REG-R.E.A. Holdings plc R.E.A. Holdings plc: Half yearly results
20/09/2019 07:05
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R.E.A. Holdings plc (RE.)
R.E.A. Holdings plc: Half yearly results
20-Sep-2019 / 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 2019
Despite continuing good production, the financial results for the six months to
30 June 2019 were severely depressed by weak CPO and CPKO prices. With FFB
production for the full year expected to be at record levels for the second year
running, recent cost reduction initiatives and CPO prices rising as surplus
stocks are absorbed globally, results for the second half of 2019 should show a
material improvement.
HIGHLIGHTS
Financial
• Average selling prices (FOB Samarinda) 22 per cent lower for CPO at $430 per
tonne (2018: $549 per tonne) and 40 per cent lower for CPKO at $590 per
tonne (2018: $977 per tonne)
• Revenue up 17 per cent to $56.6 million (2018: $48.2 million), reflecting in
part the sale of excess inventory carried forward at the end of 2018 - had
prices remained at 2018 levels, revenue would have been $72.5 million in the
first half
• Underlying operating costs in the first half of 2019 in line with 2018,
although cost of sales of $63.2 million (2018:$42.8 million) distorted by
stock movements, reflecting the temporary stock build up due to logistical
problems in the comparative period in 2018
• Pre-tax loss of $29.5 million (2018: profit of $1.3 million), due to the
impact of depressed CPO and CPKO prices exacerbated by the strengthening of
the Indonesian rupiah against the dollar, which resulted in a negative $16.0
million foreign exchange swing
Agricultural operations
• FFB production increased 3 per cent to 335,177 tonnes (2018: 324,955 tonnes)
in the period
• Increase in third party FFB purchased to 94,680 tonnes (2018: 80,463 tonnes)
• CPO extraction rates consistent in the first half of the year averaging 22.9
per cent (2018: 22.8 per cent)
• Capital expenditure focused on mill works and maintaining existing plantings
Coal operations
• Good progress as IPA expects to recommence mining at its Kota Bangun
concession in the near future by appointing a contractor who will also
manage the port facility
• The contractor will fund all further expenditure required for
infrastructure, land compensation and mobilisation in exchange for a
participation in the profits from the mine
Outlook
• CPO prices expected to increase further as global demand for vegetable oils
increasingly outstrips supply
• Resumption of planting of the group's undeveloped land bank remains on hold
pending a sustained recovery in the CPO price and a stronger financial
performance
• Recent cost reduction and improved efficiency measures, including workforce
reductions, across the operations and support departments, expected to
achieve some savings in the second half of 2019 notwithstanding associated
one-off costs and, additionally, savings of not less than $10 million per
annum from 2020 onwards
SUMMARY OF RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2019
6 months to 6 months to
30 June 30 June
2019 2018
$'000 $'000
Revenue 56,584 48,170
Earnings before interest, tax, depreciation and (110) 10,947
amortisation
(Loss)/profit before tax (29,496) 1,336
Loss for the period (24,452) (635)
Loss attributable to ordinary shareholders (23,267) (4,514)
Cash generated by operations 5,278 9,565
Loss per share (US cents) (57.4) (11.1)
INTERIM MANAGEMENT REPORT
Results
Key components of the income statement for the six months to 30 June 2019, with
comparative figures for 2018, were as follows:
6 months 6 months Year to
to 30 June to 30 June 31 December
2019 2018 2018
Average selling price $ $ $
CPO 430 549 472
CPKO 590 977 1,067
_______ _______ _______
$'m $'m $'m
Revenue 56.6 48.2 105.5
Operating loss (13.7) (0.3) (10.7)
(Loss)/profit before tax (29.5) 1.3 (5.5)
The six month period to 30 June 2019 was a particularly challenging period for
the group. Poor CPO and CPKO prices meant that revenues were some $15.9 million
lower than they would have been had prices been at the same levels (themselves
depressed) as in the corresponding period of 2018. In addition, strengthening of
the Indonesian rupiah against the dollar resulted in a $16.0 million negative
swing in the effect of foreign exchange on the income statement (made up of a
loss of $4.9 million in the period to 30 June 2019 against a profit of $11.1
million in the comparative period).
As discussed below, the directors expect that the first six months of 2019 will
represent the nadir of the group's fortunes. Crops are usually weighted to the
second half of each year so that, other things being equal, results for the full
year should reflect the benefit of better revenues in the second half without
proportionately additional costs. Moreover, revenues going forward will be
helped by recent increases in CPO and CPKO prices, while cost reduction
initiatives are already having a positive impact and will result in material
savings from 2020 onwards.
Earnings before interest, depreciation, amortisation and tax amounted to a loss
of $0.1 million for the six months to 30 June 2019 (2018: profit of $10.9
million).
Specific components of the results
Cost of sales for the six months to 30 June 2019, with comparative figures for
2018, was made up as follows:
6 months 6 months Year to
to 30 June to 30 June 31 December
2019 2018 2018
$'m $'m $'m
Depreciation and amortisation 13.6 11.3 23.0
Purchase of external FFB 8.2 8.9 18.4
Stock movement at historic cost 8.8 (8.4) (10.2)
Estate operating costs 32.6 31.0 68.4
_______ _______ _______
63.2 42.8 99.6
Whilst cost of sales at $63.2 million showed a substantial increase on the
preceding year ($42.8 million), the major part of the increase was accounted for
by changes in stock levels. These reflected the build up of stocks that occurred
during 2018 (the result of logistical problems in transferring stocks from the
estates downriver to Samarinda and Balikpapan) followed by a reduction in stocks
to more normal levels during the early months of 2019. When increases in volumes
are taken into account, actual operating costs were in line with those of the
comparative period.
Purchases of third party FFB increased by some 18 per cent, but the see-through
effect of lower CPO and CPKO prices on FFB pricing meant that the overall cost
of external FFB at $8.2 million was lower than the $8.9 million incurred in the
comparative period.
Administrative expenses charged in the income statement amounted to $8.4 million
against the $6.8 million charged in 2018. Substantially all of the increase
reflected a lower rate of capitalisation, PBJ having been disposed of in the
prior period. Before capitalisation, administrative expenses amounted to $9.6
million against $9.5 million in the comparative period.
As noted above, strengthening of the Indonesian rupiah against the dollar in the
six months to 30 June 2019 resulted in mark to market losses on rupiah balances
of $4.9 million against a gain in the comparative period of $11.1 million. These
and other exchange differences (principally arising from movement in sterling
against the dollar) have been reported within finance costs. Other finance costs,
comprising interest and other finance charges, amounted, before capitalisation,
to $11.2 million for the period to 30 June 2019, slightly lower than the $11.8
reported in 2018.
