REG-R.E.A. Holdings plc R.E.A. Holdings plc: Annual report in respect of 2023
25/04/2024 07:15
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R.E.A. Holdings plc (RE.)
R.E.A. Holdings plc: Annual report in respect of 2023
25-Apr-2024 / 07:00 GMT/BST
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R.E.A. HOLDINGS PLC (the company)
ANNUAL FINANCIAL REPORT 2023
The company's annual report for the year ended 31 December 2023 (including notice
of the AGM to be held on 6 June 2024) (the annual report) will shortly be
available for downloading from 1 www.rea.co.uk/investors/financial-reports.
A copy of the notice of AGM will also be available to download from
2 www.rea.co.uk/investors/calendar.
Upon completion of bulk printing, copies of the annual report will be despatched
to persons entitled thereto and will be submitted to the National Storage
Mechanism to be made available for inspection at
3 https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
The sections below entitled Chairman's statement, Dividends, Principal risks and
uncertainties, Viability statement, Going concern and Directors' responsibilities
have been extracted without material adjustment from the annual report. The basis
of presentation of the financial information set out below is detailed in note 1
to the financial statements below.
HIGHLIGHTS
Overview
- Implementation of several strategic initiatives to streamline the group
structure and reduce net indebtedness
- Subscription of further shares in REA Kaltim by the DSN group in March 2024 for
estimated consideration of in excess of $50 million, increasing DSN’s investment
in the operating sub-group from 15 per cent to 35 per cent
- Potential divestment of CDM based on a value for CDM’s business of some $25
million
- Minority interests in subsidiaries bought out and inactive subsidiaries
divested, helping to reduce administrative costs
- Planned simplification of ownership of stone, sand and residual coal interests,
including implementation of original agreement with ATP's shareholders to acquire
substantial equity participation in ATP
Financial
- Revenue reduced by 15 per cent to $176.7 million (2022: $208.8 million)
primarily reflecting lower CPO and CPKO prices
- Average selling prices (net of export duty and levy) 13 per cent lower for CPO
at $718 per tonne (2022: $821) and 37 per cent lower for CPKO at $749 per tonne
(2022: $1,185)
- Estate operating cost increases below local inflation despite higher fertiliser
and workforce expenses
- EBITDA for the year of $43.6 million (2022: $69.1 million), encompassing a
significant improvement in the second half of $28.1 million, compared with the
first half of $15.5 million despite lower prices in the second half
- Loss before tax of $29.2 million (2022: profit before tax of $42.0 million),
following losses on disposals of subsidiaries and similar charges of $26.0 million
- Group net indebtedness at end 2023 $178.2 million (2022: $166.7 million) but
contract liabilities (representing pre-sale advances from customers) reduced to
$17.1 million (2022: $25.9 million)
- All outstanding arrears of preference dividend totalling 11.5p per preference
share paid in April 2024
Agricultural operations
- FFB production of 762,260 tonnes (2022: 765,682) on hectarage reduced by some
1,000 hectares due to the replanting programme
- Replanting and extension planting of, respectively, 741 and 491 hectares
- Yields per mature hectare increased to: FFB 22.4 tonnes (2022: 21.6 tonnes) and
CPO 5.0 tonnes (2022: 4.8 tonnes)
Stone, sand and coal
- Production of crushed stone at ATP’s stone concession commenced and sales now
starting
- Licences being finalised for sand mining by MCU and arrangements with
contractor agreed
- Coal operations inactive, with intention to withdraw from interest in coal
Environmental, social and governance
- Increased score in the SPOTT assessment by the Zoological Society of London of
88.7 per cent, up from 87.0 per cent (ranked 12th out of 100 companies assessed)
- Arrangements progressing to separate processing of fully certified FFB to
permit sales of segregated certified CPO, normally commanding a greater price
premium
- Developing projects with smallholders to encourage and improve the sustainable
component of the group’s supply chain and promote sustainable palm oil production
- New medical centre inaugurated on the estates – awarded the highest level of
accreditation by the Indonesian department of health
- Award from the East Kalimantan Province for best management of an area with
high conservation value within a plantation designated area in recognition of the
group’s dedication to conservation
Outlook
- CPO prices firm and expected to remain at remunerative levels as limited
availability of land and increasing regulatory restrictions constrain expansion of
oil palm hectarage
- ESG initiatives to be channelled into achieving increasing premia for selling
certified CPO
- Stone and sand interests to start contributing to group profits with stone also
providing a resource for infrastructure in the agricultural operations
- Recent strategic initiatives combined with efficiency savings and reduced
financing costs should improve cash flows from core operations and permit further
reductions in group net indebtedness whilst the group continues to improve and
expand the oil palm operations
CHAIRMAN'S STATEMENT
In 2023 the directors implemented several strategic initiatives with the objective
of addressing the legacy of excessive net indebtedness. Such debt levels had
resulted from a series of operational challenges faced by the group some years ago
and, against the background of current interest rates and credit conditions, were
increasingly viewed as too high.
First, the structure of REA Kaltim, the main operating sub-group, was simplified
with the acquisition of the 5 per cent third party interests in the group’s
previously 95 per cent held subsidiaries, thereby helping to reduce administrative
costs. Such acquisitions were made possible by the recent removal of an Indonesian
requirement for 5 per cent local ownership of all Indonesian companies engaged in
oil palm cultivation. Concurrently, three minor or inactive subsidiary companies
were divested.
Second, in November, a conditional agreement was reached with the DSN group to
increase the latter's equity interest in REA Kaltim from 15 per cent to 35 per
cent by way of a subscription of further shares for a consideration estimated at
$52 million. In conjunction with this proposal, it was agreed that the DSN group
would be granted a priority right to acquire CDM, the group’s most outlying
estate, and that the company would purchase 100 per cent of PU, the group’s new
development estate, such that the DSN group would no longer hold an indirect
interest, through REA Kaltim, in PU. These proposals were approved at the general
meeting of shareholders in February 2024 and closing of the further DSN
subscription, including the financial settlements then due, was completed in March
2024. The intra-group sale and purchase of PU was also completed in March
affording the group the whole of any profit that can be realised from this new
development estate.
To allow time for further discussion, the date for the DSN group to exercise its
priority right for the purchase of CDM has been extended to the end of June 2024.
Should DSN not exercise this priority right, the directors intend to pursue an
alternative sale of CDM for which the group has received expressions of firm
interest from unrelated third parties.
While the DSN subscription has diluted the company's interest in REA Kaltim from
85 per cent to 65 per cent, it has provided an immediate and substantial cash
injection to the group and permits the group to retain its core operations without
disruption of the management of those operations. In addition, the sale of CDM,
when concluded, should relieve the group of the need to fund further significant
investment that is required to realise CDM's potential and permit the continuing
group to focus its financial resources and management on its remaining plantings
which will be more concentrated within a single geographical area.
In the agricultural operations, group FFB production in 2023 at 762,260 was
broadly in line with 2022, notwithstanding the reduction in the group’s mature
hectarage as a result of some 1,000 hectares being cleared for replanting. As is
normal, crops were weighted to the second half of the year although, unusually,
there was no pronounced peak in the fourth quarter, probably as a consequence of
lower rainfall earlier in the year. Purchases of third party FFB totalled 231,823,
almost 7 per cent lower than in 2022 reflecting competition from other mills
offering enhanced payment terms at the beginning of the year. Third party volumes
returned to normal levels in the second quarter after an adjustment to the prices
and terms that the group was offering for such fruit.
Production of CPO, CPKO and palm kernels for 2023 amounted respectively to 209,994
tonnes (2022: 218,275 tonnes), 19,393 tonnes (2022: 18,206 tonnes) and 47,324
tonnes (2022: 46,799 tonnes). In the first half, a high number of rain days
impacted harvesting rounds and field efficiencies leading to a lower CPO
extraction rate of 21.9 per cent in the first half of the year. Tighter field
disciplines, including targeted loose fruit recovery, contributed to a welcome
improvement in the CPO extraction rate at 22.3 per cent for the second half.
The substantial investment in recent years in the group’s three oil mills has
resulted in greater operating reliability and sufficient processing capacity for
the group’s own and expected third party FFB for some years to come. Oil losses in
the group’s mills have been comfortably below industry standards for some time.
FFB and CPO yields per mature hectare averaged, respectively, 22.4 tonnes and 5.0
tonnes, an improvement on 2022 yields of, respectively 21.6 tonnes and 4.8 tonnes.
Replanting and extension planting continued through 2023 totalling, respectively,
741 hectares and 491 hectares. A further 286 hectares had been prepared for
planting or replanting at the start of 2024. Replanting and extension planting of
approximately 1,345 and 1,000 hectares, respectively, are planned to be completed
in 2024.
The CPO price, CIF Rotterdam, opened the year at $1,090 per tonne but weakened
progressively through the first six months to a low of $855 per tonne in early
June 2023. The second half of the year saw prices rally and recover to a level of
$946 per tonne by the end of 2023.
The average selling price for the group’s CPO during 2023, including premia for
certified oil but net of export duty and levy, adjusted to FOB Samarinda, was $718
per tonne, 12.6 per cent lower than the average price of $821 per tonne in 2022.
The average selling price for the group’s CPKO, on the same basis, was 36.8 per
cent lower in 2023 at $749 per tonne compared with $1,185 per tonne in 2022.
These lower prices, together with the reduction in volumes of CPO and CPKO,
impacted performance in 2023, with group revenue amounting to $176.7 million, 15.4
per cent below 2022 revenue of $208.8 million. Cost of sales reduced by 3.7 per
cent, principally reflecting the reduced level of purchased FFB, while estate
operating costs increased by 1.8 per cent, less than the rate of Indonesian
inflation notwithstanding higher fertiliser costs, reflecting increased
applications, and higher workforce numbers. Operating profit for 2023 totalled
$14.8 million, $26.6 million lower than that of 2022.
EBITDA for 2023 amounted to $43.6 million, a $25.5 million reduction on the 2022
comparative of $69.1 million. As in previous years, EBITDA in the second half of
$28.1 million showed a significant improvement over EBITDA of the first half of
$15.5 million.
