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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| R.e.a. Holdings Plc | LSE:RE. | London | Ordinary Share | GB0002349065 | ORD 25P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 2.25 | 3.31% | 70.25 | 68.50 | 72.00 | 69.00 | 69.00 | 69.00 | 2,244 | 16:35:20 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Chemicals & Chem Preps, Nec | 208.78M | 27.78M | 0.6318 | 1.09 | 30.34M |
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R.E.A. Holdings plc (RE.)
R.E.A. Holdings plc: Half yearly results
22-Sep-2017 / 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.
R.E.A. HOLDINGS PLC (the "company")
HALF YEARLY REPORT 2017
The chairman, David Blackett, commented:
Operationally the group has turned around. The accompanying results reflect
the problems of the difficult past two years which are now largely behind
us. FFB production in the second half of 2017 is expected to be 50 per cent
higher than in the first half. Crops started to recover in May and the
recovery has been strengthening month by month since then, driven by
improvements in harvesting, the increased fertiliser programme and
optimisation of field disciplines. Incentive targets for harvesters are
supporting the increase in production while rehabilitation of infrastructure
is improving field access and crop evacuation. There should be further
significant progress in 2018 with an FFB crop projected at comfortably over
700,000 tonnes against 468,000 tonnes in 2016.
Since revenues from additional crops and higher extraction rates fall
largely through to the bottom line, financial performance should mirror
operational performance with significantly better results in the second half
of 2017 and again better in 2018.
HIGHLIGHTS
Financial
* Revenues up 18 per cent to $46.3 million (2016: $39.3 million) reflecting
the recovery in operational performance in May and June and firmer selling
prices
* Cost of sales increased to $39.1 million (2016: $32.5 million) reflecting
increased volumes, increased payments for external FFB and investment in
rehabilitation of the mature areas
* EBITDA increased to $8.3 million (2016: $7.5 million), after $1.1 million
of one off costs related to staff changes and the reorganisation of
Indonesian offices
* Pre-tax loss of $15.7 million (2016: $5.2 million) - mainly due to
mark-to-market movements on foreign currency liabilities and produce stocks
* Average selling prices for CPO of $622 (2016: $516) and for CPKO of $1,290
(2016: $985)
* Two year refinancing of group indebtedness largely complete, with GBP8.3m
sterling notes due December 2017
Agricultural operations
* Improved crop in May and June contributing to increase in FFB to 241,235
tonnes (2016: 225,171 tonnes)
* Third party FFB of 52,780 tonnes (2016: 48,249 tonnes)
* Extraction rates slightly lower at 22.1 per cent (2016: 23.8 per cent),
reflecting harvesting and logistics difficulties in the first four months of
the period; rates improved in May and June
* Strong recovery in July and August: combined FFB of 95,000 tonnes (July
and August 2016: 45,000 tonnes) and extraction rate of 23.2 per cent
* Conclusion of PU land transaction
* After taking into account of adverse weather impact, revised target of
3,000 hectares of new plantings in 2017, with 1,000 hectares carried over to
first quarter of 2018
Stone and coal operations
* Operations started on limestone quarry adjacent to the PBJ property, with
12,000 tonnes of stone now delivered to the crushing facility at PBJ
* Arrangements proceeding for mining Kota Bangun coal concession and
acquiring port access for loading and barging, as well as sale of the
existing coal stockpile
Sustainability
* RSPO recertification of Cakra and Perdana oil mills achieved
* RSPO and ISCC surveillance audits completed successfully
* Third biennial sustainability report to be published shortly
Outlook
* Significant increase in crop production - combined crop for July and
August more than double the same period last year
* Expected FFB crop for 2017 around 600,000 tonnes (2016: 468,000 tonnes);
in excess of 700,000 tonnes in 2018
* Increasing revenues and improving extraction rates with a direct positive
impact on profits in second half due to fixed cost base
SUMMARY OF RESULTS FOR THE SIX MONTHSED 30 JUNE 2017
6 months to 6 months to
30 June 30 June
2017 2016
$'000 $'000
Revenue 46,275 39,337
Earnings before interest, tax, 8,348 7,477
depreciation and amortisation
Loss before tax (15,708) (5,190)
Loss for the period (14,449) (4,437)
Loss attributable to ordinary (14,144) (7,911)
shareholders
Cash (utilised)/generated by operations (799) 1,165
Loss per share (US cents) (34.6) (21.5)
INTERIM MANAGEMENT REPORT
Results
Salient items, group revenue and loss before tax for the six months to 30
June 2017, with comparative figures for 2016, were as follows:
6 months 6 months Year to
to 30 June to 30 June 31 December
2017 2016 2016
$'m $'m $'m
Mark-to-market items (6.0) 1.3 8.4
One off items (1.1) 1.1 1.1
_______ _______ _______
(7.1) 2.4 9.5
_______ _______ _______
Revenue 46.3 39.3 79.3
Other net costs (54.9) (46.9) (98.1)
_______ _______ _______
(8.6) (7.6) (18.8)
_______ _______ _______
Loss before tax (15.7) (5.2) (9.3)
_______ _______ _______
As reported under "Agricultural operations" below, the year 2017 to-date has
seen a progressive and marked recovery in operational performance and the
group is confident that this will continue. However, crops only started to
improve from May so that crops to end June were only slightly ahead of those
of 2016. With better prices largely offset by additional costs incurred on
rehabilitation of the mature areas and an increase of $1.8 million in the
depreciation charge, it was to be expected that the operating loss for the
first half of 2017 would be not dissimilar from that of the corresponding
period in 2016 and this proved to be the case.
The increased loss before tax principally reflected adverse movements
between the six months to 30 June 2017 and the corresponding period of 2016
of $2.2 million in respect of one off items and of $7.3 million in respect
of mark to market differences on foreign currency liabilities and produce
stocks. The one off item of $1.1 million in 2017 comprised costs related to
staff changes and the reorganisation of the group's Indonesian offices while
2016 benefited from a one off receipt of $1.1 million booked in investment
revenues.
Earnings before interest, depreciation, amortisation and tax amounted to
$8.3 million for the six months to 30 June 2017 (2016: $7.5 million).
