REG-R.E.A. Holdings plc R.E.A. Holdings plc: Half yearly results
08/09/2021 07:05
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R.E.A. Holdings plc (RE.)
R.E.A. Holdings plc: Half yearly results
08-Sep-2021 / 07:00 GMT/BST
Dissemination of a Regulatory Announcement that contains inside information
according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
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R.E.A. HOLDINGS PLC (the "company")
HALF YEARLY REPORT 2021
HIGHLIGHTS
Overview
• Performance turned around and group returned to profit
• Stronger CPO and CPKO prices holding firm
• Direct impacts of Covid remain limited
Financial
• Revenue up 41 per cent to $87.7 million (2020: $62.4 million), benefitting
from higher average selling prices, including premia for certified oil, for
CPO and CPKO of, respectively, $696 (2020: $551) and $1,029 (2020: $625)
• Cost of sales, excluding FFB purchases, increased 7 per cent to $46.5 million
(2020: $43.5 million); cost of FFB purchases increased in line with higher
CPO prices and volume
• EBITDA increased 147 per cent to $27.7 million (2020: $11.2 million)
• New Indonesian banking arrangements for the group's principal operating
subsidiary successfully concluded, with extended repayment period and reduced
interest rate significantly improving group cash flow
• Net indebtedness decreased by $14.0 million to $175.4 million (31 December
2020: $189.4 million)
• Further initiatives to improve financial resilience progressing
• Payment of preference dividends resumed
Agricultural operations
• FFB production increased to 361,167 tonnes (2020: 342,653 tonnes)
• Third party FFB purchases increased to 114,924 tonnes (2020: 98,297 tonnes)
• CPO extraction rates averaged 22.3 per cent (2020: 22.9 per cent)
Stone and coal interests
• MoU signed by stone concession holding company ATP to supply andesite to a
neighbouring coal company and negotiations with quarrying contractor
progressing
• Coal contractor preparing to resume mining at IPA's concession and deliveries
from neighbouring coal company to IPA's port facilities recently commenced
• Group intends to recover coal loans and to withdraw from coal interests as
soon as practicable
Sustainability
• Recertification audits successfully completed and licences renewed pending
conclusion of outstanding onsite audit work when travel restrictions permit
• Pilot project underway with an international body to establish financing
mechanism in support of local smallholders with objective of improved
traceability of the FFB supply chain
• Gold certificate awarded by the Ministry of Manpower for the group's Covid
prevention and control programme
Outlook
• More favourable trading environment and new banking arrangements in place
afford opportunity to strengthen the group's finances
• With CPO and CPKO prices expected to remain at remunerative levels, the group
looks forward to a period of prosperity
SUMMARY OF RESULTS
For the six months ended 30 June 2021
6 months to 6 months to
30 June 30 June
2021 2020
Results $'000 $'000
Revenue 87,667 62,356
Earnings before interest, tax, depreciation and 27,670 11,242
amortisation*
Profit / (loss) before tax 7,648 (7,231)
Loss attributable to ordinary shareholders (2,366) (7,881)
Cash generated by operations** 29,187 29,809
Return per ordinary share
Loss (US cents) (5.4) (17.9)
* See note 5
** See note 17
INTERIM MANAGEMENT REPORT
Results
The result for the first half of 2021 was a profit before tax of $7.6 million.
This compared with the loss of $7.2 million reported for the first half of 2020
and confirmed a turnaround in the performance of the group.
The results benefitted from higher average selling prices as shown by the
following table:
6 months 6 months Year to
to 30 June to 30 June 31 December
2021 2020 2020
Average selling prices per tonne*: $ $ $
CPO 696 551 579
CPKO 1,029 625 615
* Including premia for certified oil
With sales volumes also above 2020 levels, revenue of $87.7 million showed a 41
per cent increase compared with the same period in 2020.
Earnings before interest, depreciation, amortisation and tax amounted to $27.7
million (2020: $11.2 million).
Specific components of the results
Cost of sales for the six months to 30 June 2021, with comparative figures for
2020, was made up as follows:
6 months 6 months Year to
to 30 June to 30 June 31 December
2021 2020 2020
$'m $'m $'m
Purchase of external FFB* 15.7 10.4 23.1
Estate operating costs 31.2 28.4 59.4
Depreciation and amortisation 14.1 14.1 28.0
Stock movement at historic cost 1.2 1.0 (0.3)
62.2 53.9 110.2
* Purchase of external FFB in 2021 includes purchases of FFB from plantings that
are being reallocated from group to plasma
The overall increase of $8.3 million in cost of sales against the corresponding
period in 2020 was principally the result of the higher volumes of FFB harvested
and processed during the period and an increase in the cost of external FFB
purchases. The latter arose from the adjustment of buying prices in line with the
increased selling prices of CPO and CPKO and, to a limited extent, the
reclassification as external FFB of the FFB harvested from areas that were
previously treated as group areas and that have been reclassified as plasma from
the start of 2021.
Administrative expenses amounted to $8.4 million against $6.2 million in 2020,
the increase reflecting the timing of certain employee expenses which in 2020
were accrued in the second half of the year rather than being accrued evenly over
the course of the year as in 2021. For the full year 2021, administrative
expenses are expected to be in line with 2020.
Finance costs for the half year amounted, before capitalisation, to $6.2 million
against $4.6 million in 2020. The increase was wholly attributable to the reduced
contribution from foreign exchange profits which amounted to $3.2 million against
$5.7 million.
The tax charge for the period was $4.6 million against $0.8 million in 2020. $1.0
million of the 2021 charge relates to tax paid by one of the Indonesian
subsidiaries in respect of a prior year and $2.5 million represents a release of
a deferred tax asset as losses of previous years are utilised to offset current
year profits.
Dividends
As anticipated in the company's 2020 annual report, the fixed semi-annual
dividend on the company's preference shares that fell due on 30 June 2021 was
duly paid.
The cumulative arrears of preference dividend currently amount to 18p per share
and the directors intend that 1p per share of this should be paid on 31 December
2021 together with the semi-annual preference dividend arising on that date. The
directors recognise the importance of eliminating the arrears of the preference
dividend and will aim progressively to reduce such arrears as rapidly as the
performance of the group permits.
While the dividends on the preference shares are more than six months in arrears,
the company is not permitted to pay dividends on its ordinary shares.
Agricultural operations
Key agricultural statistics were as follows:
6 months to 6 months to
30 June 30 June
2021 2020
FFB harvested (tonnes)*
Group 361,167 342,653
Third party 114,924 98,297
Total 476,091 440,950
Production (tonnes)
Total FFB processed 464,045 430,293
FFB sold 8,121 11,773
CPO 103,299 98,651
Palm kernels 21,905 21,443
CPKO 8,310 6,912
Extraction rates (percentage)
CPO 22.3 22.9
Palm kernel 4.7 5.0
CPKO 38.6 39.8
Rainfall (mm)
Average across the estates 1,785 1,543
* Group harvested FFB for both periods excludes crops from plantings that are
being reallocated from group to plasma
Despite high average rainfall and the Ramadan holiday period falling in the first
half of 2021, production in the first half was at good levels, with the typical
year end peak crop period of 2020 extending into the early months of the year.