Losses on disposals of subsidiaries and similar charges incurred during the year
totalled $26.0 million. Of this amount, $23.6 million reflected the impairment of
the CDM asset now held for sale and the effect of adjusting CDM’s assets to their
fair value (less costs to sell) in accordance with the terms of the potential sale
to the DSN group. The further $2.4 million arose from the reorganisation of the
REA Kaltim sub-group. Other gains and losses in 2023 included a foreign exchange
loss of $4.2 million compared to a $14.2 million gain in 2022, principally in
relation to sterling and rupiah borrowings, and a $0.4 million loss on the sale of
the dollar notes held in treasury. In 2022 there was a $0.5 million gain on the
extension of the redemption date of the dollar notes.
Finance costs for 2023 were $1.9 million lower than in 2022 at $17.5 million,
reflecting lower interest rates charged during the year compared to 2022 and $0.9
million additional capitalisation of interest in connection with the increase in
the area of immature plantings at the year end. Interest income during 2023,
principally arising from the group’s stone, sand and coal interests, totalled $4.1
million compared to $5.3 million in 2022.
As a result of the above, the group incurred a loss before tax of $29.2 million in
2023 compared with a profit before tax of $42.0 million in 2022. The loss after
tax was $17.7 million (2022: profit after tax $32.9 million).
Shareholders’ funds less non-controlling interests at 31 December 2023 amounted to
$219.8 million compared with $233.9 million at 31 December 2022. Non-controlling
interests at 31 December 2023 amounted to $14.3 million (2022: $23.6 million).
Total net debt increased during the year to $178.2 million at 31 December 2023
(2022: $166.7 million).
The group continues to develop its ESG strategy and to drive towards fulfilling
its stated commitments to address climate change whilst also increasing revenues
generated from sustainable production. Average premia realised during the year for
sales of certified oil increased to $13 per tonne (2022: $10 per tonne) for CPO
sold with ISCC certification and respectively, $15 (2022: $11) and $213 (2022:
$209) per tonne for CPO and CPKO sold with RSPO certification.
Plans are progressing to separate processing of fully certified FFB from
processing of other FFB so as to permit sales of segregated certified CPO which
normally commands a greater price premium. In parallel, the group is working with
smallholder suppliers to improve the sustainable component of the group’s supply
chain and promote sustainable palm oil production.
As in past years, in 2023 the group participated in the SPOTT assessment conducted
by ZSL. The group’s score increased from 87.0 per cent to 88.7 per cent against an
average score of 47.2 per cent, ranking the group 12th out of the 100 companies
assessed.
Following on from the initiatives implemented in the agricultural operations, the
group is now also pursuing plans as regards the interests in the stone, sand and
coal concession holding companies to which the group has made loans.
Taking advantage of the currently more permissive Indonesian mining regulations,
the group intends to implement its original agreement with the shareholders of the
stone concession holding company, ATP, to acquire majority ownership of ATP. Good
progress was made during 2023 with development of the stone concession. Towards
the end of the year, two stone crushers arrived at the quarry site and production
of crushed commenced with the initial output being used to surface the access
roads. Commercial sales of stone are now starting.
Pursuant to its agreement with the sand concession holding company, MCU, the group
will acquire a 49 per cent participation in MCU, once the necessary licences for
sand mining have been finalised. IPA’s coal mining contractor has been appointed
to mine the MCU sand on terms similar to those that applied to mining coal at IPA,
with profits from sales of quartz sand to be shared between MCU and the contractor
in the approximate proportion 70:30. Commercial production is expected to commence
later in 2024.
A substantial fall in prices for semi-soft and high calorie thermal coal led to
mining operations at IPA being suspended from mid-2023, although sales of
stockpiled coal continued. Under current conditions, further mining of IPA remains
uneconomic. The loan to IPA has been substantially repaid and the group does not
intend to make further loans for coal operations. Additionally, the group intends
to withdraw from further involvement with PSS, the coal concession holding company
that has not yet commenced mining.
The semi-annual dividend arising in June 2023 on the group’s 9 per cent preference
shares was paid on the due date. The semi-annual dividend arising in December 2023
was temporarily deferred but, following the DSN share subscription becoming
unconditional, the directors declared a dividend in respect of all arrears of
preference dividend (amounting in aggregate to 11.5p per preference share) and
such dividend was duly paid on 15 April 2024.
The directors expect the dividends due on the preference shares in June and
December 2024 will be paid in full on the due dates.
The outlook for the group is encouraging. CPO and CPKO prices have firmed since
the beginning of the year with the local price, FOB Belawan/Dumai, increasing from
$716 per tonne to a current level of $1,015 per tonne. Given that limited
availability of plantable land and increasing regulatory restrictions are likely
to constrain future expansion of oil palm hectarage, prices may reasonably be
expected to remain at remunerative levels for the foreseeable future. With
increasing sustainability premia on the group’s oil sales, efficiency initiatives
and reduced financing costs resulting from borrowing reductions, this should lead
to improving cash flows from the agricultural operations.
With the cash inflow from the DSN group's additional investment in REA Kaltim and
the expected sale of CDM, 2024 will see a material reduction in group net
indebtedness. Going forward, the directors will seek to derive maximum value from
the group’s ancillary interests in stone and sand and to use such extracted value,
supplemented by the cash flow from the core oil palm business, to reduce further
group net indebtedness while continuing to invest in improvements to and the
expansion of the oil palm operations.
David J BLACKETT
Chairman
DIVIDENDS
The semi-annual dividend arising on the preference shares in June 2023 was paid on
the due date. The semi-annual dividend arising in December 2023 was temporarily
deferred but on the basis that, if the agreement for the subscription by the DSN
group for further shares in REA Kaltim became unconditional, the directors would
declare a dividend representing all outstanding arrears of preference dividend.
Accordingly, following the DSN share subscription becoming unconditional, the
directors declared a dividend in respect of all of such arrears and such dividend
(amounting in aggregate to 11.5p per preference share) was duly paid on 15 April
2024.
The directors expect the semi-annual dividends arising on the preference shares in
June and December 2024 will be paid in full on the due dates.
While the dividends on the preference shares were more than six months in arrear,
the company was not permitted to pay dividends on its ordinary shares but with the
payment in full of the outstanding arrears of preference dividend that is no
longer the case. Nevertheless, in view of the results for the year, no dividend
in respect of the ordinary shares has been paid in respect of 2023 or is proposed.
ANNUAL GENERAL MEETING
The sixty fourth annual general meeting (AGM) of R.E.A. Holdings plc to be held at
the London office of Ashurst LLP at London Fruit & Wool Exchange, 1 Duval Square,
London E1 6PW on 6 June 2024 at 10.00 am.
Attendance
To help manage the number of people in attendance, we are asking that only
shareholders or their duly nominated proxies or corporate representatives attend
the AGM in person. Anyone who is not a shareholder or their duly nominated proxies
or corporate representatives should not attend the AGM unless arrangements have
been made in advance with the company secretary by emailing
4 company.secretary@rea.co.uk.
Shareholders are strongly encouraged to submit a proxy vote on each of the
resolutions in the notice in advance of the meeting:
(i) by visiting Computershare’s electronic proxy service
5 www.investorcentre.co.uk/eproxy (and so that the appointment is received by the
service by no later than 10.00 am on 4 June 2024); or
(ii) via the CREST electronic proxy appointment service; or
(iii) by completing, signing and returning a form of proxy to the Company’s
registrar, Computershare Investor Services PLC, The Pavilions, Bridgwater Road,
Bristol BS99 6ZY as soon as possible and, in any event, so as to arrive by no
later than 10.00 am on 4 June 2024; or
(iv) by using the Proxymity platform if you are an institutional investor (for
more information see 2024 notice).
The company will make further updates, if any, about the meeting at
6 www.rea.co.uk/investors/regulatory-news and on the website's home page.
Shareholders are accordingly requested to visit the group’s website for any such
further updates.
PRINCIPAL RISKS AND UNCERTAINTIES
The group’s business involves risks and uncertainties. Those risks and
uncertainties that the directors currently consider to be material or
prospectively material are described below. There are or may be other risks and
uncertainties faced by the group (such as future natural disasters or acts of God)
that the directors currently deem immaterial, or of which they are unaware, that
may have a material adverse impact on the group.
Identification, assessment, management and mitigation of the risks associated with
ESG matters forms part of the group’s system of internal control for which the
board has ultimate responsibility. The board discharges that responsibility as
described in Corporate governance in the annual report.
Geo-political uncertainty, such as may be caused by wars, can lead to pricing
volatility and shortages of the necessary inputs to the group’s operations, such
as fuel and fertiliser, inflating group costs and negatively impacting the group’s
production volumes. The impact of input shortages, however, may be offset by a
consequential benefit to prices of the group’s outputs, CPO and CPKO.
Climate change represents a particular risk both for the potential impacts of the
group’s operations on the climate and the effects of climate change on the group’s
operations. The group has been monitoring and working to minimise its GHG
emissions for over ten years, with levels of GHG emissions an established key
performance indicator for the group and for accreditation by the independent
certification bodies to which the group subscribes. The group has made a
commitment to achieve a 50 per cent reduction in net GHG emissions by 2030 and to
work towards the longer term objective of net-zero emissions by 2050. In
furtherance of these commitments, the group’s CCWG, under the direction of the
chief sustainability officer, is tasked with identifying and quantifying emission
sources across all of the group’s operations and with developing actions,
priorities and timelines for emission reductions. The group signed up to the SBTi
in early 2023 with the aim of following the science to frame the group’s actions
to reduce carbon emissions. Science-based targets demonstrate how much and how
quickly the group needs to reduce its GHG emissions in line with what is deemed
necessary to meet the goals of the Paris Agreement, that is aimed at limiting
global warming to well-below 2°C above pre-industrial levels and pursuing efforts
to limit global warming to 1.5°C. In addition to reporting on energy consumption
and efficiency in accordance with the UK government’s SECR framework, the group
also includes disclosures in accordance with the TCFD recommendations in this
annual report.
Material risks, related policies and the group’s successes and failures with
respect to ESG matters and the measures taken in response to any failures are
described in more detail under Environmental, social and governance in the annual
report. Where risks are reasonably capable of mitigation, the group seeks to
mitigate them. Beyond that, the directors endeavour to manage the group’s finances
on a basis that leaves the group with some capacity to withstand adverse impacts
from both identified and unidentified areas of risk, but such management cannot
provide insurance against every possible eventuality.