Specific components of the results
Cost of sales for the six months to 30 June 2017, with comparative figures
for 2016, was made up as follows:
6 months 6 months Year to
to 30 June to 30 June 31 December
2017 2016 2016
$'m $'m $'m
Depreciation and amortisation 10.8 9.0 21.0
Purchase of external FFB 7.1 3.8 9.1
Estate operating costs 21.2 19.7 41.7
39.1 32.5 71.8
As noted in previous reports, the amendment of IAS 41 Agriculture effective
1 January 2016 has resulted in the discontinuation of the previous movement
in the fair value of biological assets and its replacement by a depreciation
charge. Whilst this change has no effect on the group's cash flows, it means
that the group now reports a depreciation charge that is higher and profits
that are lower than they would have been applying the previous accounting
provisions of IAS 41.
The increased cost of purchasing external fresh fruit bunches ("FFB")
reflected a slight increase in the volume purchased, the payment of higher
purchase prices than in 2016 and the payments of premia for better quality
FFB. The prices for third party fruit are set monthly by a local government
authority and are based on prices prevailing in the preceding month. In a
period of falling prices, such as occurred in the six months to 30 June
2017, the prices set will be above prevailing spot prices. Margins earned by
the group on milling external FFB during this period were therefore lower
than normal.
The reported increase in operating costs of $1.5 million represented
additional expenditure on harvesting, road upkeep and weeding as part of the
work on the rehabilitation of the mature areas referred to above.
Administrative expenses at $7.3 million were much in line with the $7.2
million reported in 2016. The 2017 figure would have been lower were it not
for the one off costs already mentioned in relation to staff changes and the
combination of the former Jakarta and Samarinda offices into the group's new
office in Balikpapan.
Investment revenues in the six months to 30 June 2016 of $1.2 million
included interest of $1.1 million in respect of a tax refund. This was a one
off item and, as a result, investment revenues for the six months to 30 June
2017 were substantially lower at $0.3 million.
Finance costs amounted to $13.5 million (2016: $4.9 million). A major
component of the increase was exchange losses of $4.2 million in 2017
(arising from the strengthening of sterling and the rupiah against the
dollar over the first six months of 2017) against exchange gains of $2.1
million in 2016. Interest incurred was also higher due to the combination of
an increased level of borrowings and a greater proportion of bank loans
being denominated in rupiah (with rupiah borrowings carrying interest at
significantly higher rates than dollar borrowings).
The tax credit for the six months to 30 June 2017 of $1.3 million has been
stated after providing $0.9 million against deferred tax credits previously
recorded against losses which may not now be capable of use prior to time
expiry and after deduction of a further $1.4 million in respect of interest
charges disallowed in certain of the Indonesian subsidiaries following the
recent introduction of legislation limiting the deductibility of interest.
Ordinary dividend
In line with previous indications and in view of the current financial
performance and the need to fund the continuing development programme that
is important to the group's future, the directors do not consider it
appropriate to declare an interim ordinary dividend in respect of 2017. If
crops continue to recover as expected, prices for the group's palm products
are maintained at around current levels and the coal operations start to
return cash to the group, the directors hope that the payment of ordinary
dividends can be resumed at an early date.
Agricultural operations
The key agricultural statistics were as follows:
6 months to 6 months to
30 June 30 June
2017 2016
FFB?crops (tonnes)
Group harvested 241,235 225,171
Third party harvested 52,780 48,249
Total 294,015 273,420
Production (tonnes)
Total FFB processed 288,477 271,317
CPO 63,867 64,618
Palm kernels 12,776 12,967
CPKO 4,583 4,863
Extraction rates (percentage)
CPO 22.1 23.8
Palm kernel 4.4 4.8
CPKO 37.2 31.9
Rainfall (mm)
Average across the estates 2,034 1,574
As previously reported, the harvesting and transportation difficulties
experienced at the end of 2016 continued into the first half of 2017 but the
operating situation steadily improved over the period and this improvement
is continuing into the second half. Crops started to recover in May and
subsequent further recovery has been such that the combined crop for July
and August amounted to 95,000 tonnes against 45,000 tonnes in 2016. Third
party fruit purchases are also increasing.
Harvester numbers are now close to their full complement and more rigorous
incentive targets are supporting the drive to increase production. As
previously reported, increased fertiliser programmes were introduced into
the mature areas in 2016 and the benefit of these programmes and other
measures to optimise field disciplines, supported by advice from the
recently engaged agronomy adviser, are becoming progressively evident.
Action to strengthen the group's road infrastructure is steadily improving
access to the mature areas and evacuation of harvested crop to the group's
mills. Out of a total of some 244 kilometres of main roads and collection
roads, 120 kilometres are targeted for resurfacing in the coming months.
Mill extraction rates to June 2017 reflect the harvesting and transportation
difficulties of the first four months of the year but are also recovering.
The CPO extraction rate for July and August combined was 23.2 per cent.
Works to improve the resilience of the group's newest mill at Satria and to
refurbish the last of four boilers in the older mills are now expected to be
completed by mid 2018. Existing processing capacity is sufficient for the
group's own processing requirements and to process expected crops from
smallholders; the works currently in hand should ensure that there is
adequate processing capacity at least until 2019 when a further mill is
envisaged at PBJ.
The CPO price, CIF Rotterdam, started the year in strong fashion rising from
$790 per tonne at the beginning of January to $857 per tonne by the middle
of the month on the back of generally lower production. Thereafter, with
stock levels increasing and expectations of significant production growth in
the second half of the year, the price drifted downward reaching a low point
of $645 at the end of June. Subsequent indications that production in the
second half of 2017 may be less buoyant than initially expected have been
accompanied by some recovery in the price to its current level of $737 per
tonne and may be expected to support the price remaining at this level into
2018.
CPKO prices in January maintained the exceptionally high premia over CPO
experienced in the last quarter of 2016, reaching a price of $1,800 per
tonne, CIF Rotterdam, at the end of January. Prices then declined to
approximately $1,000 per tonne in late June before recovering to a current
level of $1,300 per tonne, reflecting concerns at the continued inadequacy
of supplies of coconut oil for which CPKO can be a substitute.
