M. P. Evans Group PLC Final Results (3389K)

TIDMMPE

RNS Number : 3389K

M. P. Evans Group PLC

10 April 2018

M.P.EVANS GROUP PLC

M.P.Evans Group PLC ("MP Evans", "the Group" or "the Company"), a producer of sustainable Indonesian palm oil, announces its results for the year ended 31 December 2017.

The Group's 2017 annual report is available on its website at www.mpevans.co.uk/AR2017.

Highlights

Financial

   --              Operating profit up 72% to US$34.0 million 

-- Profit for the year US$94.4 million (2016 US$35.3 million), including profit on discontinued operations US$68.0 million

   --              Continuing EPS up 83% to 40.7 US cents (2016 - 22.3 US cents) 
   --              Reduction in Malaysian property-development profit 
   --              Net current assets of US$92.4 million as at 31 December 2017 
   --              Proposed final dividend of 12.75p per share 

Indonesian palm oil

   --              Record production of crude palm oil ("CPO"): up 23% to 154,000 tonnes 
   --              Acquisition of new 10,000-hectare project (Bumi Mas) 
   --              Group crops increased 9% to 435,000 tonnes 
   --              Crop growth held back by flooding in East Kalimantan 
   --              New planting of 2,200 hectares for Group; 1,000 hectares for smallholders 
   --              Planting at Musi Rawas reached 5,200 hectares: more than half way to expected total 
   --              Sales begun of bio-electricity to Indonesian grid 

Malaysian property

   --              40 hectares of golf-course land released for development 
   --              Sale of 383 developed properties as property market slowed 

Group valuation

-- Directors' estimate of Group equity value at 31 December 2017, based on independent valuation, of GBP10.96 per share

Commenting on the results, Peter Hadsley-Chaplin, executive chairman of MP Evans, said: "I am pleased to report a record year for crops, production and profit, with operating profit rising by 72% to US$34 million. During 2017, the Group also took a significant step forward in executing its strategy by acquiring a new 10,000-hectare project in East Kalimantan. The Group's plantings have an average age of only seven years, underpinning an upward trend in crop that is expected to last until the end of the next decade."

Enquires:

 
 M.P.Evans Group PLC      020 7796 4133 on 10 April 
                           2018 only 
                          Thereafter telephone 
                           01892 516333 
 Peter Hadsley-Chaplin    Chairman 
 Tristan Price            Chief executive 
 Matthew Coulson          Finance director 
 
 Peel Hunt LLP            020 7418 8900 
 Dan Webster 
 Adrian Trimmings 
 George Sellar 
 
 Hudson Sandler           020 7796 4133 
 Charlie Jack 
 Bertie Berger 
 

An analysts' meeting will be held today at 9.30 a.m. at the offices of Hudson Sandler, 29 Cloth Fair, London EC1A 7NN.

Results

The Group is able to report a record year for crops, production and profit. A marked increase in production of CPO in the face of very similar prices and cost of production led to an increase in operating profit to US$34.0 million, a 72% increase compared with US$19.7 million achieved in 2016. Results from discontinued operations, namely the Group's Agro Muko palm-oil joint venture, contributed another US$68.0 million to the record profit for the year. Total profit for the year amounted to US$94.4 million.

Dividend

An interim dividend of 5.00p per share (2016 - 2.25p per share) was paid on 3 November 2017. Above its previously announced intention, the board is recommending a final dividend of 12.75p per share (2016 - 12.75p per share). This brings dividends in respect of normal operations to 17.75p per share (2016 - 15.00p per share), an 18% increase.

The board paid a special dividend of 10.00p per share in April 2017 on completion of the sale of the Group's interest in Agro Muko; a special dividend of 5.00p per share was paid in 2016. Hence, subject to shareholder approval, total dividends in respect of 2017 will amount to 27.75p per share (2016 - 20.00p per share) resulting in dividend payments to shareholders of more than US$20 million for the year.

The board's intention continues to be to maintain or increase its normal dividend in future years. The board believes the anticipated increase in yield from its young plantations and the acquisition of Bumi Mas provide a basis for sustained future crop growth and, hence, enhanced dividends.

Palm-oil market

The average price of CPO was US$714 per tonne during 2017, a little higher than the US$700 in 2016. Overall, the price weakened during the year as supplies of palm oil increased in response to the recovery in crops throughout South East Asia after the El Niño. Towards the end of 2017, however, the CPO price began to recover as stocks were rebuilt and the discount to other vegetable oils increased, making CPO more attractive to buyers. The price for palm kernel oil, which directly affects the price of palm kernels sold by the Group, was exceptionally high in January 2017. This level was not maintained and, after a marked dip in the middle of the year, returned to more normal levels during the last quarter. On average, the price of palm kernels sold by the Group was very similar to that in 2016. The Group was able to continue selling its sustainable palm oil and palm kernels at a premium.