The effect of an adverse incident relating to the stone and sand interests, as
referred to below, could impact the ability of the concession holding companies to
repay their loans. As noted elsewhere in the Strategic report of the annual
report, the active coal concession has been largely mined out and it is the
group’s intention to withdraw from its coal interests. Accordingly, coal interests
are no longer considered to represent a principal risk for the group.
Risks assessed by the directors as currently being of particular significance are
those detailed below under:
- Agricultural operations – Climatic factors
- Agricultural operations – Produce prices
- Agricultural operations – Other operational factors.
In addition, the directors have identified IT security as a substantial yet remote
risk as detailed under General below.
The directors’ assessment, as respects produce prices, reflects the key importance
of those risks in relation to the matters considered in the Viability statement
below and, as respects climatic and other operational factors, the negative impact
that could result from adverse incidence of such risks.
Risk Potential impact Mitigating or other relevant
considerations
Agricultural operations
Climatic factors
A loss of crop or
Material variations from reduction in the quality Over a long period, crop
the norm in climatic of harvest resulting in levels should be reasonably
conditions loss of potential predictable
revenue
A reduction in
Unusually low levels of subsequent crop levels Operations are located in an
rainfall that lead to a resulting in loss of area of high rainfall.
water availability below potential revenue; the Notwithstanding some seasonal
the minimum required for reduction is likely to variations, annual rainfall
the normal development of be broadly proportional is usually adequate for
the oil palm to the cumulative size normal development
of the water deficit
Delayed crop formation Normal sunshine hours in the
Overcast conditions resulting in loss of location of the operations
potential revenue are well suited to the
cultivation of oil palm
The group has established a
permanent downstream loading
facility, where the river is
tidal. Construction of a
second downstream loading
facility as currently under
discussion would further
Inability to obtain improve transport resilience.
Material variations in delivery of estate In addition, road access
levels of rainfall supplies or to evacuate between the ports of
disrupting either river or CPO and CPKO (possibly Samarinda and Balikpapan and
road transport leading to suspension of the estates offers a viable
harvesting) alternative route for
transport with any associated
additional cost more than
outweighed by avoidance of
the potential negative impact
of disruption to the business
cycle by any delay in
evacuating CPO and CPKO
Cultivation risks
A reduction in harvested The group has adopted
Failure to achieve optimal crop resulting in loss standard operating practices
upkeep standards of potential revenue designed to achieve required
upkeep standards
A loss of crop or
Pest and disease damage to reduction in the quality The group adopts best
oil palms and growing crops of harvest resulting in agricultural practice to
loss of potential limit pests and diseases
revenue
Other operational factors
The group maintains stocks of
necessary inputs to provide
resilience and has
Disruption of operations established biogas plants to
Shortages of necessary or increased input costs improve its self-reliance in
inputs to the operations, leading to reduced relation to fuel.
such as fuel and fertiliser profit margins Construction of a further
biogas plant in due course
would increase self-reliance
and reduce costs as well as
GHG emissions
The group endeavours to
employ a sufficient
complement of harvesters
FFB crops becoming within its workforce to
rotten or over ripe harvest expected crops, to
leading either to a loss provide its transport fleet
High levels of rainfall or of CPO production (and with sufficient capacity to
other factors restricting hence revenue) or to the collect expected crops under
or preventing harvesting, production of CPO that likely weather conditions and
collection or processing of has an above average to maintain resilience in its
FFB crops free fatty acid content palm oil mills with each of
and is saleable only at the mills operating
a discount to normal separately and some ability
market prices within each mill to switch
from steam based to biogas or
diesel based electricity
generation
The requirement for CPO The group’s bulk storage
and CPKO storage facilities have sufficient
Disruptions to river exceeding available capacity for expected
transport between the main capacity and forcing a production volumes and,
area of operations and the temporary cessation in together with the further
Port of Samarinda or delays FFB harvesting or storage facilities afforded
in collection of CPO and processing with a by the group’s fleet of
CPKO from the transhipment resultant loss of crop barges, have hitherto always
terminal and consequential loss proved adequate to meet the
of potential revenue group’s requirements for CPO
and CPKO storage.
Occurrence of an uninsured
or inadequately insured The group maintains insurance
adverse event; certain at levels that it considers
risks (such as crop loss reasonable against those
through fire or other Material loss of risks that can be
perils), for which potential revenues or economically insured and
insurance cover is either claims against the group mitigates uninsured risks to
not available or is the extent reasonably
considered feasible by management
disproportionately practices
expensive, are not insured
Produce prices
Volatility of CPO and CPKO Swings in CPO and CPKO prices
prices which as primary should be moderated by the
commodities may be affected fact that the annual oilseed
by levels of world economic Reduced revenue from the crops account for the major
activity and factors sale of CPO and CPKO and proportion of world vegetable
affecting the world a consequent reduction oil production and producers
economy, including levels in cash flow of such crops can reduce or
of inflation and interest increase their production
rates within a relatively short
time frame
The Indonesian government
applies sliding scales of
charges on exports of CPO and
CPKO, which are varied from
time to time in response to
prevailing prices, and has,
on occasions, placed
Restriction on sale of the temporary restrictions on the
group’s CPO and CPKO at export of CPO and CPKO;
world market prices Reduced revenue from the several such measures were
including restrictions on sale of CPO and CPKO and introduced in 2022 in
Indonesian exports of palm a consequent reduction response to generally rising
products and imposition of in cash flow prices precipitated by the
high export charges war in the Ukraine but,
whilst impacting prices in
the short term, were
subsequently modified to
afford producers economic
margins. The export levy
charge funds biodiesel
subsidies and thus supports
the local price of CPO
Depression of selling The imposition of controls or
prices for CPO and CPKO taxes on CPO or CPKO in one
Disruption of world markets if arbitrage between area can be expected to
for CPO and CPKO by the markets for competing result in greater consumption
imposition of import vegetable oils proves of alternative vegetable oils
controls or taxes in insufficient to within that area and the
consuming countries compensate for the substitution outside that
market disruption area of CPO and CPKO for
created other vegetable oils
Expansion
The group holds significant
fully titled or allocated
Inability to complete, land areas suitable for
Failure to secure in full, or delays in completing, planting. It works
or delays in securing, the the planned extension continuously to maintain
land or funding required planting programme with permits for the planting of
for the group’s planned a consequential these areas and aims to
extension planting reduction in the group’s manage its finances to
programme prospective growth ensure, in so far as
practicable, that it will be
able to fund any planned
extension planting programme
A shortfall in achieving A possible adverse The group maintains
the group’s planned effect on market flexibility in its planting
extension planting perceptions as to the programme to be able to
programme negatively value of the group’s respond to changes in
impacting the continued securities circumstances
growth of the group
Climate change
A negative effect on
production would similarly
affect many other oil palm
growers in South East Asia
Changes to levels and leading to a reduction in CPO
regularity of rainfall and Reduced production and CPKO supply, which would
sunlight hours be likely to result in higher
prices for CPO and CPKO in
turn providing at least some
offset against reduced
production
Increasing requirement Less than ten per cent of the
Increase or decrease in for bunding or loss of group’s existing plantings
water levels in the rivers plantings in low lying are in low lying or flood
running though the estates areas susceptible to prone areas. These areas are
flooding being bunded, subject to
environmental considerations
Environmental, social and governance practices
The group has established
Failure by the agricultural standard practices designed
operations to meet the to ensure that it meets its
standards expected of them obligations, monitors
as a large employer of Reputational and performance against those
significant economic financial damage practices and investigates
importance to local thoroughly and takes action
communities to prevent recurrence in
respect of any failures
identified
The group is committed to
sustainable development of
oil palm and has obtained
RSPO certification for most
Criticism of the group’s of its current operations.