The average selling price for the group's CPO for the six-month period to 30
June 2017, on an FOB basis at the port of Samarinda and after payment of
export imposts, was $622 per tonne (2016: $516 per tonne). The average
selling price for the group's CPKO on the same basis was $1,290 per tonne
(2016: $985 per tonne). In addition, the group was able to realise a premium
of $5.20 per tonne on 14,536 tonnes of CPO sold as ISCC certified and a
premium of $50 per tonne on 1,500 tonnes of CPKO sold under the mass balance
system during the half year to 30 June 2017.
Development work at PBJ and CDM was hampered by the weather conditions in
the first half of 2017 as extension planting at both estates, planned to
occur predominantly in lower lying areas, had to be delayed until
consistently drier weather would permit bunding for flood control to be
completed. With drier weather settling in since August, construction of the
bunding on the north west section of PBJ is expected to be completed within
the next few weeks. Bunding at CDM is also progressing well. In both cases,
the new bunding is to the same specification as the previously constructed
bunding at PBJ that proved completely effective throughout the heavy rains
of the first half of the year.
The group had planned to plant 4,000 hectares across the PBJ and CDM estates
during 2017, but the speed at which this planting can be completed will be
dependent upon weather conditions and, as respects a limited portion of the
area, resolution of certain land matters. The group has now set a target of
completing 3,000 hectares in 2017 and the balance of 1,000 hectares in the
first quarter of 2018.
Cumulative development to 30 June 2017 is detailed below:
Six months
to 30 June
2017
Hectares
Cleared, not yet planted at 1 January 2017 1,581
Cleared during the period 393
Cleared, not yet planted at end of period (1,733)
_______
Planted during the period 241
_______
Sales of renewable energy to PLN, the Indonesian national electricity
company, for distribution to local villages amounted to over $305,000 in the
six month period to the end of June 2017 (2016: $278,000) with household
take-up continuing to grow each month.
Implementing agreements were executed in July 2017 in respect of the
arrangements that were finalised late in 2015 to sell land held by the
group's subsidiary company, SYB and acquire land held by PU. The agreements
provided that SYB transfer to an Indonesian company, PT Ade Putra Tanrajeng
("APT"), land areas of 3,554 hectares held by SYB that overlap with mineral
rights held by APT. In exchange, ownership of PU, an associate of APT that
holds 9,097 hectares of fully titled agricultural land, would be transferred
to SYB and its local partner. The transfer of the PU shares has now been
completed (with SYB taking 95 per cent of the shares) and APT and its
associates have been granted access to the SYB mining overlap areas pending
the transfer of land titles relating to those areas which will be completed
in due course.
SYB now has full legal access to this additional land bank and plans to
establish nurseries on the PU land and to negotiate compensation
arrangements with local villages that have land overlapping the PU area, in
preparation for the planting out of areas designated for oil palm
development.
Stone and coal operations
The limestone quarry adjacent to the group's PBJ property commenced
operations in May 2017 and some 12,000 tonnes of stone have been delivered
to the crushing facility that has been established on PBJ's land. Crushing
operations commenced in early September. A proportion of the crushed stone
is to be purchased by PBJ for road hardening, which is due to begin later in
2017, and the balance sold to third parties.
Further consideration is being given to the development of the group's
andesite stone concession with a recent feasibility study indicating a
reduced upfront cost of opening a quarry at this concession of some $3
million and the prospect of a payback in a few months. The group remains of
the view that there is local demand for stone in the volumes that the
feasibility study assumes. For the moment, to the extent that any further
capital is to be committed to its stone and coal operations, the group is
giving priority to the reopening of its coal concessions, as it believes
that these offer greater certainty of quicker returns with lower risk than
the andesite concession.
Of the group's two coal concessions, the most important is the Kota Bangun
concession as this principally contains high value semi-soft coking coal
which is currently in good demand. The group is at an advanced stage in
discussions with the owners of an adjacent mine and the local Indonesian
authorities with a view to acquiring from the adjacent owner and relicensing
an established loading point on the Mahakam River, together with a coal
conveyor crossing the group's concession and running to the loading point.
At the same time, the group is seeking to obtain rights to use the adjacent
mine to access coal on the border of the group's concession. Dewatering has
been deferred pending completion of these discussions but can start
immediately they are successfully concluded. The group is also taking steps
to complete the sale of the existing coal stockpile at the concession of
some 16,000 tonnes, as soon as access to the loading point on the Mahakam
has been confirmed.
Efforts are continuing to conclude arrangements in respect of the group's
Liburdinding concession similar to those applicable to the Kota Bangun
concession whereby a third party would mine on a basis that would give the
group a guaranteed minimum revenue. Past discussions with potentially
interested parties have proved abortive but it is hoped that, with coal
prices now at much better levels than for some time, a potentially
interested party that is currently undertaking a limited drilling programme
on the concession will be willing to proceed to an agreement following
completion of that drilling.
Sustainability
The group's third sustainability report will be published shortly and will
be available for download from the group's website: www.rea.co.uk. This
report monitors the group's progress in meeting its sustainability
commitments and describes in greater detail environmental and social
challenges faced by the group through 2015 and 2016.
After a delay of over a year following the RSPO recertification audits
conducted in May 2016, the outstanding certificate for Cakra oil mill
("COM") was finally issued by the certifying body in August 2017. This means
that both of the group's older mills, Perdana oil mill ("POM") and COM,
which are subject to audits every five years under the RSPO system, are now
successfully recertified. The newer Satria oil mill ("SOM") has yet to be
audited owing to the continuing process of resolving SYB's outstanding High
Conservation Value ("HCV") compensation liability in respect of 20 hectares,
which were inadvertently cleared without completion of the required
RSPO?procedures. Resolution of this issue should be concluded in the coming
months.
As the HCV compensation process has progressed, the group has constructed
further housing, healthcare and waste facilities at SYB ensuring that
villages meet the required standards for the RSPO?assessment. Internal
audits have been conducted at SOM and Satria estate in preparation for the
eventual RSPO audit. All other audits conducted during the first half of
2017 have been concluded successfully: the annual RSPO surveillance audits
were conducted by a third party assessor for POM and its supply base in
April 2017; ISCC audits for COM were conducted in February and for POM and
SOM in May.