The tax credit of $5.0 million (2018: charge of $2.0 million) has been stated
after providing $0.4 million (2018: $0.9 million) against deferred tax credits
previously recorded against losses which may not now be capable of use prior to
time expiry.
Dividends
It was announced on 5 June 2019, that the directors had concluded that the half
yearly payment of dividend on the group's preference shares that was due on 30
June 2019 should be deferred pending an improvement in CPO prices. Since then,
prices have improved and, as noted under "Results" above, this improvement,
combined with the benefit of the normal weighting of crops to the second half of
the year, should mean that results for the six months to June 2019 are not
representative of the likely outturn for 2019 as a whole. However, the directors
are conscious of the fact that very substantial losses were incurred in the first
half of the year and, for that reason, now expect that, not only will the 30
June dividend have to continue to be deferred, but that it will also be
necessary to defer payment of the dividend falling due on 31 December 2019.
The directors recognise the importance of dividends to holders of preference
shares. Once it has become clear that the recovery in CPO prices will continue
and can reasonably be expected to be sustained, the directors plan to submit
proposals to preference shareholders to deal with the arrears of preference
dividend and to resume payment of cash dividends.
In view of the financial performance of the group in 2019 to date, the directors
do not intend to declare or recommend the payment of any ordinary dividends in
respect of 2019.
Agricultural operations
The key agricultural statistics were as follows:
6 months to 6 months to
30 June 30 June
2019 2018
FFB crops (tonnes) *
Group 335,177 324,955
Third party 94,680 80,463
Total 429,857 405,418
Production (tonnes) *
Total FFB processed 421,527 393,382
FFB sold 7,440 9,548
CPO 96,514 89,638
Palm kernels 18,882 18,649
CPKO 5,547 7,456
Extraction rates (percentage)
CPO 22.9 22.8
Palm kernel 4.5 4.7
CPKO 39.9 40.3
Rainfall (mm)
Average across the estates 2,039 1,673
* 2018 crops and production include PBJ (FFB crop 4,146 tonnes; FFB sold 3,045
tonnes) which was disposed of on 31 August 2018.
With greater consistency in field disciplines and supervision, the production
recovery seen in 2018 continued into the first half of 2019. Some harvesting
days were lost during the festive holiday period in June, but production has
subsequently picked up with FFB harvested in the eight months to August 2019
totalling 493,651 tonnes (2018: 494,932 tonnes, including 5,782 tonnes from PBJ
which was disposed of on 31 August 2018). Bunch counts indicate good crop
availability through to the end of 2019, but an industry wide decline in
production as palms enter a resting phase following the bountiful cropping in
2018 means that the group's FFB production in 2019, albeit at record levels for
the second consecutive year, may fall short of the original target of 900,000
tonnes.
Maintenance work in the mills led to a temporary reduction in CPKO production in
the first half of 2019 with some palm kernels being sold uncrushed to third
party processors. Full CPKO production capacity is being restored. Extraction
rates are generally being maintained and targeted improvements are being
achieved as major mill works are completed.
As noted under "Results" above, the positive impact of a good operational
performance in the first half of 2019 was dampened by persistently low CPO
prices. Having fallen by some 17 per cent in 2018 to reach a 10 year low of $439
per tonne, CIF Rotterdam, in November 2018, prices appeared to be on the road to
recovery at the start of 2019. This recovery then stalled, with prices falling
again to $501 per tonne at the end of June 2019 and continuing to a low for the
year to date of $480 per tonne in mid July. The widely anticipated increase in
the supply deficit then started to manifest itself in a much needed price
recovery during August and the CPO price now stands at $570 per tonne.
CPKO prices have been more fickle, increasing from $770 per tonne, CIF
Rotterdam, at the start of 2019 to reach a high of $818 per tonne in mid January
before falling to a 12 year low of $529 per tonne in early June. The average
premium over CPO was unusually low during the first half 2019, at less than $50
per tonne reflecting subdued demand generally and good availability of the
competitor coconut oil. Prices are now a little stronger, currently standing at
$625 per tonne.
The average selling price for the group's CPO for the six months to the end of
June 2019, on an FOB basis at the port of Samarinda, net of export levy and
duty, was $430 per tonne (2018: $549 per tonne). The average selling price for
the group's CPKO, on the same basis, was $590 per tonne (2018: $977 per tonne).
Against this background, the group has been taking steps to conserve cash by
limiting capital expenditure and reducing costs. Accordingly, capital
expenditure in 2019 is directed almost entirely at maintaining immature
plantings planted in earlier years and completing works to ensure resilience and
availability of sufficient capacity in the group's mills. Resumption of planting
of the group's undeveloped land bank remains on hold pending a sustained
recovery in the CPO price and a stronger financial performance.
Measures initiated during the first half of 2019 to maximise efficiencies and
reduce costs, without compromising operational performance, are continuing as
planned. Such measures have been to an extent facilitated by the concentration
of estate operations in one locality following the sale in 2018 of PBJ and by
the lower staffing that deferral of the group's expansion programme permits.
Various operational economies are being implemented, including the gradual
reduction in the number of temporary workers employed for remedial upkeep as the
work undertaken by these workers is progressively completed. The regional office
in Singapore has been closed and administrative and support departments in
Indonesia are also being slimmed down.
Coal and stone operations
As previously indicated, to the extent that any further capital is to be
committed to its coal and stone interests, the group is giving priority to
investment that will offer quicker returns with lower risk. To this end, the
group's recent concentration has been on recovering amounts already invested by
way of loans in the Kota Bangun coal concession company, PT Indo Pancadasa
Agrotama ("IPA") which is owned by the group's local partners.
Good progress has been made and the company has been informed that IPA will be
recommencing mining of the concession by appointing a contractor to, amongst
others, provide mining services and to manage the port facility adjacent to the
concession. To minimise the requirement for further funding, it has been agreed
that the contractor will fund all further expenditure needed on infrastructure,
land compensation and mobilisation in exchange for a participation in profits
from the mine. The extent of the participation will be dependent upon prevailing
coal prices but is expected to average 30 per cent.
It is hoped that the reopening of the port facility for evacuation of IPA's own
coal production will encourage adjacent third party mining companies to utilise
the port facility. This could provide useful revenues to IPA additional to its
profits from mining.
The Indonesian government has recently announced plans to establish a new
Indonesian Capital City on a site in East Kalimantan lying between Balikpapan
and Samarinda. Whilst this will be a long term project, the civil works involved
are likely to require large quantities of crushed stone. Although development of
the andesite stone concession has been viewed by the group as a lower priority
than development of the IPA concession, efforts have continued to seek interest
from contractors in commencing quarrying operations on the concession. It is
hoped that the prospect of much greater local demand for crushed stone will
facilitate a successful conclusion to these efforts.