Group FFB increased by 5 per cent compared with the previously reported crop for
2020, notwithstanding the exclusion of crops from former group areas that are
being reallocated to plasma and which, accordingly, are now treated as third
party FFB.
Whilst the group has been fortunate in having suffered only limited disruption as
a result of Covid, Covid related travel restrictions within Indonesia have made
the recruitment of new harvesters more difficult. As a result, the group's
harvesters have been under pressure to complete all necessary harvesting and
there has been some slippage in the collection of loose fruit, as a consequence
of which extraction rates have been lower than the group would like. Close
attention to harvesting standards, backed by a range of measures including
realignment of incentives to encourage loose fruit recovery, has produced some
improvement but extraction rates remain a key area of focus.
The continuing repair and modification works in the mills generally proceeded
satisfactorily during the period under review. Perdana oil mill ("POM") suffered
a setback at the end of June when a fire occurred in one of its two boilers.
Fortunately, the imminent completion of the Satria oil mill ("SOM") expansion
project should mean that the group retains sufficient capacity to process all
expected crops while the damaged Perdana boiler remains out of commission. It is
expected that the costs of reinstating the damaged boiler will be largely covered
by insurance.
In line with its previously stated intentions, the group has recently commenced
work on replanting one of the oldest mature areas of some 80 hectares dating from
1994. Bunding and resupplying certain areas prone to flooding is continuing.
Agricultural selling prices
CPO prices remained firm throughout the six months to 30 June 2021, supported by
the favourable demand-supply balance for vegetable oils generally and, in
particular, for CPO where stocks have been depleted by lower production in
Malaysia. Opening the year at $1,050 per tonne, CIF Rotterdam, prices traded in
the range $950 to $1,295 per tonne in the six months to 30 June 2021 and
currently stand at $1,200 per tonne. The Indonesian government has maintained
export duty and levy at relatively high levels, albeit that a recent revision of
the scale of export levy has resulted in some reduction in the overall level of
export charges.
The average selling price for the group's CPO for the six months to the end of
June 2021, including premia for certified oil, net of export duty and levy, was
$696 per tonne (2020: $551 per tonne). The average selling price for the group's
CPKO, on the same basis, was $1,029 per tonne (2020: $625 per tonne).
If Covid issues abate, prices could start to ease towards the end of the year and
into 2022, although reduced fertiliser applications by smaller producers in
response to previously weak CPO prices, labour shortages in Malaysia, as well as
limited new plantings are likely to support solid price levels.
Stone and coal interests
As previously reported, the stone concession holding company, PT Aragon Tambang
Pratama ("ATP"), has signed a memorandum of understanding with a neighbouring
coal company for the supply of andesite for a new road planned to be built by
that company running in part through the group's estates. Following on from that,
ATP has recently agreed an easement to permit evacuation of stone from the
concession. With this easement in place, negotiations are being progressed with a
potential contractor for quarrying the stone on a basis whereby the contractor
would conduct the quarrying operations and fund capital expenditure required to
commence operations in exchange for a participation in profits from the
concession.
Good progress has been made by PT Indo Pancadasa Agrotama ("IPA") in preparing
for resumed mining of its coal concession. Land compensation with affected local
individuals has been settled and IPA has concluded an agreement with a coal
company that holds a concession adjacent to IPA to evacuate IPA coal utilising a
road running through the adjacent concession. This will avoid the costs and
delays that would be entailed were IPA to build its own evacuation road. A work
plan has been agreed with IPA's appointed contractor (with whom a funding and
profit sharing agreement is already in place) and overburden removal is expected
to start shortly with coal recovery beginning in the final quarter of 2021.
IPA is also seeking to generate revenue from its port on the Mahakam river by
encouraging neighbouring coal companies to utilise the port facilities in
exchange for a fee per tonne of coal shipped. One such arrangement has already
been agreed and deliveries have now commenced. Two other such arrangements are
under discussion.
Sustainability
Certification and recertification audits for the ISCC, RSPO, and ISPO schemes in
2021 have been affected to some degree by ongoing travel restrictions due to the
Covid pandemic. Completed audits were conducted remotely while some onsite field
audits are still to be carried out later in 2021 (such as for the RSPO Principles
and Criteria ("P&C") certification). All licences have been renewed or extended,
pending onsite audits where applicable.
Certificates for each of the group's three mills and the bulking station were
renewed and remain valid until March 2022.
The RSPO recertification audit for POM and its supply base as well as the annual
surveillance audit for Cakra oil mill ("COM") and its supply base (in accordance
with P&C certification) were conducted partly remotely, resulting in the
PalmTrace licences for POM and COM being temporarily extended until later in 2021
pending completion of the onsite audit work. The recertification audit (in
accordance with SCCS certification) for the kernel crushing plant ("KCP") at COM
was completed remotely and the certificate has been renewed until July 2026
subject to annual surveillance audits commencing in May 2022. The PalmTrace
licence for the Cakra KCP has been renewed until July 2022.
The group is continuing to work with RSPO to resolve compensation liabilities and
remedial action in relation to minor historic errors in the application of RSPO
criteria affecting two small areas of SYB, 959 hectares at CDM, land clearing at
two plasma cooperatives and the establishment of riparian reserves along rivers
in Berkat and Damai. Once the SYB position is resolved, SOM can be audited to
secure recertification and Tepian Estate will be able to be reinstated within the
POM certificated supply base. Compensation liabilities agreed will be payable
over several years and should not exceed $50,000 per annum.
The annual renewal under ISO 14001, the international standard for effective
environmental systems, for the REA Kaltim and SYB estates and mills and the
bulking station was successfully completed in the first quarter of 2021.
The group is in discussion with an international funding body to establish a
financing mechanism that would enable smallholder farmers to access funds for
intensifying their oil palm yields and developing alternative revenue streams.
The objective is to reduce pressure on the remaining forest areas outside the
group's concession areas as well as to improve the traceability of the FFB supply
chain. A pilot project is being set up to demonstrate the effectiveness of this
approach and 150 local smallholders in two local villages have currently received
training in best management practices for oil palm to help improve yields and FFB
quality. It is intended that this training will be rolled out to other local
villages.
Plans to develop a network of trained community groups to promote fire prevention
and upgrade firefighting capabilities in eight local villages have been hindered
by the ongoing Covid restrictions, but it remains the intention to expand this
project to include additional villages in 2022.