For all new oil palm developments, the group follows the RSPO's New Planting
Procedure ("NPP"). Following the reassignment in July 2017 of a land area
held by PBJ2 (known as PBJ2-Bongan) to PBJ, the NPP for PBJ has had to be
revised and resubmitted. The necessary assessments by a third party
consultant are in the final stages and once completed will be submitted to
the RSPO for verification and approval. The NPP for the area held by PBJ2
adjacent to SYB (PBJ2-Satria) has been audited by consultants and will
shortly be submitted to the RSPO for verification and approval. Now that the
shares of PU have been transferred, PU can move to complete the NPP
assessment process. The NPP for the KKS area to the north of CDM is at a
less advanced stage but the requisite documents have been prepared and a
third party consultant is being engaged to complete the full assessment
process.
From 1 January 2017, the group ceased using the GreenPalm platform to sell
certificates derived from the sale of CPO and CPKO. Instead, the group now
uses the RSPO's own book and claim platform, PalmTrace, to facilitate the
sale of RSPO credits with one RSPO credit equivalent to one tonne of RSPO
certified CPO or CPKO. The RSPO no longer endorses GreenPalm and has
replaced this with PalmTrace to make the trading of credits more user
friendly, cost effective and easier for members to register and trace their
sustainable CPO and CPKO volumes.
Demand for book and claim credits is expected to weaken in the future as
global demand for segregated sustainable CPO increases. Producing segregated
sustainable CPO offers the prospect of larger sustainability premia than the
mass balance system. However, as long as the group receives FFB from
non-certified smallholders, its CPO production and sales must follow the
mass balance supply chain model. Refusing to process non-RSPO certified
smallholder FFB could have a significant negative socio-economic impact on
the local communities and could damage the relationships with these
communities that are now well established.
The group is therefore investigating the possibility of reconfiguring its
supply base, production and transport logistics so as to allow one of the
RSPO-certified mills to produce segregated sustainable CPO, using FFB
exclusively from the group's own certified plantations, while maintaining
the mass balance approach at the other mills. This strategy presents
significant logistical challenges that will require capital investment, but
the group believes that it represents the best option for achieving the
higher premia available for segregated CPO sales while securing the most
sustainable and prosperous future for local communities and the group's
business.
Financing
At 30 June 2017, 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 $296.7
million from $309.5 million at 31 December 2016.
Group indebtedness and related engagements at 30 June 2017 totalled $238.5
million against $229.7 million at 31 December 2016. Against this
indebtedness, the group held cash and cash equivalents of $3.0 million (31
December 2016: $24.6 million). The composition of the resultant net
indebtedness of $235.5 million was as follows:
$'m
7.5 per cent dollar notes 2022 ("2022 dollar notes") 23.6
($24.0 million nominal)
9.5 per cent guaranteed sterling notes 2015/17
("2017 sterling notes") (GBP8.3 million nominal) 10.8
8.75 per cent guaranteed sterling notes 2020
("2020 sterling notes") (GBP31.9 million nominal) 39.9
Loan from related party 5.4
Loans from non-controlling shareholder 29.5
Indonesian term bank loans 72.0
Drawings under revolving credit facilities 57.3
238.5
Cash and cash equivalents (3.0)
Net indebtedness 235.5
The above statement reflects the receipt in the period of additional loans
from the non-controlling shareholder, Dharma Satya Nusantara Tbk ("DSN") and
its subsidiaries, of $11.7 million and GBP3.9 million, a related party loan of
$5.4 million, the sale of $4.9 million nominal of the 2022 dollar notes held
by the group in treasury at the end of 2016 and the repayment of $20.2
million nominal of 2017 dollar notes on 30 June 2017.
Since 30 June 2017, a further $1.0 million nominal of the 2022 dollar notes
held by the group in treasury at end 2016 have been sold leaving $4.0
million still available for sale. In addition, the group has received a
refund of previously overpaid taxes equivalent to $4.7 million and, as a
result of this refund, a further $750,000 from DSN as additional
consideration for DSN's acquisition of the 15 per cent interest in REAK that
DSN acquired in 2016. The revolving credit facilities provided by the
group's principal Indonesian bankers were rolled over for a further twelve
months at the end of July 2017.
As previously reported, the group's financial position has been much
improved over the last two years by the subscription of some $28.0 million
for additional ordinary and preference capital, the issue of replacement
sterling and dollar notes, maturing in, respectively, 2020 and 2022,
totalling $65.0 million, the loan and equity investment by the group's new
Indonesian partners, DSN, of $44.0 million, a new Indonesian term bank loan
equivalent to $18.0 million and extensions to the maturity of other
Indonesian bank borrowings. As a result, the refinancing of the group's
indebtedness is now substantially complete, leaving GBP8.3 million of 2017
sterling notes falling due for redemption at the end of 2017.
To the extent that markets permit, during the coming months, the directors
will seek to refinance a proportion of the 2017 sterling notes by placing
additions to existing issues of fixed interest securities. At the same time,
the group is continuing, and expects successfully to conclude, discussions
with a number of parties to increase the group's immediate resources and to
provide further funding going forward for the planned extension planting
programme and expansion of milling capacity.
Whilst the foregoing measures should continue to ensure availability of the
funding that the group requires, the group recognises that it is now
incurring a relatively high level of interest charges. As an immediate step
to address this, the group is currently discussing with its principal
Indonesian bankers the conversion of a substantial proportion of its rupiah
denominated borrowings into dollar denominated borrowings, upon which the
group would then be charged interest at dollar interest rates which are
significantly lower than rupiah interest rates. The group is also exploring
the possible divestment of certain outlying plantation assets which, if
effected, would materially reduce the group's overall borrowings.
Staff
Following the resignation of Mark Parry in February 2017, Carol Gysin
assumed the position of group managing director and George Kapitan moved
from the role of President Commissioner of REA Kaltim to that of President
Director. With the appointment of an Indonesian President Director, the
group has been able to assuage the concerns expressed by the Indonesian
authorities that contributed to Mark Parry's resignation and cordial
relations with the authorities have been restored.
A number of changes have been made to strengthen the senior staff in the
agricultural operations. A new head of mills has recently joined the group
and two new estate controllers will be joining in the next few weeks. All
three of these new staff members are expatriates with many years of
experience working on plantations in Indonesia. This will further assist the
return to best agricultural practices.
The group has also made changes to enhance coordination between senior staff
in London and Indonesia. The group's chief financial and legal officers,
Martin Cooper and Matthew Salthouse, who are based in Singapore continue
regularly to visit Indonesia for extended periods to oversee the
implementation of the group's strategies and policies. Matthew Salthouse is
also a director of REAK. Similarly, Luke Robinow, who lives in Indonesia and
is a commissioner of REAK, provides the group with oversight of operational
activities.