environmental practices by All group oil palm plantings
conservation organisations are on land areas from which
scrutinising land areas logs have previously been
that fall within a region Reputational and extracted by logging
that in places includes financial damage companies and which have
substantial areas of subsequently been zoned by
unspoilt primary rain the Indonesian authorities as
forest inhabited by diverse appropriate for agricultural
flora and fauna development. The group
maintains substantial
conservation reserves that
safeguard landscape level
biodiversity
Community relations
The group seeks to foster
mutually beneficial economic
and social interaction
between the local villages
Disruption of and the agricultural
A material breakdown in operations, including operations. In particular,
relations between the group blockages restricting the group gives priority to
and the host population in access to oil palm applications for employment
the area of the plantings and mills, from members of the local
agricultural operations resulting in reduced and population, encourages local
poorer quality CPO and farmers and tradesmen to act
CPKO production as suppliers to the group,
its employees and their
dependents and promotes
smallholder development of
oil palm plantings
The group has established
Disputes over compensation standard procedures to ensure
payable for land areas fair and transparent
allocated to the group that Disruption of compensation negotiations and
were previously used by operations, including encourages the local
local communities for the blockages restricting authorities, with whom the
cultivation of crops or as access to the area the group has developed good
respects which local subject of the disputed relations and who are
communities otherwise have compensation therefore generally
rights supportive of the group, to
assist in mediating
settlements
Where claims from individuals
Disruption of in relation to compensation
Individuals party to a operations, including agreements are found to have
compensation agreement blockages restricting a valid basis, the group
subsequently denying or access to the areas the seeks to agree a new
disputing aspects of the subject of the compensation arrangement;
agreement compensation disputed by where such claims are found
the affected individuals to be falsely based the group
encourages appropriate action
by the local authorities
Stone and sand interests
Operational factors
The stone and sand concession
holding companies endeavour
Failure by external to use experienced
contractors to achieve Under recovery of contractors, to supervise
agreed production volumes receivables them closely and to take care
with optimal extraction to ensure that they have
rates equipment of capacity
appropriate for the planned
production volumes
The group is assisting the
sand concession holding
Delays to securing the company to meet the recent
required mining licences by Delays to recovery of changed regulatory
the sand concession holding receivables and requirements and in the
company commencement of mining meanwhile is financing
pre-production costs to
ensure that mining commences
as soon as permissible
External factors, in Adverse external factors
particular weather, Delays to or under would not normally have a
delaying or preventing recovery of receivables continuing impact for more
delivery of extracted stone than a limited period
and sand
Unforeseen extraction
Geological assessments, complications causing The stone and sand concession
which are extrapolations cost overruns and holding companies seek to
based on statistical production delays or ensure the accuracy of
sampling, proving failure to achieve geological assessments of any
inaccurate projected production extraction programme
resulting in under
recovery of receivables
Prices
There are currently no other
stone quarries of similar
quality or volume in the
Reduced revenue and a vicinity of the stone
Local competition reducing consequent reduction in concessions and the cost of
stone and sand prices recovery of receivables transporting stone should
restrict competition. Third
parties are showing a keen
demand for both stone and the
quartz sand
The Indonesian government has
not to date imposed measures
that would seriously affect
Imposition of additional the viability of Indonesian
royalties or duties on the Reduced revenue and a stone and sand quarrying
extraction of stone or sand consequent reduction in operations notwithstanding
or imposition of export recovery of receivables the imposition of some
restrictions temporary limited export
restrictions in response to
the exceptional circumstances
relating to the war in
Ukraine
Inability to supply
product within the Geological assessments ahead
specifications that are, of commencement of extraction
Unforeseen variations in at any particular time, operations should have
quality of deposits in demand, with reduced identified any material
revenue and a consequent variations in quality
reduction in recovery of
receivables
Environmental, social and governance practices
The areas of the stone and
sand concessions are
relatively small and should
not be difficult to
supervise. The concession
holding companies are
Failure by the stone and Reputational and committed to international
sand interests to meet the financial damage standards of best
standards expected of them environmental and social
practice and, in particular,
to proper management of waste
water and reinstatement of
quarried and mined areas on
completion of extraction
operations
Climate change
The concession holding
companies are working with
experienced, large
Disruptions to mining or contracting companies that
High levels of rainfall quarrying operations and are able to deploy additional
road transport equipment in order to meet
production and transportation
targets during periods of
higher rainfall
General
IT security
The group’s IT controls and
financial reporting systems
and procedures are
independently audited and
tested annually and
recommendations for
corrective actions to enhance
controls are implemented
accordingly. A malware attack
IT related fraud including Losses as a result of in December 2023, that had
cyber-attacks that are disruption of control compromised the group’s
becoming increasingly systems and theft systems prior to
prevalent and sophisticated implementation of some
enhanced control processes
and procedures earlier in the
year, did not affect the
group’s ability to continue
its normal operations and to
maintain control over the
group’s finances and risks,
notwithstanding some
disruption
Currency
As respects costs and
sterling denominated
shareholder capital, the
group considers that the risk
of adverse exchange movements
Adverse exchange is inherent in the group’s
movements on those business and structure and
Strengthening of sterling components of group must simply be accepted. As
or rupiah against the costs and funding that respects borrowings, where
dollar arise in rupiah or practicable the group seeks
sterling to borrow in dollars but,
when borrowing in sterling or
rupiah, considers it better
to accept the resultant
currency risk than to hedge
that risk with hedging
instruments
Cost inflation
Cost inflation is likely to
Increased costs as result have a broadly equal impact
of worldwide economic on all oil palm growers and
factors or shortages of Reduction in operating may be expected to restrict
required inputs (such as margins CPO supply if production of
shortages of fuel or CPO becomes uneconomic. Cost
fertiliser arising from the inflation can only be
wars) mitigated by improved
operating efficiency
Funding
The group maintains good
relations with its bankers
and other holders of debt who
have generally been receptive
Bank debt repayment to reasonable requests to
instalments and other debt moderate debt profiles or
maturities coincide with waive covenants when
periods of adverse trading circumstances require. Such
and negotiations with Inability to meet was the case, for example,
bankers and investors are liabilities as they fall when certain breaches of bank
not successful in due loan covenants by group
rescheduling instalments, companies at 31 December 2020
extending maturities or and 2023 were waived.
otherwise concluding Moreover, the directors
satisfactory refinancing believe that the fundamentals
arrangements of the group’s business will
normally facilitate
procurement of additional
equity capital should this
prove necessary
Counterparty risk
The group maintains strict
controls over its financial
exposures which include
regular reviews of the
Default by a supplier, Loss of any prepayment, creditworthiness of
customer or financial unpaid sales proceeds or counterparties and limits on
institution deposit exposures to counterparties.
In addition, 90 per cent of
sales revenue is receivable
in advance of product
delivery
Regulatory exposure
The directors are not aware
New, and changes to, laws of any specific planned
and regulations that affect Restriction on the changes that would adversely
the group (including, in group’s ability to affect the group to a
particular, laws and retain its current material extent; current
regulations relating to structure or to continue regulations restricting the
land tenure, work permits operating as currently size of oil palm growers in
for expatriate staff and Indonesia will not impact the
taxation) group for the foreseeable
future
The group endeavours to
Breach of the various ensure compliance with the
continuing conditions continuing conditions
attaching to the group’s attaching to its land rights
land rights and the stone and concessions and that its
and sand concessions Civil sanctions and, in activities and the activities
(including conditions an extreme case, loss of of the stone and sand
requiring utilisation of the affected rights or concession holding companies
the rights and concessions) concessions are conducted within the
or failure to maintain or terms of the licences and
renew all permits and permits that are held and
licences required for the that licences and permits are
group’s operations obtained and renewed as
necessary
The group has traditionally
had, and continues to
Failure by the group to maintain, strong controls in
meet the standards expected this area because Indonesia,
in relation to human Reputational damage and where all of the group’s
rights, slavery, criminal sanctions operations are located, has
anti-bribery and corruption been classified as relatively
high risk by the
International Transparency
Corruption Perceptions Index
Restrictions on foreign The group endeavours to
investment in Indonesian maintain good relations with
mining concessions, Constraints on the the local partners in the
limiting the effectiveness group’s ability to group’s mining interests so
of co-investment recover its investment as to ensure that returns
arrangements with local appropriately reflect agreed
partners arrangements
Country exposure
In the recent past, Indonesia
has been stable and the
Indonesian economy has
continued to grow but, in the
late 1990s, Indonesia
Difficulties in experienced severe economic
maintaining operational turbulence and there have
Deterioration in the standards particularly been subsequent occasional
political or economic if there was a instances of civil unrest,
situation in Indonesia consequential often attributed to ethnic
deterioration in the tensions, in certain parts of
security situation Indonesia. The group has
never, since the inception of
its East Kalimantan
operations in 1989, been
adversely affected by
regional security problems
Restriction on the The directors are not aware
transfer of fees, of any circumstances that
interest and dividends would lead them to believe
Introduction of exchange from Indonesia to the UK that, under current political
controls or other with potential conditions, any Indonesian
restrictions on foreign consequential negative government authority would
owned operations in implications for the impose restrictions on
Indonesia servicing of UK legitimate exchange transfers
obligations and payment or otherwise seek to restrict
of dividends; loss of the group’s freedom to manage
effective management its operations
control
The group accepts there is a
possibility that foreign
owners may be required over
time to divest partially
ownership of Indonesian oil
palm operations and there are
existing regulations that may
Mandatory reduction of Forced divestment of result in a requirement to
foreign ownership of interests in Indonesia divest over an extended
Indonesian plantation or at below market values period part of the
mining operations with consequential loss substantial equity
of value participation in the stone
concession holding company
that the group proposes to
acquire but the group has no
reason to believe that any
divestment would be at
anything other than market
value
Miscellaneous relationships
The group appreciates its
material dependence upon its
staff and employees and
Disputes with staff and Disruption of operations endeavours to manage this
employees and consequent loss of dependence in accordance with
revenues international employment
standards as detailed under
Employees in Environmental,
social and governance above
Reliance on the The group endeavours to
Indonesian courts for maintain cordial relations
enforcement of the with its local investors by
agreements governing its seeking their support for
arrangements with local decisions affecting their
partners with the interests and responding
uncertainties that any constructively to any
juridical process concerns that they may have.
Breakdown in relationships involves and with any Further, the group now
with local investors in the failure of enforcement intends to exercise its
group’s Indonesian likely to have, in rights to acquire substantial
subsidiaries particular, a material equity participation in the
negative impact on the stone concession holding
value of the stone and company and, when the
sand interests because substantive permits have been
those concessions are, obtained, to implement the
currently, legally owned previously agreed joint
by the group’s local venture agreement with the
partners sand concession holding
company
VIABILITY STATEMENT
The group’s business activities, together with the factors likely to affect its
future development, performance and financial position are described in the
Strategic report in the annual report which also provides (under the heading
Finance) a description of the group’s cash flow, liquidity and financing
development and treasury policies. In addition, note 26 to the group financial
statements in the annual report includes information as to the group’s policy,
objectives, and processes for managing capital, its financial risk management
objectives, details of financial instruments and hedging policies and exposures to
credit and liquidity risks.
The Principal risks and uncertainties section of the Strategic report in the
annual report describes the material risks faced by the group and actions taken to
mitigate those risks. In particular, there are risks associated with the group’s
local operating environment and the group is materially dependent upon selling
prices for CPO and CPKO over which it has no control.
The group has material indebtedness in the form of bank loans and listed notes.
All of the listed notes fall due for repayment by 30 June 2026 and, for this
reason, the directors have chosen the period to 31 December 2026 for their
assessment of the long term viability of the group.
The group’s present level of indebtedness reflects a number of challenges that have
confronted the group in recent years. Over the period 2015 to 2017, group crops
fell considerably short of the levels that had been expected. The reasons for this
were successfully identified and addressed but, as crops recovered to better
levels, the group had to contend with falling CPO prices. The resultant negative
cash flow impact over several years had to be financed and led to the group assuming
greater debt obligations than it would have liked.