During 2021 further links have been established with waste and recycling schemes
in local communities to improve the efficiency and increase the capacity of
recycling centres. Under a programme sponsored by the regional Environment and
Forestry Service, waste and recycling centres have already been established in
the housing areas for each of the group's estates and mills whereby households
receive financial compensation based on the volume of waste deposited and the
group benefits from the reduction in waste collected for landfill.
The conservation department has continued to supply seedlings of endemic forest
fruit and timber tree species to local communities and for restoration projects
with 462 seedlings having been supplied since January 2021. The conservation
department maintains a nursery with over 4,000 seedlings of local forest fruit
and timber trees for restoration at various sites, including the regeneration of
conservation reserves, and for the benefit of local communities and the group's
employees.
The biodiversity team's programme of mapping the locations of all species within
the group's conservation reserves has identified 192 species (mostly birds) so
far in 2021 including 43 species of Critically Endangered, Endangered and
Vulnerable species in a variety of habitats across the group's concession areas.
Although workshops and programmes have been disrupted by the Covid pandemic, the
conservation department has continued to promote conservation and environmental
awareness amongst local communities as well as working with estate employees
throughout the period. The conservation department has also regularly
participated in joint patrols with government forestry department enforcement
officers to monitor and record instances of illegal forest clearing and logging
activities in areas surrounding the group's concession areas.
Financing
At 30 June 2021, the group continued to be financed by a combination of debt and
equity (comprising ordinary and preference share capital). Total equity including
non-controlling interests amounted to $244.9 million (31 December 2020: $245.8
million).
Group indebtedness at 30 June 2021 totalled $204.2 million against $201.2 million
at 31 December 2020. Against this indebtedness, the group held cash and cash
equivalents of $28.8 million (31 December 2020: $11.8 million). As a result, the
group net indebtedness at 30 June 2021 of $175.4 million showed a decrease of
some $14.0 million from the group net indebtedness at 31 December 2020 of $189.4
million.
The composition of the net indebtedness at 30 June 2021 was as follows:
$'m
7.5 per cent dollar notes 2022 ("dollar notes") ($27.0 million nominal) 26.9
8.75 per cent guaranteed sterling notes 2025 ("sterling notes") (£30.9 43.4
million nominal)
Loan from related party 4.1
Loans from non-controlling shareholder 17.1
Indonesian term bank loans 110.6
Drawings under working capital lines 2.1
204.2
Cash and cash equivalents (28.8)
Net indebtedness 175.4
On 30 June 2021, REA Kaltim repaid its outstanding bank loan and working capital
facility totalling $64.7 million and drew down two new loans and a new working
capital facility totalling $82.8 million (all denominated in Indonesian rupiah).
The original loan had been repayable over the next 5 years with an interest rate
of 10.5 per cent; the new loan is repayable over 8 years and has an interest rate
of 9.5 per cent. The same reduction in interest rates applies to the working
capital facility though this has been reduced from $4.9 million to $2.1 million.
It is now expected that one outstanding technical requirement relating to the new
REA Kaltim loans, namely the registration of a charge over one title deed (which
was delayed by queries from the relevant local land office), will be completed
shortly.
Earnings before interest, tax, depreciation and amortisation for the six months
to 30 June 2021 amounted to $27.7 million which covered interest payments of $9.3
million, the preference dividend of $4.5 million, capital expenditure of $3.7
million and taxes of $4.0 million. Other material items affecting cash flow were
movements in bank indebtedness reflecting routine periodic repayments and the
changes to REA Kaltim's bank borrowings described above, the recovery of $5.8
million costs in respect of the coal arbitration and the rolling forward of
pre-sale advances from customers keen to secure future supplies of CPO and CPKO.
With the improvement in the group's finances, credit from suppliers has been
reduced to normal levels.
The group is continuing to work towards improving the resilience of the group's
finances. Completion of the reorganisation of REA Kaltim's bank borrowings
represented a significant step forward and the group is optimistic that over the
coming months it will complete a similar reorganisation of SYB's bank borrowings
in which the existing SYB bank loan is replaced with new bank loans of longer
tenor and providing additional overall funding. The group is also close to
completing agreements with its key customers on the continuance of pre-sale
advances from the customers concerned in exchange for extended forward
commitments of agreed volumes of CPO and CPKO but on the basis that pricing is
fixed at the time of delivery by reference to prices then prevailing.
Concurrently with discussions with Mandiri, the group continues to explore
alternative financing options to ensure its ability to redeem the $27.0 million
nominal of dollar notes falling due for repayment in 2022 and to enable it
progressively to reduce the arrears of preference dividend.
Outlook
The group's return to profit in the first six months of 2021 is encouraging and
if, as is normal, crops are weighted to the second half of the year and current
CPO and CPKO prices are maintained for the rest of the year, the group can expect
that revenues for the second half of 2021 will exceed those of the first half.
Current coal prices offer the prospect of a significant near term recovery of the
group's coal related loans to IPA and, if quarrying of the stone concession owned
by ATP can be successfully initiated, this will further augment the group's cash
flow.
The above favourable combination of circumstances provides an opportunity to
place the group's finances on a firmer footing and, if, as the group expects, CPO
and CPKO prices remain at remunerative levels, the group can look forward to a
period of prosperity.
Approved by the board on 7 September 2021 and signed on its behalf by
DAVID J BLACKETT
Chairman
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks and uncertainties, as well as mitigating and other relevant
considerations, affecting the business activities of the group as at the date of
publication of the 2020 annual report (the "annual report") were set out on pages
37 to 43 of that report, under the heading "Principal risks and uncertainties". A
copy of the report may be downloaded from the company's website at www.rea.co.uk.
Such principal risks and uncertainties in summary comprise:
Agricultural operations
Climatic factors Material variations from the norm
Cultivation Impact of pests and diseases
Logistical disruptions to the production cycle,
Other operational factors including transportation and input shortages or
cost increases
Produce prices Consequences of lower realisations from sales of
CPO and CPKO
Expansion Delays in securing land or funding for extension
planting
Climate change Reduced production due to change in levels and
regularity of rainfall and sunlight hours
Environmental, social and Failure to meet expected standards
governance practices
Community relations Disruptions arising from issues with local
stakeholders
Stone and coal interests
Operational factors Failure by external contractors to achieve agreed
targets
Prices Consequences of lower prices and variations in
quality of deposits
Environmental, social and Failure to meet expected standards
governance practices
General
Currency Adverse exchange movements between sterling or
rupiah against the dollar
Funding Meeting liabilities as they fall due in periods
of weaker produce prices
Counterparty Default by suppliers, customers or financial
institutions
Failure to meet or comply with expected standards
Regulatory and country exposure or applicable regulations; adverse political,
economic, or legislative changes in Indonesia
Disruption of operations and consequent loss of
Miscellaneous relationships revenues as a result of disputes with local
stakeholders
The risks relating to "Agricultural operations - Expansion" and "Stone and coal
interests" are prospective rather than immediate material risks because the group
is currently not expanding its agricultural operations and the stone and coal
concessions in which the group holds interests are not currently being mined.