The group completed the relocation of its Indonesian head office to
Balikpapan, in East Kalimantan, during the first half of 2017 with the
transfer to Balikpapan of the remaining staff from the finance and
administration office in Samarinda. Combining all administrative activities
within a single location, closer to the group's operations, is facilitating
improved internal communication and other efficiencies.
Outlook
Crop yields are showing a material improvement and bunch censuses indicate
that cropping should continue at good levels for the rest of 2017. The
overall FFB crop for the year (excluding third party fruit) should be in the
region of 600,000 tonnes. This would represent a 50 per cent increase in
second half crops over those of the first half. With improved disciplines in
the field, yields gradually benefiting from a more intensive fertiliser
regime and improved transport conditions, the directors have confidence that
crops will continue to recover. The directors expect to budget for an FFB
crop comfortably in excess of 700,000 tonnes in 2018 and also expect that
crops will continue to grow for several years thereafter.
The resumption of coal mining activities, with operational risks being
undertaken by third parties, now provides the opportunity to realise value
from the group's investment in coal concessions where activity has been
suspended since 2014. This will provide additional capital to fund the
planned extension planting programme. At the same time, the recent
completion of the acquisition of PU surmounts a critical hurdle in ensuring
the continuance of extension planting.
The group's financial performance is driven by crop levels, extraction rates
and prices. For a given mature area, costs of agricultural operations are
for the most part fixed and therefore the major part of the extra revenue
that should be generated by the projected 50 per cent increase in crop in
the second half of 2017, and the projected further increases in 2018 and
beyond, can be expected to flow through to profit. Such flow through will be
further enhanced by any improvement in extraction rates. Self-evidently the
group has, in recent years, been through a difficult period but, with prices
likely to remain stable into next year, the impact on profits of increased
crops and improved extraction rates should not only provide clear evidence
that the financial condition of the group is being restored but also
progressively enable the group to achieve a level of returns commensurate
with its capital base.
Approved by the board on 21 September 2017 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 2016 annual report (the "annual report")
were set out on pages 36 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
Stone and coal operations
Operational factors Failure by external contractors to achieve agreed
targets
Prices Consequences of stone or coal price weakness
Environmental, social and
government practices Failure to meet expected standards
General
Currency risk Adverse exchange movements between sterling or the Indonesian
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
At the date of the annual report, the directors considered the risks in
relation to climatic and other operational factors, produce prices and
funding to be of particular significance. In the case of climatic and other
operational factors and produce prices, the directors' assessment reflected
the negative impact on revenues that could be caused by adverse climatic
conditions or operational circumstances and, in the case of funding, the
possibility that the group's expansion programme might have to be curtailed.
More stable selling prices for the group's produce combined with increasing
production are improving revenues, which, together with the further planned
measures to improve the group's funding position (as described under
"Financing" in the Interim management report above) are mitigating the
funding risk. Subject to that, the directors consider that the principal
risks and uncertainties for the second six months of 2017 continue to be
those set out in the annual report as summarised above.
In reaching the above conclusion, the directors have also considered the
implications of termination of UK membership of the European Union in the
context of the group and its operations. Any further weakness of sterling
will positively impact the group as its operations are essentially dollar
denominated and, accordingly, costs and borrowings incurred in sterling will
be reduced in dollar terms.
GOING CONCERN
In the statements regarding viability and going concern on pages 43 and 44
of the 2016 annual report published in April 2017, the directors set out the
considerations with respect to the group's capital structure and their
assessment of liquidity and financing adequacy.
As noted under "Financing" in the Interim management report above, the
group's financial position has been strengthened by the receipt in April
2017 of further loans from the Dharma Satya Nusantara Tbk group ("DSN"), by
rollover of the group's working capital facilities in Indonesia in July
2017, by the sale since the beginning of 2017 of $5.9 million nominal of the
7.5 per cent dollar notes 2022 (the "2022 dollar notes") held in treasury
and by a significant recovery of previously overpaid Indonesian tax and a
related further payment by DSN. In addition, the group expects successfully
to conclude current discussions to increase the cash resources immediately
available to the group and to provide funding going forward for planned
expansion.
These measures, combined with increasing cash flows from the plantation
operations and the sale in due course of the remaining $4.0 million nominal
of 2022 dollar notes held in treasury, will underpin the group's improving
liquidity. That position will be further augmented if, as is proposed, the
group refinances a proportion of the GBP8.3 million nominal of 9.5 per cent
sterling notes 2017 by placing additions to existing issues of fixed
interest securities.
Accordingly, the directors have a reasonable expectation that the company
and the group have adequate resources to continue in operational existence
for the foreseeable future and they continue to adopt the going concern
basis of accounting in preparing the accompanying financial statements.
DIRECTORS' RESPONSIBILITIES
The directors are responsible for the preparation of this half yearly
financial report.
The directors confirm that:
* 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 14 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 2016 annual report that could do so.
The current directors of the company are as listed on page 42 of the
company's 2016 annual report.