Strategic developments

In 2017, the Group consolidated its position as the producer of a single commodity in a single country: Indonesian palm oil. It continues to be the Group's strategic objective to expand its production of sustainable palm oil, in a controlled fashion, from its own operations and those of its associated smallholder co-operatives. Following the successful disposal, in 2016, of its Australian cattle business and, in March 2017, of its share of the substantial Agro Muko palm-oil joint venture, the Group was able to announce, in August 2017, the acquisition of a new 10,000-hectare oil-palm project, PT Bumi Mas Agro ("Bumi Mas"). This was completed in December 2017. The Bumi Mas plantation consists mainly of young oil palms that will quickly contribute to the Group's crop, crude palm oil ("CPO") production and cash inflow. In Malaysia, 40 hectares of valuable land from the golf course on the Bertam Properties Sdn Berhad project were approved for property development.

A strong balance sheet enables the Group to continue searching for environmentally-suitable plantation land to acquire, in line with its strategy. The Group regards areas of around 10,000 hectares as being an efficient size but will only expand at a rate that does not compromise its ability to deliver the operational excellence for which it has become known. Acquisition of a new project would further increase future projected crop and CPO growth that even now does not reach a peak until nearly the end of the next decade. In addition, the Group continues to negotiate for smaller pieces of land to add to its existing plantations at Kota Bangun in East Kalimantan, with a view to increasing this project from its current total of 15,100 hectares towards 20,000 hectares.

The strategy exploits the Group's excellent operational management team and proven track record of estate development and improvement. Even without a new acquisition, growth in crop from land already planted, or available to plant, for the Group or its smallholders, underlies its commitment to deliver good and improving results for shareholders.

Operational developments

The Group's crops increased by 9% during 2017; those of its smallholder co-operatives by a similar amount. This reflected strong growth in crops during the first half of the year as the palms recovered from the extreme dryness experienced in 2015-16, a consequence of an 'El Niño' weather pattern in South East Asia. As typically occurs, the El Niño gave way to a period of high rainfall and, in some cases, temporary flooding. On the Group's Kota Bangun estates, this meant the upturn in crops during the first half of 2017 was not maintained and this area recorded a small reduction in crop for the year as a whole compared with 2016. There were no such flooding issues on Bangka Island where crops increased by nearly half during the year. Especially noteworthy is the strong increase in crops bought in from third parties, notably on Bangka Island, enabling the Group to make profitable use of spare capacity in its mills. The Pangkatan group benefited from less extreme variation in weather and an increase in yield from recent replantings. Details of crops for 2017, with comparative figures for 2016, are set out below:-

 
                                 2017   Increase/(decrease)      2016 
                               Tonnes                     %    Tonnes 
 Ffb crops 
 Own crop 
   Kota Bangun, 
    East Kalimantan           147,600                   (3)   151,700 
   Bangka                      90,200                    48    61,100 
   Musi Rawas                     400                     -         - 
   Pangkatan group            157,400                     6   149,100 
   Simpang Kiri                38,900                     4    37,400 
                             --------  --------------------  -------- 
                              434,500                     9   399,300 
                             --------  --------------------  -------- 
 Smallholder co-operative 
  crops 
   Kota Bangun, 
    East Kalimantan            60,500                  (10)    67,400 
   Bangka                      40,800                    63    25,000 
                             --------  --------------------  -------- 
                              101,300                    10    92,400 
                             --------  -------------------- 
 Outside crop 
  purchased 
   Kota Bangun, 
    East Kalimantan            16,800                  (18)    20,500 
    Bangka                     85,400                   260    23,700 
   Pangkatan group             16,100                   106     7,800 

                             --------  --------------------  -------- 
                              118,300                   128    52,000 
                             --------  --------------------  -------- 
 Total crop                   654,100                    20   543,700 
                             --------  --------------------  -------- 
 

Extraction of crude palm oil and palm kernels from fresh fruit bunches ("ffb") continued at good levels. There was a small fall in extraction of CPO in Kalimantan, to 24.7%. The Group monitors carefully the performance of its mills against others and this dip was experienced by all other operators in the region, a consequence of high rainfall that followed the El Niño. A similar small reduction was experienced in the Pangkatan mill and in Bangka, although in the latter's case this is attributable to processing very high levels of third-party ffb, which is not of the same quality as that produced by the Group or its smallholder co-operatives. In respect of extraction rates, the Group continues to perform at a high level in comparison with its peers.