However, such risks will apply when, as is contemplated, expansion and mining are
resumed or commenced. The effect of an adverse incident relating to the stone and
coal interests could impact the ability of the stone and coal companies to repay
their loans. As noted in the group's 2020 annual report, it is ultimately the
group's intention to withdraw from its coal interests.
In addition to the foregoing risks, Covid remains a risk to the group, assessment
of which is measured against the impacts experienced to date and the likelihood
of further impacts in the future. Overall, the Covid pandemic has had limited
direct effect on the group's day to day operations, save for periodic shortfalls
in the availability of harvesters, contractors and spare parts due to travel
restrictions. Adapted working practices and hygiene measures in accordance with
regulations and guidelines remain in place throughout the group and on-site
testing is conducted regularly. The group has been awarded a gold certificate by
the Ministry of Manpower for its Covid prevention and control programme.
In the first 8 months of 2021 there were some 500 confirmed cases of Covid
amongst employees and their family members, the vast majority being asymptomatic
or experiencing mild symptoms and recovered or recovering. Regrettably, one
employee has died as a result of Covid and two employees have been hospitalised.
A further employee is suffering from long Covid.
The group has secured private vaccinations for a proportion of employees who are
not eligible for the government vaccination programme and has submitted
application for further vaccines with a view to offering vaccinations to all
employees who are not eligible.
CPO prices have recovered strongly from the weak levels seen in 2020 in response
to the onset of the Covid pandemic and consequential disruption to the global
economy reflecting the favourable demand-supply balance for vegetable oils as
economies recover. Nevertheless, operational disruption and global economic
factors associated with Covid will continue to represent a risk that the
directors seek to address and mitigate by, wherever possible, minimising costs
without compromising the operations or the group's financial position.
Climate change represents an emerging 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
greenhouse gas ("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. In addition
to reporting on energy consumption and efficiency in accordance with the UK
Government's recently introduced SECR framework, the group is preparing to
incorporate disclosures in accordance with the TCFD recommendations in its 2021
annual report.
The directors keep under review potential impacts on its operations from the
termination of UK membership of the European Union ("Brexit"). This could result
in a movement in sterling against the dollar and rupiah with consequential impact
on the group dollar translation of its sterling costs and sterling liabilities,
although the directors do not believe that such impact (which could be positive
or negative) would be material in the overall context of the group. Beyond this,
and considering that the group's entire operations are in Indonesia, as
previously stated the directors do not see Brexit as posing a significant risk to
the group.
At the date of the annual report, in addition to the Covid pandemic, risks
assessed by the directors as being of particular significance were those as
detailed under Agricultural operations (Produce prices, Climatic factors and
Other operational factors) and General (Funding).
The directors' assessment, as respects produce prices and funding, reflects the
key importance of those risks in relation to the matters considered in the
"Viability statement" in the "Directors' report" on pages 45 to 47 of the annual
report and under "Financing" above and, as respects climatic and other factors,
the extent of the negative impact that could result from adverse incidence of
such risks.
The directors consider that the principal risks and uncertainties for the second
six months of 2021 continue to be those set out in the annual report and as
summarised above.
GOING CONCERN
In the statements regarding viability and going concern on pages 45 to 47 of the
2020 annual report, the directors set out considerations with respect to the
group's capital structure and their assessment of liquidity and financing
adequacy.
Since publication of the 2020 annual report, the group has continued to benefit
from firm CPO prices supported by the favourable demand-supply balance for
vegetable oils. Meanwhile, the impact of Covid on the operations has been
restricted to some periodic shortages of harvesters and contractors due to travel
hesitancy as well as delays in deliveries of spare parts.
Discussions with the group's Indonesian bankers, PT Bank Mandiri (Persero) Tbk
("Mandiri"), were successfully concluded in June 2021 with completion of an
agreement that the Indonesian rupiah denominated loan and working capital
facility previously provided by Mandiri to REA Kaltim be replaced with two new
loans and a new working capital facility, denominated in Indonesian rupiah. The
new facilities significantly improve the group's cash flow being repayable over 8
rather than 5 years at an interest rate of 9.5 per cent reduced from 10.5 per
cent.
The group's net indebtedness reduced by $14.0 million over the six months to 30
June 2021. During the same period, the group reduced to normal levels the
extended credit from suppliers that had built up during 2019 and 2020.
Proposals for the replacement of the existing Mandiri term loan to SYB continue
to advance through the bank's approval process. The group is also close to
completing agreements with its key customers on the continuance of pre-sale
advances from the customers. At the same time, the group continues to explore
alternative financing options should these be needed.
Provided that CPO prices remain at current firm levels, the group's operating and
financial performance is expected to improve further. Accordingly, and based on
the foregoing, the directors have a reasonable expectation that the company will
be able to continue its operations and meet its liabilities as they fall due over
the period of twelve months from the date of approval of the accompanying
condensed consolidated financial statements and they continue to adopt the going
concern basis of accounting in preparing these statements.
DIRECTORS' RESPONSIBILITIES
The directors are responsible for the preparation of this half yearly report.
The directors confirm that to the best of their knowledge:
• the accompanying set of condensed consolidated financial statements has been
prepared in accordance with UK adopted IAS 34 "Interim Financial Reporting";
• the "Interim management report" and "Principal risks and uncertainties"
sections of this half yearly report include a fair review of the information
required by rule 4.2.7R of the Disclosure Guidance and Transparency Rules of
the Financial Conduct Authority, being an indication of important events that
have occurred during the first six months of the financial year and their
impact on the set of condensed consolidated financial statements, and a
description of the principal risks and uncertainties for the remaining six
months of the year; and
• note 19 in the notes to the condensed consolidated financial statements
includes a fair review of the information required by rule 4.2.8R of the
Disclosure Guidance and Transparency Rules of the Financial Conduct
Authority, being related party transactions that have taken place in the
first six months of the current financial year and that have materially
affected the financial position or performance of the group during that
period, and any changes in the related party transactions described in the
2020 annual report that could do so.
The current directors of the company are as listed on page 44 of the company's
2020 annual report.