Approved by the board on 21 September 2017
DAVID J BLACKETT
Chairman
CONSOLIDATED INCOME STATEMENT FOR THE SIX MONTHSED 30 JUNE 2017
6 6 Year to
months months
to to
30 June 30 June 31
Decembe
r
2017 2016 2016
Note $'000 $'000 $'000
Revenue 2 46,275 39,337 79,265
Net (loss)/gain arising from
changes in fair value of
agricultural inventory
4 (1,830) (660) 632
Cost of sales:
Depreciation and amortisation (10,837 (9,007) (20,959
) )
Other costs (28,280 (23,531 (50,868
) ) )
_______ _______ _______
Gross profit 5,328 6,139 8,070
Other operating income 2 - - 1
Distribution costs (563) (508) (1,110)
Administrative expenses 5 (7,254) (7,161) (11,987
)
_______ _______ _______
Operating loss (2,489) (1,530) (5,026)
Investment revenues 2 263 1,238 1,742
Finance costs 6 (13,482 (4,898) (6,005)
)
_______ _______ _______
Loss before tax (15,708 (5,190) (9,289)
)
Tax 7 1,259 753 (2,019)
_______ _______ _______
Loss for the period (14,449 (4,437) (11,308
) )
_______ _______ _______
Attributable to:
Ordinary shareholders (14,144 (7,911) (17,800
) )
Preference shareholders 3,720 3,901 7,402
Non-controlling interests (4,025) (427) (910)
_______ _______ _______
(14,449 (4,437) (11,308
) )
_______ _______ _______
Loss per 25p ordinary share (US 8 (34.6) (21.5) (48.2)
cents)
All operations in all periods
are continuing
CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2017
30 June 30 June 31 December
2017 2016 2016
$'000 $'000 $'000
Non-current assets
Goodwill 12,578 12,578 12,578
Intangible assets 3,956 - 4,176
Property, plant and equipment 472,469 476,066 471,922
Prepaid operating lease rentals 34,761 34,460 34,230
Stone and coal interests 38,232 36,063 37,208
Deferred tax assets 12,702 13,970 12,781
Non-current receivables 2,142 1,870 3,136
_______ _______ _______
Total non-current assets 576,840 575,007 576,031
_______ _______ _______
Current assets
Inventories 10,379 8,761 15,767
Biological assets 1,832 - 2,037
Investments 4,930 1,954 9,880
Trade and other receivables 43,611 36,531 42,554
Cash and cash equivalents 2,974 4,463 24,593
_______ _______ _______
Total current assets 63,726 51,709 94,831
_______ _______ _______
Total assets 640,566 626,716 670,862
_______ _______ __ __
Current liabilities
Trade and other payables (19,267) (27,517) (43,426)
Current tax liabilities (8) (3,175) (317)
Bank loans (29,398) (54,992) (28,628)
Sterling notes (10,803) - (10,103)
US dollar notes - (33,725) (20,048)
Other loans and payables (5,400) (117) (519)
_______ _______ _______
Total current liabilities (64,876) (119,526) (103,041)
_______ _______ _______
Non-current liabilities
Bank loans (99,844) (67,274) (97,771)
Sterling notes (39,877) (50,522) (37,037)
US dollar notes (23,614) - (23,646)
Deferred tax liabilities (79,124) (81,005) (80,830)
Other loans and payables (36,553) (16,060) (18,987)
_______ _______ _______
Total non-current liabilities (279,012) (214,861) (258,271)
_______ _______ _______
Total liabilities (343,888) (334,387) (361,312)
_______ _______ _______
Net assets 296,678 292,329 309,550
_______ _______ _______
Equity
Share capital 121,426 120,288 121,426
Share premium account 42,585 30,683 42,585
Translation reserve (33,473) (41,365) (39,127)
Retained earnings 147,338 181,188 161,839
_______ _______ _______
277,876 290,794 286,723
Non-controlling interests 18,802 1,535 22,827
_______ _______ _______
Total equity 296,678 292,329 309,550
_______ _______ _______
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHSED 30 JUNE 2017
6 months to 6 months to Year to
30 June 30 June 31 December
2017 2016 2016
$'000 $'000 $'000
Loss for the period (14,449) (4,437) (11,308)
_______ _______ _______
Other comprehensive income
Items that may be
reclassified to profit or
loss:
Actuarial losses - - (569)
Deferred tax on actuarial - - 143
losses
_______ _______ _______
- - (426)
Items that will not be
reclassified to profit or
loss:
Exchange differences on
translation of foreign
operations
5,575 2,551 5,222
Exchange differences on (278) 2,125 2,617
deferred tax
_______ _______ _______
5,297 4,676 7,413
_______ _______ _______
Total comprehensive income (9,152) 239 (3,895)
for the period
_______ _______ _______
Attributable to:
Ordinary shareholders (8,847) (3,813) (10,387)
Preference shareholders 3,720 4,479 7,402
Non-controlling interests (4,025) (427) (910)
_______ _______ _______
(9,152) 239 (3,895)
_______ _______ _______
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHSED 30 JUNE 2017
Non-
Share Share Translation Retained Sub controlling Total
capital premium reserve earnings total interests Equity
2017 $'000 $'000 $'000 $'000 $'000 $'000 $'000
At 1 121,426 42,585 (39,127) 161,839 286,7 22,827 309,55
January 23 0
2017
Total - - 5,654 (10,781) (5,12 (4,025) (9,152
comprehen 7) )
sive
income
Dividends
to
preferenc
e
sharehold - - - (3,720) (3,72 - (3,720
ers 0) )
_____ _____ _____ _____ _____ _____ _____
At 30 121,426 42,585 (33,473) 147,338 277,8 18,802 296,67
June 2017 76 8
_____ _____ _____ _____ _____ _____ _____
2016
At 1 120,288 30,683 (46,282) 187,481 292,1 1,652 293,82
January 70 2
2016
Total - - 4,917 (4,479) 438 (199) 239
comprehen
sive
income
Dividends
to
preferenc
e
sharehold - - - (3,901) (3,90 - (3,901
ers 1) )
_____ _____ _____ _____ _____ _____ _____
At 30 120,288 30,683 (41,365) 179,101 288,7 1,453 290,16
June 2016 07 0
Total - - 2,238 (6,345) (4,10 (27) (4,134
comprehen 7) )
sive
income
Sale of
sharehold
ing in
sub-group
- - - (7,416) (7,41 21,401 13,985
6)
Issue of
new
ordinary
shares
(cash) 1,138 11,902 - - 13,04 - 13,040
0
Dividends
to
preferenc
e
sharehold - - - (3,501) (3,50 - (3,501
ers 1) )
_____ _____ _____ _____ _____ _____ _____
At 31 121,426 42,585 (39,127) 161,839 286,7 22,827 309,55
December 23 0
2016
_____ _____ _____ _____ _____ _____ _____
CONSOLIDATED CASH FLOW STATEMENT FOR THE SIX MONTHSED 30 JUNE 2017
6 months to 6 months to Year to
30 June 30 June 31 December
2017 2016 2016
Note $'000 $'000 $'000
Net cash (used in)/from
operating activities
12 (13,253) (6,658) 2,598
_______ _______ _______
Investing activities
Interest received 263 1,238 1,742
Proceeds on disposal of
property, plant and
equipment
- - 61
Purchases of property, (11,871) (8,486) (31,137)
plant and equipment
Expenditure on prepaid
operating lease rentals
(701) (165) (367)
Investment in stone and (1,024) (725) (1,860)
coal interests
_______ _______ _______
Net cash used in (13,333) (8,138) (31,561)
investing activities
_______ _______ _______
Financing activities
Preference dividends (3,720) (3,901) (7,402)
paid
Repayment of bank (1,544) (7,552) (11,004)
borrowings
Proceeds of issue of
ordinary shares, less
costs of issue
- - 13,040
Proceeds of issue of US
dollar notes, less
costs of issue
- - (44)
Redemption of US dollar (20,048) - (45)
notes
Proceeds of issue/sale
of sterling notes, less
costs of issue
- - 1,922
Proceeds of sale of 4,925 - -
investments
Proceeds of sale of - - 13,985
shareholding in
subsidiary
New borrowings from
non-controlling
shareholder and related
party
22,000 10,000 12,446
New bank borrowings 3,222 4,614 14,939
drawn
_______ _______ _______
Net cash from financing 4,835 3,161 37,837
activities
_______ _______ _______
Cash and cash
equivalents
Net (decrease)/increase
in cash and cash
equivalents
13 (21,751) (11,635) 8,874
Cash and cash
equivalents at
beginning of period
24,593 15,758 15,758
Effect of exchange rate 132 340 (39)
changes
_______ _______ _______
Cash and cash 2,974 4,463 24,593
equivalents at end of
period
_______ _______ _______
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of accounting
The condensed consolidated financial statements for the six months ended 30
June 2017 comprise the unaudited financial statements for the six months
ended 30 June 2017 and 30 June 2016, neither of which has been reviewed by
the company's auditor, together with audited financial statements for the
year ended 31 December 2016.