Sustainability
The RSPO annual surveillance audits for the group's two older mills, the
bulking station and supply bases have again successfully concluded in 2019. In
each case there was a significant reduction in the number of issues raised at the
commencement of the audit and subsequently addressed as compared with previous
years.
Work to evaluate the outstanding High Conservation Value ("HCV") compensation
liability in respect of a small area of some 20 hectares in the SYB northern
estate has been completed. The results of the independent third-party analysis
to assist in determining the final compensation liability were submitted to the
RSPO in May 2019. Feedback is now awaited.
There is a further RSPO review outstanding in respect of historic land clearing
of an area in the SYB southern estate. The company submitted the results of its
HCV analysis earlier in 2019 and, pending the outcome of the review, has
excluded this estate from supplying the Perdana oil mill so that certification of
the mill can be retained.
The response from RSPO in respect of the compensation plan for CDM remains
outstanding, although the group's proposal has been agreed in principle.
In April 2019, the group retained its certification under the recently updated
international standard for environmental management systems, ISO 14001:2015.
This covers the mills and estates of REAK and SYB as well as the group's bulking
station. Certification is valid for three years.
Following 2018 surveys among smallholder oil palm farmers in the vicinity of the
group's estate, the in-house team dealing with local communities is now focusing
on methods to improve the productivity and fruit quality of these farmers. This
includes further surveys to assess whether villagers would be interested in
business development and diversification, so that they can become more resilient
and less dependent on oil palm cultivation. In addition, this exercise is
designed to assess demands for produce by the villages, as well as by the
company, its employees and families, and to establish how best these demands can
be met, given the remote location.
The conservation department has now fully implemented its long-held plan to map
the locations of endangered species, such as orangutans, within the group's
estate boundaries, based on GPS records of individual animals photographed by
camera traps set throughout the group's forested conservation reserves. During
the first half of 2019, the population of orangutans and other species were
monitored by cameras at 111 sites in the conservation areas of the estates. Bird
surveys and herpetology transect walks were also conducted throughout this
period.
The bi-weekly updates from the Satelligence system that is being used to monitor
the status of forest cover and land clearing activities within and around the
group's estates is soon to be upgraded to an online platform that will be
readily accessible by the group's conservation and survey department. This will
facilitate rapid investigation of illegal activity that may be damaging to the
environment.
Financing
At 30 June 2019, the group continued to be financed by a combination of debt and
equity (comprising ordinary and preference share capital). There was a decrease
in total equity including non-controlling interests to $236.8 million from
$261.3 million at 31 December 2018.
Group indebtedness and related engagements at 30 June 2019 totalled $218.9
million against $215.8 million at 31 December 2018. Against this indebtedness,
the group held cash and cash equivalents of $9.9 million (31 December 2018:
$26.3 million). The composition of the resultant net indebtedness of $209.0
million was as follows:
$'m
7.5 per cent dollar notes 2022
("2022 dollar notes") ($24.0 million nominal) 23.8
8.75 per cent guaranteed sterling notes 2020
("2020 sterling notes") (£31.9 million nominal) 38.7
Loan from related party 3.7
Loans from non-controlling shareholder 23.2
Indonesian term bank loans 124.6
Drawings under working capital lines 4.9
__ ______
218.9
Cash and cash equivalents (9.9)
__ ______
Net indebtedness 209.0
The group's annual strategic report noted that the group was in discussions
with its Indonesian bankers regarding the provision of an additional loan of
$11.0 million to fund 2019 capital expenditure on the group's mills and, in
effect, refinance bank loan repayments falling due in 2019. Unfortunately, these
discussions had to be temporarily suspended pending receipt by the bank of the
2018 audited accounts of REAK and its subsidiaries, which REAK has only very
recently been able to submit to the bank. This is because the unexpected
dissolution of the group's former Indonesian audit firm and transfer of the REAK
audit to a successor firm significantly delayed completion of the audit of the
accounts in question. Discussions with the bank regarding the group's future
funding are now being resumed.
In the meanwhile, the group has been engaged in discussions with its customers
regarding the provision of funding in exchange for forward commitments of CPO
and CPKO (but on a basis that pricing will be fixed at time of delivery on an
agreed basis by reference to then prevailing prices). Supply arrangements
recently agreed with one customer will result in that customer subscribing to $3
million of new 2022 dollar notes for a total consideration of $3 million in cash
reflecting the value of the notes, the value of the CPO supply arrangements
agreed by the group and an agreement by the company to repurchase the notes
should the supply arrangements terminate. It is expected that formal agreements
in relation to these arrangements will be executed, and that the new dollar
notes will be issued, before 31 October 2019. Discussions regarding arrangements
for other customer funding are continuing.
Once the customer funding arrangements referred to above have been concluded,
the group intends to formulate proposals for the refinancing of the £31.9 million
nominal of sterling notes 2020 which fall due for repayment in August 2020.
Provided that CPO prices continue to recover, the group also plans, as noted
under "Dividends" above, to be able to submit proposals to preference
shareholders to deal with the arrears of preference dividend and to resume
payment of cash dividends.
The group recognises that implementation of the above proposed transactions will
require additional equity.
Outlook
The rate of growth in demand for vegetable oils is now exceeding the rate of
growth in supply. This situation is expected to continue with increasing use of
bio-diesel in vegetable oil producing countries, a number of different factors
limiting supplies of the principal vegetable oils and, in particular, as
respects palm oil, increasing constraints on the expansion of oil palm hectarage
as a result of sustainability concerns. CPO stocks are being absorbed and this
is already being reflected in an improvement in the CPO price. The group agrees
with the view of professional commentators that CPO prices are likely to go
higher.
The cost reduction initiatives referred to under "Agricultural operations" above
are expected to result in some savings in the second half of 2019, but those
savings will be limited as the initiatives are being implemented over a period
of several months and, in some cases, result in immediate one off costs.
Nevertheless, those savings that are achieved, combined with the normal
weighting of annual crops to the second half and the higher CPO prices currently
prevailing, are expected to result in a material improvement in the results
reported by the group for the second half, subject to CPO prices remaining at
current levels for the remainder of 2019.
For 2020 and subsequent years, the group is aiming to achieve savings, when
measured against 2019 budgeted costs, of not less than $10 million per annum.
With good crop levels and yields being maintained, some potential for further
improvements to extraction rates and the impact of increased prices on a lower
cost base, the directors look forward to the group's return to profitability.
