
pounds sterling and the US dollar would increase or decrease the valuation by
approximately $110,000 (2014: $442,000).
14. Reconciliation of operating profit to operating cash flows
6 months to 6 months to Year to
30 June 30 June 31 December
2015 2014 2014
$'000 $'000 $'000
Operating profit 6,585 24,481 32,116
Depreciation of property, plant and equipment 5,140 5,438 9,705
Decrease/(increase) in fair value of agricultural produce inventory 1,351 (1,022) 1,692
Amortisation of prepaid operating lease rentals 320 241 548
Amortisation of sterling and US dollar note issue expenses 107 220 358
Biological gain (2,907) (3,202) (3,571)
(Profit)/loss on disposal of property, plant and equipment (1,538) - 484
_______ _______ _______
Operating cash flows before movements in working capital 9,058 26,156 41,332
Decrease/(increase) in inventories (excluding fair value movements) 396 (5,106) (527)
Increase in receivables (528) (3,047) (5,659)
Increase/(decrease) in payables 1,669 (1,861) (3,123)
Exchange translation differences (1,147) 109 1,030
_______ _______ _______
Cash generated by operations 9,448 16,251 33,053
Taxes paid (1,997) (2,142) (3,401)
Tax refund received - 8,461 8,461
Interest paid (4,838) (8,410) (13,721)
_______ _______ _______
Net cash from operating activities 2,613 14,160 24,392
_______ _______ _______
15. Movement in net borrowings
6 months to 6 months to Year to
30 June 30 June 31 December
2015 2014 2014
$'000 $'000 $'000
Change in net borrowings resulting from cash flows:
Decrease in cash and cash equivalents (10,136) (9,530) (18,244)
Net (increase)/decrease in borrowings (4,374) 940 (4,704)
_______ _______ _______
(14,510) (8,590) (22,948)
Issue of preference shares - - 10,564
Redemption of US dollar notes, net of amortisation of issue expenses - - 6,310
Amortisation of sterling and US dollar notes issue expenses (80) (220) -
_______ _______ _______
(14,590) (8,810) (6,074)
Currency translation differences 1,542 (1,227) 1,555
Net borrowings at beginning of period (170,618) (157,918) (166,099)
_______ _______ _______
Net borrowings at end of period (183,666) (167,955) (170,618)
_______ _______ _______
16. Related parties
Transactions between the company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note. During the first six months of 2015 no new material related party
transactions have been started and only those related party transactions which
were disclosed in the company's 2014 annual report have continued.
17. Pensions
Since the issue of the annual report for 2014, the actuarial valuation as at
31 December 2014 of the R.E.A. Pension Scheme (the "Scheme"), as referred to
in note 37 of the annual report, has been prepared and shows that the Scheme
assets marginally exceeded the Scheme's technical provisions as at that date.
Investment outperformance since the 2011 valuation and a favourable change in
the mortality assumption have more than offset the negative changes in
financial assumptions (reflecting lower UK gilt yields).
Additional deficit contributions are now being discontinued and the remaining
provision for future deficit contributions attributable to the group has been
credited to the group's consolidated income statement for the six months ended
30 June 2015. The net (credit)/charge included in administrative expenses is
as follows:
6 months to 6 months to Year to
30 June 30 June 31 December
2015 2014 2014
$'000 $'000 $'000
Release of provision relating to additional contributions paid in the period (311) (261) (357)
Additional contributions paid in the period 311 335 671
Release of balance of provision relating to additional contributions no longer required (2,179) - -
_______ _______ _______
Net (credit)/charge to administrative expenses (note 5) (2,179) 74 314
_______ _______ _______
18. Events after the reporting period
A final dividend of 3.75p per ordinary share in respect of the year ended 31
December 2014 was paid on 24 July 2015.
On 1 July 2015, the group raised $7.9 million through a placing for cash of
4.2 million new 9 per cent cumulative preference shares at 120p per share.
On 3 August 2015, the company published proposals whereby REA Finance B.V.
would create up to £40 million nominal of 8.75 per cent guaranteed sterling
notes 2020 ("new sterling notes") to be issued as to £34.5 million by way of
an exchange offer to acquire all of the £34.5 million nominal of 9.5 per cent
guaranteed sterling notes 2015/17 ("existing sterling notes") currently in
issue (the "exchange offer") and as to the balance of up to £5.5 million by
way of an issue of new sterling notes for cash at par.
The proposals are conditional, inter alia, on the passing of a resolution at
an extraordinary general meeting of existing note holders to be held on 27
August 2015.
At the time of the publication of the proposals, the directors had received
informal and non-binding indications from holders of in excess of £25 million
nominal of existing sterling notes that they would vote in favour of the
resolution and accept the exchange offer.
The result of the vote and of the exchange offer and placing will be announced
on or before 2 September 2015.
Assuming acceptance of the offer by holders of £25 million nominal of existing
sterling notes, the existing sterling notes and the new sterling notes
(assuming the issue for cash of all £5.5 million of new sterling notes) would
be repayable as follows:
31 December 2017 (existing sterling notes) £9.5 million ($15.0 million)
31 August 2020 (new sterling notes) £30.5 million ($47.9 million)
19. Rates of exchange
30 June 2015 30 June 2014 31 December 2014
Closing Average Closing Average Closing Average
Indonesian rupiah to US dollar 13,300 12,923 11,969 11,795 12,440 11,908
US dollar to pound sterling 1.5728 1.53 1.7099 1.67 1.5593 1.65
20.Shareholder information
The company's half yearly report for the six months ended 30 June 2015 will
shortly be available for downloading from the company's web site at
www.rea.co.uk
Press enquiries to:
R.E.A. Holdings plc
Tel: 020 7436 7877
This information is provided by RNS
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