Approved by the board on 7 September 2021
DAVID J BLACKETT
Chairman
CONSOLIDATED INCOME STATEMENT
For the six months ended 30 June 2021
6 months to 6 months to Year to
30 June 30 June 31 December
2021 2020 2020
Note $'000 $'000 $'000
Revenue 2 87,667 62,356 139,088
Net loss arising from changes in fair value 4 (3,279) (4,701) (777)
of agricultural produce inventory
Cost of sales:
Depreciation and amortisation (14,092) (14,097) (27,969)
Other costs (48,092) (39,825) (82,215)
Gross profit 22,204 3,733 28,127
Distribution costs (249) (421) (2,835)
Administrative expenses 5 (8,377) (6,167) (16,486)
Operating profit / (loss) 13,578 (2,855) 8,806
Investment revenues 2 270 143 525
Impairments and similar charges - - (9,483)
Finance costs 6 (6,200) (4,519) (23,098)
Profit / (loss) before tax 7,648 (7,231) (23,250)
Tax 7 (4,585) (808) 7,336
Profit / (loss) for the period 3,063 (8,039) (15,914)
Attributable to:
Equity shareholders (2,366) (7,881) (13,183)
Preference shareholders 8 4,502 - -
Non-controlling interests 927 (158) (2,731)
3,063 (8,039) (15,914)
Loss per 25p ordinary share (US cents) 9 (5.4) (17.9) (30.0)
All operations in all periods are continuing.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2021
6 months to 6 months to Year to
30 June 30 June 31 December
2021 2020 2020
Note $'000 $'000 $'000
Profit / (loss) for the period 3,063 (8,039) (15,914)
Other comprehensive income
Items that may be reclassified to profit
or loss:
Exchange differences on translation of 1,673 - (3,504)
foreign operations
Deferred tax on exchange differences (630) 1,148 1,769
1,043 1,148 (1,735)
Items that will not be reclassified to
profit or loss:
Actuarial gains / (losses) 5 268 1,835
Deferred tax on actuarial gains / (1) (67) (367)
(losses)
4 201 1,468
Total comprehensive income for the 4,110 (6,690) (16,181)
period
Attributable to:
Equity shareholders (1,319) (6,532) (13,450)
Preference shareholders 8 4,502 - -
Non-controlling interests 927 (158) (2,731)
4,110 (6,690) (16,181)
CONSOLIDATED BALANCE SHEET
As at 30 June 2021
30 June 30 June 31 December
2021 2020 2020
Note $'000 $'000 $'000
Non-current assets
Goodwill 12,578 12,578 12,578
Intangible assets 10 575 1,613 1,098
Property, plant and equipment 11 366,545 384,922 376,551
Land 12 39,942 40,348 39,879
Financial assets: stone and coal interests 14 53,109 53,930 57,548
Deferred tax assets 6,762 13,001 8,931
Non-current receivables 5,302 3,889 5,302
Total non-current assets 484,813 510,281 501,887
Current assets
Inventories 15,085 12,947 16,069
Biological assets 2,373 1,514 2,953
Trade and other receivables 35,232 50,242 41,059
Cash and cash equivalents 28,795 6,337 11,805
Total current assets 81,485 71,040 71,886
Total assets 566,298 581,321 573,773
Current liabilities
Trade and other payables (45,930) (46,510) (51,644)
Current tax liabilities (1,564) (960) -
Bank loans 16 (16,214) (21,007) (54,148)
Dollar notes (26,937) - -
Other loans and payables (7,293) (7,541) (7,321)
Total current liabilities (97,938) (76,018) (113,113)
Non-current liabilities
Trade and other payables (14,436) - (20,712)
Bank loans 16 (96,463) (94,530) (56,062)
Sterling notes (43,444) (37,130) (42,908)
Dollar notes - (26,851) (26,891)
Deferred tax liabilities (39,774) (51,580) (39,581)
Other loans and payables (29,358) (49,480) (28,690)
Total non-current liabilities (223,475) (259,571) (214,844)
Total liabilities (321,413) (335,589) (327,957)
Net assets 244,885 245,732 245,816
Equity
Share capital 133,586 133,586 133,586
Share premium account 47,358 47,358 47,358
Translation reserve (24,790) (24,519) (25,833)
Retained earnings 68,331 76,831 70,693
224,485 233,256 225,804
Non-controlling interests 20,400 12,476 20,012
Total equity 244,885 245,732 245,816
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2021
Non-
Share Share Translation Retained controlling Total
capital premium reserve earnings Subtotal interests equity
$'000 $'000 $'000 $'000 $'000 $'000 $'000
At 1 January 133,586 47,358 (26,032) 84,779 239,691 12,999 252,690
2020
Loss for the - - - (7,881) (7,881) (158) (8,039)
period
Other
comprehensive - - 1,513 (67) 1,446 (365) 1,081
income for the
period
At 30 June 2020 133,586 47,358 (24,519) 76,831 233,256 12,476 245,732
Loss for the - - - (5,302) (5,302) (2,573) (7,875)
period
Other
comprehensive - - (1,314) (1,969) (3,283) 165 (3,118)
income for the
period
Reserve
adjustment - - - 1,133 1,133 - 1,133
relating to
warrant issue
New equity from
non-controlling - - - - - 9,944 9,944
shareholder
At 31 December 133,586 47,358 (25,833) 70,693 225,804 20,012 245,816
2020
Profit for the - - - 2,136 2,136 927 3,063
period
Dividends to
preference - - - (4,502) (4,502) - (4,502)
shareholders
Other
comprehensive - - 1,043 4 1,047 (539) 508
income for the
period
At 30 June 2021 133,586 47,358 (24,790) 68,331 224,485 20,400 244,885
CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 30 June 2021
6 months to 6 months to Year to
30 June 30 June 31 December
2021 2020 2020
Note $'000 $'000 $'000
Net cash from operating activities 17 15,889 14,433 33,479
Investing activities
Interest received 270 143 525
Proceeds on disposal of property, plant - 3 1,066
and equipment
Purchases of property, plant and (3,618) (4,179) (10,768)
equipment
Expenditure on land (63) (1,750) (3,897)
Repayment from / (investment in) stone 4,439 (3,600) (7,218)
and coal interests
Net cash generated by / (used in) 1,028 (9,383) (20,292)
investing activities
Financing activities
Preference dividends paid (4,502) - -
Repayment of bank borrowings (76,828) (6,867) (18,734)
New bank borrowings drawn 82,781 - 5,250
New borrowings from related party - 1,816 4,031
Repayment of borrowings from - - (7,514)
non-controlling shareholder
New equity from non-controlling - - 9,944
interests
Costs of extending repayment date of - (425) (459)
sterling notes
Payment of warranty obligations relating - - (663)
to divested subsidiary
Repayment of lease liabilities (1,100) (1,147) (2,434)
Net cash from / (used in) financing 351 (6,623) (10,579)
activities
Cash and cash equivalents
Net increase / (decrease) in cash and 17,268 (1,573) 2,608
cash equivalents
Cash and cash equivalents at beginning 11,805 9,528 9,528
of period
Effect of exchange rate changes (278) (1,618) (331)
Cash and cash equivalents at end of 28,795 6,337 11,805
period
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of accounting
The condensed consolidated financial statements for the six months ended 30 June
2021 comprise the unaudited financial statements for the six months ended 30 June
2021 and 30 June 2020, neither of which has been reviewed by the company's
auditor, together with audited financial information for the year ended 31
December 2020.