Total indebtedness at 31 December 2023, as detailed under Capital structure in the
Strategic report of the annual report, amounted to $192.4 million, comprising
Indonesian rupiah denominated term bank loans equivalent in total to $102.8
million, drawings under Indonesian rupiah denominated working capital and short
term revolving facilities equivalent to $9.0 million, $26.6 million nominal of 7.5
per cent dollar notes 2026, £30.9 million nominal (equivalent to $40.5million) of
8.75 per cent sterling notes 2025 and loans from the non-controlling shareholder
in REA Kaltim of $13.5 million. The total borrowings repayable in the period to 31
December 2026 (based on exchange rates ruling at 31 December 2023) amount to the
equivalent of $106.9 million of which $59.6 million will fall due in 2025 and
$47.4 million in 2026.
In addition to the cash required for debt repayments, the group also faces
substantial demands on cash to fund capital expenditure, dividends on the
company’s preference shares and the repayment of contract liabilities representing
funding from the group's customers provided in exchange for forward commitments of
CPO and CPKO.
Capital expenditure in 2024 and the immediately following years is likely to be
maintained at not less than $20 million per annum as the group progresses its
extension planting programme in PU, accelerates replanting of older oil palm areas
in REA Kaltim, invests further in its housing stock and continues a programme of
stoning the group’s extensive road network to improve the durability of roads in
periods of heavy rain.
Outstanding arrears of dividends on the preference shares at 31 December 2023
amounted to 11.5p per share with dividends accruing at the rate of 9p per share
per annum and were fully paid on 15 April 2024. The total arrears were equivalent
to $10.4 million and at the current exchange rate of £1 = $1.24 the overall cost
of the annual accrual of further dividends will amount to $8.0 million per annum.
Outstanding contract liabilities at 31 December 2023 amounted to $17.1 million
which will fall due for repayment over the two years 2024 and 2025 with $12.4
million being repaid in 2024 and $4.7 million in 2025.
Closing, in March 2024, of the agreed subscription by the DSN group of additional
shares in REA Kaltim (to increase the DSN group’s interest in REA Kaltim from 15
per cent to 35 per cent) resulted in a cash inflow to the group of some $50
million with further monies, estimated at around $5 million, still to be received
when the amount of the subscription is finalised following completion of the audit
of REA Kaltim’s 2023 financial statements. If, as is planned, CDM is sold, either
to DSN or to a third party, the group can reasonably expect a further net cash
inflow of some $16 million.
In addition, in March 2024, Bank Mandiri agreed to provide further term loans to
REA Kaltim amounting in total to the equivalent of $22.5 million to fund capital
expenditure between 2024 and 2028. Discussions are continuing with Bank Mandiri on
the provision of a term loan to assist in financing PU's extension planting
programme.
Whilst commodity prices can be volatile, there is a reasonable expectation that
CPO and CPKO prices will remain at remunerative levels for the foreseeable future
and that the group will progressively achieve increasing sustainability premia on
its oil sales. Whilst some cost inflation is unavoidable, the group believes that
efficiency initiatives, including the administrative savings from the recently
completed reorganisation of the company's subsidiaries and the prospective savings
if CDM is successfully divested, coupled with the benefits of the continuing
capital investment programme, will limit cost increases. With reduced financing
costs resulting from reduction in borrowings, the group’s plantation operations
should generate cash flows at good levels.
Following significant investment in the group’s stone and sand interests during
2023, production of stone has now started and it is expected that production of
sand will follow within 2024. Accordingly, both activities are expected to return
cash to the group in 2024 and going forward.
Taking account of the cash already held by the group at 31 December 2023 of $14.2
million and the prospective cash inflows from the DSN group's subscription of
additional shares in REA Kaltim and the planned divestment of CDM, combined with
cash flow from the oil palm operations and sand and stone interests, cash
available to the group should be sufficient progressively to reduce the group’s
indebtedness while meeting the other prospective demands on group cash referred to
above. If CPO and CPKO prices remain at favourable levels, the group may have
sufficient cash to meet the listed debt redemptions falling due in 2025 and 2026
in full but, should this not be the case, the directors are confident that the
improvements in the financial position of the group that are now occurring will be
such that any shortfalls can be successfully refinanced at the relevant times.
Based on the foregoing, the directors have a reasonable expectation that the
company and the group have adequate resources to continue in operational existence
for the period to 31 December 2026 and to remain viable during that period.
GOING CONCERN
Factors likely to affect the group’s future development, performance and financial
position are described in the Strategic report of the annual report. The directors
have carefully considered those factors, together with the principal risks and
uncertainties faced by the group which are set out in the Principal risks and
uncertainties section of the Strategic report in the annual report and have
reviewed key sensitivities which could impact on the liquidity of the group.
As at 31 December 2023, the group had cash and cash equivalents of $14.2 million,
and borrowings of $192.4 million (in both cases as set out in note 26 to the group
financial statements). The total borrowings repayable by the group in the period to
30 April 2025 (based on exchange rates ruling at 31 December 2023) amount to the
equivalent of $43.0 million.
In addition to the cash required for debt repayments, as at 31 December 2023 the
group also requires cash in the period to 30 April 2025 to fund capital
expenditure, dividends and arrears of dividend on the company’s preference shares
and repayment of contract liabilities as referred to in more detail in the
Viability statement above. That statement also notes the inflows and prospective
inflows of cash from corporate transactions and new bank development loans and the
group’s expectations regarding positive cash flows from the oil palm operations
and the stone and sand interests.
Having regard to the foregoing, based on the group’s forecasts and projections
(taking into account reasonable possible changes in trading performance and other
uncertainties) and having regard to the group’s cash position and available
borrowings, the directors expect that the group should be able to operate within
its available borrowings for at least 12 months from the date of approval of the
financial statements.
On that basis, the directors have concluded that it is appropriate to prepare the
financial statements on a going concern basis.
DIRECTORS’ RESPONSIBILITIES
The directors are responsible for preparing the annual report and the financial
statements in accordance with applicable law and regulations.
To the best of the knowledge of each of the directors, they confirm that:
- the group financial statements, prepared in accordance with UK adopted IFRS,
give a true and fair view of the assets, liabilities, financial position, and
profit or loss of the company and the subsidiary undertakings included in the
consolidation taken as a whole;
- the company financial statements, prepared in accordance with UK Accounting
Standards, comprising FRS 101 Reduced Disclosure Framework, give a true and fair
view of the company’s assets, liabilities, and financial position of the company;
- the Strategic report and Directors' report in the annual report include a fair
review of the development and performance of the business and the position of the
company and the undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and uncertainties that they
face; and
- the annual report and financial statements, taken as a whole, are fair, balanced
and understandable and provide the information necessary for shareholders to
assess the group's and the company’s position, performance, business model and
strategy.
The current directors of the company and their respective functions are set out in
the Board of directors section of the annual report.
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2023
2023 2022
$’000 $’000
Revenue 176,722 208,783
Net loss arising from changes in fair value of biological (580) (245)
assets
Cost of sales (142,415) (147,804)
Gross profit 33,727 60,734
Distribution costs (1,511) (2,014)
Administrative expenses (17,372) (17,319)
Operating profit 14,844 41,401
Interest income 4,091 5,297
Losses on disposals of subsidiaries and similar charges (26,051) –
Other (losses) / gains (4,669) 14,661
Finance costs (17,460) (19,313)
(Loss) / profit before tax (29,245) 42,046
Tax 11,552 (9,160)
(Loss) / profit before tax (17,693) 32,886
Attributable to:
Equity shareholders (10,241) 27,777
Non-controlling interests (7,452) 5,109
(17,693) 32,886
(Loss) / profit per 25p ordinary share (US cents)
Basic (32.7) 43.1
Diluted (32.7) 39.5
All operations for both years are continuing.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
2023 2022
$’000 $’000
(Loss) / profit for the year (17,693) 32,886
Other comprehensive income
Items that may be reclassified to profit or loss:
Reclassification of foreign exchange differences on disposal of 685 –
group companies
Loss arising on purchase of non-controlling interests taken to (96) –
equity
589 –
Items that will not be reclassified to profit or loss:
Actuarial gains (449) 374
Deferred tax on actuarial gains 99 (83)
(350) 291
Total comprehensive (loss) / income for the year (17,454) 33,177
Attributable to:
Equity shareholders (9,961) 28,027
Non-controlling interests (7,493) 5,150
(17,454) 33,177
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2023
2023 2022
$’000 $’000
Non-current assets
Goodwill 11,144 12,578
Intangible assets 1,593 1,836
Property, plant and equipment 297,255 354,028
Land 46,015 44,967
Financial assets 73,640 60,010
Deferred tax assets 15,012 3,000
Total non-current assets 444,659 476,419
Current assets
Inventories 16,709 27,428
Biological assets 3,087 3,909
Trade and other receivables 28,254 31,440
Current tax asset 975 188
Cash and cash equivalents 14,195 21,914
Total current assets 63,220 84,879
Assets classified as held for sale 32,516 –
Total assets 540,395 561,298
Current liabilities
Trade and other payables (27,834) (40,454)
Current tax liabilities (1,462) (1,462)
Bank loans (17,413) (16,390)
Other loans and payables (14,891) (5,712)
Total current liabilities (61,600) (64,018)
Non-current liabilities
Trade and other payables (16,841) (9,757)
Bank loans (94,361) (100,730)
Sterling notes (40,549) (38,162)
Dollar notes (26,572) (17,842)
Deferred tax liabilities (34,888) (44,454)
Other loans and payables (15,356) (28,805)
Total non-current liabilities (228,567) (239,750)
Liabilities directly associated with assets held for sale (16,109) –
Total liabilities (306,276) (303,768)
Net assets 234,119 257,530
Equity
Share capital 133,590 133,590
Share premium account 47,374 47,374
Translation reserve (24,416) (25,101)
Retained earnings 63,267 78,042
219,815 233,905
Non-controlling interests 14,304 23,625
Total equity 234,119 257,530
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
Share Share Translation Retained Subtotal Non- Total
capital premium reserve earnings controlling equity
interests
$’000 $’000 $’000 $’000 $’000 $’000 $’000
At 1 January 133,586 47,358 (25,101) 66,545 222,388 20,270 242,658
2022
Profit for the – – – 27,777 27,777 5,109 32,886
year
Amendment to
non-controlling – – – – – (295) (295)
interest
Other
comprehensive – – – 250 250 41 291
income for the
year
Exercise of 4 16 – – 20 – 20
warrants
Dividends to
preference – – – (16,530) (16,530) – (16,530)
shareholders
Dividends to
non-controlling – – – – – (1,500) (1,500)
interests
At 31 December 133,590 47,374 (25,101) 78,042 233,905 23,625 257,530
2022
Loss for the – – – (10,241) (10,241) (7,452) (17,693)
year
Reorganisation – – – – – (1,978) (1,978)
of subsidiaries
Other
comprehensive – – 685 (405) 280 (41) 239
income / (loss)
for the year
Capital from
non-controlling – – – – – 150 150
interest
Dividends to
preference – – – (4,129) (4,129) – (4,129)
shareholders
At 31 December 133,590 47,374 (24,416) 63,267 219,815 14,304 234,119
2023
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2023
2023 2022
$’000 $’000
Net cash from operating activities 29,625 16,699
Investing activities
Interest received 4,019 2,058
Proceeds on disposal of PPE 3,054 1,517
Purchases of intangible assets and PPE (21,756) (19,095)
Expenditure on land (5,093) (1,327)
Net (investment) / repayment stone, sand and coal interests (16,947) 17,018
Cash received from non-current receivables 1,574 –
Cash divested on disposal of group companies (1,340) –
Cash reclassified as assets held for sale (674) –
Proceeds on disposal of group companies 1,810 –
Net cash (used in) /generated by investing activities (35,353) 171
Financing activities
Preference dividends paid (4,129) (16,530)
Dividend to non-controlling interest – (1,500)
Repayment of bank borrowings (15,773) (39,243)
New bank borrowings drawn 6,098 30,400
Sale / (purchase) of dollar notes held in treasury 8,142 (8,570)
Repayment of borrowings from related party – (51)
Repayment of borrowings from non-controlling shareholder (1,394) (697)
New borrowings from non-controlling shareholder 10,000 –
New equity from non-controlling interests 150 –
Purchase of non-controlling interest (1,575) –
Cost of extension of redemption date of dollar notes – (252)
Proceeds from issue of ordinary shares – 20
Repayment of lease liabilities (2,846) (2,670)
Net cash used in financing activities (1,327) (39,093)
Cash and cash equivalents
Net decrease in cash and cash equivalents (7,055) (22,223)
Cash and cash equivalents at beginning of year 21,914 46,892
Effect of exchange rate changes (664) (2,755)
Cash and cash equivalents at end of year 14,195 21,914
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of preparation
The financial statements and notes 1 to 26 below (together the financial
information) have been extracted without material adjustment from the financial
statements of the group for the year ended 31 December 2023 (the 2023 financial
statements). The auditor has reported on those accounts; the reports were
unqualified and did not contain statements under sections 498(2) or (3) of the
Companies Act 2006 (CA 2006). Copies of the 2023 financial statements will be
filed in the near future with the Registrar of Companies. The accompanying
financial information does not constitute statutory accounts of the company within
the meaning of section 434 of the CA 2006.