Approved by the board on 19 September 2019 and signed on its behalf by
DAVID J BLACKETT
Chairman
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 2018 annual report (the "annual report") were set out on
pages 35 to 41 of that report, under the heading "Risks and uncertainties". A
copy of the report may be downloaded from the company's website at
www.rea.co.uk. Such risks and uncertainties in summary comprise:
Agricultural operations
Climatic factors Material variations from the norm
Cultivation risks Impact of pests and diseases
Other operational factors Logistical disruptions to the production cycle,
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 the extension planting
programme
Environmental, social and
government practices Failure to meet expected standards
Community relations Disruptions arising from issues with local stakeholders
Coal and stone operations
Operational factors Failure by external contractors to achieve agreed targets
Prices Consequences of lower coal or stone prices
Environmental, social and
government practices Failure to meet expected standards
General
Currency risk Adverse exchange movements between sterling or the rupiah and the
dollar
Funding Meeting liabilities as they fall due in periods of weaker produce prices
Counterparty risk Default by suppliers, customers or financial institutions
Regulatory and country exposure Failure to meet or comply with expected
standards or applicable regulations; adverse political or legislative changes in
Indonesia
Systems access and controls Weakness in IT controls and financial reporting
system
The risks as relating to "Agricultural operations - Expansion" and "Coal and
stone operations" are prospective rather than immediate material risks because
the group is currently not expanding its agricultural operations and not yet
mining its coal and stone concessions. However, such risks will apply when, as
is contemplated, expansion and mining are resumed. The effect of an adverse
incident relating to the coal and stone operations could impact the ability of
the coal and stone companies to repay their loans.
The directors have carefully reviewed the potential impact on its operations of
the various possible outcomes on the termination of UK membership of the
European Union ("Brexit"). The directors expect that certain outcomes may
result in a movement in sterling against the US dollar and Indonesian rupiah
with consequential impact on the group dollar translation of its sterling costs
and sterling liabilities. The directors do not believe that such impact (which
could be positive or negative) would be material in the overall context of the
group. Were there to be an outcome that resulted in a reduction in UK interest
rates, this may negatively impact the level of the technical provisions of the
REA Pension Scheme but given the Scheme's estimated funding position, the
directors do not expect that this impact would be material in the overall
context of the group. Beyond this and considering that the group's entire
operations are in Indonesia, the directors do not see Brexit as posing a
significant risk to the group.
The directors have considered the potential impact on the group of global
climate change. Between 5 and 10 per cent of the group's existing plantings are
in areas that are low lying and prone to flooding if not protected by bunding.
Were climate change to cause an increase in water levels in the rivers running
though the estates, this could be expected to increase the requirement for
bunding or, if the increase was so extreme that bunding became impossible, could
lead to the loss of low lying plantings, the percentage of which could be
expected to increase. Changes to levels and regularity of rainfall and sunlight
hours could also adversely affect production. However, it seems likely that any
climate change impact negatively affecting group production would similarly
affect many other oil palm growers in South East Asia leading to a reduction in
CPO and CPKO supply. This would be likely to result in higher prices for CPO and
CPKO which should provide at least some offset against reduced production.
At the date of the annual report, risks assessed by the directors as being of
particular significance were those as detailed under:
• "Agricultural operations - Produce prices"
• "General - Funding"
• "Agricultural operations - Climatic factors"
• "Agricultural operations - Other operational factors".
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 page 43 of the annual report
and, as respects climatic and other factors, 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 2019 continue to be those set out in the annual report as
summarised above.
GOING CONCERN
In the statements regarding viability and going concern on pages 43 and 44 of
the 2018 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 2018 annual report, CPO prices have increased (with an
expectation that they will increase further) while cost reduction measures are
already resulting in savings and are projected to save at least $10 million per
annum from 2020 onwards. Crops have remained at good levels and care has been
taken that the cost reduction measures will not impact agricultural performance.
The group can therefore expect progressive improvement in its trading cash flows
going forward.
The group has been conducting discussions with its principal customers. These
have already resulted in an agreement by one customer to subscribe $3 million
nominal of dollar notes 2022 for a total consideration of $3 million in cash
reflecting the value of the notes, the value of the CPO supply arrangements
agreed by the group and an agreement by the company to repurchase the notes
should the supply arrangements terminate. Discussions regarding arrangements for
other customer funding are continuing. Once such arrangements have been
concluded, the group intends to formulate proposals for the refinancing of the
£31.9 million nominal of sterling notes 2020 which fall due for repayment in
August 2020.
For the reasons explained under "Financing" in the Interim management report
above, REAK has only recently been able to submit 2018 audited accounts of REAK
and its subsidiaries to its Indonesian bank. This has delayed discussions
regarding the group's future bank funding but such discussions are now being
resumed. REAK has maintained regular contact with its bank and is confident that
the bank will continue to be supportive of REAK and its subsidiaries.
As noted under "Financing" in the Interim management report, the company
recognises that additional equity capital may be required and has been assured
of support from its largest shareholder.
Accordingly, the directors have a reasonable expectation that the company will
be able to continue in operation and meet its liabilities as they fall due over
the period of twelve months from the date of approval of the accompanying
financial statements and they continue to adopt the going concern basis of
accounting in preparing those statements.
DIRECTORS' RESPONSIBILITIES
The directors are responsible for the preparation of this half yearly financial
report.
The directors confirm that to the best of their knowledge:
* the accompanying condensed set of financial statements has been prepared in
accordance with IAS 34 "Interim Financial Reporting"
* the "Interim management report" and "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 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 condensed set of
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 consolidated financial statements includes a fair
review of the information required by rule 4.2.8R of the Disclosure 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 2018 annual report that could do so.
The current directors of the company are as listed on page 42 of the company's
2018 annual report.