The Group is able to report a record year for CPO production, which reached 154,000 tonnes. The significant increase over the previous record of 126,000 tonnes, achieved in 2016, was due in part to the purchase of substantial quantities of ffb from third parties in Bangka. This used spare capacity in its mill which is temporarily available until the Group's own estates reach their maximum yields. Overall, the Group processed 20% more crop in 2017 than in the previous year. Whilst the Group does not have its own mill at Simpang Kiri, it has a contract to sell its ffb to a local mill based on the commodity price for CPO and an assumed rate of extraction. To reflect the substance of this arrangement, oil produced from Simpang Kiri's crop has been included in CPO production, and the comparative figure for 2016 has been amended to bring it in line with the new presentation. Details of production for 2017, with comparative figures for 2016, are set out below:-

 
                           2017   Increase/(decrease)      2016 
                         Tonnes                     %    Tonnes 
 Production 
 Crude palm 
  oil 
   Kota Bangun, 
    East Kalimantan      55,600                   (7)    60,000 
   Bangka                50,000                   137    21,100 
   Pangkatan group       39,800                    10    36,200 
   Simpang Kiri           8,600                     4     8,300 
                       --------  --------------------  -------- 
                        154,000                    23   125,600 
                       --------  --------------------  -------- 
 Palm kernels 
   Kota Bangun, 
    East Kalimantan      10,100                   (8)    11,000 
   Bangka                11,700                   154     4,600 
   Pangkatan group        9,800                    11     8,800 
   Simpang Kiri           1,900                     6     1,800 
                       --------  --------------------  -------- 
                         33,500                    28    26,200 
                       --------  --------------------  -------- 
 Extraction                   %                     %         % 
  rates 
 Crude palm 
  oil 
   Kota Bangun, 
    East Kalimantan        24.7                   (1)      25.0 
   Bangka                  23.1                   (1)      23.3 
   Pangkatan group         22.9                   (1)      23.1 
   Simpang Kiri            22.3                     -      22.3 
                       --------  --------------------  -------- 
 Palm kernels 
   Kota Bangun, 
    East Kalimantan         4.5                   (2)       4.6 
   Bangka                   5.4                     8       5.0 
   Pangkatan group          5.7                     2       5.6 
   Simpang Kiri             4.9                     4       4.7 
                       --------  --------------------  -------- 
 

The mills at Kota Bangun in East Kalimantan and in Bangka continue to produce bio-electricity from methane and also valuable compost from empty bunches and mill effluent, which the Group uses in its operations. For the first time, in 2017, the Group began selling surplus power to the Indonesian state electricity company.

The year saw good progress on planting. In total, the Group planted 2,200 hectares for itself and 1,000 hectares for its smallholder co-operatives during the year. Planting in South Sumatra at Musi Rawas has built up good momentum. This area accounted for 90% of the Group's new planting in the year as the estates at Kota Bangun and Bangka are now essentially fully planted. The project at Musi Rawas reached 5,200 planted hectares, including smallholders, by the end of 2017. This is more than half way to the expected total of 10,000 hectares. In North Sumatra, the accelerated replanting programme referred to in previous reports continues. At the end of 2017, including the purchase of Bumi Mas, the Group's share of subsidiaries' land had increased by 37% to stand at 33,000 hectares.

As noted in the Group's interim report, high levels of rainfall in East Kalimantan led to the northern bund on the Kota Bangun estates being overrun. This made it difficult to harvest low-lying areas. The bund has been repaired and is being strengthened to prevent future breaches. Some 580 hectares of planting carried out in 2016 behind the bund had to be replaced, delaying by 12 months the point at which it will come into harvesting.

Group valuation

Continuing development of the Group's Indonesian plantations has enhanced their US Dollar value during the year. Notwithstanding a decline in value of the US Dollar against Sterling, the Group's equity valuation remains at approximately GBP11 per share, based on an independent valuation of the Group's properties performed at the end of 2017.

Prospects

The board expects crops to continue rising, notably from its projects in East Kalimantan, Bangka Island and South Sumatra. The average age of the Group's palms following the purchase of Bumi Mas is now seven years. This young average age is expected to give rise to increasing crops as the palms mature from the Group's existing plantings and new planting on land it already controls, a trend that should last for another decade.