The information shown for the year ended 31 December 2016 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 2017 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 2016 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 2017 are the same as those set out in the group's
annual report for 2016.
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 2017 were approved by the Board of Directors on 21 September 2017.
2. Revenue
6 months to 6 months to Year to
30 June 30 June 31 December
2017 2016 2016
$'000 $'000 $'000
Sales of goods 45,708 38,100 77,642
Revenue from services 567 1,237 1,623
_______ _______ _______
46,275 39,337 79,265
Other operating income - - 1
Investment revenue 263 1,238 1,742
_______ _______ _______
Total revenue 46,538 40,575 81,008
_______ _______ _______
3. Segment information
The group continues to operate in two segments, being the cultivation of oil
palms and the stone and coal operations, together with head office made up
of the activities of the UK, European and Singaporean subsidiaries. In the
period ended 30 June 2017, the relevant measures for the stone and coal
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 inventory movement
The net (loss)/gain arising from changes in fair value of agricultural
produce inventory represents the movement in the fair value of that
inventory less the amount of the movement in such inventory at historic cost
(which is included in cost of sales).
5. Administrative expenses
6 months to 6 months to Year to
30 June 30 June 31 December
2017 2016 2016
$'000 $'000 $'000
Net foreign exchange - (33) 1,290
(gains)/losses
Loss on disposal of - - 12
property, plant and
equipment
Indonesian operations 6,184 5,309 9,621
Head office 3,520 3,530 5,377
_______ _______ _______
9,704 8,806 16,300
Amounts included as (2,450) (1,645) (4,313)
additions to fixed assets
_______ _______ _______
7,254 7,161 11,987
_______ _______ _______
6. Finance costs
6 months to 6 months to Year to
30 June 30 June 31 December
2017 2016 2016
$'000 $'000 $'000
Interest on bank loans and 7,505 5,123 12,617
overdrafts
Interest on US dollar notes 1,639 1,362 2,899
Interest on sterling notes 2,324 2,776 5,184
Interest on other loans 760 - 273
Change in value of sterling
notes arising from exchange
fluctuations
3,069 (5,641) (10,470)
Change in value of loans
arising from exchange
fluctuations
1,110 3,573 1,378
Other finance charges 468 570 251
_______ _______ _______
16,875 7,763 12,132
Amount included as additions
to property, plant and
equipment
(3,393) (2,865) (6,127)
_______ _______ _______
13,482 4,898 6,005
_______ _______ _______
7. Tax
6 months to 6 months to Year to
30 June 30 June 31 December
2017 2016 2016
$'000 $'000 $'000
Current tax:
UK corporation tax 136 106 1
Overseas withholding tax 494 586 1,604
Foreign tax 16 20 38
Foreign tax - prior year - - 3
_______ _______ _______
Total current tax 646 712 1,646
_______ _______ _______
Deferred tax:
Current year (2,830) (1,465) 373
Prior year 925 - -
_______ _______ _______
Total deferred tax (1,905) (1,465) 373
_______ _______ _______
Total tax (1,259) (753) 2,019
_______ _______ _______
The tax credit for the period of $1.3 million (2016: $0.8 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 2017 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
2017 2016 2016
$'000 $'000 $'000
Loss for the purpose of (14,144) (7,911) (17,800)
calculating loss per 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 36,840 36,950
_______ _______ _______
9. Dividends
6 months to 6 months to Year to
30 June 30 June 31 December
2017 2016 2016
$'000 $'000 $'000
Amounts recognised as
distributions to equity
holders:
Preference dividends of 9p
per share per annum (2016:
9p per share)
3,720 3,901 7,402
_______ _______ _______
3,720 3,901 7,402
_______ _______ _______
10. Capital expenditure on property, plant and equipment and capital
commitments
In the period, there were additions to property, plant and equipment of
$11.9 million (31 December 2016:?$31.1 million, 30 June 2016: $8.5 million).
Capital commitments contracted, but not provided for by the group as at 30
June 2017, amounted to $2.4 million (31 December 2016: $1.4 million, 30 June
2016: $0.4 million).
11. 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 interests, as at the balance sheet date. Cash and deposits,
US?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 2017 (2016: none).