Approved by the board on 19 September 2019
DAVID J BLACKETT
Chairman
CONSOLIDATED INCOME STATEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2019
6 months to 6 months to Year to
30 June 30 June 31 December
2019 2018 2018
Note $'000 $'000 $'000
Revenue 2 56,584 48,170 105,479
Net gain arising from changes in fair
value of agricultural produce
4 1,911 1,557 305
Cost of sales:
Depreciation and amortisation (13,584) (11,281) (23,014)
Purchase of external FFB (8,186) (8,945) (18,446)
Stock movement at historic cost (8,810) 8,416 10,243
Estate operating costs (32,616) (30,993) (68,368)
_______ _______ _______
Gross (loss) / profit (4,701) 6,924 6,199
Distribution costs (592) (502) (1,258)
(15,668)
Administrative expenses 5 (8,401) (6,756)
)
_______ _______ _______
Operating loss (13,694) (334) (10,727)
Investment revenues 2 176 135 292
Profit on disposal of subsidiary - - 10,373
Finance costs 6 (15,978) 1,535 (5,412)
_______ _______ _______
(Loss) / profit before tax (29,496) 1,336 (5,474)
Tax 7 5,044 (1,971) (12,734)
_______ _______ _______
Loss for the period (24,452) (635) (18,208)
_______ _______ _______
Attributable to:
Ordinary shareholders (23,267) (4,514) (22,021)
Preference shareholders 4,124 4,260 8,353
Non-controlling interests (5,309) (381) (4,540)
_______ _______ _______
(24,452) (635) (18,208)
_______ _______ _______
Loss per 25p ordinary share (US cents) 8 (57.4) (11.1) (54.4)
All operations in all periods are
continuing
CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2019
30 June 30 June 31 December
2019 2018 2018
Note $'000 $'000 $'000
Non-current assets
Goodwill 12,578 12,578 12,578
Intangible assets 10 2,155 3,063 2,581
Property, plant and equipment 11 404,083 414,017 407,164
Land titles 12 36,206 32,848 35,890
Coal and stone interests 14 48,444 41,342 46,011
Deferred tax assets 15,669 11,116 10,088
Non-current receivables 7,564 4,354 7,544
_______ _______ _______
Total non-current assets 526,699 519,318 521,856
_______ _______ _______
Current assets
Inventories 18,607 19,421 22,637
Biological assets 3,564 3,226 2,589
Trade and other receivables 44,415 36,000 50,714
Assets available for sale 15 - 56,423 -
Cash and cash equivalents 9,923 2,269 26,279
_______ _______ _______
Total current assets 76,509 117,339 102,219
_______ _______ _______
Total assets 603,208 636,657 624,075
__ __ _______ __ __
Current liabilities
Trade and other payables (58,733) (89,769) (59,779)
Current tax liabilities - (13) -
Bank loans (9,652) (27,996) (13,966)
Other loans and payables (5,513) (10,239) (718)
__ __ _______ __ __
Total current liabilities (73,898) (128,017) (74,463)
__ __ _______ __ __
Non-current liabilities
Bank loans (119,821) (64,145) (117,008)
Sterling notes (38,706) (40,823) (38,213)
Dollar notes (23,763) (23,686) (23,724)
Deferred tax liabilities (79,244) (81,017) (79,247)
Other loans and payables (30,938) (29,681) (30,146)
__ __ _______ __ __
Total non-current liabilities (292,472) (239,352) (288,388)
__ __ _______ __ __
Total liabilities (366,370) (367,369) (362,801)
__ __ _______ __ __
Net assets 236,838 269,288 261,274
__ __ _______ __ __
Equity
Share capital 132,528 132,528 132,528
Share premium account 42,401 42,401 42,401
Translation reserve (42,470) (56,003) (42,470)
Retained earnings 95,233 133,717 114,360
__ __ _______ __ __
227,692 252,643 246,819
Non-controlling interests 9,146 16,645 14,455
_______ _______ _______
Total equity 236,838 269,288 261,274
_______ _______
_______
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 30 JUNE 2019
6 months to 6 months to Year to
30 June 30 June 31 December
2019 2018 2018
$'000 $'000 $'000
Loss for the period (24,452) (635) (18,208)
_______ _______ _______
Other comprehensive income
Items that may be reclassified to profit or
loss:
Actuarial (losses) / gains (105) (219) 1,732
Deferred tax on actuarial (losses) / gains 25 55 (425)
_______ _______ _______
(80) (164) 1,307
Items that will not be reclassified to
profit or loss:
Exchange differences on translation of
foreign operations
(29) 1,933 14,087
Exchange differences on deferred tax 125 (4,321) 3,110
_______ _______ _______
16 (2,388) 18,504
_______ _______ _______
Total comprehensive income for the period (24,436) (3,187) 296
_______ _______ _______
Attributable to:
Ordinary shareholders (23,251) (7,066) (3,517)
Preference shareholders 4,124 4,260 8,353
Non-controlling interests (5,309) (381) (4,540)
_______ _______ _______
(24,436) (3,187) 296
_______ _______ _______
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE 2019
Non-
Share Share Translation Retained Sub controlling Total
capital premium reserve earnings total interests Equity
$'000 $'000 $'000 $'000 $'000 $'000 $'000
At 1 January 132,528 42,401 (50,897) 135,074 259,106 17,629 276,735
2018
Total
comprehensive - - (5,106) 2,903 (2,203) (984) (3,187)
income
Dividends to
preference (4,260)
shareholders - - - (4,260) (4,260) -
_____ _____ _____ _____ _____ _____ _____
At 30 June 132,528 42,401 (56,003) 133,717 252,643 16,645 269,288
2018
Total
comprehensive - - 20,937 (15,264) 5,673 (2,190) 3,483
income
Disposal of - - (7,404) - (7,404) - (7,404)
subsidiary
Dividends to
preference
shareholders - - - (4,093) (4,093) - (4,093)
_____ _____ _____ _____ _____ _____ _____
At 31 132,528 42,401 (42,470) 114,360 246,819 14,455 261,274
December 2018
Total
comprehensive - - (19,127) (19,127) (5,309) (24,436)
income
_____ _____ _____ _____ _____ _____ _____
At 30 June 132,528 42,401 (42,470) 95,233 227,692 9,146 236,838
2019
_____ _____ _____ _____ _____ _____ _____
CONSOLIDATED CASH FLOW STATEMENT FOR THE SIX MONTHS
ENDED 30 JUNE 2019
6 months to 6 months to Year to
30 June 30 June 31 December
2019 2018 2018
Note $'000 $'000 $'000
Net cash (used in) / from operating
activities
17 (5,545) 2,381 (26,861)
_______ _______ _______
Investing activities
Interest received 176 135 94
Purchases of property, plant and (7,651) (13,959) (23,793)
equipment
Purchases of intangible assets - - (33)
Expenditure on land titles (316) - (1,005)
Investment in coal and stone interests (2,433) (3,595) (5,593)
Proceeds of disposal of subsidiary - - 2,793
_______ _______ _______
Net cash used in investing activities (10,224) (17,419) (27,537)
_______ _______ _______
Financing activities
Preference dividends paid - (4,260) (8,353)
Repayment of bank borrowings (4,649) (7,933) (105,768)
New bank borrowings drawn - 4,973 119,847
New borrowings from related party 3,750 8,227 13,440
Repayment of borrowings from related - - (13,440)
party
Repayment of borrowings from
non-controlling shareholder
- - (6,469)
New borrowings from non-controlling
shareholder
300 - -
Redemption of 2020 sterling notes - - (1,307)
Proceeds of sale of investments - 2,730 2,730
Deposit received relating to sale of
subsidiary
- 8,000 -
Repayment of balances from divested
subsidiary
- - 50,027
Settlement of bank loan by purchaser of
subsidiary
- - 24,748
_______ _______ _______
Net cash from financing activities (599) 11,737 75,455
_______ _______ _______
Cash and cash equivalents
Net (decrease) / increase in cash and
cash equivalents
(16,368) (3,301) 21,057
Cash and cash equivalents at beginning
of period
26,279 5,543 5,543
Effect of exchange rate changes 12 27 (321)