World production of CPO grew strongly in 2017 as the most recent El Niño receded, putting some pressure on prices and leading to an accumulation of stocks. In the longer term, insufficient levels of replanting in Malaysia and Indonesia are likely to curb growth in production. In the short term, uncertainty about the world trading regime may lead to greater commodity-price volatility. However, the board remains of the view that palm oil is well placed to benefit from rising global demand for vegetable oil and, therefore, that the outlook remains positive.

Peter Hadsley-Chaplin

Chairman

CONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2017

 
                                                   2017         2016 
                                                US$'000      US$'000 
 Continuing operations 
    Revenue                                     116,536       83,864 
    Cost of sales                              (80,290)     (59,480) 
                                            -----------  ----------- 
    Gross profit                                 36,246       24,384 
    Gain on biological assets                        47          683 
    Foreign-exchange gains/(losses)                 365        (658) 
    Other administrative expenses               (3,068)      (4,931) 
    Other income                                    360          258 
                                            -----------  ----------- 
    Operating profit                             33,950       19,736 
    Finance income                                2,147          868 
    Finance costs                               (1,027)      (1,389) 
                                            -----------  ----------- 
    Profit before tax                            35,070       19,215 
    Tax on profit on ordinary activities       (11,244)      (7,547) 
                                            -----------  ----------- 
    Profit after tax                             23,826       11,668 
    Share of associated companies' profit 
     after tax                                    2,590        4,763 
                                            -----------  ----------- 
 Profit for the year from continuing 
  operations                                     26,416       16,431 
 Profit for the year from discontinued 
  operations                                     68,018       18,823 
                                            -----------  ----------- 
 Profit for the year                             94,434       35,254 
                                            -----------  ----------- 
 
 Attributable to: 
 Owners of M.P.Evans Group PLC                   90,514       31,273 
 Non-controlling interests                        3,920        3,981 
                                            -----------  ----------- 
                                                 94,434       35,254 
                                            -----------  ----------- 
 
                                               US cents     US cents 
 Continuing operations 
    Basic earnings per 10p share                   40.7         22.3 
    Diluted earnings per 10p share                 40.5         22.3 
 Continuing and discontinued operations 
    Basic earnings per 10p share                  163.8         56.1 
    Diluted earnings per 10p share                163.0         56.0 
 
 

CONSOLIDATED BALANCE SHEET

As at 31 December 2017

 
                                           2017       2016 
                                        US$'000    US$'000 
 Non-current assets 
 Goodwill                                12,228      1,157 
 Property, plant and equipment          321,558    201,789 
 Investments in associates               20,467     18,392 
 Investments                                 53         66 
 Deferred-tax asset                      12,280     15,386 
 Trade and other receivables              5,465      2,889 
                                      ---------  --------- 
                                        372,051    239,679 
                                      ---------  --------- 
 Current assets 
 Biological assets                        1,843      1,576 
 Inventories                             10,462     13,436 
 Trade and other receivables             34,368     19,026 
 Current-tax asset                        4,614      3,440 
 Current-asset investments                6,913     14,262 
 Cash and cash equivalents              113,910     91,405 
 Assets classified as held for sale           -     31,751 
                                      ---------  --------- 
                                        172,110    174,896 
                                      ---------  --------- 
 Total assets                           544,161    414,575 
                                      ---------  --------- 
 
 Current liabilities 
 Borrowings                               9,159      9,519 
 Trade and other payables                65,194     19,232 
 Current-tax liability                    5,317     14,590 
                                      ---------  --------- 
                                         79,670     43,341 
                                      ---------  --------- 
 Net current assets                      92,440    131,555 
                                      ---------  --------- 
 
 Non-current liabilities 
 Borrowings                              30,285     20,810 
 Deferred-tax liability                  11,813        526 
 Retirement-benefit obligations           8,434      5,675 
                                      ---------  --------- 
                                         50,532     27,011 
                                      ---------  --------- 
 Total liabilities                      130,202     70,352 
                                      ---------  --------- 
 Net assets                             413,959    344,223 
                                      ---------  --------- 
 
 Equity 
 Share capital                            9,255      9,366 
 Other reserves                          51,346     49,669 
 Retained earnings                      323,397    261,964 
                                      ---------  --------- 
 Equity attributable to the owners 
  of M.P.Evans Group PLC                383,998    320,999 
 Non-controlling interests               29,961     23,224 
                                      ---------  --------- 
 Total equity                           413,959    344,223 
                                      ---------  --------- 
 