The information shown for the year ended 31 December 2020 does not constitute
statutory accounts within the meaning of section 435 of the Companies Act 2006,
and is an abridged version of the group's published financial statements for that
year which have been filed with the Registrar of Companies. The auditor's report
on those statements was unqualified and did not contain any statements under
section 498(2) or (3) of the Companies Act 2006.
The annual financial statements of the group will be prepared in accordance with
the United Kingdom adopted International Financial Reporting Standards ("IFRS").
The condensed consolidated financial statements included in this half yearly
report have been prepared in accordance with United Kingdom adopted International
Accounting Standard 34 "Interim Financial Reporting".
Going concern
The directors are satisfied that the group has sufficient resources to continue
in operation for the foreseeable future, a period of not less than 12 months from
the date of this report. Accordingly, they continue to adopt the going concern
basis in preparing the condensed consolidated financial statements.
Adoption of new and revised standards
New standards and amendments to IFRSs issued by the International Accounting
Standards Board ("IASB") that are mandatorily effective for an accounting period
beginning on 1 January 2021 have no impact on the disclosures or on the amounts
reported in these condensed consolidated financial statements.
Accounting policies
The accounting policies and methods of computation adopted in the preparation of
the condensed consolidated financial statements for the six months ended 30 June
2021 are the same as those set out in the group's annual report for 2020.
The condensed consolidated financial statements for the six months ended 30 June
2021 were approved by the board of directors on 7 September 2021.
2. Revenue
6 months to 6 months to Year to
30 June 30 June 31 December
2021 2020 2020
$'000 $'000 $'000
Sales of goods 87,021 61,795 137,993
Revenue from services 646 561 1,095
87,667 62,356 139,088
Investment revenue 270 143 525
Investment revenue includes $1.3 million interest receivable from the group's
stone and coal interests (see note 14) net of a provision of $1.2 million (31
December 2020: interest receivable of $2.7 million, provision $2.5 million, 30
June 2020: interest receivable of $1.3 million, provision $1.2 million).
3. Segment information
The group continues to operate in two segments: the cultivation of oil palms and
stone and coal interests. In the period ended 30 June 2021 the latter did not
meet the quantitative thresholds set out in IFRS 8 "Operating segments" and,
accordingly, no analyses are provided by business segment.
4. Agricultural produce movement
The net loss arising from changes in fair value of agricultural produce inventory
represents the movement in the carrying value of such inventory after reflecting
the movement in the fair value of the fresh fruit bunch input into that inventory
(measured at fair value at point of harvest) less the amount of the movement in
such inventory at historic cost (which is included in cost of sales).
5. Administrative expenses
6 months to 6 months to Year to
30 June 30 June 31 December
2021 2020 2020
$'000 $'000 $'000
(Profit) / loss on disposal of property, - (3) 537
plant and equipment
Indonesian operations 7,232 5,203 13,865
Head office 1,826 1,957 3,701
9,058 7,157 18,103
Amount included as additions to property, (681) (990) (1,617)
plant and equipment
8,377 6,167 16,486
6 months to 6 months to Year to
30 June 30 June 31 December
2021 2020 2020
$'000 $'000 $'000
Earnings before interest, tax, depreciation
and amortisation:
Operating profit / (loss) 13,578 (2,855) 8,806
Depreciation and amortisation 14,092 14,097 27,969
27,670 11,242 36,775
6. Finance costs
6 months to 6 months to Year to
30 June 30 June 31 December
2021 2020 2020
$'000 $'000 $'000
Interest on bank loans and overdrafts 5,563 6,488 12,591
Interest on dollar notes 1,014 1,014 2,028
Interest on sterling notes 1,865 1,656 3,498
Interest on other loans 563 644 1,095
Interest on lease liabilities 134 171 301
Change in value of sterling notes arising 544 (2,696) 1,869
from exchange fluctuations
Change in value of loans arising from (3,752) (2,967) (1,538)
exchange fluctuations
Finance charge related to warrant issue - - 1,133
Other finance charges 288 310 2,380
6,219 4,620 23,357
Amount included as additions to property, (19) (101) (259)
plant and equipment
6,200 4,519 23,098
Other finance charges include $50,000 (31 December 2020: $1.1 million, 30 June
2020: $nil) being the amount for the period of the present value of the premium
payable on redemption of the sterling notes discounted at the coupon rate.
7. Tax
6 months to 6 months to Year to
30 June 30 June 31 December
2021 2020 2020
$'000 $'000 $'000
Current tax:
UK corporation tax - - -
Overseas withholding tax 341 370 968
Foreign tax 1,146 75 343
Total current tax 1,487 445 1,311
Deferred tax:
Current year 3,098 363 (9,830)
Prior year - - 1,183
Total deferred tax 3,098 363 (8,647)
Total tax 4,585 808 (7,336)
Taxation is provided at the rates prevailing for the relevant jurisdiction. For
Indonesia, current and deferred taxation provisions are based on a tax rate of 20
per cent (31 December 2020: 20 per cent, 30 June 2020: 25 per cent) and for the
UK, the taxation provisions reflect a corporation tax rate of 19 per cent (2020:
19 per cent) and a deferred tax rate of 19 per cent (2020: 19 per cent). The
corporation tax rate in the UK will increase from 19 per cent to 25 per cent from
1 April 2023. A deferred tax asset relating to UK tax losses is carried at the
rate in force during the period in which the tax losses are expected to be
utilised.
8. Dividends
6 months to 6 months to Year to
30 June 30 June 31 December
2021 2020 2020
$'000 $'000 $'000
Amounts recognised as distributions to equity
holders:
Preference dividends of 9p per share per 4,502 - -
annum
As anticipated in the company's 2020 annual report, the fixed semi-annual
dividend on the company's preference shares that fell due on 30 June 2021 was
duly paid.
The cumulative arrears of preference dividend currently amount to 18p per share
and the directors intend that 1p per share of this should be paid on 31 December
2021 together with the semi-annual preference dividend arising on that date. The
directors recognise the importance of eliminating the arrears of the preference
dividend and will aim progressively to reduce such arrears as rapidly as the
performance of the group permits.
While the dividends on the preference shares are more than six months in arrears,
the company is not permitted to pay dividends on its ordinary shares.
9. Loss per share
6 months to 6 months to Year to
30 June 30 June 31 December
2021 2020 2020
$'000 $'000 $'000
Loss for the purpose of calculating loss per (2,366) (7,881) (13,183)
share*
'000 '000 '000
Weighted average number of ordinary shares 43,951 43,951 43,951
for the purpose of loss per share
* Being net loss attributable to ordinary shareholders
10. Intangible assets
30 June 30 June 31 December
2021 2020 2020
$'000 $'000 $'000
Beginning of period 5,438 5,430 5,430
Additions - - 8
End of period 5,438 5,430 5,438
Amortisation:
Beginning of period 4,340 3,295 3,295
Additions 523 522 1,045
End of period 4,863 3,817 4,340
Carrying amount:
End of period 575 1,613 1,098
Beginning of period 1,098 2,135 2,135
Development expenditure on computer software that is not integral to an item of
property, plant and equipment is recognised separately as an intangible asset.