_______ _______ _______
Cash and cash equivalents at end of 9,923 2,269 26,279
period
_______ _______ _______
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of accounting
The condensed consolidated financial statements for the six months ended 30
June 2019 comprise the unaudited financial statements for the six months ended
30 June 2019 and 30 June 2018, neither of which has been reviewed by the
company's auditor, together with audited financial statements for the year ended
31 December 2018.
The information shown for the year ended 31 December 2018 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 condensed consolidated financial statements for the six months ended 30 June
2019 have been prepared in accordance with IAS 34, "Interim Financial Reporting"
as adopted by the European Union, and should be read in conjunction with the
annual financial statements for the year ended 31 December 2018 which were
prepared in accordance with International Financial Reporting Standards ("IFRS")
as adopted by the European Union.
The accounting policies and methods of computation adopted in the preparation of
the condensed consolidated financial statements for the six months ended 30 June
2019 are the same as those set out in the group's annual report for 2018.
For the reasons given under "Going concern" above, the financial statements have
been prepared on the going concern basis.
The condensed consolidated financial statements for the six months ended 30 June
2019 were approved by the board of directors on 19 September 2019.
2. Revenue
6 months to 6 months to Year to
30 June 30 June 31 December
2019 2018 2018
$'000 $'000 $'000
Sales of goods 56,217 47,516 105,297
Revenue from services 367 654 182
_______ _______ _______
56,584 48,170 105,479
Investment revenue 176 135 292
_______ _______ _______
Total revenue 56,760 48,305 105,771
_______ _______ _______
3. Segment information
The group continues to operate in two segments, being the cultivation of oil
palms and the coal and stone operations. In the period ended 30 June 2019, the
relevant measures for the coal and stone operations continued to fall below the
quantitative thresholds set out in IFRS 8. Accordingly, no segment information
is included in these financial statements.
4. Agricultural produce movement
The net gain arising from changes in fair value of agricultural produce
represents the movement in the fair value of that inventory less the amount of
the movement in such inventory at historic cost (which is included in cost of
sales), together with movements in the value of current biological assets, which
represents growing produce on oil palm trees.
5. Administrative expenses
6 months to 6 months to Year to
30 June 30 June 31 December
2019 2018 2018
$'000 $'000 $'000
Loss on disposal of property, plant and - 207 10
equipment
Indonesian operations 6,220 5,923 14,728
Head office 3,417 3,326 5,696
_______ _______ _______
9,637 9,456 20,434
Amount included as additions to fixed assets (1,236) (2,700) (4,766)
_______ _______ _______
8,401 6,756 15,668
_______ _______ _______
Earnings before interest, tax depreciation and amortisation ("EBITDA") is
calculated to show the effect on the group's operating loss of excluding
depreciation and amortisation, which are significant non-cash movements.
6 months to 6 months to Year to
30 June 30 June 31 December
2019 2018 2018
$'000 $'000 $'000
Earnings before interest, tax, depreciation
and amortisation:
Operating loss (13,694) (334) (10,727)
Depreciation and amortisation 13,584 11,281 23,014
_______ _______ _______
(110) 10,947 12,287
_______ _______ _______
6. Finance costs
6 months to 6 months to Year to
30 June 30 June 31 December
2019 2018 2018
$'000 $'000 $'000
Interest on bank loans and overdrafts 7,375 7,107 15,485
Interest on dollar notes 901 901 1,877
Interest on sterling notes 1,717 1,832 4,085
Interest on other loans 554 1,317 2,549
Interest on lease liabilities 91 - -
Other finance charges 567 694 1,022
_______ _______ _______
11,205 11,851 25,018
Change in value of sterling notes arising
from exchange fluctuations
123 740 (2,297)
Change in value of bank loans and other
items arising from exchange fluctuations
4,927 (11,142) (12,547)
_______ _______ _______
16,255 1,449 10,174
Amount included as additions to property,
plant and equipment
(277) (2,984) (4,762)
_______ _______ _______
15,978 (1,535) 5,412
_______ _______ _______
7. Tax
6 months to 6 months to Year to
30 June 30 June 31 December
2019 2018 2018
$'000 $'000 $'000
Current tax:
UK corporation tax - - -
Overseas withholding tax 536 638 1,552
Foreign tax 6 7 9
_______ _______ _______
Total current tax 542 645 1,561
_______ _______ _______
Deferred tax:
Current year (5,940) 449 10,628
Prior year 354 877 545
_______ _______ _______
Total deferred tax (5,586) 1,326 11,173
_______ _______ _______
Total tax (credit) / charge (5,044) 1,971 12,734
_______ _______ _______
The tax credit for the period of $5.0 million (30 June 2018: charge of $2.0
million) is based on the reported results of the operations in each
jurisdiction, using relevant rates of tax, adjusted for items which include
non-taxable income/expense, prior year reduction in the carrying value of
Indonesian tax losses and Indonesian withholding taxes not utilisable in the UK.
If the income mix in the second half of 2019 differs materially from that of the
first half, it may result in a disproportionate movement in the effective rate
of taxation for the full year.
8. Loss per share
6 months to 6 months to Year to
30 June 30 June 31 December
2019 2018 2018
$'000 $'000 $'000
Loss for the purpose of calculating loss per (23,267) (4,514) (22,021)
share*
_______ _______ _______
* being net loss attributable to ordinary
shareholders
'000 '000 '000
Weighted average number of ordinary shares
for the purpose of loss per share 40,510 40,510
40,510
_______ _______ _______
9. Dividends
6 months to 6 months to Year to
30 June 30 June 31 December
2019 2018 2018
$'000 $'000 $'000
Amounts recognised as distributions to
equity holders:
Preference dividends of 9p per share per
annum (2018: 9p per share)
- 4,260 8,353
_______ _______ _______
- 4,260 8,353
_______ _______ _______
The half yearly payment of the dividend on the group's preference shares due on
30 June 2019 ($4.1 million) has been deferred pending an improvement in CPO
prices. The directors now expect that, not only will the 30 June dividend have
to continue to be deferred, but that it will also be necessary to defer payment
of the dividend falling due on 31 December 2019. Once it has become clear that
the recovery in CPO prices will continue and can reasonably be expected to be
sustained, the directors plan to submit proposals to preference shareholders to
deal with the arrears of preference dividend and to resume payment of cash
dividends.