CONSOLIDATED CASH-FLOW STATEMENT

For the year ended 31 December 2017

 
                                                   2017       2016 
                                                US$'000    US$'000 
 
 Net cash generated by operating activities      20,723     22,888 
                                              ---------  --------- 
 
 Investing activities 
 Purchase of property, plant and equipment     (29,533)   (26,847) 
 Interest received                                2,147        868 
 Proceeds on disposal of property, 
  plant and equipment                                67        155 
 Purchase of subsidiary undertaking            (39,589)          - 
 Disposal of associated undertaking              99,769     79,720 
                                              ---------  --------- 
 Net cash generated by investing activities      32,861     53,896 
                                              ---------  --------- 
 
 Financing activities 
 New borrowings                                       -     11,486 
 Repayment of borrowings                        (9,552)   (14,073) 
 Decrease in bank deposits treated 
  as current-asset investments                    7,349      4,141 
 Dividends paid to Company shareholders        (19,995)    (9,802) 
 Dividends paid to non-controlling 
  interest                                            -    (2,375) 
 Exercise of Company share options                  506          - 
 Buy-back of Company shares                     (9,188)          - 
                                              ---------  --------- 
 Net cash used by financing activities         (30,880)   (10,623) 
                                              ---------  --------- 
 
 Net increase in cash and cash equivalents       22,704     66,161 
 
 Net cash and cash equivalents at 1 
  January                                        91,405     25,811 
 Effect of foreign-exchange rates on 
  cash and cash equivalents                       (199)      (567) 
                                              ---------  --------- 
 Cash and cash equivalents at 31 December       113,910     91,405 
                                              ---------  --------- 
 

NOTES

   1.             Dividends paid and proposed 
 
                                            2017      2016 
                                         US$'000   US$'000 
 
 2017 interim dividend - 5.00p per 
  10p share (2016 interim dividend - 
  2.25p)                                   3,660     1,528 
 2017 special dividend - 10.00p per 
  10p share (2016 - 5.00p share)           7,155     3,653 
 2016 final dividend - 12.75p per 10p 
  share (2015 final dividend - 6.50p)      9,180     4,852 
                                        --------  -------- 
                                          19,995    10,033 
                                        --------  -------- 
 

Following the year end, the board has proposed a final dividend for 2017 of 12.75p per 10p share, amounting to US$9.8 million.

 
                                    2017       2016 
 Ex-dividend date               19 April   20 April 
                                    2018       2017 
 Record date                    20 April   21 April 
                                    2018       2017 
 Dividend payable on or after    22 June    23 June 
                                    2018       2017 
 
   2.             Basic and diluted earnings per share 

The calculation of earnings per 10p share is based on:-

 
                                 2017         2017      2016         2016 
                                            Number                 Number 
                                                of                     of 
                              US$'000       Shares   US$'000       Shares 
 
 Profit for the year 
  attributable to the 
  owners of M.P.Evans 
  Group PLC                    90,514                 31,273 
                            ---------               -------- 
 Average number of shares 
  in issue                              55,255,776             55,721,155 
 Diluted average number 
  of shares in issue*                   55,545,708             55,799,844 
                                       -----------            ----------- 
 

* The difference between the number of shares in issue and the diluted number of shares relates to unexercised share options held by directors and key employees of the Group.

   3.             Financial information 

The financial information has been derived from the Company's audited accounts but does not itself constitute statutory accounts within the meaning of section 434 of the Companies Act 2006.The statutory accounts for the financial year ended 31 December 2017 have been reported on by the Group's auditors, PricewaterhouseCoopers LLP, and will be filed with the Registrar of Companies. The report of the auditors thereon was unqualified and did not contain a statement under section 498(2) or (3) of the Companies Act 2006, nor did it contain any matters to which the auditors drew attention without qualifying their audit report.

   4.             International Financial Reporting Standards 

This announcement is based on the Group's financial statements which were prepared in accordance with International Financial Reporting Standards ("IFRS"), as adopted by the European Union.

   5.             Distribution timetable 

The Group's 2017 annual report is available on the Group's website and will be despatched to shareholders before 16 April 2018. Printed copies of the Group's 2017 annual report will be available from the Company, 3 Clanricarde Gardens, Tunbridge Wells, Kent TN1 1HQ. The annual general meeting will be held on Friday 15 June 2018.

By order of the board

Katya Merrick

Company Secretary

This information is provided by RNS

The company news service from the London Stock Exchange

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April 10, 2018 02:00 ET (06:00 GMT)