11. Property, plant and equipment
Buildings Plant,
and equipment Construction
Plantings structures and vehicles in progress Total
$'000 $'000 $'000 $'000 $'000
Cost:
At 1 January 2020 175,329 245,789 122,207 7,659 550,984
Additions 505 1,349 371 1,954 4,179
Reclassifications and (1) 240 374 (906) (293)
adjustments
Disposals - property, - - (506) - (506)
plant and equipment
At 30 June 2020 175,833 247,378 122,446 8,707 554,364
Additions 745 702 2,386 2,748 6,581
Reclassifications and 1 1,210 1,407 (2,342) 276
adjustments
Disposals - property, (1,164) (696) (2,091) - (3,951)
plant and equipment
At 31 December 2020 175,415 248,594 124,148 9,113 557,270
Additions 427 718 151 2,322 3,618
Reclassifications and (19) 1,585 414 (1,941) 39
adjustments
Disposals - property, (55) - (311) - (366)
plant and equipment
At 30 June 2021 175,768 250,897 124,402 9,494 560,561
Accumulated depreciation:
At 1 January 2020 46,208 45,015 65,405 - 156,628
Charge for period 5,083 3,636 4,856 - 13,575
Reclassifications and (1) (216) (38) - (255)
adjustments
Disposals - property, - - (506) - (506)
plant and equipment
At 30 June 2020 51,290 48,435 69,717 - 169,442
Charge for period 4,929 3,661 4,759 - 13,349
Reclassifications and 1 275 - - 276
adjustments
Disposals - property, (206) (51) (2,091) - (2,348)
plant and equipment
At 31 December 2020 56,014 52,320 72,385 - 180,719
Charge for period 5,085 3,817 4,667 - 13,569
Reclassifications and - 39 - - 39
adjustments
Disposals - property, - - (311) - (311)
plant and equipment
At 30 June 2021 61,099 56,176 76,741 - 194,016
Carrying amount:
At 30 June 2021 114,669 194,721 47,661 9,494 366,545
At 31 December 2020 119,401 196,274 51,763 9,113 376,551
At 30 June 2020 124,543 198,943 52,729 8,707 384,922
12. Land
30 June 30 June 31 December
2021 2020 2020
$'000 $'000 $'000
Cost:
Beginning of period 44,201 42,920 42,920
Additions 63 1,750 3,897
Reclassifications and adjustments - - 1
Impairment - - (2,617)
End of period 44,264 44,670 44,201
Accumulated amortisation:
Beginning and end of period 4,322 4,322 4,322
Carrying amount:
End of period 39,942 40,348 39,879
Beginning of period 39,879 38,598 38,598
13. Contractual commitments
At the balance sheet date the group had entered into contractual commitments for
the acquisition of property, plant and equipment amounting to $4.0 million (31
December 2020: $2.6 million, 30 June 2020: $1.7 million).
14. Financial assets: stone and coal interests
30 June 30 June 31 December
2021 2020 2020
$'000 $'000 $'000
Stone interest 24,266 23,444 24,266
Coal interests 31,843 33,486 36,282
Provision against loan to coal interests (3,000) (3,000) (3,000)
53,109 53,930 57,548
Interest bearing loans have been made to three Indonesian companies that own
rights in respect of certain stone and coal concessions in East Kalimantan
Indonesia. Pursuant to the arrangements between the group and its local partners,
the company's subsidiary, KCC Resources Limited ("KCC"), has the right, subject
to satisfaction of local regulatory requirements, to acquire 95 per cent of the
concession holding group of companies at original cost with the balance of 5 per
cent remaining owned by the local partners. Under current regulations such rights
cannot be exercised. In the meantime, 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 company in respect of the amounts owed to the group by the two
coal concession companies.
As previously reported, a merits hearing in the arbitration in respect of certain
claims made against PT Indo Pancadasa Agrotama ("IPA") by two claimants
(connected with each other), with whom IPA previously had conditional agreements
relating to the development and operations of the IPA coal concession, took place
by way of a virtual hearing at the end of June 2020. The company was joined as a
party to the arbitration on a prima facie basis and without prejudice to any
final determination of jurisdiction. Further separate, but related, potential
claims threatened by the two claimants in respect of, inter alia, alleged
tortious conduct by the group's subsidiary, R.E.A. Services Limited ("REAS"), and
its managing director were stayed pending a conclusion of the arbitration
hearing. None of the claims was considered to have any merit and this was
confirmed in December 2020, when the arbitral tribunal dismissed all claims in
the arbitration against IPA and the group and awarded costs on an indemnity basis
to IPA. Such costs totalling $5.8 million were fully recovered in January 2021.
The tribunal's decision also removed the grounds for the separate stayed claims
in respect of tortious conduct.
Included within the stone and coal interest balances at 30 June 2021 is
cumulative interest receivable of $10.1 million net of a provision of $10.1
million (31 December 2020: $9.0 million cumulative interest receivable and
provision, 30 June 2020: $6.5 million cumulative interest and provision). This
interest has been provided against due to the creditworthiness of the stone and
coal interests, which are not yet in production, and as such have no operational
cashflows from which to settle interest. The directors will reassess these
balances once production has begun and the liquidity of the stone and coal
interests has improved.
15. Fair values of financial instruments
The table below provides an analysis of the book values and fair values of
financial instruments, excluding receivables and trade payables and Indonesian
stone and coal interests, as at the balance sheet dates. Cash and deposits,
dollar notes and sterling notes are classified as level 1 in the fair value
hierarchy prescribed by IFRS 13 "Fair value measurement" (level 1 includes
instruments where inputs to the fair value measurements are quoted prices in
active markets). All other financial instruments are classified as level 3 in the
fair value hierarchy (level 3 includes instruments which have no observable
market data to provide inputs to the fair value measurements). No
reclassifications between levels in the fair value hierarchy were made during
2021 (2020: none).
30 June 2021 30 June 2020 31 December 2020
Book value Fair value Book value Fair value Book value Fair
value
$'000 $'000 $'000 $'000 $'000 $'000
Cash and 28,795 28,795 6,337 6,337 11,805 11,805
deposits*
Bank debt within (16,214) (16,214) (21,007) (21,007) (54,148) (54,148)
one year**
Bank debt after
more than one (96,463) (96,463) (94,530) (94,530) (56,062) (56,062)
year**
Loan from
non-controlling
shareholder (6,025) (6,025) (13,539) (13,539) (6,025) (6,025)
after more than
one year**
Loan from
non-controlling
shareholder (11,091) (11,091) (11,091) (11,091) (11,091) (11,091)
after more than
one year*
Loan from
related party (2,694) (2,694) - - (2,661) (2,661)
within one year
- sterling**
Loan from
related party (1,370) (1,370) (1,847) (1,847) (1,370) (1,370)
within one year
- dollar*
Dollar notes - (26,937) (26,224) (26,851) (25,143) (26,891) (25,683)
repayable 2022**
Sterling notes
after one year - (43,444) (42,637) (37,130) (34,064) (42,908) (37,896)
repayable 2025**
Net debt (175,443) (173,923) (199,658) (194,884) (189,351) (183,131)
* Bearing interest at floating rates
** Bearing interest at fixed rates
The fair values of cash and deposits, loans from non-controlling shareholder,
loans from related party and bank debt approximate their carrying values since
these carry interest at current market rates. The fair values of the dollar notes
and sterling notes are based on the latest prices at which those notes were
traded prior to the balance sheet dates.