10. Intangible assets
30 June 30 June 31 December
2019 2018 2018
$'000 $'000 $'000
Cost:
Beginning of period 5,410 5,377 5,377
Additions - - 33
_______ _______ _______
End of period 5,410 5,377 5,410
Depreciation:
Beginning of period 2,829 1,900 1,900
Additions 426 414 929
_______ _______ _______
End of period 3,255 2,314 2,829
Carrying amount:
Beginning of period 2,581 3,477 3,477
_______ _______ _______
End of period 2,155 3,063 2,581
_______ _______ _______
Computer software and proprietary technology that are not integral to an item of
property, plant and equipment are recognised separately as intangible assets.
11. 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 2018 201,369 274,640 112,749 5,076 593,834
Additions 5,217 6,190 830 1,611 13,848
Transfers to / (from)
construction in progress
- 59 - (59) -
Disposals - - (482) - (482)
Transferred to assets (25,650) (43,181) (1,731) (1,437) (71,999)
available for sale
_____ _____ _____ _____ _____
At 30 June 2018 180,936 237,708 111,366 5,191 535,201
Additions 2,400 6,038 1,715 4,554 14,707
Disposals - property,
plant and equipment
- (6,000) 224 - (5,776)
Transferred from assets 25,650 43,181 1,731 1,437 71,999
available for sale
Disposal of subsidiary (26,437) (47,075) (1,730) (1,487) (76,729)
Transfers to / (from)
construction in progress
- 2,435 18 (2,453) -
_____ _____ _____ _____ _____
At 31 December 2018 182,549 236,287 113,324 7,242 539,402
Right-of-use assets
opening balance
adjustment - 666 1,760 - 2,426
Additions 2,340 172 503 4,636 7,651
Transfers to / (from)
construction in progress
- - 2,109 (2,109) -
_____ _____ _____ _____ _____
At 30 June 2019 184,889 237,125 117,696 9,769 549,479
_____ _____ _____ _____ _____
Accumulated
depreciation:
At 1 January 2018 26,961 32,379 52,153 - 111,493
Charge 4,947 2,811 3,109 - 10,867
Disposals - property,
plant and equipment
- - (274) - (274)
Transferred to assets (257) (209) (436) - (902)
available for sale
_____ _____ _____ _____ _____
At 30 June 2018 31,651 34,981 54,552 - 121,184
Charge 4,914 2,840 3,390 - 11,144
Disposals - property,
plant and equipment
- - 25 - 25
Transferred from assets 257 209 436 - 902
available for sale
Disposal of subsidiary (257) (209) (551) - (1,017)
_____ _____ _____ _____ _____
At 31 December 2018 36,565 37,821 57,852 - 132,238
Charge 4,917 3,360 4,881 - 13,158
_____ _____ _____ _____ _____
At 30 June 2019 41,482 41,181 62,733 - 145,396
_____ _____ _____ _____ _____
Carrying amount:
At 30 June 2019 143,407 195,944 54,963 9,769 404,083
_____ _____ _____ _____ _____
At 31 December 2018 145,984 198,466 55,472 7,242 407,164
_____ _____ _____ _____ _____
At 30 June 2018 149,285 202,727 56,814 5,191 414,017
_____ _____ _____ _____ _____
Additions during the period to property, plant and equipment amounted to $7.7
million (year to 31 December 2018: $28.6 million, six months to 30 June 2018:
$13.8 million).
Disposals during the period of property, plant and equipment amounted to $nil
(2018: $0.5 million) and gave rise to a loss on disposal of $nil (2018: $0.2
million).
Leased assets that do not meet the definitions of planting, buildings and
structures, or construction in progress have been classed among plant, equipment
and vehicles.
12. Land titles
30 June 30 June 31 December
2019 2018 2018
$'000 $'000 $'000
Cost:
Beginning of period 40,271 39,851 39,851
Additions 316 111 9,605
Disposal - - (2,600)
Disposal of subsidiary - (2,733) (6,585)
_______ _______ _______
End of period 40,587 37,229 40,271
Amortisation:
Beginning of period 4,381 4,673 4,673
Disposal of subsidiary - (292) (292)
_______ _______ _______
End of period 4,381 4,381 4,381
Carrying amount:
Beginning of period 35,890 35,178 35,178
_______ _______ _______
End of period 36,206 32,848 35,890
_______ _______ _______
13. Capital commitments
Capital commitments contracted, but not provided for by the group as at 30
June 2019, amounted to $4.4 million (31 December 2018: $1.1 million, 30 June
2018: $4.5 million).
14. Coal and stone interests
30 June 30 June 31 December
2019 2018 2018
$'000 $'000 $'000
Coal companies 29,248 24,031 27,291
Stone company 22,196 20,311 21,720
Provision against loans to companies (3,000) (3,000) (3,000)
_______ _______ _______
48,444 41,342 46,011
_______ _______ _______
Interest bearing loans have been made to two Indonesian companies that, directly
and through a further Indonesian company, own rights in respect of certain coal
and stone concessions in East Kalimantan, Indonesia, together with related
balances; such loans are repayable not later than 2020. 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 the three concession holding companies at
original cost on a basis that will give the group (through KCC) 95 per cent
ownership 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 noted in the group's 2018 annual report published in April 2019, IPA has been
served with an arbitration claim by two parties (connected with one another)
(the "claimants") with whom IPA previously had conditional agreements to,
amongst other things, fund the development of, and operate, the IPA concession.
IPA believes that these agreements did not become effective as respects the
claimants because, inter alia, certain pre-conditions were never satisfied.
Since April, the claimants' detailed claim has been received and the claimants
now seek to hold the company liable for any damages awarded against IPA and to
seek damages for alleged tortious conduct by the company in conjunction with
IPA. Whilst the appointed arbitrators have joined the company as a party to the
arbitration on a prima facie basis and without prejudice to any final
determination of jurisdiction (or lack thereof), the company, which was never a
party to any of the agreements between IPA and the claimants, has declined to
accept jurisdiction or participate in the arbitration. Both IPA and the company
(without prejudice to its position concerning the arbitrators' jurisdiction)
consider the claims being made to be without merit.