30 June 2017 30 June 2016 31 December
2016
Book Fair Book Fair Book Fair
value value value value value value
$'000 $'000 $'000 $'000 $'000 $'000
Cash and 2,974 2,974 4,463 4,463 24,593 24,593
deposits*
Debt-within (29,398) (29,398) (64,992 (64,992) (28,628) (28,628
one year* ) )
Debt-after (99,844) (99,844) (67,274 (67,274) (97,771) (97,771
more than ) )
one year*
Loan from (5,400) (5,400) - - - -
related
party-withi
n one year*
Loans from
non-control
ling
shareholder
-after more (29,516) (29,516) - - (12,469) (12,469
than one )
year*
US dollar - - (33,725 (29,930) (20,048) (20,206
notes-repay ) )
able 2017**
US dollar (23,614) (23,915) - - (23,646) (24,035
notes-repay )
able 2022**
Sterling (10,803) (10,651) (9,496) (10,842) (10,103) (10,143
notes-repay )
able 2017**
Sterling (39,877) (41,479) (41,026 (41,060) (37,037) (38,553
notes-repay ) )
able 2020**
______ ______ ______ ______ ______ ______
Net debt (235,478 (237,229 (212,05 (209,635 (205,109 (207,21
and related ) ) 0) ) ) 2)
engagements
______ ______ ______ ______ ______ ______
* bearing interest at floating rates
** bearing interest at fixed rates
The fair values of cash and deposits and bank debt approximate their
carrying values since these carry interest at current market rates. The fair
value of investments approximates their carrying value. The fair values of
the US dollar notes and sterling notes are based on the latest prices at
which those notes were traded prior to the balance sheet dates.
A one per cent increase in interest applied to those financial instruments
shown in the table above which carry interest at floating rates would have
resulted over a period of one year in a pre-tax profit (and equity) decrease
of approximately $1.6 million (2016: pre-tax profit (and equity) decrease of
$1.2 million).
12. Reconciliation of operating profit to operating cash flows
6 months to 6 months to Year to
30 June 30 June 31 December
2017 2016 2016
$'000 $'000 $'000
Operating loss (2,489) (1,530) (5,026)
Amortisation of intangible 201 - 74
assets
Depreciation of property, 10,467 9,181 20,766
plant and equipment
Decrease/(increase) in fair
value of agricultural
produce inventory
1,830 660 (632)
Amortisation of prepaid 169 - 432
operating lease rentals
Amortisation of sterling and
US dollar note issue
expenses
547 306 584
Loss on disposal of - - 12
property, plant and
equipment
_______ _______ _______
Operating cash flows before
movements in working capital
10,725 8,617 16,210
Decrease/(increase) in
inventories (excluding fair
value movements)
3,558 1,770 (3,944)
(Increase)/decrease in (10,461) (4,110) 760
receivables
(Decrease)/increase in (6,227) (2,982) 13,136
payables
Exchange translation 1,606 (2,130) (791)
differences
_______ _______ _______
Cash (utilised)/generated by (799) 1,165 25,371
operations
Taxes paid (34) (52) (2,313)
Tax refunds received - - 241
Interest paid (12,420) (7,771) (20,701)
_______ _______ _______
Net cash (to)/from operating (13,253) (6,658) 2,598
activities
_______ _______ _______
13. Movements in net borrowings
6 months to 6 months to Year to
30 June 30 June 31 December
2017 2016 2016
$'000 $'000 $'000
Change in net borrowings
resulting from cash flows:
(Decrease)/increase in cash (21,619) (11,635) 8,874
and cash equivalents
Net increase in borrowings (1,678) (7,062) (3,935)
Interest in non-controlling
shareholder and related
party borrowings
(22,966) - (12,469)
_______ _______ _______
(46,263) (18,697) (7,530)
Issue of US dollar notes - - (345)
Amortisation of sterling (471) (218) (318)
notes expenses
Amortisation of US dollar (76) (88) (266)
notes expenses
Redemption of US dollar 20,048 - -
notes
_______ _______ _______
(26,762) (19,003) (8,459)
Currency translation (3,607) 5,639 2,036
differences
Net borrowings at beginning (205,109) (198,686) (198,686)
of period
_______ _______ _______
Net borrowings at end of (235,478) (212,050) (205,109)
period
_______ _______ _______
14. 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 the company has drawn a short term unsecured dollar loan
from R.E.A. Trading Limited, a company controlled by Mr R?M?Robinow and his
family, on normal commercial terms as to interest. At 30 June 2017, the loan
amounted to $5.4 million. Other than this loan during the first six months
of 2017 there have been no other new material related party transactions and
only those related transactions which were disclosed in the company's 2016
annual report have continued.
15. Events after the reporting period
Resolution of competing rights over certain plantation areas
Implementing agreements were executed in July 2017 in respect of the
arrangements that were finalised in late 2015 to sell land held by the
group's subsidiary company, SYB and acquire land held by PT Prasetia Utama
("PU"). Under the agreements, SYB is to sell 3,554 hectares of its land
areas that overlap with mineral rights held by an Indonesian third party
company, PT Ade Putra Tanrajeng ("APT"), and SYB and its local partner is to
purchase shares in PU, an associate of APT, that holds 9,097 hectares of
fully titled land areas. The acquisition of the PU shares by SYB and its
local partner has now been completed (with SYB taking 95 per cent of the PU
shares). Meanwhile APT and its associates have been granted access to the
SYB mining overlap areas pending completion of the legal formalities
relating to the land titles for such areas, which will take place in due
course.
16. Rates of exchange
30 June 2017 30 June 2016 31 December 2016
Closing Average Closing Average Closing Average
Indonesian 13,319 13,344 13,180 13,479 13,436 13,369
rupiah to
US dollar
US dollar 1.2990 1.27 1.3428 1.43 1.2226 1.36
to pound
sterling
Reference to "dollars" and "$" are to the lawful currency of the United
States of America.
17. 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.
18. Shareholder information
The company's half yearly report for the six months ended 30 June 2017 will
shortly be available for downloading from the company's web site at
www.rea.co.uk [1]
Press enquiries to:
R.E.A. Holdings plc
Tel: 020 7436 7877
ISIN: GB0002349065
Category Code: IR
TIDM: RE.
LEI Code: 213800YXL94R94RYG150
Sequence No.: 4649
End of Announcement EQS News Service
611981 22-Sep-2017
1: http://public-cockpit.eqs.com/cgi-bin/fncls.ssp?fn=redirect&url=b7175c9bb47e31ea427be0251b246ff2&application_id=611981&site_id=vwd_london&application_name=news
(END) Dow Jones Newswires
September 22, 2017 02:04 ET (06:04 GMT)
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