Whilst the 2023 financial statements have been prepared in accordance with UK
adopted IFRS and with the CA 2006, as at the date of authorisation of those
accounts the accompanying financial information does not itself contain sufficient
information to comply with IFRS.
The 2023 financial statements and the accompanying financial information were
approved by the board of directors on 24 April 2024.
2. Revenue and cost of sales
2023 2022
$’000 $’000
Revenue:
Sales of goods 175,313 206,611
Revenue from management services 1,138 1,520
Revenue from coal interest 271 652
176,722 208,783
Cost of sales:
Depreciation and amortisation (28,750) (27,654)
Other costs (113,665) (120,150)
(142,415) (147,804)
3. Segment information
In the table below, the group’s sales of goods are analysed by geographical
destination. The group operates in two segments: the cultivation of oil palms and
stone, sand and coal interests. In 2023 and 2022, the latter did not meet the
quantitative thresholds set out in IFRS 8: Operating segments and, accordingly, no
analyses are provided by business segment.
2023 2022
$’m $’m
Sales by geographical destination:
Indonesia 175.3 206.6
175.3 206.6
4. Administrative expenses
2023 2022
$’000 $’000
Loss on disposal of PPE 1,055 218
Indonesian operations 14,895 14,221
Head office 3,436 3,428
19,386 17,867
Amount included as additions to PPE (2,014) (548)
17,372 17,319
5. Interest income
2023 2022
$’000 $’000
Interest on bank deposits 851 1,161
Other interest income 3,240 897
Reversal of provision in respect of interest on stone and coal loans – 3,239
4,091 5,297
Other interest income comprises $3.9 million interest receivable in respect of
stone, sand and coal loans net of a provision of $0.7 million (2022: interest
receivable of $2.6 million net of a provision of $1.7 million).
The provision of $3.2 million reversed in 2022 was in respect of cumulative
interest payable by a coal concession holding company which commenced generating
revenue and has repaid substantially all of its loan to the group.
6. Losses on disposals of subsidiaries and similar charges
2023 2022
$’000 $’000
Impairment of asset held for sale 23,616 –
Reorganisation of subsidiaries 2,435 –
26,051 –
The impairment of asset held for sale is the effect of adjusting CDM’s assets and
liabilities to their fair value less cost to sell in line with the terms of the
potential sale of CDM to DSN (see note 19).
The reorganisation of subsidiaries is in respect of the steps taken during 2023 to
simplify the structure of the group and thereby reduce administrative costs. The
REA Kaltim sub-group acquired the 5 per cent third party interests in its
previously 95 per cent held subsidiaries such that these are all now wholly owned
by REA Kaltim with the exception of SYB which completed in January 2024.
Concurrently, two subsidiaries, KKP and KKS, in the latter case with its
subsidiary, PBJ2, were divested. The acquisition of the former 5 per cent third
party interests in subsidiaries of REA Kaltim was made possible by a 2021 change
in the Indonesian regulations which abolished a previous requirement for 5 per
cent local ownership of all Indonesian companies engaged in oil palm cultivation.
The $2.4 million cost comprises the $0.6 million write down of a loan to a third
party interest, a $0.7 million reclassification of foreign exchange differences on
the divestment of KKP, a loss on the sale of KKS and PBJ2 of $0.2 million and $1.0
million provision in respect of indemnities given in connection with that sale.
7. Other (losses) / gains
2023 2022
$’000 $’000
Change in value of sterling notes arising from exchange (2,199) 4,553
fluctuations
Change in value of other monetary assets and liabilities arising (2,042) 9,613
from exchange fluctuations
Gain arising on the extension of the redemption date of the dollar – 495
notes
Loss on sale of dollar notes held in treasury (428) –
(4,669) 14,661
8. Finance costs
2023 2022
$’000 $’000
Interest on bank loans and overdrafts 9,623 10,814
Interest on dollar notes 1,708 1,707
Interest on sterling notes 3,412 3,263
Interest on other loans 1,319 851
Interest on lease liabilities 529 377
Other finance charges 1,961 2,527
18,552 19,539
Amount included as additions to PPE (1,092) (226)
17,460 19,313
The interest on dollar notes is net of interest in respect of the $8.6 million
notes that were held in treasury by a group company for resale for the last 6
months of 2022 and the first 6 months of 2023.
Amounts included as additions to PPE arose on borrowings applicable to the
Indonesian operations and reflected a capitalisation rate of 7.0 per cent (2022:
1.0 per cent) there is no directly related tax relief.
9. Tax
2023 2022
$’000 $’000
Current tax:
UK corporation tax – 78
Overseas withholding tax 1,097 1,635
Foreign tax 4,271 7,172
Foreign tax – prior year 317 133
Total current tax 5,685 9,018
Deferred tax:
Current year (18,593) 3,128
Prior year 1,356 (2,986)
Total deferred tax (17,237) 142
Total tax (credit) / charge (11,552) 9,160
Taxation is provided at the rates prevailing for the relevant jurisdiction. For
Indonesia, the current and deferred taxation provision is based on a tax rate of
22 per cent (2022: 22 per cent) and for the UK, the taxation provision reflects a
corporation tax rate of 23.5 per cent (2022: 19 per cent) and a deferred tax rate
of 25 per cent (2022: 25 per cent).
10. Dividends
2023 2022
$’000 $’000
Amounts recognised as distributions to preference shareholders:
Dividends on 9 per cent cumulative preference shares 4,129 16,530
The semi-annual dividend arising on the preference shares in June 2023 was paid on
the due date. The semi-annual dividend arising in December 2023 was temporarily
deferred but on the basis that, if the agreement for the subscription by the DSN
group for further shares in REA Kaltim became unconditional, the directors would
declare a dividend representing all outstanding arrears of preference dividend.
Accordingly, following the DSN share subscription becoming unconditional, the
directors declared a dividend in respect of all of such arrears and such dividend
(amounting in aggregate to 11.5p per preference share) was duly paid on 15 April
2024.
The directors expect the semi-annual dividends arising on the preference shares in
June and December 2024 will be paid in full on the due dates.
While the dividends on the preference shares were more than six months in arrear,
the company was not permitted to pay dividends on its ordinary shares but with the
payment in full of the outstanding arrears of preference dividend that is no
longer the case. Nevertheless, in view of the results for the year, no dividend
in respect of the ordinary shares has been paid in respect of 2023 or is proposed.
11. (Loss) / profit per share
2023 2022
$’000 $’000
(Loss) / profit attributable to equity shareholders (10,241) 27,777
Preference dividends paid relating to current year (4,129) (8,826)
(Loss) / profit for the purpose of calculating loss per share (14,370) 18,951
’000 ’000
Weighted average number of ordinary shares for the purpose of:
Basic (loss) / profit per share 43,964 43,959
Diluted (loss) / profit per share 43,964 47,957
The warrants (see note 20) are non-dilutive in 2023 as the average share price was
below the exercise price.