16. Bank loans
30 June 30 June 31 December
2021 2020 2020
$'000 $'000 $'000
Bank loans 112,677 115,537 110,210
The bank loans are repayable as follows:
On demand or within one year 16,214 21,007 54,148
Between one and two years 17,100 19,240 9,823
After two years 79,363 75,290 46,239
112,677 115,537 110,210
Amount due for settlement within 12 months 16,214 21,007 54,148
Amount due for settlement after 12 months 96,463 94,530 56,062
112,677 115,537 110,210
Within "Amount due for settlement within 12 months" as at 31 December 2020 are
bank loans totalling $30.5 million from the group's Indonesian bankers Mandiri to
SYB and KMS that would have been classified as non-current liabilities were it
not for certain breaches by those companies of loan covenants applicable at the
balance sheet date. Mandiri subsequently waived the breaches in question. Such
loans would have been classified as non-current liabilities had the waivers been
received before the balance sheet date.
All bank loans are denominated in Indonesian rupiah and are net of unamortised
expenses. The weighted average interest rate in 2021 was 10.0 per cent (2020:
10.8 per cent).
Under the terms of its 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 Indonesian rupiah denominated
facilities of $nil (2020: $nil).
17. Reconciliation of operating profit to operating cash flows
6 months to 6 months to Year to
30 June 30 June 31 December
2021 2020 2020
$'000 $'000 $'000
Operating profit / (loss) 13,578 (2,855) 8,806
Amortisation of intangible assets 523 522 1,045
Depreciation of property, plant and equipment 13,569 13,575 26,924
Decrease in fair value of agricultural 3,279 4,701 588
produce inventory
Decrease / (increase) in value of growing 580 1,250 (229)
produce
(Profit) / loss on disposal of property, - (3) 537
plant and equipment
Operating cash flows before movements in 31,529 17,190 37,671
working capital
(Increase) / decrease in inventories (2,475) 687 1,789
(excluding fair value movements)
Decrease / (increase) in receivables 5,626 53 (3,438)
(Decrease) / increase in payables (6,016) 9,962 18,285
Exchange translation differences 523 1,917 (728)
Cash generated by operations 29,187 29,809 53,579
Taxes paid (4,026) (5,534) (882)
Interest paid* (9,272) (9,842) (19,218)
Net cash from operating activities 15,889 14,433 33,479
* Of which $134,000 is in respect of lease liabilities (31 December 2020:
$301,000, 30 June 2020: $171,000)
18. Movements in net borrowings
6 months to 6 months to Year to
30 June 30 June 31 December
2021 2020 2020
$'000 $'000 $'000
Change in net borrowings resulting from cash
flows:
Increase / (decrease) in cash and cash 16,990 (3,191) 2,277
equivalents, after exchange rate effects
Net (increase) / decrease in bank borrowings (5,953) 11,388 13,484
Decrease in borrowings from non-controlling - - 7,514
shareholder
Net increase in related party borrowings - (1,816) (4,031)
11,037 6,381 19,244
Amortisation of sterling note issue expenses (91) (159) (1,545)
and premium
Amortisation of dollar note issue expenses (46) (47) (87)
Amortisation of bank loan expenses (98) - (175)
Transfer from current assets - unamortised 953 - 1,126
bank loan expenses
11,755 6,175 18,563
Currency translation differences 2,153 1,994 (87)
Net borrowings at beginning of period (189,351) (207,827) (207,827)
Net borrowings at end of period (175,443) (199,658) (189,351)
19. Related parties
Transactions between the company and its subsidiaries, which are related parties,
have been eliminated on consolidation and are not disclosed in this note.
Loan from related party
R.E.A. Trading plc ("REAT"), a related party, has made unsecured loans to the
company on commercial terms. REAT is owned by Richard Robinow (a director of the
company) and his brother who, with members of their family, also own Emba
Holdings Limited, a substantial shareholder in the company. Total loans
outstanding at 30 June 2021 were $4.1 million (31 December 2020: $4.0 million, 30
June 2020 $1.8 million). Interest paid during the period was $193,000 (31
December 2020: $165,000, 30 June 2020 nil). This disclosure is also made in
compliance with the requirements of Listing Rule 9.8.4(10).
20. Rates of exchange
30 June 2021 30 June 2020 31 December 2020
Closing Average Closing Average Closing Average
Indonesian rupiah to US dollar 14,496 14,323 14,302 14,622 14,105 14,570
US dollar to pounds sterling 1.3820 1.39 1.2268 1.27 1.3648 1.29
21. Events after the reporting period
There have been no material post balance sheet events that would require
disclosure in, or adjustment to, these condensed consolidated financial
statements.
22. Cautionary statement
This document contains certain forward-looking statements relating to R.E.A.
Holdings plc (the "group"). The group considers any statements that are not
historical facts as "forward-looking statements". They relate to events and
trends that are subject to risk and uncertainty that may cause actual results and
the financial performance of the group to differ materially from those contained
in any forward-looking statement. These statements are made by the directors in
good faith based on information available to them and such statements should be
treated with caution due to the inherent uncertainties, including both economic
and business risk factors, underlying any such forward-looking information.
References to group companies in this report are defined below:
CDM PT Cipta Davia Mandiri
KMS PT Kutai Mitra Sejahtera
PBJ2 PT Persada Bangun Jaya
PU PT Prasetia Utama
REA Kaltim PT REA Kaltim Plantations
SYB PT Sasana Yudha Bhakti
The terms "FFB", "CPO" and "CPKO" mean, respectively, "fresh fruit bunches",
"crude palm oil" and "crude palm kernel oil".
References to "dollars" and "$" are to the lawful currency of the United States
of America; to "rupiah" are to the lawful currency of Indonesia; and to
"sterling" or "pounds sterling" are to the lawful currency of the United Kingdom.
Press enquiries to:
R.E.A. Holdings plc
Tel: 020 7436 7877
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ISIN: GB0002349065
Category Code: IR
TIDM: RE.
LEI Code: 213800YXL94R94RYG150
Sequence No.: 121677
EQS News ID: 1231866
End of Announcement EQS News Service
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References
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