15. Assets available for sale
During the six months to 30 June 2018, the group decided to sell its operating
subsidiary, PBJ. The sale completed during the second half of 2018. Accordingly,
certain assets and liabilities were temporarily reclassified as available for
sale as at 30 June 2018. There are no assets classified as available for sale at
30 June 2019. The amounts reclassified as available for sale at 30 June 2018
were as follows:
30 June
2018
$'000
Non-current assets
Property, plant and equipment 71,097
Land titles 2,441
Deferred tax assets 532
Non-current receivables 1,254
Current assets
Inventories 691
Trade and other receivables 6,540
Cash and cash equivalents 2,753
Current liabilities
Trade and other payables (3,788)
Bank loans (25,097)
_______
Reclassified as available for sale 56,423
_______
16. 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
coal and stone interests, as at the balance sheet date. Cash and deposits,
dollar notes and sterling notes are classified as level 1 in the fair value
hierarchy prescribed by IFRS 7 "Financial instruments: disclosures". (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
2019 (2018: none).
30 June 2019 30 June 2018 31 December 2018
Book value Fair value Book value Fair value Book Fair
value value
$'000 $'000 $'000 $'000 $'000 $'000
Cash and 9,923 9,923 2,269 2,269 26,279 26,279
deposits*
Bank debt within (9,652) (9,652) (833) (833) (13,966) (13,966)
one year**
Bank debt within - - (27,163) (27,163) - -
one year*
Bank debt after
more than one (119,821) (119,821) (16,176) (16,176) (117,008) (117,008)
year**
Bank debt after
more than one
year* - - (47,969) (47,969) - -
Loan from
related party (3,750) (3,750) (8,227) (8,227) - -
within one year*
Loans from
non-controlling
shareholder
after more than (23,239) (23,239) (29,681) (29,681) (22,919) (22,919)
one year*
Dollar notes (23,763) (22,172) (23,686) (23,254) (23,724) (22,833)
repayable 2022**
Sterling notes (38,706) (34,450) (40,823) (42,948) (38,213) (39,735)
repayable 2020**
______ ______ ______ ______ ______ ______
Net debt and
related (209,008) (203,161) (192,289) (193,982) (189,551) (190,182)
engagements
______ ______ ______ ______ ______ ______
* bearing interest at floating rates
** bearing interest at fixed rates
The fair values of cash and deposits, bank debt and loans 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.
A one per cent increase in interest applied to those financial instruments shown
in the table above which carry interest at floating rates would have resulted
over a period of six months in a pre-tax profit (and equity) decrease of
approximately $0.2 million (year to 31 December 2018: pre-tax profit (and
equity) decrease of $nil; six months to 30 June 2018: $0.6 million).
17. Reconciliation of operating profit to operating cash flows
6 months to 6 months to Year to
30 June 30 June 31 December
2019 2018 2018
$'000 $'000 $'000
Operating loss (13,694) (334) (10,727)
Amortisation of intangible assets 426 414 929
Depreciation of property, plant and 13,158 10,867 22,011
equipment
Increase in fair value of agricultural (1,911) (258) (305)
produce
Increase in value of growing produce (938) (1,299) (662)
Amortisation of sterling and dollar note
issue expenses
417 237 572
Loss on disposal of property, plant and - (207) 10
equipment
_______ _______ _______
Operating cash flows before movements in
working capital
(2,542) 9,420 11,828
Decrease / (increase) in inventories
(excluding fair value movements)
6,142 (8,357) (11.623)
Increase in receivables (632) (17,132) (25,000)
Increase in payables 3,778 26,304 1,053
Exchange translation differences (1,468) (670) 13,931
_______ _______ _______
Cash generated / (utilised) by operations 5,278 9,565 (9,811)
Taxes paid (115) (34) (1,771)
Tax refunds received 220 - 1,504
Interest paid (10,928) (7,150) (25,018)
Realised exchange differences - - 8,235
_______ _______ _______
Net cash (to) / from operating activities (5,545) 2,381 (26,861)
_______
_______ _______
18. Movements in net borrowings
6 months to 6 months to Year to
30 June 30 June 31 December
2019 2018 2018
$'000 $'000 $'000
Change in net borrowings resulting from cash
flows:
(Decrease) / increase in cash and cash (16,356) (3,274) 20,736
equivalents
Net decrease / (increase) in borrowings 4,649 2,960 (14,079)
Net (increase) / decrease in related party
borrowings
(3,750) (8,227) 6,469
_______ _______ _______
(15,457) (8,541) 13,126
Redemption of 2020 sterling notes - - 1,307
Amortisation of sterling notes expenses (377) (200) (497)
Amortisation of dollar notes expenses (40) (37) (75)
Transferred to assets available for sale - 22,344 -
_______ _______ _______
(15,874) 13,566 13,861
Currency translation differences (3,583) 8,610 11,053
Net borrowings at beginning of period (189,551) (214,465) (214,465)
_______ _______ _______
Net borrowings at end of period (209,008) (192,289) (189,551)
_______ _______ _______
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.
During the period R.E.A. Trading Limited ("REAT"), a related party, 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. The maximum amount loaned during the period to, and outstanding at, 30
June 2019 is $3.7m. This disclosure is made in compliance with the requirements
of Listing Rule 9.8.4.
20. Events after the reporting period
There have been no material post balance sheet events that would require
disclosure in, or adjustment to, these financial statements.
21. Rates of exchange
30 June 2019 30 June 2018 31 December 2018
Closing Average Closing Average Closing Average
Indonesian rupiah to US dollar 14,141 14,229 14,404 13,813 14,481 14,215
US dollar to pound sterling 1.2728 1.29 1.3203 1.37 1.2689 1.33
Reference to "dollars" and "$" are to the lawful currency of the United States
of America. References to rupiah are to the lawful currency of Indonesia.
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.
Press enquiries to:
R.E.A. Holdings plc
Tel: 020 7436 7877
References to group companies in this report are defined below:
CDM PT Cipta Davia Mandiri
KKS PT Kartanegara Kumalasakti
KMS PT Kutai Mitra Sejahtera
PBJ PT Putra Bongan Jaya - now divested
PBJ2 PT Persada Bangun Jaya
REAK PT REA Kaltim Plantations
SYB PT Sasana Yudha Bhakti
PU PT Prasetia Utama
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" are to the lawful currency of Indonesia.
════════════════════════════════════════════════════════════════════════════════
ISIN: GB0002349065
Category Code: IR
TIDM: RE.
LEI Code: 213800YXL94R94RYG150
Sequence No.: 20714
EQS News ID: 876957
End of Announcement EQS News Service
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References
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