12. Property, plant and equipment
Plantings Buildings Plant, Construction Total
and equipment in progress
structures and vehicles
$’000 $’000 $’000 $’000 $’000
Cost:
At 1 January 2022 175,287 250,408 125,454 15,433 566,582
Additions 2,367 3,712 9,840 2,903 18,822
Reclassifications and – 2,429 1,471 (5,168) (1,268)
adjustments
Disposals (1,107) (1,256) (6,588) – (8,951)
At 31 December 2022 176,547 255,293 130,177 13,168 575,185
Additions 4,141 6,731 4,578 6,826 22,276
Reclassifications and – 7,844 9,187 (17,031) –
adjustments
Disposals (4,511) (3,102) (1,322) – (8,935)
Divested on sale of (176) (330) (31) – (537)
subsidiary (see note 21)
Transferred to assets held (18,090) (37,154) (1,055) (76) (56,375)
for sale (see note 19)
At 31 December 2023 157,911 229,282 141,534 2,887 531,614
Accumulated depreciation:
At 1 January 2022 66,000 59,606 75,178 – 200,784
Charge for year 10,137 7,608 9,844 – 27,589
Disposals (126) (613) (6,477) – (7,216)
At 31 December 2022 76,011 66,601 78,545 – 221,157
Charge for year 9,586 8,111 10,679 – 28,376
Disposals (2,705) (872) (1,249) – (4,826)
Divested on sale of (7) (10) (31) – (48)
subsidiary (see note 21)
Transferred to assets held (3,705) (5,858) (737) – (10,300)
for sale (see note 19)
At 31 December 2023 79,180 67,972 87,207 – 234,359
Carrying amount:
At 31 December 2023 78,731 161,310 54,327 2,887 297,255
At 31 December 2022 100,536 188,692 51,632 13,168 354,028
The depreciation charge for the year includes $144,000 (2022: $44,000) which has
been capitalised as part of additions to plantings and buildings and structures.
At the balance sheet date, the group had entered into no contractual commitments
for the acquisition of PPE (2022: $7.3 million).
At the balance sheet date, PPE of $118.1 million (2022: $123.0 million) had been
charged as security for bank loans (see note 15).
Additions to PPE include $651,000 of new right-of-use assets which are not
included in purchases of PPE within the consolidated cash flow statement.
13. Land
2023 2022
$’000 $’000
Cost:
Beginning of year 48,648 47,962
Additions 5,093 1,327
Disposals – (641)
Transferred to assets held for sale (see note 19) (4,909) –
End of year 48,832 48,648
Accumulated amortisation:
Beginning of year 3,681 4,322
Disposals – (641)
Transferred to assets held for sale (see note 19) (864) –
End of year 2,817 3,681
Carrying amount:
End of year 46,015 44,967
Beginning of year 44,967 43,640
Balances classified as land represent amounts invested in land utilised for the
purpose of the plantation operations in Indonesia. There are two types of cost,
one relating to the acquisition of HGUs and the other relating to the acquisition
of Izin Lokasi.
At 31 December 2023, certificates of HGU had been obtained in respect of areas
covering 63,617 hectares (2022: 64,522 hectares). An HGU is effectively a
government certification entitling the holder to utilise the land for agricultural
and related purposes. Retention of an HGU is subject to payment of annual land
taxes in accordance with prevailing tax regulations. HGUs are normally granted for
periods of up to 35 years and are renewable on expiry of such term.
The other cost relates to the acquisition of Izin Lokasi, each of which is an
allocation of Indonesian state land granted by the Indonesian local authority
responsible for administering the land area to which the allocation relates. Such
allocations are preliminary to the process of fully titling an area of land and
obtaining an HGU in respect of it. Izin Lokasi are normally valid for periods of
between one and three years but may be extended if steps have been taken towards
obtaining full titles.
The amount carried forward at 31 December 2023 represents HGU costs only, the
group's remaining Izin Lokasi were part of the transfer to assets held for sale.
At the balance sheet date, land titles of $30.9 million (2022: $26.3 million) had
been charged as security for bank loans (see note 15).
14. Financial assets
2023 2022
$’000 $’000
Stone interest 44,681 30,354
Coal interests 11,835 13,524
Provision against loan to coal interests (2,550) (2,550)
53,966 41,328
Sand interest 3,633 –
57,599 41,328
Plasma advances 12,788 13,675
Other non-current receivables 3,253 5,007
16,041 18,682
Total financial assets 73,640 60,010
Pursuant to the arrangements between the group and its local partners, the
company’s subsidiary, KCC, has the right, subject to satisfaction of local
regulatory requirements, to acquire, at original cost, 95 per cent ownership of
two Indonesian companies that directly and through an Indonesian subsidiary of one
of those companies own rights in respect of certain stone and coal concessions in
East Kalimantan Indonesia. Until recently local regulatory requirements precluded
the exercise of such rights. For now, the concession holding companies are being
financed by loan funding from the group and no dividends or other distributions or
payments may be paid or made by the concession holding companies to the local
partners without the prior agreement of KCC. A guarantee has been executed by the
stone concession holding company in respect of the amounts owed to the group by
the two coal concession holding companies. The coal concession holding company
that commenced generation of revenue in 2022 has repaid substantially all of its
loan from the group.
Included within the stone and coal interest balances is cumulative interest
receivable of $11.8 million net of a provision of $9.7 million (2022: $9.0 million
cumulative interest receivable and provision). This interest, due from the stone
concession holding company and the second coal concession holding company has been
provided against due to the creditworthiness of the applicable concession holding
companies, the first has only just commenced production while production by the
second is uneconomic at the current level of coal prices; as such neither company
will have sufficient operational cashflows from which to settle arrears of
interest in the next year. (A provision of $3.2 million in respect of the coal
concession holding company that repaid substantially all of its loan to the group
was reversed in 2022 and included within interest income in the consolidated
income statement).
Following the identification of quartz sand deposits lying in the overburden
within the concession area held by the coal concession holding company that has
substantially repaid its loan, the group, in 2022, concluded agreements with the
company holding the rights to mine such sand deposits. The latter company is a
separate legal entity from the coal concession holding company in question because
sand mining and coal mining in Indonesia are subject to separate licencing
arrangements and a coal mining licence does not entitle the holder of such licence
to mine sand. Pursuant to its agreements with the sand concession holding company,
the group has made loans to finance the pre-production costs of that company. Once
the necessary licences have been finalised, the group will acquire a 49 per cent
participation in the sand concession holding company.
Plasma advances are discussed under Credit risk in note 26 of the annual report.
Other non-current receivables are participation advances to third parties holding,
or formerly holding, five per cent non-controlling interests in group
subsidiaries. $1.6 million was repaid during the year on the purchase of the
non-controlling interest in KMS.
15. Bank loans
2023 2022
$’000 $’000
Bank loans 111,774 117,120
The bank loans are repayable as follows:
On demand or within one year 17,413 16,390
Between one and two years 16,662 14,210
Between two and five years 58,684 53,779
After five years 19,015 32,741
111,774 117,120
Amount due for settlement within 12 months 17,413 16,390
Amount due for settlement after 12 months 94,361 100,730
111,774 117,120
All bank loans are denominated in rupiah and are stated above net of unamortised
issuance costs of $3.8 million (2022: $4.8 million). The bank loans repayable
within one year include $2.9 million drawings under working capital facilities
(2022: $2.9 million) and $6.1 million short term revolving borrowings (2022: nil).
Under the Mandiri facilities, the group is required to leave agreed amounts of
cash on deposit but is allowed additional borrowings equal to the amount of the
blocked cash.
The interest rate on the bank loans and working capital facilities at 31 December
2023 is 8.0 per cent (2022: 8.0 per cent). The short term revolving borrowings
have an interest rate of 3.0 per cent which is 0.5 per cent above the deposit
interest rate applicable to cash deposits. The weighted average interest rate on
all bank borrowings for 2023 was 7.7 per cent (2022: 8.3 per cent).
The gross bank loans of $115.6 million (2022: $122.0 million) are secured on
certain land titles, PPE, biological assets and cash assets held by REA Kaltim,
KMS and SYB having an aggregate book value of $158.1 million (2022: $159.4
million), and are the subject of an unsecured guarantee by the company. The banks
are entitled to have recourse to their security on usual banking terms.
REA Kaltim, SYB and KMS have agreed certain financial covenants under the terms of
the bank facilities relating to debt service coverage, debt equity ratio, gross
margin and the maintenance of positive net income and positive equity; such
covenants are tested annually upon delivery to Bank Mandiri of the audited
financial statements in respect of each year by reference to the company's results
for, and closing financial position as at the end of, that year. For 2023 Bank
Mandiri waived the testing requirement as regards REA Kaltim's maintenance of
positive net income and the testing requirements as regards SYB's debt service
coverage, gross margin and the maintenance of positive net income.
Under the terms of their bank facilities, certain plantation subsidiaries are
restricted to an extent in the payment of interest on borrowings from, and on the
payment of dividends to, other group companies. The directors do not believe that
the applicable covenants will affect the ability of the company to meet its cash
obligations.
At the balance sheet date, the group had undrawn rupiah denominated facilities of
nil (2022: nil).
16. Sterling notes
The sterling notes comprise £30.9 million nominal of 8.75 per cent guaranteed 2025
sterling notes (2022: £30.9 million nominal) issued by the company’s subsidiary,
REAF.
The sterling notes are due for repayment on 31 August 2025. A premium of 4p per £1
nominal of sterling notes will be paid on redemption of the sterling notes on 31
August 2025 (or earlier in the event of default) or on surrender of the sterling
notes in satisfaction, in whole or in part, of the subscription price payable on
exercise of the warrants held by sterling note holders (see note 20) on or before
the final subscription date (namely 15 July 2025).
The sterling notes are guaranteed by the company and another wholly owned
subsidiary of the company, REAS, and are secured principally on unsecured loans
made by REAS to Indonesian plantation operating subsidiaries of the company.
The repayment obligation in respect of the sterling notes of £30.9 million ($39.3
million) is carried on the balance sheet at $40.5 million (2022: $38.2 million)
which is net of the unamortised balance of the note issuance costs plus the
amortised premium to date.
17. Dollar notes
2023 2022
$’000 $’000
Dollar notes – repayable 2026 (26,572) (26,412)
Dollar notes held in treasury – 8,570
(26,572) (17,842)
The dollar notes comprise $27.0 million nominal of 7.5 per cent dollar notes 2026
(2022: $27.0 million nominal) and are stated net of the unamortised balance of the
note issuance costs.
On 3 March 2022 the repayment date for the dollar notes was extended from 30 June
2022 to 30 June 2026. In consideration of the noteholders sanctioning the
extension of the redemption date, the company paid each noteholder a consent fee
equal to 0.25 per cent of the nominal amount of the dollar notes held by such
holder. In conjunction with the proposal to extend the redemption date for the
dollar notes, the company put in place arrangements whereunder any noteholder who
wished to realise their holding of dollar notes by the previous redemption date of
30 June 2022 was offered the opportunity so to do (the sale facility).
Holders of $14.8 million nominal dollar notes elected to take advantage of the
sale facility. $6.0 million nominal of such dollar notes were resold and REAS (a
wholly owned subsidiary of the company) acquired the unsold balance of $8.8
million nominal of dollar notes. A further $248,000 nominal of dollar notes was
then resold at par for settlement on 30 June 2022. Accordingly, the total net
amount of dollar notes purchased from divesting noteholders and held by REAS at 31
December 2022 was $8.6 million.
On 28 June 2023 the dollar notes held by REAS were sold for delivery on 1 July to
an existing noteholder for 95 per cent of the par value of the notes.
18. Other loans and payables
2023 2022
$’000 $’000
Indonesian retirement benefit obligations 9,098 7,824
Lease liabilities 5,929 7,438
Loans from non-controlling shareholder 13,484 15,519
Payable under settlement agreement 1,736 3,736
30,247 34,517
Repayable as follows:
On demand or within one year (shown under current liabilities) 14,891 5,712
Between one and two years 4,326 3,721
Between two and five years 2,979 18,106
After five years 8,051 6,978
Amount due for settlement after 12 months 15,356 28,805
30,247 34,517
19. Assets held for sale
In 2023 the group entered into a share subscription agreement with DSN. Included
in this agreement was a priority right, exercisable by notice in writing to the
company given at any time prior to 30 June 2024, for DSN to acquire CDM at a price
calculated by reference to a valuation of the asset and liabilities of CDM on the
basis stipulated in the agreement.
If the right is exercised, CDM will be sold for a price of $1 but on terms that
(a) if the agreed valuation of CDM’s assets and liabilities results in a negative
value being attributed to the equity of CDM, immediately prior to completion of
the sale, REA Kaltim will make an additional capital contribution to CDM in an
amount equal to such negative value and (b) on completion, DSN will procure the
repayment by CDM of the loan from REAS while REA Kaltim will repay the balance
then owed by it to CDM.
Based on the above, at 31 December 2023 the additional capital contribution
required under (a) is a negative figure of $3.2 million and the net repayment to
the group under (b) is $19.6 million giving a fair value of $16.4 million. Costs
to sell are expected to be minimal.
Accordingly, the assets of CDM with carrying value of $40.0 million have been
treated as assets held for sale and have been impaired by $23.6 million to equal
the estimated fair value less costs to sell of $16.4 million. The composition of
those assets and of the liabilities related to them, both as at 31 December 2023,
were as shown below:
$’000
Goodwill 1,434
PPE 46,075
Land 4,045
Inventories 1,477
Biological assets 242
Plasma advances 1,476
Trade and other receivables 1,334
Cash and bank balances 49
Total assets classified as held for sale 56,132
Impairment of assets held for sale (23,616)
Assets classified as held for sale 32,516
Trade payables (869)
Deferred tax (4,242)
Other loans and payables (10,641)
Retirement benefits (357)
Total liabilities related to assets classified as held for sale (16,109)
Net assets held for sale 16,407
20. Share capital
2023 2022
$’000 $’000
Issued and fully paid:
72,000,000 – 9 per cent cumulative preference shares of £1 each 116,516 116,516
(2022: 72,000,000)
43,963,529 – ordinary shares of 25p each (2022: 43,963,529) 18,075 18,075
132,500 – ordinary shares of 25p each held in treasury (2022: (1,001) (1,001)
132,500)
133,590 133,590
The preference shares entitle the holders thereof to payment, out of the profits
of the company available for distribution, but subject to the approval of a board
resolution to make a distribution out of available profits, of a cumulative
preferential dividend of 9 per cent per annum on the nominal amount paid up on
such preference shares. The preference shares shall rank for dividend in priority
to the payment of any dividend to the holders of any other class of shares. In the
event of the company being wound up, holders of the preference shares shall be
entitled to the amount paid up on the nominal value of such shares together with
any arrears and accruals of the dividend thereon. On a winding up or other return
of capital, the preference shares shall rank in priority to any other shares of
the company for the time being in issue.
Subject to the rights of the holders of preference shares, holders of ordinary
shares are entitled to share equally with each other in any dividend paid on the
ordinary share capital and, on a winding up of the company, in any surplus assets
available for distribution among the members. Shares held by the company in
treasury do not carry voting rights.
The company has outstanding 3,997,760 warrants to subscribe for ordinary shares
(2022: 3,997,760 warrants). Each warrant entitles the holder to subscribe for one
ordinary share at a subscription price of 126p per share on or before 15 July
2025. Holders of sterling notes exercising warrants may satisfy the subscription
obligations by surrendering sterling notes (see note 16).
Changes in share capital
Issued and fully paid: 9 per cent cumulative preference Ordinary shares of 25p
shares of £1 each each
At 1 January 2022 72,000,000 43,950,529
Issued during 2022 – 13,000
At 31 December 2022 and 72,000,000 43,963,529
2023
There have been no changes in preference share capital or ordinary shares held in
treasury during the current year.
On 22 April 2022, following receipt of a notice of exercise of 13,000 warrants,
the company issued and allotted 13,000 new ordinary shares with a nominal value of
25p each fully paid at the subscription price of 126p per share.
21. Disposal of subsidiaries
As referred to under Initiatives in the Introduction and strategic environment
section of the Strategic report in the annual report, the group disposed of its
interests in KKP, KKS, and PBJ2.
The net assets of these subsidiaries at the date of disposal were as follows:
$’000
PPE 489
Trade and other receivables 519
Cash 1,340
2,348
Trade and other payables (26)
Net assets 2,322
Translation reserve 685
Non-controlling interest (337)
Total net assets disposed 2,670
Consideration received 1,810
Loss on disposal (see note 6) (860)
22. Movement in net borrowings
2023 2022
$’000 $’000
Change in net borrowings resulting from cash flows:
Decrease in cash and cash equivalents, after exchange rate (7,719) (24,978)
effects
Net decrease in bank borrowings 9,675 8,843
(Decrease) / increase in dollar notes held in treasury (8,142) 8,570
(Increase) / decrease in borrowings from non-controlling (8,606) 697
shareholder
Transfer of borrowings to assets held for sale 10,641 –
Net decrease in related party borrowings – 51
(4,151) (6,817)
Amortisation of sterling note issue expenses and premium (188) (182)
Cost of extension of redemption date of dollar notes – 252
Gain on extension of redemption date of dollar notes – 495
Loss on disposal of dollar notes held in treasury (428) –
Amortisation of dollar note issue expenses (160) (174)
Amortisation of bank loan expenses (1,266) (1,369)
(6,193) (7,795)
Currency translation differences (5,262) 16,734
Net borrowings at beginning of year (166,729) (175,668)
Net borrowings at end of year (178,184) (166,729)
23. Related party transactions
Transactions between the company and its subsidiaries, which are related parties,
have been eliminated on consolidation and are not disclosed in this note.
Transactions between the company and its subsidiaries are dealt with in the
company’s individual financial statements.
Remuneration of key management personnel
The remuneration of the directors, who are the key management personnel of the
group, is set out below in aggregate for each of the categories specified in IAS
24: Related party disclosures. Further information about the remuneration of, and
fees paid in respect of services provided by, individual directors is provided in
the audited part of the Directors’ remuneration report in the annual report.
2023 2022
$’000 $’000
Short term benefits 1,222 1,094
24. Reconciliation to published circular
Within the Class 1 circular published on 25 January 2024 there was a table
detailing the net indebtedness of the group at 31 December 2023. As per LR 9.2.18
a comparison between the figures published in the circular and those contained
within this annual report is as follows:
Actual Circular
$’000 $’000
Dollar notes 26,572 26,572
Sterling notes 40,549 40,501
Loans from DSN group 13,484 24,125
Indonesian term bank loans 102,757 102,626
Drawings under short term (working capital) banking facilities 2,919 2,919
Short term revolving borrowings 6,098 –
192,379 196,743
Cash and cash equivalents (14,195) (8,123)
End of year 178,184 188,620
In net debt the loans from the DSN group are $13.5 million compared to $24.1
million in the circular. The difference is due to $10.6 million of loans that
have been reclassified as held for sale (see note 19).
At 31 December 2023 there were $6.1 million short term revolving borrowings. Under
the Mandiri facilities, the group is required to leave agreed amounts of cash on
deposit but is allowed additional borrowings equal to the amount of the blocked
cash (see note 15). Within the circular this amount was treated as a reduction in
cash but in these financial statements as an addition to bank borrowings.
25. Rates of exchange
2023 2023 2022 2022
Closing Average Closing Average
Indonesian rupiah to US dollar 15,416 15,219 15,731 14,917
US dollar to pounds sterling 1.2747 1.2471 1.2056 1.2301
26. Events after the reporting period
As stated in note 19, in 2023 the group entered into a share subscription
agreement with DSN. The agreement with DSN, the terms of which were set out in
detail in a circular to shareholders in January 2024, were approved at a general
meeting of shareholders held in February 2024. Closing of the further DSN share
subscription, including the financial settlements due on closing, was completed in
March 2024. The intra-group sale and purchase of PU was also completed in March
2024 affording the group the benefit of the whole of any profit that can be
realised from the development of PU as a new oil palm plantation.
References to group operating companies in Indonesia are as listed under the map
on page 5 of the annual report.
The terms FFB, CPO and CPKO mean, respectively, fresh fruit bunches, crude palm
oil and crude palm kernel oil.
References to dollars and $ are to the lawful currency of the United States of
America.
References to rupiah and Rp are to the lawful currency of Indonesia.
References to sterling, pounds sterling and £ are to the lawful currency of the
United Kingdom.
Other terms are listed in the glossary of the annual report.
Press enquiries to:
R.E.A. Holdings plc
Tel: 020 7436 7877
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